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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 31, 2000
REGISTRATION NO. 333-30182
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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SUN BANCSHARES, INC.
(Name of Small Business Issuer in its Charter)
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<S> <C> <C>
SOUTH CAROLINA 6021 58-2466380
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
P.O. BOX 1359, MURRELLS INLET, SOUTH CAROLINA 29576 (843) 357-5214
(Address, and telephone number of principal executive offices)
4200 HIGHWAY 17 BYPASS
MURRELLS INLET, SOUTH CAROLINA 29576
(Address of principal place of business or intended principal place of business)
DALTON B. FLOYD, JR., ESQ.
SUN BANCSHARES, INC.
823 SURFSIDE DRIVE
SURFSIDE BEACH, SOUTH CAROLINA 29587
(843) 238-5141
(Name, address, and telephone number, of agent for service)
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COPIES TO:
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<S> <C>
KATHRYN L. KNUDSON, ESQ. BOYD C. CAMPBELL, JR., ESQ.
POWELL, GOLDSTEIN, FRAZER & MURPHY LLP SMITH HELMS MULLISS & MOORE, LLP
191 PEACHTREE STREET, N.E. 16TH FLOOR 201 NORTH TRYON STREET, 30TH FLOOR
ATLANTA, GEORGIA 30303 CHARLOTTE, NORTH CAROLINA 28202
(404) 572-6600 (704) 343-2000
</TABLE>
Approximate date of proposed sale to the public: as soon as practicable
after this Registration Statement has become effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED UNIT PRICE REGISTRATION FEE
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Warrants to purchase common stock........ 235,000(1) $0 $0 $0
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Common stock, no par value, issuable upon
the exercise of the warrants........... 235,000 $10.00(2) $2,350,000(3) $621(4)
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(1) Warrants to purchase an aggregate of 235,000 shares of common stock at an
exercise price of $10 per share will be issued to organizers in connection
with the offering.
(2) Represents the exercise price per share for each warrant.
(3) Calculated in accordance with Rule 457(i) under the Securities Act of 1933,
as amended.
(4) Includes $555 which was paid on February 11, 2000.
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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 SAID SECTION 8(A),
MAY DETERMINE.
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The information contained in this prospectus is not complete and may be
changed. We may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any state where the offer or
sale is not permitted.
PRELIMINARY PROSPECTUS DATED MARCH 31, 2000; SUBJECT TO COMPLETION
1,000,000 SHARES
SUN BANCSHARES, INC.
A PROPOSED BANK HOLDING COMPANY FOR
SUN BANCSHARES, INC. LOGO
SUNBANK, N.A. (IN ORGANIZATION)
COMMON STOCK
$10.00 PER SHARE
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We are offering shares of Sun Bancshares, Inc. common stock to raise the
money required to start SunBank, N.A., a national bank in organization. Sun
Bancshares will be the holding company and sole shareholder of SunBank after it
is organized. SunBank will be headquartered in Murrells Inlet, South Carolina,
and we expect to open SunBank in the second quarter of 2000. This is our first
offering of common stock to the public, and currently no public market exists
for our shares. This is a firm commitment underwriting. You may purchase a
minimum of 100 shares and up to a maximum of 50,000 shares, although we may
waive these limits and accept subscriptions for more or less shares. We will
request that quotations for our common stock be reported on the Nasdaq OTC
Bulletin Board under the symbol "SNNB."
Our organizers will receive warrants to purchase 235,000 shares of common
stock. These warrants will have an exercise price of $10.00 per share.
Organizers will be granted warrants based upon the number of shares of common
stock they purchase in the offering. The warrants are only being offered to the
organizers and not to the public. We describe the warrants in more detail in the
"Executive Compensation - Organizers' Warrants" section on page 34.
OUR COMMON STOCK IS NOT A DEPOSIT OR A BANK ACCOUNT AND IS NOT INSURED BY
THE FDIC OR ANY OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN OUR COMMON STOCK
INVOLVES RISKS. YOU SHOULD NOT INVEST IN THIS OFFERING UNLESS YOU CAN AFFORD TO
LOSE ALL OF YOUR INVESTMENT. WE HAVE DESCRIBED WHAT WE BELIEVE ARE THE MATERIAL
RISKS OF THIS INVESTMENT UNDER THE HEADING "RISK FACTORS" BEGINNING ON PAGE 7.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PER SHARE TOTAL
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Public offering price...................... $10.00 $10,000,000
Underwriting discount...................... $ 0.56 $ 560,000
Proceeds to us, before expenses............ $ 9.44 $ 9,440,000
</TABLE>
We will pay no underwriting discount on up to 200,000 shares sold to our
directors and executive officers and will pay an underwriting discount of $0.35
per share on up to 100,000 shares sold to investors identified in writing to the
underwriters by us. We will pay an underwriting discount of $0.75 on all other
shares sold. The underwriting discount shown in the table above reflects a
blended rate that assumes 200,000 shares are sold to our officers and directors
and 100,000 shares are sold to investors identified by Sun Bancshares. Wachovia
Securities has the right to purchase up to an additional 150,000 shares at the
public offering price, less an underwriting discount of $0.75 per share, within
30 days from the date of this prospectus to cover over-allotments.
THE UNDERWRITER EXPECTS TO DELIVER THE SHARES OF COMMON STOCK ON
, 2000.
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WACHOVIA SECURITIES, INC.
, 2000.
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SUN BANCSHARES, INC.
SUNBANK, N.A. (IN ORGANIZATION)
PROPOSED MARKET AREA
(S.C. MAP)
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SUMMARY
This summary does not contain all the information you should consider
before investing in the common stock. We encourage you to read carefully the
entire prospectus before investing. Unless otherwise stated, all information in
this prospectus assumes the underwriter will not exercise its over-allotment
option.
SUN BANCSHARES AND SUNBANK
Sun Bancshares, Inc. is a South Carolina corporation that was incorporated
on August 3, 1999 to organize and serve as the holding company for SunBank,
N.A., a national bank in organization. Our main office will be located in
Murrells Inlet, South Carolina and we intend to operate a branch office in
Georgetown, South Carolina. As a community bank, we will focus on providing
personalized service and financial products to individuals and small- to
medium-sized businesses located in Murrells Inlet, Georgetown and the
surrounding communities.
We must receive all necessary regulatory approvals before Sun Bancshares
may purchase SunBank's common stock and before SunBank may begin its banking
business. We have filed all of the necessary applications with the banking
regulators and have received preliminary conditional approval of our application
for a national bank charter from the Office of the Comptroller of the Currency.
We expect to receive all final regulatory approvals and to begin our banking
operations in the second quarter of 2000. See "Proposed Business -- Background"
on page 18 for more information regarding our regulatory applications.
OUR MARKET AND PRIMARY SERVICE AREA
Our primary service area will include southern Horry County and most of
Georgetown County, South Carolina. This area, commonly referred to as the "South
Strand" or "Waccamaw Neck," encompasses the coastal communities south of Myrtle
Beach, including Socastee, Surfside Beach, Garden City Beach, Murrells Inlet,
Litchfield Beach, Pawleys Island, DeBordieu and Georgetown. We expect initially
to draw a large percentage of our business from the areas immediately
surrounding the communities of Murrells Inlet and Georgetown.
The larger coastal region, which includes all of Horry and Georgetown
Counties, is often called the "Grand Strand." This region is recognized as one
of the fastest growing regions in the country. As reported by the American
Automobile Association, the Grand Strand is the second busiest vacation
destination in the nation, drawing more than 10 million visitors each year to
its beaches, entertainment attractions and more than 100 golf courses. The
region has also become a popular spot for retirees. The region's tourism,
hospitality, retail and entertainment base is supported by a substantial
construction and real estate development industry, a sizeable manufacturing and
industrial base, a strong healthcare sector and centers for higher education.
WHY WE ARE ORGANIZING A NEW BANK
We believe that our chosen communities will benefit greatly from the
continuing growth of the Grand Strand, particularly as available real estate and
development opportunities to the north of Myrtle Beach become more scarce.
Currently no financial institution is headquartered in either Murrells Inlet or
the City of Georgetown, and most of the institutions that have offices in our
primary service area are large national, super-regional or regional banks.
Through our local ownership and management, we believe we will be uniquely
situated to efficiently provide individuals and small- to medium-sized business
customers with loan, deposit and other financial products tailored to fit their
specific needs. We have chosen the motto "Your community . . . Your bank" to
reflect this philosophy.
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OUR ORGANIZERS AND MANAGEMENT
Sun Bancshares was organized by 15 local business and community leaders.
Each of our organizers, except for Gary L. Schaal, will serve as the initial
directors of both Sun Bancshares and SunBank. We believe our directors'
long-standing ties to the community and their significant business experience
will enable Sun Bancshares to effectively assess and address the banking needs
throughout our proposed market area. Our organizers include:
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- - Thomas Bouchette - Judy B. Long
- - Edsel J. ("Coupe") DeVille - Thomas O. Morris, Jr.
- - John S. Divine, III - Joel A. Pellicci
- - Dalton B. Floyd, Jr. - Donald E. Perry
- - Jeanne Louise Fourrier-Eggart - Chandler C. Prosser
- - David E. Grabeman - Larry N. Prosser
- - Richard Edwin Heath - Gary L. Schaal
- - Paul John Hletko
</TABLE>
Additionally, we have retained the following experienced individuals to
serve on our senior management team.
- Thomas Bouchette will serve as president of Sun Bancshares and
president and chief executive officer of SunBank. Mr. Bouchette has
over 13 years of banking and lending experience including five years in
the Georgetown/Horry County area. Prior to beginning preparations to
open SunBank, he was executive vice president and chief credit officer
of The Citizens Bank in Olanta, South Carolina where he was responsible
for all lending activity and management of branch operations. Before
joining The Citizens Bank, Mr. Bouchette served Wachovia Bank as vice
president and business banking executive responsible for the
Georgetown/Horry County area.
- Randy L. Carmon will serve as chief financial officer of Sun Bancshares
and SunBank. Mr. Carmon has over 21 years of bank management experience
in finance and operations. Prior to joining Sun Bancshares and SunBank,
he was vice president of Anderson State Bank in Hemingway, South
Carolina. Mr. Carmon previously served with The National Bank of South
Carolina and Lake City State Bank.
We are still in the process of assembling the remainder of our management
team, including a senior officer with responsibility for loan administration. We
are primarily seeking individuals who reside in the Georgetown/Horry County area
and who have significant local banking experience and a history of community
involvement.
PRODUCTS AND SERVICES
We plan to operate as a full service commercial bank that offers most of
the products and services typically offered by larger banks. Our lending
services will include consumer loans to individuals, commercial loans to small-
to medium-sized businesses and professional concerns and real estate-related
loans. Our deposit services will include demand deposits, regular savings
accounts, money market deposits, certificates of deposit and individual
retirement accounts. We will also provide cashier's checks, safe-deposit boxes,
traveler's checks, direct deposit and U.S. Savings Bonds. We intend to offer our
services through a variety of methods including branch offices, ATMs, bank by
mail, telephone banking and, in the future, online banking.
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OUR BUSINESS STRATEGY
Our strategy as an independent bank holding company will be carried out
through the operations and growth of SunBank. In an effort to emphasize prompt,
responsive service to our target customers and expand our presence in the
Georgetown/Horry County area, we have outlined our strategy as follows:
- Capitalize on our directors' and officers' diverse community
involvement and business experience.
- Hire and retain highly experienced and qualified banking personnel with
established customer relationships.
- Provide individualized attention with local decision-making authority.
- Establish a unique community identity.
- Implement an aggressive marketing program.
- Open our main office in Murrells Inlet, a branch office in Georgetown
and future additional branches in other strategic locations, as
appropriate.
- Construct a main office building that will support the hiring of
additional lending personnel and the expansion of our operations to
include new products and services.
- Utilize technology and strategic outsourcing to provide a broad array
of products and services.
THE OFFERING AND OWNERSHIP BY OUR MANAGEMENT
We are offering 1,000,000 shares of our common stock for $10.00 per share.
Our organizers, directors and executive officers intend to purchase 240,500
shares, which will represent 24.1% of the shares outstanding after the offering.
We hope to sell the remaining shares to individuals and businesses primarily
within the Georgetown/Horry County area who share our desire to support a new
community bank seeking to capitalize on the growth in our market. In recognition
of the efforts made and financial risk undertaken in organizing Sun Bancshares
and SunBank, our organizers will receive warrants to purchase an aggregate of
235,000 shares of common stock at $10.00 per share. The number of shares subject
to the warrant for each organizer will be based on the number of shares that he
or she purchases in this offering. For more detailed information see "Executive
Compensation - Organizers' Warrants" on page 34.
The 1,000,000 shares of common stock offered does not include the
underwriter's option to purchase up to 150,000 additional shares, 235,000 shares
that will be issuable upon the exercise of the warrants issued to our organizers
or 100,000 shares that we may issue under our stock incentive plan.
USE OF PROCEEDS
We will use $8,000,000 raised in this offering to capitalize SunBank,
which is the minimum amount of capital that our banking regulators will require
that we invest in SunBank prior to its opening. SunBank will use the funds that
it receives from Sun Bancshares to lease the sites for, construct and furnish
its main office and branch office buildings and to provide working capital to
operate SunBank. We will use the remaining net proceeds of this offering to
repay amounts drawn on our line of credit, to provide Sun Bancshares with
working capital to maintain adequate liquidity and for general business
purposes. For more detailed information, see "Use of Proceeds" on page 13.
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LOCATION OF OFFICES
The address and phone number of our temporary executive offices are:
911 RIVERWOOD DRIVE
MURRELLS INLET, SOUTH CAROLINA 29576
(843) 357-5214
Our permanent main office and executive offices will be located at:
4200 HIGHWAY 17 BYPASS
MURRELLS INLET, SOUTH CAROLINA 29576
Our permanent main office will be an approximately 10,000 square foot
building on a 1.9 acre site. We also intend to open an approximately 5,000
square foot permanent branch office building on a 1.1 acre site at 1134 North
Fraser Street in Georgetown, South Carolina. We plan to begin our operations in
the second quarter of 2000 in temporary facilities near the permanent sites for
our main and branch offices. We expect to complete construction of our main
office in the third quarter of 2001 and our branch office in the fourth quarter
of 2000.
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RISK FACTORS
The following describes what we believe are the material risks of an
investment in our common stock. An investment in the common stock involves a
significant degree of risk, and you should not invest in the common stock unless
you can afford to lose your entire investment. Please carefully read the entire
prospectus including the cautionary statement following the Risk Factors
regarding the use of forward-looking statements before deciding to invest in the
common stock.
SOUTH CAROLINA STATE LAW AND ANTI-TAKEOVER DEVICES WE HAVE ADOPTED LIMIT THE
ABILITY OF OTHERS TO ACQUIRE US, WHICH MAY PREVENT YOU FROM RECEIVING A PREMIUM
OVER THE MARKET PRICE FOR YOUR SHARES.
In many cases, a company acquiring another company will offer to pay
shareholders of the target company a premium over market value for their shares
of stock to encourage approval of the acquisition. Under South Carolina law,
however, no other financial institution may acquire control of Sun Bancshares
until we have been in existence for five years. In addition, state and federal
law and our articles of incorporation and bylaws make it difficult for anyone to
purchase Sun Bancshares without the approval of our board of directors.
Consequently, for the first five years of our existence you will be deprived of
any opportunity to receive a premium for your shares from an acquiring company.
Additionally, these opportunities will be limited in the future by:
- the board's authority and flexibility in considering acquisition
proposals;
- the board's authority to issue additional shares of common and preferred
stock to persons opposing the sale of Sun Bancshares;
- provisions we have adopted to preserve the continuity of our board; and
- super majority voting requirements to approve proposed acquisitions.
See "Description of Sun Bancshares' Capital Stock and Shareholders' Rights" on
page 46.
WE HAVE NO OPERATING HISTORY UPON WHICH TO BASE AN ESTIMATE OF OUR EARNINGS
PROSPECTS, MAKING IT DIFFICULT FOR YOU TO EVALUATE YOUR INVESTMENT IN THE COMMON
STOCK.
Neither Sun Bancshares nor SunBank has any operating history on which to
base any estimate of their earnings prospects. The operations of new businesses
are always risky because the operating plans and strategies of these businesses
are untested. Because SunBank has not yet opened, you will not have access to
historical financial data and similar information that would be helpful in
deciding whether to invest in Sun Bancshares.
IF WE DO NOT BECOME PROFITABLE, YOU MAY BE UNABLE TO RECOVER ALL OR ANY PART OF
YOUR INVESTMENT.
Typically, most new banks incur substantial start-up expenses, are not
profitable in the first year of operation and, in some cases, are not profitable
for several years or ever. If we are ultimately unsuccessful, you may not
recover all or any part of your investment in the common stock. Our
profitability will depend on our ability to develop a quality loan portfolio and
a core deposit base, both of which may take several years to develop.
Additionally, many of SunBank's loans initially will be new loans to new
borrowers. Accordingly, it will take several years to determine the borrowers'
payment histories, and, as a result, our management will not be able to reliably
evaluate the quality of the loan portfolio until that time. See "Management's
Discussion and Analysis of Financial Condition and Plan of Operations" on page
15.
FAILURE TO IMPLEMENT OUR BUSINESS STRATEGY MAY ADVERSELY AFFECT OUR FINANCIAL
PERFORMANCE AND THE POTENTIAL RETURN ON YOUR INVESTMENT.
If we cannot implement our business strategy, we will be hampered in our
ability to develop business and serve our customers, which could have an adverse
effect on our financial performance. We have developed a business plan that
details the strategy that we intend to implement in our efforts to achieve
profitable operations. Even if we successfully implement our strategy, it may
not have the
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favorable impact on operations that we anticipate. See "Proposed
Business - Management Philosophy and Business Strategy" on page 19.
DEPARTURES OF OUR KEY PERSONNEL OR DIRECTORS MAY IMPAIR OUR OPERATIONS AND LIMIT
OUR ABILITY TO ACHIEVE PERFORMANCE TARGETS.
Thomas Bouchette is important to our success and, without him, our
financial condition and results of operations may be adversely affected. Mr.
Bouchette has been instrumental in our organization and, as president and chief
executive officer of SunBank, will be the key management official in charge of
our daily business operations. We have entered into a three-year employment
agreement with Mr. Bouchette, which has a term expiring in 2003, but cannot be
assured of his continued service. Additionally, our directors' community
involvement, diverse backgrounds and extensive local business relationships are
important to our success. Our growth could be adversely affected if the
composition of our board of directors changes materially. See "Management" on
page 27.
A DELAY IN BEGINNING SUNBANK'S OPERATIONS WILL RESULT IN ADDITIONAL LOSSES.
Any delay in the opening of SunBank will increase our pre-opening expenses
and postpone our receipt of potential revenues. This could cause our accumulated
losses to increase as a result of continuing operating expenses, such as
salaries and other administrative expenses, coupled with our lack of revenue.
Although we intend to open SunBank in the second quarter of 2000, if we do not
receive the necessary final regulatory approvals, SunBank's opening may be
delayed or may not occur at all.
IF REGULATORY CONDITIONS ARE NOT SATISFIED, WE MAY DISSOLVE AND LIQUIDATE, AND
YOU MAY ONLY RECEIVE A PORTION, IF ANY, OF YOUR INVESTMENT.
If we do not receive final regulatory approval to open SunBank, we
anticipate that we will dissolve Sun Bancshares. If we dissolve Sun Bancshares
after the close of the offering, you will receive only a portion, if any, of
your investment because we will have used some or all of the proceeds of the
offering to pay offering, organizational and pre-opening expenses and capital
costs incurred through the time that we dissolve. Although we have received
preliminary conditional approval from the Office of the Comptroller of the
Currency to organize SunBank and we have applied to the FDIC for deposit
insurance, we will not receive final approvals until we comply with all of the
policies and regulations imposed on new banks by state and federal regulatory
agencies. These final approvals may not be granted in a timely manner, if at
all, and the closing of this offering is not conditioned upon the receipt of
final approvals.
STRONG COMPETITION FROM LARGER, MORE ESTABLISHED BANKS MAY CAUSE US TO PAY
HIGHER INTEREST RATES ON OUR DEPOSITS OR CHARGE LOWER RATES ON OUR LOANS TO
ATTRACT CUSTOMERS, WHICH MAY DECREASE OUR NET INTEREST INCOME.
We will encounter strong competition for customers from existing banks and
other types of financial institutions conducting business in the
Georgetown/Horry County area and elsewhere. We may pay higher rates of interest
on our deposits or charge lower rates on our loans than our competitors in order
to attract customers. This may decrease our net interest income. Some of our
competitors have been in business for a long time and have established their
customer base and name recognition. Many of our competitors are larger than we
will be and have greater financial and personnel resources. Some are larger
national, super-regional and regional banks like Bank of America, Wachovia,
BB&T, Carolina First Bank and Coastal Federal. Many of our competitors offer
services, such as extensive and established branch networks and trust services,
that we either do not expect to provide or will not provide for some time. In
addition, competitors that are not depository institutions are generally not
subject to the extensive regulations that will apply to our bank. See "Proposed
Business - Competition" on page 24 and "Supervision and Regulation" on page 39.
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CHANGES IN INTEREST RATES MAY DECREASE OUR NET INTEREST INCOME.
Our profitability depends substantially on SunBank's net interest income,
which is the difference between the interest income earned on its loans and
other assets and the interest expense paid on its deposits and other
liabilities. Depending on the terms and maturities of SunBank's assets and
liabilities, a large change in interest rates may significantly decrease our net
interest income and eliminate our profitability. Most of the factors that cause
changes in market interest rates, including economic conditions, are beyond our
control. While we intend to take measures to minimize the effect changes in
interest rates will have on our net interest income and profitability, these
measures may not be effective. See "Management's Discussion and Analysis of
Financial Condition and Plan of Operations - Liquidity and Interest Rate
Sensitivity" on page 16.
AN ECONOMIC DOWNTURN, ESPECIALLY ONE AFFECTING GEORGETOWN AND HORRY COUNTIES,
MAY REDUCE OUR CUSTOMER AND DEPOSIT BASES AND THE DEMAND FOR OUR LOANS AND OTHER
FINANCIAL PRODUCTS.
As a holding company for a community bank, our success will depend on the
economy of the region in which we operate. The majority of SunBank's borrowers
and depositors will be individuals and businesses located and doing business in
the Georgetown/Horry County area. An economic downturn in the Georgetown/Horry
County area or in the national economy generally could reduce our deposit base
and the demand for our financial products and may decrease our earnings. For
example, an adverse change in the local economy could make it more difficult for
borrowers to repay their loans, which could lead to loan losses for SunBank.
Additionally, we could be more severely affected by an economic downturn in the
Georgetown/Horry market than our larger, more geographically diverse
competitors. An economic downturn in our market would affect all of our
operations, as opposed to only a portion of our competitors' operations. See
"Proposed Business" on page 18.
WE MAY NOT BE ABLE TO COMPETE WITH OUR LARGER COMPETITORS FOR LARGER CUSTOMERS
BECAUSE OUR LENDING LIMITS WILL BE LOWER THAN THEIRS.
The amount that SunBank may lend to a single borrower will be limited
based on the amount of SunBank's capital. A national bank's legal lending limit
to a single borrower is equal to 15% of its capital and surplus plus an
additional 10%, if the amount that exceeds 15% is fully secured by readily
marketable collateral. We intend, however, to impose an internal limit of $1.0
million, or approximately 13% of our capital. We expect that our initial legal
lending limit following this offering will be approximately $1.1 million, plus
up to an additional $750,000 for loans secured by readily marketable collateral.
Until we are profitable, our capital will continue to decline, and therefore our
lending limit will decline. Our lending limit will be significantly less than
the limit for most of our competitors and may affect our ability to establish
relationships with larger businesses in our market area. We intend to
accommodate larger loans by selling participations in those loans to other
financial institutions, but this strategy may not succeed. See "Proposed
Business - Lending Services - Lending Limits" on page 21.
OUR ABILITY TO PAY DIVIDENDS TO OUR SHAREHOLDERS IS LIMITED AND DEPENDS ON
SUNBANK'S ABILITY TO PAY DIVIDENDS TO US.
Sun Bancshares will initially have no significant source of income other
than dividends that it receives from SunBank. Our ability to pay dividends to
you will therefore depend on SunBank's ability to pay dividends to Sun
Bancshares. Bank holding companies and national banks are subject to significant
regulatory restrictions on the payment of cash dividends. In light of these
restrictions and the need for Sun Bancshares and SunBank to retain and build
capital, it will be our policy to reinvest all of our earnings for an
undetermined period of time. As a result, we do not plan to pay dividends until
we become profitable and recover any losses that we may have incurred. Our
future dividend policy will depend on our earnings, capital requirements,
financial condition and other factors that the Boards of Directors of Sun
Bancshares and SunBank consider relevant. See "Dividends" on page 14.
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WE DETERMINED THE PUBLIC OFFERING PRICE ARBITRARILY, AND THE FUTURE MARKET PRICE
MAY FLUCTUATE BELOW THE INITIAL PUBLIC OFFERING PRICE ONCE THE SHARES BECOME
FREELY TRADEABLE.
Sun Bancshares and the underwriter arbitrarily set the public offering
price after considering prevailing market conditions and the price of comparable
publicly traded companies. Because we have no operating history, the public
offering price could not be based on historical measures of our financial
performance. Therefore, the public offering price may not indicate the market
price for the common stock after the offering. Several factors will cause the
market price to fluctuate after the offering, and the price may drop below the
initial public offering price. These factors include our results of operations,
financial analysts' estimates of our earning potential, economic conditions in
our market area and trends in the banking industry. See "Underwriting" on page
51.
WE WILL NOT HAVE A LARGE NUMBER OF SHAREHOLDERS OR SHARES OUTSTANDING AFTER THE
OFFERING, WHICH MAY LIMIT YOUR ABILITY TO SELL YOUR SHARES OF COMMON STOCK.
Prior to the offering, there has been no public market for Sun Bancshares'
common stock, and an active trading market may not develop. If an active trading
market does not develop or continue after the offering, you may not be able to
sell your shares at or above the public offering price. Although we have applied
to list the common stock on the Nasdaq OTC Bulletin Board, an active trading
market may not develop or continue after the offering because we will have a
relatively small shareholder base and small number of shares outstanding. You
should consider carefully the limited liquidity of your investment before
purchasing any shares of common stock. Additionally, the sale of a large block
of the shares outstanding after the close of the offering could adversely affect
the market price of the common stock. After the close of the offering all of our
outstanding shares will be freely tradeable without restriction except for
240,500 shares that we anticipate the organizers and the executive officers will
purchase in the offering and which will be subject to lock-up agreements.
Beginning 180 days from the date of this prospectus, shares held by the
organizers and executive officers will be eligible for sale subject to the
resale limitations of Rule 144 of the Securities Act of 1933. See "Underwriting"
on page 51 and "Shares Eligible for Future Resale" on page 50.
GOVERNMENT REGULATION MAY HAVE AN ADVERSE EFFECT ON OUR PROFITABILITY AND
GROWTH.
We will be subject to extensive government supervision and regulation. Our
ability to achieve profitability and to grow could be adversely affected by
banking laws and regulations that limit the manner in which we make loans,
purchase securities and pay dividends. These regulations are intended primarily
to protect depositors, not shareholders. In addition, the burden imposed by
federal and state regulations may place us at a competitive disadvantage
compared to competitors who are less regulated. Future legislation or government
policy may also adversely affect the banking industry or our operations. In
particular, various provisions of the Gramm-Leach-Bliley Act, which became
effective on March 11, 2000, eliminated many of the federal and state law
barriers to affiliations among banks and securities firms, insurance companies
and other financial services providers. We believe the elimination of these
barriers may significantly increase competition across the financial services
industry. See "Supervision and Regulation" on page 39.
EXERCISE OF WARRANTS AND STOCK OPTIONS WILL CAUSE DILUTION TO YOUR OWNERSHIP
INTEREST IN SUN BANCSHARES.
Our organizers, executive officers and employees may exercise warrants or
options to purchase common stock, which would result in the dilution of your
proportionate interests in Sun Bancshares. Upon completion of this offering, we
will issue to the organizers warrants to purchase an aggregate of 235,000 shares
of common stock, and will issue to our executive officers options to purchase
55,000 shares of common stock pursuant to an option plan, which permits the
grant of up to an aggregate of 100,000 shares of common stock. The warrants will
vest in one-third annual increments over three years, and options will generally
vest in one-fifth annual increments over five years. Upon the close of the
offering, we estimate that approximately 76.0% of the outstanding shares of our
common stock will be owned by persons who are neither directors, organizers nor
executive officers of Sun Bancshares. If our directors, organizers and
10
<PAGE> 12
executive officers were to exercise all of their warrants and options, the
percentage of our outstanding shares held by all other shareholders, upon the
close of the offering, would decrease to approximately 58.9%, representing a
relative ownership dilution of approximately 17.1 percentage points. In
addition, the exercise of the warrants or options could adversely affect the
terms on which we can obtain additional capital. For instance, the holders of
the warrants or options could exercise the warrants or options at a time when we
could otherwise obtain capital by offering additional securities on terms more
favorable to us than those provided for by the warrants or options. See
"Executive Compensation" on page 33.
WE MAY NOT BE ABLE TO RAISE ADDITIONAL CAPITAL, WHICH MAY LIMIT OUR ABILITY TO
GROW.
In the future, should we need additional capital to support our business,
expand our operations or maintain our minimum capital requirements, we may not
be able to raise additional funds through the issuance of additional shares of
common stock or other securities. If we are unable to raise additional capital,
our ability to grow may be limited due to regulatory capital requirements. If we
are unable to maintain our minimum capital requirements, we may be subject to
greater regulatory restrictions on our operations. See "Supervision and
Regulation -- Prompt Corrective Action" and "-- Capital Adequacy" on pages 41
and 43.
OUR ORGANIZERS, DIRECTORS AND OFFICERS COULD HAVE THE ABILITY TO INFLUENCE
SHAREHOLDER ACTIONS.
Our organizers, directors and executive officers together may be able to
significantly influence the outcome of director elections or a shareholders vote
on a significant transaction such as a merger or acquisition. Generally, a
quorum equal to a majority of the outstanding shares must be present for
shareholders to act. To be elected, a director nominee must receive more votes
than any other nominee for the same seat on the board of directors. A merger or
acquisition which has been approved by two-thirds vote of the board of directors
requires approval by a majority of the shareholders. A merger or acquisition
approved by a majority vote of the board of directors requires approval of
two-thirds of the shareholders. We anticipate that after this offering, our
organizers, directors and executive officers will directly or indirectly own
240,500 shares, representing 24.1%, of the outstanding common stock.
Additionally, we will be issuing warrants to our organizers and options to our
executive officers. Although these warrants and options will vest over time, if
our organizers, directors and executive officers exercise all of their warrants
and options, they would directly or indirectly own approximately 530,500 shares,
representing 41.1% of our outstanding stock if all these options and warrants
are exercised. These persons may acquire additional shares of common stock after
the offering, which could increase this percentage. Additionally, our board
members serve staggered three-year terms, which means only one-third of our
board members are elected each year at our annual meeting. Consequently, it
would take at least two years to replace a majority of our board members. See
"Description of Sun Bancshares' Capital Stock and Shareholders' Rights" on page
46.
WE ARE AUTHORIZED TO ISSUE ADDITIONAL SHARES OF COMMON STOCK WHICH, IF ISSUED,
MAY DILUTE YOUR OWNERSHIP INTEREST.
Our Articles of Incorporation authorize us to issue up to 10,000,000
shares of common stock without the consent of our shareholders. If we issue
additional shares of common stock, your ownership interest in Sun Bancshares
could be significantly reduced. Additionally, the sale of any shares of common
stock may be at prices lower than, or on terms better than, the shares sold in
this offering.
WE ARE AUTHORIZED TO ISSUE SHARES OF 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 2,000,000
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 of common stock. We do not
have any plans to issue any shares of preferred stock at this time. See
"Description of Sun Bancshares' Capital Stock and Shareholders' Rights" on page
46.
11
<PAGE> 13
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements concerning Sun
Bancshares and SunBank and their operations, performance, financial conditions
and likelihood of success. Forward-looking statements are based on many
assumptions and estimates and include statements about the competitiveness of
the banking industry, potential regulatory obligations, our business strategies
and other statements that are not historical facts. When used in this
prospectus, the words "may," "would," "could," "will," "expect," "anticipate,"
"believe," "intend," "plan" and "estimate," and similar expressions generally
identify forward-looking statements. Because forward-looking statements involve
risks and uncertainties that are beyond our control, our actual results may
differ materially from those expressed in the forward-looking statements. The
most significant of these risks, uncertainties and other factors are discussed
under the heading "Risk Factors" beginning on page 7 of this prospectus. We urge
you to carefully consider these factors prior to making an investment in our
common stock.
12
<PAGE> 14
USE OF PROCEEDS
We estimate that the net proceeds of the offering will be $9,295,000,
after deducting the underwriting discount of $560,000 and estimated
organizational and offering expenses of $145,000. If the underwriter exercises
its over-allotment option in full, we estimate net proceeds of the offering will
be $10,682,500, after deducting the underwriting discount of $672,500 and
organizational and offering expenses of $145,000.
We have established a line of credit in the amount of $850,000 to pay
pre-offering organizational and pre-opening expenses of Sun Bancshares and
SunBank and pre-construction costs such as architectural and engineering fees
associated with the construction of our main office and branch office buildings.
We intend to pay off the entire line of credit with proceeds that we receive
from this offering. The following two sections describe our proposed use of the
proceeds based on our current plans and business conditions. The organizational
and pre-opening expenses and construction costs described below include amounts
that were paid prior to the close of the offering with the proceeds of our line
of credit.
USE OF PROCEEDS BY SUN BANCSHARES
The following table shows the anticipated use of the proceeds by Sun
Bancshares. As shown, we will use $8,000,000 to capitalize SunBank. Sun
Bancshares will purchase the capital stock of SunBank after Sun Bancshares
receives approval to become a bank holding company and SunBank receives final
regulatory approval to begin its operations. Until we receive those regulatory
approvals, we plan to invest the $8,000,000 in short-term, investment-grade
securities, certificates of deposit or guaranteed obligations of the United
States government. We will initially invest the remaining proceeds of the
offering, including any additional amounts received as a result of the
underwriter's exercise of its over-allotment option, in United States
governmental securities or deposit them with SunBank. In the long-term, we will
use the remaining proceeds for operational expenses and other general corporate
purposes, including the provision of additional capital to SunBank, if
necessary. If the underwriter exercises its over-allotment option, the amount of
Sun Bancshares remaining proceeds shown below will be increased by up to
$1,387,500.
<TABLE>
<CAPTION>
AMOUNT
-----------
<S> <C>
Gross proceeds from offering................................ $10,000,000
Underwriter's discount...................................... $ 560,000
Expense of organizing Sun Bancshares........................ $ 10,000
Expense of offering......................................... $ 135,000
Investment in capital stock of SunBank...................... $ 8,000,000
-----------
Remaining proceeds.......................................... $ 1,295,000
===========
</TABLE>
USE OF PROCEEDS BY SUNBANK
SunBank intends to use the $8,000,000 capital it will receive from the
sale of its common stock to Sun Bancshares for the following purposes:
<TABLE>
<CAPTION>
AMOUNT
----------
<S> <C>
Investment by Sun Bancshares in SunBank's capital stock..... $8,000,000
Organizational and pre-opening expenses..................... $ 475,000
Construction of the main and branch office buildings........ $2,100,000
Purchase of temporary modular facility...................... $ 90,000
Furniture, fixtures and equipment for the main and branch
offices................................................... $ 805,000
----------
Remaining proceeds.......................................... $4,530,000
==========
</TABLE>
We will use the remaining proceeds to make loans, purchase securities and
otherwise conduct the business of SunBank.
13
<PAGE> 15
CAPITALIZATION
The following table shows Sun Bancshares' capitalization as of December
31, 1999 and its pro forma consolidated capitalization, as adjusted to give
effect to the receipt of the net proceeds from the sale of 1,000,000 shares of
common stock in this offering.
Upon Sun Bancshares' incorporation, Dalton B. Floyd, Jr., chairman of the
board and chief executive officer of Sun Bancshares, purchased one share of
common stock at the price of $10.00. Sun Bancshares will redeem this share for
$10.00 upon the issuance of shares in this offering. The number of shares shown
as outstanding after giving effect to the offering, and the book value of those
shares, do not include shares of common stock issuable upon the exercise of the
warrants or pursuant to options that may be granted under Sun Bancshares' stock
incentive plan. For additional information regarding the number and terms of
these warrants and options, see "Executive Compensation - Organizers' Warrants"
and "- Stock Incentive Plan" on page 34.
The "As Adjusted" column reflects the estimated cost of organizing Sun
Bancshares and organizing and preparing to open SunBank through the expected
opening date, which should be in the second quarter of 2000. See "Use of
Proceeds" on page 13.
<TABLE>
<CAPTION>
DECEMBER 31, 1999
----------------------------
AS ADJUSTED
ACTUAL FOR THE OFFERING
--------- ----------------
<S> <C> <C>
SHAREHOLDERS' EQUITY
Common stock, par value not stated; 10,000,000 shares
authorized; 1 share issued ($10.00) and outstanding;
1,000,000 shares issued ($10.00 each) and
outstanding as adjusted............................. $ 10 $9,305,000
Preferred stock, par value not stated; 2,000,000
shares authorized, no shares issued and
outstanding......................................... 0 0
Deficit accumulated during the pre-opening stage...... (164,796) (485,000)
--------- ----------
Total shareholders' equity............................ $(164,786) $8,820,000
========= ==========
Book value per share.................................. N/A $ 8.82
==========
</TABLE>
DIVIDENDS
Initially, we intend to retain all of our earnings to support our
operations and to expand our business. Additionally, both Sun Bancshares and
SunBank are subject to significant regulatory restrictions on the payment of
cash dividends. In light of these restrictions and the need for Sun Bancshares
and SunBank to retain and build capital, we do not plan to pay dividends until
we become profitable and recover any losses incurred during our initial
operations. Our payment of future dividends and dividend policy will depend on
the earnings, capital requirements and financial condition of Sun Bancshares and
SunBank and on other factors that our board of directors considers relevant. See
"Supervision and Regulation - Payment of Dividends" on page 43.
14
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
PLAN OF OPERATIONS
Sun Bancshares' financial statements and related notes, which are included
in this prospectus, provide additional information relating to the following
discussion of its financial condition. See "Index to Financial Statements" on
page F-1.
Sun Bancshares was organized on August 3, 1999 to serve as a holding
company for SunBank, N.A., a national bank in organization. Since it was
organized, Sun Bancshares' main activities have been:
- seeking, interviewing and selecting its officers;
- applying for a national bank charter;
- applying for FDIC deposit insurance;
- applying to become a bank holding company;
- preparing detailed business plans;
- identifying sites for our banking facilities; and
- raising equity capital through this offering.
FINANCIAL RESULTS
From August 3, 1999 to December 31, 1999, the net loss amounted to
$164,796. The estimated net loss for the period from August 3, 1999 through June
2000, the anticipated opening date of SunBank, is $485,000, which is
attributable to the following estimated noninterest expenses:
<TABLE>
<S> <C>
Salaries and benefits....................................... $292,000
Legal and professional fees................................. 75,000
Other pre-opening expenses.................................. 118,000
--------
Total............................................. $485,000
========
</TABLE>
LINE OF CREDIT
We have obtained a line of credit from The Bankers Bank, Atlanta, Georgia
for $850,000 to fund our operations from August 3, 1999 through the close of the
offering and to fund pre-construction costs associated with the construction of
our main office and branch office buildings. At December 31, 1999, $250,000 was
outstanding on the line of credit, and at January 31, 2000 approximately
$320,000 was outstanding and $530,000 was available on the line of credit. The
line of credit has been guaranteed by the organizers, bears interest at the
prime rate as published in the Money Rates section of The Wall Street Journal
minus 1/2%, and is due on September 30, 2000. The initial interest rate on the
line of credit was 7.5% as of July 30, 1999 and currently bears interest at
8.50%.
OFFICES AND FACILITIES
We intend to lease the land for the sites of our permanent main and branch
offices. On November 12, 1999, we entered into an option agreement that expires
on May 1, 2000 for the lease of our branch office site. Under the terms of the
agreement we are required to make monthly option payments of $4,583 through the
term of the option. We may exercise the option at any time during the option
term upon ten days written notice to the lessor. Upon exercise of the option,
all option payments that we have paid will be credited to our first year rental
payments. We have also entered into a letter of intent with regards to the lease
of our main office site. Under the terms of the option agreement for the branch
office site and the letter of intent of the main office site, we anticipate that
the significant terms of these leases will be as described in the table below.
<TABLE>
<CAPTION>
INITIAL
LEASE DATE MONTHLY RENTAL INITIAL TERM RENEWAL OPTIONS
---------- -------------- ------------ ---------------
<S> <C> <C> <C> <C>
Main Office Site....... May 2000 $7,500 25 Years Up to 15 Years
Branch Site............ May 2000 $4,583 30 Years Up to 20 Years
</TABLE>
15
<PAGE> 17
Additionally, each of the leases calls for us to pay taxes, insurance and
repairs on the leased properties.
We intend to begin our banking operations in the second quarter of 2000 in
temporary facilities. We plan to purchase a temporary modular facility to be
used as our main office until our permanent main office is completed. We
estimate that the purchase price of the modular facility will be approximately
$90,000. The modular facility will be located approximately one-tenth of a mile
from the site for our permanent main office building. We intend to lease the
site for the temporary main office on a month-to-month basis and estimate that
the monthly rental rate will be approximately $2,000. We plan to lease temporary
store front office space in Georgetown, where our Georgetown city manager will
be located until the construction of the branch is complete. We will not provide
branch banking services from this temporary office, but will use this location
to establish a market presence in Georgetown and to allow our city manager to
begin recruiting employees and developing business. We plan to complete
construction of the main office in the third quarter of 2001 and the branch
office in the fourth quarter of 2000. SunBank will fund the construction of the
main and branch office buildings with a portion of the capital that it receives
from Sun Bancshares after the close of this offering.
LIQUIDITY AND INTEREST RATE SENSITIVITY
Since Sun Bancshares is in the organizational stage, there are no results
to present at this time. Nevertheless, once SunBank begins operations, net
interest income, Sun Bancshares' primary source of earnings, will fluctuate with
significant interest rate movements. To lessen the impact of these margin
swings, we intend to structure the balance sheet so that repricing opportunities
exist for both assets and liabilities in roughly equal amounts at approximately
the same time intervals. Imbalance in these repricing opportunities at any point
in time creates interest rate sensitivity.
Interest rate sensitivity refers to the responsiveness of interest-bearing
assets and liabilities to change in market interest rates. The rate sensitive
position, or gap, is the difference in the volume of rate sensitive assets and
liabilities at a given time interval. The general objective of gap management is
to actively manage rate sensitive assets and liabilities in order to reduce the
impact of interest rate fluctuations on net interest income. We will generally
attempt to maintain a balance between rate sensitive assets and liabilities as
the exposure period is lengthened to minimize SunBank's overall interest rate
risks.
We will evaluate regularly the balance sheet's asset mix in terms of
several variables: yield, credit quality, appropriate funding sources and
liquidity. To manage effectively the balance sheet's liability mix, we plan to
focus on expanding our deposit base and converting assets to cash as necessary.
As SunBank grows, we will continuously structure its rate sensitivity
position in an effort to hedge against rapidly rising or falling interest rates.
SunBank's Asset and Liability Management Committee will meet on a quarterly
basis to develop a strategy for the upcoming period.
Liquidity represents the 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 can obtain these funds by converting assets to cash or by
attracting new deposits. SunBank's ability to maintain and increase deposits
will serve as its primary source of liquidity.
We know of no trends, demands, commitments, events or uncertainties that
should result in, or are reasonably likely to result in, Sun Bancshares'
liquidity increasing or decreasing in any material way in the foreseeable
future, other than this offering.
CAPITAL ADEQUACY
Capital adequacy for banks and bank holding companies is regulated by the
Office of the Comptroller of the Currency, the Federal Reserve and the FDIC. The
primary measures of capital adequacy for banks and bank holding companies are
(1) risk-based capital guidelines and (2) the leverage
16
<PAGE> 18
ratio. Changes in these guidelines or our levels of capital can affect our
ability to expand and pay dividends. See "Supervision and Regulation - Capital
Adequacy" on page 43.
After we open SunBank, we plan to develop our loan portfolio and our
deposit base. Based on our anticipated level of growth, we believe the net
proceeds of this offering will satisfy our cash and regulatory capital
requirements for at least the twelve months following this offering.
Accordingly, we do not anticipate that it will be necessary to raise additional
funds to operate Sun Bancshares or SunBank over the next twelve months. For
additional information about planned expenditures, see "Use of Proceeds" on page
13, and for additional information about our plan of operations, see "Proposed
Business" on page 18.
17
<PAGE> 19
PROPOSED BUSINESS
BACKGROUND
Sun Bancshares. We incorporated Sun Bancshares as a South Carolina
corporation on August 3, 1999 to serve as a bank holding company that will hold
100% of the capital stock of SunBank, a new national bank in organization. Sun
Bancshares plans to use $8.0 million of the net proceeds of this offering to
purchase the capital stock of SunBank. Initially, we will have no business
operations other than owning and managing SunBank. We will apply to the Federal
Reserve for approval to become a bank holding company. We have chosen this
holding company structure because we believe it will provide flexibility that
would not otherwise be available. With a holding company structure, we may
assist SunBank in maintaining its required capital ratios by borrowing money and
contributing the proceeds of that debt to SunBank as primary capital.
SunBank. SunBank is a national bank in organization that plans to engage
in general commercial and consumer banking. On November 17, 1999, we filed an
application with the Office of the Comptroller of the Currency to organize
SunBank in Murrells Inlet, South Carolina with a branch office in Georgetown,
South Carolina. On the same day, we also filed an application with the FDIC to
obtain insurance for SunBank's deposits. We have received preliminary
conditional approval of our application to the Office of the Comptroller of the
Currency. Final approval of this application is conditioned upon our raising the
required minimum capital, receipt of FDIC approval, and the implementation of
proper bank regulatory policies and procedures. During the first three years of
our operations, we must give the Office of the Comptroller of the Currency
thirty days prior written notice of any intention to significantly deviate from
the operating plan we filed as part of our application. Subject to receiving
final regulatory approvals from these agencies, we plan to open SunBank in the
second quarter of 2000.
OUR MARKET
The coastal region of South Carolina's Horry and Georgetown Counties,
often called the "Grand Strand," is recognized as one of the fastest growing
regions in the country. The Grand Strand stretches approximately 60 miles from
the North Carolina-South Carolina border at Little River south along the
"Waccamaw Neck" to Georgetown, and is best known for its largest city, Myrtle
Beach. In April 1995, American Demographics ranked Myrtle Beach as the second
fastest growing metropolitan area in both projected annual population growth and
projected employment growth from 1995-2005.
As reported by the American Automobile Association, the Grand Strand is
the second busiest vacation destination in the nation, drawing more than 10
million visitors each year to its beaches, entertainment attractions and more
than 100 golf courses. According to the Myrtle Beach Area Chamber of Commerce,
the direct economic impact of tourism along the Grand Strand was $2.6 billion in
1997, and direct and indirect economic expenditures totaled $5.1 billion, or
more than 35% of South Carolina's total travel and tourism revenue. According to
a recent Waccamaw Regional Council study, for the ten-year period from 2000 to
2010, the annual combined tourist population for Georgetown and Horry Counties
is expected to increase more than 27% from an estimated 10,372,958 to an
estimated 13,227,640.
The region has also become a popular spot for retirees. In recent years,
the Grand Strand was mentioned in The Wall Street Journal as one of the top
spots in America for retirement, and Money magazine rated it as one of the top
20 places to retire in America. The number of persons over the age of 65 living
along the Grand Strand has grown more than 300% from 1970 to 1996, and now
accounts for approximately 13% of the combined resident population of Georgetown
and Horry Counties.
The region's tourism, hospitality, retail and entertainment base is
supported by a substantial construction and real estate development industry.
Georgetown and Horry Counties also have a sizeable manufacturing and industrial
base. Major industrial employers include AVX Corporation, Conbraco Industries,
Inc., International Paper Company, Georgetown Steel Corporation and Superior
Manufacturing. The healthcare sector is represented by Grand Strand Regional
Medical Center, Conway Hospital and
18
<PAGE> 20
Georgetown Memorial Hospital, and centers for higher education include Coastal
Carolina University and Horry-Georgetown Technical College.
According to a 1997 population and economic study performed by the
Waccamaw Regional Planning and Development Council, over the period 1990 to
1995, the population of Horry County increased 20.5% from 145,300 to 175,100.
Over the same period, the population of Georgetown County increased 11.2% from
46,500 to 51,700. Additionally, the population of Horry County is expected to
grow 41.5% from an estimated 209,200 to 296,000 over the ten-year period from
2000 to 2010, and the population of Georgetown County is expected to grow 21.6%
from an estimated 57,000 to 69,300 over the same period. Also, the growth rate
of median income per family in Georgetown and Horry Counties from 1990 to 1995
outpaced the growth rate for the state of South Carolina as well as for the
United States.
OUR PRIMARY SERVICE AREA
Our primary service area for SunBank will include southern Horry County
and most of Georgetown County. This area, commonly referred to as the "South
Strand" or "Waccamaw Neck," encompasses the coastal communities south of Myrtle
Beach, including Socastee, Surfside Beach, Garden City Beach, Murrells Inlet,
Litchfield Beach, Pawleys Island, DeBordieu and Georgetown. We expect initially
to draw a large percentage of our business from the areas immediately
surrounding the communities of Murrells Inlet and Georgetown, the locations of
our planned main office and first branch office.
We believe that our chosen communities will benefit greatly from the
continuing growth of the Grand Strand, particularly as available real estate and
development opportunities to the north of Myrtle Beach become more scarce.
Growth in our communities is evidenced not only through the population growth,
but also through increases in new businesses, new golf course communities,
residential building permits, commercial construction and the influx of
additional medical services and other public infrastructure projects. Some
examples include a new 40-bed hospital in Murrells Inlet, new post offices in
Pawleys Island, Murrells Inlet and Socastee, a new middle school between
Murrells Inlet and Pawleys Island, an expansion of Horry-Georgetown Technical
College and a proposed $250 million, 1,200-acre residential community near
Georgetown.
MANAGEMENT PHILOSOPHY AND BUSINESS STRATEGY
Through our localized management and ownership we believe we will be
uniquely situated to provide responsive service and quality financial products
that are tailored to meet the needs of the individuals and small- to
medium-sized businesses located throughout the Waccamaw Neck. We believe that
local ownership and control will allow SunBank to serve customers more
efficiently and will aid in SunBank's growth and success. Our motto at SunBank
will be "Your Community . . . Your Bank." We believe the community will embrace
and support our concept of community banking. Additionally, we believe that the
expansion and growth of SunBank's operations will be a significant factor in Sun
Bancshares' success.
Although size gives larger banks advantages in competing for business from
large corporations, including higher lending limits and the ability to offer
services in other geographic areas, we believe that there is a void in the
community banking market in the Georgetown/Horry County area and that we can
successfully help fill this void. We will not compete with large institutions
for the primary banking relationships of large corporations, but will compete
for niches in this business and for the consumer business of their employees. We
will also focus on small- to medium-sized businesses and their employees. This
includes retail, service, wholesale distribution, manufacturing and
international businesses. We intend to attract these businesses based on
relationships and contacts which the bank's directors and management have within
and beyond our primary service area. In order to achieve the level of prompt,
responsive service that we believe will be necessary to attract customers and to
develop SunBank's image as a local bank with an individual focus, we will employ
the following strategies:
- Experienced Senior Management. We have assembled a senior management
team that possesses extensive experience in the banking industry as
well as substantial business and
19
<PAGE> 21
banking contacts in our target market. For example, SunBank's president
and chief executive officer, Thomas Bouchette, has over 13 years of
experience and our chief financial officer, Randy L. Carmon, has over
21 years of finance and bank operations experience. See "Management" on
page 27.
- Quality Employees. We will strive to hire experienced staff who
appreciate our emphasis on professionalism and customer service and who
have established significant customer relationships through prior
banking experience. By hiring employees with established customer
relationships, SunBank may be able to grow more rapidly than it would
if it were to hire employees who would require time to develop a
customer base. We plan to train the staff to answer questions about all
of our products and services so that the first employee the customer
encounters can resolve their questions. We are committed to hiring
experienced and qualified staff, although this may result in higher
initial personnel costs than are typically experienced by similar
financial institutions.
- Community-Oriented Board of Directors. Our board of directors consists
of long-time residents of the Georgetown/Horry County area who
represent SunBank's target markets and will be sensitive and responsive
to the needs of the community. Additionally, our board of directors
represents a wide array of business experience and community
involvement. We expect that the directors will bring substantial
business and banking contacts to SunBank as a result of their
experience, involvement and community standing.
- Community Involvement. SunBank plans to be an active participant in
and supporter of community organizations and activities that promote
economic development and charitable and social causes. Currently, all
of our officers and directors are active in the Georgetown/Horry County
communities, and we intend to encourage other employees to become
involved in the community.
- Highly Visible Locations. SunBank's proposed main office and branch
locations are highly visible and near high concentrations of our
targeted commercial business and residential customers. We believe this
will enhance SunBank's image as a strong competitor in the local
banking community. SunBank will construct a main office building with
sufficient room to allow for future expansion. The size of our proposed
main office will allow for additional loan officers and for expansion
of our operations to include new products and services. We intend to
open additional branches during our third year of operation and will
consider adding additional branches in other strategic locations, as
appropriate. Additional branches will provide us with new channels
through which we can build our deposit and loan base, solicit new
customers and better serve existing customers with more convenient
banking services.
- Individual Customer Focus. SunBank will focus on providing
individualized service and attention to our target customers, which
include individuals and small- to medium-sized businesses. We will
concentrate on establishing and maintaining long-term customer
relationships. As our employees, officers and directors develop
relationships with our customers, we will be able to respond to credit
requests more quickly and be more flexible in approving loans based on
collateral quality and personal knowledge of the customer's banking
needs. To facilitate the development of new customer relationships, we
intend to implement an active officer and director call program. The
purpose of this call program will be to personally visit prospective
customers at their places of business and describe SunBank's products,
services and philosophy.
- Local Decision Making. We want our customers to enjoy a professional
bank environment with access to their specific bank officer. We will
emphasize local decision-making with experienced bankers, a focus on
employee retention, and professional and responsive service. As SunBank
branches into other communities, we intend to maintain our policy of
making decisions locally and to utilize local advisory boards.
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<PAGE> 22
- Offer Customer-Focused Products and Services. SunBank's range of
services, pricing strategies, interest rates paid and charged, and
hours of operation will be structured to attract our target customers
and establish and grow our market share. SunBank will strive to offer
small businesses, professionals, entrepreneurs and consumers the best
loan services available while charging appropriate fees for these and
other services. We will also use technology and engage third-party
service providers to perform basic operational functions at a lower
cost than we might provide directly.
LENDING SERVICES
Lending Policy. We will offer a full range of lending products, including
commercial, real estate and consumer loans to individuals and small- and
medium-sized businesses and professional concerns. We will compete for these
loans with competitors who are well established in the Georgetown/Horry County
area and have greater resources and lending limits. As a result, we may have to
charge lower interest rates to attract borrowers.
SunBank intends to maintain a balanced loan portfolio. Our target loan mix
will be 35% commercial loans, 25% real estate loans, 20% consumer loans and 20%
residential mortgage loans. Based on our executive officers' past lending
experience, we believe that none of these categories represents a significantly
higher risk than the other. Additionally, SunBank plans to avoid concentrations
of loans to a single industry or based on a single type of collateral, although
we expect to offer a variety of products and services to our region's large
medical community.
Loan Approval and Review. SunBank's loan approval policies will provide
for various levels of officer lending authority. When the amount of total loans
to a single borrower exceeds that individual officer's lending authority, an
officer with a higher lending limit or SunBank's Loan Committee will determine
whether to approve the loan request. SunBank will not make any loans to any of
its directors or executive officers unless its board of directors approves the
loan, and the terms of the loan are no more favorable than would be available to
any other applicant.
Lending Limits. SunBank's lending activities will be subject to a variety
of lending limits imposed by federal law. Differing limits apply in certain
circumstances based on the type of loan or the nature of the borrower, including
the borrower's relationship to the bank. In general, however, SunBank will be
able to loan any one borrower a maximum amount equal to either:
- 15% of SunBank's capital and surplus; or
- 25% of its capital and surplus if the amount that exceeds 15% is fully
secured by readily marketable collateral.
Based on its proposed capitalization and projected pre-opening expenses,
SunBank's initial lending limit will be approximately $1.1 million for loans not
fully secured plus an additional $752,500, or a total of approximately $1.9
million, for loans fully secured by readily marketable collateral. Initially,
however, we intend to impose an internal lending limit of approximately $1.0
million, or 13%, of SunBank's capital. These limits will increase or decrease as
SunBank's capital increases or decreases as a result of its earnings or losses,
among other reasons. SunBank will need to sell participations in its loans to
other financial institutions in order to meet all of the lending needs of loan
customers requiring extensions of credit above these limits.
Credit Risks. The principal economic risk associated with each category
of loans that SunBank expects to make is the creditworthiness of the borrower.
Borrower creditworthiness is affected by general economic conditions and the
strength of the relevant business market segment. General economic factors
affecting a borrower's ability to repay include interest, inflation and
employment rates, as well as other factors affecting a borrower's customers,
suppliers and employees.
The well established financial institutions in the Georgetown/Horry County
market are likely to make proportionately more loans to medium to large-sized
businesses than SunBank will make. Many of
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<PAGE> 23
SunBank's anticipated commercial loans will likely be made to small- to
medium-sized businesses that may be less able to withstand competitive, economic
and financial pressures than larger borrowers.
Commercial Loans. We expect that loans for commercial purposes in various
lines of businesses will be one of the primary components of SunBank's loan
portfolio. The terms of these loans will vary by purpose and by type of
underlying collateral, if any. SunBank will typically make equipment loans for a
term of five years or less at fixed or variable rates, with the loan fully
amortized over the term. Equipment loans generally will be secured by the
financed equipment, and the ratio of the loan principal to the value of the
financed equipment or other collateral will generally be 80% or less. Loans to
support working capital will typically have terms not exceeding one year and
will usually be secured by personal guarantees of the principals of the business
and accounts receivable and/or inventory. For loans secured by accounts
receivable or inventory, principal will typically be repaid as the assets
securing the loan are converted into cash, and for loans secured with other
types of collateral, principal will typically be due at maturity. The quality of
the commercial borrower's management and its ability both to properly evaluate
changes in the supply and demand characteristics affecting its markets for
products and services and to respond effectively to these changes are
significant factors in a commercial borrower's creditworthiness.
Real Estate Loans. SunBank will make commercial real estate loans,
construction and development loans, and residential real estate loans. These
loans may include certain commercial loans where SunBank takes a security
interest in real estate out of an abundance of caution and not as the principal
collateral for the loan, but will exclude home equity loans, which are
classified as consumer loans.
- Commercial Real Estate. Commercial real estate loan terms generally
will be limited to five years or less, although payments may be
structured on a longer amortization basis. Interest rates may be fixed
or adjustable, although rates will generally not be fixed for a period
exceeding 60 months. SunBank will generally charge an origination fee
from 0.5% to 1.0% on these loans. We will attempt to reduce credit risk
on our commercial real estate loans by emphasizing loans on
owner-occupied office and retail buildings where the ratio of the loan
principal to the value of the collateral, as established by independent
appraisal, does not exceed 80%, and net projected cash flow available
for debt service generally equals 120% of the debt service requirement.
In addition, SunBank will generally require personal guarantees from the
principal owners of the property supported by a review by SunBank's
management of the principal owners' personal financial statements. Risks
associated with commercial real estate loans include fluctuations in the
value of real estate, new job creation trends, tenant vacancy rates and
the quality of the borrower's management. SunBank will limit its risk by
analyzing borrowers' cash flow and collateral value on an ongoing basis.
SunBank will compete for real estate loans with competitors that are
well established in the Georgetown/Horry County market.
- Construction and Development Loans. Construction and development loans
will be made both on a pre-sold and speculative basis. If the borrower
has entered into an agreement to sell the property prior to beginning
construction, then the loan is considered to be on a pre-sold basis. If
the borrower has not entered into an agreement to sell the property
prior to beginning construction, then the loan is considered to be on a
speculative basis. Construction and development loans are generally made
with a term of nine to twelve months and interest is paid monthly or
quarterly. The ratio of the loan principal to the value of the
collateral as established by an independent appraisal generally will not
exceed 75%. Speculative loans will be based on the borrower's financial
strength and cash flow position. Normally, loan proceeds will be
disbursed based on the percentage of completion and only after the
project has been inspected by an experienced construction lender or
appraiser chosen by SunBank. Risks associated with construction loans
include fluctuations in the value of real estate and new job creation
trends.
- Residential Real Estate. SunBank's residential real estate loans will
consist of residential first and second mortgage loans and residential
construction loans. We will offer fixed and variable rates on our
mortgages with the amortization of first mortgages generally not to
exceed 15 years and the rates not to be fixed for over 60 months. These
loans will be made consistent with
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<PAGE> 24
SunBank's appraisal policy and with the ratio of the loan principal to
the value of collateral, as established by independent appraisal, not to
exceed 90%. We expect these loan to value ratios will be sufficient to
compensate for fluctuations in real estate market values and to minimize
losses that could result from a downturn in the residential real estate
market. SunBank plans to open a mortgage department to process home
loans within the first 12 months of operation, which will allow it to
originate long term mortgages to be sold on the secondary market.
SunBank intends to limit interest rate risk and credit risk on these
loans by locking in the interest rate for each loan with the secondary
market investor and receiving the investor's underwriting approval
before originating the loan.
Consumer Loans. SunBank will make a variety of loans to individuals for
personal, family and household purposes, including secured and unsecured
installment and term loans, home equity loans and lines of credit. Consumer loan
repayments depend upon the borrower's financial stability and are more likely to
be adversely affected by divorce, job loss, illness and personal hardships.
Because many consumer loans are secured by depreciable assets such as boats,
cars, and trailers, the loan should be amortized over the useful life of the
asset. To minimize the risk that the borrower cannot afford the monthly
payments, all fixed monthly obligations should not exceed 40% of the borrower's
gross monthly income. The borrower should also be continuously employed for at
least 12 months prior to obtaining the loan and an employee in good standing at
the time of the loan. The loan officer will review the borrower's past credit
history, past income level, debt history and, when applicable, cash flow and
determine the impact of all these factors on the ability of the borrower to make
future payments as agreed. We expect that the principal competitors for consumer
loans will be the established banks in the Georgetown/Horry County market.
Lending Officers. SunBank intends to initially hire at least one
commercial lender, one real estate lender and two consumer lenders in order to
develop its loan portfolios. Each lender will have experience within the
Georgetown/Horry County market and will be expected to bring substantial
contacts to SunBank.
INVESTMENTS
In addition to loans, SunBank will make other investments primarily in
obligations of the United States or obligations guaranteed as to principal and
interest by the United States and other taxable securities. No investment in any
of those instruments will exceed any applicable limitation imposed by law or
regulation. The Asset and Liability Management Committee will review the
investment portfolio on an ongoing basis in order to ensure that the investments
conform to SunBank's policy as set by the board of directors.
ASSET AND LIABILITY MANAGEMENT
The Asset and Liability Management Committee will manage SunBank's assets
and liabilities and will strive to provide a stable, optimized net interest
margin, a profitable after-tax return on assets and return on equity and
adequate liquidity. The committee will conduct these management functions within
the framework of written loan and investment policies that SunBank will adopt.
The committee will attempt to maintain a balanced position between rate
sensitive assets and rate sensitive liabilities. Specifically, it will chart
assets and liabilities on a matrix by maturity, effective duration and interest
adjustment period and attempt to manage any gaps in maturity ranges.
DEPOSIT SERVICES
SunBank will seek to establish a sound base of core deposits, including
checking accounts, money market accounts, savings accounts, a variety of
certificates of deposit and IRA accounts. To attract deposits, SunBank will
employ an aggressive marketing plan in the overall service area and feature a
broad product line and rates and services competitive with those offered in the
Georgetown/Horry County market. The primary sources of deposits will be
residents of, and businesses and their employees located in, the Waccamaw Neck
communities. SunBank plans to obtain these deposits through personal
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<PAGE> 25
solicitation by its officers and directors, direct mail solicitations and
advertisements published in the local media.
OTHER BANKING SERVICES
Other anticipated bank services include cashier's checks, safe-deposit
boxes, travelers checks, bank by mail, direct deposit and U.S. Saving Bonds.
SunBank plans to associate with a shared network of automated teller machines
that its customers will be able to use throughout South Carolina and other
regions. We also plan to offer MasterCard(R) and VISA(R) credit card services
through a correspondent bank as an agent for SunBank. SunBank does not plan to
exercise trust powers during its initial year of operation. SunBank may in the
future offer a full-service trust department, but cannot do so without the prior
approval of the Office of the Comptroller of the Currency.
SunBank will also offer its targeted commercial customers a courier
service that will pick up non-cash deposits from the customer's place of
business and deliver them to the bank. We believe that this will be an important
convenience to our customers because SunBank will initially have only two
locations.
FUTURE SERVICES
We anticipate that, at some time in the future, we will also offer
discount brokerage and insurance services to our customers. We intend to delay
offering these services until both Sun Bancshares and SunBank are operating
profitably. We also plan to offer annuities, mutual funds and other financial
services through a third party that has not yet been chosen.
MARKETING AND ADVERTISING
SunBank's target customers will be the residents and the small- to
medium-sized businesses and their employees located in the Georgetown/Horry
County market.
We intend to develop our image as a community-oriented bank with an
emphasis on quality service and personal contact. We plan to use a targeted
marketing approach through local newspapers, radio advertisements during peak
driving times, direct mail campaigns and television spots, as necessary.
Additionally, we plan to sponsor community activities on an active, ongoing
basis. We have retained Brandon Advertising to coordinate our advertising and
marketing efforts.
Several of our directors and officers have developed business contacts
with numerous professionals within the medical service industry. Although we
intend to avoid concentrations to one industry, we intend to develop a niche in
providing banking services to these and other medical providers.
COMPETITION
The banking business is highly competitive. SunBank will compete with
other commercial banks, savings and loan associations, credit unions, money
market mutual funds and other financial institutions conducting business in the
Georgetown/Horry County market and elsewhere. According to information provided
by the FDIC as of June 30, 1999, the Georgetown/Horry County area was served by
25 banking and savings institutions with 18 offices in Georgetown County and 89
offices in Horry County. In aggregate, these institutions held over $3.2 billion
in local deposits as of June 30, 1999. A number of these competitors are well
established in the Georgetown/Horry County area.
Currently, no financial institution is headquartered in Murrells Inlet or
the City of Georgetown, and most of the institutions that have offices in our
primary service area are large national, super-regional or regional banks.
Additionally, on January 10, 2000, Anchor Financial Corporation, a regional bank
holding company headquartered in Myrtle Beach, South Carolina announced that it
intends to merge with Carolina First Corporation, a regional bank holding
company headquartered in Greenville, South Carolina. We believe these types of
mergers can diminish the autonomy and community identity of local institutions,
thereby creating more demand for locally-owned and managed, community-oriented
banks in our primary market. We believe that larger banks often lack the
consistency of local leadership and decision-making
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<PAGE> 26
authority necessary to provide efficient service to individuals and small- to
medium-sized business customers. Through our local ownership and management, we
believe we will be uniquely situated to efficiently provide these customers with
loan, deposit and other financial products tailored to fit their specific needs.
Our competitors will include large national and super-regional banks like
Bank of America, Wachovia and BB&T, large regional banks like Carolina First
Bank, and local banks like Coastal Federal, Conway National Bank and Plantation
Federal. Many of these competitors are well established in the Georgetown/Horry
County area. Additionally, most of them have substantially greater resources and
lending limits than SunBank will have and provide other services, such as
extensive and established branch networks and trust services, that we either do
not expect to provide or will not provide initially. As a result of these
competitive factors, SunBank may have to offer more flexible pricing and terms
on its loans and deposits to attract borrowers.
INFORMATION SYSTEMS AND THE YEAR 2000
The year 2000 issue common to most corporations concerns the inability of
computer software and databases to recognize the year 2000 and other year
2000-sensitive dates such as February 29, 2000 or January 1, 2001. Since the
millennium change has already occurred and we do not intend to begin our banking
operations until the second quarter of 2000, we will not face the same date
recognition issues as other financial institutions that were in operation at
January 1, 2000. Sun Bancshares, SunBank, or any of their service providers,
correspondents, vendors or customers may, however, experience a disruption of
business resulting from a year 2000 problem occurring after January 1, 2000.
Year 2000 disruptions could cause a delay in beginning our banking operations
and could have an adverse effect on our financial performance.
To date, we have not experienced any disruptions to our organization
resulting from year 2000 problems, nor are we aware of any disruptions to the
business of any of our expected service providers, correspondents or vendors. We
believe most year 2000 issues which could affect our operations will have
surfaced prior to when we begin our banking operations. Consequently, we do not
expect any year 2000 issues to have a material effect on our operations.
EMPLOYEES
When it begins operations, SunBank will have approximately 16 full-time
employees. We do not expect that Sun Bancshares will have any employees who are
not also employees of SunBank.
FACILITIES
Main Office. SunBank's main office will be located at 4200 Highway 17
Bypass in Murrells Inlet, South Carolina in Georgetown County. Sun Bancshares
will lease approximately 1.9 acres of land at this site at a monthly lease rate
of approximately $7,500. The initial term of the land lease will be 25 years
with renewal options for a total of 15 additional years. We plan to begin
construction of our permanent main office facility at this site by August 2000,
with the completion anticipated in the third quarter of 2001. The permanent main
office facility will be a two-story, traditional style building. The building
will consist of approximately 10,000 square feet and will include four drive-up
lanes and one ATM. We anticipate that this space will be sufficient to support
our initial operations and some expansion of our operations. The estimated
construction costs of the building total $1.5 million.
SunBank's proposed main office location offers high visibility in an area
with significant traffic, and is located within one-half mile of the main
shopping and retail area in Murrells Inlet. This area is the central location
for business, residential, commuting and shopping in Murrells Inlet and is on a
major highway serving the community.
SunBank will operate initially out of a temporary modular facility until
our permanent main office facility is constructed. We plan to begin our banking
business at the temporary facility in the second
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quarter of 2000. We plan to locate the temporary facility approximately
one-tenth of a mile from the site for the permanent main office facility. We
intend to purchase the modular facility for approximately $90,000.
Branch Office. We intend to open a branch office located at 1134 North
Fraser Street in Georgetown, South Carolina. We will lease approximately 1.1
acres of land at this site at a monthly lease rate of approximately $4,583. The
initial term of the land lease will be 30 years with renewal options for a total
of 20 additional years. We plan to begin construction of the branch office in
June 2000 and expect the construction to be complete in the fourth quarter of
2000. The branch office will be a one story, traditional style building,
consisting of approximately 5,000 square feet, three drive-up windows and one
ATM. The estimated construction costs of the building total $600,000.
During the construction of our permanent branch office, we intend to lease
temporary store front office space in Georgetown. We will not provide branch
banking services from this office, but will use this location to establish a
market presence in Georgetown and to allow our city manager to begin recruiting
employees and developing business. All business developed at this office prior
to the opening of the permanent branch office will be recorded at the main
office.
SunBank's proposed branch office location is on a corner lot in a planned
unit development. The branch office is in a high growth area in Georgetown. A
new Wal-Mart Super Center recently opened three-tenths of a mile north of the
site and a new 21,000 square foot post office recently opened within one-fifth
of a mile from the site. Additionally, the Georgetown Hospital and most of the
medical service providers within the area are located within a two-mile radius
of the site.
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MANAGEMENT
GENERAL
The following table sets forth the number and percentage of outstanding
shares of common stock we expect to be beneficially owned by our directors and
executive officers after the completion of this offering. The addresses of our
directors and executive officers are the same as the address of Sun Bancshares.
Prior to the offering, Dalton B. Floyd, Jr. purchased one share of common stock
for $10.00 per share. We will redeem this share after the offering. The numbers
of shares indicated in the table are based on "beneficial ownership" concepts as
defined by the Securities and Exchange Commission. Beneficial ownership includes
shares owned by 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 director to purchase one share of common stock for
each share of common stock purchased by the director in this offering because
these warrants will not be exercisable within 60 days of the date of this
prospectus.
<TABLE>
<CAPTION>
SHARES ANTICIPATED TO BE OWNED
FOLLOWING THE OFFERING
------------------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT
------------------------ ------- -------
<S> <C> <C>
DIRECTORS:
Thomas Bouchette 10,000 1.0%
Edsel J. ("Coupe") DeVille 15,000 1.5%
John S. Divine, III 17,500 1.8%
Dalton B. Floyd, Jr. 20,000 2.0%
Jeanne Louise Fourrier-Eggart 15,000 1.5%
David E. Grabeman 15,000 1.5%
Richard Edwin Heath 10,000 1.0%
Paul John Hletko 17,500 1.8%
Judy B. Long 10,000 1.0%
Thomas O. Morris, Jr. 20,000 2.0%
Joel A. Pellicci 10,000 1.0%
Donald E. Perry 10,000 1.0%
Chandler C. Prosser 30,000 3.0%
Larry N. Prosser 30,000 3.0%
EXECUTIVE OFFICERS WHO ARE
NOT ALSO DIRECTORS:
Randy L. Carmon 500 *
------- ----
All Proposed Directors and Executive Officers as
a
Group (15 persons) 230,500 23.1%
</TABLE>
- ---------------
* Represents ownership of less than 1.0%.
In addition to the individuals listed in the table above, Gary L. Schaal,
an organizer of Sun Bancshares, intends to purchase 10,000 shares, or 1.0%, of
our common stock in this offering and will receive a warrant to purchase an
additional 5,000 shares.
DIRECTORS AND EXECUTIVE OFFICERS OF SUN BANCSHARES
The following table sets forth the ages as of January 1, 2000 of our
directors and executive officers and the positions that they hold with Sun
Bancshares. Each person listed below as a director has served as a director of
Sun Bancshares since August 30, 1999. Both our president and chief executive
officer have served us in these capacities since August 30, 1999. Thomas
Bouchette will serve as president and chief executive officer of SunBank and
Randy L. Carmon will serve as chief financial officer of Sun Bancshares
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<PAGE> 29
and SunBank. The directors of Sun Bancshares will hold these same positions with
SunBank. Sun Bancshares' articles of incorporation provide for a staggered 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 first annual meeting of shareholders, which we intend to
hold in the spring of 2001,
- Class II at the second annual meeting of shareholders, and
- Class III at the third annual meeting of shareholders.
Our executive officers serve at the discretion of the board of directors.
See "Description of Sun Bancshares' Capital Stock and Shareholders' Rights" on
page 46.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH SUN BANCSHARES
- ---- --- ----------------------------
<S> <C> <C>
CLASS I DIRECTORS:
Thomas Bouchette 41 President and Director
Edsel J. ("Coupe") DeVille 61 Director
John S. Divine, III 62 Director
Dalton B. Floyd, Jr. 61 Chairman of the Board of Directors and
Chief Executive Officer
Jeanne Louise Fourrier-Eggart 46 Director
CLASS II DIRECTORS:
David E. Grabeman 46 Director
Richard Edwin Heath 52 Director
Paul John Hletko 53 Director
Judy B. Long 48 Director
Thomas O. Morris, Jr. 50 Director
CLASS III DIRECTORS:
Joel A. Pellicci 56 Director
Donald E. Perry 59 Director
Chandler C. Prosser 32 Director
Larry N. Prosser 53 Director
OTHER EXECUTIVE OFFICERS:
Randy L. Carmon 44 Chief Financial Officer
</TABLE>
Each of SunBank's proposed directors will, upon approval of the Office of
the Comptroller of the Currency, serve until SunBank's first shareholders
meeting, which will convene shortly after SunBank receives its charter. Sun
Bancshares, as the sole shareholder of SunBank, will nominate each proposed
director to serve as director of SunBank at that meeting. After the first
shareholders meeting, directors of SunBank will serve for a term of one year and
will be elected by Sun Bancshares each year at SunBank's annual meeting of
shareholders. SunBank's officers will be appointed by its board of directors and
will hold office at the will of its board.
The following is a biographical summary of each of our directors and our
executive officers and organizers who will not serve as directors:
DIRECTORS
Thomas Bouchette. Mr. Bouchette has over thirteen years of banking
experience with five years of experience within the Georgetown/Horry County
area. Prior to when Mr. Bouchette began participating in the efforts to organize
Sun Bancshares and SunBank, from August 1997 until June 1999, he served as chief
credit officer and executive vice president of The Citizens Bank, Olanta, South
Carolina. While in this position, Mr. Bouchette was responsible for all lending
activities and management of the branch
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operations, including developing new lending products, fostering the sales
culture and implementing a disciplined approach to underwriting and credit
administration. From 1989 until 1997, Mr. Bouchette served in various lending
positions with Wachovia Bank, culminating in his position as vice president and
business banking executive for the Myrtle Beach market including Horry,
Georgetown, Dillon and Marion Counties. From 1987 until 1989, Mr. Bouchette
served Pee Dee Farm Credit Banks in various capacities including lending officer
and vice president. Mr. Bouchette is an active member and has held leadership
roles in numerous civic organizations including a member of the board of
directors of the Georgetown County Chamber of Commerce, treasurer and director
of the Pee Dee Chapter of the Bank Administration Institute, and member of the
board of directors of the Pawleys Island and Litchfield Business Association and
the local Robert Morris Associates chapter and member of the Pawleys Island
Rotary Club.
Edsel J. ("Coupe") Deville. Currently, Mr. DeVille is the director of
community development for Commercial Landtec, Corp., which is a commercial real
estate firm. From 1995 until 1997, Mr. DeVille served on the Myrtle Beach
advisory board of First National South Bank, which was acquired during 1999 by
Anchor Bank. He served as a sales associate for Chicora Real Estate from 1994
until 1996 and has held a real estate license since 1994. Mr. DeVille served as
a fighter pilot in the United States Air Force from 1961 until 1989. When Mr.
DeVille retired from the Air Force in 1989 he was the base commander of the
Myrtle Beach Air Force Base with responsibility for over 7,500 enlisted, officer
and civilian personnel. He received a Masters of Science in administration
degree from Georgia College in 1976 and a Bachelor of Science in Industrial
Technology degree from Louisiana State University in 1961. Mr. DeVille currently
holds a commercial pilot license. Currently, Mr. DeVille represents Horry County
on the Partners Economic Development Commission. Mr. DeVille has also been
active in or held a leadership role in the Horry County March of Dimes Walk
America, Horry County Crime Stoppers, the South Carolina Commission on Aging,
the Surfside Area Business and Professional Organization, the Surfside Area
Rotary Club and the Myrtle Beach Area Chamber of Commerce. He has also served on
the South Carolina Aeronautics Commission, the South Carolina Defense Base
Development Commission and the Horry County Director of Airports Advisory
Committee.
John S. Divine, III. Since 1986, Mr. Divine has been a co-owner of Divine
Holdings, LLC, which invests in rental properties, secured mortgages and stocks.
Since 1971, he has been a co-owner of Divine Restaurant, Inc., which owns and
operates 15 restaurants in the Grand Strand area including Longhorn, Bovines and
Divine Fish House. Currently, Mr. Divine holds a 66.2% ownership interest in
Divine Holdings, LLC and a 75% ownership interest in Divine Restaurants, Inc.
Dalton B. Floyd, Jr. Mr. Floyd has been an attorney in South Carolina
since 1963 and has been the sole owner of the Floyd Law Firm PC since 1974. Mr.
Floyd received a Bachelor of Science in Business Administration from the
University of South Carolina in 1960 and a Juris Doctorate, cum laude, from the
University of South Carolina School of Law in 1963. Mr. Floyd served as an
officer and director of, and general counsel to, Waccamaw State Bank in Surfside
Beach from 1980 to 1987 and Patriot Federal Savings & Loan Association in Lake
City from 1978 to 1982. Additionally, he served on the Myrtle Beach advisory
boards of First National South Bank from 1996 to 1998 and the Lake City advisory
board of Palmetto State Bank from 1982 to 1984. Mr. Floyd is also an owner or
partner in several other businesses which primarily invest in or develop
commercial real estate. Mr. Floyd is currently vice chairman of the South
Carolina Higher Education Commission. Mr. Floyd has held leadership roles in the
South Carolina Bar Association and the American Bar Association and has served
as a director of the Wachesaw Plantation Club, the Lake City Country Club, Inc.,
the Lake City Rotary Club, the Surfside Rotary Club and the Horry County
Business Coalition.
Jeanne Louise Fourrier-Eggart. Dr. Fourrier-Eggart has practiced as a
periodontist since 1980. She began private practice in Louisiana in 1982 and
moved her practice to the Georgetown County area in 1984. Dr. Fourrier-Eggart
received a Bachelors of Science in Dental Hygiene in 1976 and a Doctorate of
Dentistry in 1980 from the Louisiana State University School of Dentistry. In
1982, she received a Masters in Health Sciences and Certificate of Periodontics
from the Medical University of South Carolina. Dr. Fourrier-Eggart served on the
Myrtle Beach advisory board of First National South Bank from 1996 until 1998.
Dr. Fourrier-Eggart has been involved in numerous community programs which focus
on
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promoting dental hygiene and providing dental care for underprivileged children
and adults of the community. Additionally, she has been on three medical and
dental mission trips to Haiti where she has participated in organizing a
permanent mission outreach for dental care on the Island of LaGanove, Haiti and
training other dental healthcare providers for work in the mission outreach. Dr.
Fourrier-Eggart has also served as a "Just Say No" program leader in several
schools throughout the community.
David E. Grabeman. Dr. Grabeman has practiced general dentistry in
Georgetown, South Carolina since 1979, and he has been the sole owner of a
private dentistry practice in Georgetown since 1983. Dr. Grabeman received a
Bachelor of Science from Furman University in 1975, a Doctorate of Dentistry
from the Ohio State University in 1978 and completed a year General Practice
Residency at the Medical College of Ohio in 1979. He is an active participant in
the community and currently serves on the advisory board of the Georgetown
County Citizens for Life and is the president of the board of directors at the
Low Country Day School. In the past, Dr. Grabeman has been a member of the
Georgetown Jaycees, the Downtown Georgetown Revitalization Association and the
Andrews Rotary Club.
Richard Edwin Heath. Mr. Heath is a Certified Public Accountant and a
certified valuation analyst. Since 1991, Mr. Heath has been the sole proprietor
of a public accounting practice in Surfside Beach, South Carolina. Mr. Heath has
been a Certified Public Accountant since 1974 and has been a valuation analyst
since 1995. He received a Bachelor of Science in Accounting degree in 1969 and a
Masters of Accounting degree in 1974 from Florida State University. Mr. Heath is
also a one-third owner of RAR Exchange, LLC, which provides qualified
intermediary services. Mr. Heath has been a past member and chairman of the
Horry County School Board and has served on the board of directors of the South
Strand Chamber of Commerce and Long Bay Symphony. Currently Mr. Heath is a
member of the Surfside Rotary Club.
Paul John Hletko, M.D., F.A.A.P. Dr. Hletko has practiced medicine as a
pediatrician since 1972, and he has been the sole owner of a pediatric practice
in Georgetown, South Carolina since 1991. Dr. Hletko received a Bachelor of
Science in 1968 from the University of Illinois and received his Doctorate of
Medicine from Stritch School of Medicine, Loyola University in 1971. Dr. Hletko
has been involved in promoting child transportation safety concerns since 1977.
He has served on the board of the Association for the Advancement of Automotive
Medicine since 1986. He has also served on numerous hospital committees and as
the hospital chief of staff and chief of the department of pediatrics at
Georgetown Memorial Hospital. He has been involved in the United Way Physician's
Drive and on the board of directors of Parents of Children with Cancer, the
Association of Prepared Child Birth and Hospitality House.
Judy B. Long. Ms. Long is the sole or part owner of several retail,
restaurant and printing businesses located throughout the Georgetown/Horry
County area in South Carolina. These businesses include Four Seasons Screen
Printing, Sports Spectacular, Inc., Super Sports Spectacular, Carol, Inc., and
Fins, Inc.
Thomas Ostavus Morris, Jr., R.Ph. Mr. Morris received his pharmacy
license in 1972, and has been the owner of Hemingway Pharmacy, Inc.
headquartered in Andrews, South Carolina since 1977. Mr. Morris received a
Bachelor of Science from Clemson University in 1975 and received a Bachelor of
Science in Pharmacy from the Medical University of South Carolina in 1972. Mr.
Morris is also the sole owner of Home Medical Care, which provides durable home
medical equipment, and is a part owner of Myrtle Road Park, Inc. Mr. Morris is a
member of the Georgetown County Chamber of Commerce and serves on the advisory
board of the Medical University of South Carolina.
Joel A. Pellicci. Mr. Pellicci is the owner and president of Jo-Lin
Enterprises, a McDonald's franchisee, since 1977. He was a naval aviator during
his years of service in the Navy. He received a Bachelor of Art and Education
from the University of Florida in 1965. Mr. Pellicci has served on the board of
directors of the Louisburg Chamber of Commerce and on the board of directors of
Ronald McDonald Children's Charities and several Ronald McDonald House boards of
directors.
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Donald E. Perry. Since 1961, Mr. Perry has been the president and
co-owner of Lakewood Camping Resort which provides camp ground facilities in
Myrtle Beach, South Carolina. Mr. Perry is also a co-owner of Beachwood at the
Heritage, a retirement community, Perry Issue Company, a land lease company, and
Myrtle Beach National Golf Course. Mr. Perry has also been the sole owner of
Beechwood Estates, a mobile home park, since 1963. From 1997 until 1998, Mr.
Perry served on the Myrtle Beach advisory board of First National South Bank.
Mr. Perry has been active in or held a leadership role in Rotary International,
Myrtle Beach Campground Association and the Advisory Boards of Santee Electric
Cooperative and the Jaycees.
Chandler C. Prosser. Since 1993, Mr. Prosser has been the sole owner and
president of several real estate development and management companies, including
Prosser Realty Company, Inc. Mr. Prosser is a co-owner of Grove Development,
LLC, a real estate development company and is managing partner of Wachesaw Golf,
LLC, which owns and operates Wachesaw Plantation East Golf Resort. Mr. Prosser
received a Bachelor of Arts degree cum laude from Rhodes College in Memphis,
Tennessee in 1989 and a Master of Arts from the John Hopkins University Paul H.
Nitze School of Advanced International Studies in Washington, D.C. in 1991. In
1998, Mr. Prosser was elected to serve a four-year term as the Chairman of the
Horry County Council. Prior to this position, Mr. Prosser served for four years
as the district representative for the South Strand area on the Horry County
Council. Mr. Prosser was the founder and is a board member of the City of Hope
Myrtle Beach Classic LPGA Tournament, which is held each spring in Myrtle Beach.
He is also actively involved in a number of local charities and previously
served on the Myrtle Beach Advisory Board for First National South Bank.
Larry N. Prosser. Mr. Prosser has been the president and sole owner of
Glenn's Bay, Inc., a real estate development company since 1983. Mr. Prosser is
also the owner of numerous other real estate development and construction
companies. Mr. Prosser received an Associate of Science in Civil Engineering
degree from Florence-Darlington Technical College in Florence, South Carolina in
1967. Mr. Prosser currently holds a general contractor's license in South
Carolina. Mr. Prosser served on the Myrtle Beach advisory board of United
Carolina Bank from 1994 until 1996 and on the Myrtle Beach advisory board of
BB&T from 1996 until 1999. Mr. Prosser is currently a member of the Association
of Homebuilders.
ADDITIONAL EXECUTIVE OFFICER
Randy L. Carmon. Mr. Carmon has over 21 years banking experience with
both community and regional banks. Prior to Mr. Carmon joining Sun Bancshares
and SunBank, he served as a vice president at Anderson State Bank with
responsibility for various financial and operational functions. While in this
position, Mr. Carmon was responsible for the design and installation of their
in-house ATM network, the development of an ATM and VISA CheckCard program, the
management of the year 2000 readiness project, and the design, analysis,
implementation and marketing of additional deposit products. From 1989 until
1996, Mr. Carmon was a vice president with The National Bank of South Carolina
with responsibilities in the deposit operations area that included transaction
and time deposit accounts, distribution item processing, data control, research,
electronic funds transfer and automated clearing house transactions and
corporate services. From 1978 to 1988, Mr. Carmon was responsible for
operational and financial functions at Lake City State Bank. Mr. Carmon's past
and present civic leadership roles include chairman of the Pee Dee Chapter of
the Bank Administration Institute, board member of the Operations Committee of
the South Carolina Bankers Association, president of the Lake City Lions Club,
director and founder of the Pee Dee Regional EMS Council and board member of
Circle Park Associates.
ADDITIONAL ORGANIZER
Gary L. Schaal. Mr. Schaal has been a co-owner and vice-president of TSC
Golf, Inc., a golf course management company, since 1993 and has been the
president and sole owner of G.L. Sports, a golf management company, since 1981.
Mr. Schaal received a Bachelor of Business Administration from Ohio Wesleyan
University in Delaware, Ohio in 1963 and received a Masters of Business
Administration from East Carolina University in Greenville, North Carolina in
1972. Mr. Schaal has been a board member of
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the Myrtle Beach Convention Bureau and has served as the Bureau's president.
Additionally Mr. Schaal has served on the board of directors of the Myrtle Beach
Chamber of Commerce, the Carolinas Professional Golf Association and the Myrtle
Beach Golf Holiday. He has also served as the chairman of the Tournament
Player's Club Project and has served on the Surfside Beach Planning and Advisory
Commission. He served on the Professional Golf Association Tour's Policy Board
from 1988 to 1996 and served as the Professional Golf Association president in
1993 and 1994.
Mr. Chandler C. Prosser is the son of Mr. Larry N. Prosser. No other
director, organizer or executive officer has a family relationship with any
other director, organizer or executive officer of Sun Bancshares as close as
first cousin.
COMMITTEES OF THE BOARDS OF DIRECTORS
The boards of directors of Sun Bancshares and SunBank each has established
or will establish compensation, executive and audit and compliance committees.
The members of these committees will be the same for SunBank as they are for Sun
Bancshares. SunBank's board of directors will also establish a loan and an asset
and liability management committee. These committees are described below.
Compensation Committee. The Compensation Committee establishes
compensation levels for officers of Sun Bancshares and SunBank, reviews
management organization and development, reviews significant employee benefit
programs and establishes and administers executive compensation programs,
including the Stock Incentive Plan as described below.
Executive Committee. The Executive Committee meets as needed and, with
some exceptions, has the same powers as the board of directors in the management
of the business affairs of Sun Bancshares and SunBank between meetings of their
boards. This committee makes recommendations to the board of directors regarding
matters important to the overall management and strategic operation of Sun
Bancshares and SunBank.
Audit and Compliance Committee. The Audit and Compliance Committee is
responsible for oversight of all audit functions including monitoring compliance
with the Community Reinvestment Act, follow-up on loan reviews, responding to
financial and operational audits and correcting matters raised in regulatory
examinations and audit reports for Sun Bancshares and SunBank. This committee
recommends to the board of directors the independent public accountants to audit
Sun Bancshares and SunBank's annual financial statements, ensures that audits
and examinations are performed fully, properly and timely. This committee also
is responsible for reviewing the reports of the independent auditors, regulatory
examination reports, and all of our financial statements, and evaluates internal
accounting controls.
Loan Committee. The Loan Committee will be responsible for establishing
and approving all major policies and procedures pertaining to loan policy and
transactions with affiliates, directors or officers. This committee reviews the
actions of loan officers, past due and problem loans, the asset quality of the
loan portfolio and the adequacy of the loan loss reserve. This committee
approves all loans over any loan officers' pre-approved lending limit.
Asset and Liability Management Committee. The Asset and Liability
Management Committee will provide guidance to Sun Bancshares and SunBank in
balancing the yields and maturities of SunBank's loans and investments to its
deposits. This committee also reviews the investment portfolio on an ongoing
basis to assure investments are prudent and in accordance with SunBank's
investment policy.
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EXECUTIVE COMPENSATION
1999 COMPENSATION
The following table shows information for 1999 with regard to compensation
for services rendered in all capacities to Sun Bancshares and SunBank by their
chief executive officer and president. No executive officer earned more than
$100,000 in salary and bonus in 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------------------
OTHER ANNUAL
SALARY BONUS COMPENSATION
YEAR ($) ($) ($)
---- ------- ------- ------------
<S> <C> <C> <C> <C>
Dalton B. Floyd, Jr.,
Chief Executive Officer.................. 1999 -- -- --
Thomas Bouchette,.......................... 1999 42,000 -- --
President
</TABLE>
EMPLOYMENT AGREEMENT
We have entered into an employment agreement with Thomas Bouchette, under
which Mr. Bouchette will serve as president of Sun Bancshares and president and
chief executive officer of SunBank. Under the terms of the agreement, Mr.
Bouchette's compensation will include:
- A base salary of $7,000 per month until the opening of SunBank, at
which time his salary will increase to $8,000 per month;
- A cash bonus of $10,000 upon the opening of SunBank;
- An annual incentive bonus equal to 5% of Sun Bancshares consolidated
pre-tax earnings up to the amount of Mr. Bouchette's base salary,
provided SunBank meets specified performance criteria;
- Incentive stock options, which vest in one-fifth annual increments and
have a term of ten years, to purchase 5% of the number of shares of
common stock sold in this offering at an exercise price of $10.00 per
share; and
- Other customary benefits such as health and life insurance and
automobile allowance and membership to business and social
organizations.
The initial term of the employment agreement is three years. At the end of
the initial three-year term and at the end of any extension of the initial term,
the agreement will be automatically extended for a term of 12 months unless Mr.
Bouchette, Sun Bancshares or SunBank notifies the other parties that he or it
does not intend to extend the agreement. Mr. Bouchette will be entitled to
severance compensation of an amount up to six months of his base salary if,
during the term of the agreement, his employment is terminated for any of the
following reasons:
- SunBank does not receive regulatory approval to begin its banking
operations;
- We terminate Mr. Bouchette's employment without cause;
- Mr. Bouchette becomes disabled; or
- Mr. Bouchette terminates his employment with cause.
Additionally, upon a change of control of Sun Bancshares, Mr. Bouchette will be
entitled to severance compensation in an amount equal to 12 months of his base
salary if he terminates his employment for cause or if Sun Bancshares or its
successor terminates his employment without cause. Cause for terminating
employment is defined in the agreement.
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The agreement also generally provides that, for a period of 12 months
following the termination of Mr. Bouchette's employment, he will not compete
with SunBank in the banking business nor solicit SunBank's customers or
employees. The non-competition and non-solicitation provisions of the agreement
only apply if Mr. Bouchette terminates his employment without cause or in
connection with a change of control, or if we terminate his employment with
cause.
DIRECTOR COMPENSATION
We do not plan to compensate the directors of Sun Bancshares and SunBank
separately for their services as directors until net profits of Sun Bancshares
and SunBank exceed their net losses since inception on a cumulative basis.
Thereafter, Sun Bancshares and SunBank will adopt compensatory policies for
their directors that conform to applicable law.
ORGANIZERS' WARRANTS
The organizers, including Gary L. Schaal who will not serve as a director,
intend to purchase a total of 240,000 shares of common stock in this offering at
a price of $10.00 per share. This represents 24.0% of the shares that will be
outstanding after the offering, or 20.9% if the underwriter's over-allotment
option is exercised in full. Each of our organizers has guaranteed a portion of
our $850,000 line of credit from The Bankers Bank for up to $85,000 each.
In recognition of the efforts made and financial risks undertaken by the
organizers in organizing Sun Bancshares and SunBank, Sun Bancshares will issue
to the organizers warrants to purchase additional shares of its common stock.
Sun Bancshares will issue to each organizer serving as one of our initial
directors, a warrant to purchase one share of common stock for each share the
organizer purchases in this offering. Sun Bancshares will issue Mr. Schaal, who
will not serve as an initial director, a warrant to purchase one share of common
stock for every two shares he purchases in this offering. Accordingly, the
organizers may purchase up to 235,000 shares through the exercise of these
warrants.
The warrants will become exercisable in equal one-third annual increments
beginning on the one-year anniversary of the date of this prospectus.
Exercisable warrants will remain exercisable for the ten-year period following
the date of this prospectus or, in the case of the directors, for 90 days after
he or she ceases to be a director, whichever period is shorter. Additionally, if
SunBank's capital falls below the minimum level as determined by the Office of
the Comptroller of the Currency, Sun Bancshares may be directed to require the
organizers to exercise or forfeit their warrants.
Each warrant will be exercisable at a price of $10.00 per share subject to
adjustment for stock splits, recapitalizations or other similar events. The
exercise price was determined by Sun Bancshares based on the public offering
price of the common stock. The public offering price was determined arbitrarily
by Sun Bancshares and the underwriter after considering several factors. These
factors include prevailing market conditions and the price of comparable
publicly traded companies.
STOCK INCENTIVE PLAN
General. Sun Bancshares' 2000 Stock Incentive Plan provides Sun
Bancshares with the flexibility to grant incentive stock options and
non-qualified stock options to key employees, officers, directors and organizers
of Sun Bancshares or its affiliates for the purpose of giving them a proprietary
interest in, and encouraging them to remain in the employ of, Sun Bancshares or
its affiliates. The board of directors has reserved 100,000 shares of common
stock, an amount equal to 10.0% of the shares of common stock sold in this
offering, or 8.7% if the underwriter's over-allotment option is exercised in
full, for issuance under the plan. The number of shares reserved for issuance
may be adjusted in the event of a stock split, stock dividend, recapitalization
or similar event as described in the plan.
Upon the close of this offering, in accordance with the terms of Mr.
Bouchette's employment agreement, we will grant an option to our president to
purchase a number of shares equal to 5% of the common stock sold in this
offering, which will equal 50,000 shares if the underwriter does not exercise
its
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over-allotment option and 57,500 shares if the underwriter exercises its
over-allotment option in full. We also plan to grant our chief financial officer
an option to purchase 5,000 shares of common stock. Accordingly, if the
underwriter does not exercise its over-allotment option, we will issue our
president and chief financial officer options to purchase an aggregate of 55,000
shares, or 55% of the shares reserved under the plan.
Administration. The plan is administered by a committee appointed by the
board of directors. The board of directors will consider the standards contained
in both Section 162(m) of the Internal Revenue Code of 1986, as currently in
effect, and Rule 16(b)(3) under the Securities Exchange Act of 1934, as
currently in effect, when appointing members to the committee. The committee
will have the authority to grant awards under the plan, to determine the terms
of each award, to interpret the provisions of the plan and to make all other
determinations that it may deem necessary or advisable to administer the plan.
Sun Bancshares' Compensation Committee, which is comprised of at least two
directors appointed by its board of directors, will administer the plan.
The plan permits the committee to grant stock options to eligible persons.
The committee may grant these options on an individual basis or design a program
providing for grants to a group of eligible persons. The committee determines,
within the limits of the plan, the number of shares of common stock subject to
an option, to whom an option is granted and the exercise price and forfeiture or
termination provisions of each option. Unless otherwise permitted by the
committee, a holder of a stock option generally may not transfer the option
during his or her lifetime.
Option Terms. The plan provides for incentive stock options and
non-qualified stock options. The committee will determine whether an option is
an incentive stock option or a non-qualified stock option when it grants the
option, and the option will be evidenced by an agreement describing the material
terms of the option. The maximum number of shares of common stock with respect
to which options may be granted during any one year period to any employee may
not exceed 75,000.
The committee determines the exercise price of an option. The exercise
price of an incentive stock option may not be less than the fair market value of
the common stock on the date of the grant, or less than 110% of the fair market
value if the participant owns more than 10% of the outstanding common stock of
Sun Bancshares or its affiliates. When the incentive stock option is exercised,
Sun Bancshares will be entitled to place a legend on the certificates
representing the shares of common stock purchased upon exercise of the option to
identify them as shares of common stock purchased upon the exercise of an
incentive stock option. The exercise price of non-qualified stock options may
not be less than 85% of the fair market value of the common stock on the date
that the option is awarded, based upon any reasonable measure of fair market
value. The committee may permit the exercise price to be paid in cash, by the
delivery of previously owned shares of common stock, through a cashless exercise
executed through a broker or by having a number of shares of common stock
otherwise issuable at the time of exercise withheld. The committee may make cash
awards designed to cover tax obligations of participants that result from the
receipt or exercise of a stock option.
The committee will also determine the term of an option, subject to the
terms of the plan which provide that no option may exceed ten years in length.
Any incentive stock option granted to a participant who owns more than 10% of
the outstanding common stock of Sun Bancshares or its affiliates will not be
exercisable more than five years after the date the option is granted. Subject
to any further limitations in the applicable agreement, if a participant's
employment terminated, an incentive stock option will expire and become
unexercisable no later than three months after the date of termination of
employment. If, however, termination of employment is due to death or
disability, one year may be substituted for the three-month period.
Incentive stock options are also subject to the further restriction that
the aggregate fair market value, determined as of the date of the grant, of
common stock as to which any incentive stock option first becomes exercisable in
any calendar year is limited to $100,000 per recipient. If incentive stock
options covering common stock with a value in excess of $100,000 first become
exercisable in any one calendar
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<PAGE> 37
year, the excess will be non-qualified options. For purposes of determining
which options, if any, have been granted in excess of the $100,000 limit,
options will be considered in the order they were granted.
Termination of Options. The terms of particular options may provide that
they terminate, among other reasons, upon the holder's termination of employment
or other status with Sun Bancshares or any affiliate, upon a specified date,
upon the holder's death or disability, or upon the occurrence of a change in
control of Sun Bancshares or SunBank. An agreement may provide that if the
holder dies or becomes disabled, the holder's estate or personal representative
may exercise the option. The committee may, within the terms of the plan and the
applicable agreement, cancel, accelerate, pay or continue an option that would
otherwise terminate for the reasons discussed above.
Stock Splits, Reorganizations and other Capital Changes. The plan
provides for appropriate adjustment, as determined by the committee, in the
number and kind of shares subject to and the exercise price of unexercised
options in the event of any change in the outstanding shares of common stock by
reason of any subdivision or combination of shares, payment of a stock dividend
or other increase or decrease in the number of outstanding shares without the
receipt of consideration. In the event of certain corporate reorganizations, the
committee may, within the terms of the plan and the applicable agreement,
substitute, cancel (with or without consideration), accelerate, remove
restrictions or otherwise adjust the terms of an option.
Amendment and Termination of the Plan. The board of directors has the
authority to amend or terminate the plan. The board of directors is not required
to obtain shareholder approval to amend or terminate the plan, but may condition
any amendment or termination of the plan upon shareholder approval if it
determines that shareholder approval is necessary or appropriate under tax,
securities or other laws. The board's action may not adversely affect the rights
of a holder of a stock option without the holder's consent.
Federal Income Tax Consequences. The following discussion generally
outlines the federal income tax consequences of participation in the plan.
Individual circumstances may vary and each participant should rely on his or her
own tax counsel for advice regarding federal income tax treatment under the
plan.
- Incentive Stock Options. A participant who exercises an incentive stock
option will not be taxed when he or she exercises the option or a
portion of the option. Instead, the participant will be taxed when he or
she sells the shares of common stock purchased upon exercise of the
incentive stock option. The participant will be taxed on the difference
between the price he or she paid for the common stock and the amount for
which he or she sells the common stock. If the participant does not sell
the shares of common stock prior to two years from the date of grant of
the incentive stock option and one year from the date the common stock
is transferred to him or her, any gain will be a capital gain and Sun
Bancshares will not be entitled to a corresponding deduction. If the
participant sells the shares of common stock at a gain before that time,
the difference between the amount the participant paid for the common
stock and the lesser of its fair market value on the date of exercise or
the amount for which the stock is sold will be taxed as ordinary income
and Sun Bancshares will be entitled to a corresponding deduction. If the
participant sells the shares of common stock for less than the amount he
or she paid for the stock prior to the one- or two-year period
indicated, no amount will be taxed as ordinary income and the loss will
be taxed as a capital loss. Exercise of an incentive stock option may
subject a participant to, or increase a participant's liability for, the
alternative minimum tax.
- Non-Qualified Options. A participant will not recognize income upon the
grant of a non-qualified option or at any time before the exercise of
the option or a portion of the option. When the participant exercises a
non-qualified option or portion of the option, he or she will recognize
compensation taxable as ordinary income in an amount equal to the excess
of the fair market value of the common stock on the date the option is
exercised over the price paid for the common stock, and Sun Bancshares
will then be entitled to a corresponding deduction.
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Depending upon the time period for which shares of common stock are held
after exercise of a non-qualified option, the sale or other taxable disposition
of shares acquired through the exercise of a non-qualified option generally will
result in a short- or long-term capital gain or loss equal to the difference
between the amount realized on the disposition and the fair market value of such
shares when the non-qualified option was exercised.
Special rules apply to a participant who exercises a non-qualified option
by paying the exercise price, in whole or in part, by the transfer of shares of
common stock to Sun Bancshares and to a participant who is subject to the
reporting requirements of Section 16 of the Securities Exchange Act of 1934.
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RELATED PARTY TRANSACTIONS
We expect to enter into banking and other business transactions in the
ordinary course of business with our directors and officers, including members
of their families and corporations, partnerships or other organizations in which
they have a controlling interest. If these transactions occur, each transaction
will:
- In the case of banking transactions, be on substantially the same terms,
including price or interest rate and collateral, as those prevailing at
the time for comparable transactions with unrelated parties, and any
banking transactions will not be expected to involve more than the
normal risk of collectibility or present other unfavorable features to
SunBank;
- In the case of business transactions, be on terms no less favorable than
could be obtained from an unrelated third party; and
- In the case of all related party transactions, be approved by a majority
of the directors, including a majority of the directors who do not have
an interest in the transaction.
In addition to transactions in the ordinary course of our business, we
have entered into the following business transactions with the directors
indicated:
- Lease of Main Office Site. We have signed a letter of intent with
Prosser & Floyd, a partnership, for the lease of the site for our
permanent main office building. Mr. Dalton B. Floyd, Jr., the chairman
of our board of directors and chief executive officer of Sun Bancshares,
and Mr. Larry N. Prosser, one of our directors, are both one-third
partners in this partnership. We anticipate that a final lease agreement
with Prosser & Floyd will be signed in the second quarter of 2000. Based
on our negotiations to date and the letter of intent, we expect that the
annual rental payments will equal 10% of the appraised value of the
land, or approximately $7,500 per month, for the first year of the
lease, with annual adjustments based on the consumer price index
thereafter. The initial term of the lease will be 25 years with renewal
options for a total of 15 additional years. The lease will call for us
to pay taxes, insurance and repairs on the leased property. Based on our
review of an independent appraisal, we believe the terms of the lease
will be no less favorable than those that could be obtained from an
unrelated third party.
- Lease of Site for Temporary Main Office. During the construction of our
main office, we will operate out of a temporary modular facility, which
will be located on a temporary site approximately one-tenth of a mile
from the permanent main office site. We plan to lease this temporary
site from Wachesaw Development, LLC. Mr. Larry N. Prosser, one of our
directors, is the sole owner of Wachesaw Development, LLC. We expect
that the lease will be on a month to month basis and will begin in May
2000 and end in the third quarter of 2001. We estimate that the monthly
rental rate will be approximately $2,000. Based on our review of the
independent appraisal for our permanent main office site and the recent
purchase price of a similar property located across the street, we
believe the terms of this lease are no less favorable than those that
could be obtained from an unrelated party. Due to the short term of the
lease and limited amount of the lease payments, the board determined
that an independent appraisal was neither cost effective nor necessary
for them to establish that the lease arrangement is on no less favorable
terms than could be obtained from an unrelated third party.
- Loan Guarantee. Each of our directors has guaranteed a portion of our
$850,000 line of credit from The Bankers Bank for up to $85,000 each.
Each of these transactions has been approved by a majority of our
directors, including a majority of the directors who do not have an interest in
the transaction.
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SUPERVISION AND REGULATION
Both Sun Bancshares and SunBank will be subject to extensive state and
federal banking regulations that impose restrictions on and provide for general
regulatory oversight of our operations. These laws are generally intended to
protect depositors and not shareholders. The following discussion describes the
material elements of the regulatory framework that will apply.
SUN BANCSHARES
Since Sun Bancshares will own all of the capital stock of SunBank, it will
be a bank holding company under the federal Bank Holding Company Act of 1956 and
the South Carolina Banking and Branching Efficiency Act. As a result, Sun
Bancshares will primarily be subject to the supervision, examination, and
reporting requirements of the Bank Holding Company Act and the regulations of
the Federal Reserve.
Acquisitions of Banks. The Bank Holding Company Act requires every bank
holding company to obtain the Federal Reserve's prior approval before:
- Acquiring direct or indirect ownership or control of any voting shares
of any bank if, after the acquisition, the bank holding company will
directly or indirectly own or control more than 5% of the bank's voting
shares;
- Acquiring all or substantially all of the assets of any bank; or
- Merging or consolidating with any other bank holding company.
Under the Bank Holding Company Act, an adequately capitalized and
adequately managed bank holding company located in South Carolina may purchase a
bank located outside of South Carolina. Conversely, an adequately capitalized
and adequately managed bank holding company located outside of South Carolina
may purchase a bank located inside South Carolina. In each case, however,
restrictions may be placed on the acquisition of a bank which has only been in
existence for a limited amount of time or an acquisition which may result in
specified concentrations of deposits.
In addition, under the South Carolina Banking and Branching Efficiency
Act, no company or person may acquire Sun Bancshares or SunBank until SunBank
has been in existence and continuous operations for five years.
Change in Bank Control. Subject to various exceptions, the Bank Holding
Company Act and the Change in Bank Control Act, together with related
regulations, 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 or a company acquires 10% or more, but less than 25%, of any class
of voting securities and either the bank holding company has registered
securities under Section 12 of the Securities Act of 1934, or 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.
Permitted Activities. On November 12, 1999, President Clinton signed the
Gramm-Leach-Bliley Act, which amends the Bank Holding Company Act and greatly
expand the activities in which bank holding companies and affiliates of banks
are permitted to engage. The Gramm-Leach-Bliley Act eliminates many federal and
state law barriers to affiliations among banks and securities firms, insurance
companies, and other financial service providers. The provisions of the
Gramm-Leach-Bliley Act relating to permitted activities of bank holding
companies and affiliates of banks became effective on March 11, 2000.
Generally, if Sun Bancshares qualifies and elects to become a financial
holding company, it may engage in activities that are financial in nature or
incidental or complementary to a financial activity. Activities that the
Gramm-Leach-Bliley Act expressly lists as financial in nature include insurance
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activities, providing financial, investment and advisory services, underwriting
securities and limited merchant banking activities.
To qualify to become a financial holding company, SunBank and any other
depository institution subsidiary of Sun Bancshares must be well capitalized and
well managed and must have a Community Reinvestment Act rating of at least
satisfactory. Additionally, Sun Bancshares must file an election with the
Federal Reserve to become a financial holding company and must provide the
Federal Reserve with 30 days written notice prior to engaging in a permitted
financial activity. We have no plans to elect to become a financial holding
company.
Under the Bank Holding Company Act, a bank holding company, which has not
qualified or elected to become a financial 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
prior to the enactment of the Gramm-Leach-Bliley Act the Federal Reserve found
those activities to be so closely related to banking as to be a proper incident
to the business of banking. Activities that the Federal Reserve has found to be
so closely related to banking to be a proper incident to the business of banking
include:
- factoring accounts receivable,
- acquiring or servicing loans,
- leasing personal property,
- conducting discount securities brokerage activities,
- performing selected data processing services,
- acting as agent or broker in selling credit life insurance and other
types of insurance in connection with credit transactions, and
- performing selected insurance underwriting activities.
Despite prior approval, the Federal Reserve may order a bank holding company or
its subsidiaries to terminate any of these activities or to terminate its
ownership or control of any subsidiary when it has reasonable cause to believe
that the bank holding company's continued ownership, activity or control
constitutes a serious risk to the financial safety, soundness, or stability of
any of its bank subsidiaries.
Support of Subsidiary Institutions. Under Federal Reserve policy, bank
holding companies are expected to act as a source of financial strength for, and
to commit resources to support, their depository institution subsidiaries. This
support may be required at times when, without this Federal Reserve policy, the
bank holding company might not be inclined to provide it. In addition, any
capital loans by a bank holding company to a bank will be repaid only after its
deposits and other indebtedness are repaid in full. In the event of a bank
holding company's bankruptcy, any commitment by the bank holding company to a
federal bank regulatory agency to maintain the capital of a banking subsidiary
will be assumed by the bankruptcy trustee and entitled to a priority of payment.
South Carolina State Regulation. As a bank holding company registered
under the South Carolina Banking and Branching Efficiency Act, we are subject to
limitations on sale or merger and to regulation by the South Carolina Board of
Financial Institutions. Prior to acquiring the capital stock of a national bank,
we are not required to obtain the approval of the Board, but we must notify them
at least 15 days prior to doing so. Prior to engaging in the acquisition of
nonbanking institutions or state chartered banks, we must receive the Board's
approval, and we must file periodic reports with respect to our financial
condition and operations, management and intercompany relationships between Sun
Bancshares and its subsidiaries.
SUNBANK
SunBank will be subject to numerous state and federal statutes and
regulations that will affect its business, activities and operations, and it may
be supervised and examined by one or more state or federal bank regulatory
agencies. Since SunBank will be chartered as a national bank, it will primarily
be subject to the supervision, examination and reporting requirements of the
National Bank Act and the regulations of the Office of the Comptroller of the
Currency. The Office of the Comptroller of the Currency will
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regularly examine SunBank's operations and has the authority to approve or
disapprove mergers, the establishment of branches and similar corporate actions.
The Office of the Comptroller of the Currency also has the power to prevent the
continuance or development of unsafe or unsound banking practices or other
violations of law. Additionally, SunBank's deposits will be insured by the FDIC
to the maximum extent provided by law.
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, SunBank 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,
SunBank will be able to acquire existing banking operations in South Carolina.
SunBank and any other national or state-chartered bank generally may branch
across state lines by merging with banks in other states if allowed by the
applicable states' laws. South Carolina law, with limited exceptions, currently
permits branching across state lines through interstate mergers.
Under the Federal Deposit Insurance Act, states may "opt-in" and allow
out-of-state national banks to branch into their state by establishing a new
start-up branch in the state. Currently, South Carolina has not opted-in to this
provision. Therefore, interstate merger is the only method through which a bank
located outside of South Carolina may branch into South Carolina. This provides
a barrier of entry into the South Carolina banking market.
Prompt Corrective Action. The Federal Deposit Insurance Corporation
Improvement Act of 1991 establishes a system of prompt corrective action to
resolve the problems of undercapitalized financial institutions. Under this
system, federal banking regulators have established five capital categories,
well capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized and critically undercapitalized, in which all institutions are
placed. To qualify as well capitalized, a bank must have a leverage ratio of no
less than 5%, a Tier 1 risk-based capital ratio of no less than 6%, and a total
risk-based capital ratio of no less than 10%. These ratios are described below
under "Capital Adequacy." Additionally, 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. The federal
banking agencies have also specified by regulation the relevant capital levels
for each of the other categories.
Federal banking regulators are required to take some mandatory supervisory
actions and are authorized to take other discretionary actions with respect to
institutions in the three undercapitalized categories. The severity of the
action depends upon the capital category in which the institution is placed.
Generally, subject to a narrow exception, the banking regulator must appoint a
receiver or conservator for an institution that is critically undercapitalized.
An institution in any of the undercapitalized categories is required to submit
an acceptable capital restoration plan to its appropriate federal banking
agency. A bank holding company must guarantee that a subsidiary depository
institution meets its capital restoration plan up to the lesser of 5% of an
undercapitalized subsidiary's assets or the amount required to meet regulatory
capital requirements. An undercapitalized institution is also generally
prohibited from increasing its average total assets, making acquisitions,
establishing any branches or engaging in any new line of business, except under
an accepted capital restoration plan or with FDIC approval. The Federal Reserve
regulations also establish procedures for downgrading an institution to a lower
capital category based on supervisory factors other than capital.
FDIC Insurance Assessments. The FDIC has adopted a risk-based assessment
system for determining an insured depository institutions' insurance assessment
rate. The system that takes into account the risks attributable to different
categories and concentrations of assets and liabilities. An institution is
placed into one of three capital categories: (1) well capitalized; (2)
adequately capitalized; and (3) undercapitalized. These three categories are
substantially similar to the prompt corrective action categories described
above, with the "undercapitalized" category including institutions that are
undercapitalized, significantly undercapitalized and critically
undercapitalized. The FDIC also assigns an institution to one of three
supervisory subgroups based on a supervisory evaluation that the institution's
primary federal regulator provides to the FDIC and information that the FDIC
determines to be relevant to the
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institution's financial condition and the risk posed to the deposit insurance
funds. Assessments range from 0 to 27 cents per $100 of deposits, depending on
the institution's capital group and supervisory subgroup. In addition, the FDIC
imposes assessments to help pay off the $780 million in annual interest payments
on the $8 billion Financing Corporation bonds issued in the late 1980s as part
of the government rescue of the thrift industry. This assessment rate is
adjusted quarterly and is set at 2.08 cents per $100 of deposits for the second
quarter of 2000.
The FDIC may terminate its insurance of deposits if it finds that the
institution has engaged in unsafe and unsound practices, is in an unsafe or
unsound condition to continue operations or has violated any applicable law,
regulation, rule, order, or condition imposed by the FDIC.
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 SunBank. Under the Gramm-Leach-Bliley Act, banks with
aggregate assets of not more than $250 million will be subject to a Community
Reinvestment Act examination only once every 60 months if the bank receives an
outstanding rating, once every 48 months if it receives a satisfactory rating
and as needed if the rating is less than satisfactory. Additionally, under the
Gramm-Leach-Bliley Act, banks will be required to publicly disclose the terms of
various Community Reinvestment Act-related agreements.
Other Regulations. Interest and other charges collected or contracted for
by SunBank are subject to state usury laws and federal laws concerning interest
rates. SunBank'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 these federal laws.
The deposit operations of SunBank 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 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.
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CAPITAL ADEQUACY
Sun Bancshares and SunBank will be required to comply with the capital
adequacy standards established by the Federal Reserve, in the case of Sun
Bancshares, and the Office of the Comptroller of the Currency, in the case of
SunBank. The Federal Reserve has established a risk-based and a leverage measure
of capital adequacy for bank holding companies that is substantially similar to
that adopted by the Office of the Comptroller of the Currency for banks.
The risk-based capital standards are designed to make regulatory capital
requirements more sensitive to differences in risk profiles among banks and bank
holding companies, to account for off-balance-sheet exposure, and to minimize
disincentives for holding liquid assets. Assets and off-balance-sheet items,
such as letters of credit and unfunded loan commitments, are assigned to broad
risk categories, each with appropriate risk weights. The resulting capital
ratios represent capital as a percentage of total risk-weighted assets and
off-balance-sheet items.
The minimum guideline for the ratio of total capital to risk-weighted
assets is 8%. Total capital consists of two components, Tier 1 Capital and Tier
2 Capital. Tier 1 Capital generally consist of common shareholders' equity,
minority interests in the equity accounts of consolidated subsidiaries,
qualifying noncumulative perpetual preferred stock, and a limited amount of
qualifying cumulative perpetual preferred stock, less goodwill and other
specified intangible assets. Tier 1 Capital must equal at least 4% of
risk-weighted assets. Tier 2 Capital generally consist of subordinated debt,
other preferred stock and hybrid capital and a limited amount of loan loss
reserves. The total amount of Tier 2 Capital is limited to 100% of Tier 1
Capital.
In addition, the Federal Reserve has established minimum leverage ratio
guidelines for bank holding companies. These guidelines provide for a minimum
ratio of Tier 1 Capital to average assets, less goodwill and other specified
intangible assets, of 3% for bank holding companies that meet certain specified
criteria, including having the highest regulatory rating and implementing the
Federal Reserve's risk-based capital measure for market risk. All other bank
holding companies generally are required to maintain a leverage ratio of at
least 4%. The guidelines also provide that bank holding companies experiencing
internal growth, as will be the case for Sun Bancshares, or making acquisitions
will be expected to maintain strong capital positions substantially above the
minimum supervisory levels without significant reliance on intangible assets.
The Federal Reserve considers the leverage ratio and other indicators of capital
strength in evaluating proposals for expansion or new activities.
SunBank and Sun Bancshares are also both subject to other capital
guidelines issued by the Office of the Comptroller of the Currency and the
Federal Reserve, respectively, which provide for minimum ratios of total capital
to total assets.
Failure to meet capital guidelines could subject a bank or bank holding
company to a variety of enforcement remedies, including issuance of a capital
directive, the termination of deposit insurance by the FDIC, a prohibition on
accepting brokered deposits, and certain other restrictions on its business. As
described above, substantial additional restrictions can be imposed on
FDIC-insured depository institutions that fail to meet applicable capital
requirements. See "- Prompt Corrective Action" on page 41.
PAYMENT OF DIVIDENDS
Sun Bancshares is a legal entity separate and distinct from SunBank. The
principal sources of Sun Bancshares' cash flow, including cash flow to pay
dividends to its shareholders, are dividends that SunBank pays to its sole
shareholder, Sun Bancshares. Statutory and regulatory limitations apply to
SunBank's payment of dividends to Sun Bancshares as well as to Sun Bancshares'
payment of dividends to its shareholders.
SunBank is required by federal law to obtain the prior approval of the
Office of the Comptroller of the Currency for payments of dividends if the total
of all dividends declared by its Board of Directors in any year will exceed (1)
the total of SunBank's net profits for that year, plus (2) SunBank's retained
net profits of the preceding two years, less any required transfers to surplus.
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The payment of dividends by Sun Bancshares and SunBank may also be
affected by other factors, such as the requirement to maintain adequate capital
above regulatory guidelines. If, in the opinion of the Office of the Comptroller
of the Currency, SunBank were engaged in or about to engage in an unsafe or
unsound practice, the Office of the Comptroller of the Currency could require,
after notice and a hearing, SunBank to cease and desist from the practice. The
federal banking agencies have indicated that paying dividends that deplete a
depository institution's capital base to an inadequate level would be an unsafe
and unsound banking practice. Under the Federal Deposit Insurance Corporation
Improvement Act of 1991, a depository institution may not pay any dividend if
payment would cause it to become undercapitalized or if it already is
undercapitalized. Moreover, the federal agencies have issued policy statements
that provide that bank holding companies and insured banks should generally only
pay dividends out of current operating earnings. See "- Prompt Corrective
Action" on page 41.
RESTRICTIONS ON TRANSACTIONS WITH AFFILIATES
Sun Bancshares and SunBank are subject to the provisions of Section 23A of
the Federal Reserve Act. Section 23A places limits on the amount of:
- loans or extensions of credit to affiliates;
- investment in affiliates;
- the purchase of assets from affiliates, except for real and personal
property exempted by the Federal Reserve;
- loans or extensions of credit to third parties collateralized by the
securities or obligations of affiliates; and
- any guarantee, acceptance or letter of credit issued on behalf of an
affiliate.
The aggregate of all of the above transactions is limited in amount, as to
any one affiliate, to 10% of a bank's capital and surplus and, as to all
affiliates combined, to 20% of a bank's capital and surplus. In addition to the
limitation on the amount of these transactions, each of the above transactions
must also meet specified collateral requirements. Sun Bancshares must also
comply with certain provisions designed to avoid the taking of low-quality
assets.
Sun Bancshares and SunBank are also subject to the provisions of Section
23B of the Federal Reserve Act which, among other things, prohibits an
institution from engaging in the above transactions with affiliates unless the
transactions are on terms substantially the same, or at least as favorable to
the institution or its subsidiaries, as those prevailing at the time for
comparable transactions with nonaffiliated companies.
SunBank is also subject to restrictions on extensions of credit to its
executive officers, directors, certain principal shareholders and their related
interests. These extensions of credit (1) 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 (2) must not involve more
than the normal risk of repayment or present other unfavorable features.
PRIVACY
The Gramm-Leach-Bliley Act also contains provisions regarding consumer
privacy. These provisions require financial institutions to disclose their
policy for collecting and protecting confidential information. Customers
generally may prevent financial institutions from sharing personal financial
information with nonaffiliated third parties except for third parties that
market the institutions' own products and services. Additionally, financial
institutions generally may not disclose consumer account numbers to any
nonaffiliated third party for use in telemarketing, direct mail marketing or
other marketing through electronic mail to the consumer.
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PROPOSED LEGISLATION AND REGULATORY ACTION
New regulations and statutes are regularly proposed that contain
wide-ranging proposals for altering the structures, regulations and competitive
relationships of the nation's financial institutions. We cannot predict whether
or in what form any proposed regulation or statute will be adopted or the extent
to which our business may be affected by any new regulation or statute.
EFFECT OF GOVERNMENTAL MONETARY POLICES
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 operating 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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DESCRIPTION OF SUN BANCSHARES' CAPITAL STOCK
AND SHAREHOLDERS' RIGHTS
COMMON STOCK
Sun Bancshares' articles of incorporation authorize it to issue up to
10,000,000 shares of common stock, par value not stated, of which at least
1,000,000 shares will be issued in this offering. As of the date of this
prospectus, 100,000 shares of common stock, or an amount equal to 10.0% of the
shares of common stock offered in this prospectus, were reserved for issuance
upon the exercise of stock options to be issued under our stock incentive plan
and 235,000 shares of common stock were reserved for issuance upon the exercise
of the warrants to be issued to the organizers.
All shares of common stock will be entitled to share equally in dividends
from legally available funds, when, as and if declared by the board of
directors. We do not anticipate, however, that Sun Bancshares will pay any cash
dividends on the common stock in the near future. Upon Sun Bancshares' voluntary
or involuntary liquidation or dissolution, all shares of common stock will be
entitled to share equally in all of Sun Bancshares' assets that are available
for distribution to the shareholders. Each holder of common stock will be
entitled to one vote for each share on all matters submitted to the
shareholders. Holders of common stock will not have any right to acquire
authorized but unissued capital stock of Sun Bancshares whenever it issues new
shares of capital stock. No cumulative voting, redemption, sinking fund or
conversion rights or provisions apply to the common stock. All shares of the
common stock issued in the offering as described in this prospectus will be
fully paid and non-assessable.
PREFERRED STOCK
Sun Bancshares' articles of incorporation also authorize its board of
directors to issue up to 2,000,000 shares of preferred stock, par value not
stated, without any further action by the holders of the common stock. The board
of directors may determine the terms of the preferred stock including, but not
limited to, dividend rates and voting, conversion, redemption or sinking fund
rights. Preferred stock may have voting rights, subject to applicable law and as
determined by the board of directors. Any preferred stock that we issue may rank
senior to our common stock with respect to the payment of dividends and/or the
distribution of assets upon liquidation or dissolution of Sun Bancshares. Sun
Bancshares has not issued any preferred stock and will not issue preferred stock
to the organizers except on the same terms as it is offered to all other
existing shareholders or to new shareholders. Although Sun Bancshares has no
present plans to issue any preferred stock, the ownership and control of Sun
Bancshares by the holders of the common stock would be diluted if Sun Bancshares
were to issue preferred stock that had voting or conversion rights.
TRANSFER AGENT
The transfer agent and registrar for the common stock is SunTrust Bank,
Atlanta, Georgia.
PROTECTIVE PROVISIONS
General. Sun Bancshares' shareholders' rights and related matters are
governed by the South Carolina Business Corporation Act of 1988 and Sun
Bancshares' articles of incorporation and bylaws. Sun Bancshares' articles of
incorporation and bylaws contain protective provisions that could have the
effect of delaying or impeding an attempt to change or remove Sun Bancshares'
management or to gain control of Sun Bancshares in a transaction not supported
by its board of directors. These provisions are discussed in more detail below.
In general, one purpose of these provisions is to assist our board of directors
in playing a role in connection with attempts to acquire control of Sun
Bancshares. They allow the board of directors to further and protect Sun
Bancshares' interests and those of its shareholders, as appropriate, under the
circumstances.
Although we believe the protective provisions are beneficial to our
shareholders, they also may tend to discourage some takeover bids. As a result,
our shareholders may be deprived of opportunities to sell
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some or all of their shares at prices that represent a premium over prevailing
market prices. On the other hand, defeating undesirable acquisition offers can
be a very expensive and time-consuming process. To the extent that the
protective provisions discourage undesirable proposals, Sun Bancshares may be
able to avoid those expenditures of time and money.
The protective provisions also may discourage open market purchases by a
potential acquirer. These purchases could increase the market price of the
common stock temporarily, enabling shareholders to sell their shares at a price
higher than that which otherwise would prevail. In addition, the provisions
could decrease the market price of the common stock by making the stock less
attractive to persons who invest in securities in anticipation of price
increases from potential acquisition attempts. The provisions also could make it
more difficult and time consuming for a potential acquirer to obtain control of
Sun Bancshares by replacing its board of directors and management. Furthermore,
the provisions could make it more difficult for our shareholders to replace the
board of directors or management, even if a majority of the shareholders
believes that replacing them would be in Sun Bancshares' best interests. As a
result, the protective provisions could tend to keep the incumbent board of
directors and management in place.
Restriction on Acquisitions. Under the South Carolina Banking and
Branching Efficiency Act of 1996, no company or person may acquire Sun
Bancshares or SunBank until SunBank has been in existence and continuous
operation for five years.
Control Share Act. Sun Bancshares has specifically elected to opt out of
a provision of the South Carolina Business Corporation Act 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 specific thresholds will not possess
any voting rights unless the voting rights are approved by a majority vote of
the corporation's disinterested shareholders.
Authorized but Unissued Stock. Sun Bancshares' 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 Sun Bancshares by means of a proxy contest, tender offer,
merger or otherwise, and as a result protect the continuity of our management.
In addition, the issuance of shares of common stock or preferred stock with
voting rights may adversely affect the rights of the existing holders of common
stock and, in certain circumstances, could decrease the market price of the
common stock.
Staggered Terms for Board of Directors. Sun Bancshares' articles of
incorporation and bylaws provide that Sun Bancshares' board of directors will be
divided into three classes. Directors serve staggered terms, which means that
one-third of the directors will be elected each year at our annual meeting of
shareholders. As a result, unless the existing directors were to resign, it
would take at least two annual meetings of shareholders to replace a majority of
our directors.
Change in Number of Directors. Sun Bancshares' articles of incorporation
provide that any change in the number of directors, as set forth in its bylaws,
would have to be made by the affirmative vote of two-thirds of the entire board
of directors or by the affirmative vote of the holders of at least two-thirds of
the outstanding shares of common stock entitled to vote in an election of
directors.
Removal of Directors. Sun Bancshares' articles of incorporation provide
that one or more directors may be removed for cause during their terms only if
the number of votes cast to remove the director exceeds the number of votes cast
against removing the director. Sun Bancshares articles of incorporation also
provide that directors may be removed during their terms without cause only by
the affirmative vote of the holders of two-thirds of the issued and outstanding
shares of common stock entitled to vote in an election of directors.
47
<PAGE> 49
Supermajority Voting. Under Sun Bancshares' articles of incorporation,
with some exceptions, any merger or consolidation involving Sun Bancshares or
any sale or other disposition of all or substantially all of its assets will
require the affirmative vote of a majority of Sun Bancshares' directors then in
office and the affirmative vote of the holders of at least two-thirds of the
outstanding shares of common stock. However, if Sun Bancshares' board of
directors has approved the particular transaction by the affirmative vote of
two-thirds of the entire Board, then shareholder approval of the transaction
would require the affirmative vote of the holders of only a majority of the
outstanding shares of common stock entitled to vote on the transaction.
Advance Notice Requirements for Shareholder Nominations of Director. Sun
Bancshares' bylaws establish advance notice procedures with regard to
shareholder nominations, other than by or at the direction of the board of
directors or a committee of the board, of candidates for election as directors.
Shareholder nominations for the election of directors must be made in writing
and delivered to the secretary of the company no later than 30 days prior to the
date of meeting at which directors will be elected, or in the case a meeting for
the election of directors for which shareholders are given less than 40 days
notice, the close of business on the tenth day following the date on which
notice of the meeting is first given to shareholders. We may reject a
shareholder nomination that is not made in accordance with these procedures.
Nomination Requirement. Sun Bancshares' bylaws establish nomination
requirements for an individual to be elected as a director, including that the
nominating party provide (1) notice that the party intends to nominate the
proposed director; (2) the name of and biographical information on the nominee;
and (3) 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.
Consideration of Sun Bancshares' Constituencies. Sun Bancshares' articles
of incorporation provide that in determining what is in the best interest of Sun
Bancshares and its shareholders the board of directors, in addition to
considering the effect of any action on Sun Bancshares and its shareholders, may
also consider the (1) interest of Sun Bancshares' employees, customers,
suppliers, creditors, and other constituencies; (2) the communities in which Sun
Bancshares operates; and (3) other factors the directors consider pertinent.
INDEMNIFICATION
Sun Bancshares' articles of incorporation and bylaws contain provisions
which provide that Sun Bancshares 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, Sun Bancshares'
bylaws provide additional protections that include, but are not limited to,
situations where:
- The director conducted him or herself in good faith;
- The director reasonably believed that conduct in his or her official
capacity with the corporation was in the corporation's best interest or
was not opposed to the best interest of the corporation; and
- In the case of a criminal proceeding, the director had no reasonable
cause to believe his or her conduct was unlawful.
48
<PAGE> 50
No director will, however, be indemnified if he or she is found liable to Sun
Bancshares in a proceeding brought on Sun Bancshares' behalf or he or she is
found liable on the basis that he or she received an improper personal benefit.
Sun Bancshares' 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 conditions and obligations described above. The
board of directors intends to extend indemnification rights to all of its
executive officers.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
Sun Bancshares pursuant to these provisions, or otherwise, Sun Bancshares has
been informed that in the opinion of the Securities and Exchange Commission this
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable.
LIMITATION OF LIABILITY
Sun Bancshares' articles of incorporation contain a provision which,
subject to the following 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 the director's duty of loyalty to Sun Bancshares or its
shareholders;
- An act or omission not in good faith or which involves gross negligence,
intentional misconduct or a knowing violation of law;
- Any payment of a dividend or any other type of distribution that is
illegal under Section 33-8-330 of the South Carolina Business
Corporation Act;
- Any transaction from which the director derives an improper personal
material tangible benefit.
In addition, if the South Carolina Business Corporation 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 the provisions of the Act, as then in effect without further
action by the shareholders, unless the law requires shareholder action. The
provision does not limit the right of Sun Bancshares or its shareholders to seek
injunctive or other equitable relief not involving payments in the nature of
monetary damages.
49
<PAGE> 51
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the offering, Sun Bancshares will have 1,000,000 shares
of common stock outstanding, or 1,150,000 shares of common stock outstanding if
the underwriter exercises its over-allotment option in full. These shares of
common stock will be freely tradable without restriction, except that
"affiliates" of Sun Bancshares must comply with the resale limitations of Rule
144 under the Securities Act of 1933. Rule 144 defines an "affiliate" of a
company as a person who directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
the company. Affiliates of a company generally include its directors, officers
and principal shareholders. A total of 240,500 shares owned directly or
indirectly by affiliates of Sun Bancshares will be eligible for public sale
under Rule 144, subject to the contractual and volume restrictions discussed
below, beginning 180 days after the date of this prospectus.
In general, under Rule 144 affiliates are entitled to sell within any
three-month period a number of shares that does not exceed the greater of:
- 1% of the outstanding shares of common stock; or
- The average weekly trading volume during the four calendar weeks
preceding his or her sale.
Sales under Rule 144 are also subject to manner of sale provisions, notice
requirements and the availability of current public information about Sun
Bancshares. Affiliates will no longer be subject to the volume restrictions and
other limitations under Rule 144 beginning 90 days after their status as an
affiliate terminates.
Even though Rule 144 would otherwise permit the sale of shares held by
affiliates beginning 90 days after the date of this prospectus, the directors
and executive officers have each agreed with the underwriter that they will not
sell, contract to sell, or otherwise dispose of any shares of common stock or
any securities convertible into or exchangeable for any shares of common stock
for a period of 180 days from the date of this prospectus without the
underwriter's prior written consent except in limited circumstances.
Sun Bancshares intends to issue warrants to purchase up to a total of
235,000 shares of common stock, representing an amount equal to 23.5% of the
common stock sold in the offering. Sun Bancshares may also grant options, under
its stock incentive plan, to purchase up to a total of 100,000 shares of common
stock, representing an amount equal to 10.0% of the common stock sold in the
offering. Sun Bancshares intends to register the shares issuable upon exercise
of warrants and options granted under the plan. Upon registration, these shares
will be eligible for resale in the public market without restriction by persons
who are not affiliates of Sun Bancshares, and to the extent they are held by
affiliates, under Rule 144 without a holding period.
Prior to the offering, there has been no public market for the common
stock, and we cannot predict the effect, if any, that the sale of shares or the
availability of shares for sale will have on the market price prevailing from
time to time. Nevertheless, sales of substantial amounts of common stock in the
public market could adversely affect prevailing market prices and our ability to
raise equity capital in the future.
50
<PAGE> 52
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement among
Sun Bancshares and the underwriter named below, the underwriter has agreed to
purchase from us, and we have agreed to sell to the underwriter, the number of
shares of common stock listed opposite the underwriter's name below.
<TABLE>
<CAPTION>
NUMBER OF
NUMBER OF OVER-ALLOTMENT
UNDERWRITER FIRM SHARES SHARES
----------- ----------- --------------
<S> <C> <C>
Wachovia Securities, Inc.................................... 1,000,000 150,000
</TABLE>
The underwriting agreement provides that the underwriter's obligations are
subject to approval of certain legal matters by counsel and to various other
conditions customary in a firm commitment underwritten public offering. The
underwriter is required to purchase and pay for the shares offered by this
prospectus other than those covered by the over-allotment option described
below.
The underwriter will not charge an underwriting discount on up to 200,000
shares purchased in this offering by Sun Bancshares' directors and executive
officers. The underwriter will charge an underwriting discount equal to 3.5% of
the public offering price, or $0.35 per share, on up to 100,000 shares purchased
by investors who are identified in writing to the underwriter by Sun Bancshares.
The underwriter will charge an underwriting discount equal to 7.5% of the public
offering price, or $0.75 per share, on all other shares sold in this offering.
The underwriter proposes to offer the common stock directly to the public
at the public offering price listed on the cover page of this prospectus and to
selected securities dealers at that 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 other brokers and
dealers. We expect that the shares of common stock will be ready for delivery on
or about , 2000. After the offering, the offering price and other
selling terms may change.
The public offering price was determined arbitrarily by Sun Bancshares and
the underwriter after considering several factors. These factors include
prevailing market conditions and the price of comparable publicly traded
companies.
Sun Bancshares has granted the underwriter an option, exercisable within
30 days after the date of this prospectus, to purchase up to 150,000 additional
shares of common stock to cover over-allotments, if any, at the public offering
price listed on the cover page of this prospectus, less the 7.5% underwriting
discount. The underwriter may purchase these shares only to cover
over-allotments made in connection with this offering.
In addition, Sun Bancshares has granted to the underwriter a right of
first refusal to serve as exclusive or lead advisor on all corporate finance
transactions undertaken or considered by Sun Bancshares for a period of three
years after the date of this prospectus.
The underwriter does not intend to sell shares of common stock to any
account over which it exercises discretionary authority.
Each of our directors and executive officers has agreed with the
underwriter not to sell, contract to sell, or otherwise dispose of any shares of
common stock or any securities that can be converted into or exchanged for
shares of common stock for a period of 180 days from the date of this prospectus
without the underwriter's prior written consent, except in limited
circumstances. The underwriter and its affiliates may on occasion be a customer
of, engage in transactions with, and perform services for Sun Bancshares or
SunBank in the ordinary course of business.
We have agreed to indemnify the underwriter against certain liabilities,
including liabilities under the Securities Act of 1933, as currently in effect,
or to contribute to payments that the underwriter may be required to make in
connection with these liabilities.
51
<PAGE> 53
In connection with this offering, the underwriter may purchase and sell
common stock in the open market. These transactions may include over-allotment
and stabilizing transactions, and purchases to cover syndicate short positions
created in connection with this offering. Stabilizing transactions consist of
bids or purchases for the purpose of preventing or retarding a decline in the
market price of the common stock, and syndicate short positions involve the
underwriter's sale of a greater number of shares of common stock than it is
required to purchase from Sun Bancshares in the offering. These activities may
stabilize, maintain or otherwise affect the market price of the common stock,
which may be higher than the price that might otherwise prevail in the open
market. The underwriter may effect these transactions on the Nasdaq OTC Bulletin
Board or otherwise and may discontinue them at any time.
LEGAL MATTERS
Powell, Goldstein, Frazer & Murphy LLP, Atlanta, Georgia will pass upon
the validity of the shares of common stock offered by this prospectus for Sun
Bancshares. Smith Helms Mulliss & Moore, L.L.P., Charlotte, North Carolina is
acting as counsel for the underwriter in connection with legal matters relating
to the shares of common stock offered by this prospectus.
EXPERTS
Sun Bancshares' audited financial statements at December 31, 1999 and for
the period from August 3, 1999 through December 31, 1999, included in this
prospectus have been included in reliance on the report of Tourville, Simpson &
Caskey, L.L.P., Columbia, South Carolina independent certified public
accountants, given on the authority of that firm as experts in accounting and
auditing.
REPORTS TO SHAREHOLDERS
Upon the effective date of the Registration Statement on Form SB-2 that
registers the shares of common stock offered by this prospectus with the
Securities and Exchange Commission, Sun Bancshares will be subject to the
reporting requirements of the Securities Exchange Act of 1934, as currently in
effect, which include requirements to file annual reports on Form 10-KSB and
quarterly reports on Form 10-QSB with the Securities and Exchange Commission.
This reporting obligation will exist for at least one year and will continue for
successive fiscal years, except that these reporting obligations may be
suspended for any subsequent fiscal year if at the beginning of the year the
common stock is held of record by less than 300 persons.
At any time that Sun Bancshares is not a reporting company, it will
furnish its shareholders with annual reports containing audited financial
information for each fiscal year on or before the date of the annual meeting of
shareholders. Sun Bancshares' fiscal year ends on December 31. Additionally, Sun
Bancshares will also furnish such other reports as it may determine to be
appropriate or as otherwise may be required by law.
ADDITIONAL INFORMATION
Sun Bancshares has filed with the Securities and Exchange Commission a
Registration Statement on Form SB-2 under the Securities Act of 1933, as
currently in effect, with respect to the shares of common stock offered by this
prospectus. This prospectus does not contain all of the information contained in
the Registration Statement. For further information with respect to Sun
Bancshares and the common stock, we refer you to the Registration Statement and
the exhibits to it. The Registration Statement may be examined and copied at the
public reference facilities maintained by the Securities and Exchange Commission
at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549
and at the regional offices of the Securities and Exchange Commission located at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511 and Seven World Trade Center, 13th Floor, New York, New York 10048.
Copies of the Registration Statement are available at prescribed rates from the
Public
52
<PAGE> 54
Reference Section of the Securities and Exchange Commission, Room 1024, 450
Fifth Street, N.W., Judiciary Plaza, Washington, DC 20549. You may obtain
information on the operation of the Public Reference Room by calling the
Securities and Exchange Commission at 1-800-SEC-0330. The Securities and
Exchange Commission also maintains a Web site (http://www.sec.gov) that contains
registration statements, reports, proxy and information statements and other
information regarding registrants, such as Sun Bancshares, that file
electronically with the Securities and Exchange Commission.
Sun Bancshares and the organizers have filed or will file various
applications with the Office of the Comptroller of the Currency, the FDIC and
the Federal Reserve. These applications and the information they contain are not
incorporated into this prospectus. You should rely only on information contained
in this prospectus and in the related Registration Statement in making an
investment decision. To the extent that other available information not
presented in this prospectus, including information available from Sun
Bancshares and information in public files and records maintained by the Office
of the Comptroller of the Currency, FDIC and the Federal Reserve, is
inconsistent with information presented in this prospectus or provides
additional information, that information is superseded by the information
presented in this prospectus and should not be relied on. Projections appearing
in the applications are based on assumptions that the organizers believe are
reasonable, but as to which they can make no assurances Sun Bancshares
specifically disaffirms those projections for purposes of this prospectus and
cautions you against relying on them for purposes of making an investment
decision.
53
<PAGE> 55
- --------------------------------------------------------------------------------
SUN BANCSHARES, 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 December 31, 1999 F-3
Statement of Operations and Accumulated Deficit For the
Period August 3, 1999 to December 31, 1999 F-4
Statement of Changes in Stockholders' Equity (deficit) For
the Period August 3, 1999 to December 31, 1999 F-5
Statement of Cash Flows For the Period August 3, 1999 to
December 31, 1999 F-6
NOTES TO FINANCIAL STATEMENTS F-7
</TABLE>
F-1
<PAGE> 56
- --------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS' REPORT
To the Organizers
SUN BANCSHARES, INC.
We have audited the accompanying balance sheet of Sun Bancshares, Inc., (a
Company in the development stage) as of December 31, 1999 and related statements
of operations and accumulated deficit, stockholders' equity and cash flows for
the period from inception August 3, 1999 to December 31, 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 SUN BANCSHARES, INC., (a
Company in the development stage) as of December 31, 1999, and the results of
its operations and its cash flows for the period from inception August 3, 1999
to December 31, 1999 in conformity with generally accepted accounting
principles.
Tourville, Simpson & Caskey, L.L.P.
Columbia, South Carolina
March 31, 2000
F-2
<PAGE> 57
- --------------------------------------------------------------------------------
SUN BANCSHARES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
BALANCE SHEET
DECEMBER 31, 1999
<TABLE>
<S> <C>
ASSETS
Cash $ 10,750
Premises and equipment 30,740
Deferred stock offering costs 34,557
Lease deposits 9,167
----------------
Total assets $ 85,214
================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Borrowings $ 250,000
----------------
STOCKHOLDERS' EQUITY
Common stock, par value not stated; 10,000,000 shares
authorized; 1 shares issued and outstanding 10
Preferred stock, par value not stated; 2,000,000 shares
authorized, no shares issued and outstanding --
Deficit accumulated in the development stage (164,796)
----------------
Total stockholders' equity (deficit) (164,786)
----------------
Total liabilities and stockholders' equity $ 85,214
================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 58
- --------------------------------------------------------------------------------
SUN BANCSHARES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE PERIOD AUGUST 3, 1999 (INCEPTION) TO DECEMBER 31, 1999
<TABLE>
<S> <C>
Income - interest $ 237
----------------
Expenses:
Interest 1,146
Salaries and employee benefits 50,423
Consultant fees 80,470
Application fee 15,350
Other 17,644
----------------
Total expenses 165,033
----------------
Net loss and accumulated deficit $ (164,796)
================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 59
- --------------------------------------------------------------------------------
SUN BANCSHARES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD AUGUST 3, 1999 (INCEPTION) TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
COMMON STOCK IN
--------------- THE DEVELOP-
SHARES AMOUNT MENT STAGE TOTAL
------ ------ ---------------- ----------------
<S> <C> <C> <C> <C>
Issuance of common stock 1 $10 $ $ 10
Net loss for the period August 3, 1999 to
December 31, 1999 (164,796) (164,796)
-- --- ---------------- ----------------
Balance, December 31, 1999 1 $10 $ (164,796) $ (164,786)
== === ================ ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 60
- --------------------------------------------------------------------------------
SUN BANCSHARES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF CASH FLOWS
FOR THE PERIOD AUGUST 3, 1999 (INCEPTION) TO DECEMBER 31, 1999
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss and accumulated deficit $ (164,796)
----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Deposit on lease (9,167)
Purchases of premises and equipment (30,740)
----------------
Cash used by investing activities (39,907)
----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 250,000
Proceeds from issuance of common stock 10
Deferred stock offering costs (34,557)
----------------
Cash provided by investing activities 215,453
----------------
CASH BALANCE AT END OF PERIOD $ 10,750
================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 61
- --------------------------------------------------------------------------------
SUN BANCSHARES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
ORGANIZATION
Sun Bancshares, Inc. (the Company) was formed to organize and own all of
the capital stock of SunBank, N.A. (the Bank), a proposed national bank to be
located in Murrells Inlet, South Carolina, by a group of fifteen individuals
(the Organizers). Upon receipt of required regulatory approvals, the proposed
bank will engage in general banking. The Organizers have received preliminary
conditional approval of their application to the Office of The Comptroller of
the Currency to obtain a national bank charter and have filed an application
with the Federal Deposit Insurance Corporation (FDIC) for deposit insurance.
Provided the necessary capital is raised and the necessary final regulatory
approvals are received, it is expected that operations will commence in the
second quarter of 2000.
The Company plans to raise a minimum of $10,000,000 by offering for sale
1,000,000 shares of its common stock. The Company will use $8,000,000 of the
proceeds to capitalize the proposed Bank. The organizers, directors, executive
officers, and members of their immediate families expect to purchase a total of
240,500 shares at an aggregate purchase price of approximately $2,405,000.
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 of the
Company 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 initial
period's operating results.
It is estimated the Company will incur approximately $485,000 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 $135,000.
NOTE 2 - PREMISES AND EQUIPMENT
The Company has entered into a tentative agreement to lease a lot from two
of the organizers. The lot is located in Murrells Inlet, South Carolina and will
be the site of the Bank's main office facility. This agreement is contingent
upon it being approved by the Office of the Comptroller of the Currency. The
lease will be a triple-net lease for a twenty-five year term with three five
year renewals. The estimated rent for the first year is $90,000. From years two
through twenty five, the proposed rent is the amount computed for year one plus
the increase in the consumer price index.
The Company has an option that expires May 1, 2000 to lease a lot located
in Georgetown, South Carolina, for the purpose of constructing a branch bank
facility. The option agreement requires the Company to pay the lessor
non-refundable monthly installments of $4,583 beginning December 1, 1999 and
continuing monthly thereafter for the term of this agreement. The amount paid
during the option term
F-7
<PAGE> 62
- --------------------------------------------------------------------------------
NOTE 2 - PREMISES AND EQUIPMENT, CONTINUED
will be applied to the first year's rent. The proposed lease will be a triple
net lease for an initial thirty year term, with four five year renewal options.
The proposed rent will be $55,000 per year for years one through three.
The rent for subsequent years will be adjusted by the corresponding changes in
the consumer price index.
NOTE 3 - BORROWINGS
As of December 31, 1999, borrowings consist of $250,000 drawn on an
$850,000 unsecured line of credit obtained from The Bankers Bank, 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 September 30, 2000.
The line of credit is being used to fund the Bank's organizational and
pre-opening costs.
NOTE 4 - STOCKHOLDERS' EQUITY
COMMON STOCK
Sun Bancshares, Inc. has the authority to issue up to 10,000,000 shares of
voting common stock, par value not stated.
PREFERRED STOCK
Sun Bancshares, Inc. has the authority to issue up to 2,000,000 shares of
preferred stock, par value not stated. Also, Sun Bancshares, Inc. has the right
to establish and designate from time to time any part or all of the shares by
filing an amendment to Sun Bancshares, 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
Sun Bancshares, Inc. has elected not to have cumulative voting, and no
shares issued by Sun Bancshares, Inc. may be cumulatively voted.
PREEMPTIVE RIGHTS
The stockholders of Sun Bancshares, Inc. shall not have any preemptive
rights regarding any issuance of Sun Bancshares, Inc.'s capital stock.
STOCK OFFERING
Upon receiving preliminary regulatory approvals, the Company, through its
underwriter, Wachovia Securities, Inc., plans to offer for sale to the general
public 1,000,000 shares of no stated par value common stock at an offering price
of $10.00 per share. Wachovia Securities has the right to exercise its
over-allotment option to purchase up to an additional 150,000 shares of common
stock at $10.00 per share, less a 7.5% underwriting discount. The Organizers and
executive officers intend to purchase an aggregate of 240,500 shares of common
stock to be sold in the offering which represent approximately 24% of the
offering. The Organizers will receive a warrant to purchase one share of common
stock for each share of common stock purchased in the offering. The exercise
price for the warrants will be $10.00 per share and
F-8
<PAGE> 63
- --------------------------------------------------------------------------------
NOTE 4 - STOCKHOLDERS' EQUITY, CONTINUED
may be exercised over a ten (10) year period. The warrants will be subject to
certain conditions and limitations.
NOTE 5 - INCOME TAXES
As of December 31, 1999, Sun Bancshares, Inc. had a net operating loss
carryforward of $164,796.
There was no provision (benefit) for income taxes for the period from
August 3, 1999 to December 31, 1999, since a 100% valuation reserve is being
maintained for the net operating loss carryforward.
NOTE 6 - EMPLOYMENT CONTRACT
Sun Bancshares, Inc. intends to enter into a three-year employment
contract with its President. Subject to certain conditions, at the end of the
initial three-year term of the contract, the contract shall be extended for an
additional year so that the remaining term of the contract will be one year. The
contract provides that the President will receive an initial annual salary of
$96,000.
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.
F-9
<PAGE> 64
- ------------------------------------------------------
- ------------------------------------------------------
PROSPECTIVE INVESTORS MAY RELY ONLY ON THE INFORMATION CONTAINED IN THIS
PROSPECTUS. NO ONE HAS AUTHORIZED ANYONE TO PROVIDE PROSPECTIVE INVESTORS WITH
INFORMATION DIFFERENT FROM THAT CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS IS
NOT AN OFFER TO SELL NOR IS IT SEEKING AN OFFER TO BUY THESE SECURITIES IN ANY
JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED. THE INFORMATION CONTAINED
IN THIS PROSPECTUS IS CORRECT ONLY AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS
OF THE TIME OF THE DELIVERY OF THIS PROSPECTUS OR ANY SALE OF THESE SECURITIES.
---------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary............................... 3
Risk Factors.......................... 7
Caution Regarding Forward-Looking
Statements.......................... 12
Use of Proceeds....................... 13
Capitalization........................ 14
Dividends............................. 14
Management's Discussion and Analysis
of Financial Condition and Plan of
Operations.......................... 15
Proposed Business..................... 18
Management............................ 27
Executive Compensation................ 33
Related Party Transactions............ 38
Supervision and Regulation............ 39
Description of Sun Bancshares' Capital
Stock and Shareholders' Rights...... 46
Shares Eligible for Future Sale....... 50
Underwriting.......................... 51
Legal Matters......................... 52
Experts............................... 52
Reports to Shareholders............... 52
Additional Information................ 52
Index to Financial Statements......... F-1
</TABLE>
UNTIL 2000 (40 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS THAT BUY, SELL OR TRADE THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION
TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
1,000,000 SHARES
SUN
BANCSHARES, INC.
A PROPOSED BANK HOLDING COMPANY FOR
SUN BANCSHARES, INC. LOGO
SUNBANK, N.A.
(IN ORGANIZATION)
COMMON STOCK
----------
PROSPECTUS
----------
WACHOVIA SECURITIES, INC.
, 2000
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 65
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Consistent with the applicable provisions of the laws of South Carolina,
the Registrant's Bylaws provide that the Registrant shall indemnify its
directors, officers, employees and agents against expenses (including attorneys'
fees) and liabilities arising from actual or threatened actions, suits or
proceedings, whether or not settled, to which they become subject by reason of
having served in such role if such director, officer, employee or agent acted in
good faith and in a manner he or she reasonably believed to be in or not opposed
to the best interests of the Registrant and, with respect to a criminal action
or proceeding, had no reasonable cause to believe his or her conduct was
unlawful. Advances against expenses shall be made so long as the person seeking
indemnification agrees to refund the advances if it is ultimately determined
that he or she is not entitled to indemnification. A determination of whether
indemnification of a director, officer, employee or agent is proper because he
or she met the applicable standard of conduct shall be made (1) by the board of
directors of the Registrant, (2) in certain circumstances, by independent legal
counsel in a written opinion or (3) by the affirmative vote of a majority of the
shares entitled to vote.
In addition, Article 5.6 of the Registrant's Articles of Incorporation,
subject to certain exceptions, eliminates the potential personal liability of a
director for monetary damages to the Registrant and to the shareholders of the
Registrant for breach of a duty as a director. There is no elimination of
liability for (1) a breach of the director's duty of loyalty to the Registrant
or its shareholders, (2) an act or omission, not in good faith which involves
gross negligence intentional misconduct or a knowing violation of law, (3) a
transaction from which the director derives an improper personal material
tangible benefit or (4) as to any payment of a dividend or any other type of
distribution that is illegal under the South Carolina Business Corporation Act.
The Articles of Incorporation do not eliminate or limit the right of the
Registrant or its shareholders to seek injunctive or other equitable relief not
involving monetary damages.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Estimated expenses, other than underwriting discounts and commissions, of
the sale of the Registrant's Common Stock, no par value, are as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee......... 3,591
National Association of Securities Dealers, Inc. Filing
Fee....................................................... 1,860
Blue Sky Fees and Expenses.................................. 10,000
Legal Fees and Expenses..................................... 68,000
Accounting Fees and Expenses................................ 9,000
Printing and Engraving Expenses............................. 40,000
Miscellaneous............................................... $ 2,549
--------
Total............................................. $135,000
========
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
On August 30, 1999, the Registrant issued to Dalton B. Floyd, Jr., in a
private placement, one share of the Registrant's Common Stock, no par value per
share, for an aggregate price of $10.00 in connection with the organization of
the Company. The sale to Mr. Floyd was exempt from registration under the
Securities Act pursuant to Section 4(2) of the Act because it was a transaction
by an issuer that did not involve a public offering.
II-1
<PAGE> 66
ITEM 27. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C> <C>
1.1 -- Underwriting Agreement
3.1(a ) -- Articles of Incorporation*
3.1(b ) -- Articles of Amendment*
3.2 -- Bylaws*
4.1 -- Specimen Common Stock Certificate
4.2 -- See Exhibits 3.1 and 3.2 for provisions of the articles of
incorporation and bylaws defining rights of holders of the
Common Stock
5.1 -- Legal Opinion of Powell, Goldstein, Frazer & Murphy LLP
10.1 -- Letter of Intent for Lease dated October 20, 1999 (Murrells
Inlet main office site)*
10.2 -- Option Agreement (For Lease) dated November 12, 1999
(Georgetown branch office site)*
10.3 -- Employment Agreement dated February 2, 2000, among SunBank,
N.A. (Proposed), Sun Bancshares, Inc. and Thomas Bouchette
10.4 -- Form of Sun Bancshares, Inc. Organizers' Warrant Agreement*
10.5 -- Sun Bancshares, Inc. 2000 Stock Incentive Plan
10.6 -- Form of Sun Bancshares, Inc. Incentive Stock Option Award
10.7 -- Promissory Note dated January 26, 2000 between Sun
Bancshares, Inc. and The Bankers Bank*
10.8 -- Form of Commercial Guaranty*
23.1 -- Consent of Tourville, Simpson & Caskey, L.L.P.
23.2 -- Consent of Powell, Goldstein, Frazer & Murphy LLP (contained
in Exhibit 5.1)
24.1 -- Power of Attorney (Reference is made to page II-4)
27.1 -- Financial Data Schedule (for SEC use only)*
</TABLE>
- ---------------
* Previously filed.
ITEM 28. UNDERTAKINGS.
The Registrant hereby undertakes to provide to the underwriter at the
closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to foregoing provisions, or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-2
<PAGE> 67
The undersigned Registrant hereby undertakes as follows:
(a)(1) To file, during any period in which it offers or sells
securities, a post-effective amendment to this Registration Statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information set forth in the Registration Statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective Registration
Statement;
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities being registered that remain unsold at the end of the
offering.
The Registrant hereby undertakes as follows:
(b)(1) For determining any liability under the Securities Act, to
treat the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant under Rule 424(b)(1), or (4) or
497(h) under the Securities Act as part of this Registration Statement as
of the time the Commission declared it effective.
(2) For determining any liability under the Securities Act, to treat
each post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the Registration
Statement, and that offering of the securities at that time as the initial
bona fide offering of those securities.
II-3
<PAGE> 68
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as
amended the Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form SB-2 and authorized this
Registration Statement to be signed on its behalf by the undersigned in the city
of Murrells Inlet, State of South Carolina, on March 31, 2000.
SUN BANCSHARES, INC.
By: /s/ THOMAS BOUCHETTE
------------------------------------
Thomas Bouchette
President
POWER OF ATTORNEY
In accordance with the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the following persons in
the capacities and on the dates stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ THOMAS BOUCHETTE President and Director** March 31, 2000
- -----------------------------------------------------
Thomas Bouchette
* Director March 31, 2000
- -----------------------------------------------------
Edsel J. DeVille
* Director March 31, 2000
- -----------------------------------------------------
John S. Divine, III
* Chairman and Chief Executive March 31, 2000
- ----------------------------------------------------- Officer
Dalton B. Floyd, Jr.
* Director March 31, 2000
- -----------------------------------------------------
Jeanne Louise Fourrier-Eggart
* Director March 31, 2000
- -----------------------------------------------------
David E. Grabeman
* Director March 31, 2000
- -----------------------------------------------------
Richard Edwin Heath
* Director March 31, 2000
- -----------------------------------------------------
Paul John Hletko
* Director March 31, 2000
- -----------------------------------------------------
Judy Long
* Director March 31, 2000
- -----------------------------------------------------
Thomas Morris
* Director March 31, 2000
- -----------------------------------------------------
Joel A. Pellicci
</TABLE>
II-4
<PAGE> 69
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Director March 31, 2000
- -----------------------------------------------------
Donald Perry
* Director March 31, 2000
- -----------------------------------------------------
Chandler C. Prosser
* Director March 31, 2000
- -----------------------------------------------------
Larry N. Prosser
*By: /s/ THOMAS BOUCHETTE
------------------------------------------------
Thomas Bouchette
Attorney-In-Fact
</TABLE>
- ---------------
** Principal executive, financial and accounting officer.
II-5
<PAGE> 70
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
1.1 -- Underwriting Agreement
3.1(a) -- Articles of Incorporation*
3.1(b) -- Articles of Amendment*
3.2 -- Bylaws*
4.1 -- Specimen Common Stock Certificate
4.2 -- See Exhibits 3.1 and 3.2 for provisions of the articles of
incorporation and bylaws defining rights of holders of the
Common Stock
5.1 -- Legal Opinion of Powell, Goldstein, Frazer & Murphy LLP
10.1 -- Letter of Intent for Lease dated October 20, 1999 (Murrells
Inlet main office site)*
10.2 -- Option Agreement (For Lease) dated November 12, 1999
(Georgetown branch office site)*
10.3 -- Employment Agreement dated February 2, 2000, among SunBank,
N.A. (Proposed), Sun Bancshares, Inc. and Thomas Bouchette
10.4 -- Form of Sun Bancshares, Inc. Organizers' Warrant Agreement*
10.5 -- Sun Bancshares, Inc. 2000 Stock Incentive Plan
10.6 -- Form of Sun Bancshares, Inc. Incentive Stock Option Award
10.7 -- Promissory Note dated January 26, 2000 between Sun
Bancshares, Inc. and The Bankers Bank*
10.8 -- Form of Commercial Guaranty*
23.1 -- Consent of Tourville, Simpson & Caskey, L.L.P.
23.2 -- Consent of Powell, Goldstein, Frazer & Murphy LLP (contained
in Exhibit 5.1)
24.1 -- Power of Attorney (Reference is made to page II-4 of the
Registration Statement)
27.1 -- Financial Data Schedule (for SEC use only)*
</TABLE>
- ---------------
* Previously filed.
<PAGE> 1
SUN BANCSHARES, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
_____________________ , 2000
WACHOVIA SECURITIES, INC.
As representative of the several
Underwriters named in Schedule I hereto,
c/o Wachovia Securities, Inc.
IJL Financial Center
201 North Tryon Street
Charlotte, North Carolina 28202
Ladies and Gentlemen:
Sun Bancshares, Inc., a South Carolina corporation (the "Company") and
proposed holding company for SunBank, N.A., a national banking association (the
"Bank"), proposes, subject to the terms and conditions stated herein, to issue
and sell to the underwriters named in Schedule I hereto (the "Underwriters") an
aggregate of 1,000,000 shares of common stock, no par value (the "Common
Stock"), of the Company (the "Firm Shares"), and, at the election of the
Underwriters, subject to the terms and conditions stated herein, to sell to the
Underwriters up to 150,000 additional shares of Common Stock (the "Optional
Shares") solely to cover overallotments, if any (the Firm Shares and the
Optional Shares that the Underwriters elect to purchase pursuant to Section 2
hereof are collectively called the "Shares").
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to, and agrees with each of the Underwriters that:
(a) A registration statement on Form SB-2 (File No.
333-_____) with respect to the Shares, has been filed by the Company
with the Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933, as amended (the "Securities Act"). The
registration statement and any amendments thereto, including any
post-effective amendments, have been declared effective by the
Commission in such form and copies of each of those items have been
delivered by the Company to you. No other document with respect to the
registration statement or any post effective amendment thereto has
been filed with the Commission; and no stop order suspending the
effectiveness of the registration statement has been issued and no
proceeding for that purpose has been instituted or threatened by the
Commission. Any preliminary
<PAGE> 2
prospectus included in the registration statement or filed with the
Commission pursuant to Rule 424 of the Rules and Regulations of the
Commission under the Securities Act (the "Rules and Regulations"),
is herein called a "Preliminary Prospectus." The various parts of such
registration statement, including the prospectus, Part II, all
financial schedules and exhibits thereto, and including the
information contained in the form of final prospectus filed with the
Commission pursuant to Rule 424(b) under the Securities Act, and
deemed by virtue of Rule 430A under the Securities Act to be part of
the registration statement at the time it was declared effective, as
amended at the time such part became effective, are herein called
collectively the "Registration Statement," and the final prospectus,
in the form first filed pursuant to Rule 424(b) or as included in the
Registration Statement at the time it is declared effective if no Rule
424(b) filing is required, is herein called the "Prospectus."
(b) No order preventing or suspending the use of any
Prospectus, including any Preliminary Prospectus, has been issued and
no proceeding for that purpose has been instituted or threatened by
the Commission or the securities authority of any state or other
jurisdiction. No stop order suspending the effectiveness of the
Registration Statement or any part thereof has been issued and no
proceeding for that purpose has been instituted or threatened or, to
the knowledge of the Company, contemplated by the Commission or the
securities authority of any state or other jurisdiction.
(c) Each Preliminary Prospectus filed as part of the
Registration Statement as originally filed or as part of any amendment
thereto complied when so filed in all material respects with the
requirements applicable to it under the Securities Act and the Rules
and Regulations and none of such documents contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading; and any further amendment or supplement
thereto, when such documents become effective or are filed with the
Commission, as the case may be, will conform in all material respects
to the requirements of the Securities Act, and the Rules and
Regulations and will not contain an untrue statement of material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by an Underwriter
through Wachovia Securities, Inc. (the "Representative") expressly for
use therein. When the Registration Statement or any amendment thereto
was declared effective, and at each Time of Delivery (as hereinafter
defined), it (i) contained all statements required to be stated
therein in accordance with, and complied or will comply in all
material respects with the requirements of, the Securities Act and the
Rules and Regulations and (ii) did not include any untrue statement of
a material fact or omit to state any material fact necessary to make
the statements therein not misleading. When the Prospectus or any
amendment or supplement thereto is filed with the Commission pursuant
to Rule 424(b) (or, if the Prospectus or such amendment or supplement
is not required to be so filed, when the Registration Statement or the
amendment thereto containing such amendment
2
<PAGE> 3
or supplement to the Prospectus was or is declared effective) and at
each Time of Delivery, the Prospectus, as amended or supplemented at
any such time (i) contained or will contain all statements required to
be stated therein in accordance with, and complied or will comply in
all material respects with the requirements of, the Securities Act and
the Rules and Regulations and (ii) did not or will not include any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein not misleading.
(d) The descriptions in the Registration Statement and
the Prospectus of statutes, rules, regulations, legal and governmental
proceedings or contracts and other documents that are required to be
so described are accurate and fairly present the information required
to be shown; and there are no statutes, rules, regulations or legal or
governmental proceedings required to be described in the Registration
Statement or the Prospectus that are not described as required and no
contracts or documents of a character that are required to be
described in the Registration Statement or the Prospectus or to be
filed as exhibits to the Registration Statement that are not described
and filed as required.
(e) The Company has been duly incorporated, is validly
existing as a corporation under the laws of the State of South
Carolina and has full power and authority to own or lease its
properties and conduct its business as described in the Prospectus.
The Bank is a national banking association in organization under the
laws of the United States of America and, upon the issuance of a
charter by the Office of the Comptroller of the Currency (the "OCC"),
will have full power and authority to own or lease its properties and
conduct its business as described in the Prospectus. The Company has
full power and authority to enter into this Agreement and to perform
its obligations hereunder. Neither the Company nor the Bank is
required to be qualified to transact business as a foreign corporation
under the laws of any other jurisdiction.
(f) The capitalization of the Company is as disclosed
under the caption "Capitalization" in the Prospectus. All of the issued
shares of capital stock of the Company have been duly authorized and
validly issued, are fully paid and nonassessable and conform to the
description of the capital stock under the caption "Description of Sun
Bancshares' Capital Stock and Shareholders' Rights" contained in the
Prospectus. None of the issued shares of capital stock of the Company
has been issued or is owned or held in violation of any preemptive or
similar rights, and no person or entity (including any holder of
outstanding shares of capital stock of the Company or its subsidiary)
has any preemptive or other rights to subscribe for any of the Shares.
None of the shares of capital stock of the Bank has been issued.
(g) Upon the issuance of a charter by the OCC and the
payment for the capital stock of the Bank, all of the issued shares of
the Bank will be duly authorized and validly issued, fully paid, and,
except as may be applicable under the National Bank Act, nonassessable
and will be owned beneficially by the Company free and clear of all
liens, security interests, pledges, charges, encumbrances, defects,
shareholders' agreements,
3
<PAGE> 4
voting trusts, equities or claims of any nature whatsoever. The
Company has made application
(i) to the Board of Governors of the Federal
Reserve System for approval to become a bank holding company
and to acquire all of the shares of the Bank;
(ii) to the OCC, for approval to charter a national
bank; and
(iii) to the Federal Deposit Insurance Corporation
for approval for Federal Deposit Insurance for Bank deposits
(each a "Regulatory Approval" and collectively, the
"Regulatory Approvals").
The Company and the Bank have obtained or have filed for all
other material licenses, consents and approvals, and have satisfied or
have taken all action required at this time to satisfy all material
eligibility and other similar requirements imposed by federal and
state regulatory bodies, administrative agencies or other governmental
bodies, agencies or officials, in each case applicable to the conduct
of the business in which they are engaged or are contemplated to be
engaged as described in the Registration Statement. With respect to
the Regulatory Approvals, as well as all other material licenses,
consents and approvals, and any other similar requirements that the
Company or the Bank does not have at this time, (i) all applications
therefor are complete, accurate, and have been filed with the
appropriate regulatory authorities, (ii) the Company has received
preliminary notice from the OCC that such application for Regulatory
Approval will be approved, and (iii) the Company knows of no reason
why all final Regulatory Approvals will not be received prior to the
time required. Other than the Bank, the Company does not own, directly
or indirectly, any capital stock or other equity securities of any
corporation or any ownership interest in any partnership, joint
venture or other association.
(h) Except as disclosed in the Prospectus, there are no
outstanding (i) securities or obligations of the Company or the Bank
convertible into or exchangeable for any capital stock of the Company
or the Bank, (ii) warrants, rights or options to subscribe for or
purchase from the Company or the Bank any such capital stock or any
such convertible or exchangeable securities or obligations, or (iii)
obligations of the Company or the Bank to issue any shares of capital
stock, any such convertible or exchangeable securities or obligations,
or any such warrants, rights or options.
(i) Since the date as of which information is given in
the Prospectus, neither the Company nor the Bank has sustained any
material loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance, or from
any labor dispute or court or governmental action, order or decree,
otherwise than as disclosed in or contemplated by the Prospectus.
(j) Since the date as of which information is given in
the Prospectus, (i) neither the Company nor the Bank has incurred any
liabilities or obligations, direct or contingent, or entered into any
transactions, not in the ordinary course of business, that
4
<PAGE> 5
are material to the Company and the Bank, (ii) the Company has not
purchased any of its outstanding capital stock or declared, paid or
otherwise made any dividend or distribution of any kind on its capital
stock, (iii) there has not been any change in the capital stock,
long-term debt or short-term debt of the Company or the Bank (except
with respect to such changes in the balance due under the Company's
line of credit described in the Prospectus), and (iv) there has not
been any material adverse change, or any development involving a
prospective material adverse change, in or affecting the financial
position, general affairs, management, business or prospects of the
Company and the Bank, in each case other than as disclosed in or
contemplated by the Prospectus.
(k) The consolidated financial statements of the Company,
together with related notes and schedules as set forth in the
Registration Statement, conform to the requirements of the Securities
Act and the Rules and Regulations. Such financial statements fairly
present the consolidated financial position of the Company at the
respective dates indicated in accordance with generally accepted
accounting principles applied on a consistent basis for the periods
indicated. The Company and the Bank have no material contingent
obligations which are not disclosed in the Company's financial
statements which are included in the Registration Statement.
Tourville, Simpson & Caskey, L.L.P. whose report is included in the
Registration Statement, are independent certified public accountants
as required by the Securities Act and the Rules and Regulations.
(l) The Shares to be sold by the Company hereunder have been
duly authorized and, when issued and delivered against payment
therefor as provided herein, will be validly issued and fully paid and
nonassessable and will conform to the description of the Common Stock
contained in the Prospectus; and all corporate action required to be
taken for the authorization, issuance and sale of the Shares has been
validly taken. The Underwriters will receive good and marketable title
to the Shares to be issued and delivered hereunder, free and clear of
all liens, encumbrances, claims, security interests, restrictions,
shareholders' agreements and voting trusts whatsoever. The
certificates evidencing the Shares will be in due and proper form and
will comply with all applicable legal requirements.
(m) There are no contracts, agreements or understandings
between the Company and any person granting such person the right to
require the Company to file a registration statement under the
Securities Act with respect to any securities of the Company owned or
to be owned by such person or to require the Company to include such
securities in the securities registered pursuant to the Registration
Statement or any securities being registered pursuant to any other
registration statement filed by the Company under the Securities Act.
(n) Neither the Company nor the Bank is, or (with or without
the giving of notice or passage of time or both) would be: (i) in
violation of its Articles of Incorporation, Articles of Association,
Bylaws or other governing instruments; or (ii) in
5
<PAGE> 6
default under any indenture, mortgage, deed of trust, loan agreement,
lease or other agreement or instrument to which the Company or the
Bank is a party or to which any of their respective properties or
assets are subject, except, in the case of clause (ii) above, where
such default would not have a material adverse effect on either the
Company or the Bank.
(o) The issue and sale of the Shares and the performance of
this Agreement and the consummation of the transactions herein
contemplated will not conflict with, or (with or without the giving of
notice or the passage of time or both) result in a breach or violation
of any of the terms or provisions of, or constitute a default under,
any indenture, mortgage, deed of trust, loan agreement, lease or other
agreement or instrument to which the Company or the Bank is a party or
to which any of their respective properties or assets is subject, nor
will such action conflict with or violate any provision of the
Articles of Incorporation, Articles of Association, Bylaws or other
governing instruments of the Company or the Bank, or any statute, rule
or regulation or any order, judgment or decree of any court or
governmental agency or body having jurisdiction over the Company or
the Bank or any of their respective properties or assets.
(p) The Company and the Bank have good and marketable title
in fee simple to all real property, if any, and good title to all
personal property owned by them, in each case free and clear of all
liens, security interests, pledges, charges, encumbrances, mortgages
and defects, except such as are disclosed in the Prospectus or such as
do not materially and adversely interfere with the operations of the
Company and the Bank; and any real property and buildings held under
lease by the Company or the Bank are held under valid, subsisting and
enforceable leases, with such exceptions as are disclosed in the
Prospectus or are not material and do not interfere with the
operations of the Company or the Bank.
(q) No consent, approval, authorization, order or declaration
of or from, or registration, qualification or filing with, any court
or governmental agency or body or third party is required for the
issue and sale of the Shares or the consummation of the transactions
contemplated by this Agreement, except (i) the registration of the
Shares under the Securities Act and such as may be required by the
National Association of Securities Dealers, Inc. (the "NASD") and
under state securities or blue sky laws in connection with the offer,
sale and distribution of the Shares by the Underwriters, and (ii) as
required in connection with the Regulatory Approvals.
(r) Other than as disclosed in the Prospectus, there is no
litigation, arbitration, claim, proceeding (formal or informal) or
investigation pending or, to the knowledge of any director or
executive officer of the Company, threatened (or any reasonable basis
therefor) in which the Company or the Bank is a party or of which any
of their respective properties or assets are the subject which, if
determined adversely to the Company or the Bank, would individually or
in the aggregate have a material adverse effect on the
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<PAGE> 7
financial position, general affairs, management, business or prospects
of the Company and the Bank.
(s) This Agreement has been duly authorized, executed and
delivered by the Company and constitutes the valid and binding
agreement of the Company enforceable against the Company in accordance
with its terms subject, as to enforcement, to applicable bankruptcy,
insolvency, reorganization and moratorium laws and other laws relating
to or affecting the enforcement of creditors' rights generally and to
general equitable principles, and except as the enforceability of
rights to indemnity and contribution under this Agreement may be
limited under applicable securities laws or the public policy
underlying such laws.
(t) Neither the Company nor any of its officers, directors or
affiliates has (i) taken, directly or indirectly, any action designed
to cause or result in, or that has constituted or might reasonably be
expected to constitute, the stabilization or manipulation of the price
of any security of the Company to facilitate the sale or resale of the
Shares or (ii) since the filing of the Registration Statement (A)
sold, bid for, purchased or paid anyone any compensation for
soliciting purchases of, the Shares or (B) paid or agreed to pay to
any person any compensation for soliciting another to purchase any
other securities of the Company.
(u) None of the Company, the Bank, nor, to the knowledge of
the Company, any director or executive officer, agent, employee or
other person acting on behalf of the Company or the Bank has (i) used
or authorized the use of, any corporate or other funds for unlawful
payments, or contributions, (ii) made unlawful expenditures relating
to political activity to government officials, or (iii) established or
maintained any unlawful or unrecorded funds in violation of any
federal, state, or local law or regulation, including Section 30A of
the Exchange Act. None of the Company, the Bank, nor, to the knowledge
of the Company, any director or executive officer of the Company or
the Bank has accepted or received any unlawful contributions or
payments.
(v) The Company has obtained for the benefit of the Company
and the Underwriters from each of its directors and executive officers
a written agreement (the "Lockup Agreements") that for a period of 180
days from the date of the Prospectus such director or officer will
not, without your prior written consent, offer, pledge, sell, contract
to sell, grant any option for the sale of, or otherwise dispose of (or
announce any offer, pledge, sale, grant of an option to purchase or
other disposition), directly or indirectly, any shares of Common Stock
or securities convertible into, or exercisable or exchangeable for,
shares of Common Stock.
(w) The Bank, upon the issuance of a charter by the OCC, will
not be prohibited, directly or indirectly, from paying any dividends
to the Company, from making any other distributions on the Bank's
capital stock, from repaying to the
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<PAGE> 8
Company any loans or advances to the Bank or from transferring the
Bank's property or assets to the Company, except under federal
regulations as disclosed in the Prospectus.
(x) The Company and the Bank have filed all material foreign,
federal, state and local tax returns that are required to be filed by
them and have paid all taxes shown as due on such returns as well as
all other taxes, assessments and government charges that are due and
payable; and no deficiency with respect to any such return has been
assessed or proposed in any material respects. All tax liabilities
have been adequately provided for in the financial statements of the
Company.
(y) The Company is not, nor will it become as a result of
transactions contemplated hereby, and does not intend to conduct its
business in a manner that would cause it to become an "investment
company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940.
2. PURCHASE AND SALE OF SHARES.
(a) Subject to the terms and conditions herein set forth, (i)
the Company agrees to issue and sell to each of the Underwriters, and
each of the Underwriters agree, severally and not jointly, to purchase
from the Company the number of Firm Shares set opposite the name of
such Underwriter in Schedule 1 hereto, at the following purchase
prices: (A) with respect to the Firm Shares not purchased by the
Company's directors, executive officers and certain other investors
identified in writing by the Company, as described in (B) and (C)
below, at a purchase price of $9.25 per share, and (B) with respect to
the Firm Shares purchased by the Company's directors and executive
officers, but only up to a maximum of 200,000 Firm Shares, at a
purchase price of $10.00 per share, and (C) with respect to the Firm
Shares purchased by certain other investors identified in writing by
the Company, but only up to a maximum of 100,000 Firm Shares, at a
purchase price of $9.65 per share, (ii) in the event and to the extent
that the Underwriters shall exercise the election to purchase Optional
Shares as provided below, the Company agrees to issue and to sell to
each of the Underwriters, and each of the Underwriters agree,
severally and not jointly, to purchase from the Company, at a purchase
price of $9.25 per share, that portion of the number of Optional
Shares as to which such election shall have been exercised (to be
adjusted by you so as to eliminate fractional shares) determined by
multiplying such number of Optional Shares by a fraction, the
numerator of which is the maximum number of Optional Shares that such
Underwriter is entitled to purchase as set forth opposite the name of
such Underwriter in Schedule I hereto and the denominator of which is
the maximum number of the Optional Shares that all of the Underwriters
are entitled to purchase hereunder.
(b) The Company hereby grants to the Underwriters the right
to purchase at their election in whole or in part from time to time up
to 150,000 Optional Shares, at the purchase price of $9.25 per share
for the sole purpose of covering over-allotments in the sale of Firm
Shares. Any such election to purchase Optional Shares may be exercised
by
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<PAGE> 9
written notice from you to the Company, given from time to time within
a period of 30 calendar days after the date of this Agreement and
setting forth the aggregate number of Optional Shares to be purchased
and the date on which the Optional Shares are to be delivered, as
determined by you but in no event (i) earlier than the First Time of
Delivery (as hereinafter defined) or (ii) unless you and the Company
otherwise agree in writing, earlier than two or later than ten
business days after the date of such notice. In the event you elect to
purchase all or a portion of the Optional Shares, the Company agrees
to furnish or cause to be furnished to you the certificates, letters
and opinions, and to satisfy all conditions set forth in Section 7
hereof at each Subsequent Time of Delivery (as hereinafter defined).
3. OFFERING BY THE UNDERWRITERS. Upon the release of the Shares,
the several Underwriters propose to offer the Shares for sale upon the terms
and conditions disclosed in the Prospectus.
4. DELIVERY OF SHARES; CLOSING. Certificates in definitive form
for the Shares to be purchased by each Underwriter hereunder, and in such
denominations and registered in such names as the Representative may request
upon at least 48 hours prior notice to the Company shall be delivered by or on
behalf of the Company to you for your account against payment by you of the
purchase price therefor by wire transfer of immediately available funds to an
account designated by the Company. The closing of the sale and purchase of the
Shares shall be held at the offices of Smith Helms Mulliss & Moore, L.L.P.,
Charlotte, North Carolina. The time and date of such delivery and payment shall
be, with respect to the Firm Shares, at 10:00 a.m., Charlotte, North Carolina
time, on the 3rd (or if the Firm Shares are priced, as contemplated by Rule
15c6-1(c) under the Exchange Act, after 4:30 p.m., Washington, D.C. time, the
4th) full business day after the execution of this Agreement or at such other
legally permissible time and date as you and the Company may agree upon in
writing, and, with respect to the Optional Shares, at 10:00 a.m., Charlotte,
North Carolina time, on the date specified by you in the written notice given
by you of the Underwriters' election to purchase all or part of such optional
shares, or at such other time and date as you and the Company may agree upon in
writing. Such time and date for delivery of the Firm Shares is herein called
the "First Time of Delivery," such time and date for delivery of the Optional
Shares, if not the First Time of Delivery, is herein called a "Subsequent Time
of Delivery," and each such time and date for delivery is herein called a "Time
of Delivery." The Company will make such certificates available for checking
and packaging at least 24 hours prior to each Time of Delivery at your office
at the address set forth above or such other location designated by you to the
Company. If the Representative so elects, delivery of the Firm Shares and the
Optional Shares, if any, may be made by credit through full fast transfer to
the accounts at the Depositary Trust Company designated by the Representative.
5. COVENANTS OF THE COMPANY. The Company covenants and agrees with the
Underwriters:
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<PAGE> 10
(a) The Company shall comply with the provisions of and make all
requisite filings with the Commission pursuant to and in accordance with Rule
430A and subparagraph (1) (or, if applicable and if consented to by you,
subparagraph (4)) of Rule 424(b) not later than the earlier of (i) the second
business day following the execution and delivery of this Agreement or (ii) the
date on which the Prospectus is first used after the Registration Statement is
declared effective. The Company will advise you promptly of any such filing
pursuant to Rules 430A or 424(b).
(b) The Company will not file with the Commission the Prospectus
or any amendment or supplement to the Prospectus or any amendment to the
Registration Statement unless you have received a reasonable period of time to
review any such proposed amendment or supplement and consented to the filing
thereof and will use its best efforts to cause any such amendment to the
Registration Statement to be declared effective as promptly as possible. Upon
the request of the Representative or counsel for the Representative, the
Company will promptly prepare and file with the Commission, in accordance with
the Rules and Regulations, any amendments to the Registration Statement or
amendments or supplements to the Prospectus that may be necessary or advisable
in connection with the distribution of the Shares by the Underwriters and will
use its best efforts to cause any such amendment to the Registration Statement
to be declared effective as promptly as possible. If required, the Company will
file any amendment or supplement to the Prospectus with the Commission in the
manner and within the time period required by Rule 424(b) under the Securities
Act. The Company will advise the Representative, promptly after receiving
notice thereof, of the time when the Registration Statement or any amendment
thereto has been filed or declared effective or the Prospectus or any amendment
or supplement thereto has been filed and will provide evidence to the
Representative of each such filing or effectiveness.
(c) The Company will advise you promptly after receiving notice or
obtaining knowledge of (i) the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or any part thereof
or any order preventing or suspending the use of any Preliminary Prospectus or
the Prospectus or any amendment or supplement thereto, (ii) the suspension of
the qualification of the Shares for offer or sale in any jurisdiction or of the
initiation or threatening of any proceeding for any such purpose, or (iii) any
request made by the Commission or any securities authority of any other
jurisdiction for amending the Registration Statement, for amending or
supplementing the Prospectus or for additional information. The Company will
use its best efforts to prevent the issuance of any such stop order and, if any
such stop order is issued, to obtain the withdrawal thereof as promptly as
possible.
(d) If during the period in which a prospectus is required by law
to be delivered by an Underwriter or dealer, any events shall have occurred as
a result of which, in the judgment of the Company or the opinion of the
Underwriters, the Prospectus as then amended or supplemented would include an
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in light
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<PAGE> 11
of the circumstances under which they were made, not misleading, or if for any
reason it is necessary during such same period to amend or supplement the
Prospectus to comply with the Securities Act or the Rules and Regulations or
any law, the Company will promptly notify you and upon your request (but at
the Company's expense) prepare and file with the Commission and any state or
other governmental securities commissions in jurisdictions where the Shares
have been sold by the Underwriters, an amendment or supplement to the
Prospectus that corrects such statement or omission or effects such compliance
and will furnish without charge to each Underwriter and to any dealer in
securities, as many copies of such amended or supplemented Prospectus as you
may from time to time reasonably request. Neither your consent to, nor the
Underwriter's delivery of, any such amendment or supplement shall constitute a
waiver of any of the conditions set forth in Section 7.
(e) The Company promptly from time to time will take such action
as you may reasonably request to qualify the Shares for offering and sale under
the securities or blue sky laws of such jurisdictions as you may request and
will continue such qualifications in effect for as long as may be necessary to
complete the distribution of the Shares, provided that in connection therewith
the Company shall not be required to qualify as a foreign corporation or to
file a general consent to service of process in any jurisdiction. In the event
that the qualification of the Shares in any jurisdiction is suspended, the
Company shall so advise the Representative promptly in writing.
(f) The Company will deliver to, or upon the order of, the
Representative, from time to time, as many copies of the Preliminary Prospectus
as the Representative may reasonably request. The Company will deliver to, or
upon the order of, the Representative, during the period when delivery of a
Prospectus is required under the Securities Act, as many copies of the
Prospectus in final form, or as thereafter amended or supplemented, as the
Representative may reasonably request. The Company will deliver to the
Representative at or before the Time of Delivery, four signed copies of the
Registration Statement and all amendments thereto including all exhibits filed
therewith, and will deliver to the Representative such number of copies of the
Registration Statement (including such number of copies of the exhibits filed
therewith that may be reasonably requested), and of all amendments thereto, as
the Representative may reasonably request.
(g) The Company will, from time to time, after the effective date
of the Registration Statement file with the Commission such reports as are
required by the Securities Act, the Exchange Act and the Rules and Regulations,
and the Company agrees to keep the Common Stock registered pursuant to the
Exchange Act for at least five years from the date hereof. The Company shall
also file with foreign, state and other governmental securities commissions in
jurisdictions where the Shares have been sold by the Underwriters such reports
as are required to be filed by the securities acts and the regulations of those
jurisdictions.
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<PAGE> 12
(h) As soon as practicable, but in any event not later than the
last day of the thirteenth month after the effective date of the Registration
Statement, the Company will make generally available to its security holders an
earnings statement (which need not be audited) in reasonable detail covering a
period of at least 12 consecutive months beginning after the effective date of
the Registration Statement, complying with Section 11(a) of the Securities Act
and the Rules and Regulations and will advise you in writing when such
statement has been so made available.
(i) The Company will, for a period of three years from the Time
of Delivery, deliver to the Representative copies of annual reports and copies
of all other documents, reports and information furnished by the Company to its
shareholders or filed with the NASD or any securities exchange pursuant to the
requirements of such exchange or with the Commission pursuant to the Securities
Act or the Exchange Act. The Company will deliver to the Representative similar
reports with respect to significant subsidiaries, as that term is defined in
the Rules and Regulations, which are not consolidated in the Company's
financial statements.
(j) During the period beginning from the date hereof and
continuing to and including the date 180 days after the date of the Prospectus,
the Company will not, without your prior written consent, offer, pledge, issue,
sell, contract to sell, grant any option for the sale of, or otherwise dispose
of (or announce any offer, pledge, sale, grant of an option to purchase or other
disposition), directly or indirectly, any shares of Common Stock or securities
convertible into, exercisable or exchangeable for, shares of Common Stock,
except as provided in Section 2 and except as described in the Prospectus.
(k) Neither the Company nor any of its officers, directors or
affiliates will (i) take, directly or indirectly, prior to the closing of the
purchase and sale of the Shares, any action designed to cause or to result in,
or that might reasonably be expected to constitute, the stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of any of the Shares, (ii) sell, bid for, purchase or pay anyone any
compensation for soliciting purchases of, the Shares or (iii) pay or agree to
pay to any person any compensation for soliciting another to purchase any other
securities of the Company.
(l) The Company will apply the net proceeds from the offering in
the manner set forth under the heading "Use of Proceeds" in the Prospectus,
including the payment of the full amount required for the capitalization of the
Bank, and will timely report such use of proceeds pursuant to Item 701 of
Regulation S-B and S-K in its periodic reports filed pursuant to Section 13(a)
and 15(d) of the Exchange Act in accordance with Rule 463 of the Securities Act
or any successor provision.
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<PAGE> 13
(m) Following the Time of Delivery, the Company will
diligently take all steps appropriate to obtain all Regulatory Approvals and
cause the Bank to be opened for the conduct of business as described in the
Prospectus.
(n) If at any time during the 90-day period after the
Registration Statement becomes effective, any rumor, publication or event
relating to or affecting the Company shall occur as a result of which in your
reasonable opinion the market price of the Common Stock has been or is likely
to be materially affected (regardless of whether such rumor, publication or
event necessitates a supplement to or amendment of the Prospectus) and after
written notice from you advising the Company to the effect set forth above, the
Company agrees to forthwith prepare, consult with you concerning the substance
of, and disseminate a press release or other public statement, reasonably
satisfactory to you, responding to or commenting on such rumor, publication or
event.
(o) The Company will cause the Shares to be quoted on the
Nasdaq OTC Bulletin Board (or any other exchange acceptable to the
Representative) at each Time of Delivery and for at least five years from the
date hereof.
6. EXPENSES. The Company will pay all costs and expenses incident
to the performance of its obligations under this Agreement, whether or not the
transactions contemplated hereby are consummated or this Agreement is
terminated pursuant to Section 10 hereof, including without limitation all
costs and expenses incident to (i) the fees, disbursements and expenses of the
Company's counsel and accountants in connection with the registration of the
Shares under the Securities Act and all other expenses in connection with the
preparation, printing and filing of the Registration Statement (including all
amendments thereto), any Preliminary Prospectus, the Prospectus and any
amendments and supplements thereto, this Agreement and any blue sky memoranda;
(ii) the delivery of copies of the foregoing documents to the Underwriters;
(iii) the filing fees of the Commission and the National Association of
Securities Dealers, Inc. relating to the Shares; (iv) the preparation, issuance
and delivery to the Underwriters of any certificates evidencing the Shares,
including transfer agent's and registrar's fees; (v) the qualification of the
Shares for offering and sale under state securities and blue sky laws,
including filing fees and fees and disbursements of counsel for the
Underwriters relating thereto; (vi) any expenses of listing the Shares on the
Nasdaq OTC Bulletin Board; (vii) any expenses for travel, lodging and meals
incurred by the Company and any of its officers, directors and employees in
connection with any meetings with prospective investors in the Shares. It is
understood, however, that, except as provided in this Section, Section 8 and
Section 10 hereof, the Underwriters will pay all of their own costs and
expenses, including the fees of their counsel (other than those related to
qualification of the Shares under state securities or blue sky laws).
7. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The obligations
of the Underwriters hereunder to purchase and pay for the Shares to be
delivered at each Time of Delivery shall be subject, in their discretion, to
the accuracy of the representations and warranties of the Company contained
herein as of the date hereof and as of such Time of Delivery, to the accuracy
of the statements of Company officers made pursuant to the provisions hereof,
to the
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<PAGE> 14
performance by the Company of its covenants and agreements hereunder, and to
the following additional conditions precedent:
(a) The Registration Statement as amended to date shall have
become effective prior to the execution of this Agreement or at such
later date and/or time as shall have been consented to by you in
writing. If required, the Prospectus and any amendment or supplement
thereto shall have been filed with the Commission pursuant to Rule
424(b) within the applicable time period prescribed for such filing
and in accordance with Section 5(a) of this Agreement; no stop order
suspending the effectiveness of the Registration Statement or any part
thereof shall have been issued and no proceedings for that purpose
shall have been instituted, threatened or, to the knowledge of the
Company and the Representative, contemplated by the Commission; and
all requests for additional information on the part of the Commission
shall have been complied with to your satisfaction.
(b) Smith Helms Mulliss & Moore, L.L.P., counsel for the
Underwriters, shall have furnished to you such opinion or opinions,
dated such Time of Delivery, with respect to such matters as you may
reasonably require and which are customary, and the Company shall have
furnished to such counsel such documents as they request for the
purpose of enabling them to pass upon such matters and such firm may
rely, as to matters of South Carolina law, upon the opinion of Powell,
Goldstein, Frazer & Murphy LLP.
(c) You shall have received an opinion, dated such Time of
Delivery, of Powell, Goldstein, Frazer & Murphy LLP, counsel for the
Company in form and substance satisfactory to you and your counsel, to
the effect that:
(i) The Company is a corporation in existence and in
good standing under the laws of the State of South Carolina
and has the corporate power and authority to own or lease its
properties and conduct its business as described in the
Registration Statement and the Prospectus and to enter into
this Agreement and perform its obligations hereunder. The
Company is not qualified to transact business as a foreign
corporation under the laws of any other jurisdiction.
(ii) The Company has applied for registration as a
"bank holding company" under the Bank Holding Company Act to
acquire the stock of the Bank. The Organizers of the Bank
have filed for and received preliminary conditional approval
from the OCC for the Bank to become a national bank under the
laws of the United States, and they have filed an application
to obtain deposit insurance from the FDIC.
(iii) The Bank is a national banking association in
organization under the laws of the United States of America
and, upon the issuance of articles of association by the OCC,
will have the corporate power and authority to own or
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<PAGE> 15
lease its properties and conduct its business as described in
the Registration Statement and the Prospectus.
(iv) The Company's authorized, issued and outstanding
capital stock is as disclosed under the caption
"Capitalization" in the Prospectus. None of the issued shares
have been issued in violation of or subject to any preemptive
rights provided for by law, agreement or the Company's
Articles of Incorporation or Bylaws.
(v) Upon the issuance of articles of association by
the OCC, the shares of capital stock of the Bank will be
issued only to the Company free and clear of any liens,
claims or encumbrances of any kind, and the Bank will become
a wholly owned subsidiary of the Company.
(vi) The Shares to be sold by the Company have been
duly authorized and, when issued and delivered against
payment therefor as provided herein, will be validly issued
and fully paid and nonassessable and will conform to the
description of the Common Stock contained in the Prospectus.
The Underwriters will receive the Shares to be issued and
delivered by the Company pursuant to this Agreement, free and
clear of all liens, encumbrances, claims, security interests,
restrictions, shareholders' agreements and voting trusts
whatsoever.
(vii) To the knowledge of such counsel, the Company
does not have outstanding any options to purchase, or any
rights or warrants to subscribe for, or any securities or
obligations convertible into, or any contracts or commitments
to issue or sell any capital stock, and there are no
preemptive rights or other rights to subscribe for or
purchase any capital stock of the Company, or any restriction
upon the transfer of, the Shares pursuant to the Company's
Articles of Incorporation or Bylaws or any agreement or other
instrument to which the Company is a party or by which it may
be bound, except as described in the Prospectus. To the
knowledge of such counsel, neither the filing of the
Registration Statement nor the offer or sale of the Shares as
contemplated by this Agreement gives rise to any rights for
or relating to the registration of any Common Stock or any
other securities of the Company.
(viii) The issue and sale of the Shares being issued
at such Time of Delivery and the performance of this
Agreement and the consummation of the transactions herein
contemplated will not conflict with, or (with or without the
giving of notice or the passage of time or both) result in a
breach or violation of any of the terms or provisions of, or
constitute a default under any document or agreement which is
an Exhibit to the Registration Statement, or violate any
provision of the Articles of Incorporation, Articles of
Association, Bylaws or other governing instruments of the
Company or the Bank and, except for such conflicts, breaches,
violations or defaults as would not individually, or in the
aggregate, materially and adversely
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<PAGE> 16
affect the business, financial condition or results of
operations of the Company and the Bank, taken as a whole, any
statute, rule or regulation or, to such counsel's knowledge,
any order, judgment or decree of any court or governmental
agency or body having jurisdiction over the Company or the
Bank or any of their respective properties or assets.
(ix) No consent, approval, authorization or order
from, or registration, qualification or filing with, any
governmental agency or body or third party is required for
the issue and sale of the Shares or the consummation of the
transactions contemplated by this Agreement, except (a) the
registration of the Shares under the Securities Act and such
as may be required by the NASD and under state securities or
blue sky laws in connection with the offer, sale and
distribution of the Shares by the Underwriters, and (b) as
required in connection with the Regulatory Approvals.
(x) This Agreement has been duly authorized,
executed and delivered by the Company and constitutes the
valid and binding agreement of the Company enforceable
against the Company in accordance with its terms subject, as
to enforcement, to applicable bankruptcy, insolvency,
reorganization and moratorium laws and other laws relating to
or affecting the enforcement of creditors' rights generally
and to general equitable principles, and except as the
enforceability of rights to indemnity and contribution under
this Agreement may be limited under applicable securities
laws and further subject to 12 U.S.C. ss.1818(b)(6)(D) and
similar bank regulatory powers and to the application of the
public policy underlying such laws.
(xi) The Company and the Bank have obtained or have
filed for all licenses, consents and approvals, and have
satisfied or have taken all action required at this time to
satisfy all eligibility and other similar requirements
imposed by federal and state regulatory bodies,
administrative agencies or other governmental bodies,
agencies or officials, in each case necessary for the conduct
of the banking business in which they are engaged or are
contemplated to be engaged as described in the Prospectus
(except where the failure to have any such licenses,
consents, and approvals, or to have satisfied or taken such
action to satisfy the requirements, individually or in the
aggregate, would not have a material adverse effect on the
business, properties, operations, or financial condition of
the Company or its subsidiaries, taken as a whole). With
respect to any such necessary licenses, consents and
approvals, and any such necessary eligibility and other
similar requirements that the Company or the Bank does not
have at this time, (i) all applications therefor are, to such
counsel's knowledge, complete and accurate, and have been
filed with the appropriate regulatory authorities, and (ii)
counsel knows of no reason why the same will not be received
or satisfied prior to the time the same are required to
conduct business as described in the Prospectus.
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<PAGE> 17
(xii) To such counsel's knowledge, there is not
pending or threatened any action, suit, proceeding, inquiry
or investigation, to which the Company or the Bank is a
party, or to which property of the Company or the Bank is
subject, before or brought by any court or governmental
agency or body that is required to be disclosed in the
Registration Statement and the Prospectus and has not been
properly disclosed therein. In rendering the opinion set
forth in this paragraph, such counsel shall not be required
to search the dockets of any courts or governmental
authority.
(xiii) To the knowledge of such counsel, neither the
Company nor the Bank is in violation of any law, ordinance,
administrative or governmental rule or regulation applicable
to the Company or the Bank, or any decree of any court or
governmental agency or body having jurisdiction over the
Company or the Bank, except where such violation does not and
will not have a material adverse effect on the Company and
the Bank as a whole.
(xiv) The Registration Statement and the Prospectus
and each amendment or supplement thereto (other than the
financial statements and schedules and other financial
information included therein, as to which such counsel need
express no opinion), as of their respective effective or
issue dates, complied as to form in all material respects
with the requirements of the Securities Act and the Rules and
Regulations. The descriptions in the "Supervision and
Regulation" section of the Registration Statement and the
Prospectus of statutes, rules and regulations are accurate
and fairly present the information required to be shown; and
such counsel does not know of any statutes, rules,
regulations or legal or governmental proceedings required to
be described in the Registration Statement or Prospectus that
are not described as required or of any contracts or
documents of a character required to be described in the
Registration Statement or Prospectus or to be filed as
exhibits to the Registration Statement which are not
described and filed as required.
(xv) The Registration Statement and all
post-effective amendments thereto have become effective under
the Securities Act; any required filing of the Prospectus
pursuant to Rule 430A and Rule 424(b) has been made in the
manner and within the time period required by such rules; and
to such counsel's knowledge no stop order suspending the
effectiveness of the Registration Statement or any part
thereof has been issued and, to such counsel's knowledge, no
proceedings for that purpose have been instituted or
threatened or are contemplated by the Commission.
(xvi) The Company is not, and will not be as a
result of the consummation of the transactions contemplated
by this Agreement, an
17
<PAGE> 18
"investment company," or a company "controlled" by an
"investment company," within the meaning of the Investment
Company Act of 1940.
In addition, such opinion shall also contain a
statement that such counsel has participated in conferences
with officers and representatives of the Company,
representatives of the independent public accountants for the
Company and representatives of the Underwriters at which the
contents of the Registration Statement and the Prospectus and
related matters were discussed and, although such counsel is
not passing upon and does not assume any responsibility for
the accuracy, completeness or fairness of the statements
contained in the Registration Statement or the Prospectus
(other than as specifically provided above), and any
amendments or supplements thereto, on the basis of the
foregoing, no facts have come to the attention of such
counsel that would lead such counsel to believe that either
the Registration Statement at the time it became effective
(including the information deemed to be part of the
Registration Statement at the time of effectiveness pursuant
to Rule 430A(b) or Rule 434, if applicable) or any amendment
thereof made prior to the Closing Date as of the date of such
amendment, contained an untrue statement of a material fact
or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading or that the Prospectus as of its date (or any
amendment thereof or supplement thereto made prior to the
Closing Date as of the date of such amendment or supplement)
and as of the Closing Date contained or contains an untrue
statement of a material fact or omitted or omits to state any
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 (it
being understood that such counsel need express no belief or
opinion with respect to the financial statements and
schedules and other financial and statistical data included
or incorporated by reference therein).
In rendering any such opinion, such counsel may
rely, as to matters of fact, to the extent such counsel deems
proper, on certificates of responsible officers of the
Company and public officials.
(d) You shall have received from Tourville, Simpson &
Caskey, L.L.P., letters dated, respectively, the date of this
Agreement and the effective date of the most recently filed
post-effective amendment to the Registration Statement and also at
each Time of Delivery, in form and substance satisfactory to you,
containing statements and information of the type ordinarily included
in accountants' "comfort letters" to underwriters with respect to the
financial statements and certain financial information contained in
the Registration Statement and the Prospectus.
(e) You shall have received at each Time of Delivery a
certificate or certificates of the President and Chief Executive
Officer and the Chief Financial Officer of the Company to the effect
that:
18
<PAGE> 19
(i) the representations and warranties of the
Company in Section 1 of this Agreement are true and correct,
as if made at and as of the First Time of Delivery or the
Subsequent Time of Delivery, as the case may be, and the
Company has complied with all the agreements and covenants
and satisfied all the conditions on its part to be performed
or satisfied at or prior to the Time of Delivery and as to
such other matters as you may reasonably request;
(ii) no stop order suspending the effectiveness of
the Registration Statement has been issued, and no
proceedings for that purpose have been initiated or are
pending, or to their knowledge, contemplated under the
Securities Act;
(iii) all filings required by Rule 424 and Rule 430A
of the Rules and Regulations have been made;
(iv) they have carefully examined the Registration
Statement and the Prospectus, and any amendments or
supplements thereto, and in his or her opinion, such
documents do not include any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading in light of the circumstances under which they
were made; and
(v) since the effective date of the Registration
Statement, there has occurred no event required to be set
forth in an amendment or supplement to the Registration
Statement or the Prospectus which has not been so set forth.
(f) Since the date of the latest audited financial statements
included in the Prospectus, neither the Company nor the Bank shall
have sustained (i) any loss or interference with their respective
businesses from fire, explosion, flood, hurricane or other calamity,
whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, otherwise than as
disclosed in or contemplated by the Prospectus, or (ii) any change, or
any development involving a prospective change (including without
limitation a change in management or control of the Company), in or
affecting the position (financial or otherwise), results of
operations, net worth or business prospects of the Company and the
Bank, otherwise than as disclosed in or contemplated by the Prospectus
(including any amendment), the effect of which, in either such case,
is in your judgment so material and adverse as to make it
unpracticable or inadvisable to proceed with the purchase, sale and
delivery of the Shares being delivered at such Time of Delivery as
contemplated by the Registration Statement, as amended as of the date
hereof.
(g) Subsequent to the date hereof there shall not have
occurred any of the following: (i) any suspension or limitation in
trading in securities generally on the New
19
<PAGE> 20
York Stock Exchange or the over-the-counter market (other than normal
market breaks or cooling periods), or any setting of minimum prices
for trading on such exchange, or if trading in any securities of the
Company has been suspended by the Commission, or limitations on prices
for trading (other than limitations on hours or numbers of days of
trading) have been fixed, or maximum ranges for prices for securities
have been required, by the Nasdaq OTC Bulletin Board or the NASD or by
order of the Commission or any other governmental authority; (ii) a
moratorium on commercial banking activities in New York declared by
either federal or state authorities; (iii) any major outbreak or major
escalation of hostilities involving the United States, declaration by
the United States of a national emergency (other than with respect to
natural disasters) or war or any other national or international
calamity or emergency or any material adverse change in general
economic, political or financial conditions if the effect of any such
event specified in this clause (iii) in your judgment makes it
impracticable or inadvisable to proceed with the purchase, sale and
delivery of the Shares being delivered at such Time of Delivery as
contemplated by the Registration Statement.
(h) The Shares shall be approved for quotation on the
Nasdaq OTC Bulletin Board when issued.
(i) The Company shall have furnished the Representative
with evidence of its receipt of the preliminary conditional approval
of the OCC and the applications for each of the Regulatory Approvals.
(j) The Representative shall have received the Lockup
Agreements as described in Section 1(v).
8. INDEMNIFICATION AND CONTRIBUTION. (a) The Company agrees to
indemnify and hold harmless each Underwriter against any losses, claims,
damages or liabilities, joint or several, to which such Underwriter may become
subject, under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon: (i) any untrue statement or alleged untrue statement made by the
Company in Section 1 of this Agreement; (ii) any untrue statement or alleged
untrue statement of any material fact contained in (A) the Registration
Statement or any amendment thereto, any Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto, or (B) any application or
other document, or any amendment or supplement thereto, executed by the Company
or based upon written information furnished by or on behalf of the Company
filed in any jurisdiction in order to qualify the Shares under the securities
or blue sky laws thereof or filed with the Commission or any securities
association or securities exchange (each an "Application"); or (iii) the
omission or alleged omission to state in the Registration Statement or
any amendment thereto, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto, or any Application, a material fact required
to be stated therein or necessary to make the statements therein not
misleading, and will reimburse each Underwriter for any legal or other expenses
reasonably incurred by such Underwriter in connection with investigating,
defending against or appearing as a third-party witness in connection with any
such loss, claim, damage, liability or action; provided, however, that the
Company shall not be liable in any such case to the extent that any such loss,
claim,
20
<PAGE> 21
damage, liability or action arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
the Registration Statement or any amendment thereto, any Preliminary
Prospectus, the Prospectus or any amendment or supplement thereto or any
Application in reliance upon and in conformity with written information
furnished to the Company by any Underwriter expressly for inclusion in the
Prospectus beneath the heading "Underwriting". The Company will not, without
the prior written consent of each Underwriter, settle or compromise or consent
to the entry of any judgment in any pending or threatened claim, action, suit
or proceeding (or related cause of action or portion thereof) in respect of
which indemnification may be sought hereunder (whether or not such Underwriter
is a party to such claim, action, suit or proceeding), unless such settlement,
compromise or consent includes an unconditional release of such Underwriter
from all liability arising out of such claim, action, suit or proceeding or
related cause of action or portion thereof.
(b) Each Underwriter agrees to indemnify and hold harmless the
Company and its officers, directors, agents, representatives and affiliates
against any losses, claims, damages or liabilities to which the Company or its
officers, directors, agents, representatives and affiliates may become subject
under the Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact contained
in the Registration Statement or any amendment thereto, any Preliminary
Prospectus, the Prospectus or any amendment or supplement thereto or any
Application or arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, in each case to the extent, but
only to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company by the Underwriter through the
Representative expressly for inclusion in the Prospectus beneath the heading
"Underwriting"; and will reimburse the Company for any legal or other expenses
reasonably incurred by the Company in connection with investigating or
defending any such loss, claim, damage, liability or action.
(c) Promptly after receipt by an indemnified party under
subsection (a) and (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party); provided, however, that if the defendants in any such action included
both the indemnified party and the indemnifying party,
21
<PAGE> 22
and the indemnified party shall have reasonably concluded that there may be one
or more legal defenses available to it or other indemnified parties which are
different from or additional to those available to the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such
action on behalf of such indemnified party and such indemnified party shall
have the right to select separate counsel to defend such action on behalf of
such indemnified party. After such notice from the indemnifying party to such
indemnified party of its election so to assume the defense of any action and
approval by such indemnified party of counsel appointed to defend such action,
the indemnifying party will not be liable to such indemnified party under this
Section 8 for any legal or other expenses, other than reasonable costs of
investigation, subsequently incurred by such indemnified party in connection
with the defense of the action, unless (i) the indemnified party shall have
employed separate counsel in accordance with the proviso to the next preceding
sentence (it being understood, however, that in connection with such action the
indemnifying party shall not be liable for the expenses of more than one
separate counsel (in addition to local counsel) in any one action or separate
but substantially similar actions in the same jurisdiction arising out of the
same general allegations or circumstances, which separate counsel shall be
designated by the Representative in the case of indemnity arising under
paragraph (a) of this Section 8) or (ii) the indemnifying party has authorized
the employment of counsel for the indemnified party at the expense of the
indemnifying party. Nothing in this Section 8(c) shall preclude an indemnified
party from participating at its own expense in the defense of any such action
so assumed by the indemnifying party.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities
(or actions in respect thereof) in such proportion as is appropriate to reflect
the relative benefits received by the Company on the one hand and the
Underwriter on the other from the offering of the Shares. If, however, the
allocation provided by the immediately preceding sentence is not permitted by
applicable law or if the indemnified party failed to give the notice required
under subsection (c) above, then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and the Underwriter on the other in
connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities (or actions in respect thereof), as well as any
other relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Underwriter on the other shall be deemed to be
in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company bear to the total underwriting
discounts and commissions received by the Underwriters. The relative fault
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company on the
one hand or the Underwriters on the other and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the
22
<PAGE> 23
Underwriters agree that it would not be just and equitable if contributions
pursuant to this subsection (d) were determined by pro rata allocation (even if
the Underwriters were treated as one for such purpose) or by any other method
of allocation which does not take account of the equitable considerations
referred to above in this subsection (d). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or liabilities (or
actions in respect thereof) referred to above in this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this subsection (d), the
Underwriter shall not be required to contribute any amount in excess of the
amount by which the total price at which the Shares underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
(e) The obligations of the Company under this Section 8 shall be
in addition to any liability which the Company may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who
controls any Underwriter within the meaning of the Securities Act; and the
obligations of the Underwriters under this Section 8 shall be in addition to
any liability which the Underwriters may otherwise have and shall extend, upon
the same terms and conditions, to each officer and director of the Company and
to each person, if any, who controls the Company within the meaning of the
Securities Act.
9. DEFAULT OF UNDERWRITERS. (a) If any Underwriter defaults in
its obligation to purchase Shares at a Time of Delivery, you may in your
discretion arrange for you or another party, or other parties to purchase such
shares on the terms contained herein. If within 36 hours after such default by
any Underwriter you do not arrange for the purchase of such Shares, the Company
shall be entitled to a further period of 36 hours within which to procure
another party or other parties satisfactory to you to purchase such Shares on
such terms. In the event that, within the respective prescribed periods, you
notify the Company that you have so arranged for the purchase of such Shares,
or the Company notifies you that it has so arranged for the purchase of such
Shares, you or the Company shall have the right to postpone a Time of Delivery
for a period of not more than 7 days in order to effect whatever change is made
necessary thereby in the Registration Statement or the Prospectus, or in any
other documents or arrangements, and the Company agrees to file promptly any
amendments to the Registration Statement or the Prospectus that in your opinion
may thereby be made necessary. The cost of preparing, printing and filing any
such amendments shall be paid for by the Underwriters. The term "Underwriters"
as used in this Agreement shall include any person substituted under this
Section with effect as if such person had originally been a party to this
Agreement with respect to such Shares.
(b) If, after giving effect to any arrangements for the purchase
of the Shares of a defaulting Underwriter or Underwriters by you and the
Company as provided in subsection (a)
23
<PAGE> 24
above, the aggregate number of such Shares which remains unpurchased does not
exceed one eleventh of the aggregate number of Shares to be purchased at such
Time of Delivery, then the Company shall have the right to require each
non-defaulting Underwriter to purchase the number of Shares which such
Underwriter agreed to purchase hereunder at such Time of Delivery and, in
addition, to require each non-defaulting Underwriter to purchase its pro rata
share (based on the number of Shares which such Underwriter agreed to purchase
hereunder) of the Shares of such defaulting Underwriter or Underwriters for
which such arrangements have not been made, but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
10. TERMINATION. (a) This Agreement may be terminated with respect
to the Firm Shares or any Optional Shares in the sole discretion of the
Representative by notice to the Company given prior to the First Time of
Delivery or any Subsequent Time of Delivery, respectively, in the event that
(i) any condition to the obligations of the Underwriters set forth in Section 7
hereof has not been satisfied, or (ii) the Company shall have failed, refused
or been unable to deliver the Shares or to perform all obligations and satisfy
all conditions on its part to be performed or satisfied hereunder at or prior
to such Time of Delivery, in either case other than by reason of a default by
any of the Underwriters. If this Agreement is terminated pursuant to this
Section 10(a), the Company will reimburse the Underwriters upon demand for all
out-of-pocket expenses (including counsel fees and disbursements) that shall
have been incurred by it in connection with the proposed purchase and sale of
the Shares.
(b) If, after giving effect to any arrangements for the purchase
of the Shares of a defaulting Underwriter or Underwriters by you and the
Company as provided in Section 9(a), the aggregate number of such Shares which
remain unpurchased exceeds one-eleventh of the aggregate number of Shares to be
purchased at such Time of Delivery, or if the Company shall not exercise the
right described in Section 9(b) to require non-defaulting Underwriters to
purchase Shares of a defaulting Underwriter or Underwriters, then this
Agreement (or, with respect to a Subsequent Time of Delivery, the obligations
of the Underwriters to purchase and of the Company to sell the Optional Shares)
thereupon will terminate, without liability on the part of any nondefaulting
Underwriter or the Company, except for the expenses to be borne by the Company
and the Underwriters as provided in Section 6 hereof and the indemnity and
contribution agreements in Section 8 hereof; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
11. SURVIVAL. The respective indemnities, agreements,
representations, warranties and other statements of the Company, its officers
and the Underwriter, as set forth in this Agreement or made by or on behalf of
them, respectively, pursuant to this Agreement, shall remain in full force and
effect, regardless of any investigation (or any statement as to the results
thereof) made by or on behalf of the Underwriter or any controlling person
referred to in Section 8(e) or made by or on behalf of the Company, or any
officer or director or controlling person of the Company referred to in Section
8(e), and shall survive delivery of and payment for the Shares. The respective
agreements, covenants, indemnities and other statements set forth in Sections
6, 8 and 13 hereof shall remain in full force and effect, regardless of any
termination or cancellation of this Agreement.
24
<PAGE> 25
12. NOTICES. All communications hereunder shall be in writing and,
if sent to the Representative, shall be mailed, delivered or faxed and
confirmed in writing to Wachovia Securities, Inc., IJL Financial Center, 201
North Tryon Street, Charlotte, North Carolina 28202, Attention: Investment
Banking Department (with a copy to Boyd C. Campbell, Jr. at Smith Helms Mulliss
& Moore L.L.P., 201 North Tryon Street, Charlotte, North Carolina 28202), and
if sent to the Company, shall be mailed, delivered or faxed and confirmed in
writing to the Company at 911 Riverwood Drive, Murrells Inlet, South Carolina
29576, Attention: President (with a copy to Kathryn L. Knudson at Powell,
Goldstein, Frazer & Murphy, LLP, 191 Peachtree Street, N.E., 16th Floor,
Atlanta, Georgia 30303).
13. RIGHT OF FIRST REFUSAL. The Company grants to the
Representative an unconditional right of first refusal to serve as exclusive or
lead advisor to the Company on all corporate finance transactions undertaken or
considered by the Company for three years from the effective date of the
Prospectus. The Representative shall not be entitled to more than one payment
or fee in exchange for the waiver or termination of this right of first
refusal, and any payment or fee to waive or terminate the right of first
refusal shall be paid in cash and will not exceed the greater of (a) one
percent (1%) of the aggregate purchase price of the Shares purchased pursuant
to this Agreement, and (b) five percent (5%) of the underwriting discount or
commission paid in connection with the future financing (including any
overallotment option that may be exercised).
14. REPRESENTATIVE. You will act for the several Underwriters in
connection with the transactions contemplated by this Agreement, and any action
under this Agreement taken by you will be binding upon all the Underwriters.
15. BINDING EFFECT. This Agreement shall be binding upon, and
inure solely to the benefit of, each Underwriter and the Company and to the
extent provided in Sections 8 and 10 hereof, the officers and directors and
controlling persons referred to therein and their respective heirs, executors,
administrators, successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. No purchaser of any of the
Shares from the Underwriters shall be deemed a successor or assign by reason
merely of such purchase.
16. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of North Carolina without
giving effect to any provisions regarding conflicts of laws.
17. COUNTERPARTS. This Agreement may be executed by any one or
more of the parties hereto in any number of counterparts, each of which shall
be deemed to be an original, but all such counterparts shall together
constitute one and the same instrument.
25
<PAGE> 26
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us one of the counterparts hereof, and
upon the acceptance hereof by Wachovia Securities, Inc., this letter will
constitute a binding agreement among the Underwriters and the Company.
Very truly yours,
SUN BANCSHARES, INC.
By:
-------------------------------------
Name: Thomas Bouchette
Title: President
WACHOVIA SECURITIES, INC.
By:
-----------------------------------
Name:
------------------------------
Title:
-----------------------------
26
<PAGE> 27
SCHEDULE I
SUN BANCSHARES, INC.
1,000,000 SHARES
COMMON STOCK
<TABLE>
<CAPTION>
NUMBER OF
OPTIONAL SHARES
TOTAL NUMBER OF TO BE PURCHASED
FIRM SHARES TO IF MAXIMUM
UNDERWRITER BE PURCHASED OPTION EXERCISED
- ----------- --------------- ----------------
<S> <C> <C>
Wachovia Securities, Inc.
</TABLE>
Total
27
<PAGE> 1
EXHIBIT 4.1
- ------------ --------------
NUMBER SHARES
*** ***
- ------------ --------------
SEE REVERSE SIDE FOR CERTAIN DEFINITIONS
CUSIP 8666311 10 0
SUN BANCSHARES, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF SOUTH CAROLINA
THIS CERTIFIES that
------------------------------------------------------------
Is the owner of
----------------------------------------------------------------
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK (NO PAR VALUE) OF
SUN BANCSHARES, INC.
Transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney on surrender of this certificate properly endorsed.
This certificate is not valid until countersigned and registered by the
Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated:
[SEAL]
- -------------------------------- ----------------------------
Secretary President
Countersigned and Registered:
SUNTRUST BANK, ATLANTA
TRANSFER AGENT AND REGISTRAR
By:
----------------------------
Authorized Signature
<PAGE> 2
SUN BANCSHARES, INC.
NOTICE: UPON THE REQUEST OF THE HOLDER HEREOF, SUN BANCSHARES, INC.
WILL FURNISH TO SUCH HOLDER, IN WRITING AND WITHOUT CHARGE, A SUMMARY
OF THE DESIGNATIONS, RELATIVE RIGHTS, PREFERENCES, AND LIMITATIONS
APPLICABLE TO EACH CLASS OF SHARES THE CORPORATION IS AUTHORIZED TO
ISSUE, AND THE VARIATIONS IN RIGHTS, PREFERENCES, AND LIMITATIONS FOR
EACH SERIES, IF ANY, WITHIN A CLASS (INCLUDING THE AUTHORITY OF THE
BOARD OF DIRECTORS TO DETERMINE VARIATIONS FOR FUTURE SERIES).
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 law or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT -- Custodian
TEN ENT - as tenants by the entireties --------------------------------
JT TEN - as joint tenants with right of
survivorship and not as tenant (Cust) (Minor)
in common under Uniform Gift to Minor
Act
-----------------------
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
For value received, ____________________ hereby sells, assigns and transfers
unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
--------------------------------------
--------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------- shares
of the Common Stock represented by the within Certificate, and do
hereby irrevocably constitute and appoint ______________________ -Attorney to
transfer the said stock on the books of the within named Corporation with full
power of substitution in the premises.
- -----------------------------
(DATE)
- --------------------------------------------------------------------------------
(SIGNATURE: THE SIGNATURE ON 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 WHATSOEVER.)
KEEP THIS CERTIFICATE IN A SAFE PLACE, IF IT IS LOST, STOLEN,
MUTILATED OR DESTROYED, THE CORPORATION WILL REQUIRE A BOND OF
INDEMNITY AS A CONDITION TO THE ISSUANCE OF A REPLACEMENT CERTIFICATE
<PAGE> 1
EXHIBIT 5.1
POWELL, GOLDSTEIN, FRAZER & MURPHY LLP
191 PEACHTREE STREET, N.E.
SIXTEENTH FLOOR
ATLANTA, GEORGIA 30303
(404) 572-6600
March 31, 2000
Sun Bancshares, Inc.
P.O. Box 1359
Murrells Inlet, South Carolina 29576
RE: REGISTRATION OF 1,150,000 SHARES OF COMMON STOCK AND WARRANTS TO
PURCHASE 235,000 SHARES OF COMMON STOCK;
Ladies and Gentlemen:
We have acted as counsel to Sun Bancshares, Inc., a South Carolina
corporation (the "Company"), in connection with the registration under the
Securities Act of 1933, as amended, pursuant to the Company's Registration
Statement on Form SB-2 (the "Registration Statement"), of up to 1,150,000 shares
(the "Shares") of common stock, no par value ("Common Stock"), of the Company
and warrants (the "Warrants") to purchase up to 235,000 shares of Common Stock.
In this capacity, we have examined (1) the Registration Statement in
the form filed by the Company with the Securities and Exchange Commission (the
"Commission") on February 11, 2000, as amended by Pre-Effective Amendment No. 1
thereto, which is to be filed with the Commission on the date hereof, (2) the
proposed form of Underwriting Agreement (the "Underwriting Agreement") between
the Company and Wachovia Securities, Inc. to be used in effecting the sale of
the Shares, (3) originals or copies, certified or otherwise identified to our
satisfaction, of such corporate records, agreements, documents and other
instruments of the Company relating to the authorization and issuance of the
Shares and the Warrants, and (4) such other matters as we have deemed relevant
and necessary as a basis for the opinion hereinafter set forth.
In conducting our examination, we have assumed the genuineness of all
signatures, the legal capacity of all natural persons, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such documents.
Based upon the foregoing, and in reliance thereon, and subject to the
limitations and qualifications set forth herein, we are of the opinion that the
Shares, when issued and delivered against payment therefor in accordance with
the terms of the Underwriting Agreement, and the
<PAGE> 2
Sun Bancshares, Inc.
March 31, 2000
Page 2
Warrants, when issued and delivered to the organizers, will be legally and
validly issued, fully paid and non-assessable.
We hereby consent to the use of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference to our firm under the heading "Legal
Matters" in the prospectus which is a part of the Registration Statement.
Very truly yours,
/s/ POWELL, GOLDSTEIN, FRAZER & MURPHY LLP
<PAGE> 1
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of the 30th day of March, by and among SUN
BANK, N.A. (Proposed) (the "Bank"), a proposed national bank; SUN BANCSHARES,
INC., a bank holding company incorporated under the laws of the State of South
Carolina (the "Company") (collectively, the Bank and the Company are referred to
hereinafter as the "Employer"), and THOMAS BOUCHETTE, a resident of the State of
South Carolina (the "Executive").
RECITALS:
The Employer desires to employ the Executive as President and Chief
Executive Officer of the Bank and the President of the Company and the Executive
desires to accept such employment.
In consideration of the above premises and the mutual agreements
hereinafter set forth, the parties hereby agree as follows:
THIS AGREEMENT CONTAINS A BINDING, IRREVOCABLE AGREEMENT TO
ARBITRATE AND IS SUBJECT TO ARBITRATION PURSUANT TO TITLE 15,
CHAPTER 48 (UNIFORM ARBITRATION ACT) OF THE CODE OF LAWS OF
SOUTH CAROLINA
1. DEFINITIONS. Whenever used in this Agreement, the following terms and their
variant forms shall have the meaning set forth below:
1.1 "AGREEMENT" shall mean this Agreement and any exhibits incorporated
herein together with any amendments hereto made in the manner described in this
Agreement.
1.2 "AFFILIATE" shall mean any business entity which controls the Company, is
controlled by or is under common control with the Company.
1.3 "AREA" shall mean the geographic area within the boundaries of Horry and
Georgetown Counties, South Carolina. It is the express intent of the parties
that the Area as defined herein is the area where the Executive performs or
performed services on behalf of the Employer under this Agreement as of, or
within a reasonable time prior to, the termination of the Executive's employment
hereunder.
1.4 "BUSINESS OF THE EMPLOYER" shall mean the business conducted by the
Employer, which is the business of commercial banking.
1.5 "CAUSE" shall mean:
1.5.1 With respect to termination by the Employer:
(a) A material breach of the terms of this Agreement by the
Executive, including, without limitation, failure by the Executive to
perform his duties and
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responsibilities in the manner and to the extent required under this
Agreement, which remains uncured after the expiration of thirty (30) days
following the delivery of written notice of such breach to the Executive by
Employer. Such notice shall (i) specifically identify the duties that the
Board of Directors of either the Company or the Bank believes the Executive
has failed to perform, (ii) state the facts upon which such Board of
Directors made such determination, and (iii) be approved by a resolution
passed by two-thirds (2/3) of the directors then in office;
(b) Conduct by the Executive that amounts to fraud, dishonesty or
willful misconduct in the performance of his duties and responsibilities
hereunder;
(c) Arrest for, charged in relation to (by criminal information,
indictment or otherwise), or conviction of the Executive during the Term of
this Agreement of a crime involving breach of trust or moral turpitude;
(d) Conduct by the Executive that amounts to gross and willful
insubordination or inattention to his duties and responsibilities
hereunder; or
(e) Conduct by the Executive that results in removal from his
position as an officer or executive of Employer pursuant to a written order
by any regulatory agency with authority or jurisdiction over Employer.
1.5.2 With respect to termination by the Executive, a material diminution
in the powers, responsibilities or duties of the Executive hereunder or a
material breach of the terms of this Agreement by Employer, which remains
uncured after the expiration of thirty (30) days following the delivery of
written notice of such breach to Employer by the Executive.
1.6 "CHANGE OF CONTROL" means any one of the following events:
(a) the acquisition by any person or persons acting in concert of
the then outstanding voting securities of either the Bank or the Company,
if, after the transaction, the acquiring person (or persons) owns, controls
or holds with power to vote fifty percent (50%) or more of any class of
voting securities of either the Bank or the Company, as the case may be;
(b) within any twelve-month period (beginning on or after the
Effective Date) the persons who were directors of either the Bank or the
Company immediately before the beginning of such twelve-month period (the
"Incumbent Directors") shall cease to constitute at least a majority of
such board of directors; provided that any director who was not a director
as of the Effective Date shall be deemed to be an Incumbent Director if
that director were elected to such board of directors by, or on the
recommendation of or with the approval of, at least two-thirds of the
directors who then qualified as Incumbent Directors; and provided further
that no director whose initial assumption of office is in connection with
an actual or threatened election contest (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Securities
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Exchange Act of 1934) relating to the election of directors shall be deemed
to be an Incumbent Director;
(c) a reorganization, merger or consolidation, with respect to
which persons who were the stockholders of the Bank or the Company, as the
case may be, immediately prior to such reorganization, merger or
consolidation do not, immediately thereafter, own more than fifty percent
(50%) of the combined voting power entitled to vote in the election of
directors of the reorganized, merged or consolidated company's then
outstanding voting securities; or
(d) the sale, transfer or assignment of all or substantially all of
the assets of the Company and its subsidiaries to any third party.
1.7 "COMPANY INFORMATION" means Confidential Information and Trade Secrets.
1.8 "CONFIDENTIAL INFORMATION" means data and information relating to the
business of the Bank or the Company (which does not rise to the status of a
Trade Secret) which is or has been disclosed to the Executive or of which the
Executive became aware as a consequence of or through the Executive's
relationship to the Employer and which has value to the Employer and is not
generally known to its competitors. Confidential Information shall not include
any data or information that has been voluntarily disclosed to the public by the
Employer (except where such public disclosure has been made by the Executive
without authorization) or that has been independently developed and disclosed by
others, or that otherwise enters the public domain through lawful means.
1.9 "DISABILITY" shall mean the inability of the Executive to perform each of
his material duties under this Agreement for the duration of the short-term
disability period under the Employer's policy then in effect as certified by a
physician chosen by the Employer and reasonably acceptable to the Executive.
1.10 "EFFECTIVE DATE" shall mean the date that the Securities and Exchange
Commission declares the Company's Registration Statement for its initial public
offering of common stock effective.
1.11 "INITIAL TERM" shall mean that period of time commencing on January 1,
2000 (the "Beginning Date") and running until the earlier of the close of
business on the last business day immediately preceding the third anniversary of
the Beginning Date or any termination of employment of the Executive under this
Agreement as provided for in Section 3.
1.12 "TERM" shall mean the Initial Term and all subsequent renewal periods.
1.13 "TRADE SECRETS" means Employer information including, but not limited
to, technical or nontechnical data, formulas, patterns, compilations, programs,
devices, methods, techniques, drawings, processes, financial data, financial
plans, product plans or lists of actual or potential customers or suppliers
which:
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(a) 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
(b) is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy.
2. DUTIES.
2.1 POSITION. The Executive is employed initially as President and Chief
Executive Officer of the Bank and the President of the Company, subject to the
direction of the Board of Directors of the Bank or the Company or its
designee(s), shall perform and discharge well and faithfully the duties which
may be assigned to him from time to time by the Bank or the Company in
connection with the conduct of its business. The duties and responsibilities of
the Executive are set forth on Exhibit A attached hereto.
2.2 FULL-TIME STATUS. In addition to the duties and responsibilities
specifically assigned to the Executive pursuant to Section 2.1 hereof, the
Executive shall:
(a) devote substantially all of his time, energy and skill during
regular business hours to the performance of the duties of his employment
(reasonable vacations and reasonable absences due to illness excepted) and
faithfully and industriously perform such duties;
(b) diligently follow and implement all reasonable and lawful
management policies and decisions communicated to him by the Board of
Directors of either the Bank or the Company; and
(c) timely prepare and forward to the Board of Directors of either
the Bank or the Company all reports and accountings as may be requested of
the Executive.
2.3 PERMITTED ACTIVITIES. The Executive shall devote his entire business
time, attention and energies to the Business of the Employer and shall not
during the Term be engaged (whether or not during normal business hours) in any
other business or professional activity, whether or not such activity is pursued
for gain, profit or other pecuniary advantage; but this shall not be construed
as preventing the Executive from:
(a) investing his personal assets in businesses which (subject to
clause (b) below) are not in competition with the Business of the Employer
and which will not require any services on the part of the Executive in
their operation or affairs and in which his participation is solely that of
an investor;
(b) purchasing securities in any corporation whose securities are
regularly traded provided that such purchase shall not result in him
collectively owning beneficially at any time five percent (5%) or more of
the equity securities of any business in competition with the Business of
the Employer; and
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(c) participating in civic and professional affairs and
organizations and conferences, preparing or publishing papers or books or
teaching so long as the Board of Directors of either the Bank or the
Company approves of such activities prior to the Executive's engaging in
them.
3. TERM AND TERMINATION.
3.1 TERM. This Agreement shall remain in effect for the Initial Term. At the
end of the Initial Term and at the end of each twelve-month extension thereof,
this Agreement shall automatically be extended for a successive twelve-month
period unless either party gives written notice to the other of its intent not
to extend this Agreement with such written notice to be given not less than
sixty (60) days prior to the end of the Initial Term or such twelve-month
period. In the event such notice of non-extension is properly given, this
Agreement shall terminate at the end of the remaining term then in effect.
3.2 TERMINATION. During the Term, the employment of the Executive under this
Agreement may be terminated only as follows:
3.2.1 By the Employer:
(a) In the event that the Bank fails to receive its regulatory
charter, or the Company fails to raise the necessary capital required to
open the Bank, and should the Company's or the Bank's Board of Directors
decide to forgo future efforts to open the Bank, in which event the
Employer shall be required to continue to meet its obligation to the
Executive under Section 4.1 for six (6) months.
(b) For Cause, upon written notice to the Executive pursuant to
Section 1.5.1 hereof, where the notice has been approved by a resolution
passed by two-thirds of the directors of either the Bank or the Company
then in office in which event the Employer shall have no further obligation
to the Executive except for the payment of any amounts due and owing under
Section 4 on the effective date of termination;
(c) Without Cause at any time, provided that the Bank shall give
the Executive thirty (30) days' prior written notice of its intent to
terminate, in which event the Employer shall be required to continue to
meet its obligations to the Executive under Section 4.1 for a period equal
to the lesser of (i) six (6) months following the termination or (ii) the
remaining Term of the Agreement; or
(d) Upon the Disability of Executive at any time, provided that the
Employer shall give the Executive thirty (30) days' prior written notice of
its intent to terminate, in which event, the Employer shall be required to
continue to meet its obligations under Section 4.1 for six (6) months
following the termination or until the Executive begins receiving payments
under the Company's long-term disability policy, whichever occurs first.
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<PAGE> 6
3.2.2 By the Executive:
(a) For Cause, in which event the Employer shall be required to
continue to meet its obligations under Section 4.1 for a period equal to
the lesser of (i) six (6) months following the termination or (ii) the
remaining Term of the Agreement; or
(b) Without Cause or upon the Disability of the Executive, provided
that the Executive shall give the Employer sixty (60) days' prior written
notice of his intent to terminate, in which event the Employer shall have
no further obligation to the Executive except future payment of any amounts
due and owing under Section 4 on the effective date of the termination.
3.2.3 At any time upon mutual, written agreement of the parties, in which
event the Employer shall have no further obligation to the Executive except
for the payment of any amounts due and owing under Section 4 of this
Agreement on the effective date of termination unless otherwise set forth in
the written agreement.
3.2.4 Notwithstanding anything in this Agreement to the contrary, the
Term shall end automatically upon the Executive's death, in which event the
Employer shall have no further obligation to the Executive except for the
payment of any amounts due and owing under Section 4 on the effective date
of termination.
3.3 CHANGE OF CONTROL. If the Executive terminates his employment with the
Employer under this Agreement for Cause or the Employer terminates Executive's
employment without Cause within six (6) months following a Change of Control,
the Executive, or in the event of his subsequent death, his designated
beneficiaries or his estate, as the case may be, shall receive, as liquidated
damages, in lieu of all other claims, a severance payment equal to one (1) times
the Executives then current Base Salary, to be paid in full on the last day of
the month following the date of termination. In no event shall the payment(s)
described in this Section 3.3 exceed the amount permitted by Section 280G of the
Internal Revenue Code, as amended (the "Code"). Therefore, if the aggregate
present value (determined as of the date of the Change of Control in accordance
with the provisions of Section 280G of the Code) of both the severance payment
and all other payments to the Executive in the nature of compensation which are
contingent on a change in ownership or effective control of the Bank or the
Company or in the ownership of a substantial portion of the assets of the Bank
or the Company (the "Aggregate Severance") would result in a "parachute
payment," as defined under Section 280G of the Code, then the Aggregate
Severance shall not be greater than an amount equal to 2.99 multiplied by
Executive's "base amount" for the "base period, " as those terms are defined
under Section 280G. In the event the Aggregate Severance is required to be
reduced pursuant to this Section 3.3, the Executive shall be entitled to
determine which portions of the Aggregate Severance are to be reduced so that
the Aggregate Severance satisfies the limit set forth in the preceding sentence.
Notwithstanding any provision in this Agreement, if the Executive may exercise
his right to terminate employment under this Section 3.3 or under Section
3.2.2(a), the Executive may choose which provision shall be applicable.
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3.4 EFFECT OF TERMINATION. Termination of the employment of the Executive
pursuant to Section 3.2 or Section 3.3 shall be without prejudice to any right
or claim which may have previously accrued to either the Employer or the
Executive hereunder and shall not terminate, alter, supersede or otherwise
affect the terms and covenants and the rights and duties prescribed in this
Agreement.
4. COMPENSATION. The Executive shall receive the following salary and the
benefits described in Exhibit B, attached hereto and made a part hereof:
4.1 BASE SALARY. During the Initial Term, the Executive shall be compensated
at a base rate of $7,000 per month until the opening of the Bank and $8,000 per
month after the opening of the Bank (the "Base Salary"). The Executive's Base
Salary shall be reviewed by the Board of Directors of the Bank and the Company
at least annually, and the Executive shall be entitled to receive annually an
increase in such amount, if any, as may be determined by the Board of Directors
based on its evaluation of Executive's performance. Base Salary shall be payable
in accordance with the Employer's normal payroll practices.
4.2 INCENTIVE COMPENSATION.
(a) The Executive shall be entitled to annual bonus compensation,
if any, in accordance with the terms specified in Exhibit B attached
hereto.
(b) The Executive shall also be entitled to a cash bonus of $10,000
payable immediately upon the opening of the Bank.
4.3 STOCK OPTIONS. As of the Effective Date, the Company will have
established a stock incentive plan and will grant to the Executive pursuant to
such stock incentive plan an incentive stock option to purchase, at a per share
purchase price equal to $10.00, five percent (5%) of the number of shares of the
Company's common stock. The option generally will become vested and exercisable
in 20% increments, commencing on the first anniversary of the option grant date
and continuing for the next four successive anniversaries until the option is
fully vested and exercisable. The option shall expire generally upon the earlier
of ninety (90) days following termination of employment or upon the tenth
anniversary of the option grant date. The incentive stock option will be issued
by the Employer pursuant to the Company's stock incentive plan and subject to
the terms of a related stock option agreement.
4.4 HEALTH INSURANCE.
(a) The Employer shall reimburse the Executive for the cost of
premium payments paid by the Executive for the Executive's current health
insurance covering the Executive and the members of his immediate family:
(i) until such time as the Company adopts a health insurance
plan for employees of the Company and the Bank; or
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(ii) until the Company and the Bank abandon their organizational
efforts or for twelve (12) months after the Beginning Date, whichever
occurs first.
(b) In the event of termination by the Executive For Cause (Section
3.2.3(a)) or following a Change of Control (Section 3.3), the Employer
shall reimburse Executive for the cost of premium payments paid by the
Executive to continue his then existing health insurance as provided by the
Employer for a period of six (6) months following the date of termination
of employment.
(c) In the event of a termination by the Employer Without Cause
(Section 3.2.1(c)), the Employer shall reimburse the Executive for the cost
of premium payments paid by the Executive to continue his then existing
health insurance as provided by Employer for a period of twelve (12) months
following the date of termination of employment.
4.5 AUTOMOBILE. Beginning as of the Effective Date, the Employer will provide
the Executive with an automobile to be used by the Executive for business and
personal purposes. The make and model of the automobile shall be determined by
the Employer with a value not to exceed $25,000. The Employer will pay expenses
associated with the operation, maintenance, repair and insurance for the
automobile. In addition, the automobile shall be made available by the Executive
for use by other employees of the Bank on a reasonable basis during normal
business hours of the Bank.
4.6 BUSINESS EXPENSES; MEMBERSHIPS. The Employer specifically agrees to
reimburse the Executive for:
(a) reasonable and necessary business (including travel) expenses
incurred by him in the performance of his duties hereunder not to exceed
$1,000 per month, unless otherwise approved by the Board of Directors of
either the Bank or the Company; and
(b) beginning as of the Effective Date, the dues and business
related expenditures, including initiation fees, associated with membership
in a single country club and a single civic association both as selected by
the Executive and in professional associations which are commensurate with
his position; provided, however, that the Executive shall, as a condition
of reimbursement, submit verification of the nature and amount of such
expenses in accordance with reimbursement policies from time to time
adopted by the Employer and in sufficient detail to comply with rules and
regulations promulgated by the Internal Revenue Service. In the event that
membership in the country club selected by the Executive requires the
purchase of an equity interest in such club, the Company or the Bank shall
be the owner of the equity interest and the Executive shall be the
designated member pursuant to such equity interest during the Term of this
Agreement.
4.7 VACATION. On a non-cumulative basis, the Executive shall be entitled to
four (4) weeks of vacation in each successive twelve-month period during the
Term, during which his compensation shall be paid in full.
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4.8 LIFE INSURANCE. During the Term of this Agreement, the Employer will
provide the Executive with term life insurance coverage providing a death
benefit of not less than $300,000, payable to such beneficiary or beneficiaries
as the Executive may designate.
4.9 BENEFITS. In addition to the benefits specifically described in this
Agreement, the Executive shall be entitled to such benefits as may be available
from time to time to executives of the Bank similarly situated to the Executive.
All such benefits shall be awarded and administered in accordance with the
Bank's standard policies and practices. Such benefits may include, by way of
example only, profit-sharing plans, retirement or investment funds, dental,
health, life and disability insurance benefits and such other benefits as the
Bank deems appropriate.
4.10 WITHHOLDING. The Employer may deduct from each payment of compensation
hereunder all amounts required to be deducted and withheld in accordance with
applicable federal and state income, FICA and other withholding requirements.
5. COMPANY INFORMATION.
5.1 OWNERSHIP OF COMPANY INFORMATION. All Company Information received or
developed by the Executive while employed by the Employer will remain the sole
and exclusive property of the Employer.
5.2 OBLIGATIONS OF THE EXECUTIVE. The Executive agrees:
(a) to hold Company Information in strictest confidence;
(b) not to use, duplicate, reproduce, distribute, disclose or
otherwise disseminate Company Information or any physical embodiments of
Company Information; and
(c) in any event, not to take any action causing or fail to take
any action necessary in order to prevent any Company Information from
losing its character or ceasing to qualify as Confidential Information or a
Trade Secret.
In the event that the Executive is required by law to disclose any Company
Information, the Executive will not make such disclosure unless (and then only
to the extent that) the Executive has been advised by independent legal counsel
that such disclosure is required by law and then only after prior written notice
is given to the Company when the Executive becomes aware that such disclosure
has been requested and is required by law. This Section 5 shall survive for a
period of twelve (12) months following termination of this Agreement for any
reason with respect to Confidential Information, and shall survive termination
of this Agreement for any reason for so long as is permitted by applicable law,
with respect to Trade Secrets.
5.3 DELIVERY UPON REQUEST OR TERMINATION. Upon request by the Employer, and
in any event upon termination of his employment with the Employer, the Executive
will promptly deliver to the Employer all property belonging to the Employer,
including, without limitation, all Company Information then in his possession or
control.
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6. NON-COMPETITION. The Executive agrees that during his employment by the Bank
hereunder and, in the event of his termination:
- by the Employer For Cause pursuant to Section 3.2.1(b),
- by the Executive Without Cause pursuant to Section 3.2.2(b), or
- by the Executive in connection with a Change of Control pursuant to
Section 3.3,
for a period of twelve (12) months thereafter, he will not (except on behalf of
or with the prior written consent of the Employer), within the Area, either
directly or indirectly, on his own behalf or in the service or on behalf of
others, as an executive employee or in any other capacity which involves duties
and responsibilities similar to those undertaken for the Employer (including as
an organizer or proposed executive officer of a new financial institution),
engage in any business which is the same as or essentially the same as the
Business of the Employer.
7. NON-SOLICITATION OF CUSTOMERS. The Executive agrees that during his
employment by the Employer hereunder and, in the event of his termination:
- by the Employer For Cause pursuant to Section 3.2.1(b),
- by the Executive Without Cause pursuant to Section 3.2.2(b), or
- by the Executive in connection with a Change of Control pursuant to
Section 3.3,
for a period of twelve (12) months thereafter, he will not (except on behalf of
or with the prior written consent of the Employer), within the Area, on his own
behalf or in the service or on behalf of others, solicit, divert or appropriate
or attempt to solicit, divert or appropriate, any business from any of the
Employer's customers, including actively sought prospective customers, with whom
the Executive has or had material contact during the last two (2) years of his
employment, for purposes of providing products or services that are competitive
with those provided by the Bank.
8. NON-SOLICITATION OF EMPLOYEES. The Executive agrees that during his
employment by the Employer hereunder and, in the event of his termination:
- by the Employer For Cause pursuant to Section 3.2.1(b),
- by the Executive Without Cause pursuant to Section 3.2.2(b), or
- by the Executive in connection with a Change of Control pursuant to
Section 3.3,
for a period of twelve (12) months thereafter, he will not, within the Area, on
his own behalf or in the service or on behalf of others, solicit, recruit or
hire away or attempt to solicit, recruit or hire away, any employee of the
Employer or its Affiliates, whether or not:
- such employee is a full-time employee or a temporary employee of the
Employer or its Affiliates,
- such employment is pursuant to written agreement, and
- such employment is for a determined period or is at will.
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9. REMEDIES. The Executive agrees that the covenants contained in Sections 5
through 8 of this Agreement are of the essence of this Agreement; that each of
the covenants is reasonable and necessary to protect the business, interests and
properties of the Employer, and that irreparable loss and damage will be
suffered by the Employer should he breach any of the covenants. Therefore, the
Executive agrees and consents that, in addition to all the remedies provided by
law or in equity, the Employer shall be entitled to a temporary restraining
order and temporary and permanent injunctions to prevent a breach or
contemplated breach of any of the covenants. The Employer and the Executive
agree that all remedies available to the Employer or the Executive, as
applicable, shall be cumulative.
10. SEVERABILITY. The parties agree that each of the provisions included in this
Agreement is separate, distinct and severable from the other provisions of this
Agreement and that the invalidity or unenforceability of any Agreement provision
shall not affect the validity or enforceability of any other provision of this
Agreement. Further, if any provision of this Agreement is ruled invalid or
unenforceable by a court of competent jurisdiction because of a conflict between
the provision and any applicable law or public policy, the provision shall be
redrawn to make the provision consistent with and valid and enforceable under
the law or public policy.
11. NO SET-OFF BY THE EXECUTIVE. The existence of any claim, demand, action or
cause of action by the Executive against the Employer, or any Affiliate of the
Employer, whether predicated upon this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Employer of any of its rights
hereunder.
12. NOTICE. All notices and other communications required or permitted under
this Agreement shall be in writing and, if mailed by prepaid first-class mail or
certified mail, return receipt requested, shall be deemed to have been received
on the earlier of the date shown on the receipt or three (3) business days after
the postmarked date thereof. In addition, notices hereunder may be delivered by
hand or overnight courier, in which event the notice shall be deemed effective
when delivered. All notices and other communications under this Agreement shall
be given to the parties hereto at the following addresses:
(i) If to the Employer, to it at:
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(ii) If to the Executive, to him at:
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13. ASSIGNMENT. Neither party hereto may assign or delegate this Agreement or
any of its rights and obligations hereunder without the written consent of the
other party to this Agreement.
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14. WAIVER. A waiver by one party to this Agreement of any breach of this
Agreement by the other party to this Agreement shall not be effective unless in
writing, and no waiver shall operate or be construed as a waiver of the same or
another breach on a subsequent occasion.
15. ARBITRATION. Any controversy or claim arising out of or relating to this
contract, or the breach thereof, shall be settled by binding arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association. Judgment upon the award rendered by the arbitrator may be entered
only in the State Court of Georgetown County or the federal court for the
District of South Carolina. The Employer and the Executive agree to share
equally the fees and expenses associated with the arbitration proceedings.
16. ATTORNEYS' FEES. In the event that the parties have complied with this
Agreement with respect to arbitration of disputes and litigation ensues between
the parties concerning the enforcement of an arbitration award, the party
prevailing in such litigation shall be entitled to receive from the other party
all reasonable costs and expenses, including without limitation attorneys' fees,
incurred by the prevailing party in connection with such litigation, and the
other party shall pay such costs and expenses to the prevailing party promptly
upon demand by the prevailing party.
17. APPLICABLE LAW. This Agreement shall be construed and enforced under and in
accordance with the laws of the State of South Carolina.
18. INTERPRETATION. Words importing any gender include all genders. Words
importing the singular form shall include the plural and vice versa. The terms
"herein", "hereunder", "hereby", "hereto", "hereof" and any similar terms refer
to this Agreement. Any captions, titles or headings preceding the text of any
article, section or subsection herein are solely for convenience of reference
and shall not constitute part of this Agreement or affect its meaning,
construction or effect.
19. ENTIRE AGREEMENT. This Agreement embodies the entire and final agreement of
the parties on the subject matter stated in this Agreement. No amendment or
modification of this Agreement shall be valid or binding upon the Bank or the
Executive unless made in writing and signed by both parties. All prior
understandings and agreements relating to the subject matter of this Agreement
are hereby expressly terminated.
20. RIGHTS OF THIRD PARTIES. Nothing herein expressed is intended to or shall be
construed to confer upon or give to any person, firm or other entity, other than
the parties hereto and their permitted assigns, any rights or remedies under or
by reason of this Agreement.
21. SURVIVAL. The obligations of the Executive pursuant to Sections 5, 6, 7, 8
and 9 shall survive the termination of the employment of the Executive hereunder
for the period designated under each of those respective sections.
22. JOINT AND SEVERAL. The obligations of the Bank and the Company to Executive
hereunder shall be joint and several.
12
<PAGE> 13
IN WITNESS WHEREOF, the Employer and the Executive have executed and
delivered this Agreement as of the date first shown above.
THE BANK:
SUN BANK, N.A. (PROPOSED)
By: /s/ Dalton B. Floyd, Jr.
-----------------------------------
Print Name: Dalton B. Floyd, Jr.
---------------------------
Title: Chairman of the Board
--------------------------------
THE COMPANY:
SUN BANCSHARES, INC.
By: /s/ Dalton B. Floyd, Jr.
-----------------------------------
Print Name: Dalton B. Floyd, Jr.
---------------------------
Title: Chief Executive Officer
--------------------------------
THE EXECUTIVE:
THOMAS BOUCHETTE
/s/ Thomas Bouchette
--------------------------------------
13
<PAGE> 14
EXHIBIT A
INITIAL DUTIES OF THE EXECUTIVE
The initial duties of the Executive shall include, in addition to any other
duties assigned the Executive by the Board of Directors of the Bank or the
Company or their respective designees, the following:
- Foster a corporate culture that promotes ethical practices, encourages
individual integrity, fulfills social responsibility, and is conducive to
attracting, retaining and motivating a diverse group of top-quality
employees at all levels.
- Work with the Board of Directors to develop a long-term strategy for the
Company that creates shareholder value.
- Develop and recommend to the Board annual business plans and budgets that
support the Company's long-term strategy.
- Manage the day-to-day business affairs of the Company appropriately.
- Use best efforts to achieve the Company's financial and operating goals
and objectives.
- Use best efforts to improve the quality and value of the products and
services provided by the Company.
- Use best efforts to ensure that the Company maintains a satisfactory
competitive position within its industry.
- Develop an effective management team and an active plan for its
development and succession, and make recommendations to the Board
regarding hiring, firing and compensation.
- Implement major corporate policies.
<PAGE> 15
EXHIBIT B
Within ninety (90) days following the end of each calendar year of the
Employer's operations, the Employer shall pay the Executive a cash bonus equal
to five percent (5%) of the Employer's consolidated pre-tax earnings for that
calendar year, but, in no event, shall such bonus amount exceed an amount equal
to one-hundred percent (100%) of Executive's Base Salary for the calendar year
for which the bonus is paid. Notwithstanding the foregoing, the bonus payments
contemplated by this Exhibit B shall not become due and payable until the Board
of Directors of the Bank has determined, according to reasonable safety and
soundness standards, that:
- The Bank is and after the payment of any bonus will continue to be "well
capitalized" under the capital adequacy guidelines issued by its primary
banking regulator;
- The Bank is not subject to any regulatory actions (i.e., a Memorandum of
Understanding or Cease and Desist Order);
- The Capital, Management, Asset, and Liquidity components of the Bank's
CAMELS rating are "2" or better and the Bank receives an overall CAMELS
rating of "2" or better from its primary banking regulator;
- The Bank's loan loss reserve is adequate and loan portfolio quality is
satisfactory based on the board of directors review of (1) the most recent
report of exam of the Bank's primary banking regulator; (2) the audit
report of the Company's independent auditors for the calendar year then
ended; and (3) any other internally prepared credit review(s) that the
board of directors deem necessary and appropriate; and
- The overall financial condition of the Bank, including asset quality, is
satisfactory and will not be adversely affected by the payment of any
bonus. The overall financial condition shall be presumed to be
unsatisfactory if the Bank's average loans past due greater than 90 days
as a percent of total average loans (the "Past Due Ratio") for the
calendar year then ended exceeds the average Past Due Ratio for the Bank's
pier group by greater than 0.25%.
<PAGE> 1
EXHIBIT 10.5
SUN BANCSHARES, INC.
2000 STOCK INCENTIVE PLAN
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 1 DEFINITIONS................................................................ 1
1.1 Definitions.................................................................. 1
SECTION 2 THE STOCK INCENTIVE PLAN................................................... 4
2.1 Purpose of the Plan.......................................................... 4
2.2 Stock Subject to the Plan.................................................... 4
2.3 Administration of the Plan................................................... 4
2.4 Eligibility and Limits....................................................... 5
SECTION 3 TERMS OF STOCK INCENTIVES.................................................. 5
3.1 General Terms and Conditions................................................. 5
3.2 Terms and Conditions of Options.............................................. 6
(a) Option Price.............................................................. 7
(b) Option Term............................................................... 7
(c) Payment................................................................... 7
(d) Conditions to the Exercise of an Option................................... 8
(e) Termination of Incentive Stock Option..................................... 8
(f) Special Provisions for Certain Substitute Options......................... 8
3.3 Treatment of Awards Upon Termination of Service.............................. 8
SECTION 4 RESTRICTIONS ON STOCK...................................................... 9
4.1 Escrow of Shares............................................................. 9
4.2 Restrictions on Transfer..................................................... 9
SECTION 5 GENERAL PROVISIONS......................................................... 9
5.1 Withholding.................................................................. 9
5.2 Changes in Capitalization; Merger; Liquidation.............................. 10
5.3 Cash Awards................................................................. 10
5.4 Compliance with Code........................................................ 11
5.5 Right to Terminate Service.................................................. 11
5.6 Restrictions on Delivery and Sale of Shares; Legends........................ 11
5.7 Non-Alienation of Benefits.................................................. 11
5.8 Termination and Amendment of the Plan....................................... 12
5.9 Stockholder Approval........................................................ 12
5.10 Choice of Law............................................................... 11
</TABLE>
<PAGE> 3
SUN BANCSHARES, INC.
2000 STOCK INCENTIVE PLAN
SECTION 1 DEFINITIONS
1.1 Definitions. Whenever used herein, the masculine pronoun shall
be deemed to include the feminine, and the singular to include the plural,
unless the context clearly indicates otherwise, and the following capitalized
words and phrases are used herein with the meaning thereafter ascribed:
(a) "Bank" means SunBank, N.A., a national bank.
(b) "Board of Directors" means the board of directors of the
Company.
(c) "Cause" has the same meaning as provided in the
employment agreement between the Participant and the Company or affiliate(s) on
the date of Termination of Service, or if no such definition or employment
agreement exists, "Cause" means conduct amounting to (1) fraud or dishonesty
against the Company or affiliate(s), (2) Participant's willful misconduct,
repeated refusal to follow the reasonable directions of the Board of Directors
or knowing violation of law in the course of performance of the duties of
Participant's service with the Company or affiliate(s), (3) repeated absences
from work without a reasonable excuse, (4) repeated intoxication with alcohol
or drugs while on the Company or affiliate(s)' premises during regular business
hours, (5) a conviction or plea of guilty or nolo contendere to a felony or a
crime involving dishonesty, or (6) a breach or violation of the terms of any
agreement to which Participant and the Company or affiliate(s) are party.
(d) "Change in Control" means any one of the following
events which may occur after the date the Stock Incentive is granted:
(1) the acquisition by any person or persons
acting in concert of the then outstanding voting securities of either the Bank
or the Company, if, after the transaction, the acquiring person (or persons)
owns, controls or holds with power to vote fifty percent (50%) or more of any
class of voting securities of either the Bank or the Company, as the case may
be;
(2) within any twelve-month period the persons who
were directors of either the Bank or the Company immediately before the
beginning of such twelve-month period (the "Incumbent Directors") shall cease
to constitute at least a majority of such board of directors; provided that any
director who was not a director as of the beginning of such twelve-month period
shall be deemed to be an Incumbent Director if that director were elected to
such board of directors by, or on the recommendation of or with the approval
of, at least two-thirds of the directors who then qualified as Incumbent
Directors; and provided further that no director whose initial assumption of
office is in connection with an actual or threatened election contest (as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Securities Exchange Act of 1934) relating to the election of directors shall be
deemed to be an Incumbent Director;
<PAGE> 4
(3) a reorganization, merger or consolidation, with
respect to which persons who were the stockholders of either the Bank or the
Company, as the case may be, immediately prior to such reorganization, merger
or consolidation do not, immediately thereafter, own more than fifty percent
(50%) of the combined voting power entitled to vote in the election of
directors of the reorganized, merged or consolidated company's then outstanding
voting securities; or
(4) the sale, transfer or assignment of all or
substantially all of the assets of the Company and its subsidiaries to any
third party.
(e) "Company" means Sun Bancshares, Inc., a corporation
organized under the laws of the State of South Carolina as a bank holding
company.
(f) "Code" means the Internal Revenue Code of 1986, as
amended.
(g) "Committee" means the committee appointed by the Board
of Directors to administer the Plan pursuant to Plan Section 2.3.
(h) "Disability" has the same meaning as provided in the
long-term disability plan or policy maintained or, if applicable, most recently
maintained, by the Company or affiliate for the Participant. If no long-term
disability plan or policy was ever maintained on behalf of the Participant or,
if the determination of Disability relates to an Incentive Stock Option,
Disability shall mean that condition described in Code Section 22(e)(3), as
amended from time to time. In the event of a dispute, the determination of
Disability shall be made by the Board of Directors and shall be supported by
advice of a physician competent in the area to which such Disability relates.
(i) "Disposition" means any conveyance, sale, transfer,
assignment, pledge or hypothecation, whether outright or as security, inter
vivos or testamentary, with or without consideration, voluntary or involuntary.
(j) "Fair Market Value" refers to the determination of value
of a share of Stock. If the Stock is actively traded on any national securities
exchange or any Nasdaq quotation or market system, Fair Market Value shall mean
the closing price at which sales of Stock shall have been sold on the most
recent trading date immediately prior to the date of determination, as reported
by any such exchange or system selected by the Committee on which the shares of
Stock are then traded. If the shares of Stock are not actively traded on any
such exchange or system, Fair Market Value shall mean the arithmetic mean of
the bid and asked prices for the shares of Stock on the most recent trading
date within a reasonable period prior to the determination date as reported by
such exchange or system. If there are no bid and asked prices within a
reasonable period or if the shares of Stock are not traded on any exchange or
system as of the determination date, Fair Market Value shall mean the fair
market value of a share of Stock as determined by the Committee taking into
account such facts and circumstances deemed to be material by the Committee to
the value of the Stock in the hands of the Participant; provided that, for
purposes of granting awards other than Incentive Stock Options, Fair Market
Value of a share of Stock may be determined by the Committee by reference to
the average market value determined over a period certain or as of specified
dates, to a tender offer price for
2
<PAGE> 5
the shares of Stock (if settlement of an award is triggered by such an event)
or to any other reasonable measure of fair market value and provided further
that, for purposes of granting Incentive Stock Options, Fair Market Value of a
share of Stock shall be determined in accordance with the valuation principles
described in the regulations promulgated under Code Section 422.
(k) "Incentive Stock Option" means an incentive stock
option, as defined in Code Section 422, described in Plan Section 3.2.
(l) "Non-Qualified Stock Option" means a stock option,
other than an option qualifying as an Incentive Stock Option, described in Plan
Section 3.2.
(m) "Option" means a Non-Qualified Stock Option or an
Incentive Stock Option.
(n) "Over 10% Owner" means an individual who at the time an
Incentive Stock Option is granted owns Stock possessing more than 10% of the
total combined voting power of the Company or one of its Parents or
Subsidiaries, determined by applying the attribution rules of Code Section
424(d).
(o) "Parent" means any corporation (other than the Company)
in an unbroken chain of corporations ending with the Company if, with respect
to Incentive Stock Options, at the time of granting of the Incentive Stock
Option, each of the corporations other than the Company owns stock possessing
50% or more of the total combined voting power of all classes of stock in one
of the other corporations in the chain.
(p) "Participant" means an individual who receives a Stock
Incentive hereunder.
(q) "Plan" means the Sun Bancshares, Inc. 2000 Stock
Incentive Plan.
(r) "Stock" means the Company's common stock, $1.00 par
value per share.
(s) "Stock Incentive Agreement" means an agreement between
the Company and a Participant or other documentation evidencing an award of a
Stock Incentive.
(t) "Stock Incentives" means, collectively, Incentive Stock
Options and Non-Qualified Stock Options.
(u) "Subsidiary" means any corporation (other than the
Company) in an unbroken chain of corporations beginning with the Company if,
with respect to Incentive Stock Options, at the time of the granting of the
Incentive Stock Option, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in the chain.
3
<PAGE> 6
(v) "Termination of Service" means the termination of the
service relationship, whether employment or otherwise, between a Participant
and the Company and any affiliates, regardless of the fact that severance or
similar payments are made to the Participant for any reason, including, but not
by way of limitation, a termination by resignation, discharge, death,
Disability or retirement. The Committee shall, in its absolute discretion,
determine the effect of all matters and questions relating to Termination of
Service, including, but not by way of limitation, the question of whether a
leave of absence constitutes a Termination of Service, or whether a Termination
of Service is for Cause.
SECTION 2 THE STOCK INCENTIVE PLAN
2.1 Purpose of the Plan. The Plan is intended to (a) provide
incentives to officers, employees, directors and organizers of the Company and
affiliates to stimulate their efforts toward the continued success of the
Company and to operate and manage the business in a manner that will provide
for the long-term growth and profitability of the Company; (b) encourage stock
ownership by officers, employees, directors and organizers by providing them
with a means to acquire a proprietary interest in the Company by acquiring
shares of Stock; and (c) provide a means of obtaining and rewarding key
personnel.
2.2 Stock Subject to the Plan. Subject to adjustment in accordance
with Section 5.2, 100,000 shares of Stock (the "Maximum Plan Shares") are
hereby reserved exclusively for issuance pursuant to Stock Incentives. At such
time as the Company becomes subject to Section 16 of the Exchange Act, at no
time shall the Company have outstanding Stock Incentives subject to Section 16
of the Exchange Act and shares of Stock issued in respect of Stock Incentives
in excess of the Maximum Plan Shares. The shares of Stock attributable to the
nonvested, unpaid, unexercised, unconverted or otherwise unsettled portion of
any Stock Incentive that is forfeited or cancelled or expires or terminates for
any reason without becoming vested, paid, exercised, converted or otherwise
settled in full will again be available for purposes of the Plan.
2.3 Administration of the Plan. The Plan shall be administered by
the Committee. The members of the Committee shall consist solely of at least
two members of the Board of Directors who are both "outside directors" as
defined in Treasury Regulations ss.1.162-27(e) as promulgated by the Internal
Revenue Service and "non-employee directors" as defined in Rule 16b-3(b)(3) as
promulgated under the Exchange Act. The Committee shall have full authority in
its discretion to determine the officers, employees, directors and organizers
of the Company or its affiliates to whom Stock Incentives shall be granted and
the terms and provisions of Stock Incentives subject to the Plan. Subject to
the provisions of the Plan, the Committee shall have full and conclusive
authority to interpret the Plan; to prescribe, amend and rescind rules and
regulations relating to the Plan; to determine the terms and provisions of the
respective Stock Incentive Agreements and to make all other determinations
necessary or advisable for the proper administration of the Plan. The
Committee's determinations under the Plan need not be uniform and may be made
by it selectively among persons who receive, or are eligible to receive, awards
under the Plan (whether or not such persons are similarly situated). The
Committee's decisions shall be final and binding on all Participants. Each
member of the Committee shall serve at the discretion of the Board of Directors
and the Board of Directors may from time to time remove
4
<PAGE> 7
members from or add members to the Committee. Vacancies on the Committee shall
be filled by the Board of Directors.
The Committee shall select one of its members as chairman and shall
hold meetings at the times and in the places as it may deem advisable. Acts
approved by a majority of the Committee in a meeting at which a quorum is
present, or acts reduced to or approved in writing by a majority of the members
of the Committee, shall be the valid acts of the Committee.
2.4 Eligibility and Limits. Stock Incentives may be granted only
to officers, employees, directors and organizers of the Company or any
affiliate; provided, however, that an Incentive Stock Option may only be
granted to an employee of the Company or any Subsidiary. In the case of
Incentive Stock Options, the aggregate Fair Market Value (determined as of the
date an Incentive Stock Option is granted) of stock with respect to which stock
options intended to meet the requirements of Code Section 422 become
exercisable for the first time by an individual during any calendar year under
all plans of the Company and its Parents and Subsidiaries shall not exceed
$100,000; provided further, that if the limitation is exceeded, the Incentive
Stock Option(s) which cause the limitation to be exceeded shall be treated as
Non-Qualified Stock Option(s). Pursuant to Section 162(m) of the Code and the
regulations thereunder, for compensation to be treated as qualified performance
based compensation, the maximum number of shares of Stock with respect to which
Options may be granted during any one year period to any employee may not
exceed 75,000, subject to adjustment in accordance with Section 5.2. In
applying this limitation, if a Stock Incentive, or any portion thereof, granted
to an employee is cancelled or repriced for any reason, then the shares of
Stock attributable to such cancellation or repricing either shall continue to
be counted as an outstanding grant or shall be counted as a new grant, as the
case may be, against the affected employee's 75,000 limit for the appropriate
fiscal year.
SECTION 3 TERMS OF STOCK INCENTIVES
3.1 General Terms and Conditions.
(a) The number of shares of Stock as to which a Stock
Incentive shall be granted shall be determined by the Committee in its sole
discretion, subject to the provisions of Section 2.2, as to the total number of
shares available for grants under the Plan. If a Stock Incentive Agreement so
provides, a Participant may be granted a new Option to purchase a number of
shares of Stock equal to the number of previously owned shares of Stock
tendered in payment of the Exercise Price (as defined below) for each share of
Stock purchased pursuant to the terms of the Stock Incentive Agreement.
(b) Each Stock Incentive shall be evidenced by a Stock
Incentive Agreement in such form and containing such terms, conditions and
restrictions as the Committee may determine is appropriate. Each Stock
Incentive Agreement shall be subject to the terms of the Plan and any provision
in a Stock Incentive Agreement that is inconsistent with the Plan shall be null
and void.
5
<PAGE> 8
(c) The date a Stock Incentive is granted shall be the date
on which the Committee has approved the terms of, and satisfaction of any
conditions applicable to, the grant of the Stock Incentive and has determined
the recipient of the Stock Incentive and the number of shares covered by the
Stock Incentive and has taken all such other action necessary to complete the
grant of the Stock Incentive.
(d) The Committee may provide in any Stock Incentive
Agreement (or subsequent to the award of a Stock Incentive but prior to its
expiration or cancellation, as the case may be) that, in the event of a Change
in Control, the Stock Incentive shall or may be cashed out on the basis of any
price not greater than the highest price paid for a share of Stock in any
transaction reported by any market or system selected by the Committee on which
the shares of Stock are then actively traded during a specified period
immediately preceding or including the date of the Change in Control or offered
for a share of Stock in any tender offer occurring during a specified period
immediately preceding or including the date the tender offer commences;
provided that, in no case shall any such specified period exceed three (3)
months (the "Change in Control Price"). For purposes of this Subsection,
Options shall be cashed out on the basis of the excess, if any, of the Change
in Control Price (but not more than the Fair Market Value of the Stock on the
date of the cash-out in the case of Incentive Stock Options) over the Exercise
Price with or without regard to whether the Option may otherwise be exercisable
only in part.
(e) Any Stock Incentive may be granted in connection with
all or any portion of a previously or contemporaneously granted Stock
Incentive. Exercise or vesting of a Stock Incentive granted in connection with
another Stock Incentive may result in a pro rata surrender or cancellation of
any related Stock Incentive, as specified in the applicable Stock Incentive
Agreement.
(f) Unless otherwise permitted by the Committee with respect
to Non-Qualified Stock Options, Stock Incentives shall not be transferable or
assignable except by will or by the laws of descent and distribution and shall
be exercisable, during the Participant's lifetime, only by the Participant; in
the event of the Disability of the Participant, by the legal representative of
the Participant; or in the event of the death of the Participant, by the
personal representative of the Participant's estate or if no personal
representative has been appointed, by the successor in interest determined
under the Participant's will.
(g) No Stock Incentive shall have a term that extends beyond
the tenth anniversary of the date the Stock Incentive was granted.
3.2 Terms and Conditions of Options. Each Option granted under the
Plan shall be evidenced by a Stock Incentive Agreement. At the time any Option
is granted, the Committee shall determine whether the Option is to be an
Incentive Stock Option or a Non-Qualified Stock Option, and the Option shall be
clearly identified as to its status as an Incentive Stock Option or a
Non-Qualified Stock Option. At the time any Incentive Stock Option is
exercised, the Company shall be entitled to place a legend on the certificates
representing the shares of Stock purchased pursuant to the Option to clearly
identify them as shares of Stock purchased upon exercise of an Incentive Stock
Option. An Incentive Stock Option may only be granted within
6
<PAGE> 9
ten (10) years from the earlier of the date the Plan is adopted by the Board of
Directors or approved by the Company's stockholders. All Options shall provide
that the primary Federal regulator of the Bank may require Participant to
exercise an Option in whole or in part if the capital of the Bank falls below
minimum requirements and shall further provide that, if the Participant fails
to so exercise any such portion of the Option, that portion of the Option shall
be forfeited.
(a) Option Price. Subject to adjustment in accordance with
Section 5.2 and the other provisions of this Section 3.2, the exercise price
(the "Exercise Price") per share of Stock purchasable under any Option shall be
as set forth in the applicable Stock Incentive Agreement. With respect to each
grant of an Incentive Stock Option to a Participant who is not an Over 10%
Owner, the Exercise Price per share shall not be less than the Fair Market
Value on the date the Option is granted. With respect to each grant of an
Incentive Stock Option to a Participant who is an Over 10% Owner, the Exercise
Price shall not be less than 110% of the Fair Market Value on the date the
Option is granted. With respect to each grant of a Non-Qualified Stock Option,
the Exercise Price per share shall be no less than the Fair Market Value.
(b) Option Term. The term of an Option shall be as specified
in the applicable Stock Incentive Agreement; provided, however that any
Incentive Stock Option granted to a Participant who is not an Over 10% Owner
shall not be exercisable after the expiration of ten (10) years after the date
the Option is granted and any Incentive Stock Option granted to an Over 10%
Owner shall not be exercisable after the expiration of five (5) years after the
date the Option is granted.
(c) Payment. Payment for all shares of Stock purchased
pursuant to the exercise of an Option shall be made in any form or manner
authorized by the Committee in the Stock Incentive Agreement or by amendment
thereto, including, but not limited to, cash or, if the Stock Incentive
Agreement provides, (1) by delivery to the Company of a number of shares of
Stock which have been owned by the holder for at least six (6) months prior to
the date of exercise having an aggregate Fair Market Value of not less than the
product of the Exercise Price multiplied by the number of shares the
Participant intends to purchase upon exercise of the Option on the date of
delivery; (2) in a cashless exercise through a broker; or (3) by having a
number of shares of Stock withheld, the Fair Market Value of which as of the
date of exercise is sufficient to satisfy the Exercise Price. In its
discretion, the Committee also may authorize (at the time an Option is granted
or thereafter) Company financing to assist the Participant as to payment of the
Exercise Price on such terms as may be offered by the Committee in its
discretion. Payment shall be made at the time that the Option or any part
thereof is exercised, and no shares shall be issued or delivered upon exercise
of an Option until full payment has been made by the Participant. The holder of
an Option, as such, shall have none of the rights of a stockholder.
(d) Conditions to the Exercise of an Option. Each Option
granted under the Plan shall be exercisable by whom, at such time or times, or
upon the occurrence of such event or events, and in such amounts, as the
Committee shall specify in the Stock Incentive Agreement; provided, however,
that subsequent to the grant of an Option, the Committee, at any time before
complete termination of such Option, may accelerate the time or times at which
such
7
<PAGE> 10
Option may be exercised in whole or in part, including, without limitation,
upon a Change in Control and may permit the Participant or any other designated
person to exercise the Option, or any portion thereof, for all or part of the
remaining Option term notwithstanding any provision of the Stock Incentive
Agreement to the contrary. Notwithstanding the foregoing, no Option granted
prior to the third anniversary of the date the Plan is adopted by the Board of
Directors shall contain provisions which allow the Option to become vested and
exercisable at a rate faster than in equal, annual one-third increments
commencing with the first anniversary of the Option's grant date.
(e) Termination of Incentive Stock Option. With respect to
an Incentive Stock Option, in the event of the Termination of Service of a
Participant, the Option or portion thereof held by the Participant which is
unexercised shall expire, terminate, and become unexercisable no later than the
expiration of three (3) months after the date of Termination of Service;
provided, however, that in the case of a holder whose Termination of Service is
due to death or Disability, one (1) year may be substituted for such three (3)
month period. For purposes of this Subsection (e), Termination of Service of
the Participant shall not be deemed to have occurred if the Participant is
employed by another corporation (or a parent or subsidiary corporation of such
other corporation) which has assumed the Incentive Stock Option of the
Participant in a transaction to which Code Section 424(a) is applicable.
(f) Special Provisions for Certain Substitute Options.
Notwithstanding anything to the contrary in this Section 3.2, any Option issued
in substitution for an option previously issued by another entity, which
substitution occurs in connection with a transaction to which Code Section
424(a) is applicable, may provide for an exercise price computed in accordance
with such Code Section and the regulations thereunder and may contain such
other terms and conditions as the Committee may prescribe to cause such
substitute Option to contain as nearly as possible the same terms and
conditions (including the applicable vesting and termination provisions) as
those contained in the previously issued option being replaced thereby.
3.3 Treatment of Awards Upon Termination of Service. Except as
otherwise provided by Plan Section 3.2(e), any award under this Plan to a
Participant who suffers a Termination of Service may be cancelled, accelerated,
paid or continued, as provided in the Stock Incentive Agreement or, in the
absence of such provision, as the Committee may determine. The portion of any
award exercisable in the event of continuation or the amount of any payment due
under a continued award may be adjusted by the Committee to reflect the
Participant's period of service from the date of grant through the date of the
Participant's Termination of Service or such other factors as the Committee
determines are relevant to its decision to continue the award.
SECTION 4 RESTRICTIONS ON STOCK
4.1 Escrow of Shares. Any certificates representing the shares of
Stock issued under the Plan shall be issued in the Participant's name, but, if
the Stock Incentive Agreement so provides, the shares of Stock shall be held by
a custodian designated by the Committee (the "Custodian"). Each applicable
Stock Incentive Agreement providing for transfer of shares of
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<PAGE> 11
Stock to the Custodian shall appoint the Custodian as the attorney-in-fact for
the Participant for the term specified in the applicable Stock Incentive
Agreement, with full power and authority in the Participant's name, place and
stead to transfer, assign and convey to the Company any shares of Stock held by
the Custodian for such Participant, if the Participant forfeits the shares
under the terms of the applicable Stock Incentive Agreement. During the period
that the Custodian holds the shares subject to this Section, the Participant
shall be entitled to all rights, except as provided in the applicable Stock
Incentive Agreement, applicable to shares of Stock not so held. Any dividends
declared on shares of Stock held by the Custodian shall, as the Committee may
provide in the applicable Stock Incentive Agreement, be paid directly to the
Participant or, in the alternative, be retained by the Custodian until the
expiration of the term specified in the applicable Stock Incentive Agreement
and shall then be delivered, together with any proceeds, with the shares of
Stock to the Participant or to the Company, as applicable.
4.2 Restrictions on Transfer. The Participant shall not have the
right to make or permit to exist any Disposition of the shares of Stock issued
pursuant to the Plan except as provided in the Plan or the applicable Stock
Incentive Agreement. Any Disposition of the shares of Stock issued under the
Plan by the Participant not made in accordance with the Plan or the applicable
Stock Incentive Agreement shall be void. The Company shall not recognize, or
have the duty to recognize, any Disposition not made in accordance with the
Plan and the applicable Stock Incentive Agreement, and the shares so
transferred shall continue to be bound by the Plan and the applicable Stock
Incentive Agreement.
SECTION 5 GENERAL PROVISIONS
5.1 Withholding. The Company shall deduct from all cash
distributions under the Plan any taxes required to be withheld by federal,
state or local government. Whenever the Company proposes or is required to
issue or transfer shares of Stock under the Plan, the Company shall have the
right to require the recipient to remit to the Company an amount sufficient to
satisfy any federal, state and local withholding tax requirements prior to the
delivery of any certificate or certificates for such shares. A Participant may
pay the withholding tax in cash, by tendering shares of Stock which have been
owned by the holder for at least six (6) months prior to the date of exercise
or, if the applicable Stock Incentive Agreement provides, a Participant may
elect to have the number of shares of Stock he is to receive reduced by the
smallest number of whole shares of Stock which, when multiplied by the Fair
Market Value of the shares of Stock determined as of the Tax Date (defined
below), is sufficient to satisfy federal, state and local, if any, withholding
taxes arising from exercise or payment of a Stock Incentive (a "Withholding
Election"). A Participant may make a Withholding Election only if both of the
following conditions are met:
(a) The Withholding Election must be made on or prior to the
date on which the amount of tax required to be withheld is determined (the "Tax
Date") by executing and delivering to the Company a properly completed notice
of Withholding Election as prescribed by the Committee; and
(b) Any Withholding Election made will be irrevocable;
however, the Committee may, in its sole discretion, disapprove and give no
effect to the Withholding Election.
9
<PAGE> 12
5.2 Changes in Capitalization; Merger; Liquidation.
(a) The number of shares of Stock reserved for the grant of
Options and the number of shares of Stock reserved for issuance upon the
exercise or payment, as applicable, of each outstanding Option, and the
Exercise Price of each outstanding Option shall be proportionately adjusted for
any increase or decrease in the number of issued shares of Stock resulting from
a subdivision or combination of shares or the payment of an ordinary stock
dividend in shares of Stock to holders of outstanding shares of Stock or any
other increase or decrease in the number of shares of Stock outstanding
effected without receipt of consideration by the Company.
(b) In the event of any merger, consolidation, extraordinary
dividend (including a spin-off), reorganization or other change in the
corporate structure of the Company or its Stock or tender offer for shares of
Stock, the Committee, in its sole discretion, may make such adjustments with
respect to awards and take such other action as it deems necessary or
appropriate to reflect or in anticipation of such merger, consolidation,
extraordinary dividend (including a spin-off), reorganization, other change in
corporate structure or tender offer, including, without limitation, the
substitution of new awards, the termination or adjustment of outstanding
awards, the acceleration of awards or the removal of restrictions on
outstanding awards, all as may be provided in the applicable Stock Incentive
Agreement or, if not expressly addressed therein, as the Committee subsequently
may determine in the event of any such merger, consolidation, extraordinary
dividend (including a spin-off), reorganization or other change in the
corporate structure of the Company or its Stock or tender offer for shares of
Stock. Any adjustment pursuant to this Section 5.2 may provide, in the
Committee's discretion, for the elimination without payment therefor of any
fractional shares that might otherwise become subject to any Stock Incentive.
(c) The existence of the Plan and the Stock Incentives
granted pursuant to the Plan shall not affect in any way the right or power of
the Company to make or authorize any adjustment, reclassification,
reorganization or other change in its capital or business structure, any merger
or consolidation of the Company, any issue of debt or equity securities having
preferences or priorities as to the Stock or the rights thereof, the
dissolution or liquidation of the Company, any sale or transfer of all or any
part of its business or assets, or any other corporate act or proceeding.
5.3 Cash Awards. The Committee may, at any time and in its
discretion, grant to any holder of a Stock Incentive the right to receive, at
such times and in such amounts as determined by the Committee in its
discretion, a cash amount which is intended to reimburse such person for all or
a portion of the federal, state and local income taxes imposed upon such person
as a consequence of the receipt of the Stock Incentive or the exercise of
rights thereunder.
5.4 Compliance with Code. All Incentive Stock Options to be
granted hereunder are intended to comply with Code Section 422, and all
provisions of the Plan and all Incentive Stock Options granted hereunder shall
be construed in such manner as to effectuate that intent.
10
<PAGE> 13
5.5 Right to Terminate Service. Nothing in the Plan or in any
Stock Incentive Agreement shall confer upon any Participant the right to
continue as an officer, employee, director or organizer of the Company or
affect the right of the Company to terminate the Participant's service at any
time.
5.6 Restrictions on Delivery and Sale of Shares; Legends. Each
Stock Incentive is subject to the condition that if at any time the Committee,
in its discretion, shall determine that the listing, registration or
qualification of the shares covered by such Stock Incentive upon any securities
exchange or under any state or federal law is necessary or desirable as a
condition of or in connection with the granting of such Stock Incentive or the
purchase or delivery of shares thereunder, the delivery of any or all shares
pursuant to such Stock Incentive may be withheld unless and until such listing,
registration or qualification shall have been effected. If a registration
statement is not in effect under the Securities Act of 1933 or any applicable
state securities laws with respect to the shares of Stock purchasable or
otherwise deliverable under Stock Incentives then outstanding, the Committee
may require, as a condition of exercise of any Option or as a condition to any
other delivery of Stock pursuant to a Stock Incentive, that the Participant or
other recipient of a Stock Incentive represent, in writing, that the shares
received pursuant to the Stock Incentive are being acquired for investment and
not with a view to distribution and agree that the shares will not be disposed
of except pursuant to an effective registration statement, unless the Company
shall have received an opinion of counsel that such disposition is exempt from
such requirement under the Securities Act of 1933 and any applicable state
securities laws. The Company may include on certificates representing shares
delivered pursuant to a Stock Incentive such legends referring to the foregoing
representations or restrictions or any other applicable restrictions on resale
as the Company, in its discretion, shall deem appropriate.
5.7 Non-alienation of Benefits. Other than as specifically
provided with regard to the death of a Participant, no benefit under the Plan
shall be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance or charge; and any attempt to do so shall be
void. No such benefit shall, prior to receipt by the Participant, be in any
manner liable for or subject to the debts, contracts, liabilities, engagements
or torts of the Participant.
5.8 Termination and Amendment of the Plan. The Board of Directors
at any time may amend or terminate the Plan without stockholder approval;
provided, however, that the Board of Directors may condition any amendment on
the approval of stockholders of the Company if such approval is necessary or
advisable with respect to tax, securities or other applicable laws. No such
termination or amendment without the consent of the holder of a Stock Incentive
shall adversely affect the rights of the Participant under such Stock
Incentive.
5.9 Stockholder Approval. The Plan must be submitted to the
stockholders of the Company for their approval within twelve (12) months before
or after the adoption of the Plan by the Board of Directors. If such approval
is not obtained, any Stock Incentive granted hereunder will be void.
5.10 Choice of Law. The laws of the State of South Carolina shall
govern the Plan, to the extent not preempted by federal law.
11
<PAGE> 14
IN WITNESS WHEREOF, the Company has caused this Plan to be executed as
of this ___ day of ___________________, 2000.
SUN BANCSHARES, INC.
By:
-----------------------
Title:
--------------------
ATTEST:
- -------------------------------
Secretary
[SEAL]
12
<PAGE> 1
EXHIBIT 10.6
INCENTIVE STOCK OPTION AWARD
PURSUANT TO THE SUN BANCSHARES, INC.
2000 STOCK INCENTIVE PLAN
THIS AWARD is made as of the Grant Date by SUN BANCSHARES, INC. (the
"Company") to _________________________ (the "Optionee").
Upon and subject to the Terms and Conditions attached hereto and
incorporated herein by reference, the Company hereby awards as of the Grant
Date to Optionee an incentive stock option (the "Option"), as described below,
to purchase the Option Shares.
A. Grant Date: _________________________.
B. Type of Option: Incentive Stock Option.
C. Plan under which granted: Sun Bancshares, Inc. 2000 Stock Incentive
Plan.
D. Option Shares: All or any part of _____ shares of the Company's
$1.00 par value common stock (the "Common Stock"), subject to
adjustment as provided in the attached Terms and Conditions.
E. Exercise Price: $________ per share, subject to adjustment as
provided in the attached Terms and Conditions. The Exercise Price
is, in the judgment of the Committee, not less than 100% of the
Fair Market Value of a share of Common Stock on the Grant Date or,
in the case of an Over 10% Owner, not less than 110% of the Fair
Market Value of a share of Common Stock on the Grant Date.
F. Option Period: The Option may be exercised only during the Option
Period which commences on the Grant Date and ends, generally, on
the earlier of (a) the tenth (10th) anniversary of the Grant Date
(unless the Optionee is an Over 10% Owner, in which case the fifth
(5th) anniversary of the Grant Date); or (b) 90 days following the
date the Optionee ceases to be an employee of the Company
(including any Parent or Subsidiary); provided that the Option may
be exercised as to no more than the vested Option Shares,
determined pursuant to the Vesting Schedule. Note that other
limitations to exercising the Option, as described in the attached
Terms and Conditions, may apply.
G. Vesting Schedule: The Option Shares shall become vested in
accordance with Schedule 1 hereto.
IN WITNESS WHEREOF, the Company has executed and sealed this Award as
of the Grant Date set forth above.
SUN BANCSHARES, INC.
By:
--------------------------
Title:
----------------------
<PAGE> 2
TERMS AND CONDITIONS
TO THE
INCENTIVE STOCK OPTION AWARD
PURSUANT TO THE SUN BANCSHARES, INC.
2000 STOCK INCENTIVE PLAN
1. Exercise of Option. Subject to the provisions provided herein
or in the Award made pursuant to the Sun Bancshares, Inc. 2000 Stock Incentive
Plan:
(a) the Option may be exercised with respect to all or any
portion of the vested Option Shares at any time during the Option
Period by the delivery to the Company, at its principal place of
business, of a written notice of exercise in substantially the form
attached hereto as Exhibit 1, which shall be actually delivered to the
Company no earlier than thirty (30) days and no later than ten (10)
days prior to the date upon which Optionee desires to exercise all or
any portion of the Option; and
(b) payment to the Company of the Exercise Price multiplied
by the number of Option Shares being purchased (the "Purchase Price")
as provided in Section 2.
(c) Notwithstanding any other provision of this Agreement,
in the event that the capital of the Bank falls below the minimum
requirements determined by the primary Federal regulator of the Bank
(the "Regulator"), the Regulator may direct the Company to require the
Optionee to exercise, or otherwise forfeit, the Option in whole or in
part. If the Regulator gives such direction, the Company will notify
the Optionee within forty-five (45) days from the date the Regulator
notifies the Company or the Bank in writing that the Optionee must
exercise, or otherwise forfeit, the Option in whole or in part. If the
Optionee does not exercise the Option in accordance with the Company's
direction within twenty-one (21) days of the Company's notification to
the Optionee, the Committee may provide for the cancellation of the
Option.
Upon acceptance of such notice and receipt of payment in full of the Purchase
Price, the Company shall cause to be issued a certificate representing the
Option Shares purchased.
2. Purchase Price. Payment of the Purchase Price for all Option
Shares purchased pursuant to the exercise of an Option shall be made in cash or
certified check or, alternatively, as follows:
(a) by delivery to the Company of a number of shares of
Common Stock which have been owned by the Optionee for at least six
(6) months prior to the date of the Option's exercise having an
aggregate Fair Market Value, as determined under the Plan, on the date
of exercise either equal to the Purchase Price or in combination with
cash or a certified check to equal the Purchase Price; or
(b) if and when the Common Stock becomes traded by brokers,
whether on a national securities exchange or otherwise, by receipt of
the Purchase Price in cash from a broker, dealer or other "creditor"
as defined by Regulation T issued by the Board of Governors of the
Federal Reserve System following delivery by the Optionee to the
2
<PAGE> 3
Committee of instructions in a form acceptable to the Committee
regarding delivery to such broker, dealer or other creditor of that
number of Option Shares with respect to which the Option is exercised.
3. Rights as Shareholder. Until the stock certificates reflecting
the Option Shares accruing to the Optionee upon exercise of the Option are
issued to the Optionee, the Optionee shall have no rights as a shareholder with
respect to such Option Shares. The Company shall make no adjustment for any
dividends or distributions or other rights on or with respect to Option Shares
for which the record date is prior to the issuance of that stock certificate,
except as the Plan or the attached Award otherwise provides.
4. Restriction on Transfer of Option and of Option Shares. The
Option evidenced hereby is nontransferable other than by will or the laws of
descent and distribution and shall be exercisable during the lifetime of the
Optionee only by the Optionee (or in the event of his Disability, by his
personal representative) and after his death, only by his legatee or the
executor of his estate.
5. Changes in Capitalization.
(a) If the number of shares of Common Stock shall be
increased or decreased by reason of a subdivision or combination of
shares of Common Stock, the payment of a stock dividend in shares of
Common Stock or any other increase or decrease in the number of shares
of Common Stock outstanding effected without receipt of consideration
by the Company, an appropriate adjustment shall be made by the
Committee, in a manner determined in its sole discretion, in the
number and kind of Option Shares and in the Exercise Price.
(b) If the Company shall be the surviving corporation in any
merger consolidation, extraordinary dividend (including spin-off)
recapitalization, reclassification of shares or similar
reorganization, the Optionee shall be entitled to purchase the number
and class of securities to which a holder of the number of shares of
Common Stock subject to the Option at the time of the transaction
would have been entitled to receive as a result of such transaction,
and a corresponding adjustment, where appropriate, shall be made in
the Exercise Price. In the event of a Change in Control or other
corporate transaction pursuant to which the Company is not the
surviving entity, the Committee may provide for the assumption of the
Option by the surviving entity or the substitution of a new option,
adjusted in a manner similar to that contemplated by the immediately
preceding sentence; however, if the surviving entity does not agree to
the assumption or substitution of the Option, the Committee may elect
to terminate the Option Period as of the effective date of the Change
in Control in consideration of the payment to the Optionee of the sum
of the difference between the then aggregate Fair Market Value of the
Common Stock and the aggregate Exercise Price for each Option Share
which has not been exercised as of the effective date of the Change in
Control. A dissolution or liquidation of the Company shall cause the
Option to terminate as to any portion thereof not exercised as of the
effective date of the dissolution or liquidation.
(c) The existence of the Plan and the Option granted
pursuant to this Agreement shall not affect in any way the right or
power of the Company to make or authorize any adjustment,
reclassification, reorganization or other change in its capital or
business structure, any merger or consolidation of the Company, any
issue of debt or equity securities having
3
<PAGE> 4
preferences or priorities as to the Common Stock or the rights
thereof, the dissolution or liquidation of the Company, any sale or
transfer of all or any part of its business or assets, or any other
corporate act or proceeding. Any adjustment pursuant to this Section
may provide, in the Committee's discretion, for the elimination
without payment therefor of any fractional shares that might otherwise
become subject to any Option.
6. Special Limitation on Exercise. No purported exercise of the
Option shall be effective without the approval of the Committee, which may be
withheld to the extent that the exercise, either individually or in the
aggregate together with the exercise of other previously exercised stock
options and/or offers and sales pursuant to any prior or contemplated offering
of securities, would, in the sole and absolute judgment of the Committee,
require the filing of a registration statement with the United States
Securities and Exchange Commission or with the securities commission of any
state. If a registration statement is not in effect under the Securities Act of
1933 or any applicable state securities law with respect to shares of Common
Stock purchasable or otherwise deliverable under the Option, the Optionee (a)
shall deliver to the Company, prior to the exercise of the Option or as a
condition to the delivery of Common Stock pursuant to the exercise of an Option
exercise, such information, representations and warranties as the Company may
reasonably request in order for the Company to be able to satisfy itself that
the Option Shares are being acquired in accordance with the terms of an
applicable exemption from the securities registration requirements of
applicable federal and state securities laws and (b) shall agree that the
shares of Common Stock so acquired will not be disposed of except pursuant to
an effective registration statement, unless the Company shall have received an
opinion of counsel that such disposition is exempt from such requirement under
the Securities Act of 1933 and any applicable state securities law.
7. Legend on Stock Certificates. Certificates evidencing the
Option Shares, to the extent appropriate at the time, shall have noted
conspicuously on the certificates a legend intended to give all persons full
notice of the existence of the conditions, restrictions, rights and obligations
set forth herein and in the Plan.
8. Governing Laws. This Award and the Terms and Conditions shall
be construed, administered and enforced according to the laws of the State of
South Carolina.
9. Successors. This Award and the Terms and Conditions shall be
binding upon and inure to the benefit of the heirs, legal representatives,
successors and permitted assigns of the Optionee and the Company.
10. Notice. Except as otherwise specified herein, all notices and
other communications under this Award shall be in writing and shall be deemed
to have been given if personally delivered or if sent by registered or
certified United States mail, return receipt requested, postage prepaid,
addressed to the proposed recipient at the last known address of the recipient.
Any party may designate any other address to which notices shall be sent by
giving notice of the address to the other parties in the same manner as
provided herein.
11. Severability. In the event that any one or more of the
provisions or portion thereof contained in the Award and these Terms and
Conditions shall for any reason be held to be invalid, illegal or unenforceable
in any respect, the same shall not invalidate or otherwise affect any other
provisions of the Award and these Terms and
4
<PAGE> 5
Conditions, and the Award and these Terms and Conditions shall be construed as
if the invalid, illegal or unenforceable provision or portion thereof had never
been contained herein.
12. Entire Agreement. Subject to the terms and conditions of the
Plan, the Award and the Terms and Conditions express the entire understanding
of the parties with respect to the Option.
13. Violation. Any transfer, pledge, sale, assignment, or
hypothecation of the Option or any portion thereof shall be a violation of the
terms of the Award or these Terms and Conditions and shall be void and without
effect.
14. Headings and Capitalized Terms. Section headings used herein
are for convenience of reference only and shall not be considered in construing
the Award or these Terms and Conditions. Capitalized terms used, but not
defined, in either the Award or the Terms and Conditions shall be given the
meaning ascribed to them in the Plan.
15. Specific Performance. In the event of any actual or threatened
default in, or breach of, any of the terms, conditions and provisions of the
Award and these Terms and Conditions, the party or parties who are thereby
aggrieved shall have the right to specific performance and injunction in
addition to any and all other rights and remedies at law or in equity, and all
such rights and remedies shall be cumulative.
16. No Right to Continued Retention. Neither the establishment of
the Plan nor the award of Option Shares hereunder shall be construed as giving
the Optionee the right to continued employment with the Company or any
affiliate.
17. Qualified Status of Option. In accordance with Section 2.4 of
the Plan, the aggregate Fair Market Value (determined as of the date an
Incentive Stock Option is granted) of the Option Shares which become
exercisable for the first time by an individual during any calendar year shall
not exceed $100,000. If the foregoing limitation is exceeded with respect to
any portion of the Option Shares, that portion of the Option Shares which cause
the limitation to be exceeded shall be treated as a Non-Qualified Stock Option.
5
<PAGE> 6
EXHIBIT 1
NOTICE OF EXERCISE OF
STOCK OPTION TO PURCHASE
COMMON STOCK OF
SUN BANCSHARES, INC.
Name
----------------------------------------
Address
-------------------------------------
--------------------------------------------
Date
----------------------------------------
Sun Bancshares, Inc.
U.S. Highway 17
Murrells Inlet, SC 29576
Attn: Corporate Secretary
Re: Exercise of Incentive Stock Option
Gentlemen:
Subject to acceptance hereof by Sun Bancshares, Inc. (the "Company")
and pursuant to the provisions of the Sun Bancshares, Inc. 2000 Stock Incentive
Plan (the "Plan"), I hereby give notice of my election to exercise options
granted to me to purchase ______________ shares of Common Stock of the Company
under the Incentive Stock Option Award (the "Award") dated as of ____________.
The purchase shall take place as of __________, 200__ (the "Exercise Date").
On or before the Exercise Date, I will pay the applicable purchase
price as follows:
[ ] by delivery of cash or a certified check for $___________ for
the full purchase price payable to the order of Sun Bancshares,
Inc.
[ ] by delivery of cash or a certified check for $___________
representing a portion of the purchase price with the balance to
consist of shares of Common Stock that I have owned for at least
six months and that are represented by a stock certificate I
will surrender to the Company with my endorsement. If the number
of shares of Common Stock represented by such stock certificate
Exhibit 1 - Page 1 of 4
<PAGE> 7
exceed the number to be applied against the purchase price, I
understand that a new stock certificate will be issued to me
reflecting the excess number of shares.
[ ] by delivery of a stock certificate representing shares of Common
Stock that I have owned for at least six months which I will
surrender to the Company with my endorsement as payment of the
purchase price. If the number of shares of Common Stock
represented by such certificate exceed the number to be applied
against the purchase price, I understand that a new certificate
will be issued to me reflecting the excess number of shares.
[ ] by delivery of the purchase price by _________________________,
a broker, dealer or other "creditor" as defined by Regulation T
issued by the Board of Governors of the Federal Reserve System.
I hereby authorize the Company to issue a stock certificate for
the number of shares indicated above in the name of said broker,
dealer or other creditor or its nominee pursuant to instructions
received by the Company and to deliver said stock certificate
directly to that broker, dealer or other creditor (or to such
other party specified in the instructions received by the
Company from the broker, dealer or other creditor) upon receipt
of the purchase price.
As soon as the stock certificate is registered in my name, please
deliver it to me at the above address.
If the Common Stock being acquired is not registered for issuance to
and resale by the Optionee pursuant to an effective registration statement on
Form S-8 (or successor form) filed under the Securities Act of 1933, as amended
(the "1933 Act"), I hereby represent, warrant, covenant, and agree with the
Company as follows:
The shares of the Common Stock being acquired by me will be acquired
for my own account without the participation of any other person, with
the intent of holding the Common Stock for investment and without the
intent of participating, directly or indirectly, in a distribution of
the Common Stock and not with a view to, or for resale in connection
with, any distribution of the Common Stock, nor am I aware of the
existence of any distribution of the Common Stock;
I am not acquiring the Common Stock based upon any representation,
oral or written, by any person with respect to the future value of, or
income from, the Common Stock but rather upon an independent
examination and judgment as to the prospects of the Company;
The Common Stock was not offered to me by means of publicly
disseminated advertisements or sales literature, nor am I aware of any
offers made to other persons by such means;
I am able to bear the economic risks of the investment in the Common
Stock, including the risk of a complete loss of my investment therein;
I understand and agree that the Common Stock will be issued and sold
to me without registration under any state law relating to the
registration of securities for sale, and will
Exhibit 1 - Page 2 of 4
<PAGE> 8
be issued and sold in reliance on the exemptions from registration
under the 1933 Act, provided by Sections 3(b) and/or 4(2) thereof and
the rules and regulations promulgated thereunder;
The Common Stock cannot be offered for sale, sold or transferred by me
other than pursuant to: (A) an effective registration under the 1933
Act or in a transaction otherwise in compliance with the 1933 Act; and
(B) evidence satisfactory to the Company of compliance with the
applicable securities laws of other jurisdictions. The Company shall
be entitled to rely upon an opinion of counsel satisfactory to it with
respect to compliance with the above laws;
The Company will be under no obligation to register the Common Stock
or to comply with any exemption available for sale of the Common Stock
without registration or filing, and the information or conditions
necessary to permit routine sales of securities of the Company under
Rule 144 under the 1933 Act are not now available and no assurance has
been given that it or they will become available. The Company is under
no obligation to act in any manner so as to make Rule 144 available
with respect to the Common Stock;
I have and have had complete access to and the opportunity to review
and make copies of all material documents related to the business of
the Company, including, but not limited to, contracts, financial
statements, tax returns, leases, deeds and other books and records. I
have examined such of these documents as I wished and am familiar with
the business and affairs of the Company. I realize that the purchase
of the Common Stock is a speculative investment and that any possible
profit therefrom is uncertain;
I have had the opportunity to ask questions of and receive answers
from the Company and any person acting on its behalf and to obtain all
material information reasonably available with respect to the Company
and its affairs. I have received all information and data with respect
to the Company which I have requested and which I have deemed relevant
in connection with the evaluation of the merits and risks of my
investment in the Company;
I have such knowledge and experience in financial and business matters
that I am capable of evaluating the merits and risks of the purchase
of the Common Stock hereunder and I am able to bear the economic risk
of such purchase; and
The agreements, representations, warranties and covenants made by me
herein extend to and apply to all of the Common Stock of the Company
issued to me pursuant to this Award. Acceptance by me of the
certificate representing such Common Stock shall constitute a
confirmation by me that all such agreements, representations,
warranties and covenants made herein shall be true and correct at that
time.
I understand that the certificates representing the shares being
purchased by me in accordance with this notice shall bear a legend
referring to the foregoing covenants, representations and warranties
and restrictions on transfer, and I agree that a legend to that effect
may be placed
Exhibit 1 - Page 3 of 4
<PAGE> 9
on any certificate which may be issued to me as a substitute for the
certificates being acquired by me in accordance with this notice. I
further understand that capitalized terms used in this Notice of
Exercise without definition shall have the meanings given to them in
the Plan.
Very truly yours,
--------------------------
AGREED TO AND ACCEPTED:
SUN BANCSHARES, INC.
By:
-----------------------------
Title:
--------------------------
Number of Shares
Exercised:
-----------------------
Number of Shares
Remaining: Date:
---------------------- ---------------------
Exhibit 1 - Page 4 of 4
<PAGE> 10
SCHEDULE 1
VESTING SCHEDULE
INCENTIVE STOCK OPTION AWARD
ISSUED PURSUANT TO THE
SUN BANCSHARES, INC.
2000 STOCK INCENTIVE PLAN
A. The Option Shares shall become vested Option Shares following
completion of the years of service as an employee of the Company or
any Parent or Subsidiary as indicated in the schedule below.
<TABLE>
<CAPTION>
Percentage of Option Shares Years of Service
Which are Vested Shares after the Grant Date
--------------------------- --------------------
<S> <C>
20% 1
40% 2
60% 3
80% 4
100% 5
</TABLE>
B. Notwithstanding Part A, in the event of a Change in Control prior to
the third anniversary of the Grant Date, the Option shall become
vested as indicated in the following Vesting Schedule:
<TABLE>
<CAPTION>
Percentage of Option Shares Years of Service
Which are Vested Shares after the Grant Date
--------------------------- --------------------
<S> <C>
33 1/3% 1
66 2/3% 2
100% 3
</TABLE>
C. Notwithstanding Part A, in the event of a Change in Control subsequent
to the third anniversary of the Grant Date, the Option will be fully
vested as of a date determined by the Committee which is no less than
thirty (30) days prior to the effective date of the Change in Control.
D. For purposes of the Vesting Schedule, Optionee shall be granted a year
of service for each twelve-consecutive-month period following the
Grant Date and during which Optionee continues, at all times, as an
employee of the Company or any Parent or Subsidiary.
Schedule 1 - Page 1 of 1
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EXHIBIT 23.1
Tourville, Simpson & Caskey, 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 January 26,
2000 on the financial statements of Sun Bancshares, Inc., at December 31, 1999
and for the period then ended, in the Form SB-2 Registration Statement as filed
by Sun Bancshares, 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/ Tourville, Simpson & Caskey, L.L.P.
Tourville, Simpson & Caskey, L.L.P.
Columbia, South Carolina
March 31, 2000
