<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 25, 2000.
REGISTRATION STATEMENT NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------------
SOUTHERN COMMUNITY BANCORP
(Name of Small Business Issuer in its Charter)
Florida 6021 59-3619325
(State or Jurisdiction of (Primary Standard (I.R.S. Employer
Incorporation or Industrial Identification
Organization) Classification Code Number)
Number)
250 North Orange Avenue
Orlando, Florida 32801
(407) 648-1844
(Address and Telephone Number of Principal Executive Offices
and Principal Place of Business)
----------------------------
Charlie W. Brinkley, Jr.
Chairman and Chief Executive Officer
Southern Community Bancorp
250 North Orange Avenue
Orlando, Florida 32801
(407) 648-1844
(Name, Address and Telephone Number of Agent for Service)
Copies to:
Rod Jones, Esq. Alfred G. Smith, II, Esq.
Shutts & Bowen LLP Shutts & Bowen LLP
20 North Orange Avenue, Suite 1000 201 S. Biscayne Boulevard, Suite 1500
Orlando, Florida 32801 Miami, Florida 33131
(407) 849-4906 (305) 379-9147
(407) 425-8316 (fax) (305) 381-9982 (fax)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, 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 delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
----------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of Each Proposed Proposed
Class of Maximum Maximum
Securities to be Amount to be Offering Price Per Aggregate Amount of
Registered Registered Unit Offering Price Registration Fee
---------------- ------------ ------------------ -------------- ----------------
<S> <C> <C> <C> <C>
Common Stock 1,050,000 shares $16.50 $17,325,000 $4,573
- ----------------------- ----------------------- ----------------------- ----------------------- ----------------------
</TABLE>
----------------------------
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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<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO 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.
SUBJECT TO COMPLETION, DATED APRIL 25, 2000.
PROSPECTUS
SOUTHERN COMMUNITY BANCORP
1,050,000 Shares
Common Stock
We are offering a minimum of 200,000 shares, and a maximum of 1,050,000
shares, of our common stock. There is currently no public market for the common
stock, and we do not expect a public market to develop after the offering. The
price to the public in the offering is $16.50 per share. Each subscriber is
required to purchase a minimum of 1,000 shares.
INVESTING IN THE SHARES INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE 5.
The purpose of the offering is to capitalize our proposed new bank
subsidiary, Southern Community Bank of Southwest Florida (in organization), and
to provide additional working capital for our existing bank subsidiary, Southern
Community Bank.
We will not utilize an underwriter to offer the shares. Instead,
certain of our executive officers will offer the shares on our behalf on a "best
efforts" basis. These officers will not receive any commissions or additional
compensation for these efforts.
The initial expiration date of the offering is September 30, 2000.
However, we have the right to extend the expiration date without notice to
subscribers until December 31, 2000.
We will deposit all amounts received from each subscriber into one of
two escrow accounts which we have established with SunTrust Bank, as escrow
agent. Each subscriber in the offering must designate the escrow account into
which we should deposit the subscriber's funds.
We have established the first escrow account for the purpose of
capitalizing our proposed new bank subsidiary, Southern Community Bank of
Southwest Florida (in organization). The escrow agent will hold all of the
amounts deposited in the first escrow account subject to the following
conditions:
o The escrow agent will return all of the funds deposited in the first
escrow account to subscribers, without interest or deduction, in the
event that we do not sell at least 610,000 shares with proceeds
designated for the first escrow account (i.e., at least $10,065,000)
prior to the expiration date of the offering.
o If we sell at least 610,000 shares with proceeds designated for the
first escrow account before the expiration date, then the escrow
agent will continue to hold the amounts in the first
<PAGE> 3
escrow account until we have received all required regulatory
approvals to open Southern Community Bank of Southwest Florida. At
that time, the escrow agent will release the amounts in the first
escrow account to us, and we will contribute the proceeds to
Southern Community Bank of Southwest Florida.
o After we have sold 610,000 shares with proceeds designated for the
first escrow account, we may continue to offer any unsold shares
until the expiration date of the offering. Subscribers to these
shares may continue to designate that their funds be deposited in
the first escrow account.
o If we do not obtain all required regulatory approvals to open
Southern Community Bank of Southwest Florida by December 31, 2000,
then the escrow agent will return all of the funds deposited in the
first escrow account to subscribers, without interest or deduction.
We have established the second escrow account for the principal purpose
of providing additional working capital for our existing bank subsidiary,
Southern Community Bank. The escrow agent will hold all of the subscription
funds deposited the second escrow account subject to the following conditions:
o If we have not sold at least 200,000 shares with proceeds designated
for the second escrow account (i.e., at least $3,300,000) prior to
the expiration date of the offering, then the escrow agent will
return all of the funds deposited in the second escrow account to
subscribers, without interest or deduction.
o If we sell 200,000 shares with proceeds designated for the second
escrow account prior to the expiration date, then the escrow agent
will release the amount of $3,300,000 to us and we will contribute
this amount to Southern Community Bank.
o If we sell more than 200,000 shares with proceeds designated for the
second escrow account, then our Board of Directors will instruct the
escrow agent whether to transfer the excess amounts to the first
escrow account or to release the funds to us for contribution to
Southern Community Bank. The escrow agent will hold any amounts
which are transferred to the first escrow account on the same terms
as amounts initially deposited in the first escrow account.
If we fulfill the conditions of the release of funds from the first
escrow account, we will complete the sale of shares pursuant to the first escrow
account, even if we do not fulfill the conditions for the release of funds from
the second escrow account. Likewise, if we fulfill the conditions for the
release of funds from the second escrow account but not the first escrow
account, then we will complete the sale of shares pursuant to the second escrow
account.
We will issue shares to subscribers at the same time as the escrow
agent releases the proceeds from each escrow account to us. As a result,
subscribers may receive shares at different times.
<PAGE> 4
The escrow accounts will be interest bearing accounts. We will retain
all interest earned on the accounts, regardless of whether the offering is
completed or canceled.
Subscribers may not revoke any subscription for the shares without our
consent, which may be withheld at our sole discretion.
We have the right to cancel the offering at any time prior to the
release of funds from either of the escrow accounts. If we cancel the offering,
the escrow agent will promptly return all funds received from subscribers,
without interest or deduction.
<TABLE>
<CAPTION>
PROCEEDS TO
UNDERWRITING SOUTHERN COMMUNITY
PRICE TO PUBLIC COMMISSIONS BANCORP(1)
--------------- ----------- ------------------
<S> <C> <C> <C>
Per Share ............................... $ 16.50 None $ 16.50
Minimum Offering................. $ 3,300,000.00 None $ 3,300,000.00
Maximum Offering................ $17,325,000.00 None $ 17,325,000.00
</TABLE>
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(1) Before deducting estimated offering expenses of $75,000.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THE DISCLOSURES IN THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
YOU SHOULD NOTE THAT THESE SECURITIES ARE NOT BANK ACCOUNTS OR DEPOSITS AND ARE
NOT FEDERALLY INSURED BY THE FDIC OR ANY STATE OR FEDERAL AGENCY.
The date of this prospectus is , 2000.
<PAGE> 5
TABLE OF CONTENTS
PROSPECTUS SUMMARY.......................................................... 1
RISK FACTORS................................................................ 5
USE OF PROCEEDS.............................................................13
DILUTION ...................................................................14
CAPITALIZATION..............................................................16
DIVIDEND POLICY.............................................................17
SELECTED FINANCIAL DATA.....................................................18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS......................20
BUSINESS ...................................................................34
SUPERVISION AND REGULATION..................................................42
MANAGEMENT..................................................................49
CERTAIN TRANSACTIONS........................................................57
SECURITIES OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT...................................59
DESCRIPTION OF CAPITAL STOCK................................................61
SHARES ELIGIBLE FOR FUTURE SALE.............................................64
TERMS OF OFFERING...........................................................65
LEGAL MATTERS...............................................................67
EXPERTS ...................................................................67
ADDITIONAL INFORMATION......................................................68
INDEX TO FINANCIAL STATEMENTS...............................................F-1
EXHIBIT A - SUBSCRIPTION AGREEMENT
i
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PROSPECTUS SUMMARY
This summary highlights information contained in other parts of this
prospectus. Because it is a summary, it does not contain all of the information
that you should consider before investing in our common stock. You should read
the entire prospectus carefully.
SOUTHERN COMMUNITY BANCORP
This is the initial public offering of shares of our common stock. We
are offering a minimum of 200,000 shares and a maximum of 1,050,000 shares, at a
price of $16.50 per share.
OUR BUSINESS
Southern Community Bancorp is a recently formed, Florida-based bank
holding company. We currently conduct all of our activities through Southern
Community Bank. This bank commenced banking operations in December 1998 and
currently has a main office and three branches in the Orlando, Florida area, and
expects to open an additional branch in Bonita Springs, Florida in May 2000.
We intend to expand our operations by opening a new bank in Bonita
Springs, Florida in the fall of 2000. The new bank will acquire the assets and
liabilities of the proposed Bonita Springs branch of our existing bank.
OUR STRATEGY
Our strategy is to target customers who are dissatisfied with the level
of service delivered by the multi-state banking organizations which recently
acquired a large percentage of the banking business in Florida. According to
FDIC statistics, the ten largest banks in Florida at June 30, 1999, controlled
64.7% of total deposits and including just one Florida-based institution. Five
years earlier, at June 30, 1994, the ten largest banks controlled 55.9% of total
deposits and included two Florida-based institutions. By a different measure,
the market share of the three largest banks in Florida has increased from 40.5%
at June 30, 1994 to 50.3% on June 30, 1999. As a result of this consolidation,
we believe that we have the ability to attract owners of small and medium sized
businesses, entrepreneurs, and other professional and executive customers by
providing personalized service and products tailored to meet the needs of these
customers.
As part of our strategy, we will attempt to operate our existing bank,
our proposed new bank, and any banks which we may open or acquire in the future,
in substantially the same manner as local community banks. Accordingly, we
expect that the board of directors of each of our banks will primarily consist
of individuals who live within the communities served by each bank.
Additionally, we anticipate that all of the lending decisions for each bank will
be made by the executives and board of directors of that bank. Each bank will
also seek to become an active participant in the local community by supporting
local charities and civic organizations.
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We also expect to realize some of the benefits of larger banking
organizations. For example, we will operate each of our banks on the same data
processing system. Additionally, we will utilize a single human resources
department to handle employee benefits and related employment matters. We hope
to realize the benefits of economies of scale for these administrative
functions.
We may open or acquire additional banks in Florida in the future,
although we have no current plans to do so. If we open or acquire additional
banks, we expect that we would utilize our same strategy for establishing and
growing these banks - i.e., emphasizing personalized service and the community
bank aspects of our banks.
OUR EXISTING BANK
Our existing bank, Southern Community Bank, was formed by a group of
Orlando businessmen and bank executives who believed that there was significant
demand for an additional community bank in the Orlando area. Since opening in
December 1998, our existing bank has grown rapidly. As of December 31, 1999, our
existing bank had total assets of approximately $83.9 million. We expect our
existing bank to open a new branch in Bonita Springs, Florida in May, 2000, and
to open two additional branches in the Orlando market during the next 18 months.
OUR NEW BANK
We plan to open our new bank, Southern Community Bank of Southwest
Florida, to serve the southwest Florida market (i.e., the area between Naples
and Ft. Myers, Florida). We have filed an application to establish this bank
with the Florida Department of Banking and Finance and the FDIC. We will apply
to the Board of Governors of the Federal Reserve System to acquire all of the
capital stock of Southern Community Bank of Southwest Florida once the bank's
charter is granted by the Florida Department of Banking and Finance and
insurance is obtained from the FDIC. Assuming that we receive all required
regulatory approvals and the offering is successful, we expect the new bank to
commence operations in the fall of 2000.
Our new bank will acquire the assets and liabilities of the new branch
which our existing bank will open in Bonita Springs, Florida in May, 2000. We
believe that the opening of this branch will accelerate our ability to grow the
new bank by providing it with a base of personnel, deposits, loans and customer
relationships.
OUR MANAGEMENT TEAM
Our management team includes individuals who have significant
experience serving our target markets. Our chairman and chief executive officer
is Charlie W. Brinkley, Jr., who has more than 21 years of banking experience in
the Central Florida market, including serving as the president of Southern Bank
of Central Florida for 8 years and as the president of Colonial Bank - Florida
for 2 years. Our president and the head of our Orlando bank is John G. Squires,
who also has more than 21 years of experience in the Orlando banking market,
including serving as vice-chairman of Southern Bank of Central Florida for 8
years and executive vice-president of Colonial Bank - Florida for 2 years.
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<PAGE> 8
Our new bank in southwest Florida will be headed by Richard Garner, who
will serve as its president and chief executive officer. Mr. Garner has more
than 6 years of banking experience in the southwest Florida market (and more
than 20 years in the Florida market), including serving as the president of
First National Bank of Bonita Springs Florida, and as senior vice-president of
Colonial Bank - Southwest Florida. The management team at the new bank will also
include Joel Whittenhall, who has 19 years of banking experience in the
southwest Florida market, including service as the executive vice-president and
senior lending officer of First National Bank of Florida.
OUR ADDRESS AND TELEPHONE NUMBER
Our address is 250 N. Orange Avenue, Orlando, Florida, 32801 and our
telephone number is (407) 648-1844.
3
<PAGE> 9
THE OFFERING
<TABLE>
<CAPTION>
<S> <C>
Securities Offered for Sale: We are offering a minimum of 200,000 shares, and a
maximum of 1,050,000 shares, of our common stock. For
a description of the shares, see "Description of Capital
Stock."
Price to Public: $16.50 per share
Shares to be Outstanding after the We will have a minimum of 1,080,298 shares, and a
Offering: maximum of 1,940,298 shares, outstanding after the
offering.
Escrow Accounts: We have established two escrow accounts with SunTrust
Bank, as escrow agent, in connection with the offering.
We will deposit all proceeds of the offering in the escrow
accounts, as designated by each subscriber. The escrow
agent will release these amounts to us, or return them to
subscribers, depending upon whether we fulfill certain
specific conditions. See "Terms of Offering."
Use of Proceeds Deposited in the We will utilize the proceeds deposited in the first escrow
First Escrow Account: account to capitalize our new bank, Southern Community
Bank of Southwest Florida. We will use a portion of this
amount to pay the organizers for the organizational costs of
the new bank, which are estimated at $500,000. See "Use
of Proceeds."
Use of Proceeds Deposited in the We will utilize at least $3,300,000 of the proceeds
Second Escrow Account: deposited in the second escrow account to increase the
working capital of our existing bank, Southern
Community Bank. We have the right to utilize any
proceeds in excess of $3,300,000 to either increase the
amounts deposited in the first escrow account (which
would then be utilized to capitalize our new bank) or
to increase the working capital of our existing bank.
See "Use of Proceeds."
Risk Factors: You should read the "Risk Factors" section before
deciding to invest in our shares.
</TABLE>
4
<PAGE> 10
RISK FACTORS
An investment in our common stock involves a high degree of risk. You
should carefully consider the risks below and other information in this
prospectus before deciding to invest in our common stock.
WE HAVE INCURRED A SUBSTANTIAL LOSS SINCE WE COMMENCED OPERATIONS AND WE MAY
CONTINUE TO INCUR LOSSES IN THE FUTURE.
We commenced banking operations on December 15, 1998. From that date
through December 31, 1999, we have incurred a consolidated loss of $986,000.
This loss was primarily due to the costs of opening our existing bank and
establishing its business, including the opening of four branches. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
We expect to incur a loss in 2000 due to the costs of establishing our
new bank in Bonita Springs, Florida and the continuing expansion of our banking
activities in the Orlando market. In this regard, a newly formed bank is
ordinarily expected to incur operating losses in its early periods of operations
because of an inability to generate sufficient net interest income to cover
operating expenses. Those operating losses can be significant and can occur for
longer periods than planned depending on the bank's ability to control operating
expenses and generate net interest income.
We do not expect to become profitable before 2001. Our ability to
become profitable by that time depends on our ability to establish our new bank,
to grow at the rate we expect, and to avoid unexpected operating expenses or
loan losses. Because these items are not within our control, there is a risk
that we may never become profitable.
WE MAY BE UNABLE TO EFFECTIVELY MANAGE OUR GROWTH.
We have rapidly and significantly expanded our operations and
anticipate that we will continue to expand in the foreseeable future. Our rapid
growth has placed significant demands on our management and other personnel,
which, given our expected future growth rate, are likely to continue. To manage
future growth, we will need to attract and retain highly skilled and motivated
officers and employees, to expand our existing data processing systems, to
establish necessary financial and operations controls over our business and to
train our new employees.
WE ARE NOT CERTAIN THAT WE WILL BE ABLE TO OPEN OUR PROPOSED NEW BANK.
We have filed applications with the Florida Department of Banking and
the FDIC for permission to open Southern Community Bank of Southwest Florida. We
will also need to file an application with the Federal Reserve to acquire the
shares of this bank. Although we believe that these regulatory agencies will
approve these applications, there can be no assurance that they will be
approved. Furthermore, we need to sell at least 610,000 shares with proceeds
designated for the first escrow account in order to capitalize the new bank. If
we do not sell these shares, we will not open the new bank, although we will
continue to operate our proposed branch in Bonita Springs,
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<PAGE> 11
Florida. If we are unable to open the new bank for any reason, it is likely that
our future operating results will be adversely affected.
WE MAY COMPLETE THE SALE OF SHARES TO SUBSCRIBERS WITH FUNDS DESIGNATED FOR THE
SECOND ESCROW ACCOUNT EVEN IF WE ARE UNABLE TO OPEN THE NEW BANK.
If we sell at least 200,000 shares designated for the second escrow
account, we will have the right to complete the sale of these shares, even if we
are unable to open the proposed new bank. In this event, we would receive all of
the proceeds deposited in the second escrow account, and the escrow agent would
return all of the funds deposited in the first escrow account.
IF YOU DESIGNATE THAT YOUR SUBSCRIPTION FUNDS BE DEPOSITED IN THE SECOND ESCROW
ACCOUNT, WE MAY STILL REALLOCATE THEM TO THE FIRST ESCROW ACCOUNT.
If we receive subscriptions for more than 200,000 shares designated for
the second escrow account, we have the right to reallocate any additional
subscriptions to the first escrow account even if the subscriber has designated
that his funds be deposited in the second escrow account. If we reallocate a
subscriber's funds to the first escrow account, then the escrow agent will hold
those funds on the same terms and conditions as all other funds held in the
first escrow account. If the conditions for the first escrow account are not
fulfilled, then the escrow agent will return all funds in the first escrow
account to subscribers, without interest or deduction.
IT IS POSSIBLE THAT THE ESCROW AGENT WILL HOLD YOUR FUNDS UNTIL DECEMBER 31,
2000 AND THEN RETURN THEM TO YOU, WITHOUT INTEREST.
The escrow agent will hold the funds deposited in the two escrow
accounts until either the conditions to release the funds are fulfilled, or the
expiration date of the offering. As a result, it is possible that the escrow
agent could hold the funds in escrow until December 31, 2000. On that date, the
escrow agent would be required to return the funds in the escrow accounts
without interest or deduction.
YOU WILL NOT RECEIVE ANY INTEREST ON THE FUNDS DEPOSITED IN ESCROW EVEN IF THE
ESCROW AGENT RETURNS YOUR FUNDS.
We will retain all interest earned on the escrow accounts, regardless
of whether the offering is consummated or canceled.
OUR ABILITY TO GROW WILL DEPEND ON OUR ABILITY TO ATTRACT ADDITIONAL DEPOSITS
AND TO INCREASE OUR CAPITAL.
We plan to significantly increase the level of our assets (including
our loan portfolio). Our ability to increase our assets depends in large part on
our ability to attract additional deposits at competitive rates. We intend to
seek additional deposits by offering deposit products which are competitive with
those offered by other financial institutions in our markets and by establishing
personal relationships with our customers. There can be no assurance that these
efforts will be
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<PAGE> 12
successful.
Furthermore, our ability to increase our assets depends on our ability
to maintain adequate levels of capital. In this connection, federal and state
banking law require each of our banks to maintain certain minimum levels of
capital relative to the size of their assets. One of the purposes of the
offering is to provide our existing bank with additional capital in order to
permit further growth. If we do not obtain this additional capital, we may not
be able to grow the existing bank.
We will utilize a substantial portion of the proceeds in the offering
to capitalize the new bank to be opened in Bonita Springs. In particular, we
will contribute to minimum of $10,065,000 to the new bank if we are able to sell
the required number of shares and obtain regulatory approvals for the new bank.
This should permit the new bank to grow significantly. However, our new bank may
eventually encounter capital problems if our growth plans are successful.
WE ARE DEPENDENT UPON THE CONTRIBUTIONS OF OUR KEY MANAGEMENT PERSONNEL.
Our future success depends, in large part, upon the continuing
contributions of our key management personnel, including our chairman and the
presidents of our existing bank and our proposed new bank. The loss of services
of one or more key employees could have a material adverse effect on our
operations and financial condition. We can provide no assurance that we will be
able to retain any of our key officers or employees or attract or retain
qualified personnel in the future. None of our key executives has an employment
agreement.
IF WE CAN NOT RECRUIT ADDITIONAL PERSONNEL, OUR BUSINESS MAY SUFFER.
Our strategy depends upon our continuing ability to attract and retain
other highly qualified personnel. Competition for such employees among financial
institutions is intense. Availability of personnel with appropriate community
banking experience varies. If we do not succeed in attracting new employees or
retaining and motivating current and future employees, our business could suffer
significantly.
INTEREST RATE VOLATILITY COULD SIGNIFICANTLY HARM OUR BUSINESS.
The monetary and fiscal policies of the federal government and the
regulatory policies of governmental authorities will have a material effect on
our operations. Our profitability depends to a large extent on our net interest
income, which is the difference between our income on interest-earning assets
(such as loans) and our expenses on interest-bearing liabilities (such as
deposits). A change in market interest rates could adversely affect our
earnings.
WE MAY INCUR SIGNIFICANT LOSSES IF OUR BORROWERS ARE UNABLE TO REPAY THEIR LOANS
ON A TIMELY BASIS.
Lending money is an essential part of the banking business. However,
borrowers do not always repay their loans. The risk of non-payment is affected
by:
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<PAGE> 13
o credit risks of a particular borrower;
o changes in economic and industry conditions;
o the duration of the loan; and
o in the case of a collateralized loan, uncertainties as to the future
value of the collateral.
Generally, commercial, construction and commercial real estate loans
present a greater risk of non-payment by a borrower than other types of loans.
Our focus on making these types of loans, especially commercial real estate
loans, may make us more susceptible to the risk of non-payment than other banks
with a more diversified loan portfolio.
CHANGES IN REAL ESTATE VALUES MAY ADVERSELY IMPACT OUR LOANS THAT ARE SECURED BY
REAL ESTATE.
A significant portion of our loan portfolio consists of residential and
commercial mortgages secured by real estate located in central Florida. Real
estate values and real estate markets are generally affected by, among other
things, changes in national, regional or local economic conditions, fluctuations
in interest rates and the availability of loans to potential purchasers, changes
in the tax laws and other governmental statutes, regulations and policies, and
acts of nature. If real estate prices decline in central Florida, the value of
the real estate collateral securing our loans could be reduced. Such a reduction
in the value of our collateral could increase the number of non-performing loans
and adversely affect our financial performance.
OUR FUTURE SUCCESS DEPENDS ON OUR ABILITY TO COMPETE EFFECTIVELY IN THE HIGHLY
COMPETITIVE BANKING INDUSTRY.
We face substantial competition in all phases of our operations from a
variety of different competitors. This competition includes:
o large national and super-regional financial institutions which have
well-established branches and significant market share in the
communities we serve;
o finance companies, investment banking and brokerage firms, and
insurance companies that offer bank-like products;
o credit unions, which can offer highly competitive rates on loans and
deposits because they receive tax advantages not available to
commercial banks;
o other community banks, including start-up banks, that can compete
with us for customers who desire a high degree of personal service;
and
o technology-based financial institutions including large national and
super-regional banks offering on-line deposit, bill payment, and
mortgage loan application services.
8
<PAGE> 14
Other existing community banks, and many new community bank start-ups,
have marketing strategies similar to ours. These other community banks may open
new branches in the communities we serve and compete directly for customers who
want the offered level of service by community banks. Other community banks also
compete for the same management personnel in Florida.
Historically, insurance companies, brokerage firms, credit unions, and
other non-bank competitors have been subject to less regulation than banks and
could be more flexible in the products and services they offer. Under the
recently enacted Gramm - Leach - Bliley Act of 1999, most of the barriers
separating banks, brokerage firms, and insurance companies have been eliminated,
which is likely to increase competition.
WE MAY NOT BE ABLE TO COMPETE WITH OUR LARGER COMPETITORS FOR LARGER CUSTOMERS
BECAUSE OUR LENDING LIMITS WILL BE LOWER THAN THEIRS.
We will be limited in the amount each of our banks can loan a single
borrower by the amount of each bank's capital. The legal lending limit for
secured loans is 25% of capital and surplus. Due to the relatively small size of
our existing bank and our proposed new bank, our lending limits will be
significantly less than those of our competitors. This may adversely affect our
ability to establish lending relationships with larger businesses in our target
markets.
GOVERNMENT REGULATION AND LEGISLATION COULD HURT OUR BUSINESS AND PROSPECTS.
We are subject to extensive state and federal regulation, supervision
and legislation which govern almost all aspects of our operations, including:
o the capital we must maintain;
o the kinds of activities we can engage in;
o the kinds and amounts of investments we can make; and
o the location of our offices.
Bank regulation may hinder our ability to compete with financial
services companies that are not regulated or are less regulated. This regulation
is primarily intended for the protection of consumers, depositors, and deposit
insurance funds and not for the protection of our shareholders.
OUR SUCCESS WILL DEPEND UPON ECONOMIC CONDITIONS IN OUR TARGET MARKETS.
Our success will significantly depend upon economic conditions in
central Florida and southwest Florida. A prolonged economic downturn or
recession in these markets could cause our non-performing assets to increase,
which would cause operating losses, impaired liquidity and the erosion of
capital. Such an economic dislocation or recession could result from a variety
of causes, including a prolonged downturn in various industries upon which these
markets depend, or natural
9
<PAGE> 15
disasters such as floods, tornadoes or hurricanes. Adverse changes in the
economy of these areas could have a material adverse effect on our business,
future prospects, financial condition or results of operations.
WE DO NOT EXPECT TO PAY DIVIDENDS ON OUR COMMON STOCK FOR THE FORESEEABLE
FUTURE.
As a holding company, we will have no significant independent sources
of revenue. Accordingly, our principal source of funds will be cash dividends
and other payments that we receive from our bank subsidiaries. We expect that
our bank subsidiaries will retain their earnings in order to increase their
capital. Furthermore, our bank subsidiaries' ability to pay dividends is
restricted under Federal and state banking law. As a result, we do not
anticipate that we will pay dividends on our common stock in the foreseeable
future. See "Dividend Policy."
OUR MANAGEMENT ARBITRARILY DETERMINED THE OFFERING PRICE FOR THE SHARES BECAUSE
THERE IS NO PUBLIC TRADING MARKET FOR OUR COMMON STOCK.
Prior to the offering, there was no active trading market in our common
stock. Our Board of Directors arbitrarily determined the offering price without
the assistance of underwriters or other valuation experts. Our Board of
Directors considered our historic and expected growth, and general market
conditions, among other factors, in determining the offering price. The offering
price bears no relationship to the amount of our assets, book value,
shareholders' equity or other typical criteria of value, and may exceed the
price at which shares may be bought or sold after the offering. Consequently,
you may lose a portion of your investment simply as a result of an inaccurately
determined offering price.
FUTURE SALES OF OUR COMMON STOCK COULD DEPRESS THE PRICE OF OUR COMMON STOCK.
After the offering, the market price of our common stock could be
materially and adversely affected by the sale or the availability for sale of
shares now held by our existing shareholders. After the offering, we will have a
minimum of 1,090,298 shares and a maximum of 1,940,298 shares of common stock
outstanding.
Almost all of the shares which will be outstanding after the offering,
including all of the shares sold in the offering, will be eligible for sale in
the open market without restriction, except for shares held by our "affiliates."
At the present time, our affiliates hold an aggregate of 373,531 shares. We
expect that our affiliates (and persons who will serve as directors of our new
bank) will acquire a minimum of 200,000 shares in the offering. Following the
offering, almost all of the shares held by the affiliates will be eligible for
sale in the public market subject to compliance with certain volume limitations
and other conditions of Rule 144. See "Shares Eligible For Future Sale."
YOU WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION IN YOUR SHARES.
Investors purchasing shares of common stock in this offering will incur
immediate and substantial dilution in their shares. If we sell a minimum of
200,000 shares in the offering, then the pro forma book value of one share of
common stock as of December 31, 1999 would have been
10
<PAGE> 16
$13.96, or $2.54 less than the offering price of $16.50 per share. If we were to
sell a maximum of 1,050,000 shares in the offering, then the pro forma net
tangible book value as of December 31, 1999 would have been $15.08, or $1.42
less the offering price of $16.50 per share. See "Dilution."
WE MAY NEED TO RAISE ADDITIONAL CAPITAL WHICH COULD DILUTE YOUR OWNERSHIP.
We may need to raise additional capital in the future to support our
business, expand our operations, or maintain our minimum capital requirements as
set forth by our applicable bank regulatory agencies. At the present time, we do
expect to sell additional shares of common stock or other equity securities for
at least 12 months. However, we believe that we will need to sell additional
shares after that time in order to support the planned expansion of our banks.
If we do sell additional shares of common stock in the future to raise capital,
the sale will dilute your ownership interest and such dilution could be
substantial.
CERTAIN PROVISIONS OF FLORIDA LAW MAY DISCOURAGE OR PREVENT A TAKEOVER OF OUR
COMPANY AND RESULT IN A LOWER MARKET PRICE FOR OUR COMMON STOCK.
Florida law, as well as certain federal regulations, contain certain
anti-takeover provisions that apply to us. While these provisions may provide us
with flexibility in managing our business, they could discourage potential
buyers from seeking to acquire us, even though certain shareholders may wish to
participate in the transaction. These provisions could also potentially
adversely affect the market price of our common stock. See "Description of
Capital Stock -- Anti-Takeover Provisions."
WE DO NOT EXPECT A PUBLIC MARKET FOR OUR SHARES TO DEVELOP AFTER THE OFFERING.
There is no established public market for our common stock and we do
not expect a public market to develop in the future. In this connection, we do
not currently have any brokers or other persons who make a market in our common
stock and we do not intend to solicit brokers to establish a market in the
future. Additionally, we do not intend to seek the listing of our shares on any
securities exchange or inclusion of our shares on NASDAQ.
The absence of a public market for our shares will make it difficult
for investors to resell their shares and is likely to depress the price at which
the shares may be resold.
YOU WILL HAVE MINIMAL INFLUENCE ON SHAREHOLDER DECISIONS.
Our directors and executive officers beneficially own 373,531 shares,
representing 42% of the total number of shares outstanding as of March 31, 2000.
Our current directors and executive officers (and the persons who will serve as
directors of our new bank) are expected to purchase a minimum of 200,000 shares
in the offering. Charlie W. Brinkley, Jr., Chairman and Chief Executive Officer
of Southern Community Bancorp, and John G. Squires, President and a director of
Southern Community Bancorp, each currently hold 5.7% of our shares of common
stock. See "Security Ownership of Certain Beneficial Owners and Management."
11
<PAGE> 17
Our directors and executive officers have the ability to significantly
influence our management policies and decisions as well as issues that require a
shareholder vote. If our directors and executive officers vote together, they
could influence the outcome of certain corporate actions requiring shareholder
approval, including the election of directors and the approval or non-approval
of significant corporate transactions, such as the merger or sale of all of
substantially all of our assets. Their interests may differ from the interests
of other shareholders with respect to management issues.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS.
We have made forward-looking statements in this prospectus that are
subject to risks and uncertainties. These forward-looking statements include
information about possible or assumed future results of our operations or
performance after the offering. Also, when we use any of the words "believes,"
"expects," "anticipates," "intends," or "may" or similar expressions, we are
making forward-looking statements. Many possible events or factors could affect
our future financial results and the performance of our bank subsidiaries, and
could cause those results or performances to differ materially from those
expressed in our forward-looking statements. These possible events or factors
include the following:
o legal and regulatory risks and uncertainties;
o economic, political and competitive forces affecting our businesses,
markets, constituencies or securities; and
o the risk that our analyses of these risks and forces could be
incorrect, or that the strategies we have developed to deal with
them may not succeed.
We recognize that all forward-looking statements are necessarily
speculative, speak only as of the date made, and advise potential investors that
various risks and uncertainties, such as those described above, could cause
actual results for future periods to differ materially. Although we believe that
the expectations reflected in such forward-looking statements are reasonable, we
can give no assurance that any expectations will prove to be correct.
12
<PAGE> 18
USE OF PROCEEDS
We will receive a minimum of $3,300,000 and a maximum of $17,325,000 in
gross proceeds from the offering. We will deposit the gross proceeds into one of
two escrow accounts, as designated each by subscriber.
FIRST ESCROW ACCOUNT. If the offering is successful, the first escrow
account will hold a minimum of $10,065,000 in gross proceeds (from the sale of
610,000 shares). The maximum amount in this escrow account could be $17,325,000
(if we sell all of the shares in the offering and the subscribers designate that
all of their funds be deposited in the first escrow account). If we receive all
regulatory approvals required to open our proposed new bank (to be located in
Bonita Springs, Florida), we will contribute these proceeds to the new bank as
its initial capital (less a pro-rata portion of the offering expenses). The new
bank will initially invest most of these proceeds in marketable securities. The
new bank will liquidate these securities as necessary to fund loans and to pay
its start up and operating expenses. The new bank will also pay its organizers
approximately $500,000 incurred by them in organizing the new bank, for such
items as salaries, administrative costs, legal fees, accounting fees and
application fees.
SECOND ESCROW ACCOUNT. If the offering is successful, the second escrow
account will hold a minimum of $3,300,000 (from the sale of 200,000 shares). The
maximum number of shares in this escrow account could be $17,325,000 (if we sell
all of the shares in the offering, the subscribers designated that all of their
funds be deposited in the second escrow account and the Board of Directors does
not reallocate any of the proceeds to the first escrow account). We will utilize
these proceeds to make a contribution to our existing Orlando based bank (less a
pro-rata portion of the offering expenses). The existing bank will initially
utilize these proceeds to purchase marketable securities, which can then be sold
to fund loans and operating expenses.
OFFERING EXPENSES. We will pay the estimated offering expenses of
$75,000 from the proceeds of the offering, prorated between the amounts we
actually receive from each of the escrow accounts.
13
<PAGE> 19
DILUTION
As of December 31, 1999, our net tangible book value, on a pro forma
basis as adjusted for the sale of a minimum of 200,000 shares and a maximum of
1,050,000 shares offered in the offering, would have been approximately $13.96
per share in the case of a minimum offering and $15.08 per share in the case of
a maximum offering. The following table illustrates this per share dilution.
<TABLE>
<CAPTION>
MINIMUM MAXIMUM
OFFERING OFFERING
-------- --------
<S> <C> <C>
Offering price per share ................................. $16.50 $16.50
Net book value per share as of December 31,
1999 .................................................... $13.39 $13.39
Increase per share attributable to new
investors ................................................ $ 0.57 $ 1.69
Pro forma net book value per share after the
offering ................................................. $13.96 $15.08
Pro forma dilution per share to new investors............ $ 2.54 $ 1.42
</TABLE>
The following tables summarize on a pro forma basis as of December 31,
1999, the differences between the total consideration paid and the average price
per share paid by the existing shareholders prior to the offering and by new
investors in the offering.
MINIMUM OFFERING
(200,000 SHARES)
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------------- ------------------------ PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------ ------- ------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing
shareholders 884,425 81.6% $13,266,375 80.1% $15.00
======
Investors in
the offering 200,000 18.4% 3,300,000 19.9% $16.50
---------- ------ ------------- ------ ======
Total 1,084,425 100.0% $16,566,375 100.0% $15.28
========= ===== =========== ====== ======
</TABLE>
14
<PAGE> 20
MAXIMUM OFFERING
(1,050,000 SHARES)
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------------- ------------------------ PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------ ------- ------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing
shareholders 884,425 47.7% $13,266,375 43.4% $15.00
======
Investors in
the offering 1,050,000 54.3% 17,325,000 56.6% $16.50
--------- ------ ---------- ------ ======
Total 1,934,425 100.0% $30,591,375 100.0% $15.81
========= ===== =========== ====== ======
</TABLE>
15
<PAGE> 21
CAPITALIZATION
The following table sets forth (i) our actual capitalization as of
December 31, 1999, (ii) on as adjusted basis to give effect to the sale of a
minimum of 200,000 shares in the offering and the application of the net
proceeds from such shares and (iii) on as adjusted basis to give effect to the
sale of a maximum of 1,050,000 shares in the offering and the application of the
net proceeds from such shares. This table should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Financial Statements included in this prospectus.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
---------------------------------------------------------
AS ADJUSTED TO AS ADJUSTED TO
GIVE EFFECT TO GIVE EFFECT TO
SALE OF SALE OF
ACTUAL 200,000 SHARES 1,050,000 SHARES
------ -------------- ----------------
(IN THOUSANDS)
<S> <C> <C> <C>
Federal funds purchased ...................... $ 6,000 $ 6,000 $ 6,000
Shareholders' equity:
Common stock, $1.00 par value;
10,000,000 shares authorized;
884,425 shares issued and outstanding
(actual), 1,084,425 issued and outstanding
(as adjusted for sale of 200,000 shares;
1,934,425 shares issued and outstanding
(as adjusted for sale of 1,050,000 shares) 884 1,084 1,934
Additional paid-in capital ................... 12,382 15,482 28,657
Accumulated deficit and accumulated other
comprehensive (loss) ..................... (1,428) (1,428) (1,428)
-------- -------- --------
Total shareholders' equity . 11,838 15,138 29,163
-------- -------- --------
Total capitalization ....... $ 17,838 $ 21,138 $ 35,163
======== ======== ========
</TABLE>
- ---------------
(1) Does not include (i) 163,000 shares of our common stock issuable upon the
exercise of outstanding stock options and (ii) 13,000 additional shares
reserved for issuance upon the exercise of stock options which may be
granted under the Company's employee stock option plan.
16
<PAGE> 22
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock.
Following the offering, we do not intend to pay cash dividends in the
foreseeable future. We may only pay dividends out of funds legally available as
permitted by statute, at the discretion of our Board of Directors. See "Risk
Factors - We do not plan to pay dividends in the foreseeable future" and
"Supervision and Regulation."
We are a legal entity separate and distinct from our subsidiaries.
Substantially all of our revenues and cash flow, including funds available for
other offering expenses, will be paid from fees which we charge to our existing
bank for management services. Funds available for payment of our dividends would
principally consist of dividends paid to us by our banks. Due to the
developmental status of our existing bank, its ability to pay dividends to us is
severely limited. There are also statutory regulatory limitations on the amount
of dividends that may be paid by our existing bank to us. Our ability to receive
dividends from our proposed new bank will be subject to the same limitations.
See "Supervision and Regulation" for a discussion of the regulatory restrictions
on the payment of dividends by our banks to us.
17
<PAGE> 23
SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial data of
Southern Community Bancorp for the year ended December 31, 1999. The selected
consolidated financial data has been derived from Southern Community Bancorp's
financial statements, which have been audited by Hacker, Johnson, Cohen & Grieb
PA, independent certified public accountants. The selected consolidated
financial data should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our Financial
Statements and Notes thereto included in this prospectus.
YEAR ENDED
DECEMBER 31, 1999
-----------------
FINANCIAL CONDITION DATA
(Dollars in thousands)
Total Amount of:
Assets ..................................................... 3,864
Securities available for sale ............................. 1,998
Loans Receivable, net ...................................... 1,363
Deposits ................................................... 5,063
Stockholders' Equity ....................................... 1,838
Number of full service customer facilities .................. 4
OPERATING DATA
Interest income ............................................ 3,399
Interest expense ........................................... 1,186
Net interest income before loan loss provision ............. 2,213
Provision for loan losses .................................. 609
Net interest income after loan loss provision .............. 1,604
Other income ............................................... 116
Other expense .............................................. 3,216
Income tax benefit ......................................... 554
Net loss ................................................... (942)
Loss per share, basic and diluted ..........................$(1.10)
SELECTED STATISTICAL DATA
Return on average assets ................................... (2.11)%
Return on average equity ................................... (7.74)%
Equity to asset ratio (period end) ......................... 14.12%
Average equity to average assets ........................... 27.20%
Interest rate spread during the period (1) ................. 4.38%
Net interest margin (2)..................................... 5.71%
Non-interest expense to average assets ..................... 7.19%
Dividend payout ratio ...................................... --
18
<PAGE> 24
Ratio of average interest-earning assets to average interest-
bearing liabilities ................................................ 1.44
Allowance for loan losses as a percentage of total loans ........... 1.00%
Total shares outstanding at end of period .......................... 884,425
Book value per share ............................................... $13.39
- -----------------------
(1) Represents difference between average interest-earnings assets and average
interest-bearing liabilities.
(2) Represents net interest income divided by average interest-earning assets.
19
<PAGE> 25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Southern Community Bancorp had a consolidated net loss in 1999 of
$941,985. Net loss per common basic and diluted share was $1.10 in 1999.
Southern Community Bancorp's only subsidiary, Southern Community Bank, began
operations on December 15, 1998. Southern Community Bank's performance in 1999,
its first full year of operations, resulted in a return on average shareholders'
equity of (7.74%). Southern Community Bank's results of operations for 1998 are
not presented because they are not meaningful in comparison to 1999. Southern
Community Bancorp's operations began in July, 1999.
Over the past year, the total assets and liabilities of Southern
Community Bancorp have grown significantly. Total assets grew from $16.6 million
at December 31, 1998 to $83.9 million at December 31, 1999. Total liabilities
grew from $4.4 million to $72.0 million during the same period. The growth in
assets and liabilities was primarily the result of the establishment of three
new branch offices of Southern Community Bank in 1999. This successful expansion
has enabled Southern Community Bancorp to target additional markets and
customers.
NET INTEREST INCOME
The operating results of Southern Community Bancorp depend primarily on
its bank's net interest income, which is the difference between interest income
on interest-earning assets and interest expense on interest-bearing liabilities,
consisting primarily of deposits. Net interest income is determined by the
difference between yields earned on interest-earning assets and rates paid on
interest-bearing liabilities ("interest-rate spread") and the relative amounts
of interest-earning assets and interest-bearing liabilities. The bank's
interest-rate spread is affected by regulatory, economic and competitive factors
that influence interest rates, loan demand and deposit flows. In addition, the
bank's net earnings are also affected by the level of non-performing loans and
foreclosed real estate, as well as the level of its non-interest income, and its
non-interest expenses, such as salaries and employee benefits and occupancy
expense and income taxes.
The following table sets forth, for the periods indicated, information
regarding (i) the total dollar amount of interest and dividend income from the
bank's interest-earning assets and the resultant average yields; (ii) the total
dollar amount of interest expense on interest-bearing liabilities and the
resultant average cost; (iii) net interest/dividend income; (iv) interest-rate
spread; (v) interest margin; and (vi) ratio of average interest-earning assets
to average interest-bearing liabilities.
20
<PAGE> 26
YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
AVERAGE INTEREST &
BALANCE DIVIDENDS YIELD
------- --------- -----
(Dollars in Thousands)
<S> <C> <C> <C>
Loans $26,915 $2,716 10.09%
Securities $6,088 $398 6.54%
Other interest-earning assets(1) $5,776 $285 4.93%
-------- --------
Total Interest Earnings Assets $38,779 $3,399 8.77%
-------
Non-interest-earning assets $5,950
-------
Total assets $44,729
=======
Savings and NOW deposits $3,592 $34 0.95%
Money Market Deposits $9,124 $363 3.98%
Time Deposits $13,985 $772 5.52%
------- -------
Total Interest-bearing Deposits $26,701 $1,169 4.38%
Other Borrowings $298 $17 5.70%
------- --------
Total interest-bearing liabilities $26,999 $1,186 4.39%
-------
Non-interest-bearing deposits $4,766
Non-interest-bearing liabilities $797
Shareholders' Equity $12,167
--------
Total liabilities and equity $44,729
=======
Net Interest Income and Spread(2) $2,213 4.38%
======== =====
Net Interest Margin(3) 5.71%
=====
Average interest-earning assets to
average interest-bearing liabilities 1.44
====
</TABLE>
- --------------
(1) Includes federal funds sold and Federal Home Loan Bank stock.
21
<PAGE> 27
(2) Represents the difference between average interest-earning assets and
average interest-bearing liabilities.
(3) Represents net interest income divided by average interest-earning assets.
INTEREST INCOME AND EXPENSE
Interest income in 1999 was $3.4 million and the weighted average yield on
interest-earning assets was 8.77%. Interest expense was $1.2 million in 1999 and
the weighted-average rate paid on interest-bearing liabilities was 4.39%.
PROVISION FOR LOAN LOSSES
The provision for loan losses totaled $609,000 in 1999. See "- Allowance
and Provision for Loan Losses."
NON-INTEREST INCOME
Non-interest income totaled $115,894 in 1999. Non-interest income consists
of service charges on deposit accounts and other service charges and fees.
NON-INTEREST EXPENSES
Non-interest expenses for 1999 totaled $3,216,414. This total was
comprised of the following:
PERSONNEL. Personnel expense (which includes salaries and benefits)
totaled $1,464,520 or 45.5% of total non-interest expenses in 1999. Staff on a
full-time equivalent basis averaged 25 in 1999.
OCCUPANCY EXPENSE. Net occupancy expense in 1999 totaled $804,439 or 25.0%
of total non-interest expenses. The principal reason for this total was the
establishment of three branch offices.
OTHER NON-INTEREST EXPENSES. Other non-interest expenses for 1999 totaled
$947,455 or 29.5% of total non-interest expenses. Other non-interest expenses
include data processing, printing and office supplies, marketing and
advertising, professional fees and other expenses.
INCOME TAX BENEFIT
The income tax benefit totaled $554,223 in 1999 as a result of the
Southern Community Bancorp's net operating loss. See Note 9 to the Consolidated
Financial Statements of Southern Community Bancorp for more information
regarding the income tax benefit.
CAPITAL EXPENDITURES
Southern Community Bancorp's capital expenditures are reviewed by its
Board of Directors. Southern Community Bancorp makes capital expenditures in
order to improve its ability to provide
22
<PAGE> 28
quality services to its customers. Capital expenditures equaled $2,651,876 in
1999. These expenditures were principally related to leasehold improvements and
furniture and equipment purchased for three new banking facilities opened during
1999.
ASSET QUALITY AND CREDIT RISK
SECURITIES. Southern Community Bancorp maintains a high quality
investment portfolio, including U.S. government agencies and mortgage-backed
securities. Southern Community Bancorp believes that these securities have very
little risk of default. At December 31, 1999, all of the securities held in the
investment portfolio were rated "A" or better. All of these securities were
classified "available for sale." A rating of "A" or better means that the bonds
are of "upper medium grade, with strong ability to repay, possibly with some
susceptibility to adverse economic conditions or changing circumstances."
Ratings are assigned by independent rating agencies and are subject to the
accuracy of reported information concerning the issuers and the subjective
judgment and analysis of the rating agencies. They are not a guarantee of
collectibility. Approximately 21.4% of these securities mature in five years or
less. As such, there is a significant risk of fluctuations in market value due
to changes in the general level of interest rates.
The following table sets forth information regarding the composition of
the investment portfolio at December 31, 1999 (amounts in thousands):
Securities of U.S. Government
agencies and corporations $10,058
Mortgage-backed securities 1,940
-------
Total Securities $11,998
========
LOANS. Southern Community Bank maintains a high quality portfolio of real
estate, commercial and consumer loans. All loans over individual lending limits
are reviewed and approved by the loan committee, which ensures that loans comply
with applicable credit standards. In most cases, the bank requires collateral
from the borrower. The type and amount of collateral varies, but may include
residential or commercial real estate, deposits held by financial institutions,
U.S. Treasury securities, other marketable securities and personal property.
Collateral values are monitored to ensure that they are maintained at proper
levels.
As of December 31, 1999, approximately 63.5% of all the bank's loans were
real estate loans secured by real estate in central Florida. This level of
concentration could present a potential credit risk because the ultimate
collectibility of these loans is susceptible to adverse changes in real estate
market conditions in this market. We have addressed this risk by limiting most
loans to a maximum of 75% of the appraised value of the underlying real estate
and maximum amortization schedules of 20 years with balloons not exceeding 5
years.
The following table divides Southern Community Bank's loan portfolio into
four categories. Most of the loans are short-term and may be renewed or rolled
over at maturity. At that time, the bank undertakes a complete review of the
borrower's credit worthiness and the value of any collateral. If these items are
satisfactory, the bank will generally renew the loan at prevailing interest
rates. In addition to
23
<PAGE> 29
loans outstanding at December 31, 1999, as of that date, the bank had entered
into legally binding commitments to extend credit and letters of credit in the
amount of $25.7 million and had unused lines of credit totaling $4.7 million.
TYPES OF LOANS
<TABLE>
<CAPTION>
% TO
AMOUNT TOTAL LOANS
------ -----------
(in thousands)
<S> <C> <C>
Commercial $19,122 30.8%
Commercial real estate 26,451 42.7%
Residential real estate 12,915 20.8%
Consumer and other 3,536 5.7%
--------- -------
Total loans $62,024 100.0%
======
Less:
Allowance for loan losses (621)
Net deferred loan fees (41)
-----------
Loans receivable, net $61,363
</TABLE>
The following table sets forth information regarding the maturities of
Southern Community Bank's loans. For purposes of the table, demand loans are
shown as being payable in one year or less. The entire amount of a balloon loan
is treated as maturing in the year that the balloon payment is due.
MATURITIES OF LOANS BASED ON CONTRACTUAL PRINCIPAL REPAYMENTS
<TABLE>
<CAPTION>
AT DECEMBER 31, 1999
--------------------------------------------------------------
ONE YEAR OVER ONE TO OVER FIVE
TOTAL LOANS: OR LESS FIVE YEARS YEARS TOTAL
- ------------ ------- ---------- --------- -----
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Commercial ............ $ 9,619 $ 5,806 $ 3,697 $19,122
Commercial real estate 5,644 6,087 14,720 26,451
Residential real estate 9,362 2,341 1,212 12,915
Consumer and other .... 1,484 1,965 87 3,536
------- ------- ------- -------
Total ................. $26,109 $16,199 $19,716 $62,024
======= ======= ======= =======
</TABLE>
24
<PAGE> 30
Of the $35.9 million in loans due after one year, 59.3% have fixed
interest rates and 40.7% have adjustable rates.
COMMERCIAL LOANS. Southern Community Bank makes commercial loans
primarily to businesses located in central Florida. The credit risk associated
with business lending is influenced by general economic conditions,
deterioration in a borrower's capital position resulting in increasing debt to
equity ratios, deterioration in a borrower's cash position resulting in a
liquidity problem, and decreasing revenues due to inefficient operations of the
borrower. These loans are generally secured by corporate assets, marketable
securities or other liquid financial instruments. These loans totaled
approximately $19.1 million or 30.8% of total loans at December 31, 1999.
REAL ESTATE LOANS. Southern Community Bank makes real estate loans from
time to time for real estate projects located in central Florida. The bank
generally requires security in the form of a mortgage on the underlying real
property and the improvements constructed thereon and personal guarantees. The
bank attempts to limit its credit exposure to 75% of the appraised value of the
underlying real property. On December 31, 1999, real estate loans totaled
approximately $39.4 million or 63.5% of total loans. Risks associated with real
estate loans include variations from vacancy projections, delays in
construction, environmental factors, reliability of subcontractors and timing
and reliability of inspections, and costs overruns.
Southern Community Bank makes real estate loans secured by commercial
real estate, including loans to acquire or refinance office buildings,
warehouses and apartments. At December 31, 1999, these loans totaled $26.5
million, or 42.7% of total loans. Most of these loans have a maturity of five
years or less. Almost all of these loans are secured by real property located in
central Florida. These loans generally require a loan-to-collateral value of not
more than 75%.
Residential real estate loans totaled $12.9 million, or 20.8% of total
loans at December 31, 1999. Residential real estate loans are predominately
adjustable rate home mortgages which generally require a loan-to-collateral
value of not more than 90% and equity credit lines which generally limit the
loan-to-collateral value to not more than 90%. Most loans have a maximum term of
five years. Almost all of the residential real estate loans are secured by homes
in central Florida.
CONSUMER LOANS AND OTHER. Southern Community Bank offers consumer loans
and personal and secured loans. The security for these loans ordinarily consists
of automobiles, consumer goods, marketable securities, certificates of deposit
and similar items. These loans totaled approximately $3.5 million, or 5.7% of
total loans, on December 31, 1999. Risks associated with installment loans
include loss of employment of borrowers, declines in the financial condition of
borrowers resulting in delinquencies, and rapid depreciation of loan collateral.
NON-PERFORMING ASSETS AND PAST DUE LOANS
Non-performing assets consist of non-accrual loans and residential and
commercial properties acquired in partial or total satisfaction of problem loans
which are known as "other real estate owned" or "OREO." Past due loans are loans
that are delinquent 30 days or more which are still accruing interest.
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<PAGE> 31
Maintaining a low level of non-performing assets is important to the
on-going success of any financial institution. Southern Community Bank's
credit review and approval process is critical to its ability to minimize
non-performing assets on a long-term basis. In addition to the negative impact
on interest income, non-performing assets also increase operating costs due to
the expense of collection efforts. It is the bank's policy to place all loans
which are past due 90 days or more on non-accrual status, subject to exceptions
made on a case by case basis. As of December 31, 1999, Southern Community Bank
had no such loans.
ALLOWANCE AND PROVISION FOR LOAN LOSSES
Southern Community Bank evaluates the adequacy of its allowance for
loan losses as part of its on-going credit review and approval process. The
review process is intended to identify, as early as possible, customers who may
be facing financial difficulties. Once identified, the extent of the client's
financial difficulty is carefully monitored by the bank's credit administrator,
who recommends to the directors' loan committee the portion of any credit that
needs a specific reserve allocation or should be charged off. Other factors
considered by the loan committee in evaluating the adequacy of the allowance
include overall loan volume, historical net loan loss experience, the level and
composition of nonaccrual and past due loans, local economic conditions, and
value of any collateral. From time to time, specific amounts of the reserve are
designated for certain loans in connection with the loan review officer's
analysis of the adequacy of the allowance for loan losses.
While a portion of this allowance is typically intended to cover
specific loan losses, it is considered a general reserve which is available for
all credit-related purposes. The allowance is not a precise amount, but is
derived based upon the above factors and represents management's best estimate
of the amount necessary to adequately cover probable losses from current credit
exposures. The provision for loan losses is a charge against current earnings
and is determined by management as the amount needed to maintain an adequate
allowance.
To date, the overall credit quality of the loan portfolio has been
strong, as evidenced by the fact that Southern Community Bank had no
non-performing loans or charge-offs in 1999. As a result, the bank has
maintained its allowance for loan losses at approximately 1.0% of total loans,
or $621,000 at December 31, 1999. We believe that this amount is more than
sufficient to absorb anticipated loan charge-offs.
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<PAGE> 32
The following table further summarizes the allocation of the allowance
for loan losses by type of loan at December 31, 1999.
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
% OF LOANS
AMOUNT TO TOTAL LOANS
------ --------------
(in thousands)
<S> <C> <C>
Commercial $191 30.8%
Commercial Real Estate 265 42.7%
Residential Real Estate 65 20.8%
Consumer loans and other 71 5.7%
Unallocated general reserves 30 --
------ ------
Total allowance for loan losses $621 100.0%
====== ======
</TABLE>
The following table displays loan originations by type of loan and principal
reductions during the year ended December 31, 1999 (dollars in thousands).
<TABLE>
<CAPTION>
<S> <C>
Originations:
Commercial loans $ 27,708
Commercial real estate loans 38,413
Residential real estate loans 18,712
Consumer loans and other 5,128
--------
Total loans originated 89,961
Principal reductions (29,151)
--------
Increase in gross loans $60,810
</TABLE>
FINANCIAL CONDITION
Our goal is to maintain a high quality and liquid balance sheet. We
seek to achieve this objective through increases in collateralized loans, a
strong portfolio of real estate loans and a stable portfolio of investment
securities of high quality.
SECURITIES. In 1999, securities averaged $6.1 million or 15.7% of total
earning assets. Management's strategy for its investment account is to maintain
a very high quality portfolio with generally short-to medium-term maturities.
The following tables sets forth information regarding the investment portfolio
at December 31, 1999.
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<PAGE> 33
REMAINING MATURITY AND AVERAGE YIELD OF INVESTMENT SECURITIES
<TABLE>
<CAPTION>
ONE TO FIVE FIVE TO TEN
YEARS YEARS TOTAL
--------------------- ---------------------- ----------------------
CARRYING CARRYING CARRYING
VALUE YIELD VALUE YIELD VALUE YIELD
------- ----- -------- ----- -------- -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Securities of U.S.
government agencies
and corporations $2,565 5.52% $7,493 7.04% $10,058 6.71%
Mortgage-backed
securities -- -- 1,940 6.56% 1,940 6.56%
---------- ------- ---------
Total $2,565 5.52% $9,433 6.95% $11,998 6.70%
====== ====== =======
</TABLE>
LOANS. Loans averaged $26.9 million in 1999. The growth in the loan
portfolio reflects an expanded customer base, favorable economic conditions and
increased business development. See " -Asset Quality and Credit Risk - Loans."
INTEREST-BEARING LIABILITIES. Total interest-bearing liabilities
averaged $27.0 million in 1999.
The following table sets forth information regarding Southern Community
Bank's average deposits for the past year.
AVERAGE DEPOSITS
(Dollars in Thousands)
<TABLE>
<CAPTION>
AVERAGE
AMOUNT RATE
------ --------
<S> <C> <C>
Demand deposits - non-interest bearing $4,766 --%
Savings and NOW accounts 3,592 0.95%
Money market accounts 9,124 3.98%
Time deposits 13,985 5.52%
------
Total deposits $31,467 3.72%
======= =====
</TABLE>
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<PAGE> 34
The following table summarizes the maturity of time deposits over
$100,000 at December 31, 1999.
SUMMARY OF TIME DEPOSITS OVER $100,000 BY MATURITY
(Dollars in Thousands)
Three months or less $9,047
Three to Six months 1,956
Six to Twelve months 2,106
Over Twelve months 6,219
--------
Total $19,328
========
The following table sets forth the net deposit flows of Southern Community Bank
during the year ended December 31, 1999 (in thousands):
Net increase before interest credited $60,985
Net credited $ 804
-------
Net deposit increase $61,789
=======
LIQUIDITY AND RATE SENSITIVITY
The principal functions of asset and liability management are to
provide for adequate liquidity, to manage interest rate exposure by maintaining
a prudent relationship between rate sensitive assets and liabilities and to
manage the size and composition of the balance sheet so as to maximize net
interest income.
Liquidity is the ability to provide funds at minimal cost to meet
fluctuating deposit withdrawals or loan demand. These demands are met by
maturing assets and the capacity to raise funds from internal and external
sources. Southern Community Bank primarily utilizes cash and federal funds sold
to meet their liquidity needs. Although not utilized in managing daily liquidity
needs, the sale of investment securities provides a secondary source of
liquidity.
Fluctuating interest rates, increased competition and changes in the
regulatory environment continue to significantly affect the importance of
interest-rate sensitivity management. Rate sensitivity arises when interest
rates on assets change in a different period of time or a different proportion
than that of interest rates on liabilities. The primary objective of
interest-rate sensitivity management is to prudently structure the balance sheet
so that movements of interest rates on assets and liabilities are highly
correlated and produce a reasonable net interest margin even in periods of
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<PAGE> 35
volatile interest rates.
Regular monitoring of assets and liabilities that are rate sensitive
within 90 days, one year and three years is an integral part of Southern
Community Bank's rate-sensitivity management process. It is the bank's policy to
maintain a reasonable balance of rate-sensitive assets and liabilities on a
cumulative one-year basis, thus minimizing net interest income exposure to
changes in interest rates. A ratio of 1.0 represents perfect matching of
interest-earning assets and interest-bearing liabilities. The bank's sensitivity
position at December 31, 1999 was such that net interest income would decrease
modestly if there were an increase in short-term interest rates.
The bank's monitors the interest rate risk sensitivity with traditional
gap measurements. The gap table has certain limitations in its ability to
accurately portray interest sensitivity; however, it does provide a static
reading of the bank's interest rate risk exposure.
The following table shows the repricing structure of our balance sheet
at December 31, 1999 with each maturity interval referring to the earliest
repricing opportunity (i.e., the earlier of scheduled contractual maturities or
next reset date) for each asset and liability. As of that date, Southern
Community Bank was liability sensitive (interest sensitive liabilities subject
to repricing exceeded interest sensitive assets subject to repricing) on a
365-day basis to the extent of $16.5 million. This negative gap at December 31,
1999 was 19.67% of total assets. Southern Community Bank targeted gap position
is in the range of negative 20 percent to positive 20 percent. Southern
Community Bank measures its gap position as a percentage of its total assets.
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<PAGE> 36
INTEREST RATE SENSITIVITY & GAP REPORT
(Dollars in Thousands)
<TABLE>
<CAPTION>
OVER 3 YRS.
3 MOS. 3 MOS. OVER 1 YR. TO OVER 5
OR LESS TO YR. TO 3 YRS. 5 YRS. YRS. TOTAL
------- ------ --------- ----------- ---- -----
<S> <C> <C> <C> <C> <C> <C>
Assets:
Loans(1) ................ $ 28,578 $8,414 $ 6,372 $ 9,497 $ 9,163 $ 62,024
Securities .............. -- -- -- $ 2,565 $ 9,433 $ 11,998
Other Interest-earning
assets(2) ............... $ 212 -- -- -- -- $ 212
-------- -------- -------- -------- -------- --------
Total Interest-bearing
assets .................. $ 28,790 $8,414 $ 6,372 $ 12,062 $ 18,596 $ 74,234
======== ======== ======== ======== ======== ========
Interest-bearing
Liabilities:
Savings and NOW
deposits(3) ............. $ 5,757 -- -- -- -- $ 5,757
Money-market
deposits(3) ............. $ 14,052 -- -- -- -- $ 14,052
Time deposits(3) ........ $ 19,582 $8,308 $ 6,569 $ 26 -- $ 34,485
Other Borrowings ........ $ 6,000 -- -- -- -- $ 6,000
-------- -------- -------- -------- -------- --------
Total Interest-bearing .. $ 45,391 $8,308 $ 6,569 $ 26 -- $ 60,294
======== ======== ======== ======== ======== ========
Liabilities
GAP ..................... ($16,601) $ 106 ($ 197) $ 12,036 $ 18,596 $ 13,940
======== ======== ======== ======== ======== ========
Cumulative GAP .......... ($16,601) ($16,495) ($16,692) ($ 4,656) $ 13,940
======== ======== ======== ======== ========
Ratio of interest-earning
assets to interest-
bearing liabilities ..... .63 1.01 .97 463.92 N/A 1.23
======== ====== ======== ======== ======== ========
Cumulative ratio of
interest-earning assets
to interest-bearing
liabilities ............. .63 .69 .72 .92 1.23
====== ======== ======== ======== ========
Cumulative GAP to
Total Assets ............ (19.80)% (19.67)% (19.90)% (5.55)% 16.62%
====== ======== ======== ======== ========
</TABLE>
- ---------------
(1) In preparing the above table, adjustable-rate loans are included in the
period in which the interest rates are next scheduled to adjust rather than
in the period in which the loans mature. Fixed-rate loans are scheduled,
including repayment, according to their maturities.
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<PAGE> 37
(2) Includes Federal Home Loan Bank Stock, which reprices quarterly.
(3) Savings, NOW and money-market deposits are regarded as readily accessible
withdrawable accounts. Time deposits are scheduled according to their
respective maturity dates.
CAPITAL
One of our primary objectives is to maintain a strong capital position
to merit the confidence of customers, bank regulators and shareholders. A strong
capital position helps us withstand unforeseen adverse developments and take
advantage of attractive lending and investment opportunities when they raise.
Under the Federal Reserve's rules pertaining to risk-based capital,
Southern Community Bank's tier one capital as of December 31, 1999 was 16.6% of
risk-weighted assets and the ratio of total capital to risk-weighted assets was
17.5%. These risk-based capital ratios are well in excess of the minimum
requirements of 4% for tier one and 8% for total risk-based capital ratios
established by the federal regulations.
Southern Community Bank's leverage ratio (tier one capital to total
average adjusted quarterly assets) of 15.5% at December 31, 1999, is also well
in excess of the minimum 4% requirement.
The following table sets forth Southern Community Bank's required
and actual capital amounts and percentages at December 31, 1999 (dollars in
thousands):
<TABLE>
<CAPTION>
ACTUAL REQUIRED
-------------------- -------------------
AMOUNT % AMOUNT %
------ --- ------ ---
<S> <C> <C> <C> <C>
Tier 1 Capital
(to Risk-Weighted Assets) $11,551 16.6% $2,776 4.0%
Total Capital
(to Risk-Weighted Assets) $12,172 17.5% $5,551 8.0%
Tier 1 Capital
(to Total Assets) $11,551 15.5% $2,972 4.0%
</TABLE>
IMPACT OF INFLATION AND CHANGING PRICES
The financial statements and related data presented herein have been
prepared in accordance with GAAP, which requires the measurement of financial
position and operating results in terms of historical dollars, without
considering changes in the relative purchasing power of money over time
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<PAGE> 38
due to inflation. Unlike most industrial companies, substantially all of our
assets and liabilities of are monetary in nature. As a result, interest rates
have a more significant impact on our performance than the effects of general
levels of inflation. Interest rates do not necessarily move in the same
direction or in the same magnitude as the prices of goods and services, since
such prices are affected by inflation to a larger extent than interest rates.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the risk of loss from adverse changes in market prices
and rates. Our market risk arises primarily from interest rate risk inherent in
our banks' lending and deposit taking activities. We have little or no risk
related to trading account, commodities or foreign exchange.
Management actively monitors and manages its interest rate risk
exposure. The primary objective in managing interest-rate risk is to limit,
within established guidelines, the adverse impact of changes in interest rates
on our bank's net interest income and capital, while adjusting our bank's
asset-liability structure to obtain the maximum yield-cost spread on that
structure. Management relies primarily on its asset-liability structure to
control interest rate risk. However, a sudden and substantial increase in
interest rates could adversely impact our banks' earnings, to the extent that
the interest rates borne by assets and liabilities do not change at the same
speed, to the same extent, or on the same basis. There have been no significant
changes in Southern Community Bank's market risk exposure since December 31,
1999.
FUTURE ACCOUNTING REQUIREMENTS
Financial Accounting Standards 133 - ACCOUNTING FOR DERIVATIVE
INVESTMENTS AND HEDGING ACTIVITIES - requires companies to record derivatives
on the balance sheet as assets or liabilities, measured at fair value. Gains or
losses resulting from changes in the values of those derivatives would be
accounted for depending on the use of the derivatives and whether they qualify
for hedge accounting. The key criterion for hedge accounting is that the hedging
relationship must be highly effective in achieving offsetting changes in fair
value or cash flows. We will be required to adopt this Statement effective
January 1, 2001. Management does not anticipate that this Statement will have a
material impact on us.
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<PAGE> 39
BUSINESS
GENERAL
Southern Community Bancorp is a bank holding company which owns and
operates Southern Community Bank, a Florida bank based in Orlando, Florida. We
became a bank holding company on July 30, 1999 when we acquired all of the
shares of Southern Community Bank in a share exchange with the shareholders of
the bank.
We are in the process of establishing a new Florida bank, Southern
Community Bank of Southwest Florida, which will be based in Bonita Springs,
Florida. The opening of the new bank is contingent upon the approval of the
Florida Department of Banking and Finance, the FDIC, the Federal Reserve and the
sale of at least 200,000 shares in the offering. See "Terms of Offering."
STRATEGY
Our goal is to operate our existing bank and our new bank in the
substantially the same manner as local community banks, emphasizing local
leadership and local decision-making. The management of each bank will make its
own credit decisions. Each bank will price and market its own loan and deposit
products. Each bank will have its own board of directors, drawn mainly from
members of the local business community. Each board will have full authority
over the bank, in contrast to an "advisory" board which lacks authority. Each
bank will endeavor to be an active supporter of local charities and civic
organizations.
Our strategy is to capitalize on the opportunities created by the
recent consolidation in the Florida banking industry. We believe that this
consolidation has reduced the levels of personalized services as the larger
regional financial institutions have increasingly focused on larger corporate
customers, standardized loan and deposit products and other services. More
specifically, many financial institutions have centralized their loan approval
practices for small businesses, leaving less responsibility and authority with
the traditional loan officer. By virtue of their banking experience in Florida,
management believes that the most frequent customer complaints are based on a
lack of personalized service and turnover in lending personnel, which limits the
customer's ability to develop a relationship with his or her banker. As a result
of these factors, we believe there currently exists a significant opportunity to
attract and maintain customers who are dissatisfied with their banks. We also
believe we can attract experienced management personnel within our identified
markets.
Our holding company structure provides flexibility for the future
expansion of our banking business through the possible acquisition of other
financial institutions and the formation of new banks. In addition, our holding
company structure also makes it easier to raise additional capital for our banks
because we can issue securities without the need for prior banking regulatory
approval. Any such acquisitions will be subject to regulatory approvals and
other requirements. See "Supervision and Regulation."
SOUTHERN COMMUNITY BANK
We currently conduct all of our activities through Southern Community
Bank. Southern
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<PAGE> 40
Community Bank is a Florida state-chartered bank which commenced operations in
December 1998. The bank seeks to emphasize the needs of individuals and small to
medium-sized businesses who desire high levels of personalized attention and
customer service. Southern Community Bank's principal office is located in the
central business district in Orlando, Florida, and it maintains branch offices
in the cities of Winter Park, Altamonte Springs and Longwood Beach, Florida. All
of these offices are located within less than one mile of Interstate Highway 4,
which provides access from most communities located in the northern portion of
the Orlando metropolitan area. The bank intends to establish two additional
branch offices in central Florida within the next 12 to 18 months, one to be
located in the southwest Orlando area and the other to be located in the
vicinity of Lake Mary, Seminole County. The opening of these branches is subject
to the receipt of required regulatory approvals. At December 31, 1999, the bank
had total assets of approximately $83.9 million.
The bank has recently received regulatory approval to establish a
branch office in Bonita Springs in Lee County, Florida. This branch office will
be located at the site where we proposed to open the main office of Southern
Community Bank of Southwest Florida. Our existing bank will operate this office
as a branch office until our new bank commences operations. At that time, we
will transfer this office (and all related personnel, assets and liabilities) to
the new bank. We believe that the opening of the Bonita Springs branch office
will accelerate the growth of our new bank by providing the new bank with an
established facility, personnel and customer relationships.
SOUTHERN COMMUNITY BANK OF SOUTHWEST FLORIDA
We are in the process of forming a new bank, Southern Community Bank of
Southwest Florida, which will serve the Bonita Springs market. We expect to
receive regulatory approval to open the new bank during the third quarter of
2000, and to open the new bank in the fall of 2000. The opening of the new bank
will depend on the sale of at least 610,000 shares with proceeds designated to
capitalize the new bank and compliance with any conditions which the Florida
Department of Banking and Finance, the Federal Reserve and the FDIC may impose.
These conditions are generally designed to ensure that a new bank has sufficient
resources to begin its banking operations in a safe and sound manner.
We expect that construction of the new bank's main office building will
commence in July, 2000 and be completed early in 2001. Pending the completion of
the permanent facility, we expect the new bank to conduct operations in a
temporary modular facility to be located at this site.
Our existing bank has entered into a contract to purchase a site in
North Naples, Collier County, Florida, which will be used as a branch office of
the new bank. We expect to acquire this property before we open the new bank. If
this occurs, our existing bank will contribute this property to our new bank
upon its opening.
SOUTHERN COMMUNITY INSURANCE AGENCY, INC.
We recently formed Southern Community Insurance Agency, Inc., a Florida
corporation, as a wholly owned subsidiary of our existing bank. As of the date
of this prospectus, this subsidiary has not conducted any business activities.
Southern Community Insurance Agency, Inc. will refer customers of the bank to
another insurance agency, Insurance Office of America, Inc., for the purchase of
insurance
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<PAGE> 41
products. Insurance Office of America, Inc. will pay our subsidiary a percentage
of the commissions generated from customers referred to them by our subsidiary.
Insurance Office of America, Inc. is owned by one of our directors, John
Ritenour.
PRODUCTS AND SERVICES
We offer a broad array of traditional banking products and services to
our customers, including the products and services described below.
DEPOSITS. We offer a full range of interest bearing and non-interest
bearing accounts, including commercial and retail checking accounts, money
market accounts, individual retirement accounts, savings accounts, and other
time deposits of various types, ranging from daily money market accounts to
longer term certificates of deposit. We have tailored the rates and terms of
our accounts and time deposits to compete with the rates and terms in our
principal markets. We seek deposits from residents, businesses and employees of
businesses in these markets. The FDIC insures all of our accounts up to the
maximum amount permitted by law. In addition, we receive service charges which
are competitive with other financial institutions in our markets, covering such
matters as maintenance fees on checking accounts, per item processing fees on
checking accounts, returned check charges and other similar fees.
LENDING ACTIVITIES. We use our deposits, together with borrowings and
other sources of funds, to originate and purchase loans. We offer a full range
of short and medium-term small business and commercial, consumer and real estate
loans. We generally seek to allocate our loan portfolio as follows: 80% to real
estate loans; 15% to small business and commercial loans; and 5% to consumer
loans. We have a loan approval process which provides for various levels of
officer lending authority. When a loan amount exceeds an officer's lending
authority, we transfer the loan to an officer with a higher limit, with ultimate
lending authority resting with the loan committee of the bank's board of
directors.
The risk of non-payment of loans is inherent in all loans. However, we
carefully evaluate all loan applicants and attempt to minimize our credit risk
exposure by use of thorough loan application and approval procedures that we
have established for each category of loan. In determining whether to make a
loan, we consider the borrower's credit history, analyze the borrower's income
and ability to service the loan, and evaluate the need for collateral to secure
recovery in the event of default. We maintain an allowance for loan losses based
upon assumptions and judgments regarding the ultimate collectibility of loans in
their portfolio and a percentage of the outstanding balances of specific loans
when their ultimate collectibility is considered questionable.
We direct our lending activities primarily to individuals and
businesses in our markets whose demand for funds fall within the bank's legal
lending limits and are also potential deposit customers. The following is a
description of each of the major categories of loans which we make:
COMMERCIAL LOANS. This category includes loans made to individuals,
partnerships or corporate borrowers for a variety of business purposes. We
place particular emphasis on loans to small to medium-sized professional firms,
retail and wholesale businesses, light industry and manufacturing concerns
operating in our markets. We consider "small businesses" to include
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<PAGE> 42
commercial, professional and retail businesses with annual gross sales of less
than $20 million or annual operating costs of less than $5 million. Our
commercial loans include term loans with variable interest rates secured by
equipment, inventory, receivables and real estate, as well as secured and
unsecured working capital lines of credit. Risks of these types of loans depend
on the general business conditions of the local economy and the borrower's
ability to sell its products and services in order to generate sufficient
business profits to repay the loan under the agreed upon terms and conditions.
Personal guarantees may be obtained from the principals of business borrowers
and third parties to further support the borrower's ability to service the debt
and reduce the risk of non-payment.
CONSUMER AND INSTALLMENT LOANS. Consumer loans include lines of credit
and term loans secured by second mortgages on the residences of borrowers for a
variety of purposes, including home improvements, education and other personal
expenditures. Consumer loans also include installment loans to individuals for
personal, family and household purposes, including automobile loans to
individuals and pre-approved lines of credit. Consumer loans generally involve
more risk than first mortgage loans because the collateral for a defaulted loan
may not provide an adequate source of repayment of the principal. This risk is
due to the potential for damage to the collateral or other loss of value, while
the remaining deficiency often does not warrant further collection efforts. In
addition, consumer loan performance depends on the borrower's continued
financial stability and is, therefore, more likely to be adversely affected by
job loss, divorce, illness or personal bankruptcy.
REAL ESTATE LOANS. We make commercial real estate loans, construction
and development loans, and residential real estate loans. These loans include
commercial loans where we take a security interest in real estate out of an
abundance of caution and not as the principal collateral for the loan. Interest
rates for all categories may be fixed or adjustable, and will more than likely
be fixed for shorter-term loans. We will compete for real estate loans with
financial institutions and others who are well established and have greater
resources and lending limits. As a result, we may have to charge lower interest
rates to attract borrowers.
COMMERCIAL REAL ESTATE. We offer commercial real estate loans to
developers of both commercial and residential properties. We manage credit risk
associated with these loans by actively monitoring such measures as advance
rate, cash flow, collateral value and other appropriate credit factors. Risks
associated with commercial real estate loans include the general risk of the
failure of the commercial borrower, which are different for each type of
business and commercial entity. We evaluate each business on an individual basis
and attempt to determine such business' risks and credit profile. We attempt to
reduce credit risks in the commercial real estate portfolio by emphasizing loans
on owner-occupied office and retail buildings where the loan-to-value ratio,
established by independent appraisals, does not exceed 80%. In addition, we may
also require personal guarantees of the principal owners.
CONSTRUCTION AND DEVELOPMENT LOANS. We make construction and
development loans on a pre-sold and speculative basis. If the borrower has
entered into an arrangement to sell the property prior to beginning
construction, we consider the loan to be on a pre-sold basis. If the borrower
has not entered into an agreement to sell the property prior to beginning
construction, we consider the loan to be on a speculative basis. We make
residential and commercial construction loans to builders
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<PAGE> 43
and developers and consumers who wish to build their own home. We limit the
term of most construction and development loans to 18 months, although we may
structure the payments based on a longer amortization basis. We base speculative
loans on the borrower's financial strength and cash flow position. We disburse
loan proceeds based on the percentage of completion and only after an
experienced construction lender or appraiser inspects the project. These loans
generally command higher rates and fees commensurate with the risks warranted in
the construction lending field. The risk in construction lending depends upon
the performance of the builder, building the project to the plans and
specifications of the borrower and the bank's ability to administer and control
all phases of the construction disbursements. Upon completion of the
construction, we typically convert construction loans to permanent loans.
RESIDENTIAL REAL ESTATE LOANS. We make residential real estate loans to
qualified individuals for the purchase of existing single-family residences in
the our markets. We make these loans in accordance with our appraisal policy and
real estate lending policy which detail maximum loan to value ratios and
maturities. We believe that these loan to value ratios are sufficient to
compensate us for fluctuations in real estate market value and minimize losses
that could result from a downturn in the residential real estate market. We sell
mortgage loans that do not conform to our policies in the secondary markets. The
risk of these loans depends on the salability of the loan to national investors
and on interest rate changes. We intend 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. We retain loans for our portfolios when there is
sufficient liquidity to fund the needs of the established customers and when
rates are favorable to retain the loans. The loan underwriting standards and
policies are generally the same for both loans sold in the secondary market and
those retained in our portfolio.
ASSET AND LIABILITY MANAGEMENT
Our primary assets are our loan portfolio and investment account. Our
liabilities consist primarily of deposits. Our objective is to support asset
growth primarily through the growth of core deposits, which include deposits of
all categories made by individuals, partnerships, corporations and other
entities. Consistent with the requirements of prudent banking necessary to
maintain liquidity, we seek to match maturities and rates of loans and the
investment portfolio with those of deposits, although exact matching is not
always possible. We seek to invest the largest portion of our assets in
commercial, consumer and real estate loans. We anticipate that we will limit our
loans to less than 75% of deposits and capital funds. This ratio may be
exceeded, however, in the initial period of operation. Our investment account
consists primarily of marketable securities of the United States Government,
federal agencies and state and municipal governments, generally with varied
maturities.
We monitor our asset/liability mix on a regular basis with a monthly
report detailing interest-sensitive assets and interest-sensitive liabilities
presented to their board of directors. The objective of this policy is to
control interest-sensitive assets and liabilities in order to minimize the
impact of substantial movements in interest rates on our banks' earnings.
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CORRESPONDENT BANKING
Correspondent banking involves providing services by one bank to
another bank which, from an economic or practical standpoint, cannot provide
that service for itself. We may purchase correspondent services offered by
larger banks, including check collections, purchase of federal funds, securities
safekeeping, investment services, coin and currency supplies, overline and
liquidity loan participations, and sales of loans to or participations with
correspondent banks. We will sell loan participations to correspondent banks
with respect to loans which exceed our lending limits. As compensation for
services provided by a correspondent bank, we may maintain balances with
correspondents in non-interest bearing accounts.
OTHER SERVICES
Our other services include cash management services, safe deposit
boxes, traveler's checks, direct deposit of payroll and social security checks,
wire transfers, telephone banking, and automatic drafts for various accounts. We
offer a debit card, VISA and/or MasterCard credit card services through our
correspondent banks. We offer extended banking hours, both drive-in and lobby,
and an after-hours depository. We are associated with a shared network of
automated teller machines that customers may use throughout our market areas and
other regions. We are associated with third party Internet banking service
providers that enable us to provide customers with a cost effective, secure and
reliable Internet banking solution.
CUSTOMERS
We believe that the recent consolidation of the Florida banking
industry provides community-oriented banks significant opportunities to build
successful, locally-oriented community banks. We further believe that many of
the larger financial institutions do not provide the high level of personalized
services desired by many small and medium-sized businesses and their principals.
We intend to focus our marketing efforts on attracting small and medium-sized
businesses and individuals, including service companies, manufacturing
companies, commercial real estate developers, entrepreneurs and professionals,
such as physicians and attorneys.
Although we will concentrate our lending efforts on commercial
business, we also anticipate that we will attract a significant amount of
consumer business. We expect that many of our retail customers will be the
principals of our small and medium-sized business customers. These customers
comprise our private banking clients. We emphasize "relationship banking" in
order that each customer will identify and establish a comfort level with the
bank officers. We intend to develop our retail business with individuals who
appreciate a high level of personal service, contact with their lending officer
and responsive decision-making. We expect that most of our business will be
developed through our lending officers and local boards of directors and by
pursuing an aggressive strategy of calling on customers throughout the market
area.
COMPETITION
We are subject to intense competition in the markets which we currently
serve, and expect to be subject to intense competition in the target markets for
our new bank. We compete with other
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<PAGE> 45
bank holding companies, state and national commercial banks, savings and loan
associations, consumer finance companies, credit unions, insurance companies,
mortgage banking companies, money market mutual funds, asset-based non-bank
lenders and other financial institutions. Many of these competitors have
substantially greater resources and lending limits, larger branch networks and
are able to offer a broader range of products and services than we offer.
Various legislative actions in recent years have led to increased
competition among financial institutions. With the enactment of the Riegle-Neal
Interstate Banking and Branching Efficiency Act of 1994 and other laws and
regulations affecting interstate bank expansion, it is easier for financial
institutions located outside of the State of Florida to enter the Florida
market, including our targeted markets. In addition, recent legislative and
regulatory changes and technological advances have enabled customers to conduct
banking activities without regard to geographic barriers through computer and
telephone-based banking and similar services. There can be no assurance that the
United States Congress, or the Florida Legislature or the applicable bank
regulatory agencies will not enact legislation or promulgate rules that may
further increase competitive pressures on us. Our failure to compete effectively
for customers in our market areas could have a material adverse effect on our
business, future prospects, financial condition or results of operations.
FACILITIES
Our principal executive office is located at 250 North Orange Avenue,
Orlando, Florida. We share our office with the main office of Southern Community
Bank. These offices occupy approximately 6,000 square feet on the ground floor
of a high-rise office building. The main office is leased for a term of ten
years through June 30, 2008. We may extend the lease for up to an additional ten
years.
Southern Community Bank's Altamonte Springs branch is located in a
building containing approximately 4,182 square feet under a ground lease with an
initial term expiring on November 30, 2018. We may extend the lease until
November 30, 2028.
Southern Community Bank's Longwood branch is located in the Springs
Plaza Shopping Center in a space containing approximately 2,200 square feet
under a lease with an initial term expiring on December 8, 2003. We may extend
the lease until December 8, 2018.
Southern Community Bank owns its Winter Park branch, which occupies a
building containing approximately 4,850 square feet.
Southern Community Bank has acquired property located at 9021 Bonita
Beach Road, S.E., Bonita Springs, Florida. We will initially use this property
for a branch office of our existing bank, which will be housed in a temporary
facility. We plan to construct a permanent facility on this site starting in the
later part of 2000.
The Bonita Springs property was formerly the site of a gas station at
which leaking underground fuel storage tanks caused some contamination of the
subsurface groundwater. The State of Florida has accepted this site for clean-up
under the State's remediation program, and the State has reserved $250,000 to
cover the estimated clean-up costs. Due to the relatively low priority
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level of the site in the State's clean-up program, we cannot predict when the
State will commence or complete the clean-up of the site. We have received an
environmental engineering assessment of the contamination and the required
remediation. Based on this report, we believe that the clean-up of the site will
not disrupt our proposed banking services at the site.
EMPLOYEES
Southern Community Bank presently has approximately 45 full-time
employees. The bank will hire additional employees as needed to support its
growth.
We expect to hire approximately 11 full-time employees and one
part-time employee for Southern Community Bank of Southwest Florida before it
commences operations. We anticipate that Southern Community Bank of Southwest
Florida will hire eight additional full-time employees during its first year of
operations.
LEGAL PROCEEDINGS
From time to time, we are involved in litigation arising from the
ordinary course of our business, such as claims to collect past due loans. As of
the date of this prospectus, we are not engaged in any material legal
proceedings.
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SUPERVISION AND REGULATION
GENERAL
We are subject to an extensive body of state and federal banking laws
and regulations which impose specific requirements and restrictions on, and
provide for general regulatory oversight with respect to, virtually all aspects
of our operations. We are also affected by government monetary policy and by
regulatory measures affecting the banking industry in general. The actions of
the Federal Reserve System affect the money supply, and in general, the lending
abilities of banks by increasing or decreasing the costs and availability of
funds to the banks. Additionally, the Federal Reserve System regulates the
availability of bank credit in order to combat recession and curb inflationary
pressures in the economy by open market operations in United States government
securities, changes in the discount rate on bank borrowings, changes in the
reserve requirements against bank deposits and limitations on interest rates
which banks may pay on time and savings deposits.
The following is a brief summary of some of the statutes, rules and
regulations which affect us. This summary is qualified in its entirety by
reference to the particular statutory and regulatory provisions referred to
below and is not intended to be an exhaustive description of the statutes or
regulations applicable to our business. Any change in applicable laws or
regulations may have a material adverse effect on the business and prospects of
these entities.
SOUTHERN COMMUNITY BANCORP
Southern Community Bancorp is a bank holding company within the meaning
of the Federal Bank Holding Company Act of 1956 and the Florida Interstate
Banking Act. Southern Community Bancorp is registered as a bank holding company
with the Federal Reserve System and is required to file annual reports and other
information regarding its business operations and those of any subsidiary. It is
also subject to the supervision of, and to periodic inspections by, the Federal
Reserve.
The Bank Holding Company Act requires every bank holding company to
obtain the prior approval of the Federal Reserve before:
o acquiring all or substantially all of the assets of a bank;
o acquiring direct or indirect ownership or control of more than five
percent of the voting shares of any bank; or
o merging or consolidating with another bank holding company.
Except as authorized by the Gramm-Leach-Bliley Act of 1999, a bank
holding company is generally prohibited by the Bank Holding Company Act from
engaging in, or acquiring direct or indirect control of more than five percent
of the voting shares of any company engaged in any business other than the
business of banking or managing and controlling banks. Some of the activities
the Federal Reserve has determined by regulation to be proper incidents to the
business of
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banking, and thus permissible for bank holding companies, include:
o making or servicing loans and certain types of leases;
o engaging in certain insurance and discount brokerage activities;
o performing certain data processing services;
o acting in certain circumstances as a fiduciary or investment or
financial advisor;
o owning savings associations; and
o making investments in corporations or projects designed primarily to
promote community welfare.
In determining whether an activity is so closely related to banking as
to be permissible for bank holding companies, the Federal Reserve is required to
consider whether the performance of the particular activities by a bank holding
company or its subsidiaries can reasonably be expected to produce benefits to
the public, such as greater convenience, increased competition and gains in
efficiency that outweigh possible adverse effects, such as undue concentration
of resources, decreased or unfair competition, conflicts of interests and
unsound banking practices. Generally, bank holding companies are required to
obtain prior approval of the Federal Reserve to engage in any new activity not
previously approved by the Federal Reserve. Despite prior approval, the Federal
Reserve may order a bank holding company or its subsidiaries to terminate any
activity or to terminate its ownership or control of any subsidiary when it has
reasonable cause to believe that the 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.
The Bank Holding Company Act and the Federal Change in Bank Control
Act, together with regulations promulgated by the Federal Reserve, require that,
depending on the particular circumstances, either the Federal Reserve's approval
must be obtained or notice must be furnished to the Federal Reserve and not
disapproved prior to any person or company acquiring control of a bank holding
company, such as Southern Community Bancorp, subject to certain exemptions.
Control is conclusively presumed to exist when an individual or company acquires
25 percent or more of any class of voting securities of the bank holding
company. Control is rebuttably presumed to exist if a person acquires 10 percent
or more, but less than 25 percent, of any class of voting securities and either
the bank holding company has registered securities under Section 12 of the
Securities Exchange Act of 1934 or no other person owns a greater percentage of
that class of voting securities immediately after the transaction. Southern
Community Bancorp is required to register its common stock under Section 12
of the Securities Exchange Act of 1934 prior to the offering.
The Federal Reserve, pursuant to regulation and published policy
statements, has maintained that a bank holding company must serve as a source of
financial strength to its subsidiary banks. In adhering to the Federal Reserve's
policy, Southern Community Bancorp may be required to provide
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financial support to a subsidiary bank at a time when, absent such Federal
Reserve policy, it might not be deemed advisable to provide such assistance.
Under the Bank Holding Company Act, the Federal Reserve may also require a bank
holding company to terminate any activity or relinquish control of a non-bank
subsidiary, other than a non-bank subsidiary of a bank, upon the Federal
Reserve's determination that the activity or control constitutes a serious risk
to the financial soundness or stability of any subsidiary depository institution
of the bank holding company. Further, federal bank regulatory authorities have
additional discretion to require a bank holding company to divest itself of any
bank or non-bank subsidiary if the agency determines that divestiture may aid
the depository institution's financial condition.
THE BANKS
As state banks, Southern Community Bank is, and Southern Community Bank
of Southwest Florida will be, subject to the supervision of the Florida
Department of Banking and Finance and the FDIC. Southern Community Bank's
deposits are insured by the FDIC for a maximum of $100,000 per depositor, and
the deposits of Southern Community Bank of Southwest Florida will be similarly
insured. For this protection, the banks must pay a semi-annual statutory
assessment and comply with the rules and regulations of the FDIC. The Florida
Department of Banking and Finance and the FDIC regulate and monitor all areas of
a bank's operations, including:
o security devices and procedures;
o adequacy of capitalization and loss reserves;
o loans;
o investments;
o borrowings;
o deposits;
o mergers;
o issuances of securities;
o payment of dividends;
o interest rates payable on deposits;
o interest rates or fees chargeable on loans;
o establishment of branches;
o corporate reorganizations;
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o maintenance of books and records; and
o adequacy of staff training to carry out safe lending and deposit
gathering practices.
In addition, banks are prohibited from engaging in tie-in arrangements in
connection with any extension of credit, or the offer of any property or
service. The regulatory requirements to which banks are subject also set
forth various conditions regarding the eligibility and qualifications of their
officers and directors.
CAPITAL ADEQUACY REQUIREMENTS
Both Southern Community Bancorp and its banks are subject to regulatory
capital requirements imposed by the Federal Reserve and the FDIC which vary
based on differences in risk profiles. The capital adequacy guidelines issued by
the Federal Reserve are applied to bank holding companies on a consolidated
basis with the banks owned by the holding company. The FDIC's risk-based capital
guidelines apply directly to insured state banks, such as Southern Community
Bank and Southern Community Bank of Southwest Florida, regardless of whether
they are subsidiaries of a bank holding company. Both agencies' requirements,
which are substantially similar, provide that banking organizations must have
capital (as defined in the rules) equivalent to eight percent of risk-weighted
assets. The risk weights assigned to assets are based primarily on credit risks.
Depending upon the riskiness of a particular asset, it is assigned to a risk
category. For example, securities with an unconditional guarantee by the United
States government are assigned to the lowest risk category. The aggregate amount
of assets assigned to each risk category is multiplied by the risk weight
assigned to that category to determine the weighted values, which are added
together to determine total risk-weighted assets.
Both the Federal Reserve and the FDIC have also adopted minimum capital
leverage ratios to be used in tandem with the risk-based guidelines in assessing
the overall capital adequacy of banks and bank holding companies. The guidelines
define a two-tier capital framework. Tier 1 capital consists of common and
qualifying preferred shareholder's equity, less goodwill and other adjustments.
Tier 2 capital consists of mandatory convertible, subordinated, and other
qualifying term debt, preferred stock not qualifying for Tier 1, and a limited
allowance for credit losses up to a designated percentage of risk-weighted
assets. Under these guidelines, institutions must maintain a specified minimum
ratio of "qualifying" capital to risk-weighted assets. At least 50 percent of an
institution's qualifying capital must be "core" or "Tier 1" capital, and the
balance may be "supplementary" or "Tier 2" capital. The guidelines imposed on
the banks include a minimum leverage ratio standard of capital adequacy. The
leverage standard requires top-rated institutions to maintain a minimum Tier 1
capital to assets ratio of three percent, with institutions receiving less than
the highest rating required to maintain a ratio of four percent or greater,
based upon their particular circumstances and risk profiles.
Federal bank regulatory authorities have adopted regulations revising
the risk-based capital guidelines to further ensure that the guidelines take
adequate account of interest rate risk. Interest rate risk is the adverse effect
that changes in market interest rates may have on a bank's financial condition
and is inherent to the business of banking. Under the regulations, when
evaluating a bank's capital adequacy, the revised capital standards now
explicitly include a bank's exposure to declines
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in the economic value of its capital due to changes in interest rates. The
exposure of a bank's economic value generally represents the change in the
present value of its assets, less the change in the value of its liabilities,
plus the change in the value of its interest rate off-balance sheet contracts.
The foregoing capital guidelines could affect our banks in several
ways. If the banks grow rapidly, their capital base may become insufficient to
support continued growth, making an additional capital infusion necessary. The
capital guidelines could also impact the banks' ability to pay dividends. It is
expected that the banks' capital levels will initially be more than adequate.
Rapid growth, poor loan portfolio performance or poor earnings performance, or a
combination of these factors, could change our capital position in a relatively
short period of time. Failure to meet these capital requirements would require
the banks to develop and file with the FDIC a plan describing the means and a
schedule for achieving the minimum capital requirements. In addition, we would
not be able to receive regulatory approval of any application that required
consideration of capital adequacy, such as a branch or merger application,
unless we could demonstrate a reasonable plan to meet the capital requirement
within a reasonable period of time.
DIVIDENDS
Our ability to pay cash dividends will depend entirely upon the amount
of dividends paid by our bank subsidiaries. Additionally, the Florida Business
Corporation Act provides that we may only pay dividends if the dividend payment
would not render us insolvent or unable to meet our obligations as they come
due.
Our banks will be subject to regulatory restrictions on the payment of
dividends, including a prohibition of payment of dividends from the banks'
capital without the prior approval of the Florida Department of Banking and
Finance and the FDIC. Except with the prior approval of the Florida Department
of Banking and Finance, all dividends of any Florida bank must be paid out of
retained net profits from the current period and the previous two years, after
deducting expenses, including losses and bad debts. In addition, any Florida
bank is required to transfer at least 20 percent of its net income to surplus
until their surplus equals the amount of paid-in capital. Our existing bank is
not currently able to pay dividends because it has incurred losses since its
inception.
OTHER LAWS
State usury laws and federal laws concerning interest rates limit the
amount of interest and various other charges collected or contracted by a bank.
Our lending operations will be subject to federal laws applicable to credit
transactions, such as the:
o Federal Truth-In-Lending Act governing disclosures of credit terms
to consumer borrowers;
o Community Reinvestment Act requiring financial institutions to meet
their obligations to provide for the total credit needs of the
communities they serve, including investing their assets in loans to
low and moderate-income borrowers;
o Home Mortgage Disclosure Act requiring financial institutions to
provide
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information to enable public officials to determine whether a
financial institution is fulfilling its obligations to meet the
housing needs of the community it serves;
o Equal Credit Opportunity Act prohibiting discrimination on the basis
of race, creed or other prohibitive factors in extending credit;
o Fair Credit Reporting Act governing the manner in which consumer
debts may be collected by collection agencies; and
o the rules and regulations of various federal agencies charged with
the responsibility of implementing such federal laws.
Our deposit operations are also subject to the:
o 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
o Electronic Funds Transfer Act and Regulation E, issued by the
Federal Reserve to implement that act, which govern 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.
INTERSTATE BANKING AND BRANCHING
Under the Riegle-Neal Interstate Banking and Branching Efficiency Act
of 1994, eligible bank holding companies in any state are permitted, with
Federal Reserve approval, to acquire banking organizations in any other state.
As such, all regional compacts and substantially all then-existing regional
limitations on interstate acquisitions of banking organizations have been
eliminated. The Interstate Banking and Branching Efficiency Act also removed
substantially all of the then-existing prohibitions on interstate branching by
banks. The authority of a bank to establish and operate branches within a state
continues to be subject to applicable state branching laws. Subject to these
laws, a bank operating in any state may now establish one or more branches
within any other state without the establishment of a separate banking structure
within the other state through the merger with an existing bank in that state.
Under current Florida law, our banks may open branch offices throughout Florida
with the prior approval of the Florida Department of Banking and Finance and the
FDIC. In addition, with prior regulatory approval, we will be able to acquire
existing banking operations in other states. Although the Interstate Banking and
Branching Efficiency Act has the potential to increase the number of competitors
in the respective market areas of the banks, we cannot predict the actual impact
of such legislation on the competitive position of the banks.
FINANCIAL MODERNIZATION
The recently enacted Gramm-Leach-Bliley Act of 1999 sought to achieve
significant modernization of the federal bank regulatory framework by allowing
the consolidation of banking institutions with other types of financial services
firms, subject to various restrictions and
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requirements. As of the date of this prospectus, some of its provisions had not
yet taken effect, and many are subject to implementing regulations that have not
yet been adopted by the various regulatory agencies responsible for licensing
and supervising the provision of different types of financial services. In
general, the Gramm-Leach-Bliley Act repealed most of the federal statutory
barriers which separated commercial banking firms from insurance and securities
firms and authorized the consolidation of such firms in a "financial services
holding company." Southern Community Bancorp has no immediate plans to utilize
the structural options created by the Gramm-Leach-Bliley Act, but may develop
such plans in the future. In the meantime, we may provide our customers with a
broader range of financial products and services, including various insurance
products and securities brokerage services, through cooperative arrangements
with one or more suitable third-party vendors.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS OF SOUTHERN COMMUNITY BANCORP
The following table sets forth certain information with respect to our
executive officers and directors.
<TABLE>
<CAPTION>
NAME AGE SOUTHERN COMMUNITY BANCORP
- ---- --- --------------------------
<S> <C> <C>
Charlie W. Brinkley, Jr. .................. 46 Chairman of the Board and Chief Executive Officer
John G. Squires............................ 53 President and Chief Operating Officer
Patrick J. Armstrong....................... 53 Director
Richard M. Dunn............................. 50 Director
Jennings L. Hurt, III ...................... 47 Director
Eugene M. Pascarella........................ 45 Director
Jon C. Peterson............................. 61 Director
John K. Ritenour............................ 48 Director
Stanley H. Sandefur......................... 47 Director
Stephen R. Jeuck ........................... 48 Secretary and Chief Financial Officer
</TABLE>
CHARLIE W. BRINKLEY, JR. has served as Chairman of the Board and Chief
Executive Officer of Southern Community Bancorp since its organization in 1999.
Mr. Brinkley was an organizing director of Southern Bank of Central Florida and
served as its only president and CEO from 1988 to 1996 when it was acquired by
Colonial Bank of Montgomery, Alabama. From 1996 until 1998, Mr. Brinkley
continued to serve as president of Colonial Bank, Florida region. Mr. Brinkley
began his banking career in the Orlando area in 1978 at ComBank of Casselberry,
which was acquired by Freedom Savings and Loan Association in 1983.
JOHN G. SQUIRES has served as President and Chief Operating Officer of
Southern Community Bancorp since its organization in 1999. He was an organizing
director of Southern Community Bank in 1998 and has served as its only president
and CEO. Mr. Squires was also an organizing director of Southern Bank of Central
Florida in 1988 and served as its vice-chairman until its acquisition by
Colonial Bank in 1996. From 1996 until 1997, Mr. Squires continued to serve as
an executive vice president and director of Colonial Bank, Florida region. Mr.
Squires began his Florida banking career in 1978 as president and director of
ComBank of Casselberry which was acquired by Freedom Savings and Loan
Association in 1983.
PATRICK J. ARMSTRONG has served as a director of Southern Community
Bancorp since 1999 and director of Southern Community Bank since 1998. Since
1985, Mr. Armstrong has served as president of Parc Records, Inc.
RICHARD M. DUNN has served as a director of Southern Community Bancorp
since 1999 and director of Southern Community Bank since 1998. Since 1977, Mr.
Dunn has served as president of Richard M. Dunn, D.D.S., P.A.
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JENNINGS L. HURT, III has served as a director of Southern Community
Bancorp since 1999 and director of Southern Community Bank since 1998. Since
1988, Mr. Hurt has served as the managing shareholder of the law firm Rissman,
Weisberg, Barrett, Hurt, Donahue & McLain, P.A., located in Orlando, Florida.
EUGENE M. PASCARELLA has served as a director of Southern Community
Bancorp since 1999 and director of Southern Community Bank since 1998. Since
1984, Mr. Pascarella has served as a principal in Foot and Ankle Associates of
Florida.
JON C. PETERSON has served as a director of Southern Community Bancorp
since 1999. Since 1984, Mr. Peterson has served as chief executive officer of
Peterson Broadcasting. From 1989 to 1996, Mr. Peterson served as a director of
Southern Bank of Central Florida.
JOHN K. RITENOUR has served as a director of Southern Community Bancorp
since 1999 and director of Southern Community Bank since 1998. Since 1988, Mr.
Ritenour has served as chief executive officer of the Insurance Office of
America, Inc.
STANLEY H. SANDEFUR has served as a director of Southern Community
Bancorp since 1999 and director of Southern Community Bank since 1998. Since
1978, Mr. Sandefur has served as president and chief executive officer of
Sandefur Holding Co., Inc. From 1985 to 1997, Mr. Sandefur served as a director
of Seminole National Bank.
STEPHEN R. JEUCK has served as Secretary and Chief Financial Officer of
Southern Community Bancorp since 1999 and director of Southern Community Bank
since 1998. Since 1998, Mr. Jeuck has served as vice president and chief
financial officer of Southern Community Bank. From 1995 until 1997, Mr. Jeuck
served as vice president and controller of Southern Bank of Central Florida and
Colonial Bank, Florida.
PROPOSED NEW DIRECTORS OF SOUTHERN COMMUNITY BANCORP
Following the organization of Southern Community Bank of Southwest
Florida, it is anticipated that Richard Garner, the proposed chairman and CEO of
such bank, and Joel Whittenhall, the proposed president and chief lending
officer of such bank, along with two other directors of the bank yet to be
determined, will be added to the board of directors of Southern Community
Bancorp.
EXECUTIVE OFFICERS AND DIRECTORS OF SOUTHERN COMMUNITY BANK
The following table sets forth certain information with respect to the
executive officers and directors of Southern Community Bank.
NAME POSITION WITH SOUTHERN COMMUNITY BANK
- ---- -------------------------------------
Charlie W. Brinkley, Jr. Chairman of the Board
John G. Squires President and Director
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NAME Position with Southern Community Bank
- ---- -------------------------------------
Patrick J. Armstrong Director
Derek C. Burke Director
Richard M. Dunn Director
Jennings L. Hurt, III Director
Nancy Daniel Outlaw Director
Eugene M. Pascarella Director
John K. Ritenour Director
Stanley H. Sandefur Director
Norman P. Thompson, Jr. Executive Vice President and Chief
Lending Officer
Teague L. Gilliland Executive Vice President and Senior
Operations Officer
Stephen R. Jeuck Vice President and Chief Financial
Officer
All of the executive officers and directors of Southern Community Bank
also serve as executive officers or directors of Southern Community Bancorp
other than Derek C. Burke, Nancy Daniel Outlaw, Norman P. Thompson, Jr. and
Teague L. Gilliland.
DEREK C. BURKE has served as director of Southern Community Bank since
1998. Mr. Burke is the founder and president of the Orlando-based civil
engineering consulting firm, WBQ Design and Engineering, Inc.
NANCY DANIEL OUTLAW has served as director of Southern Community Bank
since 1998. Ms. Outlaw is a licensed real estate broker and manager of the
Longwood, Florida office of Coldwell Banker Residential Real Estate Services.
NORMAN P. THOMPSON, JR. has served as executive vice president and
chief lending officer of Southern Community Bank since its organization in 1998.
From 1996 until 1998, Mr. Thompson served as senior corporate banking executive
for Colonial Bank, Florida region. From 1987 to 1996, Mr. Thompson held various
positions in the corporate banking department of Barnett Bank of Central
Florida, N.A., Orlando, where he was a senior vice president. From 1985 to 1987,
Mr. Thompson served as regional executive for central Florida for Pioneer
Savings Bank, Clearwater. From 1973 to 1985, Mr. Thompson held various positions
with ComBanks Corporation, Winter Park, including service as president of a
newly chartered bank subsidiary of that company. During his tenure there,
ComBanks was merged with Freedom Savings and Loan Association, Tampa.
TEAGUE L. GILLILAND has served as executive vice president and senior
operations officer of
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Southern Community Bank since 1999. From 1996 to 1999, Ms. Gilliland served as
branch manager of the Lake Mary and Longwood, Florida offices of Colonial Bank,
formerly offices of Southern Bank of Central Florida. From 1994 to 1996, Ms.
Gilliland served as a regional trainer for the acquisitions team for AmSouth
Bancorporation, Birmingham, Alabama. From 1986 to 1994, Ms. Gilliland was a
branch administrator and acquisitions coordinator for Orange Bank, Orlando. From
1970 to 1979, Ms. Gilliland worked in various positions for SunTrust Bank of
Central Florida, N.A., Orlando.
PROPOSED EXECUTIVE OFFICERS AND DIRECTORS OF SOUTHERN COMMUNITY BANK OF
SOUTHWEST FLORIDA
The proposed board of directors of Southern Community Bank of Southwest
Florida will consist initially of eight persons from the Bonita Springs and
Naples, Florida communities, plus Mr. Brinkley and Mr. Squires. The executive
officers of the new bank will include Richard L. Garner, its chairman of the
board of directors and chief executive officer, and Joel E. Whittenhall, its
president and chief lending officer, who will also serve as a director.
<TABLE>
<CAPTION>
PROPOSED POSITION WITH SOUTHERN COMMUNITY
NAME BANK OF SOUTHWEST FLORIDA
- ---- ------------------------------------------
<S> <C>
Richard L. Garner Chairman of the Board and Chief Executive Officer
Joel E. Whittenhall President, Director and Chief Lending Officer
Charlie W. Brinkley, Jr. Director
John G. Squires Director
Frederick T. Barber III Director
Gerald T. Berry Director
Dennis E. Gilkey Director
Clark D. Jensen Director
Edward J. Oates Director
G. Donald Thompson, Jr. Director
</TABLE>
RICHARD L. GARNER served as president and CEO of First National Bank of
Bonita Springs (subsequently known as First National Bank of Florida) from 1994
until the acquisition of that bank by Colonial Bank, Montgomery, Alabama, in
1998. From 1998 until 1999, Mr. Garner served as regional president and CEO of
Colonial Bank, Southwest Florida region. From 1991 to 1994, Mr. Garner was
senior vice president and chief lending officer of that bank. From 1982 to 1991,
Mr. Garner held the positions of vice president, branch manager and commercial
lending officer for American Bank in Merritt Island. From 1979 until 1982 Mr.
Garner was a vice president and commercial lending officer for the Bank of
Brevard in Melbourne, Florida.
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<PAGE> 58
JOEL E. WHITTENHALL served as executive vice president and senior
lending officer of First National Bank of Florida (subsequently acquired by
Colonial Bank) from 1994 to 1999. From 1985 to 1992, Mr. Whittenhall was
employed by SunBank/Naples, N.A., serving initially as manager of that bank's
problem loan portfolio and from 1992, as senior vice president and lending group
manager. From 1981 to 1985, Mr. Whittenhall served as a commercial lending
officer for Southeast Bank, N.A. in Naples.
The other local area directors of the bank will include:
FREDERICK T. BARBER, III, a civil engineer and principal of the firm
Agnoli, Barber & Brundage, Inc., residing in Bonita Springs.
GERALD T. BERRY, an attorney and president of the law firm Berry, Day &
McFee, residing in Naples.
DENNIS E. GILKEY, chief executive officer of the real estate
development firm Bonita Bay Properties, Inc., residing in Bonita Springs.
CLARK D. JENSEN, a building contractor and president of Jensen
& Bernier, Inc., residing in Naples.
EDWARD J. OATES, a retired banker and formerly a director of First
National Bank of Florida in Bonita Springs and previously executive vice
president and cashier of Southeast Bank, N.A., residing in Naples.
G. DONALD THOMPSON, JR., an attorney and shareholder in the law firm G.
Donald Thompson, P.A., residing in Bonita Springs.
SALARY CONTINUATION AGREEMENTS AND RESTRICTED STOCK PURCHASE AGREEMENT
Each of Mr. Brinkley and Mr. Squires has entered into a salary
continuation agreement with Southern Community Bank pursuant to which they are
entitled to receive various benefits in the event of the termination of their
employment as a result of normal retirement, death, disability, or following a
change of control of Southern Community Bancorp. With the exception of the
change of control benefit, the benefit payments vest over a 10 year period and
are payable in monthly installments for a benefit period of 15 years (in the
case of Mr. Squires) or 20 years (in the case of Mr. Brinkley), with annual
adjustments for changes in the consumer price index. No benefits will be payable
under either agreement in the event of termination of the employment for cause.
In the event of a change of control of Southern Community Bancorp, the fully
vested normal retirement benefit would be payable to each of Mr. Brinkley and
Mr. Squires for their respective benefit periods, provided that no benefits are
payable that would be subject to the excise tax applicable to excess parachute
payments under the Internal Revenue Code. In addition to the foregoing, in the
event of any termination of their employment as a result of a change of control
of Southern Community Bancorp, Mr. Brinkley would be entitled to receive a lump
sum severance payment equal to 25% of his base salary and Mr. Squires would be
entitled to receive a lump sum severance payment equal to three times his base
salary if such termination occurs prior to January 1, 2002, or two times his
base salary if such termination occurs thereafter.
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<PAGE> 59
On January 1, 1999, Mr. Brinkley entered into an agreement with
Southern Community Bancorp providing for the grant of 50,000 unregistered shares
of common stock, which are non-transferable except as described below. The
agreement provides that 5,000 shares will be granted to Mr. Brinkley each year
for a period of 10 years commencing on January 1, 1999 and on each January 1st
thereafter through the year 2008; however, shares granted after year 2003 will
be granted in the sole discretion of the board of directors based on the
performance of Southern Community Bancorp. Shares of stock granted on January 1,
1999 and January 1, 2000 vest over a five year period from the date of grant
with five percent (5%) of the total number of such shares being vested on the
first anniversary of the date of grant, ten percent (10%) of such shares being
vested on the second anniversary of the date of grant, thirty-five percent (35%)
of such shares being vested on the third anniversary of the date of grant, and
twenty-five percent (25%) of such shares being vested on the fourth and fifth
anniversaries of the date of grant. Shares of stock granted after January 1,
2000 shall vest ratably over a three year period from the date of grant, with
thirty-three percent (33%) of such shares being vested on each of the first,
second and third anniversary of the date of grant. In the event that a majority
of the outstanding shares of Southern Community Bancorp are acquired in a merger
or other transaction requiring approval under the Bank Holding Company Act of
1956, as amended, all shares issuable under the plan will immediately be granted
to Mr. Brinkley and become fully vested shares. If Mr. Brinkley is terminated
without cause, all of the shares granted to him under the plan shall be
immediately and fully vested and transferable without restriction. If Mr.
Brinkley is terminated for cause, Mr. Brinkley forfeits all rights to the stock
except stock which has become vested as of the date of such termination.
Subject to approval by the shareholders of an increase in the number of
shares reserved under our existing stock option plans, the Board of Directors
has approved the grant to Mr. John Squires of options to purchase up to an
additional 67,500 shares of our common stock. Of this total, we will grant an
option to purchase 17,500 shares at an exercise price of $15.00 per share,
subject to vesting on a pro-rata basis over a term of five years commencing as
of January 1, 1998. We will grant an option to purchase the balance of 50,000
shares at a price of $15.00 per share with vesting parallel to the vesting of
the stock granted to Mr. Brinkley pursuant to the above mentioned agreement
after January 1, 2000.
DIRECTORS' STOCK OPTION PLAN
We have adopted the Directors' Statutory Stock Option Plan, effective
as of March 18, 1999. The plan provides for grants of nonqualified stock options
to purchase shares of common stock to directors of Southern Community Bancorp.
By encouraging stock ownership, we seek to motivate such individuals to promote
our success. As of the date of this prospectus, we have granted options to
purchase 70,000 shares of common stock under the plan, with an exercise price of
$15.00 per share. These options represent all of the options available under the
plan.
The board of directors administers and interprets the plan. The board
of directors has complete discretion to determine which directors are eligible
to receive option grants, the number of shares subject to each such grant, the
terms of each option, and the fair market value of the shares of common stock
underlying options. The board of directors may suspend or terminate the plan at
any time. The board of directors may amend or modify the plan at any time,
provided that no such amendment or modification may adversely affect the rights
and obligations of the participants with
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<PAGE> 60
respect to their outstanding options or vested shares without their consent. In
addition, no amendment of the plan may, without the approval of shareholders:
o modify the class of individuals eligible for participation in the
plan;
o amend the provisions of the plan relating to the plan's
administration;
o increase the number of shares of common stock available for issuance
under the plan, except in the event of certain changes to the
capital structure of Southern Community Bancorp; or
o extend the term of options granted under the plan.
The plan will terminate on March 18, 2009; however, such termination will not
affect any options granted under the plan or vested shares.
Each option granted under the Option Plan has a term of 10 years,
subject to earlier termination following the director's termination for
deliberate, willful or gross misconduct. The maximum number of shares for which
options may be granted to any director pursuant to the plan is 10,000 shares. In
no event, will an option be granted to a director who, at the time such option
is granted, owns shares possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of Southern Community Bancorp. The
minimum number of shares for which options may be exercised at any one time is
100 shares. The purchase price for shares of common stock is payable in cash
immediately upon the exercise of the option. Each option granted under the plan
is non-transferable by the director and exercisable during the director's
lifetime only by such director. However, in the event that the director dies
prior to exercising an option, such option may be exercised by the personal
representative of the estate of such director for a period of one year after
such representative's appointment. If options granted under the plan expire or
are terminated for any reason without being exercised, the shares of common
stock underlying such grant will again be available for purposes of the plan.
EXECUTIVE COMPENSATION
Our most highly compensated executive officers are Charlie W. Brinkley,
Jr., and John G. Squires, who currently receive an annual base salary of
$150,000. During 1999, Mr. Brinkley and Mr. Squires each received an annual
salary of $135,000 from Southern Community Bank.
EMPLOYEES' INCENTIVE STOCK OPTION PLAN
We have adopted the Employees' Incentive Stock Option Plan, effective
as of March 18, 1999. The plan provides for grants of incentive stock options to
purchase shares of common stock to certain officers and key management employees
of Southern Community Bancorp and its subsidiaries. The purpose of the plan is
to attract and retain qualified capable management personnel, provide additional
incentives to such persons and promote the success of our business. As of the
date of this prospectus, 93,000 options have been granted at the initial public
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<PAGE> 61
offering price of the common stock offered hereby, and options to purchase an
additional 13,000 shares of common stock remain available for issuance pursuant
to the plan.
The board of directors administers and interprets the plan. The board
of directors has complete discretion to determine which employees are eligible
to receive option grants, the number of shares subject to each such grant, the
time or times when options will be granted, the price of the shares subject to
each option, the time when each option may be exercised, any other provisions of
the option agreement and all questions relating to the administration of the
plan. The shareholders of Southern Community Bancorp may terminate, modify or
amend the plan at any time. In addition, the board of directors may amend or
modify the plan at any time, provided that no such amendment or modification may
adversely affect the rights and obligations of the participants with respect to
their outstanding options or vested shares without their consent. In addition,
no amendment of the plan may, without the approval of shareholders:
o increase the number of shares for which options may be granted under
the plan;
o increase the purchase price for the shares subject to options;
o alter the periods during which options may be granted or exercised;
o alter the provisions relating to the determination of employees to
whom options may be granted;
o alter the provisions relating to the annual dollar limitation upon
options granted to any employee;
o alter the provisions relating to the transferability of the options;
or
o alter the provisions relating to the employment status of an
employee to whom an option may be granted.
The plan will terminate on March 18, 2009; however, such termination will not
affect any options granted under the plan or vested shares.
Each option granted under the plan has a maximum term of 10 years,
subject to earlier termination following the participant ceasing to be an
employee. The exercise price of an option granted under the plan must be at
least 100% of the fair market value of the stock subject to the option on the
date of grant (or 110% with respect to an option granted to a holder of more
than 10% of the combined voting power of all classes of stock of Southern
Community Bancorp). The minimum number of shares for which options may be
exercised at any one time is 100 shares. In general, options vest ratably over a
five year period commencing one year from the date of grant. The purchase price
for shares of common stock is payable in cash immediately upon the exercise of
the option. Each option granted under the plan is non-transferable and
exercisable only during the holder's lifetime. In the event that the holder dies
prior to exercising an option, such option may be exercised by the personal
representative of the estate of such holder for a period of one year after such
representative's appointment. In the event that the holder is terminated for any
reason other
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<PAGE> 62
than death, such option may be exercised at any time prior to the expiration
date of the option or within three months after the date of such termination (12
months in the case of an employee who is disabled), whichever is earlier, but
only to the extent such holder had the right to exercise such option at the date
of such termination; provided, however, that, if the holder's employment is
terminated as a result of deliberate, willful or gross misconduct, all rights
under the option shall terminate and expire upon such termination. If options
granted under the plan expire or are terminated for any reason without being
exercised, the shares of common stock underlying such grant will again be
available for purposes of the plan.
In the event of a reorganization, merger or consolidation in which
Southern Community Bancorp is not the surviving corporation, the sale of
substantially all of the assets of Southern Community Bancorp to another
corporation, or a change in control or threatened change in control of Southern
Community Bancorp, all options granted prior to such event under the plan shall
become immediately exercisable. Unless otherwise determined by the board of
directors, the term "control" shall refer to the acquisition of ten percent
(10%) or more of the voting securities of Southern Community Bancorp by any
person or group acting in concert.
EMPLOYEE STOCK PURCHASE PLAN
We have established an employee stock purchase plan under which a total
of 15,000 shares of our common stock will be made available for sale to our
employees. The board of directors administers the plan. Employees are eligible
to participate in the plan if they are full-time employees employed by us or a
designated subsidiary for at least 90 consecutive days. The plan permits
eligible employees to purchase common stock through payroll deductions, which,
subject to certain limitations, may not exceed 10% of an employee's
compensation. The minimum purchase each month by an eligible employee is one
share of common stock. The purchase price of each share of common stock under
the purchase plan will be equal to the fair market value per share of common
stock on the date of purchase, but will never be less than $15.00 per share.
Eligible employees have the opportunity to enroll in the purchase plan
beginning on March 1 and ending on March 31 every year. Employees may terminate
their participation in the purchase plan at any time. Participation ends
automatically upon termination of employment. In the event that an employee
participating in the plan ceases to be our employee, we have the right to
repurchase all or any portion of the shares purchased by such employee under the
plan at any time during the following 24 months for a purchase price equal to
the fair market value of the stock at the time of such repurchase. The plan will
terminate upon the earlier of September 16, 2004, or the date all of the shares
reserved for purchase under the purchase plan have been purchased, unless the
board of directors terminates it sooner. The board of directors also has the
right to amend or suspend the plan at any time without prior notice.
CERTAIN TRANSACTIONS
From time to time, Southern Community Bank makes loans to its executive
officers and directors in accordance with its usual loan approval criteria. We
made all such loans on terms, including interest rates and collateral, and are
subject to conditions that are applicable to loans we
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make to unaffiliated parties. As of the date of this prospectus, the aggregate
balance of all such loans was $4,763,000. In addition, the bank has approved an
unsecured line of credit for each of our directors and Mr. Burke and Ms. Outlaw,
directors of Southern Community Bank, in the amount of $75,000. Such lines of
credit are subject to renewal on an annual basis. All extensions of credit to
executive officers and directors of the bank are subject to approval by the full
board of directors with the interested person abstaining from any participation
in the discussion or decision with respect to his or her own loan.
Southern Community Bank has entered into a lease agreement with one of
our directors, Patrick Armstrong, pursuant to which the bank leases the site of
its Altamonte Springs branch office. The term of the lease is for a period of 20
years expiring in 2018 which may be extended by the bank for up to 10 additional
years. The rent payments are $10,070 per month through the first five years of
the lease, increasing at the rate of 4% per year thereafter.
Southern Community Insurance Agency, Inc., a wholly owned subsidiary of
Southern Community Bank, has entered into a relationship with Insurance Office
of America, Inc., an insurance agency owned by on of our directors, John
Ritenour. Insurance Office of America, Inc. will pay Southern Community
Insurance Agency, Inc. a percentage of the commissions received by Insurance
Office of America, Inc. from the sale of insurance products to customers
referred by Southern Community Insurance Agency, Inc.
We will utilize a portion of the proceeds of the offering to pay the
organizers of our proposed new bank for the organizational costs which they have
incurred (and will incur) in establishing the new bank. The organizers of the
new bank are the persons designated as the proposed directors of the new bank,
including two of our current directors. See "Management - Proposed Executive
Offices and Directors of Southern Community Bank of Southwest Florida." We
estimate that these costs will be approximately $500,000. If the offering is
not successful, the organizers of the new bank will be required to bear all of
these expenses.
We intend to grant stock options to each of the organizers (other than
Mr. Brinkley and Mr. Squires) of our proposed new bank at the time it is opened.
These individuals will each receive options for 5,000 shares, with an exercise
price of $16.50 per share. The other terms of these options will be equivalent
to the terms of our existing director stock options.
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SECURITIES OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 31, 2000, the number and
percentage of shares of Southern Community Bancorp's outstanding common stock
which are beneficially owned, directly or indirectly, by:
o each shareholder who owns more than 5% of the outstanding shares;
o each of Southern Community Bancorp's directors;
o Southern Community Bancorp's named executive officers; and
o all of Southern Community Bancorp's directors and executive officers
as a group.
We determine beneficial ownership based on the rules of Securities and
Exchange Commission. In general, beneficial ownership includes shares over which
the indicated person has sole or shared voting or investment power and shares
which he or she has the right to acquire within 60 days of March 31, 2000.
Unless otherwise indicated, the persons listed have sole voting and investment
power over the shares beneficially owned.
<TABLE>
<CAPTION>
POSITION WITH
SOUTHERN SHARES
COMMUNITY BENEFICIALLY
NAME BANCORP OWNED PERCENTAGE
- ---- -------------- ----- -----------
<S> <C> <C> <C>
Charlie W. Brinkley, Jr. (1).......... Chairman and 57,404 6.4%
CEO
John G. Squires (2)................... President, 57,596 6.4%
COO and
Director
Patrick J. Armstrong (3).............. Director 43,333 4.8%
Richard M. Dunn (3)................... Director 43,333 4.8%
Jennings L. Hurt, III (3)............. Director 60,000 6.7%
Eugene M. Pascarella (3).............. Director 43,333 4.8%
Jon C. Peterson (3)................... Director 43,333 4.8%
John K. Ritenour (3).................. Director 50,000 5.6%
Stanley H. Sandefur (3)............... Director 59,999 6.7%
Stephen R. Jeuck (4).................. Secretary and 1,802 0.2%
CFO
All executive officers
and directors as a group
(9 persons)................................... 458,331 47.0%
</TABLE>
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- -----------------
(1) Includes 250 shares that are subject to disposition restrictions and 7,000
shares issuable upon exercise of outstanding stock options.
(2) Includes 7,000 shares issuable upon exercise of outstanding stock options.
(3) Includes 10,000 shares issuable upon exercise of outstanding stock options.
(4) Includes 800 shares issuable upon exercise of outstanding stock options.
Our directors and executive officers have indicated that they intend to
purchase a minimum of 330,000 shares in the offering.
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DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of Southern Community Bancorp consists of
10,000,000 shares of common stock, par value $1.00 per share. As of the date of
this prospectus, 890,298 shares of common stock were issued and outstanding.
COMMON STOCK
Subject to the rights of the holders of any outstanding shares of
preferred stock and any restrictions that may be imposed by any lender to
Southern Community Bancorp, holders of common stock are entitled to receive
ratably dividends, if any, declared by the board of directors out of funds
legally available for dividends. See "Dividend Policy." In the event of the
liquidation, dissolution or winding up of Southern Community Bancorp, holders of
common stock are entitled to share ratably, based on the number of shares held,
in the assets, if any, remaining after payment of all the debts and liabilities
of Southern Community Bancorp.
Holders of common stock are entitled to one vote per share for each
share held of record on any matter submitted to the holders of common stock for
a vote. Because holders of common stock do not have cumulative voting rights
with respect to the election of directors, the holders of a majority of the
shares of common stock represented at a meeting can elect all of the directors.
Holders of common stock do not have preemptive or other rights to subscribe for
or purchase any additional shares of capital stock issued by Southern Community
Bancorp or to convert their common stock into any other securities. There are no
redemption or sinking fund provisions applicable to the common stock.
ANTI-TAKEOVER PROVISIONS
GENERAL. The Florida Business Corporation Act contains provisions
designed to enhance the ability of the board of directors to respond to attempts
to acquire control of Southern Community Bancorp. These provisions may be deemed
to have an anti-takeover effect and may discourage takeover attempts which have
not been approved by the board of directors. This could include takeover
attempts that some of our shareholders may deem to be in their best interest.
These provisions may also adversely affect the price that a potential purchaser
would be willing to pay for our common stock and deprive you of the opportunity
to obtain a takeover premium for your shares. To the extent that takeover
attempts are discouraged, temporary fluctuations in the market price of the
common stock resulting from actual or rumored takeover attempts may be
inhibited. These provisions also could make the removal of incumbent management
more difficult and may permit a minority of our directors and the holders of a
minority of our outstanding voting stock to prevent, discourage or make more
difficult a merger, tender offer or proxy contest, even though the transaction
may be favorable to the interests of shareholders. These provisions could also
potentially adversely affect the market price of the common stock.
The following briefly summarizes protective provisions contained in the
Florida Business Corporation Act and is not intended to be a complete
description of all the features and consequences of these provisions. The
following is qualified in its entirety by reference to the articles of
incorporation of Southern Community Bancorp and the relevant provisions of
Florida law.
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AUTHORIZED BUT UNISSUED STOCK. The authorized but unissued shares of
common 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 may enable the board of directors
to issue shares of stock to persons friendly to existing management. This may
have the effect of discouraging attempts to obtain control of Southern Community
Bancorp through a proxy contest, tender offer, merger or otherwise, thereby
protecting the continuity of current management.
EVALUATION OF ACQUISITION PROPOSALS. The Florida Business Corporation
Act expressly permits the board of directors, when evaluating any proposed
tender or exchange offer, any merger, consolidation or sale of substantially all
of the assets of Southern Community Bancorp, or any similar extraordinary
transaction, to consider (a) all relevant factors including, without limitation,
the social, legal, and economic effects on the employees, customers, suppliers,
and other constituencies of Southern Community Bancorp and its subsidiaries, on
the communities and geographical areas in which Southern Community Bancorp and
its subsidiaries operate or are located, and on any of the business and
properties of Southern Community Bancorp or any of its subsidiaries, and (b) the
consideration being offered, not only in relation to the then current market
price for the Southern Community Bancorp's outstanding shares of capital stock,
but also in relation to the then current value of Southern Community Bancorp in
a freely negotiated transaction and in relation to the board of directors'
estimate of the future value of Southern Community Bancorp as an independent
going concern. The board of directors believes that these provisions are in the
long-term best interests of Southern Community Bancorp and its shareholders.
CONTROL SHARE ACQUISITIONS. We are currently subject to the Florida
control share acquisitions statute which is designed to afford shareholders of
public corporations in Florida protection against acquisitions in which a
person, entity or group seeks to gain voting control of the public corporation.
With enumerated exceptions, the statute provides that shares of a public
corporation acquired within certain specific ranges will not possess voting
rights in the election of directors unless the voting rights are approved by a
majority vote of the public corporation's disinterested shareholders.
Disinterested shares are shares other than those owned by the acquiring person
or by a member of a group with respect to a control share acquisition, or by any
officer of the corporation or any employee of the corporation who is also a
director. The specific acquisition ranges that trigger the statute are:
acquisitions of shares possessing one-fifth or more but less than one-third of
all voting power; acquisitions of shares possessing one-third or more but less
than a majority of all voting power; or acquisitions of shares possessing a
majority of more of all voting power. Under certain circumstances, the statute
permits the acquiring person to call a special shareholders meeting for the
purpose of considering the grant of voting rights to the holder of the control
shares. Unless otherwise provided in a corporation's articles of incorporation
or bylaws before a control share acquisition has occurred, in the event the
shares acquired in a control share acquisition are accorded full voting rights
and the acquiring person has acquired a majority or more of all voting power,
then all shareholders of the public corporation have dissenter's rights to
receive fair value for their shares. There is currently no provision in our
articles of incorporation or our bylaws limiting or eliminating such rights. The
statute also enables a corporation to provide the redemption under certain
circumstances of control shares with no voting rights. Among the acquisitions
specifically excluded from the statute are acquisitions consummated pursuant to
a merger or plan of share exchange in compliance with law if the public
corporation is a party to the agreement of merger or plan or share exchange. A
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corporation may opt-out of the statute by so providing in its articles of
incorporation. We have not opted out of the statute.
TRANSACTIONS WITH INTERESTED SHAREHOLDERS. We are also currently
subject to the Florida affiliated transactions statute which, with enumerated
exceptions, places restrictions on mergers, consolidations, sales of assets,
liquidations, reclassifications or other similar kinds of transactions with or
between a public corporation in Florida and any person who owns, directly or
indirectly, 10% or more of the voting power of the outstanding voting shares of
the public corporation. The statute provides that the public corporation may not
engage in any affiliated transaction with any 10% or greater shareholder of the
corporation for a period of two years following the date the person became a 10%
shareholder unless before the date the person became a 10% shareholder either
(a) the affiliated transaction or (b) the purchase of shares that first made the
shareholder a 10% shareholder is approved by a majority of the "disinterested"
members of the board of directors of the corporation. A member of the board is
"disinterested" if the director is not a present or former officer or employee
of the public corporation or a related corporation. The statute further provides
that, subject to various exceptions, a public corporation may not engage at any
time in an affiliated transaction with a 10% shareholder unless the transaction
complies with all of the requirements of the public corporation's articles of
incorporation and either (a) the transaction is approved by the board of
directors of the public corporation before the date the shareholder first became
a 10% shareholder, or the purchase of shares made by the 10% shareholder on the
date the shareholder first became a 10% shareholder has been approved by the
board of directors of the public corporation before the date the shareholder
first became a 10% shareholder, (b) the transaction is approved by the
affirmative vote of the holders of a majority of the outstanding voting shares
not beneficially owned by the 10% shareholder proposing the transaction at a
meeting called for that purposes no earlier than two years after the date the
shareholder first became a 10% shareholder, or (c) the transaction meets
specified fair price and form of consideration requirements. A company may
opt-out of the affiliated transaction statute by so providing in its articles of
incorporation. We have not opted out of the statute.
TRANSFER AGENT AND REGISTRAR
Unless we otherwise become required by law or administrative action to
appoint an independent transfer agent and registrar, or our board of directors
otherwise deems it appropriate to do so, we will act as transfer agent and
registrar for our common stock.
LIMITED LIABILITY AND INDEMNIFICATION
Under the Florida Business Corporation Act, a director is not
personally liable for monetary damages to the corporation or any other person
for any statement, vote, decision, or failure to act unless (i) the director
breached or failed to perform his duties as a director and (ii) a director's
breach of, or failure to perform, those duties constitutes (1) a violation of
the criminal law, unless the director had reasonable cause to believe his
conduct was lawful or had no reasonable cause to believe his conduct was
unlawful, (2) a transaction from which the director derived an improper personal
benefit, either directly or indirectly, (3) a circumstance under which an
unlawful distribution is made, (4) in a proceeding by or in the right of the
corporation to procure a judgment in its favor or by or in the right of a
shareholder, conscious disregard for the best interest of the corporation or
willful
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misconduct, or (5) in a proceeding by or in the right of someone other than the
corporation or a shareholder, recklessness or an act or omission which was
committed in bad faith or with malicious purpose or in a manner exhibiting
wanton and willful disregard of human rights, safety, or property. A corporation
may purchase and maintain insurance on behalf of any director or officer against
any liability asserted against him and incurred by him in his capacity or
arising out of his status as such, whether or not the corporation would have the
power to indemnify him against such liability under the Florida Business
Corporation Act.
The articles of incorporation and bylaws of Southern Community Bancorp
provide that we shall, to the fullest extent permitted by applicable law, as
amended from time to time, indemnify all directors of Southern Community
Bancorp, as well as any officers or employees of Southern Community Bancorp to
whom we have agreed to grant indemnification.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the offering, we will have a minimum of 1,090,298
shares and a maximum of 1,940,298 shares of common stock outstanding. Except for
shares held by affiliates of Southern Community Bancorp, almost all of our
outstanding shares will be freely tradeable without restriction or registration
under the Securities Act of 1933. Affiliates of Southern Community Bancorp will
need to comply with the resale limitations of Rule 144 under the Securities Act
of 1933. Rule 144 defines an "affiliate" as a person who directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, a company. Affiliates of a company generally include its
directors, officers and principal shareholders and the directors and executive
officers of its principal subsidiaries.
Purchasers of the common stock in the offering, other than affiliates,
may resell their shares immediately. Our affiliates will be subject to the
volume and other limitations of Rule 144. Rule 144 in general permits affiliates
to sell within any three-month period a number of shares that does not exceed
the greater of one percent 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
Southern Community Bancorp.
64
<PAGE> 70
TERMS OF OFFERING
We are offering a minimum of 200,000 shares and a maximum of 1,050,000
shares of our common stock at a price of $16.50 per share.
MINIMUM SUBSCRIPTION
Each subscriber must agree to purchase a minimum of 1,000 shares.
PLAN OF DISTRIBUTION
We will not utilize an underwriter to offer the shares. Instead,
certain of our executive officers will offer the shares on our behalf on a "best
efforts" basis. These officers will not receive any commissions or additional
compensation for these efforts.
EXPIRATION DATE
The initial expiration date of the offering is September 30, 2000.
However, we have the right to extend the expiration date without notice to
subscribers until December 31, 2000.
ESCROW TERMS
We will deposit all amounts received from each subscriber into one of
two escrow accounts which we have established with SunTrust Bank, as escrow
agent. Each subscriber in the offering must designate the escrow account into
which we should deposit the subscriber's funds.
We have established the first escrow account for the purpose of
capitalizing our proposed new bank subsidiary, Southern Community Bank of
Southwest Florida (in organization). The escrow agent will hold all of the
amounts deposited in the first escrow account subject to the following
conditions:
o The escrow agent will return all of the funds deposited in the first
escrow account to subscribers, without interest or deduction, in the
event that we do not sell at least 610,000 shares with proceeds
designated for the first escrow account (i.e., at least $10,065,000)
prior to the expiration date of the offering.
o If we sell at least 610,000 shares with proceeds designated for the
first escrow account before the expiration date, then the escrow
agent will continue to hold the amounts in the first escrow account
until we have received all required regulatory approvals to open
Southern Community Bank of Southwest Florida. At that time, the
escrow agent will release the amounts in the first escrow account to
us, and we will contribute the proceeds to Southern Community Bank
of Southwest Florida.
o After we have sold 610,000 shares with proceeds designated for the
first escrow account, we may continue to offer any unsold shares
until the expiration date of the
65
<PAGE> 71
offering. Subscribers to these shares may continue to designate that
their funds be deposited in the first escrow account.
o If we do not obtain all required regulatory approvals to open
Southern Community Bank of Southwest Florida by December 31, 2000,
then the escrow agent will return all of the funds deposited in the
first escrow account to subscribers, without interest or deduction.
We have established the second escrow account for the principal purpose
of providing additional working capital for our existing bank subsidiary,
Southern Community Bank. The escrow agent will hold all of the subscription
funds deposited the second escrow account subject to the following conditions:
o If we have not sold at least 200,000 shares with proceeds designated
for the second escrow account (i.e., at least $3,300,000) prior to
the expiration date of the offering, then the escrow agent will
return all of the funds deposited in the second escrow account to
subscribers, without interest or deduction.
o If we sell 200,000 shares with proceeds designated for the second
escrow account prior to the expiration date, then the escrow agent
will release the amount of $3,300,000 to us and we will contribute
this amount to Southern Community Bank.
o If we sell more than 200,000 shares with proceeds designated for the
second escrow account, then our Board of Directors will instruct the
escrow agent whether to transfer the excess amounts to the first
escrow account or to release the funds to us for contribution to
Southern Community Bank. The escrow agent will hold any amounts
which are transferred to the first escrow account on the same terms
as amounts initially deposited in the first escrow account.
If we fulfill the conditions of the release of funds from the first
escrow account, we will complete the sale of shares pursuant to the first escrow
account, even if we do not fulfill the conditions for the release of funds from
the second escrow account. Likewise, if we fulfill the conditions for the
release of funds from the second escrow account but not the first escrow
account, then we will complete the sale of shares pursuant to the second escrow
account.
The escrow accounts will be interest bearing accounts. We will retain
all interest earned on the accounts, regardless of whether the offering is
completed or canceled.
ISSUANCE OF SHARES
We will issue shares to subscribers at the same time as the escrow
agent releases the proceeds from each escrow account to us. As a result,
subscribers may receive shares at different times.
66
<PAGE> 72
CANCELLATION OF OFFERING
We have the right to cancel the offering at any time prior to the
release of funds from either of the escrow accounts. If we cancel the offering,
the escrow agent will promptly return all funds received from subscribers,
without interest or deduction.
HOW TO SUBSCRIBE
If you desire to purchase shares of our common stock you must:
o Complete and sign the appropriate Subscription Agreement
accompanying this prospectus;
o Make full payment for the purchase price for the shares in United
States currency by check, bank draft or money order payable to
"SunTrust Bank - Southern Community Bancorp Escrow Account"; and
o Deliver the executed Subscription Agreement, together with full
payment for the purchase price, in person or by mail, to the address
shown in the form.
SUBSCRIPTION TERMS
We reserve the right to disregard any subscription which is not fully
paid when we receive it. No subscription will be binding until we have accepted
it, and we may refuse to accept any subscription for shares, in whole or in
part, for any reason. In determining which subscriptions to accept, in whole or
in part, we may take into account the order in which we receive subscriptions
and a subscriber's potential to do business with, or to refer customers to,
either or both of the banks. In the event we reject all or part of your
subscription, the escrow agent will refund by mail all or the appropriate
portion of the amount paid by you with the subscription, without interest,
promptly after the rejection.
If you have any questions about the offering or how to subscribe,
please call Charlie Brinkley or John Squires in Orlando at (407) 648-1844. If
you subscribe, you should retain a copy of the completed subscription documents
for your records.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for
Southern Community Bancorp by Shutts & Bowen LLP, Orlando, Florida.
EXPERTS
The consolidated financial statements of Southern Community Bancorp as
of December 31, 1999 and 1998, included in this prospectus have been audited by
Hacker, Johnson, Cohen & Grieb, P.A., independent certified public accountants,
as stated in their opinion, which has been rendered upon the authority of said
firm as experts in accounting and auditing.
67
<PAGE> 73
ADDITIONAL INFORMATION
Southern Community Bancorp has filed with the Securities and Exchange
Commission a registration statement on Form SB-2 under the Securities Act of
1933, as amended. The registration statement covers the common stock offered in
the offering. As permitted by the rules and regulations of the Securities and
Exchange Commission, this prospectus does not contain all of the information
contained in the registration statement and its exhibits. Prospective investors
may refer to the registration statement and its exhibits for further information
concerning the securities offered by this prospectus.
Each statement contained in this prospectus as to the contents of a
document filed as an exhibit to the registration statement is qualified by
reference to that exhibit for a complete statement of its terms and conditions.
Copies of these materials, as well as periodic reports and information filed by
Southern Community Bancorp, can be obtained upon payment of the fees prescribed
by the Securities and Exchange Commission, or may be examined at the offices of
the Securities and Exchange Commission without charge, at the public reference
section of the SEC, Room 1024, 450 Fifth Street, NW, Washington, DC 20549.
The Securities and Exchange Commission also maintains a website that
contains reports, proxy and information statements and other information
regarding registrants such as Southern Community Bancorp that file
electronically with the Securities and Exchange Commission. The address of this
website is http://www.sec.gov.
We have filed or will file various applications with the Florida
Department of Banking and Finance, the FDIC and the Federal Reserve. You should
rely only on information in this prospectus and in our related registration
statement in making an investment decision. If other available information is
inconsistent with information in this prospectus, including information in
public files or provided by the bank regulatory agencies, such other information
is superseded by the information in this prospectus. Projections appearing in
the applications to such agencies were based on assumptions that the organizers
believed were reasonable at the time, but which may have changed or may
otherwise be wrong. Southern Community Bancorp, Southern Community Bank and
Southern Community Bank of Southwest Florida (in organization) specifically
disclaim all projections for purposes of this prospectus and caution prospective
investors against placing reliance on them for purposes of making an investment
decision.
68
<PAGE> 74
SOUTHERN COMMUNITY BANCORP AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C>
Independent Auditors' Report....................................................................................F-2
Consolidated Balance Sheets, December 31, 1999 and 1998.........................................................F-3
Consolidated Statements of Operations for the Year Ended December 31, 1999 and
for the Period from December 15, 1998
(commencement of banking operations) to December 31, 1998..............................................F-4
Consolidated Statements of Changes in Stockholders' Equity for the Year Ended
December 31, 1999 and for the Period from December 15, 1998
(commencement of banking operations)
to December 31, 1998...................................................................................F-5
Consolidated Statements of Cash Flows for the Year Ended December 31, 1999 and
for the Period from December 15, 1998
(commencement of banking operations) to December 31, 1998..............................................F-6
Notes to Consolidated Financial Statements for the Year Ended December 31,
1999 and for the Period from December 15, 1998
(commencement of banking operations) to December 31, 1998.......................................F-7 - F-23
</TABLE>
All schedules are omitted because of the absence of the conditions
under which they are required or because the required information is included in
the Consolidated Financial Statements and related Notes.
F-1
<PAGE> 75
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Southern Community Bancorp
Orlando, Florida:
We have audited the accompanying consolidated balance sheets of
Southern Community Bancorp and its wholly-owned subsidiary, Southern Community
Bank (together, the "Company") at December 31, 1999 and 1998, and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for the year ended December 31, 1999 and for the period from December 15,
1998 (commencement of banking operations) to December 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company
at December 31, 1999 and 1998, and the results of its operations and its cash
flows for the year ended December 31, 1999 and for the period from December 15,
1998 (commencement of banking operations) to December 31, 1998, in conformity
with generally accepted accounting principles.
HACKER, JOHNSON, COHEN & GRIEB PA
Orlando, Florida
January 26, 2000
F-2
<PAGE> 76
SOUTHERN COMMUNITY BANCORP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------------
1999 1998
---- ----
<S> <C> <C>
ASSETS
Cash and due from banks .......................................... $ 4,519,649 133,920
Federal funds sold ............................................... -- 13,124,000
------------ ------------
Cash and cash equivalents ............................... 4,519,649 13,257,920
Securities available for sale .................................... 11,997,900 --
Loans receivable, net of allowance for loan losses of
$621,000 in 1999 and $12,000 in 1998 .................... 61,362,573 1,202,605
Accrued interest receivable ...................................... 554,036 31,061
Federal Home Loan Bank stock, at cost ............................ 212,400 --
Premises and equipment, net ...................................... 4,317,768 1,850,072
Deferred income tax asset ........................................ 811,146 148,031
Other assets ..................................................... 88,696 116,748
------------ ------------
Total assets ............................................ $ 83,864,168 16,606,437
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Noninterest-bearing demand deposits ..................... 10,768,768 57,740
Money-market deposits ............................................ 14,051,702 3,152,763
Savings and NOW deposits ......................................... 5,757,244 35,371
Time deposits .................................................... 34,485,277 27,730
------------ ------------
Total deposits .......................................... 65,062,991 3,273,604
Federal funds purchased ................................. 6,000,000 --
Official checks .................................................. 662,237 1,035,385
Accrued interest payable and other liabilities ................... 300,453 64,749
------------ ------------
Total liabilities ....................................... 72,025,681 4,373,738
------------ ------------
Commitments and contingencies (Notes 4, 6, 7 and 16)
Stockholders' equity:
Common stock, $1 par value, 10,000,000 shares authorized,
884,425 and 834,425 shares issued and outstanding ....... 884,425 834,425
Additional paid-in capital .............................. 12,381,950 11,681,950
Accumulated deficit .............................................. (1,225,661) (283,676)
Accumulated other comprehensive income (loss) .................... (202,227) --
------------ ------------
Total stockholders' equity .............................. 11,838,487 12,232,699
------------ ------------
Total liabilities and stockholders' equity .............. $ 83,864,168 16,606,437
============ ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-3
<PAGE> 77
SOUTHERN COMMUNITY BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
DECEMBER 15, 1998
(COMMENCEMENT
OF BANKING
YEAR ENDED OPERATIONS) TO
DECEMBER 31, DECEMBER 31,
1999 1998
------------- -----------------
<S> <C> <C>
Interest income:
Loans receivable ..................................... $ 2,715,861 3,908
Securities available for sale ........................ 398,178 --
Other interest-earning assets ........................ 285,012 28,311
----------- -----------
Total interest income .......................... 3,399,051 32,219
----------- -----------
Interest expense:
Deposits ........................................... 1,168,568 6,641
Other borrowings ................................... 17,171 --
----------- -----------
Total interest expense ............................. 1,185,739 6,641
----------- -----------
Net interest income ......................................... 2,213,312 25,578
Provision for loan losses .......................... 609,000 12,000
----------- -----------
Net interest income after provision for loan losses ......... 1,604,312 13,578
----------- -----------
Noninterest income:
Service charges on deposit accounts ................ 53,036 --
Other service charges and fees ..................... 62,858 --
----------- -----------
Total noninterest income ........................... 115,894 --
----------- -----------
Noninterest expense:
Salaries and employee benefits ....................... 1,464,520 46,659
Occupancy expense .................................... 804,439 15,593
Data processing ...................................... 127,413 10,092
Printing and office supplies ......................... 148,313 5,356
Marketing and advertising ............................ 173,586 1,521
Professional fees .................................... 135,682 1,000
Telephone ............................................ 71,354 490
Travel and entertainment ............................. 54,562 1,301
Other ................................................ 236,545 1,871
----------- -----------
Total noninterest expense ...................... 3,216,414 83,883
----------- -----------
Loss before income tax benefit ................. (1,496,208) (70,305)
Income tax benefit .......................................... (554,223) (26,282)
----------- -----------
Net loss ........................................... $ (941,985) (44,023)
=========== ===========
Basic and diluted loss per share ................... $ (1.10) (.05)
=========== ===========
Weighted-average number of common shares outstanding $ 855,258 834,425
=========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-4
<PAGE> 78
SOUTHERN COMMUNITY BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
COMPRE-
ADDITIONAL HENSIVE TOTAL
COMMON PAID-IN ACCUMULATED INCOME STOCKHOLDERS'
STOCK CAPITAL DEFICIT (LOSS) EQUITY
----- ------- ------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Balance at December 15, 1998
(Commencement of
banking operations) $ 834,425 11,681,950 (239,653) -- 12,276,722
Comprehensive income (loss) -
Net loss for the period -- -- (44,023) -- (44,023)
----------- ----------- ----------- ----------- -----------
Balance at December 31, 1998 834,425 11,681,950 (283,676) -- 12,232,699
-----------
Comprehensive income (loss):
Net loss for the year -- -- (941,985) -- (941,985)
Net change in unrealized loss on
securities available for sale,
net of tax -- -- -- (202,227) (202,227)
-----------
Comprehensive income (loss) (1,144,212)
Sale of common stock (50,000
shares) 50,000 700,000 -- -- 750,000
----------- ----------- ----------- ----------- -----------
Balance at December 31, 1999 $ 884,425 12,381,950 (1,225,661) (202,227) 11,838,487
=========== =========== =========== =========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-5
<PAGE> 79
SOUTHERN COMMUNITY BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
DECEMBER 15, 1998
(COMMENCEMENT
OF BANKING
YEAR ENDED OPERATIONS) TO
DECEMBER 31, DECEMBER 31,
1999 1998
----------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (941,985) (44,023)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Provision for loan losses 609,000 12,000
Depreciation and amortization 184,180 6,144
Credit for deferred income taxes (554,223) (26,282)
Accretion of discounts on securities (11,552) --
Increase in accrued interest receivable (522,975) (31,061)
Decrease (increase) in other assets 28,052 (116,748)
(Decrease) increase in official checks (373,148) 1,035,385
Increase in accrued interest payable and other liabilities 235,704 42,845
------------ ------------
Net cash (used in) provided by operating
activities (1,346,947) 878,260
------------ ------------
Cash flows from investing activities:
Repayments of securities available for sale 18,005 --
Purchases of securities available for sale (12,315,472) --
Net increase in loans (60,768,968) (1,214,605)
Purchases of premises and equipment (2,651,876) (1,856,216)
Purchases of Federal Home Loan Bank stock (212,400) --
------------ ------------
Net cash used in investing activities (75,930,711) (3,070,821)
------------ ------------
Cash flows from financing activities:
Net increase in deposits 61,789,387 3,273,604
Net increase in Federal funds purchased 6,000,000 --
Proceeds from issuance of common stock 750,000 --
------------ ------------
Net cash provided by financing activities 68,539,387 3,273,604
------------ ------------
Net (decrease) increase in cash and cash equivalents (8,738,271) 1,081,043
Cash and cash equivalents at beginning of period 13,257,920 12,176,877
------------ ------------
Cash and cash equivalents at end of period $ 4,519,649 13,257,920
============ ============
Supplemental disclosures of cash flow information: Cash paid during the period
for:
Interest $ 1,070,498 3,448
============ ============
Income taxes $ -- --
============ ============
Noncash investing activities-
Accumulated other comprehensive income, unrealized
loss on securities available for sale, net of tax $ (202,227) --
============ ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-6
<PAGE> 80
SOUTHERN COMMUNITY BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1999 AND FOR THE
PERIOD FROM DECEMBER 15, 1998 (COMMENCEMENT OF
BANKING OPERATIONS) TO DECEMBER 31, 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION. Southern Community Bancorp (the "Holding Company") owns
100% of the outstanding common stock of Southern Community Bank (the
"Bank") (collectively the "Company"). The Holding Company operates as a
one-bank holding company. The Holding Company was formed on July 30,
1999 and on April 15, 1999, the Bank's stockholders approved a plan of
corporate reorganization under which the Bank became a wholly-owned
subsidiary of the Holding Company. The Bank's stockholders exchanged
their common shares for shares of the Holding Company. As a result, all
of the previously issued $7.50 par value common shares of the Bank were
exchanged for 834,425 shares of the $1.00 par value common shares of the
Holding Company. The Holding Company's acquisition of the Bank has been
accounted for similar to a pooling of interests and, accordingly, the
financial data for periods presented include the results of the Bank.
The Holding Company=s only business activity is the operation of the
Bank. The Bank is a state (Florida) chartered commercial bank. The Bank
began its organizational phase in March of 1998. These financial
statements do not include the organizational phase of the Bank. The
consolidated 1998 financial statements include the operations of the
Bank from December 15, 1998 (the date of the commencement of banking
operations) to December 31, 1998. The Bank offers a variety of financial
services to individual and corporate customers through its four banking
offices located in Orange and Seminole Counties, Florida. The deposits
of the Bank are insured by the Federal Deposit Insurance Corporation
("FDIC") through the Bank Insurance Fund ("BIF").
BASIS OF PRESENTATION. The accompanying consolidated financial
statements include the accounts of the Holding Company and the Bank. All
significant intercompany accounts and transactions have been eliminated
in consolidation. The accounting and reporting practices of the Company
conform to generally accepted accounting principles and to general
practices within the banking industry. The following summarizes the more
significant of these policies and practices:
USE OF ESTIMATES. In preparing consolidated financial statements in
conformity with generally accepted accounting principles, management is
required to make estimates and assumptions that affect the reported
amounts of assets and liabilities as of the date of the balance sheet
and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates. Material
estimates that are particularly susceptible to significant change in the
near term relate to the determination of the allowance for loan losses
and deferred tax assets.
CASH AND CASH EQUIVALENTS. For purposes of the consolidated statements
of cash flows, cash and cash equivalents include cash and balances due
from banks and federal funds sold.
F-7
<PAGE> 81
SOUTHERN COMMUNITY BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
SECURITIES. The Company may classify its securities as either trading,
held to maturity or available for sale. Trading securities are held
principally for resale and recorded at their fair values. Unrealized
gains and losses on trading securities are included immediately in
earnings. Heldto-maturity securities are those which the Company has the
positive intent and ability to hold to maturity and are reported at
amortized cost. Available-for-sale securities consist of securities not
classified as trading securities nor as held-to-maturity securities.
Unrealized holding gains and losses, net of tax, on available-for-sale
securities are excluded from earnings and reported in other
comprehensive income. Gains and losses on the sale of available-for-sale
securities are recorded on the trade date and are determined using the
specific-identification method. Premiums and discounts on securities are
recognized in interest income using the interest method over the period
to maturity.
LOANS RECEIVABLE. Loans receivable that management has the intent and
ability to hold for the foreseeable future or until maturity or pay-off
are reported at their outstanding principal adjusted for any
charge-offs, the allowance for loan losses, and any deferred fees or
costs on originated loans.
Loan origination fees and certain direct origination costs are
capitalized and recognized as an adjustment of the yield of the related
loan.
The accrual of interest on loans is discontinued at the time the loan is
90 days delinquent unless the credit is well-secured and in process of
collection. In all cases, loans are placed on nonaccrual or charged-off
at an earlier date if collection of principal or interest is considered
doubtful.
All interest accrued but not collected for loans that are placed on
nonaccrual or charged-off is reversed against interest income. The
interest on these loans is accounted for on the cash-basis or
cost-recovery method, until qualifying for return to accrual. Loans are
returned to accrual status when all the principal and interest amounts
contractually due are brought current and future payments are reasonably
assured.
ALLOWANCE FOR LOAN LOSSES. The allowance for loan losses is established
as losses are estimated to have occurred through a provision for loan
losses charged to earnings. Loan losses are charged against the
allowance when management believes the uncollectibility of a loan
balance is confirmed. Subsequent recoveries, if any, are credited to the
allowance.
The allowance for loan losses is evaluated on a regular basis by
management and is based upon management's periodic review of the
collectibility of the loans in light of historical experience, the
nature and volume of the loan portfolio, adverse situations that may
affect the borrower's ability to repay, estimated value of any
underlying collateral and prevailing economic conditions. This
evaluation is inherently subjective as it requires estimates that are
susceptible to significant revision as more information becomes
available.
(continued)
F-8
<PAGE> 82
SOUTHERN COMMUNITY BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
ALLOWANCE FOR LOAN LOSSES, CONTINUED. A loan is considered impaired when,
based on current information and events, it is probable that the Company
will be unable to collect the scheduled payments of principal or interest
when due according to the contractual terms of the loan agreement.
Factors considered by management in determining impairment include
payment status, collateral value, and the probability of collecting
scheduled principal and interest payments when due. Loans that experience
insignificant payment delays and payment shortfalls generally are not
classified as impaired. Management determines the significance of payment
delays and payment shortfalls on a case-by-case basis, taking into
consideration all of the circumstances surrounding the loan and the
borrower, including the length of the delay, the reasons for the delay,
the borrower's prior payment record, and the amount of the shortfall in
relation to the principal and interest owed. Impairment is measured on a
loan by loan basis for commercial loans by either the present value of
expected future cash flows discounted at the loan's effective interest
rate, the loan's obtainable market price, or the fair value of the
collateral if the loan is collateral dependent.
Large groups of smaller balance homogeneous loans are collectively
evaluated for impairment. Accordingly, the Company does not separately
identify individual consumer and residential loans for impairment
disclosures.
PREMISES AND EQUIPMENT. Land is carried at cost. Premises, furniture and
equipment, and leasehold improvements are carried at cost, less
accumulated depreciation and amortization computed principally using the
straight-line method. The Company amortizes leasehold improvements over
the lease term, which could include lease renewal periods, if it is the
intent of management to exercise the renewal option on the lease.
TRANSFER OF FINANCIAL ASSETS. Transfers of financial assets are
accounted for as sales, when control over the assets has been
surrendered. Control over transferred assets is deemed to be surrendered
when (1) the assets have been isolated from the Company, (2) the
transferee obtains the right (free of conditions that constrain it from
taking advantage of that right) to pledge or exchange the transferred
assets, and (3) the Company does not maintain effective control over the
transferred assets through an agreement to repurchase them before their
maturity.
INCOME TAXES. Deferred tax assets and liabilities are determined using
the liability (or balance sheet) method. Under this method, the net
deferred tax asset or liability is determined based on the tax effects
of the temporary differences between the book and tax bases of the
various balance sheet assets and liabilities and gives current
recognition to changes in tax rates and laws.
ORGANIZATIONAL COSTS. Preopening and organizational expenses totaled
$239,653 (net of tax effect of $121,749) and were charged to expense as
incurred during the organizational phase.
(continued)
F-9
<PAGE> 83
SOUTHERN COMMUNITY BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
STOCK COMPENSATION PLANS. Statement of Financial Accounting Standards
(SFAS) No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, encourages all
entities to adopt a fair value based method of accounting for employee
stock compensation plans, whereby compensation cost is measured at the
grant date based on the value of the award and is recognized over the
service period, which is usually the vesting period. However, it also
allows an entity to continue to measure compensation cost for those
plans using the intrinsic value based method of accounting prescribed by
Accounting Principles Board Opinion No. 25, ACCOUNTING FOR STOCK ISSUED
TO EMPLOYEES, whereby compensation cost is the excess, if any, of the
quoted market price of the stock at the grant date (or other measurement
date) over the amount an employee must pay to acquire the stock. Stock
options issued under the Company's stock option plan have no intrinsic
value at the grant date, and under Opinion No. 25 no compensation cost
is recognized for them. The Company has elected to continue with the
accounting methodology in Opinion No. 25 and, as a result, has provided
proforma disclosures of net loss and other disclosures, as if the fair
value based method of accounting had been applied. (See Note 11).
OFF-BALANCE SHEET INSTRUMENTS. In the ordinary course of business, the
Company has entered into off-balance-sheet instruments consisting of
commitments to extend credit, standby letters of credit, undisbursed
loans in process and unused lines of credit. Such financial instruments
are recorded in the financial statements when they are funded.
FAIR VALUES OF FINANCIAL INSTRUMENTS. The fair value of a financial
instrument is the current amount that would be exchanged between willing
parties, other than in a forced liquidation. Fair value is best
determined based upon quoted market prices. However, in many instances,
there are no quoted market prices for the Company's various financial
instruments. In cases where quoted market prices are not available, fair
values are based on estimates using present value or other valuation
techniques. Those techniques are significantly affected by the
assumptions used, including the discount rate and estimates of future
cash flows. Accordingly, the fair value estimates may not be realized in
an immediate settlement of the instrument. SFAS 107 excludes certain
financial instruments and all nonfinancial instruments from its
disclosure requirements. Accordingly, the aggregate fair value amounts
presented may not necessarily represent the underlying fair value of the
Company. The following methods and assumptions were used by the Company
in estimating fair values of financial instruments:
CASH AND CASH EQUIVALENTS. The carrying amounts of cash and cash
equivalents approximate their fair value.
SECURITIES. Fair values for securities available for sale are based
on quoted market prices, where available. If quoted market prices are
not available, fair values are based on quoted market prices of
comparable instruments. The carrying amount of Federal Home Loan Bank
stock approximates fair value.
LOANS. For variable-rate loans that reprice frequently and have no
significant change in credit risk, fair values are based on carrying
values. Fair values for fixed-rate mortgage (e.g. one-to-four family
residential), commercial real estate and commercial loans are estimated
using discounted cash flow analyses, using interest rates currently
being offered for loans with similar terms to borrowers of similar
credit quality. Fair values for nonperforming loans are estimated using
discounted cash flow analysis or underlying collateral values, where
applicable.
(continued)
F-10
<PAGE> 84
SOUTHERN COMMUNITY BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
FAIR VALUES OF FINANCIAL INSTRUMENTS, CONTINUED.
ACCRUED INTEREST RECEIVABLE. Book value approximates fair value.
DEPOSIT LIABILITIES. The fair values disclosed for demand, NOW,
money-market and savings deposits are, by definition, equal to the
amount payable on demand at the reporting date (that is, their carrying
amounts). Fair values for fixed-rate certificates of deposit are
estimated using a discounted cash flow calculation that applies interest
rates currently being offered on certificates to a schedule of
aggregated expected monthly maturities of time deposits.
FEDERAL FUNDS PURCHASED. The carrying amount of federal funds purchased
approximates fair value.
OFF-BALANCE-SHEET INSTRUMENTS. Fair values for off-balance-sheet lending
commitments are based on fees currently charged to enter into similar
agreements, taking into account the remaining terms of the agreements
and the counterparties' credit standing.
LOSS PER SHARE. Basic and diluted loss per share is calculated by
dividing net loss by the weighted average number of shares of common
stock outstanding during the period. Outstanding stock options are not
dilutive due to the net losses incurred by the Company.
ADVERTISING. The Company expenses all media advertising as incurred.
FUTURE ACCOUNTING REQUIREMENTS. Financial Accounting Standards No. 133 -
ACCOUNTING FOR DERIVATIVE INVESTMENTS AND HEDGING ACTIVITIES requires
companies to record derivatives on the balance sheet as assets or
liabilities, measured at fair value. Gains or losses resulting from
changes in the values of those derivatives would be accounted for
depending on the use of the derivatives and whether they qualify for
hedge accounting. The key criterion for hedge accounting is that the
hedging relationship must be highly effective in achieving offsetting
changes in fair value or cash flows. The Company will be required to
adopt this Statement effective January 1, 2001. Management does not
anticipate that this Statement will have a material impact on the
Company.
(continued)
F-11
<PAGE> 85
SOUTHERN COMMUNITY BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(2) SECURITIES AVAILABLE FOR SALE
Securities have been classified according to management's intent. The
carrying amount of securities and their approximate fair value at
December 31, 1999 are summarized as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------- ---------- ---------- -----
<S> <C> <C> <C> <C>
U.S. governments agency securities $ 10,336,148 19,760 (297,714) 10,058,194
Mortgage-backed security 1,972,871 -- (33,165) 1,939,706
---------- ---------- -------- -----------
$ 12,309,019 19,760 (330,879) 11,997,900
========== ========== ======== ===========
</TABLE>
There was no sales of securities in 1999 or 1998.
At December 31, 1999, the Company has pledged securities with a
carrying value of approximately $2.4 million for public deposits.
The scheduled maturities at December 31, 1999 are as follows:
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
--------- ----
<S> <C> <C>
Due from one to five years $ 2,686,610 2,565,313
Due from five to ten years 7,649,538 7,492,881
Mortgage-backed security 1,972,871 1,939,706
---------- -----------
$ 12,309,019 11,997,900
========== ==========
</TABLE>
(3) LOANS
The components of loans were as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------------
1999 1998
--------- ----
<S> <C> <C>
Commercial $ 19,122,523 1,092,911
Commercial real estate 26,450,845 --
Residential real estate 12,915,102 50,308
Consumer and other 3,535,775 71,386
----------- -----------
Total loans 62,024,245 1,214,605
Less:
Allowance for loan losses (621,000) (12,000)
Net deferred loan fees (40,672) --
----------- -------------
Loans receivable, net $ 61,362,573 1,202,605
========== =============
</TABLE>
(continued)
F-12
<PAGE> 86
SOUTHERN COMMUNITY BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(3) LOANS, CONTINUED
The following is a summary of the activity in the allowance for loan losses:
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31,
------------ ------------
1999 1998
---- ----
<S> <C> <C>
Allowance, at beginning of period $ 12,000 --
Provision for loan losses 609,000 12,000
------- ------
Allowance, at end of period $ 621,000 12,000
======= ======
</TABLE>
There were no impaired loans recognized under SFAS 114 and 118 during
1999 or 1998.
(4) PREMISES AND EQUIPMENT
Premises and equipment were as follows:
AT DECEMBER 31,
---------------------
1999 1998
---- ----
Cost:
Land $ 450,000 450,000
Building 839,514 672,166
Leasehold improvements 2,110,188 428,816
Furniture and equipment 1,108,390 305,234
----------- -----------
Total cost 4,508,092 1,856,216
Less accumulated depreciation (190,324) (6,144)
----------- -----------
Net book value $ 4,317,768 1,850,072
=========== ===========
The Company leases three of its office facilities under operating leases.
The leases contain escalation clauses and have renewal options from 5 to
15 years. Rent expense under operating leases for the year ended December
31, 1999 and for the period from December 15, 1998 (commencement of
banking operations) to December 31, 1998 was approximately $327,000 and
$6,500, respectively. Future minimum rental commitments under
noncancelable leases are as follows:
YEAR ENDING DECEMBER 31: AMOUNT
------------------------ ------
2000 $ 376,914
2001 411,599
2002 430,338
2003 433,135
2004 364,300
2005 and thereafter 1,436,401
---------
$ 3,452,687
=========
In January 2000, the Company purchased land in Bonita Springs, Florida
for approximately $725,000 for a future branch site. The Company will
purchase a temporary building unit for approximately $100,000 until
construction of the new branch is completed (see Note 17).
(continued)
F-13
<PAGE> 87
SOUTHERN COMMUNITY BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(5) DEPOSITS
The aggregate amount of jumbo certificates of deposit with a minimum
denomination of $100,000, were approximately $19.3 million at December
31, 1999.
At December 31, 1999, the scheduled maturities of certificates of deposit
were as follows:
YEAR ENDING DECEMBER 31, AMOUNT
------------------------ ------
2000 $ 27,890,399
2001 6,309,342
2002 259,645
2004 25,891
-------------
$ 34,485,277
=============
(6) BENEFIT AGREEMENTS
The Company has entered into Salary Continuation Agreements (the
"Agreements") with the Chairman of the Board of Directors ("Chairman")
and the President/Chief Executive Officer ("CEO") which requires the
Company to provide salary continuation benefits to them upon retirement.
The Agreements require the Company to pay annual benefits for up to
twenty years following their normal retirement ages. The Agreements also
provide for salary continuation in the event of a change in control of
the Company, for early voluntary termination by the officers, based on a
ten-year vesting schedule, and for disability benefits. The Company is
accruing the present value of the future benefits to be paid over the
terms of the Agreements using a discount rate of 7.5%, assuming the
officers will retire at their normal retirement age. Expense relating to
these Agreements was $38,817 and $16,211 for the year ended December 31,
1999 and for the period from December 15, 1998 (commencement of banking
operations) to December 31, 1998, respectively. As of December 31, 1999,
the Company has accrued $55,028 related to these Agreements.
(continued)
F-14
<PAGE> 88
SOUTHERN COMMUNITY BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(7) FINANCIAL INSTRUMENTS
The Company is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of its
customers. These financial instruments are commitments to extend credit,
standby letters of credit, undisbursed loans in process and unused lines
of credit and may involve, to varying degrees, elements of credit and
interest-rate risk in excess of the amount recognized in the balance
sheet. The contract amounts of these instruments reflect the extent of
involvement the Company has in these financial instruments.
The Company's exposure to credit loss in the event of nonperformance by
the other party to the financial instrument for commitments to extend
credit is represented by the contractual amount of those instruments. The
Company uses the same credit policies in making commitments as it does
for on-balance-sheet instruments.
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since some of the commitments
are expected to expire without being drawn upon, the total commitment
amounts do not necessarily represent future cash requirements. The
Company evaluates each customer's credit worthiness on a case-by-case
basis. The amount of collateral obtained if deemed necessary by the
Company upon extension of credit is based on management's credit
evaluation of the counterparty.
Standby letters of credit are conditional commitments issued by the
Company to guarantee the performance of a customer to a third party. The
credit risk involved is essentially the same as that involved in
extending loans to customers.
The estimated fair values of the Company's financial instruments were as
follows (in thousands):
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------------------------------------------------
1999 1998
-------------------------- ---------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
--------- -------- -------- ------
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents $ 4,520 4,520 13,258 13,258
Securities available for sale 11,998 11,998 -- --
Loans receivable, net 61,363 61,316 1,203 1,203
Accrued interest receivable 554 554 31 31
Federal Home Loan Bank stock 212 212 -- --
Financial liabilities:
Deposit liabilities 65,063 64,598 3,274 3,274
Federal funds purchased 6,000 6,000 -- --
</TABLE>
(continued)
F-15
<PAGE> 89
SOUTHERN COMMUNITY BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(7) FINANCIAL INSTRUMENTS, CONTINUED
A summary of the notional amounts of the Company's financial instruments
which approximates fair value, with off-balance-sheet risk at December
31, 1999, follows:
Commitments to extend credit $ 24,642,000
===========
Standby letters of credit $ 1,043,000
============
Undisbursed loans in process $ 8,925,839
============
Unused lines of credit $ 4,718,187
============
(8) CREDIT RISK
The Company grants real estate, commercial and consumer loans to
customers primarily in the State of Florida with the majority of such
loans in the Orange and Seminole Counties area. Therefore, the Company's
exposure to credit risk is significantly affected by changes in the
economy of the Orange and Seminole Counties area.
(9) INCOME TAXES
The income tax benefit consisted of the following:
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31,
------------ --------------
1999 1998
---- ----
Deferred:
Federal $(473,218) (22,441)
State (81,005) (3,841)
--------- ---------
Total deferred $(554,223) (26,282)
========= =========
The reasons for the differences between the statutory Federal income tax
rate and the effective tax rate are summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
--------------------- -----------------
AMOUNT % AMOUNT %
------ --- ------ ---
<S> <C> <C> <C> <C>
Income tax benefit at statutory rate $(508,711) (34.0)% $ (23,904) (34.0)%
(Increase) decrease resulting from:
State income taxes, net of Federal tax benefit (53,463) (3.6) (2,535) (3.6)
Other 7,951 .5 157 .2
------- ----- ------- -----
Income tax benefit $(554,223) (37.1)% $(26,282) (37.4)%
======= ===== ====== =====
</TABLE>
(continued)
F-16
<PAGE> 90
SOUTHERN COMMUNITY BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(9) INCOME TAXES, CONTINUED
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are as
follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------------
1999 1998
---- ----
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 572,844 36,034
Allowance for loan losses 164,044 --
Unrealized loss on securities available for sale 108,892 --
Start up and organization costs 108,370 136,039
Deferred compensation 20,707 --
Depreciation -- 1,190
Other 13,510 --
--------- ---------
Gross deferred tax assets 988,367 173,263
--------- ---------
Deferred tax liabilities:
Accrual to cash conversion (174,106) (2,485)
Depreciation (3,115) --
Allowance for loan losses -- (22,747)
--------- ---------
Gross deferred tax liabilities 177,221 (25,232)
--------- ---------
Net deferred tax asset $ 811,146 148,031
========= =========
</TABLE>
At December 31, 1999, the Company has the following net operating loss
carryforwards available to offset future Federal and state taxable
income:
EXPIRATION AMOUNT
---------- ------
2018 $ 94,515
2019 1,427,791
---------
$ 1,522,306
=========
(continued)
F-17
<PAGE> 91
SOUTHERN COMMUNITY BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(10) RELATED PARTY TRANSACTIONS
In the ordinary course of business, the Company has made loans, at terms
and rates prevailing at the time, to Company officers, directors and
their affiliates. The aggregate dollar amount of these loans totaled $4.5
million and $.9 million at December 31, 1999 and 1998, respectively.
During the year ended December 31, 1999, total principal additions were
$4.0 million and total principal repayments were $.4 million. As of the
same dates, these individuals and entities had approximately $12.6
million and $3.2 million, respectively, of funds on deposit with the
Company.
In addition, in 1999 the Company began leasing one of its branch
facilities from a director of the Company. Total lease payments made to
this director totaled $115,724 for the year ended December 31, 1999.
During 1999, the Company also entered into agreements for various
insurance coverages which have resulted in normal commissions being paid
to a company affiliated with a director. The total insurance premiums
paid for these policies was approximately $202,800 for the year ended
December 31, 1999.
(11) STOCK OPTION PLANS
In 1999, the Company adopted an employee incentive stock option plan.
Under this plan, the total number of shares which may be issued is
106,000. The option price shall not be less than the greater of the par
value of the common stock or the fair market value at the date of grant
and the options vest ratably over a five year period. Options granted
during 1999 were effective the date employees were hired by the Company.
During 1999, 93,000 options were granted under this plan.
Also in 1999, the Company adopted a directors' nonstatutory stock option
plan. Under this plan, the total number of shares which may be issued is
70,000. The option price shall not be less than the greater of the par
value of the common stock or the fair market value at the date of grant
and all options are immediately excisable when granted. During 1999,
70,000 options were granted under this plan.
A summary of stock option transactions follows:
<TABLE>
<CAPTION>
RANGE
OF PER WEIGHTED-
SHARE AVERAGE AGGREGATE
NUMBER OF OPTION PER SHARE OPTION
SHARES PRICE PRICE PRICE
------ ------- -------- --------
<S> <C> <C> <C> <C>
Options granted and outstanding at
December 31, 1999 163,000 $ 15.00 15.00 2,244,000
======= ===== ===== ==========
</TABLE>
All options granted under both plans have ten year lives. The
weighted-average remaining contractual life of options outstanding at
December 31, 1999 was 9.1 years.
(continued)
F-18
<PAGE> 92
SOUTHERN COMMUNITY BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(11) STOCK OPTION PLANS, CONTINUED The options are exercisable as follows:
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED-AVERAGE
YEAR ENDING DECEMBER 31, SHARES EXERCISE PRICE
------------------------ ------ --------------
<S> <C> <C>
Currently exercisable 75,600 $ 15.00
2000 18,600 15.00
2001 18,600 15.00
2002 18,600 15.00
2003 18,600 15.00
2004 13,000 15.00
--------
163,000 $ 15.00
========
</TABLE>
In order to calculate the fair value of the options, it was assumed that
the risk-free interest rate was 6.0%, there would be no dividends paid by
the Company over the exercise period, the expected life of the options
would be the entire exercise period and stock volatility would be zero
due to the lack of an active market for the stock. For purposes of pro
forma disclosures, the estimated fair value is included in expense during
the vesting period. The following information summarizes the options
granted under both plans (in thousands):
Weighted-average grant-date fair value of options
issued during the year $ 1,057
======
Proforma net loss $(1,671)
======
Proforma net loss per share - basic and diluted $ (1.95)
======
(12) PROFIT SHARING PLAN
During 1999, the Company adopted a 401(k) profit sharing plan (the
"Plan"). The Plan is available to all employees electing to participate
after meeting certain length-of-service requirements. The Company's
contributions to the Plan are discretionary and are determined
annually. The Company did not make any contributions to the Plan during
the year ended December 31, 1999. One of the investment choices
available under the Plan, allows for participants to purchase the
Company's common stock. 25,000 shares of the Company's common stock has
been allocated to the Plan. In 1999, $71,186 had been contributed to
the Plan by participants to purchase 4,745 shares of the Company's
common stock. These shares will be issued during the first quarter of
2000.
(continued)
F-19
<PAGE> 93
(13) EMPLOYEE STOCK PURCHASE PLAN
During 1999, the Company adopted an Employee Stock Purchase Plan (the
"Plan"). Under this Plan employees can elect to make payroll deductions
to purchase the Company's common stock. The total number of shares
which has been allocated under the Plan is 15,000 shares. During the
year ended December 31, 1999, employees had withheld $14,957, of which
$14,820 will be used to purchase 988 shares of the Company's common
stock. These shares will be issued during the first quarter of 2000.
(continued)
F-20
<PAGE> 94
SOUTHERN COMMUNITY BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(14) REGULATORY MATTERS
Banking regulations place certain restrictions on dividends and loans
or advances made by the Bank to the Holding Company.
The Bank is subject to various regulatory capital requirements
administered by the regulatory banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory and
possibly additional discretionary actions by regulators that, if
undertaken, could have a direct material effect on the Company's
financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet
specific capital guidelines that involve quantitative measures of their
assets, liabilities, and certain off-balance-sheet items as calculated
under regulatory accounting practices. The capital amounts and
classification are also subject to qualitative judgements by the
regulators about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Bank to maintain minimum amounts and percentages
(set forth in the following table) of total and Tier 1 capital (as
defined in the regulations) to risk-weighted assets (as defined) and of
Tier 1 capital (as defined) to average assets (as defined). Management
believes, as of December 31, 1999 and 1998, the Bank met all capital
adequacy requirements to which they are subject.
As of December 31, 1999, the most recent notification from the
regulatory authorities categorized the Bank as well capitalized under
the regulatory framework for prompt corrective action. To be
categorized as well capitalized, an institution must maintain minimum
total risk-based, Tier I risk-based, and Tier I leverage percentages as
set forth in the following tables. There are no conditions or events
since that notification that management believes have changed the
Bank's category. The Bank's actual capital amounts and percentages as
of December 31, 1999 and 1998 are also presented in the table (dollars
in thousands).
<TABLE>
<CAPTION>
MINIMUM
TO BE WELL
CAPITALIZED UNDER
FOR CAPITAL ADEQUACY PROMPT CORRECTIVE
ACTUAL PURPOSES: ACTION PROVISIONS:
-------------------- ------------------ --------------------
AMOUNT % AMOUNT % AMOUNT %
------ --- ------ --- ------ ---
<S> <C> <C> <C> <C> <C> <C>
AS OF DECEMBER 31, 1999:
Total capital to Risk-
Weighted assets ..... $12,172 17.5% $ 5,551 8.0% $ 6,939 10.0%
Tier I Capital to Risk-
Weighted Assets ..... 11,551 16.6 2,776 4.0 4,163 6.0
Tier I Capital
to Total Assets ..... 11,551 15.5 2,972 4.0 3,715 5.0
AS OF DECEMBER 31, 1998:
Total capital to Risk-
Weighted assets ..... 12,097 207.3 467 8.0 584 10.0
Tier I Capital to Risk-
Weighted Assets ..... 12,085 207.1 233 4.0 350 6.0
Tier I Capital
to Total Assets ..... 12,085 94.2 513 4.0 641 5.0
</TABLE>
(continued)
F-21
<PAGE> 95
SOUTHERN COMMUNITY BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(15) HOLDING COMPANY FINANCIAL INFORMATION
As discussed in Note 1 to the Consolidated Financial Statements, the
Holding Company was organized during 1999. The Holding Company's
financial information as of December 31, 1999 and for the year then
ended follows:
CONDENSED BALANCE SHEET
AT DECEMBER 31,
1999
----------------
ASSETS
Investment in subsidiary $11,838,487
-----------
Total assets $11,838,487
===========
STOCKHOLDERS' EQUITY
Stockholders' equity 11,838,487
-----------
Total stockholders' equity $11,838,487
===========
CONDENSED STATEMENT OF OPERATIONS
FOR THE
YEAR ENDED
DECEMBER 31,
1999
------------
Loss of subsidiary $(941,985)
----------
Net loss $(941,985)
==========
(continued)
F-22
<PAGE> 96
SOUTHERN COMMUNITY BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(15) HOLDING COMPANY FINANCIAL INFORMATION, CONTINUED
CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE
YEAR ENDED
DECEMBER 31,
------------
1999
------------
<S> <C>
Cash flows from operating activities:
Net loss $(941,985)
Adjustments to reconcile net loss to net cash used in
operating activities -
Equity in undistributed loss of subsidiary (941,985)
---------
Net cash used in operating activities --
---------
Net increase in cash and cash equivalents --
Cash and cash equivalents at beginning of the year --
---------
Cash and cash equivalents at end of year $ --
=========
Noncash transactions:
Change in investment in subsidiary due to change in accumulated
other comprehensive income, unrealized loss on securities
available for sale, net of income tax $(202,227)
=========
</TABLE>
(16) YEAR 2000 ISSUES
The Company's operating and financial systems have been found to be
compliant; the "Y2K Problem" has not adversely affected the Company's
operations nor does management expect that it will. However, the
Company has not determined what effect it has had on its customers and
vendors. Any adverse effect it might have on the Company because of
vendors and customers noncompliance has not been determined.
(17) NEW BANK CHARTER
In September, 1999 the Company's Board of Directors approved the
formation of a new bank in Southwest, Florida. The new bank is subject
to regulatory approval.
F-23
<PAGE> 97
Exhibit A
SUBSCRIPTION AGREEMENT
Southern Community Bancorp
250 North Orange Avenue
Orlando, Florida 32801
Attn: Mr. John G. Squires or
Mr. Charlie W. Brinkley, Jr.
Dear Gentlemen:
1. SUBSCRIPTION
Subject to the terms and conditions set forth below, the
undersigned hereby subscribes to purchase shares (the "Shares") of the common
stock, par value $1.00 per share (the "Common Stock") of Southern Community
Bancorp, a corporation organized under the laws of Florida (the "Company"). The
undersigned hereby acknowledges receipt of a copy of the Prospectus for the
Shares, dated as of
, 2000 (the "Prospectus").
2. PURCHASE OF SHARES
(a) PURCHASE PRICE. The undersigned hereby subscribes
for:
Number of Shares to be ___________________
Purchase:
(1,000 share minimum)
Price per Share: x __________
Total Purchase Price: $__________________
Amount of enclosed check:
($16.50 per Share times
number of Shares purchased) $__________________
(b) PAYMENT OF PURCHASE PRICE. Enclosed with this Agreement is
the undersigned's personal check (or a certified check, bank check or money
order) payable to "SunTrust Bank -- Escrow Agent for Southern Community Bancorp"
in payment for the number of Shares specified below.
1
<PAGE> 98
(c) TITLE TO SHARES.
TITLE TO BE TAKEN - (check one)
( ) Individual Ownership
( ) Joint Tenants with Right
of Survivorship
( ) Other-Specify: ________________
Taxpayer Identification No:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Name as it should appear on the Corporation's stock register - two names for
Joint Owners - please print or type)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Residence Address)
- --------------------------------------------------------------------------------
(Home Phone)
- --------------------------------------------------------------------------------
(Business Phone)
(d) DESIGNATION OF ESCROW ACCOUNT.
(a) The undersigned hereby directs the Company
to deposit the undersigned's funds (if
accepted by the Company for subscription) as
follows:
( ) Deposit subscription funds in the
first escrow account (as described
in the Prospectus).
( ) Deposit subscription Funds in the
second escrow account (as described in
the Prospectus).
The undersigned acknowledges and agrees that
the undersigned's funds will be held in escrow in accordance with the terms of
the Escrow Agreement dated ____, 2000 by and between the Company and SunTrust
Bank, as escrow agent.
3. REPRESENTATIONS AND WARRANTIES
As an inducement to the Company to accept this Agreement, the
undersigned represents and warrants to the Company that:
(a) The undersigned (and the undersigned's advisors) have
received a copy of the Prospectus prior to signing this subscription agreement,
have read and understand the disclosures set forth on the cover page of the
Prospectus, and are fully familiar with the Prospectus, including the Exhibits
thereto.
(b) The undersigned is fully aware that:
(i) This subscription may be accepted or
rejected in whole or in part by the Company in its sole and absolute discretion;
(ii) This subscription is and shall be
irrevocable, except as set forth in the Prospectus; provided that the
undersigned shall have no obligation hereunder in the event that this
subscription is for any reason rejected or the offering described in the
Prospectus is for any reason canceled or withdrawn;
2
<PAGE> 99
(iii) No federal or state agency has made any
finding or determination as to the fairness of the offering for public
investment, and no such agency has made any recommendation or endorsement of the
Shares;
(iv) There is no public market for the Shares;
(v) THE SHARES ARE NOT DEPOSITS AND ARE
NOT INSURED BY THE FDI OR ANY OTHER AGENCY.
4. MISCELLANEOUS
(a) MODIFICATION. Neither this Agreement nor any provisions
hereof shall be modified, discharged or terminated except by an instrument in
writing signed by the party against whom any waiver, change, discharge or
termination is sought.
(b) NOTICES. Any notice, demand or other communication which
any party hereto may be required, or may elect, to give to anyone interested
hereunder shall be sufficiently given if (a) deposited, postage prepaid, in a
United States mail letter box, registered or certified mail, return receipt
requested, addressed to such address as may be given herein, or (b) delivered
personally at such address.
(c) BINDING EFFECT. Except as otherwise provided herein, this
Agreement shall be binding upon and inure to the benefit of the parties and
their heirs, executors, administrators, successors, legal representatives and
permitted assigns. If the undersigned is more than one person, the obligation of
the undersigned shall be joint and several and the agreements, representations,
warranties and acknowledgments herein contained shall be deemed to be made by
and be binding upon each such person and his heirs, executors, administrators
and successors.
(d) ENTIRE AGREEMENT. This Agreement contains the entire
agreement of the parties, and there are no representations, covenants or other
agreements except as referred to herein.
(e) ASSIGNABILITY. This Agreement is not transferable or
assignable by the undersigned; any purported transfer or assignment by the
undersigned shall be null and void.
(f) APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of Florida.
(g) NO WAIVER. Failure of the Company to exercise any right or
remedy under this Subscription Agreement or any other agreement between the
Company and the undersigned, or otherwise, or delay by the Company in exercising
same, will not operate as a waiver thereof. No waiver by any party will be
effective unless and until it is in writing and signed by such party.
(h) SEVERABILITY. In the event that any provisions of this
Subscription Agreement are invalid or unenforceable under any applicable statute
or rule of law, then such provisions shall be deemed inoperative to the extent
that they may conflict therewith and shall be deemed modified to conform with
such statute or rule of law. Any provision hereof which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of
any other provision hereof.
3
<PAGE> 100
IN WITNESS WHEREOF, the undersigned has executed this
Subscription Agreement on this ____ day of ___________________, 2000.
---------------------------------------------
Signature
---------------------------------------------
Signature (Second signature required for joint
ownership)
The foregoing subscription for the purchase of the shares of Southern
Community Bancorp is hereby accepted for the following number of shares:
__________.
Number of Shares:
-------------------------
Purchase Price:
-------------------------
ACCEPTED AT _______________, Florida, this ____ day of
________________, 2000.
SOUTHERN COMMUNITY BANCORP
By:
-----------------------------------
Its:
-----------------------------------
4
<PAGE> 101
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant's Bylaws limit, to the maximum extent permitted by
Florida law, the personal liability of directors and officers for monetary
damages for breach of their fiduciary duties as directors or officers. The
Bylaws provide further that the Registrant shall indemnify to the fullest extent
permitted by Florida law any person made a party to an action or proceeding by
reason of the fact that such person was director, officer, employee or agent of
the Registrant. The Bylaws also provide that directors and officers who are
entitled to indemnification shall be paid their expenses incurred in connection
with any action, suit, or proceeding in which such director or officer is made a
party by virtue of his or her being an officer or director of the Registrant to
the maximum extent permitted by Florida law.
Reference is made to the following documents filed as Exhibits to this
Registration Statement regarding relevant indemnification provisions described
above and elsewhere herein:
DOCUMENT EXHIBIT NUMBER
- --------- --------------
Registrant's Articles of Incorporation................ 3.1.
Registrant's Bylaws................................... 3.2.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses payable in
connection with the sale of the common stock being registered hereby. All
amounts are estimates, except the registration fee.
ITEM AMOUNT
- ---- ------
SEC registration fee........................................ $ 4,573
Blue sky fees and expenses..................................
Printing and engraving expenses.............................
Legal fees and expenses.....................................
Auditors' fees and expenses.................................
Transfer agent and registrar fees...........................
Miscellaneous expenses......................................
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
The following is a summary of the transactions by Registrant since the
Registrant's incorporation on March 24, 1999, involving sales of Registrant's
securities that were not registered under the Securities Act of 1933, as amended
(the "Securities Act").
II-1
<PAGE> 102
On July 30, 1999, the Registrant issued 884,425 shares of common stock
in exchange for all of the outstanding capital stock of Southern Community Bank.
This transaction was exempt from Section 5 of the Securities Act pursuant to the
provisions of Section 3(a)(12).
The Registrant has entered into a Restricted Stock Agreement with
Charlie W. Brinkley, Jr., its Chairman, under which the Registrant has agreed to
issue up to 50,000 shares of its common stock to Mr. Brinkley as compensation
for services. Under the terms of this agreement, the Registrant issued 250
shares effective as of January 1, 2000. This transaction was exempt from Section
5 of the Securities Act of 1933 pursuant to Section 4(2).
On January 1, 2000, the Registrant issued 986 shares of its common
stock to certain employees pursuant to the Registrant's Employee Stock Purchase
Program. These shares were issued at a price of $15.00 per share. These
transactions were exempt from Section 5 of the Securities Act of 1933 pursuant
to Section 4(2) of the Securities Act.
On January 1, 2000, the Registrant sold 4,637 shares of its common
stock to certain employees at a price of $15.00 per share. These transactions
were exempt from Section 5 of the Securities Act of 1933 pursuant to Section
4(2) of the Securities Act.
ITEM 27. EXHIBITS.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------ -------
<S> <C>
3.1 Articles of Incorporation, as amended, of Registrant
3.2 Bylaws of Registrant
4.1 Specimen Common Stock Certificate of Registrant
5.1 Opinion of Shutts & Bowen LLP*
10.1 Employees' Incentive Stock Option Plan of Registrant
10.2 Directors' Statutory Stock Option Plan of Registrant
10.3 Amended and Restated Employee Stock Purchase Plan of Registrant
10.4 Salary Continuation Agreement between the Registrant and Charlie W. Brinkley, Jr. dated
February 23, 1999
10.5 Salary Continuation Agreement between the Registrant and John G. Squires dated
February 23, 1999
10.6 Lease Agreement dated April 22, 1998 between Marx Realty and Improvement Co., Inc.
and Registrant
10.7 Lease Agreement dated November 30, 1998 between Patrick J. Armstrong and Registrant
10.8 Electronic Data Processing Agreement dated August 12, 1998 between the Registrant and
First Commerce Technologies, Inc.
10.9 Restricted Stock Agreement made effective as of January 1, 1999 between the Registrant
and Charlie W. Brinkley, Jr.
10.10 Escrow Agreement between the Registrant and SunTrust Bank*
21.1 List of Subsidiaries of Registrant
23.1 Consent of Hacker, Johnson, Cohen & Grieb PA
23.2 Consent of Shutts & Bowen LLP (included in Exhibit 5.1)*
24.1 Powers of Attorney (included on signature page of Registration Statement)
27.1 Financial Data Schedule of Registrant
99.1 Consent of Richard Garner, Proposed Director*
99.2 Consent of Joel Whittenhall, Proposed Director*
</TABLE>
II-2
<PAGE> 103
--------
* To be filed by amendment
(b) Financial Statement Schedules: None
ITEM 28. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement: (i) To include any
prospectus required by Section 10(a)(3) of the Securities Act; (ii) To reflect
in the prospectus any facts or events which, individually or together, represent
a fundamental change in the registration statement; (iii) To include any
additional or changed material information on the plan of distribution.
(2) For determining liability under the Securities Act, to 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) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(4) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officer or controlling persons of
the registrant, pursuant to the 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 hereunder, 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-3
<PAGE> 104
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, 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 Orlando,
State of Florida on April 25, 2000.
SOUTHERN COMMUNITY BANCORP
By: /s/ CHARLIE W. BRINKLEY, JR.
-------------------------------
Charlie W. Brinkley, Jr.
Chairman of the Board and Chief
Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby authorizes Charlie W.
Brinkley, Jr., as his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution for him and in his name, place and
stead, in any and all capacities to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and any Registration
Statement filed pursuant to Rule 462(b) under the Securities Act of 1933, and to
file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates stated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
/s/ CHARLIE W. BRINKLEY, JR. Chairman of the Board and Chief April 25, 2000
- ----------------------------- Executive Officer (Principal
Charlie W. Brinkley, Jr. Executive Officer)
/s/ JOHN G. SQUIRES President and Director April 25, 2000
- -----------------------------
John G. Squires
/s/ PATRICK J. ARMSTRONG Director April 25, 2000
- -----------------------------
Patrick J. Armstrong
/s/ RICHARD M. DUNN Director April 25, 2000
- -----------------------------
Richard M. Dunn
/2/ JENNINGS L. HURT, III Director April 25, 2000
- -----------------------------
Jennings L. Hurt, III
/s/ EUGENE M. PASCARELLA Director April 25, 2000
- -----------------------------
Eugene M. Pascarella
Director
- -----------------------------
Jon C. Peterson
/s/ JOHN K. RITENOUR Director April 25, 2000
- -----------------------------
John K. Ritenour
</TABLE>
II-4
<PAGE> 105
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ STANLEY H. SANDEFUR Director April 25, 2000
- --------------------------------
Stanley H. Sandefur
/s/ STEPHEN R. JEUCK Chief Financial Officer and April 25, 2000
- -------------------------------- Secretary (Principal Financial and
Stephen R. Jeuck Principal Accounting Officer)
</TABLE>
II-5
<PAGE> 106
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- --------- -------
<S> <C>
3.1 Articles of Incorporation, as amended, of Registrant
3.2 Bylaws of Registrant
4.1 Specimen Common Stock Certificate of Registrant
10.1 Employees' Incentive Stock Option Plan of Registrant
10.2 Directors' Statutory Stock Option Plan of Registrant
10.3 Amended and Restated Employee Stock Purchase Plan of Registrant
10.4 Salary Continuation Agreement between the Registrant and Charlie W. Brinkley, Jr. dated
February 23, 1999
10.5 Salary Continuation Agreement between the Registrant and John G. Squires dated
February 23, 1999
10.6 Lease Agreement dated April 22, 1998 between Marx Realty and Improvement Co., Inc.
and Registrant
10.7 Lease Agreement dated November 30, 1998 between Patrick J. Armstrong and Registrant
10.8 Electronic Data Processing Agreement dated August 12, 1998 between the Registrant and
First Commerce Technologies, Inc.
10.9 Restricted Stock Agreement made effective as of January 1, 1999 between the Registrant
and Charlie W. Brinkley, Jr.
21.1 List of Subsidiaries of Registrant
23.1 Consent of Hacker, Johnson, Cohen & Grieb PA
24.1 Powers of Attorney (included on signature page of Registration Statement)
27.1 Financial Data Schedule of Registrant
</TABLE>
<PAGE> 1
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
COMMUNITY BANKS OF THE SOUTH, INC.
The undersigned, acting as incorporator, and for the purpose of forming
a corporation under and pursuant to the laws of the State of Florida, adopts the
following Articles of Incorporation.
ARTICLE I
The name of the corporation shall be COMMUNITY BANKS OF THE SOUTH,
INC., and its mailing address and initial principal place of business shall be
at 250 North Orange Avenue, in the City of Orlando, Orange County, Florida.
ARTICLE II
The corporation shall be authorized to issue 10,000,000 shares of a
single class of common stock, par value $1.00 per share.
ARTICLE III
The street address of the corporation's initial registered office is 20
North Orange Avenue, Suite 1000, Orlando, Florida 32801, and the name of the
initial registered agent at that office is Rod Jones.
ARTICLE IV
The name and address of the incorporator is Rod Jones, 20 North Orange
Avenue, Suite 1000, Orlando, Florida 32801.
IN WITNESS of the foregoing, the undersigned incorporator has signed
these Articles of Incorporation this 23rd day of March, 1999.
/s/ ROD JONES
---------------------------------
ROD JONES, Incorporator
-1-
<PAGE> 2
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
COMMUNITY BANKS OF THE SOUTH, INC.
Pursuant to the provisions of section 607.1002, Florida Statutes,
COMMUNITY BANKS OF THE SOUTH, INC., a Florida profit corporation, adopts the
following Articles of Amendment to its Articles of Incorporation:
FIRST:
Article I of the Articles of Incorporation of COMMUNITY BANKS OF THE
SOUTH, INC., is hereby amended to read:
ARTICLE I
The name of the corporation shall be SOUTHERN COMMUNITY BANCORP, and
its mailing address and initial principal place of business shall be at 250
North Orange Avenue in the City of Orlando, Orange County, Florida.
SECOND:
The foregoing amendment was adopted by the Board of Directors of the
Corporation on September 16, 1999 without shareholder action, which was not
required pursuant to section 607.1002(6), Florida Statutes.
Signed this 17th day of September, 1999.
/s/ CHARLIE W. BRINKLEY, JR
--------------------------------------------------
CHARLIE W. BRINKLEY, JR., Chairman and CEO
-2-
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
SOUTHERN COMMUNITY BANCORP
ARTICLE I. MEETINGS OF SHAREHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of the Shareholders of
this corporation shall be held at the time and place designated by the Board of
Directors of the corporation. The annual meeting shall be held within four
months after the close of the corporation's fiscal year. The annual meeting of
Shareholders for any year shall be held no later than thirteen months after the
last preceding annual meeting of Shareholders. Business transacted at the annual
meeting shall include the election of Directors of the corporation.
SECTION 2. SPECIAL MEETINGS. Special meetings of the Shareholders shall
be held when directed by the President or the Board of Directors, or when
requested in writing by the holders of not less than ten percent of all the
shares entitled to vote at the meeting. A meeting requested by Shareholders
shall be called for a date not less than ten nor more than sixty days after the
request is made, unless the Shareholders requesting the meeting designate a
later date. The call for the meeting shall be issued by the Secretary, unless
the Chief Executive Officer, the President, the Board of Directors, or the
Shareholders requesting the meeting shall designate another person to do so.
SECTION 3. PLACE. Meetings of Shareholders may be held within or
without the State of Florida.
SECTION 4. NOTICE. Written notice stating the place, day and hour of
the meeting and, in the case of a special meeting, the purpose or purposes for
which the meeting is called shall be delivered not less than ten nor more than
sixty days before the meeting, either personally or by first class mail, by or
at the direction of the President, the Secretary, or the Officer or persons
calling the meeting to each Shareholder of record entitled to vote at such
meeting. If mailed, such notice shall be deemed to be delivered when deposited
in the United States mail addressed to the Shareholder at his address as it
appears on the stock transfer books of the corporation, with postage thereon
prepaid.
SECTION 5. NOTICE OF ADJOURNED MEETINGS. When a meeting is adjourned to
another time or place, it shall not be necessary to give any notice of the
adjourned meeting if the time and place to which the meeting is adjourned are
announced at the meeting at which the adjournment is taken, and at the adjourned
meeting any business may be transacted that might have been transacted on the
original date of the meeting. if, however, after the adjournment the Board of
Directors fixes a new record date for the adjourned meeting, a notice of the
adjourned meeting shall be given as provided in this section to each Shareholder
of record on the new record date entitled to vote at such meeting.
<PAGE> 2
SECTION 6. FIXING RECORD DATE. For the purpose of determining
Shareholders entitled to notice of or to vote at any meeting of Shareholders or
any adjournment thereof, or entitled to receive payment of any dividend, or in
order to make a determination of Shareholders for any other purpose, the Board
of Directors shall fix in advance a date as the record date for any
determination of Shareholders, such date in any case to be not more than sixty
days and, in case of a meeting of Shareholders, not less than ten days, prior to
the date on which the particular action requiring such determination of
Shareholders is to be taken. When a determination of Shareholders entitled to
vote at any meeting of Shareholders has been made as provided in this section,
such determination shall apply to any adjournment thereof, unless the Board of
Directors fixes a new record date for the adjourned meeting.
SECTION 7. VOTING RECORD. The Officers or agent having charge of the
stock transfer books for shares of the corporation shall make, at least ten days
before each meeting of Shareholders, a complete list of the Shareholders
entitled to vote at such meeting or any adjournment thereof, with the address of
and the number and class and series, if any, of shares held by each. The list,
for a period of ten days prior to such meeting, shall be kept on file at the
registered office of the corporation, at the principal place of business of the
corporation or at the office of the transfer agent or registrar of the
corporation and any Shareholder shall be entitled to inspect the list at any
time during the usual business hours. The list shall also be produced and kept
open at the time and place of the meeting and shall be subject to the inspection
of any Shareholder at any time during the meeting.
If the requirements of this section have not been substantially
complied with, the meeting on demand of any Shareholder in person or by proxy,
shall be adjourned until the requirements are complied with. If no such demand
is made, failure to comply with the requirements of this section shall not
affect the validity of any action taken at such meeting.
SECTION 8. SHAREHOLDER QUORUM AND VOTING. A majority of the shares
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of Shareholders. When a specified item of business is required to
be voted on by a class or series of stock, a majority of the shares of such
class or series shall constitute a quorum for the transaction of such item of
business by that class or series.
If a quorum is present, the affirmative vote of the majority of the
shares represented at the meeting and entitled to vote on the subject matter
shall be the act of the Shareholders unless otherwise provided by law.
After a quorum has been established at a Shareholders' meeting, the
subsequent withdrawal of Shareholders, so as to reduce the number of
Shareholders entitled to vote at the meeting below the number required for a
quorum, shall not affect the validity of any action taken at the meeting or any
adjournment thereof.
SECTION 9. VOTING OF SHARES. Each outstanding share, regardless of
class, shall be entitled to one vote on each matter submitted to a vote at a
meeting of Shareholders.
2
<PAGE> 3
Treasury shares, shares of stock of this corporation owned by another
corporation the majority of the voting stock of which is owned or controlled by
this corporation, and shares of stock of this corporation held by it in a
fiduciary capacity shall not be voted, directly or indirectly, at any meeting,
and shall not be counted in determining the total number of outstanding shares
at any given time.
A Shareholder may vote either in person or by proxy executed in writing
by the Shareholder or his duly authorized attorney-in-fact.
At each election for Directors every Shareholder entitled to vote at
such election shall have the right to vote, in person or by proxy, the number of
shares owned by him for as many persons as there are Directors to be elected at
that time and for whose election he has a right to vote.
Shares standing in the name of another corporation, domestic or
foreign, may be voted by the Officer, agent, or proxy designated by the Bylaws
of the corporate Shareholder; or, in the absence of any applicable Bylaw, by
such person as the Board of Directors of the corporate Shareholder may
designate. Proof of such designation may be made by presentation of a certified
copy of the Bylaws or other instrument of the corporate Shareholder. In the
absence of any such designation, or in case of conflicting designation by the
corporate Shareholder, the Chairman of the Board, the President, any Vice
President, the Secretary and the Treasurer of the corporate Shareholder shall be
presumed to possess, in that order, authority to vote such shares.
Shares held by an administrator, executor, guardian or conservator may
be voted by him, either in person or by proxy, without a transfer of such shares
into his name. Shares standing in the name of a trustee may be voted by him,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him without a transfer of such shares into his name.
Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted by
such receiver without the transfer thereof into his name if authority so to do
be contained in an appropriate order of the court by which such receiver was
appointed.
A Shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee or his nominee shall be entitled to vote the shares so
transferred.
On and after the date on which a written notice of redemption of
redeemable shares has been mailed to the holders thereof and a sum sufficient to
redeem such shares has been deposited with a bank or trust company with
irrevocable instruction and authority to pay the redemption price to the holders
thereof upon surrender of certificates therefor, such shares shall not be
entitled to vote on any matter and shall not be deemed to be outstanding shares.
SECTION 10. PROXIES. Every Shareholder entitled to vote at a meeting of
Shareholders or to express consent or dissent without a meeting or any
Shareholder's duly authorized attorney-in-fact may authorize another person or
persons to act for him by proxy.
3
<PAGE> 4
Every proxy must be signed by the Shareholder or his attorney-in-fact.
No proxy shall be valid after the expiration of eleven months from the date
thereof unless otherwise provided in the proxy. Every proxy shall be revocable
at the pleasure of the Shareholder executing it, except as otherwise provided by
law.
The authority of the holder of a proxy to act shall not be revoked by
the incompetence or death of the Shareholder who executed the proxy unless,
before the authority is exercised, written notice of an adjudication of such
incompetence or of such death is received by the corporate officer responsible
for maintaining the list of Shareholders.
If a proxy for the same shares confers authority upon two or more
persons and does pot otherwise provide, a majority of them present at the
meeting, or if only one is present then that one, may exercise all the powers
conferred by the proxy; but if the proxy holders present at the meeting are
equally divided as to the right and manner of voting in any particular case, the
voting of such shares shall be prorated.
If a proxy expressly provides, any proxy holder may appoint in writing
a substitute to act in his place.
SECTION 11. VOTING TRUSTS. Any number of Shareholders of this
corporation may create a voting trust for the purpose of conferring upon a
trustee or trustees the right to vote or otherwise represent their shares, as
provided by law. Where the counterpart of a voting trust agreement and the copy
of the record of the holders of voting trust certificates has been deposited
with the corporation as provided by law, such documents shall be subject to the
same right of examination by a Shareholder of the corporation, in person or by
agent or attorney, as are the books and records of the corporation, and such
counterpart and such copy of such record shall be subject to examination by any
holder of record of voting trust certificates either in person or by agent or
attorney, at any reasonable time for any proper purpose.
SECTION 12. SHAREHOLDERS' AGREEMENTS. Two or more Shareholders of this
corporation may enter into an agreement or agreements providing for the exercise
of voting rights in the manner provided in the agreement(s) or relating to any
phase of the affairs of the corporation as provided by law. Nothing therein
shall impair the right of this corporation to treat the Shareholders of record
as entitled to vote the shares standing in their names.
SECTION 13. ACTION WITHOUT A MEETING. Any action required to be taken
at any annual or special meeting of Shareholders of the corporation or any
action which may be taken at any annual or special meeting of Shareholders, may
be taken without a meeting, without prior notice, and without a vote if a
consent in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted. If any class of
shares is entitled to vote thereon as a class, such written consent shall be
required of the holders of a majority of the shares of each class entitled to
vote as a class thereon and of the total shares entitled to vote thereon.
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Within 10 days after first obtaining such authorization by written
consent, notice must be given to those Shareholders who have not consented in
writing. The notice shall fairly summarize the material features of the
authorized action and, if the action be a merger, consolidation, or sale or
exchange of assets for which dissenters rights are provided, the notice shall
contain a clear statement of the right of Shareholders dissenting therefrom to
be paid the fair value of their shares upon compliance with the Florida Statutes
provision concerning dissenters rights of Shareholders.
ARTICLE II. DIRECTORS
SECTION 1. FUNCTION. All corporate powers shall be exercised by or
under the authority of, and the business and affairs of a corporation shall be
managed under the direction of, the Board of Directors.
SECTION 2. QUALIFICATION. Directors need not be residents of this state
or Shareholders of this corporation.
SECTION 3. COMPENSATION. The Board of Directors shall have authority to
fix the compensation of Directors.
SECTION 4. DUTIES OF DIRECTORS. A Director shall perform his duties as
a Director, including his duties as a member of any committee of the Board upon
which he may serve, in good faith, in a manner he reasonably believes to be in
the best interests of the corporation, and with such care as an ordinarily
prudent person in a like position would use under similar circumstances.
In performing his duties, a Director shall be entitled to rely on
information, opinions, reports or statements, including financial. statements
and other financial data, in each case prepared or presented by:
(a) one or more Officers or employees of the corporation whom
the Director reasonably believes to be reliable and competent in the matters
presented,
(b) counsel, public accountants or other persons as to matters
which the Director reasonably believes to be within such person's professional
or expert competence, or
(c) a committee of the Board upon which he does not serve,
duly designated in accordance with a provision of the Articles of Incorporation
or the Bylaws, as to matters within its designated authority, which committee
the Director reasonably believes to merit confidence.
A Director shall not be considered to be acting in good faith if he has
actual knowledge concerning the matter in question that would cause such
reliance described above to be unwarranted.
A person who performs his duties in compliance with this section shall
have no liability by reason of being or having been a Director of the
corporation.
SECTION 5. PRESUMPTION OF ASSENT. A Director of the corporation who is
present at a meeting of its Board of Directors at which action on any corporate
matter is taken shall be presumed to have
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assented to the action taken unless he votes against such action or abstains f
rom voting in respect thereto because of an asserted conflict of interest.
SECTION 6. NUMBER. This corporation shall initially have nine (9)
Directors. The number of Directors may be increased or decreased from time to
time by amendment to these Bylaws, but no decrease shall have the effect of
shortening the terms of any incumbent Director.
SECTION 7. ELECTION AND TERM. Each person named in the Articles of
Incorporation as a member of the initial Board of Directors shall hold office
until the first annual meeting of Shareholders, and until his successor shall
have been elected and qualified or until his earlier resignation, removal from
office or death.
At the first annual meeting of Shareholders and at each annual meeting
thereafter the Shareholders shall elect Directors to hold office until the next
succeeding annual meeting. Each Director shall hold office for the term for
which he is elected and until his successor shall have been elected and
qualified or until his earlier resignation, removal from office or death.
SECTION 8. VACANCIES. Any vacancy occurring in the Board of Directors,
including any vacancy created by reason of an increase in the number of
Directors, may be filled by the affirmative vote of a majority of the remaining
Directors though less than a quorum of the Board of Directors. A Director
elected to fill a vacancy shall hold office only until the next election of
Directors by the Shareholders.
SECTION 9. REMOVAL OF DIRECTORS. At a meeting of Shareholders called
expressly for that purpose, any Director or the entire Board of Directors may be
removed, with or without cause, by a vote of the holders of a majority of the
shares then entitled to vote at an election of Directors.
SECTION 10. QUORUM AND VOTING. A majority of the number of Directors
fixed by these Bylaws shall constitute a quorum for the transaction of business.
The act of the majority of the Directors present at a meeting at which a quorum
is present shall be the act of the Board of Directors.
SECTION 11. DIRECTOR CONFLICTS OF INTEREST. No contract or other
transaction between this corporation and one or more of its Directors or any
other corporation, firm, association or entity in which one or more of the
Directors are Directors or Officers or are financially interested, shall be
either void or voidable because of such relationship or interest or because such
Director or Directors are present at the meeting of the Board of Directors or a
committee thereof which authorizes, approves or ratifies such contract or
transaction or because his or their votes are counted for such purpose, if:
(a) the fact of such relationship or interest is disclosed or
known to the Board of Directors or committee which authorizes, approves or
ratifies the contract or transaction by a vote or consent sufficient for the
purpose without counting the votes or consents of such interested Directors; or
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(b) the fact of such relationship or interest is disclosed or
known to the Shareholders entitled to vote and they authorize, approve or ratify
such contract or transaction by vote or written consent; or
(c) the contract or transaction is fair and reasonable as to
the corporation at the time it is authorized by the Board, a committee or the
Shareholders.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or a committee
thereof which authorizes, approves or ratifies such contract or transaction.
SECTION 12. EXECUTIVE AND OTHER COMMITTEES. The Board of Directors, by
resolution adopted by a majority of the full Board of Directors, may designate
from among its members an executive committee and one or more other committees
each of which, to the extent provided in such resolution shall have and may
exercise all the authority of the Board of Directors, except that no committee
shall have the authority to:
(a) approve or recommend to Shareholders actions or proposals
required by law to be approved by Shareholders;
(b) designate candidates for the office of Director, for
purposes of proxy solicitation or otherwise;
(c) fill vacancies on the Board of Directors or any committee
thereof;
(d) amend the Bylaws;
(e) authorize or approve the reacquisition of shares unless
pursuant to a general formula or method specified by the Board of Directors; or
(f) authorize or approve the issuance or sale of, or any
contract to issue or sell, shares or designate the terms of a series of a class
of shares, except that the Board of Directors" having acted regarding general
authorization for the issuance or sale of shares, or any contract therefor, and,
in the case of a series, the designation thereof, may, pursuant to a general
formula or method specified by the Board of Directors, by resolution or by
adoption of a stock option or other plan, authorize a committee to fix the terms
of any contract for the sale of the shares and to fix the terms upon which such
shares may be issued or sold, including, without limitation, the price, the rate
or manner of payment of dividends, provisions for redemption, sinking fund,
conversion, voting or preferential rights, and provisions for other features of
a class of shares, or a series of a class of shares, with full power in such
committee to adopt any final resolution setting forth all the terms thereof and
to authorize the statement of the terms of a series for filing with the
Department of State.
The Board of Directors, by resolution adopted in accordance with this
section, may designate one or more Directors as alternate members of any such
committee, who may act in the place and stead of any absent member or members at
any meeting of such committee.
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SECTION 13. PLACE OF MEETINGS. Regular and special meetings by the
Board of Directors may be held within or without the State of Florida.
SECTION 14. TIME, NOTICE AND CALL OF MEETINGS. Regular meetings of the
Board of Directors shall be held without notice immediately following the annual
meeting of Shareholders. Written notice of the time and place of special
meetings of the Board of Directors shall be given to each Director by either
personal delivery, telegram, telex or cable at least two days before the meeting
or by notice mailed to the Director at least five days before the meeting.
Notice of a meeting of the Board of Directors need not be given to any
Director who signs a waiver of notice either before or after the meeting.
Attendance of a Director at a meeting shall constitute a waiver of notice of
such meeting and waiver of any and all objections to the place of the meeting,
the time of the meeting, or the manner in which it has been called or convened,
except when a Director states, at the beginning of the meeting, any objection to
the transaction of business because the meeting is not lawfully called or
convened.
Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting.
A majority of the Directors present, whether or not a quorum exists,
may adjourn any meeting of the Board of Directors to another time and place.
Notice of any such adjourned meeting shall be given to the Directors who were
not present at the time of the adjournment and, unless the time and place of the
adjourned meeting are announced at the time of the adjournment, to the other
Directors.
Meetings of the Board of Directors may be called by the Chairman of the
Board, by the President of the corporation, or by any two Directors.
Members of the Board of Directors may participate in a meeting of such
Board by means of a conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other at
the same time. Participation by such means shall constitute presence in person
at a meeting.
SECTION 15. ACTION WITHOUT A MEETING. Any action required to be taken
at a meeting of the Directors of a corporation, or any action which may be taken
at a meeting of the Directors or a committee thereof, may be taken without a
meeting if a consent in writing, setting forth the action so to be taken, signed
by all of the Directors, or all the members of the committee, as the case may
be, is filed in the minutes of the proceedings of the Board or of the committee.
Such consent shall have the same effect as a unanimous vote.
ARTICLE III. OFFICERS
SECTION 1. OFFICERS. The Officers of this corporation shall consist of
a Chairman of the Board, a President, a Secretary and a Treasurer, each of whom
shall be elected by the Board of Directors. Such other Officers and Assistant
Officers and agents as-may be deemed necessary may be elected or appointed by
the Board of Directors from time to time. Any two or more offices may be held by
the same person.
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SECTION 2. DUTIES. The Officers of this corporation shall have the
following duties:
The Chairman of the Board shall be the Chief Executive Officer of the
corporation and shall preside at all meetings of the Shareholders and Board of
Directors at which he is present. Except where, by law, the signature of the
President is required, the Chairman shall possess the same power as the
President to sign all certificates, contracts, and other instruments of the
corporation which may be authorized by the Board of Directors.
The President shall have general authority over and responsibility for
the management of the business and affairs of the corporation, subject to the
direction of the Chairman of the Board and the Board of Directors.
The Secretary shall have custody of, and maintain, all of the corporate
records except the financial records; shall record the minutes of all meetings
of the Shareholders and Board of Directors, send all notices of meetings out,
and perform such other duties as may be prescribed by the Board of Directors,
its Chairman or the President.
The Treasurer shall have custody of all corporate funds and financial
records, shall keep full and accurate accounts of receipts and disbursements and
render accounts thereof at the annual meetings of Shareholders and whenever else
required by the Board of Directors, its Chairman or the President, and shall
perform such other duties as may be prescribed by the Board of Directors, its
Chairman or the President.
SECTION 3. REMOVAL OF OFFICERS. Any Officer or agent elected or
appointed by the Board of Directors may be removed by the Board, with or without
cause, whenever in its judgment the best interests of the corporation will be
served thereby.
Any Officer or agent elected by the Shareholders may be removed only by
vote of the Shareholders, unless the Shareholders shall have authorized the
Directors to remove such officer or agent.
Any vacancy, however occurring, in any office may be filled by the
Board of Directors, unless the Bylaws shall have expressly reserved such power
to the Shareholders.
Removal of any Officer shall be without prejudice to the contract
rights, if any, of the person so removed; however, election or appointment of an
Officer or agent shall not of itself create contract rights.
SECTION 4. COMPENSATION. The compensation of the Chairman, the
President, the Secretary, the Treasurer and such other Officers elected or
appointed by the Board of Directors shall be fixed by the Board of Directors and
may be changed from time to time by a majority vote of the Board. The fact that
an Officer is also a Director shall not preclude such person from receiving
compen sation as either a Director or Officer, nor shall it affect the validity
of any resolution by the Board
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of Directors fixing such compensation. The Chairman and the President shall have
authority to fix the salaries of all employees of the corporation other than
Officers elected or appointed by the Board of Directors.
ARTICLE IV. STOCK CERTIFICATES
SECTION 1. ISSUANCE. Every holder of shares in this corporation shall
be entitled to have a certificate, representing all shares to which he is
entitled. No certificate shall be issued for any share until such share is fully
paid.
SECTION 2. FORM. Certificates representing shares in this corporation
shall be signed by the Chairman or the President or any Vice President and the
Secretary or any Assistant Secretary and may be sealed with the seal of this
corporation or a facsimile thereof. The signatures of the Chairman, the
President or Vice President and the Secretary or Assistant Secretary may be
facsimiles if the certificate is manually signed on behalf of a transfer agent
or a registrar, other than the corporation itself or an employee of the
corporation. In case any Officer who signed or whose facsimile signature has
been placed upon such certificate shall have ceased to be such Officer before
such certificate is issued, it may be issued by the corporation with the same
effect as if he were such Officer at the date of its issuance.
Every certificate representing shares which are restricted as to the
sale, disposition or other transfer of such shares shall state that such shares
are restricted as to transfer and shall set forth or fairly summarize upon the
certificate, or shall state that the corporation will furnish to any Share
holder upon request and without charge a full statement of, such restrictions.
Each certificate representing shares shall state upon the face thereof:
the name of the corporation; that the corporation is organized under the laws of
this state; the name of the person or persons to whom issued; the number and
class of shares, and the designation of the series, if any, which such
certificate represents; and the par value of each share represented by such
certificate, or a statement that the shares are without par value.
SECTION 3. TRANSFER OF STOCK. The corporation shall register a stock
certificate presented to it for transfer if the certificate is properly endorsed
by the holder of record or by his duly authorized attorney.
SECTION 4. LOST, STOLEN, OR DESTROYED CERTIFICATES. The corporation
shall issue a new stock certificate in the place of any certificate previously
issued if the holder of record of the certificate (a) makes proof in affidavit
form that it has been lost, destroyed or wrongfully taken; (b) requests the
issue of a new certificate before the corporation has notice that the
certificate has been acquired by a purchaser for value in good faith and without
notice of any adverse claim; and (c) satisfies any other reasonable requirements
imposed by the corporation, including bond in such form as the corporation may
direct, to indemnify the corporation, the transfer agent, and registrar against
any claim that may be made on account of the alleged loss, destruction or theft
of a certificate.
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ARTICLE V. BOOKS AND RECORDS
SECTION 1. BOOKS AND RECORDS. This corporation shall keep correct and
complete books and records of account and shall keep minutes of the proceedings
of its Shareholders, Board of Directors and committees of Directors.
This corporation shall keep at its registered office or principal place
of business, or at the office of its transfer agent or registrar, a record of
its Shareholders, giving the names and addresses of all Shareholders, and the
number, class and series, if any, of the shares held by each.
Any books, records and minutes may be in written form or in any other
form capable of being converted into written form within a reasonable time.
SECTION 2. SHAREHOLDERS' INSPECTION RIGHTS. Any person who shall have
been a holder of record of one quarter of one percent (.25%) shares or of voting
trust certificates therefor at least six months immediately preceding his demand
or shall be the holder of record of, or the holder of record of voting trust
certificates for, at least five percent of the outstanding shares of any class
or series of the corporation, upon written demand stating the purpose thereof,
shall have the right to examine, in person or by agent or attorney, at any
reasonable time or times, for any proper purpose its relevant books and records
of accounts, minutes and records of Shareholders and to make extracts therefrom.
SECTION 3. FINANCIAL INFORMATION. Not later than four months after the
close of each fiscal year, this corporation shall prepare a balance sheet
showing in reasonable detail the financial condition of the corporation as of
the close of its fiscal year, and a profit and loss statement showing the
results of the operations of the corporation during its fiscal year. This
requirement may be modified by a resolution of the Shareholders not later than
four months after the close of each fiscal year.
Upon written request of any Shareholder or holder of voting trust
certificates for shares of the corporation, the corporation shall mail to such
Shareholder or holder of voting trust certificates a copy of the most recent
such balance sheet and profit and loss statement.
The balance sheets and profit and loss statements shall be filed in the
registered office of the corporation in this state, shall be kept for at least
five years, and shall be subject to inspection during business hours by any
Shareholder or holder of voting trust certificates, in person or by agent.
ARTICLE VI. DIVIDENDS
The Board of Directors of this corporation may, from time to time,
declare and the corporation may pay dividends on its shares in cash, property or
its own shares, except when the corporation is insolvent or when the payment
thereof would render the corporation insolvent or when the declaration or
payment thereof would be contrary to any restrictions contained in the Articles
of Incorporation, subject to the following provisions:
(a) Dividends in cash or property may be declared and paid,
except as otherwise provided in this section, only out of the unreserved and
unrestricted earned surplus of the corporation
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or out of capital surplus, howsoever arising, but each dividend paid out of
capital surplus shall be identified as a distribution of capital surplus, and
the amount per share paid from such surplus shall be disclosed to the
Shareholders receiving the same concurrently with the distribution.
(b) Dividends may be declared and paid in the corporation's
own treasury shares.
(c) Dividends may be declared and paid in the corporation's
own authorized but unissued shares out of any unreserved and unrestricted
surplus of the corporation upon the following conditions:
(1) If a dividend is payable in shares having a par
value, such shares shall be issued at not less than the par value thereof and
there shall be transferred to stated capital at the time such dividend is paid
an amount of surplus equal to the aggregate par value of the shares to be issued
as a dividend.
(2) If a dividend is payable in shares without par
value, such shares shall be issued at such stated value as shall be fixed by the
Board of Directors by resolution adopted at the time such dividend is declared,
and there shall be transferred to stated capital at the time such dividend is
paid an amount of surplus equal to the aggregate stated value so fixed in
respect of such shares; and the amount per share so transferred to stated
capital shall be disclosed to the Shareholders receiving such dividend
concurrently with the payment thereof.
(d) No dividend payable in shares of any class shall be paid
to the holders of shares of any other class unless the Articles of Incorporation
so provide or such payment is authorized by the affirmative vote or the written
consent of the holders of at least a majority of the outstanding shares of the
class in which the payment is to be made.
(e) A split-up or division of the issued shares of any class
into a greater number of shares of the same class without increasing the stated
capital of the corporation shall not be construed to be a share dividend within
the meaning of this section.
ARTICLE VII. CORPORATE SEAL
The Board of Directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the following:
SOUTHERN COMMUNITY BANCORP
1999
Florida
ARTICLE VIII. INDEMNIFICATION
SECTION 1. CERTAIN DEFINITIONS. For the purposes of this Section,
certain terms and phrases used herein shall have the meanings set forth below:
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(a) The term "enterprise" shall include, but not be limited
to, any employee benefit plan.
(b) An "executive" shall mean any person, including a
volunteer, who is or was a director or officer of the Corporation or who is or
was serving at the request of the corporation as a director or officer of
another corporation, partnership, joint venture, trust or other enterprise.
(c) The term "expenses" shall include, but not be limited to,
all costs and expenses (including attorneys' fees and paralegal expenses) paid
or incurred by an executive, in, for or related to a proceeding or in connection
with investigating, preparing to defend, defending, being a witness in or
participating in a proceeding, including such costs and expenses incurred on
appeal. Such attorneys' fees shall include, but not be limited to (a) attorneys'
fees incurred by an executive in any and all judicial or administrative
proceedings, including appellate proceedings, arising out of or related to a
proceeding; (b) attorneys' fees incurred in order to interpret, analyze or
evaluate that person's rights and remedies in a proceeding or under any
contracts or obligations which are the subject of such proceeding; and (c)
attorneys' fees to negotiate with counsel with any claimants, regardless of
whether formal legal action is taken against him.
(d) The term "liability" shall include, but not be limited to,
the obligation to pay a judgment, settlement, penalty or fine (including an
excise tax assessed with respect to any employee benefit plan), and expenses
actually and reasonably incurred with respect to a proceeding.
(e) The term "proceeding" shall include, but not be limited
to, any threatened, pending or completed action, suit or other type of
proceeding, whether civil, criminal, administrative or investigative and whether
formal or informal, including, but not limited to, an action by or in the right
of any corporation of any type or kind, domestic or foreign, or of any
partnership, joint venture, trust, employee benefit plan or other enterprise,
whether predicated on foreign, federal, state or local law, to which an
executive is a party by reason of the fact that he is or was or has agreed to
become a director or officer of the corporation or is now or was serving at the
request of the corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise.
(f) The phrase "serving at the request of the corporation"
shall include, but not be limited to, any service as a director or officer of
the corporation that imposes duties on such person, including duties related to
an employee benefit plan and its participants or beneficiaries.
(g) The phrase "not opposed to the best interests of the
corporation" describes the actions of a person who acts in good faith and in a
manner which he reasonably believes to be in the best interests of the
corporation or the participants and beneficiaries of an employee benefit plan.
SECTION 2. PRIMARY INDEMNIFICATION. The corporation shall indemnify to
the fullest extent permitted by law, and shall advance expenses therefor, to any
executive who was or is a party to a proceeding against any liability incurred
in such proceeding, including any appeal thereof, unless a court of competent
jurisdiction establishes by judgment or other final adjudication that his
actions, or omissions to act, were material to the cause of action so
adjudicated and constitute: (a) a violation of the criminal law, unless the
executive had reasonable cause to believe his conduct was lawful or had no
reasonable cause to believe his conduct was unlawful; (b) a transaction from
which the
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executive derived an improper personal benefit; (c) in a case of director, a
circumstance under which the liability provisions of Section 607.0834; Florida
Statutes, or any successor provision, are applicable; or (d) willful misconduct
or conscious disregard for the best interests of the corporation in a proceeding
by or in the right of the corporation to procure a judgment in its favor or in a
proceeding by or in the right of a shareholder. Notwithstanding the failure to
satisfy conditions (a) through (d) of this Section, the corporation shall
nevertheless indemnify an executive pursuant to Sections 4 or 5 hereof unless a
determination is reasonably and promptly made pursuant to Section 3 hereof that
the executive did not meet the applicable standard of conduct set forth in
Sections 4 or 5.
SECTION 3. DETERMINATION OF RIGHT OF INDEMNIFICATION IN CERTAIN CASES.
Any indemnification under Sections 4 or 5 hereof (unless ordered by a court)
shall be made by the corporation unless a determination is reasonably and
promptly made that the executive did not meet the applicable standard of conduct
set forth in Sections 4 or 5. Such determination shall be made by: (a) the Board
of Directors by a majority vote of a quorum consisting of directors who were not
parties to such proceeding; (b) if such a quorum is not obtainable or, even if
obtainable, by majority vote of a committee duly designated by the Board of
Directors (in which directors who are parties may participate) consisting solely
of two or more directors not at the time parties to the proceeding; (c) by
independent counsel (i) selected by the Board of Directors prescribed in
subparagraph (a) or the committee prescribed in subparagraph (b), or (ii) if a
quorum of the directors cannot be obtained under subparagraph (a), and the
committee cannot be designated under subparagraph (b), selected by majority vote
of the full Board of Directors (in which directors who are parties may
participate); or (d) by the shareholders by a majority vote of a quorum
consisting of shareholders who are not parties to such proceeding, or if no such
quorum is attainable, by a majority vote of the shareholders who were not
parties to such proceeding. If the determination of the permissibility of
indemnification is made by independent legal counsel as set forth in
subparagraph (c) above, the other persons specified in this Section 3 shall
evaluate the reasonableness of expenses.
SECTION 4. PROCEEDING OTHER THAN BY OR IN THE RIGHT OF THE CORPORATION.
The corporation shall indemnify any executive who was or is a party to any
proceeding (other than an action by, or in the right of, the corporation)
against liability in connection with such proceeding, including any appeal
thereof, if he acted in good faith and in a manner he reasonably believed to be
in, or not opposed to, the best interests of the corporation and, with respect
to any criminal proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any proceeding by judgment, order, settlement or
conviction or upon a plea of nolo contendere or its equivalent shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in, or not opposed to, the best
interests of the corporation or, with respect to any criminal proceeding, had
reasonable cause to believe that his conduct was unlawful.
SECTION 5. PROCEEDING BY OR IN THE RIGHT OF THE CORPORATION. The
corporation shall indemnify any executive who was or is' a party to any
proceeding by or in the right of the corporation to procure a judgment in its
favor against expenses and amounts paid in settlement not exceeding, in the
judgment of the Board of Directors, the estimated expense of litigating the
proceeding to conclusion, actually and reasonably incurred in connection with
the defense or settlement of such proceeding, including any appeal thereof, if
such person acted in good faith and in manner which he reasonably believed to be
in, or not opposed to, the best interests of the
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corporation, except that no indemnification shall be made under this Section 5
in respect to any claim, issue or matter as to which such person shall have been
adjudged to be liable unless, and only to the extent that, the court in which
such proceeding was brought, or any other court of competent jurisdiction, shall
determine upon application that, despite the adjudication of liability but in
view of all circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such court shall deem proper.
SECTION 6. INDEMNIFICATION AGAINST EXPENSES OF SUCCESSFUL PARTY.
Notwithstanding the other provisions of this Section, to the extent that an
executive is successful on the merits or otherwise, including the dismissal of
an action without prejudice or the settlement of an action without admission of
liability, in defense of any proceeding or in defense of any claim, issue or
matter therein, the corporation shall indemnify such executive against all
expenses incurred in connection with such defense.
SECTION 7. ADVANCEMENT OF EXPENSES. Notwithstanding anything in the
corporation's articles of incorporation, these bylaws or any agreement to the
contrary, if so requested by an executive, the corporation shall advance (within
two business days of such request) any and all expenses relating to a proceeding
(an "expense advance"), upon the receipt of a written undertaking by or on
behalf of such person to repay such expense advance if a judgment or other final
adjudication adverse to such person (as to which all rights of appeal have been
exhausted or lapsed) establishes that he, with respect to such proceeding, is
not eligible for indemnification under the provisions of this Section. Expenses
incurred by other employees or agents of the corporation may be paid in advance
upon such terms and conditions as the Board of Directors deems appropriate.
SECTION 8. RIGHT OF EXECUTIVE TO INDEMNIFICATION UPON APPLICATION;
PROCEDURES UPON APPLICATION. Any indemnification or advancement of expenses
under this Section shall be made promptly upon the written request of the
executive, unless, with respect to a request under Section 4 or 5, a
determination is reasonably and promptly made under Section 3 that such
executive did not meet the applicable standard of conduct set forth in Section 4
or 5. The right to indemnification or advances as granted by this Section shall
be enforceable by the executive in any court of competent jurisdiction, if the
claim is improperly denied, in whole or in part, or if no disposition of such
claim is made promptly. The executive's expenses incurred in connection with
successfully establishing his right to indemnification or advancement of
expenses, in whole or in part, under this Section shall also be indemnified by
the corporation.
SECTION 9. COURT ORDERED INDEMNIFICATION. Notwithstanding the failure
of the corporation to provide indemnification due to a failure to satisfy the
conditions of Section 2, and despite any contrary determination by the
corporation in the specific case under Sections 4 or 5, an executive of the
corporation who is or was a party to a proceeding may apply for indemnification
or advancement of expenses, or both, to the court conducting the proceeding, to
the circuit court, or to another court of competent jurisdiction, and such court
may order indemnification and advancement of expenses, including expenses
incurred in seeking court ordered indemnification or advancement of expenses, if
the court determines that:
(a) The executive is entitled to indemnification or
advancement of expenses, or both, under this Section; or
15
<PAGE> 16
(b) The executive is fairly and reasonably ;entitled to
indemnification or advancement of expenses, or both, in view of all the relevant
circumstances, regardless of whether such person met any applicable standards of
conduct set forth in this Section.
SECTION 10. PARTIAL INDEMNITY, ETC. If an executive is entitled under
any provisions of this Bylaw to indemnification by the corporation for some or a
portion of the expenses, judgments, fines, penalties, excise taxes and amounts
paid or to be paid in settlement of a proceeding, but not, however, for all of
the total amount therefor, the corporation shall nevertheless indemnify such
person for the portion thereof to which he is entitled. In connection with any
determination by the Board of Directors or arbitration that an executive is not
entitled to be indemnified hereunder, the burden shall be on the corporation to
establish that he is not so entitled.
SECTION 11. OTHER RIGHTS AND REMEDIES. Indemnification and advancement
of expenses provided by this Section: (a) shall not be deemed exclusive of any
other rights to which an executive seeking indemnification may be entitled under
any statute, Bylaw, agreement, vote of shareholders or disinterested directors
or otherwise, both as to action in his official capacity and as to action in any
other capacity while holding such office; (b) shall continue as to a person who
has ceased to be an executive; and (c) shall inure to the benefit of the heirs,
executors and administrators of such a person. It is the intent of this Bylaw to
provide the maximum indemnification possible under applicable law. To the extent
applicable law or the articles of incorporation of the corporation, as in effect
on the date hereof or at any time in the future, permit greater indemnification
than is provided for in this Bylaw, the executive shall enjoy by this Bylaw the
greater benefits so afforded by such law or provision of the articles of
incorporation, and this bylaw and the exceptions to indemnification set forth
herein, to the extent applicable, shall be deemed amended without any further
action by the corporation to grant such greater benefits. All rights to
indemnification under this Section shall be deemed to be provided by a contract
between the corporation and the executive who serves in such capacity at any
time while these Bylaws and other relevant provisions of the Florida Business
Corporation Act and other applicable law, if any, are in effect. Any repeal or
modification thereof shall not affect any rights or obligations then existing.
SECTION 12. INSURANCE. By resolution passed by the Board of Directors,
the corporation may purchase and maintain insurance on behalf of any person who
is or was an executive against any liability asserted against him and incurred
by him in any such capacity, or arising out of his status as such, whether or
not the corporation would have the power to indemnify him against such liability
under this Section.
SECTION 13. CERTAIN REDUCTIONS IN INDEMNITY. The corporation's
indemnification of any executive shall be reduced by any amounts which such
person may collect as indemnification: (a) under any policy of insurance
purchased and maintained on his behalf by the corporation, or (b) from any other
corporation, partnership, joint venture, trust or other enterprise for whom the
executive has served at the request of the corporation.
SECTION 14. NOTIFICATION TO SHAREHOLDERS. If any expenses or other
amounts are paid by way of indemnification other than by court order or action
by the shareholders or by an insurance carrier pursuant to insurance maintained
by the corporation, the corporation shall, not later than the time
16
<PAGE> 17
of delivery to the shareholders of written notice of the next annual meeting of
shareholders, unless such meeting is held within 3 months f rom the date of such
payment, and, in any event, within 15 months from the date of such payment,
deliver either personally or by mail to each shareholder of record at the time
entitled to vote for the election of directors a statement specifying the
persons paid, the amounts paid, and the nature and status at the time of such
payment of the litigation or threatened litigation.
SECTION 15. CONSTITUENT CORPORATIONS. For the purposes of this Section,
references to the "corporation" shall include, in addition to any resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger, so that any executive of
such a constituent corporation shall stand in the same position under the
provisions of this Section with respect to the resulting or surviving
corporation as he would if its separate existence had contained.
SECTION 16. SAVINGS CLAUSE. If this Section or any portion hereof shall
be invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each executive as to liability with
respect to any proceeding, whether internal or external, including a grand jury
proceeding or an action or suit brought by or in the right of the corporation,
to the full extent permitted by any applicable portion of this Section that
shall not have been invalidated, or by any applicable provision of Florida law.
SECTION 17. EFFECTIVE DATE. The provisions of this Section shall be
applicable to all proceedings commenced after the adoption hereof, whether
arising from acts or omissions occurring before or after its adoption.
ARTICLE IX. AMENDMENT
These Bylaws may be repealed or amended, and new Bylaws may be adopted,
by either the Board of Directors or the Shareholders, but the Board of Directors
may not amend or repeal any Bylaw adopted by Shareholders if the Shareholders
specifically provide such Bylaw not subject to amendment or repeal by the
Directors.
17
<PAGE> 1
EXHIBIT 4.1
FORM OF
COMMON STOCK CERTIFICATE
<TABLE>
<S> <C> <C>
NUMBER SHARES
SOUTHERN COMMUNITY BANCORP
COMMON STOCK INCORPORATED UNDER THE LAWS OF THE STATE OF FLORIDA COMMON STOCK
THIS CERTIFIES THAT
SEE REVERSE
FOR CERTAIN
DEFINITIONS
IS THE OWNER OF
</TABLE>
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK,
PAR VALUE $1.00, OF
===============================================================================
SOUTHERN COMMUNITY BANCORP
transferable on the books of the Corporation in person or by the duly authorized
attorney upon this Certificate being properly endorsed.
Witness the facsimile seal of the Corporation and the facsimile signature of
its duly authorized officers.
<TABLE>
<S> <C> <C>
Dated:
/s/ Stephen R. Jeuck [SEAL] /s/ Charlie W. Brinkley, Jr.
CHIEF FINANCIAL OFFICER SOUTHERN COMMUNITY BANCORP CHAIRMAN AND CHIEF EXECUTIVE OFFICER
AND SECRETARY CORPORATE SEAL 1999 FLORIDA
</TABLE>
<PAGE> 2
SOUTHERN COMMUNITY BANCORP
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 the applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT-______ Custodian______
TEN ENT - as tenants by the (Cust) (Minor)
entireties under Uniform Gifts to
JT TEN - as joint tenants with Minors Act____________
right of survivorship (State)
and not as tenants in
common
Additional abbreviations may also be used though not in the above list.
For value received,________________,hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
______________________________________
______________________________________
_______________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE)
_______________________________________________________________________________
_______________________________________________________________________________
________________________________________________________________________ shares
of the capital 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.
Dated______________________________
____________________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND
WITH THE NAME AS WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATEVER.
SIGNATURE(S) GUARANTEED: ____________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS
AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE
MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17AD-15.
<PAGE> 1
EXHIBIT 10.1
SOUTHERN COMMUNITY BANCORP
EMPLOYEES' INCENTIVE STOCK OPTION PLAN
1. PURPOSE. The purpose of this Employees' Incentive Stock Option Plan
(hereinafter called the "Plan") is to promote the interest of Southern
Community Bancorp, a Florida corporation (hereinafter called the
"Company"), by affording an incentive to certain officers and key
management employees to remain in the employ of the Company to use
their best efforts in its behalf, and further to aid the Company in
attracting, maintaining, and developing capable management personnel of
a caliber required to insure the company's continued success, by means
of an offer to such persons of an opportunity to acquire or increase
their proprietary interest in the Company through the granting of
options to purchase the Company's stock pursuant to the terms of the
Plan.
2. SHARES SUBJECT TO PLAN.
(a) The shares to be delivered upon exercise of options granted
under the Plan (hereinafter call "Options" or "Option") shall
be made available, at the discretion of the Board of
Directors, from the authorized and unissued shares of the
Company's Common Stock or from the shares acquired by the
Company, including shares purchased in the open market.
(b) Subject to adjustments made pursuant to the provisions of
Section 11 hereof, the aggregate number of shares which may be
issued upon exercise of all Options shall not exceed 106,000
shares of the Common Stock of the Company; provided, however,
that in no event shall any Option be granted under the Plan
which would cause the total number of shares subject to such
Options, when coupled with the shares subject to options that
may be or have been granted under any other stock option plan
of the Company, to exceed 20% of the total number of shares of
the Company's Common Stock then outstanding, exclusive of
shares issued pursuant to the exercise of options previously
granted under all of such plans.
(c) In the event that any Option shall expire or terminate for any
reason whatsoever without having been exercised in full, the
unpurchased shares covered thereby shall (unless the Plan
shall have been terminated) be added to the shares otherwise
available for Options which may be granted in accordance with
the terms of the Plan; or shall be available for any lawful
corporate purpose.
(d) More than one Option may be granted to any employee pursuant
to the Plan. The aggregate fair market value of the stock
(determined as of the time the Option is granted) for which
Options are exercisable for the first time under the terms of
the Plan by any employee during any calendar year shall not
exceed the aggregate dollar
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<PAGE> 2
limitation of Section 422(d) of the Internal Revenue Code of
1986, as amended (the "Code") ($100,000.00 as of the date of
the Plan).
3. OPTION AGREEMENTS.
(a) Each Option shall be evidenced by a written option agreement,
which shall be signed by an officer of the Company and by the
employee and which shall contain such provisions as may be
approved by the Compensation Committee of the Board of
Directors of the Company (or such other committee as the Board
of Directors may designate, hereinafter called the
"Committee").
(b) The option agreements shall constitute binding contracts
between the Company and the employee and every employee, upon
acceptance of such option agreement, shall be bound by the
terms and restrictions of the Plan and of the option
agreement.
(c) The terms of the option agreement shall be in accordance with
the Plan, but may include additional provisions and
restrictions, provided that the same are not inconsistent with
the terms and provisions of the Plan.
(d) Each Option granted under the Plan shall vest ratably over a
period of five years from the date of employment of the
grantee of such Option or such later date as the Committee
shall determine in its discretion, such that twenty percent
(20%) of the total number of shares subject to each Option
shall become exercisable on the first anniversary of the date
of the grantee's employment by the Company or the date on
which the Option is granted, as determined by the Committee,
and the Option shall be exercisable with respect to an
additional twenty percent (20%) of such shares on each
succeeding anniversary date until the Option shall be
exercisable with respect to all of such shares.
Notwithstanding the foregoing, each Option granted under the
Plan shall become immediately exercisable in the event of any
Terminating Transaction as defined in Section 7(d) of the
Plan.
(e) Neither anything contained in the Plan nor in any resolution
adopted or to be adopted by the Board of Directors or the
shareholders of the Company nor any action taken by the
Committee shall constitute the granting of any Option. The
granting of any Option shall take place only when a written
option agreement shall have been duly executed and delivered
by or on behalf of the Company and the employee to whom such
Option shall be granted.
(f) No Option shall be granted after ten (10) years from the date
the Plan is adopted by the Company's Board of Directors, or
the date the Plan is approved by the Company's shareholders,
whichever is earlier.
4. ADMINISTRATION. The Committee, which shall consist solely of
"disinterested persons" (which term shall have the same meaning as used
in SEC Rule 16b-3(c)(2)(i)), shall administer the Plan. The Committee
shall consist of not less than three nor more than five
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<PAGE> 3
members of the Board, to serve at the pleasure of the Board. If it is
proposed that any member of the Committee shall be granted Options,
such member shall not be present during the discussion at any meeting
of the Committee at which the granting of an Option to such member is
considered. Vacancies on the Committee shall be filled by members
appointed by the Board of Directors.
A majority of the Committee shall constitute a quorum, and acts of a
majority of the disinterested members present at any meeting at which a
quorum is present, or acts approved in writing by a majority of the
disinterested members of the Committee, shall be deemed the acts of the
Committee.
The Committee shall select one of its members as its Chairman. The
Committee shall appoint a secretary who need not be a member of the
Committee and who shall maintain a record of its actions, decisions and
proceedings.
The Committee shall have full power and authority to construe,
interpret, and administer the Plan and may from time to time adopt such
rules and regulations for carrying out the Plan as it may deem proper
and in the best interest of the Company. Subject to the terms,
provisions, and conditions of the Plan, the Committee in the light and
on the consideration of recommendations of the Company's Directors,
President and other officers, if the Committee shall deem the same
appropriate, shall (i) select the key employees to whom Options shall
be granted, (ii) determine the number of shares subject to each Option,
(iii) determine the time or times when Options will be granted, (iv)
determine the price of the shares subject to each Option, (v) determine
the time when each Option may be exercised, (vi) fix such other
provisions of the option agreement as the Committee may deem necessary
or desirable consistent with the terms of the Plan, and (vii) determine
all other questions relating to the administration of the Plan. The
interpretation of any provisions of the Plan by the Committee shall be
final, conclusive, and binding upon all persons and the Board of
Directors shall place into effect the determinations of the Committee.
5. ELIGIBILITY. Key employees of the Company and, except as restricted by
law, any of its subsidiaries, including officers and directors who are
salaried employees, shall be eligible to receive Options; provide,
however, that no person shall be eligible to receive Options who
immediately after such Option is granted hereunder owns (within the
meaning of Section 422(b)(6) of the Code) capital stock possessing more
than 10% of the total combined voting power of all classes of stock of
the Company or any of its subsidiaries, as defined in Section 424(f) of
the Code, unless the Options are priced in an amount which equals at
least 110% of the fair market value of the stock (determined at the
time of the grant) and the Options are required to be exercised within
five (5) years from the date of the grant. The fact that an employee
has been granted an Option shall not in any way effect or qualify the
right of the employer to terminate his employment at any time. Nothing
contained in the Plan shall be construed to limit the right of the
Company to grant options otherwise than under the Plan for any proper
and lawful corporate purpose, including but not limited to options
granted to key employees. Key employees will be those selected by the
Committee from time to time who, in the sole discretion of the
Committee, have contributed in the past or who may be
-3-
<PAGE> 4
expected to contribute materially in the future to the successful
performance of the Company or any of its subsidiaries.
6. OPTION PRICE. Except as provided in Section 5 hereof relating to an
employee who owns capital stock possessing more than 10% of the total
combined voting power of all classes of stock, the price at which
shares of stock may be purchased under an Option shall be determined by
the Committee but shall not be less than the greater of the par value
of the shares or 100% of the fair market value (within the meaning of
Section 422(c)(7) of the Code) of such shares on the date that the
Option is granted, such fair market value to be determined by, and in
accordance with procedures to be established by the Committee. The
option price will be subject to adjustments in accordance with the
provisions of Section 11 hereof.
7. EXERCISE OF OPTIONS.
(a) Subject to the provisions of the Plan with respect to
termination of employment under Section 9 hereof, the period
during which each Option may be exercised shall be fixed by
the Committee at the time such Option is granted, but such
period shall expire not later than ten years from the date the
Option is granted. Subject to the terms and conditions of the
option agreement, an Option may be exercised, at any time or
from time to time, as to any part of or all of the shares
which shall be covered thereby; provided, however, that an
Option may not be exercised as to less than 100 shares at any
one time (or the remaining shares then purchasable under the
Option, if less than 100 shares).
(b) No shares shall be delivered pursuant to any exercise of an
Option until the requirements of such laws and regulations as
may be deemed by the Committee to be applicable to them are
satisfied and until payment in full in cash of the option
price for them is received by the Company. No employee to whom
an Option shall have been granted or the legal representative,
legatee, or distributee of such an employee, shall be deemed
to be a holder of any shares subject to any Option unless and
until the certificate or certificates for them have been
issued.
(c) Except as provided in Section 9 and 10 hereof, at all time
during the period beginning on the date of the granting of the
Option and ending on the date of the exercise of the option,
the individual must have been an employee of the Company or
any of its subsidiaries or a corporation or a parent or
subsidiary of such corporation issuing, or assuming a stock
option in a transaction to which Section 424(a) of the Code
applies.
(d) In the event of (i) a reorganization, merger or consolidation
in which the Company is not the surviving corporation, (ii)
the sale of substantially all of the assets of the Company to
another corporation, or (iii) a change in control or
threatened change in control of the Company (all such events
referred to collectively herein as a "Terminating
Transaction"), all Options granted prior to such Terminating
Transaction shall become immediately exercisable. Unless
otherwise determined by
-4-
<PAGE> 5
the Board of Directors, the term "control" shall refer to the
acquisition of ten percent (10%) or more of the voting
securities of the Company by any person or group acting in
concert within the meaning of the Change in Bank Control Act,
12 U.S.C. 1817(j), or section 658.28, Florida Statutes.
8. TRANSFERABILITY OF OPTIONS. An Option granted under the Plan may not be
transferred except by will or the laws of descent and distribution,
and, during the lifetime of the employee to whom granted, may be
exercised only by such employee.
9. TERMINATION OF EMPLOYMENT. In the event that the employment of an
employee to whom an Option shall have been granted shall be terminated
for any reason other than death, such Option may be exercised at any
time prior to the expiration date of the Option or within three (3)
months after the date of such termination (twelve (12) months in the
case of an employee who is disabled within the meaning of Section
22(e)(3) of the Code), whichever is earlier, but only to the extent
such employee had the right to exercise such Option at the date of such
termination; provided, however, that, if the employment is terminated
as a result of deliberate, willful or gross misconduct as determined by
the Board of Directors or the Committee, all rights under the Option
shall terminate and expire upon such termination.
10. DEATH OF EMPLOYEE. If an employee to whom an Option shall have been
granted shall die while he is employed by the Company or any of its
subsidiaries or within three (3) months after the termination of his
employment, such Option may be exercised (to the extent that the
employee shall have been entitled to do so at the date of his death) by
the person or persons to which such deceased employee's rights passed
by will or by the laws of descent and distribution at any time prior to
the expiration date of the Option or within one (1) year after the date
of the appointment of a personal representative for such deceased
employee's estate, whichever is earlier.
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. In the event of a capital
adjustment resulting from a stock dividend, stock split,
reorganization, merger, consolidation, or a combination or exchange of
shares, the number of shares of stock subject to the Plan and the
number of shares under Option shall be adjusted consistent with such
capital adjustment. The price of any share under Option shall be
adjusted so that there will be no change in the aggregate purchase
price payable upon exercise of any such Option. The granting of an
Option pursuant to the Plan shall not affect in any way the right or
power of the Company to make adjustments, reorganizations,
reclassifications, or changes of its capital or business structure or
to merge, consolidate, dissolve, liquidate, or sell or transfer all or
any part of its business or assets.
12. TERMINATION AND AMENDMENT OF PLAN. The Plan may at any time or from
time to time be terminated, modified, or amended by the shareholders of
the Company, by the affirmative vote of a majority of the common
shares, in addition to the affirmative vote of a majority in interest
of all the shares of the Company. The Board of Directors may at any
time and from time to time modify or amend the Plan in such respects as
it shall deem advisable in order that the Options shall be "Incentive
Stock Options" as defined in Section 422 of the Code or
-5-
<PAGE> 6
to conform to any change in the law, or in any other respect which
shall not change (a) the maximum number of shares for which Options may
be granted under the Plan; or (b) the minimum purchase price for the
shares subject to Options, except as provided in Section 11; or (c) the
periods during which Options may be granted or exercised; or (d) the
provisions relating to the determination of employees to whom Options
shall be granted; or (e) the provisions relating to the annual dollar
limitation upon Options granted to any employee; or (f) the provisions
relating to the transferability of the Options; or (g) the provisions
relating to the employment status of an employee to whom an Option
shall have been granted. The termination or any modification or
amendment of the Plan shall not, without the consent of an employee,
affect such employee's rights under an Option theretofore granted to
such employee.
13. EFFECTIVE DATE, TERM, AND APPROVAL. The Plan shall take effect on the
earliest date on which the Plan shall have been approved by each of (i)
the Board of Directors of the Company, (ii) the Shareholders of the
Company, and (iii) the Florida Department of Banking and Finance (the
"Department"). The Plan will terminate on the tenth anniversary of such
effective date, and no Options may be granted under the Plan after that
date, unless an earlier termination date, after which no Options may be
granted under the Plan, is fixed by action of the Board of Directors of
the Company, but any Option granted prior thereto may be exercised in
accordance with its terms. The Plan and all Options granted pursuant to
it are subject to all laws, approvals, requirements and regulations of
any governmental authority which may be applicable thereto and
notwithstanding any provisions of the Plan or option agreement, the
holder of an Option shall not be entitled to exercise his Option nor
shall the Company be obligated to issue any shares to the holder if
such exercise or issuance shall constitute a violation by the holder or
the Company of any provisions of any such approval requirement, law or
regulation.
14. PROCEEDS FROM SALE OF STOCK. Proceeds from the purchase of shares
pursuant to the Plan shall be for the general business purpose of the
Company.
-6-
<PAGE> 7
15. ADOPTION AND APPROVAL OF PLAN.
Date Plan adopted by the Board of Directors: MARCH 18, 1999.
Date Plan approved by the Shareholders: APRIL 29, 1999.
Date Plan approved by the Department: JUNE 1, 1999.
-7-
<PAGE> 8
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (the "Agreement") is made as of the ____
day of ______________, by and between SOUTHERN COMMUNITY BANCORP, a Florida
corporation (hereinafter referred to as the "Company"), and
________________________________________ (hereinafter referred to as the
"Optionee").
WHEREAS, the Optionee is a valuable and trusted employee of the
Company, and the Company considers it desirable and in its best interest that
the Optionee be given an inducement to acquire a further proprietary interest in
the Company and an added incentive to advance the interests of the Company by
possessing an option to purchase voting shares of the Company's common stock,
par value $1.00 per share (the "Common Stock"), in accordance with the
provisions of the Company's Employees' Incentive Stock Option Plan (the "Plan"),
a copy of which is attached to this Agreement, as adopted by the Board of
Directors of the Company on March 18, 1999, and ratified by the stockholders on
April 29, 1999, and as approved by the Florida Department of Banking and Finance
on June 1, 1999.
NOW, THEREFORE, in consideration of the premises, it is agreed by and
between the parties as follows:
1. GRANT OF OPTION. The Company hereby grants to the Optionee the right,
privilege, and option to purchase ____________________________ (______)
shares of the Common Stock, at the purchase price of ____________
dollars ($____) per share (the "Option"), in the manner and subject to
the conditions hereinafter provided and as provided in the Plan.
2. TIME OF EXERCISE OF OPTION. The Option may be exercised at any time,
and from time to time, in whole or in part (subject to the limitation
that the Option may not be exercised with respect to less than 100
shares of the Common Stock at any one time or the remaining number of
shares subject to the Option, if less than 100 shares), until the
termination of the Option as provided in Section 4 below; provided,
however, that:
(a) the Option granted hereby shall vest and be exercisable
only in accordance with the following vesting schedule: (i) the Option shall
vest and be exercisable with respect to __________________ (______) shares of
the Common Stock on ______________________; and (ii) the Option shall vest and
be exercisable with respect to an additional __________________ (______) shares
of the Common Stock on each anniversary of such date thereafter until the Option
is fully vested and exercisable; and
(b) notwithstanding the foregoing vesting schedule: (i) the
aggregate fair market value of the Common Stock (determined as of the date of
this Agreement) for which the Option is exercisable by the Optionee for the
first time during any calendar year under the terms of the Plan shall not exceed
the aggregate dollar limitation of Section 422(d) of the Internal Revenue Code
of 1986, as amended ($100,000.00 at the grant of this Option); and (ii) the
Option shall be fully vested and immediately exercisable upon the occurrence of
any "Terminating Transaction" as such term is defined in the Plan.
-1-
<PAGE> 9
3. METHOD OF EXERCISE. The Option shall be exercised by written notice
directed to the Secretary of the Company,at its principal place of
business, accompanied by a certified or cashier's check in payment of
the purchase price for the number of shares specified and paid for. The
Company shall make immediate delivery of such shares; provided that if
any law or regulation requires the Company to take any action with
respect to the shares specified in such notice before the issuance
thereof, then the date of delivery of such shares shall be extended for
the period necessary to take such action.
4. TERMINATION OF OPTION. Except as herein otherwise stated, the Option,
to the extent not theretofore exercised, shall terminate upon the first
to occur of the following:
(a) the expiration of three (3) months after the date on which the
Optionee's employment by the Company or any of its
subsidiaries is terminated (unless such termination is for
cause as provided below or is by reason of the death or
permanent and total disability of the Optionee).
(b) the expiration of twelve (12) months after the date on which
Optionee's employment by the Company or any of its
subsidiaries is terminated, if such termination is by reason
of the permanent and total disability of the Optionee.
(c) the expiration of twelve (12) months after the date of the
Optionee's death: (i) while in the employ of the Company or
any of its subsidiaries, (ii) within three (3) months after
the termination of the Optionee's employment, or (iii) within
twelve (12) months after the termination of the Optionee's
employment if such termination was by reason of Optionee's
permanent and total disability. In any such case, the person
or persons to whom the Optionee's rights pass by will or by
the laws of descent and distribution may exercise the Option
(to the extent the Option has not theretofore been exercised
during the Optionee's lifetime).
(d) the expiration of ten (10) years from the date of this
Agreement.
Notwithstanding any provision herein to the contrary, if the Optionee's
employment is terminated for cause as a result of the deliberate, willful or
gross misconduct of the Optionee as determined by the Board of Directors of the
Company, then the Option and all rights granted hereby shall terminate and
expire immediately upon such termination.
5. RECLASSIFICATION, CONSOLIDATION, OR MERGER. If and to the extent that
the number of issued shares of Common Stock shall be increased or
reduced by any change in par value, split up, reclassification,
distribution of a dividend payable in stock, or the like, the number of
shares subject to the Option and the purchase price per share shall be
proportionally adjusted. If the Company is reorganized or consolidated
or merged with another corporation, the Optionee shall be entitled to
receive options covering shares of such reorganized, consolidated or
merged corporation in the same proportion, at an equivalent price, and
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<PAGE> 10
subject to the same terms and conditions as provided in this Agreement.
For purposes of the preceding sentence, the excess of the aggregate
fair market value of the shares subject to such option immediately
after the reorganization, consolidation, or merger over the aggregate
purchase price of such shares pursuant to such option shall not be more
than the excess of the aggregate fair market value of all shares of the
Common Stock subject to the Option immediately before such
reorganization, consolidation, or merger over the aggregate purchase
price of such shares pursuant to the Option, and any new option shall
neither give Optionee additional benefits which Optionee did not have
under the Option, nor deprive Optionee of benefits which Optionee had
under the Option.
6. RIGHTS PRIOR TO EXERCISE OF OPTION. This Option is non-transferrable by
Optionee, except in the event of Optionee's death as provided in
Section 4(c) above, and during Optionee's lifetime this Option is
exercisable only by the Optionee. The Optionee shall have no rights as
a stockholder of the Company with respect to the shares of the Common
Stock covered by the Option until payment of the purchase price and
delivery of such shares to the Optionee as herein provided.
7. BINDING EFFECT. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
8. NOTICE. Any notice or other communication with respect to this
Agreement or the Plan, if given by the Optionee, shall be delivered or
mailed to the Company, to the attention of the Secretary of the
Company, 250 North Orange Avenue, Orlando, Florida 32801; telephone
407-648-1844, facsimile 407-648-2163; or, if given by the Company,
shall be addressed to the Optionee at:
Name:
Street or P.O. Address:
City, State, Zip:
Telephone:
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed.
SOUTHERN COMMUNITY BANCORP
By: ___________________________________
_______________________________________
, Optionee
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<PAGE> 1
EXHIBIT 10.2
SOUTHERN COMMUNITY BANCORP
DIRECTORS' STATUTORY STOCK OPTION PLAN
1. PURPOSE. The purpose of this Directors' Statutory Stock Option
Plan (the "Plan") is to retain the best available directors for Southern
Community Bancorp, a Florida corporation (the "Bank"), by providing an
additional incentive to such directors to promote the success of the Bank.
Unless otherwise indicated, the term "Bank" shall include any parent or
subsidiary of the Bank which now exists or hereafter is organized or acquired by
the Bank. This Plan is created pursuant to the provisions of Section 658.35,
Florida Statutes, as amended.
2. ADMINISTRATION.
(a) The Board of Directors of the Bank shall have the
power, subject to, and within the limits of, the express provisions of the Plan:
(i) To prescribe the other terms and provisions
(which need not be identical) of each option granted under the Plan to eligible
persons;
(ii) To construe and interpret the Plan and
options granted under it, and to establish, amend, and revoke rules and
regulations for administration. The Board of Directors, in the exercise of this
power, may correct any defect or supply any omission, or reconcile any
inconsistency in the Plan, or in any option agreement, in the manner and to the
extent it shall deem necessary or expedient to make the Plan fully effective. In
exercising this power the Board of Directors may retain counsel at the expense
of the Bank. All decisions and determinations by the Board of Directors in
exercising this power shall be final and binding upon the Bank and the
Optionees;
(iii) To exercise such powers and to perform such
acts as are deemed necessary or expedient to promote the best interests of the
Bank with respect to the Plan.
(b) All options granted will be evidenced by an option
agreement or certificate which shall bear a number specifically assigned to the
Optionee throughout the term of the option in order for the Bank to maintain an
accurate record of the options.
3. STOCK. The stock subject to options under the Plan shall be
shares of the Bank's authorized but unissued common stock or treasury shares of
common stock (the "Common Stock"). The number of shares of Common Stock for
which options may be granted, excluding the shares involved in the unexercised
portion of any cancelled, terminated or expired options, shall equal seventy
thousand (70,000) shares, which is approximately 8.2% of the present number of
outstanding shares of Common Stock of the Bank. In the case of a liquidation or
dissolution of the Bank, or
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<PAGE> 2
upon a reorganization, merger or consolidation of the Bank, any adjustments to
the options covered under the Plan will be governed by the provisions of Section
8 hereof.
4. ELIGIBILITY. The persons who shall be eligible to receive
options under the Plan shall be directors of the Bank. In no event, however,
shall an option be granted to an individual who, at the time such option is
granted, owns shares possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Bank or of any parent or
subsidiary corporation thereof.
5. TERMS OF THE OPTION AGREEMENT. Each option agreement shall
contain such provisions as the Board of Directors deems appropriate. Option
agreements need not be identical, but each option agreement, by appropriate
language, shall include the substance of all of the following provisions, as
applicable:
(a) In no event shall an option granted pursuant to this
Plan be exercisable after the expiration of ten (10) years from the date of the
grant. Each option granted under this Plan shall also be subject to earlier
termination as provided in this Plan or as provided in the particular option
agreement. Options shall expire on the date specified in the option agreement,
which date shall not be later than the tenth (10th) anniversary of the date on
which the option was granted.
(b) The maximum number of shares with respect to which
options may be granted to any director pursuant to this Plan shall be ten
thousand (10,000) shares.
(c) The minimum number of shares with respect to which
options may be exercised at any one time shall be one hundred (100) shares,
unless the number purchased is the total number at the time available for
purchase under the option.
(d) The purchase price per share of Common Stock under
each option shall not be less than 100% of the fair market value of the
underlying Common Stock subject to the option on the date the option is granted
(but in no event less than par value per share). For this purpose, the fair
market value of the Common Stock shall be the book value per share as determined
by the Board of Directors.
(e) The Optionee shall not be deemed to be the holder of,
or to have any of the rights of a holder with respect to, any shares of Common
Stock subject to such option, unless and until the option shall have been
exercised pursuant to the terms thereof, the Bank shall have issued and
delivered the shares to the Optionee, and the Optionee's name shall have been
entered as a stockholder of record on the books of the Bank. Thereupon, the
Optionee shall have full voting, dividend and other ownership rights with
respect to such shares of Common Stock.
(f) Each option granted under this Plan shall, by its
terms, be non-transferable by the Optionee and exercisable during the Optionee's
lifetime only by the Optionee. Notwithstanding the foregoing, any option granted
to an Optionee shall, upon his death, pass to the
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<PAGE> 3
Optionee's estate and be exercisable by the personal representative of such
estate in accordance with the provisions of this Plan.
(g) Each option granted under this Plan shall be subject
to any provision(s) necessary to assure compliance with federal and state
banking and securities laws.
6. METHOD OF EXERCISE, PAYMENT OF PURCHASE PRICE.
(a) Subject to Section 5(b) and (c) hereof, stock options
granted under this Plan may be exercised in whole or in installments, to such
extent, and at such time or times during the terms thereof, as shall be
determined by the Board of Directors at the time of grant of each such option.
(b) An option shall be exercised by the Optionee
delivering to the Bank on any business day a written notice specifying the
number of shares of Common Stock the Optionee then desires to purchase (the
"Notice").
(c) Payment for shares of Common Stock purchased pursuant
to the exercise of an option shall be in cash equal to the option price for the
number of shares specified in the Notice.
(d) Except as otherwise provided herein, a stock option
granted hereunder shall remain outstanding and shall be exercisable during the
entire term of the Option.
7. USE OF PROCEEDS FROM STOCK. Proceeds from the sale of Common
Stock pursuant to options granted under the Plan shall constitute general funds
of the Bank.
8. ADJUSTMENT UPON CHANGES IN CAPITALIZATION.
(a) If the outstanding shares of the Common Stock as a
whole are increased, decreased or changed into, or exchanged for, a different
number or kind of shares or securities of the Bank, whether through a
recapitalization, reclassification, stock dividend, stock split, combination of
shares, exchange of shares, change in corporate structure or the like, an
appropriate and proportionate adjustment shall be made in the number and kinds
of shares subject to the Plan, and in the number, kinds, and per share exercise
price of shares subject to unexercised options or portions thereof granted prior
to any such change. Any such adjustment in an outstanding option, however, shall
be made without a change in the total price applicable to the unexercised
portion of the option, but with a corresponding adjustment in the number of
shares and price for each share of Common Stock covered by the option.
(b) Upon the effective date of a dissolution or
liquidation of the Bank, or upon a reorganization, merger or consolidation in
which the Bank is not the surviving corporation, or upon the sale of
substantially all of the assets of the Bank to another corporation, this Plan
and the options issued hereunder shall terminate, unless provision is made in
writing in connection with such
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<PAGE> 4
transaction for the continuance of the Plan and the assumption of options
theretofore granted, or the substitution for such options of new options of the
successor corporation or a parent or subsidiary thereof, with appropriate
adjustment as may be determined and approved by the Board of Directors of the
successor to the Bank as to the number and kinds of shares and the per share
exercise prices, in which event this Plan and the options theretofore granted or
the new options substituted therefor shall continue in the manner and under the
terms so provided. Upon the occurrence of a transaction in which provision is
not made for the continuance of this Plan and for the assumption of options
theretofore granted or the substitution for such options of new options covering
the shares of the successor corporation or a parent or subsidiary thereof
(hereinafter referred to as a "Terminating Transaction"), each individual to
whom an option has been granted under this Plan (or the legal guardian or
personal representative of such individual's estate), which option has not
otherwise been cancelled or terminated in accordance with the terms of this Plan
prior to such Terminating Transaction, shall be entitled, prior to the effective
date of any such Terminating Transaction, to exercise, in whole or in part, his
or her rights under any option granted to him or her without regard to any
restrictions on exercise that would otherwise apply.
(c) Adjustments under this Section 8 shall be made by the
Board of Directors of the Bank, whose determination as to what adjustment shall
be made, and the extent thereof, shall be conclusive. The Board of Directors
shall have the discretion and power in any such event to determine and to make
effective provision for the acceleration of the time during which the option may
be exercised, notwithstanding the provisions of the option setting forth the
date or dates on which all or any part of it may be exercised, provided that
such date shall be no later than ten (10) years from the date of grant of such
option. No fractional shares of Common Stock shall be issued under the Plan on
account of any adjustment specified in this Section 8.
9. TERMINATION OF OPTIONS.
(a) In the event of the death of the Optionee prior to
either the exercise or the expiration of any options granted pursuant to this
Plan, options granted to such Optionee under this Plan may be exercised, as
provided in Section 6 hereof, by the personal representative of the estate of
the Optionee at any time during the one (1) year period beginning on the date of
appointment of the personal representative of the Optionee's estate and ending
on the first (1st) anniversary thereof, but not later than the date on which the
option would otherwise expire. If such option is not timely exercised, such
option shall be cancelled on the day following such anniversary date.
(b) Except as provided in subsection (a) above, if the
service of an Optionee as a director of the Bank is terminated for cause, such
cause being defined to mean deliberate, willful or gross misconduct as
determined by the Board of Directors or the Committee, the options personally
held by such Optionee shall, to the extent not theretofore exercised, be
cancelled immediately upon such termination.
10. AMENDMENT OF THE PLAN. The Board of Directors at any time, and
from time to time, may amend the Plan, subject to any required regulatory
approval and to the limitation that, except
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<PAGE> 5
as provided in Section 8 hereof, no amendment shall be effective unless approved
by the stockholders of the Bank at an Annual or Special Meeting held within
twelve (12) months before or after the date of such amendment's adoption, where
such amendment will:
(a) Increase the number of shares of Common Stock as to
which options may be granted under the Plan;
(b) Change in substance Section 4 hereof relating to
eligibility to participate in the Plan or Section 2 hereof relating to
administration of this Plan; or
(c) Increase the maximum terms of options as provided
herein.
Except as provided in Section 8 hereof, rights and obligations under
any option granted before amendment of the Plan shall not be altered or impaired
by amendment of the Plan, except with the consent of the Optionee.
11. EFFECTIVENESS OF THE PLAN. The Plan shall become effective upon its
adoption by the Board of Directors of the Bank; provided, however, that (1) the
effectiveness of this Plan shall be subject to the approval of the Florida
Department of Banking and Finance (the "Department") and the stockholders of the
Bank within twelve (12) months before or after the adoption of this Plan by the
Board of Directors, and (2) the effectiveness of stock options granted under
this Plan prior to the date such stockholder approval is obtained shall also be
subject to such approval.
12. TERMINATION OR SUSPENSION OF OPTION PLAN. The Board of Directors at
any time may terminate or suspend the Plan. Unless sooner terminated, the Plan
shall terminate on the tenth (10th) anniversary of the earlier of the effective
date specified in Section 11 hereof or the date the Plan is approved by the
stockholders, but such termination shall not affect any option theretofore
granted. An option may not be granted while the Plan is suspended or after it is
terminated.
Rights and obligations under any option granted while the Plan is in
effect shall not be altered or impaired by suspension or termination of the
Plan, except with the consent of the Optionee.
13. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of the Plan by the
Board of Directors nor the submission of the Plan to the stockholders of the
Bank for approval shall be construed as creating any limitations on the power of
the Board of Directors to adopt such other incentive arrangements as it may deem
desirable, including, without limitation, the granting of stock options
otherwise than under this Plan, and such arrangements may be either applicable
generally or only in specific cases.
14. COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY AGENCIES. No option
shall be exercisable and no shares will be delivered under this Plan except in
compliance with all applicable federal and state laws and regulations. The Board
of Directors may demand and shall receive prior to the issuance of any shares
under the Plan such written representations as the Board of Directors
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<PAGE> 6
shall reasonably deem necessary or advisable to assure proper ownership of the
option and/or compliance with all applicable federal and state laws and
regulations. Any share certificate issued to evidence shares for which an option
is exercised may bear legends and statements which the Board of Directors shall
deem advisable to assure compliance with federal and state laws and regulations.
No option shall be exercisable and no shares will be delivered under this Plan
until the Bank has obtained consents or approvals from regulatory bodies,
federal or state, having jurisdiction over such matters as the Board of
Directors may deem advisable.
In the case of the exercise of an option by the personal representative
of a deceased Optionee's estate in accordance with the provisions of this Plan,
the Board of Directors may require reasonable evidence as to the ownership of
the option and may require consents and releases of taxing authorities that it
may deem advisable.
15. MANNER OF GRANTING OPTIONS. Nothing contained in this Plan, or in
any resolution heretofore or hereafter adopted by the Board of Directors, the
Compensation Committee or any other committee or by the stockholders of the Bank
with respect to this Plan, shall constitute the granting of an option or a
promise or commitment to grant an option under this Plan. The granting of an
option under this Plan shall be deemed to occur only upon the date on which the
Board of Directors shall approve the grant of such option pursuant to Section 2
hereof.
16. CONTINUATION OF SERVICE. Nothing contained in this Plan (or in any
written option agreement) shall obligate the Bank to retain, for any period, any
director to whom an option has been granted.
17. EXCULPATION AND INDEMNIFICATION. The Bank shall indemnify and hold
harmless the members of the Board of Directors from and against any and all
liabilities, costs and expenses incurred by such persons as a result of any act,
or omission to act, in connection with the performance of such persons' duties,
responsibilities and obligations under this Plan, other than such liabilities,
costs and expenses as may result from the gross negligence, bad faith, willful
conduct or criminal acts of such persons.
18. NOTICES. All notices under the Plan shall be made in writing, and
if to Bank shall be delivered personally to the Cashier of the Bank or mailed to
its principal office addressed to the attention of the Cashier, and if to an
Optionee shall be delivered personally or mailed to the Optionee at the address
appearing in the payroll records of the Bank. Such addresses may be changed at
any time by written notice to the other party.
19. GOVERNING LAW. This Plan shall be construed and interpreted in
accordance with, and the validity of this Plan, and any amendments thereto,
shall be judged by, the laws of the State of Florida, where this Plan was
prepared and adopted.
20. ADOPTION AND APPROVAL OF PLAN.
Date Plan adopted by the Board of Directors: MARCH 18, 1999.
Date Plan approved by the Shareholders: APRIL 29, 1999.
Date Plan approved by the Department: JUNE 1, 1999.
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<PAGE> 7
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (the "Agreement") is made as of the ____
day of ___________, by and between SOUTHERN COMMUNITY BANCORP, a Florida
corporation (hereinafter referred to as the "Company"), and
_________________________ (hereinafter referred to as the "Optionee").
WHEREAS, the Optionee is a member of the Board of Directors of the
Company, and the Company considers it desirable and in its best interest that
the Optionee be given an inducement to acquire a further proprietary interest in
the Company and an added incentive to advance the interests of the Company by
possessing an option to purchase voting shares of the Company's common stock,
par value $1.00 per share (the "Common Stock"), in accordance with the
provisions of the Company's Directors' Statutory Stock Option Plan (the "Plan")
adopted by the Board of Directors of the Company on March 18, 1999, and ratified
by the stockholders on April 29, 1999, and as approved by the Florida Department
of Banking and Finance on June 1, 1999.
NOW, THEREFORE, in consideration of the premises, it is agreed by and
between the parties as follows:
1. GRANT OF OPTION. The Company hereby grants to the Optionee the right,
privilege, and option to purchase ____________ shares of the Common
Stock, at the purchase price of ___________ dollars per share (the
"Option"), in the manner and subject to the conditions hereinafter
provided and as provided in the Plan.
2. TIME OF EXERCISE OF OPTION. The Option may be exercised at any time,
and from time to time, in whole or in part (subject to the limitation
that the Option may not be exercised with respect to less than 100
shares of the Common Stock at any one time or the remaining number of
shares subject to the Option, if less than 100 shares), until the
termination of the Option as provided in Section 4 below.
3. METHOD OF EXERCISE. The Option shall be exercised by written notice
directed to the Secretary of the Company,at its principal place of
business, accompanied by a certified or cashier's check in payment of
the purchase price for the number of shares specified and paid for. The
Company shall make immediate delivery of such shares; provided that if
any law or regulation requires the Company to take any action with
respect to the shares specified in such notice before the issuance
thereof, then the date of delivery of such shares shall be extended for
the period necessary to take such action.
4. TERMINATION OF OPTION. Except as herein otherwise stated, the Option,
to the extent not theretofore exercised, shall terminate upon the first
to occur of the following:
(a) in the event of the death of the Optionee, upon the expiration
of one (1) year after the date of the appointment of the
personal representative of the estate of the Optionee.
(b) the expiration of ten (10) years from the date of this Agreement.
Notwithstanding any provision herein to the contrary, if the Optionee's services
as a director are terminated for cause as a result of the deliberate, willful or
gross misconduct of the Optionee as
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<PAGE> 8
determined by the Board of Directors of the Company, then the Option and all
rights granted hereby shall terminate and expire immediately upon such
termination.
5. RECLASSIFICATION, CONSOLIDATION, OR MERGER. If and to the extent that
the number of issued shares of Common Stock shall be increased or
reduced by any change in par value, split up, reclassification,
distribution of a dividend payable in stock, or the like, the number of
shares subject to the Option and the purchase price per share shall be
proportionally adjusted. If the Company is reorganized or consolidated
or merged with another corporation, the Optionee shall be entitled to
receive options covering shares of such reorganized, consolidated or
merged corporation in the same proportion, at an equivalent price, and
subject to the same terms and conditions as provided in this Agreement.
For purposes of the preceding sentence, the excess of the aggregate
fair market value of the shares subject to such option immediately
after the reorganization, consolidation, or merger over the aggregate
purchase price of such shares pursuant to such option shall not be more
than the excess of the aggregate fair market value of all shares of the
Common Stock subject to the Option immediately before such
reorganization, consolidation, or merger over the aggregate purchase
price of such shares pursuant to the Option, and any new option shall
neither give Optionee additional benefits which Optionee did not have
under the Option, nor deprive Optionee of benefits which Optionee had
under the Option.
6. RIGHTS PRIOR TO EXERCISE OF OPTION. This Option is non-transferrable by
Optionee, and during Optionee's lifetime this Option is exercisable
only by the Optionee. In the event of the death of the Optionee prior
to the exercise or expiration of the Option, the Option may be
exercised (to the extent not previously exercised by the Optionee) by
the personal representative of the estate of the Optionee. The Optionee
shall have no rights as a stockholder of the Company with respect to
the shares of the Common Stock covered by the Option until payment of
the purchase price and delivery of such shares to the Optionee as
herein provided.
7. BINDING EFFECT. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
8. NOTICE. Any notice or other communication with respect to this
Agreement or the Plan, if given by the Optionee, shall be delivered or
mailed to the Company, to the attention of the Secretary of the
Company, 250 North Orange Avenue, Orlando, Florida 32801; telephone
407-648-1844, facsimile 407-648-2163; or, if given by the Company,
shall be addressed to the Optionee at:
[insert name, street or post office address, and city, state
and zip code]
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<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed.
SOUTHERN COMMUNITY BANCORP
By:
--------------------------
-----------------------------
[Insert name], Optionee
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<PAGE> 1
EXHIBIT 10.3
AMENDED AND RESTATED
EMPLOYEE STOCK PURCHASE PLAN
SOUTHERN COMMUNITY BANCORP, a Florida banking corporation, hereby adopts
this Amended and Restated Employee Stock Purchase Plan, for the benefit of its
employees, on the following terms and conditions:
ARTICLE 1
PURPOSE
The purpose of the Plan is to advance the growth and development of the
Bank by affording an opportunity to employees to purchase shares of the Bank's
common stock, thereby providing incentives for them to put forth maximum
efforts for the success of the Bank's business.
ARTICLE II
DEFINED TERMS
The following terms shall have the meanings ascribed to them:
"Annual Enrollment Period" means the period from March 1 to March 31 of
each calendar year during which any Eligible Employee may elect to enroll and
participate in the Plan.
"Bank" means Southern Community BanCorp, a Florida banking corporation.
"Board" means the board of the directors of the Bank.
"Eligible Employee" means any full-time employee of the Bank who has been
employed on a full-time basis for ninety (90) consecutive days.
"Fair Market Value" means the fair market value of the Stock, which shall
be determined annually by the Board within 90 days after the end of each fiscal
year of the Bank. Fair Market Value determined for an applicable fiscal year
and shall apply for all purposes until the next determination of Fair Market
Value.
"Participant" means a Bank employee who has elected to participate in the
Plan.
"Plan" means the Bank's Employee Stock Purchase Plan.
"Stock" means the authorized and unissued common stock of the Bank, par
value $1.00 per share.
ARTICLE III
STOCK RESERVED UNDER PLAN
The total number of shares of Stock which may be purchased by all
employees under this Plan is fifteen thousand (15,000) shares. The total number
of shares of Stock which may be so issued may be increased only by a resolution
adopted by the Board. Shares of Stock which have been issued pursuant to this
Plan and subsequently repurchased by the Bank under Article VII herein shall be
available for purchase by another Participant.
ARTICLE IV
ADMINISTRATION
4.1 ADMINISTRATION. The Plan shall be administered by the Board, which
shall have the complete and express authority, subject to the terms of this
Plan, to (i) amend, modify or discontinue the Plan; (ii) determine, establish,
decrease or increase, where it so desires, in its sole and absolute discretion,
the number of shares of Stock available for purchase under the Plan; (iii)
determine and
<PAGE> 2
establish the acceptable methods of payment for shares of Stock purchased under
the Plan, and to take any and all actions required of it hereunder; (iv)
interpret, implement and administer any and all terms and provisions of the
Plan, with advice of counsel or other professionals as may be deemed
appropriate, advisable or otherwise in the best interests of the Bank; (v)
adopt, amend, and rescind interests of the Bank for the administration of the
Plan; and (vi) take any and all such other actions as may be deemed
appropriate, advisable, or otherwise in the best interests of the Bank in the
creation, modification, amendment, administration, and/or discontinuance of the
Plan.
4.2 EMPLOYMENT OF AGENTS. The Board may employ, upon such terms, as it
deems appropriate in its sole and absolute discretion, such employees, agents,
clerical help, custodians, servants, contractors, professional and other
persons as it may deem appropriate, advisable or otherwise in the best
interests of the Bank to render advice with regard to any responsibility or
obligation it may have under the Plan or to perform other services for the
effective operation and administration of the Plan, including, without
limitation, legal counsel, accountants, trustees and/or certified financial
planners.
4.3 LIABILITY AND INDEMNIFICATION. The Bank may purchase insurance to
cover potential liability of those persons who shall serve on the Board in
administering the Plan, and the Bank shall indemnify such persons to the
maximum extent permitted by applicable law against any and all liabilities and
expenses incurred in connection with any actions or proceedings to which such
persons may be made a party by reason of their being or having been a member of
the Board and having any responsibility or obligation for the administration of
the Plan; provided, however, that no such person shall be entitled to
indemnification from the Bank for any act determined by a court of competent
jurisdiction to be fraudulent or without good faith. Furthermore, no Board
member shall be liable to any Participant or officer or employee of the Bank
for any action taken or determination made in good faith or at the advice of
counsel.
ARTICLE V
ELIGIBILITY AND PARTICIPATION IN PLAN
5.1 GENERAL. All full-time employees of the Bank who have been employed
on a full-time basis for at least ninety (90) consecutive days shall be deemed
Eligible Employees who may elect to participate in the Plan. No Eligible
Employee shall be required to participate in the Plan and, once enrolled, may
terminate participation at any time.
5.2 PARTICIPATION IN THE PLAN.
5.2.1 INITIAL ENROLLMENT PERIOD. Each employee who qualifies
as an Eligible Employee as of October 1, 1999, shall be eligible to participate
and enroll in the Plan during an initial enrollment period commencing effective
October 1, 1999, and continuing through and including October 31, 1999
("Initial Enrollment Period"). The Board shall notify each Eligible Employee of
such eligibility on or before October 10, 1999. An employee who wishes to
participate in the Plan must provide the Board written Notice of Participation
setting forth the payroll deduction requested for each pay period on or before
October 31, 1999. Following the expiration of the Initial Enrollment Period, an
Eligible Employee only may enroll and participate in the Plan under the
provisions of Section 5.2.2. No Eligible Employee shall be obligated to
participate in the Plan or to purchase Stock hereunder.
5.2.2 ANNUAL ENROLLMENT PERIOD. Following the expiration of
the Initial Enrollment Period, an Eligible Employee who became an Eligible
Employee after October 1, 1999 may enroll as a participant in the Plan only
when first notified by the Board of his/her eligibility to participate during
each Annual Enrollment Period. Within ten (10) days after the date on which an
employee first becomes eligible to participate in this Plan, the Board shall
notify him/her of such eligibility. Within ten (10) days after such employee's
receipt of notification of eligibility, an employee who wishes to participate
in the Plan must provide the Board written Notice of Participation setting
forth the payroll deduction requested for each pay period. Thereafter, (i) any
Eligible Employee who elects not to participate in the Plan upon first becoming
eligible to do so (either during the Initial Enrollment Period or any Annual
Enrollment Period, as the case may be), and (ii) any employee who
2
<PAGE> 3
during a Plan Year elects to terminate participation in the Plan may re-enroll
and participate in the Plan only during the next Annual Enrollment Period by
providing a new Notice of Participation. An employee who elects to participate
in the Plan by purchasing Stock may terminate his participation at any time
during a Plan Year by providing the Board written Notice of Termination of
Participation, however, this Employee will not be eligible to re-enroll and
participate in the Plan until the next Annual Enrollment Period.
ARTICLE VI
PURCHASE OF STOCK UNDER THE PLAN
6.1 METHOD OF PURCHASE AND PURCHASE PRICE. Participants purchasing
Stock under the Plan shall pay for such Stock by means of an automatic payroll
deduction administered by the Board or agents of the Board. Certificates
representing the Stock purchased by each Participant will be issued as set
forth in Section 6.3. The purchase price for the Stock shall be the Fair Market
Value, but shall never be less than $15.00 per share.
6.2 REPORTS.
6.2.1 QUARTERLY REPORTS. Within thirty (30) days following
the end of each calendar quarter, the Board will provide each Participant a
report setting forth (i) the number of shares of Stock and the purchase price
paid for such shares purchased in each pay period during such calendar quarter,
(ii) the total number of shares purchased and the aggregate purchase price paid
for all shares of Stock purchased during the quarter, and (iii) the aggregate
number of shares of Stock purchased and the aggregate purchase price paid for
such shares of Stock on a calendar year-to-date basis.
6.2.2 ANNUAL PLAN REPORTS. The Board shall prepare and
maintain reports annually on the status and implementation of the Plan,
including all purchases thereunder and current Fair Market Value determination.
6.2.3 ANNUAL REPORT OF BANK. The Bank shall provide each
Participant a copy of the Bank's annual report or other communication issued to
its stockholders.
6.3 MINIMUM PURCHASE AMOUNT. The minimum purchase per month by any
Participant shall be one (1) share of Stock. All Stock purchases must be made
in even share increments, and no fractional shares may be purchased.
6.4 LIMITATIONS ON PURCHASE. No Participant may spend in any single pay
period more than ten percent (10%) of his gross wages on the purchase of Stock
under the Plan.
6.5 NO FRACTIONAL SHARES. No fractional shares of Stock may be
purchased or will be issued. In the even that, as of the end of each calendar
quarter, there remains a balance in any Participant's payroll deduction account
which has not been applied to the purchase of Stock because such purchase, if
applied, would result in the issuance of a fractional share, then such balance
will be carried over and applied to purchases of Stock in the immediately
following calendar quarter. If, at any time of any Participant's termination of
participation in the Plan, there remains a balance in a Participant's payroll
deduction account because application of such balance to the purchase of Stock
would result in the issuance of a fractional share, then the balance in such
account will be returned to such Participant within a reasonable period
following the effective date of such termination.
6.6 RESTRICTIVE LEGEND. Each certificate for Stock purchased by a
Participant shall contain a legend or legends to the following effect:
THESE SHARES HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), THE FLORIDA
SECURITIES AND INVESTOR PROTECTION ACT, OR
ANY OTHER STATE SECURITIES LAWS AND,
THEREFORE, CANNOT BE SOLD UNLESS THEY ARE
SUBSEQUENTLY REGISTERED UNDER THE ACT AND
ANY
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APPLICABLE STATE SECURITIES LAWS OR AN
EXEMPTION FROM REGISTRATION IS AVAILABLE.
THE SHARES OF COMMON STOCK EVIDENCED BY
THIS CERTIFICATE HAS BEEN ISSUED UNDER THE
SOUTHERN COMMUNITY BANCORP EMPLOYEE STOCK
PURCHASE PLAN (THE "PLAN") AND ARE SUBJECT
TO THE TERMS AND PROVISIONS OF SUCH PLAN.
THESE SHARES ARE SUBJECT TO A REPURCHASE
AGREEMENT AS SET FORTH IN THE PLAN, AND
ANY SALE, TRANSFER, GIFT, PLEDGE, OR
ENCUMBRANCE OF THESE SHARES IS SUBJECT TO
THIS REPURCHASE AGREEMENT AND RIGHT OF
FIRST REFUSAL.
ARTICLE VII
BANK'S REPURCHASE RIGHTS
In the event a Participant ceases to be an employee of the Bank for any
reason, including, without limitation, voluntary termination of employment,
death, retirement, termination due to disability, or termination by the Bank
with or without cause, the Bank shall have the option, but not the obligation,
to purchase all or any part of the shares of Stock purchases by such
Participant under the Plan at any time during the twenty-four (24) months
immediately preceding the effective date of Participant's termination of
employment for a price equal to the Fair Market Value per share of Stock as
determined by the most recent valuation of the Stock by an independent public
accounting firm selected by the Bank. The Bank shall provide the Participant
written notice of the exercise of its repurchase option on or before ninety
(90) days following the effective date of the Employee's termination of
employment. If the Bank elects to purchase such Stock, the purchase price will
be paid in cash and the closing of such purchase shall be thirty (30) days
after the exercise of such rights.
ARTICLE VIII
OWNERSHIP AND VOTING OF STOCK
Once a Participant purchases Stock under the Plan, the Participant shall
be deemed the owner of the Stock for all purposes, subject to the restrictions
set forth in this Plan. The Participant shall be entitled to exercise all
rights of a shareholder of the Stock issued to him/her, including voting and
receipt of dividends, if any.
ARTICLE IX
LIABILITY OF THE BANK
9.1 NO EMPLOYMENT RIGHTS. No provision in this Plan shall confer upon
any Participant any right to continue in the employ of the Bank or to interfere
with the right of the Bank to terminate such person's employment at any time,
nor shall this Plan be construed as evidence of any agreement of understanding,
expressed or implied, that the Bank will employ any Participant in any
particular position or at any particular rate of remuneration or for any
particular period of time. Furthermore, no provision of this Plan shall be
construed so as to limit the right of the Bank to (i) terminate any employee at
will without cause or reason, (ii) make changes, in its sole and absolute
discretion, in its accounting principles or the methods of applying such
principles, or (iii) enter into significant transactions with affiliates or in
the Board's sole and absolute discretion, to modify the Plan.
9.2 LIMITATION OF LIABILITY. This Plan shall not be construed as
creating any right of any employee of the Bank to receive any benefit
hereunder, or as affecting the rights of the Bank with respect to its
employees, but instead, only as establishing the benefits of eligible
Participants under this Plan, and then only in strict accordance with the terms
hereof. No Participant shall ever have, or may ever assert, any rights or
claims against the Bank, the Board, or any Board member with respect to the
enforcement of any benefits under this Plan. Furthermore, no provision herein
shall be deemed to create a trust or fiduciary relationship between the Bank
(or the Board or any member
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thereof) and any other person whatsoever, including, without limitation, any
employee, officer, or any eligible Participant hereunder. Furthermore, in the
event that any court of competent jurisdiction determines that any person has
any enforceable right or remedy hereunder vis-a-vis the Bank, such person shall
merely have the status as a general, unsecured creditor of the Bank. As a
condition precedent to participation in this Plan, the Board may require any
Participant or his/her beneficiary to execute a release and/or an indemnity in
such form as it shall determine.
ARTICLE X
AMENDMENT AND TERMINATION OF PLAN
10.1 AMENDMENT AND TERMINATION OF THE PLAN.
10.1.1 DISCRETION OF THE BOARD. The Board may amend, suspend,
or terminate this Plan at any time without prior notice.
10.2 AUTOMATIC TERMINATION. This Plan shall terminate automatically on
the earlier of (i) five (5) years after its effective date, or (ii) the date on
which all 15,000 shares of Stock reserved for purchase under this Plan have
been purchased (including all shares which have again become available for
purchase following exercise by the Bank of its repurchase option) unless the
Board shall, in its discretion, elect to terminate this Plan at an earlier date.
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1 EXCLUSIVE BENEFIT OF EMPLOYEES. This Plan is created for the
exclusive benefit of the Bank and employees, subject to the limitations herein
contained.
11.2 COOPERATION OF ALL PARTIES. All persons claiming any interest
whatsoever under this Plan shall perform any and all acts and execute any and
all documents or papers which may be necessary or desirable by the Board for
the implementation and administration of this Plan or any of its provisions.
11.3 IMPOSSIBILITY OF PERFORMANCE. In the event that it becomes
impossible for the Bank or the Board to perform any act under this Plan, or when
the provisions of this Plan are deemed ambiguous or unclear, then that act
shall be performed or action taken which, in the sole and absolute discretion of
the Board, will most nearly carry out the intent and purposes of this Plan
which intent and purposes shall be determined by the Board in good faith in the
best interests of the Bank. All persons in any way interested in this Plan,
including but not limited to, retired, disabled, terminated and deceased
Participants (and their estates and beneficiaries), shall be bound by all acts
performed by the Board or its delegees under such conditions.
11.4 MISSTATEMENT OF FACT. Notwithstanding anything to the contrary
contained in this Plan, if a Participant shall at any time misstate any fact
relevant to the operation of this Plan, the matter shall be referred to the
Board. The Board shall, in its sole discretion, make such decision and give
such instructions as it shall determine to be equitable under the
circumstances. No member of the Board shall be liable for any action or
non-action taken by it in good faith in such cases.
11.5 WAIVER; PARTIAL INVALIDITY. No waiver or application of any
provision or term of this Plan by any party hereto or by anyone concerned with
the operation of this Plan, whether such waiver or application be direct or
indirect, express of implied, or written or oral, shall be deemed to constitute
a waiver or application of any other provision or term of this Plan, or any
assent to the application or non-application of any provision or term of this
Plan in any other situation, whether such situation be of the same or of a
different nature. Unless otherwise provided herein, should any provision of
this Plan be held to be unlawful, as to any person or instance, such fact
shall not adversely affect the other provisions herein contained or the
application of said provisions to any other person or instance.
11.6 APPLICABLE LAW. This Plan shall be construed and enforced in
accordance with the applicable laws of the State of Florida.
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11.7 NOTICES. All notices and elections by a Participant shall be in
writing and delivered in person, by certified mail or nationally recognized
courier service to the President or Secretary of the Bank at the principal
office of the Bank. Notices by the Bank shall be delivered to a Participant in
writing either by personal delivery, U.S. Mail or express courier service.
11.8 EFFECTIVE DATE OF THE PLAN. The effective date of this Plan shall
be the date on which the Board adopts the Plan.
11.9 RULES OF CONSTRUCTION. Whenever the context so requires, the use of
the masculine gender shall be deemed to include the feminine and vice versa,
and either gender shall be deemed to include the neuter, and vice versa, and
the use of the singular shall be deemed to include the plural and vice versa.
11.10 HEADINGS. The headings of Articles and Sections of this Plan are
included only for convenience and shall not be construed as a part of this Plan
or in any respect affecting or modifying its provisions.
11.11 INDEMNIFICATION. Each director of the Bank ("Indemnified Party")
shall be indemnified by the Bank against all costs and reasonable expenses,
including reasonable attorneys' fees, incurred by him in connection with any
action, suit, or proceeding, or in connection with any appeal therefore, to
which he may be a party by reason of any action taken or failure to act under
or in connection with this Plan or any Stock purchased hereunder, and against
all amounts paid by such Indemnified Party in settlement thereof (provided such
settlement is approved in advance by legal counsel selected by the Bank) or
paid by such Indemnified Party in satisfaction of a judgment in any such
action, suit, or proceedings; provided, however, that, within sixty (60) days
after institution of such action, suit, or proceedings, such Indemnified Party
shall in writing offer the Bank the opportunity, at its own expense, to defend
the same; and provided, further, however, that anything contained in this Plan
to the contrary notwithstanding, there shall be no indemnification of an
Indemnified Party who is finally adjudged by a court of competent jurisdiction
to be guilty of, or liable for, willful misconduct, gross neglect of duty, or
criminal actions in connection with this Plan or the sale and issuance of Stock
to any Participant hereunder. The foregoing rights of indemnification shall be
in addition to any other rights of indemnification that an Indemnified Party
may have as a Director of the Bank.
Adopted on September 16, 1999, by the Board of Directors.
SOUTHERN COMMUNITY BANCORP
By: /s/ JOHN G. SQUIRES
---------------------------------
John G. Squires, President
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EXHIBIT 10.4
SOUTHERN COMMUNITY BANK
SALARY CONTINUATION AGREEMENT
THIS AGREEMENT is made this 23rd, day of February, 1999, by and between
SOUTHERN COMMUNITY BANCORP, a Florida corporation (the "Company") and Charlie W.
Brinkley, Jr. (the "Executive").
INTRODUCTION
To encourage the Executive to remain an employee of the Company, the
Company is willing to provide salary continuation benefits to the Executive. The
Company will pay the benefits from its general assets.
AGREEMENT
The Executive and the Company agree as follows:
ARTICLE 1
DEFINITIONS
1.1 DEFINITIONS. Whenever used in this Agreement, the following words
and phrases shall have the meanings specified:
1.1.1 "CHANGE OF CONTROL" means the transfer of shares of the
Company's voting common stock such that one entity or one person
acquires (or is deemed to acquire when applying Section 318 of the
Code) more than 50 percent of the Company's outstanding voting
common stock; provided, however, that the formation by the Company
of a bank holding company which acquires all or substantially all
of the shares of the Company's voting common stock shall not be
deemed a Change of Control for purposes of this Agreement.
1.1.2 "CODE" means the Internal Revenue Code of 1986, as amended.
1.1.3 "CONSUMER PRICE INDEX" means an annual cost of living
increase (but not decrease) of the benefit provided Executive in
this Agreement, The cost of living increase shall be determined
based upon the annual increase in the Consumer Price Index for all
Urban Consumers - South, All Items (base year 1982-84 = 100) as
published by the U.S. Department of Labor. If publication of the
Consumer Price Index is discontinued, the parties shall accept
comparable statistics on the cost of living for Orlando, Florida as
such statistic are computed and published by a federal agency or by
a recognized financial periodical selected by the parties.
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1.1.4 "DISABILITY" means, if the Executive is covered by a Company
sponsored disability policy, total disability as defined in such
policy without regard to any waiting period. If the Executive is
not covered by such a policy, Disability means the Executive
suffering a sickness, accident or injury which, in the judgment of
a physician satisfactory to the Company, prevents the Executive
from performing substantially all of the Executive's normal duties
for the Company. As a condition to any benefits, the Company may
require the Executive to submit to such physical or mental
evaluations and tests as the Company's Board of Directors deems
appropriate.
1.1.5 "EARLY TERMINATION" means the Termination of Employment
before Normal Retirement Age for reasons other than death,
Disability, Termination for Cause or following a Change of Control.
1.1.6 "EARLY TERMINATION DATE" means the month, day and year in
which Early Termination occurs.
1.1.7 "EFFECTIVE DATE" means January 1, 1999.
1.1.8 "NORMAL RETIREMENT AGE" means the Executive's age 60.
1.1.9 "NORMAL RETIREMENT DATE" means the later of the Normal
Retirement Age or Termination of Employment.
1.1.10 "PLAN YEAR" means a twelve-month period commencing on
January 1st and ending on December 31st of each year. The initial
Plan Year shall commence on the Effective Date of this Agreement.
1.1.11 "TERMINATION FOR CAUSE" See Section 5.2.
1.1.12 "TERMINATION OF EMPLOYMENT" means that the Executive ceases
to be employed by the Company for any reason whatsoever other than
by reason of a leave of absence which is approved by the Company.
For purposes of this Agreement, if there is a dispute over the
employment status of the Executive or the date of the Executive's
Termination of Employment, the Company shall have the sole and
absolute right to decide the dispute.
ARTICLE 2
LIFETIME BENEFITS
2.1 NORMAL RETIREMENT BENEFIT. Upon Termination of Employment on or
after the Normal Retirement Age for reasons other than death, the Company shall
pay to the Executive the benefit described in this Section 2.1 in lieu of any
other benefit under this Agreement.
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2.1.1 AMOUNT OF BENEFIT. The annual benefit under this Section 2.1
is $ 50,507 (fifty thousand five hundred seven dollars) in the
first Plan Year, increased by five percent (5.0%) each successive
Plan Year until Termination of Employment
2.1.2 PAYMENT OF BENEFIT. The Company shall pay the annual benefit
to the Executive in 12 equal monthly installments payable on the
first day of each month commencing with the month following the
Executive's Normal Retirement Date and continuing for 239
additional months.
2.1.3 BENEFIT INCREASES. Commencing on the first anniversary of the
first benefit payment, and continuing on each subsequent
anniversary, the annual benefit will be increased by the Consumer
Price Index.
2.2 VOLUNTARY EARLY TERMINATION BENEFIT. Upon voluntary Early
Termination, the Company shall pay to the Executive the benefit described in
this Section 2.2 in lieu of any other benefit under this Agreement.
2.2.1 AMOUNT OF BENEFIT. The benefit under this Section 2.2 is the
Voluntary Early Termination Annual Benefit amount set forth in
Schedule A for the Plan Year ending immediately prior to the Early
Termination Date. (The Vesting Schedule for Voluntary Early
Termination is 10% after the first Plan Year and an additional 10%
for each additional Plan Year until vesting is 100% at the end of
the tenth Plan Year.)
2.2.2 PAYMENT OF BENEFIT. The Company shall pay the annual benefit
to the Executive in 12 equal monthly installments payable on the
first day of each month commencing with the month following the
Normal Retirement Age and continuing for 239 additional months.
2.2.3 BENEFIT INCREASES. Benefit payments will be increased as
provided in Section 2.1.3.
2.3 INVOLUNTARY EARLY TERMINATION BENEFIT. Upon involuntary Early
Termination, the Company shall pay to the Executive the benefit described in
this Section 2.3 in lieu of any other benefit under this Agreement.
2.3.1 AMOUNT OF BENEFIT. The benefit under this Section 2.3 is the
Involuntary Early Termination Annual Benefit amount set forth in
Schedule A for the Plan Year ending immediately prior to the Early
Termination Date. (The Vesting Schedule for Involuntary Early
Termination is 50% during the first five Plan Years and an
additional 10% for each additional Plan Year thereafter until
vesting is 100% at the end of the tenth Plan Year.)
2.3.2 PAYMENT OF BENEFIT. The Company shall pay the annual benefit
to the Executive in 12 equal monthly installments payable on the
first day of each month
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commencing with the month following the Normal Retirement Age and
continuing for 239 additional months.
2.3.3 BENEFIT INCREASES. Benefit payments will be increased as
provided in Section 2.1.3.
2.4 DISABILITY BENEFIT. If the Executive terminates employment due to
Disability prior to Normal Retirement Age, the Company shall pay to the
Executive the benefit described in this Section 2.4 in lieu of any other benefit
under this Agreement.
2.4.1 AMOUNT OF BENEFIT. The benefit under this Section 2.4 is the
Disability Annual Benefit amount set forth in Schedule A for the
Plan Year ending immediately prior to the date in which the
Termination of Employment occurs. (The Disability Annual Benefit
amount is the twelve month total of monthly payments determined by
calculating a fixed annuity which is payable in 180 equal monthly
installments, crediting interest on the unpaid balance of the
Accrual Balance at an annual rate of 7.5 %, compounded monthly.)
2.4.2 PAYMENT OF BENEFIT. The Company shall pay the annual benefit
amount to the Executive in 12 equal monthly installments payable on
the first day of each month commencing with the month following the
Termination of Employment and continuing for 239 additional months.
2.4.3 BENEFIT INCREASES. Benefit payments may be increased as
provided in Section 2.1.3.
2.5 CHANGE OF CONTROL BENEFIT. Upon a Termination of Employment
following a Change of Control, the Company shall pay to the Executive the
benefit described in this Section 2.5 in lieu of any other benefit under this
Agreement.
2.5.1 AMOUNT OF BENEFIT. The annual benefit under this Section 2.5
is the Change of Control Annual Benefit set forth in Schedule A for
the Plan Year in which Termination of Employment occurs. (The
Change of Control Annual Benefit is the Normal Retirement Benefit
amount described in Section 2.1.1 as if the date of the Termination
of Employment was the Executive's Normal Retirement Date.)
2.5.2 PAYMENT OF BENEFIT. The Company shall pay the annual benefit
amount to the Executive in 12 equal monthly installments payable on
the first day of each month commencing with the month following the
Normal Retirement Date and continuing for 239 additional months.
2.5.3 BENEFIT INCREASES. Benefit payments will be increased as
provided in Section 2.1.3.
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ARTICLE 3
DEATH BENEFITS
3.1 DEATH DURING ACTIVE SERVICE. If the Executive dies while in the
active service of the Company, the Company shall pay to the Executive's
beneficiary the benefit described in this Section 3.1. This benefit shall be
paid in lieu of the Lifetime Benefits of Article 2.
3.1.1 AMOUNT OF BENEFIT. The annual benefit under this Section 3.1
is the Normal Retirement Benefit amount described in Section 2.1.1.
3.1.2 PAYMENT OF BENEFIT. The Company shall pay the annual benefit
to the beneficiary in 12 equal monthly installments payable on the
first day of each month commencing with the month following the
Executive's death and continuing for 239 additional months.
3.2 DEATH DURING BENEFIT PERIOD. If the Executive dies after the
benefit payments have commenced under this Agreement but before receiving all
such payments, the Company shall pay the remaining benefits to the Executive's
beneficiary at the same time and in the same amounts they would have been paid
to the Executive had the Executive survived.
3.3 DEATH AFTER TERMINATION OF EMPLOYMENT BUT BEFORE BENEFIT PAYMENTS
COMMENCE. If the Executive is entitled to benefit payments under this Agreement,
but dies prior to the commencement of said benefit payments, the Company shall
pay the benefit payments to the Executive's beneficiary that the Executive was
entitled to prior to death except that the benefit payments shall commence on
the first day of the month following the date of the Executive's death.
ARTICLE 4
BENEFICIARIES
4.1 BENEFICIARY DESIGNATIONS. The Executive shall designate a
beneficiary by filing a written designation with the Company. The Executive may
revoke at any time by filing a new designation. However, designations will only
be effective if signed by the Executive and accepted by the Company during the
Executive's lifetime. The Executive's beneficiary designation shall be deemed
automatically revoked if the beneficiary predeceases the Executive, or if the
Executive names a spouse as beneficiary and the marriage is subsequently
dissolved. If the Executive dies without a valid beneficiary designation, all
payments shall be made to the Executive's estate.
4.2 FACILITY OF PAYMENT. If a benefit is payable to a minor, to a
person declared incapacitated, or to a person incapable of handling the
disposition of his or her property, the Company may pay such benefit to the
guardian, legal representative or person having the care or custody of such
minor, incapacitated person or incapable person. The Company may require proof
of incapacity, minority or guardianship as it may deem appropriate prior to
distribution of the benefit. Such distribution shall completely discharge the
Company from all liability with respect to such benefit.
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ARTICLE 5
GENERAL LIMITATIONS
Notwithstanding any provision of this Agreement to the contrary, the
Company shall not pay any benefit under this Agreement:
5.1 EXCESS PARACHUTE PAYMENT. TO the extent the benefit would create an
excise tax under the excess parachute rules of Section 280G of the Code.
5.2 TERMINATION FOR CAUSE. If the Company terminates the Executive's
employment for:
5.2.1 Gross negligence or gross neglect of duties;
5.2.2 Commission of a felony or of a gross misdemeanor involving
moral turpitude; or
5.2.3 Fraud, disloyalty, dishonesty or willful violation of any law
or significant Company policy committed in connection with the
Executive's employment and resulting in an adverse effect on the
Company.
5.3 SUICIDE OR MISSTATEMENT. No benefits shall be payable if the
Executive commits suicide within two years after the date of this Agreement, or
if the Executive has made any material misstatement of fact on any application
for life insurance purchased by the Company.
ARTICLE 6
CLAIMS AND REVIEW PROCEDURES
6.1 CLAIMS PROCEDURE. The Company shall notify any person or entity
that makes a claim against the Agreement (the "Claimant") in writing, within
ninety (90) days of Claimant's written application for benefits, of his or her
eligibility or noneligibility for benefits under the Agreement. If the Company
determines that the Claimant is not eligible for benefits or full benefits, the
notice shall set forth (1) the specific reasons for such denial, (2) a specific
reference to the provisions of the Agreement on which the denial is based, (3 )
a description of any additional information or material necessary for the
Claimant to perfect his or her claim, and a description of why it is needed, and
(4) an explanation of the Agreement's claims review procedure and other
appropriate information as to the steps to be taken if the Claimant wishes to
have the claim reviewed. If the Company determines that there are special
circumstances requiring additional time to make a decision, the Company shall
notify the Claimant of the special circumstances and the date by which a
decision is expected to be made, and may extend the time for up to an additional
ninety-day period.
6.2 REVIEW PROCEDURE. If the Claimant is determined by the Company not
to be eligible for benefits, or if the Claimant believes that he or she is
entitled to greater or different benefits, the Claimant shall have the
opportunity to have such claim reviewed by the Company by filing a petition for
review with the Company within sixty (60) days after receipt of the notice
issued by the Company. Said petition shall state the specific reasons which the
Claimant believes entitle him or her to benefits or to greater or different
benefits. Within sixty (60) days after receipt by the
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Company of the petition, the Company shall afford the Claimant (and counsel, if
any) an opportunity to present his or her position to the Company orally or in
writing, and the Claimant (or counsel) shall have the right to review the
pertinent documents. The Company shall notify the Claimant of its decision 'in
writing within the sixty-day period, stating specifically the basis of its
decision, written in a manner calculated to be understood by the Claimant and
the specific provisions of the Agreement on which the decision is based. If,
because of the need for a hearing, the sixty-day period is not sufficient, the
decision may be deferred for up to another sixty-day period at the election of
the Company, but notice of this deferral shall be given to the Claimant.
ARTICLE 7
AMENDMENTS AND TERMINATION
This Agreement may be amended or terminated only by a written agreement
signed by the Company and the Executive.
ARTICLE 8
MISCELLANEOUS
8.1 BINDING EFFECT. This Agreement shall bind the Executive and the
Company, and their beneficiaries, survivors, executors, successors,
administrators and transferees.
8.2 NO GUARANTEE OF EMPLOYMENT. THIS Agreement is not an employment
policy or contract. It does not give the Executive the right to remain an
employee of the Company, nor does it interfere with the Company's right to
discharge the Executive. It also does not require the Executive to remain an
employee nor interfere with the Executive's right to terminate employment at any
time.
8.3 NON-TRANSFERABILITY. Benefits under this Agreement cannot be sold,
transferred, assigned, pledged, attached or encumbered in any manner.
8.4 REORGANIZATION. The Company shall not merge or consolidate into or
with another company, or reorganize, or sell substantially all of its assets to
another company, firm, or person unless such succeeding or continuing company,
firm, or person agrees to assume and discharge the obligations of the Company
under this Agreement. Upon the occurrence of such event, the term "Company" as
used in this Agreement shall be deemed to refer to the successor or survivor
company.
8.5 TAX WITHHOLDING. The Company shall withhold any taxes that are
required to be withheld from the benefits provided under this Agreement.
8.6 APPLICABLE LAW. The Agreement and all rights hereunder shall be
governed by the laws of the State of Florida, except to the extent preempted by
the laws of the United States of America.
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8.7 UNFUNDED ARRANGEMENT. The Executive and beneficiary are general
unsecured creditors of the Company for the payment of benefits under this
Agreement. The benefits represent the mere promise by the Company to pay such
benefits. The rights to benefits are not subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or
garnishment by creditors. Any insurance on the Executive's life is a general
asset of the Company to which the Executive and beneficiary have no preferred or
secured claim.
8.8 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the Company and the Executive as to the subject matter hereof. No rights
are granted to the Executive by virtue of this Agreement other than those
specifically set forth herein.
8.9 ADMINISTRATION. The Company shall have powers which are necessary
to administer this Agreement, including but not limited to:
8.9.1 Interpreting the provisions of the Agreement;
8.9.2 Establishing and revising the method of accounting for the
Agreement;
8.9.3 Maintaining a record of benefit payments; and
8.9.4 Establishing rules and prescribing any forms necessary or
desirable to administer the Agreement.
8.10 NAMED FIDUCIARY. For purposes of the Employee Retirement Income
Security Act of 1974, if applicable, the Company shall be the named fiduciary
and plan administrator under the Agreement. The named fiduciary may delegate to
others certain aspects of the management and operation responsibilities of the
plan including the employment of advisors and the delegation of ministerial
duties to qualified individuals.
IN WITNESS WHEREOF, the Executive and a duly authorized Company officer
have signed this Agreement.
EXECUTIVE: COMPANY:
SOUTHERN COMMUNITY BANCORP
/s/ CHARLIE W. BRINKLEY, JR. By: /s/ STEPHEN R. JEUCK
- ----------------------------- ------------------------------
CHARLIE W. BRINKLEY, JR. Stephen R. Jeuck
Secretary and CFO
8
<PAGE> 9
BENEFICIARY DESIGNATION
SOUTHERN COMMUNITY BANK
SALARY CONTINUATION AGREEMENT
CHARLIE W. BRINKLEY, JR.
I designate the following as beneficiary of any death benefits under this Salary
Continuation Agreement:
Primary:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Contingent:
-------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE: TO NAME A TRUST AS BENEFICIARY, PLEASE PROVIDE THE NAME OF THE
TRUSTEE(S) AND THE EXACT NAME AND DATE OF THE TRUST AGREEMENT.
I understand that I may change these beneficiary designations by filing a new
written designation with the Company. I further understand that the designations
will be automatically revoked if the beneficiary predeceases me, or, if I have
named my spouse as beneficiary and our marriage is subsequently dissolved.
Signature ____________________________________
Date ________________________________________
Accepted by the Company this 29th day of March, 1999.
By __________________________________________
Title _________________________________________
9
<PAGE> 10
SOUTHERN COMMUNITY BANK
CHARLIE W. BRINKLEY, JR.
SALARY CONTINUATION PLAN - SCHEDULE A
<TABLE>
<CAPTION>
INVOLUNTARY
EARLY EARLY CHANGE OF
TERM. VOLUNTARY EARLY TERMINATION CONTROL ANNUAL DISABILITY ANNUAL
PLAN BENEFIT ACCRUAL VESTING VESTED TERMINATION ANNUAL BENEFIT BENEFIT PAYABLE BENEFIT PAYABLE
YEAR LEVEL BALANCE SCHEDULE BENEFIT ANNUAL BENEFIT PAYABLE AT 60 AT 60 IMMEDIATELY
- ---- -------- ------- --------- -------- -------------- ------------- ----- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 50,507 18,343 10.00% 5,051 5,051 25,253 100,000 1,773
2 53,032 41,510 20.00% 10,606 10,606 26,516 100,000 4,013
3 55,684 70,454 30.00% 16,705 16,705 27,842 100,000 6,811
4 58,468 106,293 40.00% 23,387 23,387 29,234 100,000 10,275
5 61,392 150,340 50.00% 30,696 30,696 30,696 100,000 14,534
6 64,461 204,134 60.00% 38,677 38,677 38,677 100,000 19,734
7 67,684 269,478 70.00% 47,379 47,379 47,379 100,000 26,051
8 71,068 348,477 80.00% 56,855 56,855 56,855 100,000 33,688
9 74,622 443,595 90.00% 67,160 67,160 67,160 100,000 42,883
10 78,353 557,705 100.00% 78,353 78,353 78,353 100,000 53,914
11 82,271 631,051 100.00% 82,271 82,271 82,271 100,000 61,004
12 86,384 714,043 100.00% 86,384 86,384 86,384 100,000 69,027
13 90,703 807,950 100.00% 90,703 90,703 90,703 100,000 78,106
14 95,238 914,207 100.00% 95,238 95,238 95,238 100,000 88,378
15 100,000 1,034,439 100.00% 100,000 100,000 100,000 100,000 100,000
</TABLE>
BANK COMPENSATION STRATEGIES GROUP
10
<PAGE> 1
EXHIBIT 10.5
SOUTHERN COMMUNITY BANK
SALARY CONTINUATION AGREEMENT
THIS AGREEMENT is made this 23rd, day of February, 1999, by and between
SOUTHERN COMMUNITY BANCORP, a Florida corporation (the "Company"), and John G.
Squires (the "Executive").
INTRODUCTION
To encourage the Executive to remain an employee of the Company, the
Company is willing to provide salary continuation benefits to the Executive. The
Company will pay the benefits from its general assets.
AGREEMENT
The Executive and the Company agree as follows:
ARTICLE 1
DEFINITIONS
1.1 DEFINITIONS. Whenever used in this Agreement, the following words
and phrases shall have the meanings specified:
1.1.1 "CHANGE OF CONTROL" means the transfer of shares of the
Company's voting common stock such that one entity or one person
acquires (or is deemed to acquire when applying Section 318 of the
Code) more than 50 percent of the Company's outstanding voting
common stock; provided, however, that the formation by the Company
of a bank holding company which acquires all or substantially all
of the shares of the Company's voting common stock shall not be
deemed a Change of Control for purposes of this Agreement.
1.1.2 "CODE" means the Internal Revenue Code of 1986, as amended.
1.1.3 "CONSUMER PRICE INDEX" means an annual cost of living
increase (but not decrease) of the benefit provided Executive in
this Agreement, The cost of living increase shall be determined
based upon the annual increase in the Consumer Price Index for all
Urban Consumers - South, All Items (base year 1982-84 = 100) as
published by the U.S. Department of Labor. If publication of the
Consumer Price Index is discontinued, the parties shall accept
comparable statistics on the cost of living for Orlando, Florida as
such statistic are computed and published by a federal agency or by
a recognized financial periodical selected by the parties.
1
<PAGE> 2
1.1.4 "DISABILITY" means, if the Executive is covered by a Company
sponsored disability policy, total disability as defined in such
policy without regard to any waiting period. If the Executive is
not covered by such a policy, Disability means the Executive
suffering a sickness, accident or injury which, in the judgment of
a physician satisfactory to the Company, prevents the Executive
from performing substantially all of the Executive's normal duties
for the Company. As a condition to any benefits, the Company may
require the Executive to submit to such physical or mental
evaluations and tests as the Company's Board of Directors deems
appropriate.
1.1.5 "EARLY TERMINATION" means the Termination of Employment
before Normal Retirement Age for reasons other than death,
Disability, Termination for Cause or following a Change of Control.
1.1.6 "EARLY TERMINATION DATE" means the month, day and year in
which Early Termination occurs.
1.1.7 "EFFECTIVE DATE" means January 1, 1998.
1.1.8 "NORMAL RETIREMENT AGE" means the Executive's age 65.
1.1.9 "NORMAL RETIREMENT DATE" means the later of the Normal
Retirement Age or Termination of Employment.
1.1.10 "PLAN YEAR" means a twelve-month period commencing on
January 1st and ending on December 31st of each year. The initial
Plan Year shall commence on the Effective Date of this Agreement.
1.1.11 "TERMINATION FOR CAUSE" See Section 5.2.
1.1.12 "TERMINATION OF EMPLOYMENT" means that the Executive ceases
to be employed by the Company for any reason whatsoever other than
by reason of a leave of absence which is approved by the Company.
For purposes of this Agreement, if there is a dispute over the
employment status of the Executive or the date of the Executive's
Termination of Employment, the Company shall have the sole and
absolute right to decide the dispute.
ARTICLE 2
LIFETIME BENEFITS
2.1 NORMAL RETIREMENT BENEFIT. Upon Termination of Employment on or
after the Normal Retirement Age for reasons other than death, the Company shall
pay to the Executive the benefit described in this Section 2.1 in lieu of any
other benefit under this Agreement.
2
<PAGE> 3
2.1.1 AMOUNT OF BENEFIT. The annual benefit under this Section 2.1
is $ 47,664 (fifty thousand five hundred seven dollars) in the
first Plan Year, increased by five percent (5.0%) each successive
Plan Year until Termination of Employment
2.1.2 PAYMENT OF BENEFIT. The Company shall pay the annual benefit
to the Executive in 12 equal monthly installments payable on the
first day of each month commencing with the month following the
Executive's Normal Retirement Date and continuing for 179
additional months.
2.1.3 BENEFIT INCREASES. Commencing on the first anniversary of the
first benefit payment, and continuing on each subsequent
anniversary, the annual benefit will be increased by the Consumer
Price Index.
2.2 VOLUNTARY EARLY TERMINATION BENEFIT. Upon voluntary Early
Termination, the Company shall pay to the Executive the benefit described in
this Section 2.2 in lieu of any other benefit under this Agreement.
2.2.1 AMOUNT OF BENEFIT. The benefit under this Section 2.2 is the
Voluntary Early Termination Annual Benefit amount set forth in
Schedule A for the Plan Year ending immediately prior to the Early
Termination Date. (The Vesting Schedule for Voluntary Early
Termination is 10% after the first Plan Year and an additional 10%
for each additional Plan Year until vesting is 100% at the end of
the tenth Plan Year.)
2.2.2 PAYMENT OF BENEFIT. The Company shall pay the annual benefit
to the Executive in 12 equal monthly installments payable on the
first day of each month commencing with the month following the
Normal Retirement Age and continuing for 179 additional months.
2.2.3 BENEFIT INCREASES. Benefit payments will be increased as
provided in Section 2.1.3.
2.3 INVOLUNTARY EARLY TERMINATION BENEFIT. Upon involuntary Early
Termination, the Company shall pay to the Executive the benefit described in
this Section 2.3 in lieu of any other benefit under this Agreement.
2.3.1 AMOUNT OF BENEFIT. The benefit under this Section 2.3 is the
Involuntary Early Termination Annual Benefit amount set forth in
Schedule A for the Plan Year ending immediately prior to the Early
Termination Date. (The Vesting Schedule for Involuntary Early
Termination is 50% during the first five Plan Years and an
additional 10% for each additional Plan Year thereafter until
vesting is 100% at the end of the tenth Plan Year.)
2.3.2 PAYMENT OF BENEFIT. The Company shall pay the annual benefit
to the Executive in 12 equal monthly installments payable on the
first day of each month
3
<PAGE> 4
commencing with the month following the Normal Retirement Age and
continuing for 179 additional months.
2.3.3 BENEFIT INCREASES. Benefit payments will be increased as
provided in Section 2.1.3.
2.4 DISABILITY BENEFIT. If the Executive terminates employment due to
Disability prior to Normal Retirement Age, the Company shall pay to the
Executive the benefit described in this Section 2.4 in lieu of any other benefit
under this Agreement.
2.4.1 AMOUNT OF BENEFIT. The benefit under this Section 2.4 is the
Disability Annual Benefit amount set forth in Schedule A for the
Plan Year ending immediately prior to the date in which the
Termination of Employment occurs. (The Disability Annual Benefit
amount is the twelve month total of monthly payments determined by
calculating a fixed annuity which is payable in 180 equal monthly
installments, crediting interest on the unpaid balance of the
Accrual Balance at an annual rate of 7.5 %, compounded monthly.)
2.4.2 PAYMENT OF BENEFIT. The Company shall pay the annual benefit
amount to the Executive in 12 equal monthly installments payable on
the first day of each month commencing with the month following the
Termination of Employment and continuing for 179 additional months.
2.4.3 BENEFIT INCREASES. Benefit payments may be increased as
provided in Section 2.1.3.
2.5 CHANGE OF CONTROL BENEFIT. Upon a Termination of Employment
following a Change of Control, the Company shall pay to the Executive the
benefit described in this Section 2.5 in lieu of any other benefit under this
Agreement.
2.5.1 AMOUNT OF BENEFIT. The annual benefit under this Section 2.5
is the Change of Control Annual Benefit set forth in Schedule A for
the Plan Year in which Termination of Employment occurs. (The
Change of Control Annual Benefit is the Normal Retirement Benefit
amount described in Section 2.1.1 as if the date of the Termination
of Employment was the Executive's Normal Retirement Date.)
2.5.2 PAYMENT OF BENEFIT. The Company shall pay the annual benefit
amount to the Executive in 12 equal monthly installments payable on
the first day of each month commencing with the month following the
Normal Retirement Date and continuing for 179 additional months.
2.5.3 BENEFIT INCREASES. Benefit payments will be increased as
provided in Section 2.1.3.
4
<PAGE> 5
ARTICLE 3
DEATH BENEFITS
3.1 DEATH DURING ACTIVE SERVICE. If the Executive dies while in the
active service of the Company, the Company shall pay to the Executive's
beneficiary the benefit described in this Section 3.1. This benefit shall be
paid in lieu of the Lifetime Benefits of Article 2.
3.1.1 AMOUNT OF BENEFIT. The annual benefit under this Section 3.1
is the Normal Retirement Benefit amount described in Section 2.1.1.
3.1.2 PAYMENT OF BENEFIT. The Company shall pay the annual benefit
to the beneficiary in 12 equal monthly installments payable on the
first day of each month commencing with the month following the
Executive's death and continuing for 179 additional months.
3.2 DEATH DURING BENEFIT PERIOD. If the Executive dies after the
benefit payments have commenced under this Agreement but before receiving all
such payments, the Company shall pay the remaining benefits to the Executive's
beneficiary at the same time and in the same amounts they would have been paid
to the Executive had the Executive survived.
3.3 DEATH AFTER TERMINATION OF EMPLOYMENT BUT BEFORE BENEFIT PAYMENTS
COMMENCE. If the Executive is entitled to benefit payments under this Agreement,
but dies prior to the commencement of said benefit payments, the Company shall
pay the benefit payments to the Executive's beneficiary that the Executive was
entitled to prior to death except that the benefit payments shall commence on
the first day of the month following the date of the Executive's death.
ARTICLE 4
BENEFICIARIES
4.1 BENEFICIARY DESIGNATIONS. The Executive shall designate a
beneficiary by filing a written designation with the Company. The Executive may
revoke at any time by filing a new designation. However, designations will only
be effective if signed by the Executive and accepted by the Company during the
Executive's lifetime. The Executive's beneficiary designation shall be deemed
automatically revoked if the beneficiary predeceases the Executive, or if the
Executive names a spouse as beneficiary and the marriage is subsequently
dissolved. If the Executive dies without a valid beneficiary designation, all
payments shall be made to the Executive's estate.
4.2 FACILITY OF PAYMENT. If a benefit is payable to a minor, to a
person declared incapacitated, or to a person incapable of handling the
disposition of his or her property, the Company may pay such benefit to the
guardian, legal representative or person having the care or custody of such
minor, incapacitated person or incapable person. The Company may require proof
of incapacity, minority or guardianship as it may deem appropriate prior to
distribution of the benefit. Such distribution shall completely discharge the
Company from all liability with respect to such benefit.
5
<PAGE> 6
ARTICLE 5
GENERAL LIMITATIONS
Notwithstanding any provision of this Agreement to the contrary, the
Company shall not pay any benefit under this Agreement:
5.1 EXCESS PARACHUTE PAYMENT. TO the extent the benefit would create an
excise tax under the excess parachute rules of Section 280G of the Code.
5.2 TERMINATION FOR CAUSE. If the Company terminates the Executive's
employment for:
5.2.1 Gross negligence or gross neglect of duties;
5.2.2 Commission of a felony or of a gross misdemeanor involving
moral turpitude; or
5.2.3 Fraud, disloyalty, dishonesty or willful violation of any law
or significant Company policy committed in connection with the
Executive's employment and resulting in an adverse effect on the
Company.
5.3 SUICIDE OR MISSTATEMENT. No benefits shall be payable if the
Executive commits suicide within two years after the date of this Agreement, or
if the Executive has made any material misstatement of fact on any application
for life insurance purchased by the Company.
ARTICLE 6
CLAIMS AND REVIEW PROCEDURES
6.1 CLAIMS PROCEDURE. The Company shall notify any person or entity
that makes a claim against the Agreement (the "Claimant") in writing, within
ninety (90) days of Claimant's written application for benefits, of his or her
eligibility or noneligibility for benefits under the Agreement. If the Company
determines that the Claimant is not eligible for benefits or full benefits, the
notice shall set forth (1) the specific reasons for such denial, (2) a specific
reference to the provisions of the Agreement on which the denial is based, (3 )
a description of any additional information or material necessary for the
Claimant to perfect his or her claim, and a description of why it is needed, and
(4) an explanation of the Agreement's claims review procedure and other
appropriate information as to the steps to be taken if the Claimant wishes to
have the claim reviewed. If the Company determines that there are special
circumstances requiring additional time to make a decision, the Company shall
notify the Claimant of the special circumstances and the date by which a
decision is expected to be made, and may extend the time for up to an additional
ninety-day period.
6.2 REVIEW PROCEDURE. If the Claimant is determined by the Company not
to be eligible for benefits, or if the Claimant believes that he or she is
entitled to greater or different benefits, the Claimant shall have the
opportunity to have such claim reviewed by the Company by filing a petition for
review with the Company within sixty (60) days after receipt of the notice
issued by the Company. Said petition shall state the specific reasons which the
Claimant believes entitle him or her to benefits or to greater or different
benefits. Within sixty (60) days after receipt by the
6
<PAGE> 7
Company of the petition, the Company shall afford the Claimant (and counsel, if
any) an opportunity to present his or her position to the Company orally or in
writing, and the Claimant (or counsel) shall have the right to review the
pertinent documents. The Company shall notify the Claimant of its decision 'in
writing within the sixty-day period, stating specifically the basis of its
decision, written in a manner calculated to be understood by the Claimant and
the specific provisions of the Agreement on which the decision is based. If,
because of the need for a hearing, the sixty-day period is not sufficient, the
decision may be deferred for up to another sixty-day period at the election of
the Company, but notice of this deferral shall be given to the Claimant.
ARTICLE 7
AMENDMENTS AND TERMINATION
This Agreement may be amended or terminated only by a written agreement
signed by the Company and the Executive.
ARTICLE 8
MISCELLANEOUS
8.1 BINDING EFFECT. This Agreement shall bind the Executive and the
Company, and their beneficiaries, survivors, executors, successors,
administrators and transferees.
8.2 NO GUARANTEE OF EMPLOYMENT. This Agreement is not an employment
policy or contract. It does not give the Executive the right to remain an
employee of the Company, nor does it interfere with the Company's right to
discharge the Executive. It also does not require the Executive to remain an
employee nor interfere with the Executive's right to terminate employment at any
time.
8.3 NON-TRANSFERABILITY. Benefits under this Agreement cannot be sold,
transferred, assigned, pledged, attached or encumbered in any manner.
8.4 REORGANIZATION. The Company shall not merge or consolidate into or
with another company, or reorganize, or sell substantially all of its assets to
another company, firm, or person unless such succeeding or continuing company,
firm, or person agrees to assume and discharge the obligations of the Company
under this Agreement. Upon the occurrence of such event, the term "Company" as
used in this Agreement shall be deemed to refer to the successor or survivor
company.
8.5 TAX WITHHOLDING. The Company shall withhold any taxes that are
required to be withheld from the benefits provided under this Agreement.
8.6 APPLICABLE LAW. The Agreement and all rights hereunder shall be
governed by the laws of the State of Florida, except to the extent preempted by
the laws of the United States of America.
7
<PAGE> 8
8.7 UNFUNDED ARRANGEMENT. The Executive and beneficiary are general
unsecured creditors of the Company for the payment of benefits under this
Agreement. The benefits represent the mere promise by the Company to pay such
benefits. The rights to benefits are not subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or
garnishment by creditors. Any insurance on the Executive's life is a general
asset of the Company to which the Executive and beneficiary have no preferred or
secured claim.
8.8 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the Company and the Executive as to the subject matter hereof. No rights
are granted to the Executive by virtue of this Agreement other than those
specifically set forth herein.
8.9 ADMINISTRATION. The Company shall have powers which are necessary
to administer this Agreement, including but not limited to:
8.9.1 Interpreting the provisions of the Agreement;
8.9.2 Establishing and revising the method of accounting for the
Agreement;
8.9.3 Maintaining a record of benefit payments; and
8.9.4 Establishing rules and prescribing any forms necessary or
desirable to administer the Agreement.
8.10 NAMED FIDUCIARY. For purposes of the Employee Retirement Income
Security Act of 1974, if applicable, the Company shall be the named fiduciary
and plan administrator under the Agreement. The named fiduciary may delegate to
others certain aspects of the management and operation responsibilities of the
plan including the employment of advisors and the delegation of ministerial
duties to qualified individuals.
IN WITNESS WHEREOF, the Executive and a duly authorized Company officer
have signed this Agreement.
EXECUTIVE: COMPANY:
SOUTHERN COMMUNITY BANCORP
/s/ JOHN G. SQUIRES By: /s/ STEPHEN R. JEUCK
- ------------------------------ --------------------------------------
JOHN G. SQUIRES Stephen R. Jeuck
Secretary and CFO
8
<PAGE> 9
BENEFICIARY DESIGNATION
SOUTHERN COMMUNITY BANK
SALARY CONTINUATION AGREEMENT
JOHN G. SQUIRES
I designate the following as beneficiary of any death benefits under this Salary
Continuation Agreement:
Primary:
-----------------------------------------------------------------------
- -------------------------------------------------------------------------------
Contingent:
-------------------------------------------------------------------
- -------------------------------------------------------------------------------
NOTE: TO NAME A TRUST AS BENEFICIARY, PLEASE PROVIDE THE NAME OF THE
TRUSTEE(S) AND THE EXACT NAME AND DATE OF THE TRUST AGREEMENT.
I understand that I may change these beneficiary designations by filing a new
written designation with the Company. I further understand that the designations
will be automatically revoked if the beneficiary predeceases me, or, if I have
named my spouse as beneficiary and our marriage is subsequently dissolved.
Signature ____________________________________
Date ________________________________________
Accepted by the Company this 29th day of March, 1999.
By __________________________________________
Title _________________________________________
9
<PAGE> 10
SOUTHERN COMMUNITY BANK
JOHN G. SQUIRES
SALARY CONTINUATION PLAN - SCHEDULE A
<TABLE>
<CAPTION>
INVOLUNTARY
VOLUNTARY EARLY CHANGE OF
EARLY TERMINATION CONTROL DISABILITY
TERMINATION ANNUAL ANNUAL ANNUAL
EARLY TERM. ANNUAL BENEFIT BENEFIT BENEFIT
PLAN BENEFIT ACCRUAL VESTING VESTED BENEFIT PAYABLE PAYABLE PAYABLE PAYABLE
YEAR LEVEL BALANCE SCHEDULE BENEFIT AT 65 AT 65 AT 66 IMMEDIATELY
- ---- ----- ------- -------- ------- ----- ----- ----- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 44,664 16,211 10.00% 4,766 4,766 23,832 89,878 1,803
2 50,047 36,685 20.00% 10,009 10,009 25,024 89,878 4,081
3 52,550 62,265 30.00% 15,765 15,765 26,275 89,878 6,926
4 55,177 93,939 40.00% 22,071 22,071 27,589 89,878 10,450
5 57,936 132,866 50.00% 28,968 28,968 28,968 89,878 14,780
6 60,833 180,408 60.00% 36,500 36,500 36,500 89,878 20,069
7 63,874 238,157 70.00% 44,712 44,712 44,712 89,878 26,493
8 67,068 307,974 80.00% 53,654 53,654 53,654 89,878 34,260
9 70,421 392,037 90.00% 63,379 63,379 63,379 89,878 43,611
10 73,943 492,884 100.00% 73,943 73,943 73,943 89,878 54,829
11 77,640 557,705 100.00% 77,640 77,640 77,640 89,878 62,040
12 81,522 631,051 100.00% 81,522 81,522 81,522 89,878 70,199
13 85,598 714,043 100.00% 85,598 85,598 85,598 89,878 79,431
14 89,878 807,950 100.00% 89,878 89,878 89,878 89,878 89,878
</TABLE>
BANK COMPENSATION STRATEGIES GROUP
10
<PAGE> 1
EXHIBIT 10.6
OFFICE LEASE
THIS LEASE made as of the 22 day of April 1998 between Marx Realty and
Improvement Co., Inc., Agent, a ("Landlord") and Southern Community Bancorp, a
("Tenant").
WITNESSETH:
ARTICLE 1
PREMISES AND TERM
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord
that certain space (See Exhibit A) ("Premises") described or shown on Exhibit A
attached hereto, in the building known as the 250 N. Orange ("Building") located
at 250 N. Orange Ave., Orlando, Florida ("Property," as further described in
Article 25), subject to the provisions herein contained. The term ("Term") of
this Lease shall commence on the 1st day of July 1998 ("Commencement Date"), and
end on the 30th day of June, 2008 ("Expiration Date"), unless sooner terminated
as provided herein. The Commencement Date shall be subject to adjustment as
provided in Article 4. Landlord and Tenant agree that for purposes of this Lease
the rentable area of the Premises is 6,000 + or - square feet as shown on
Exhibit A, Section A and the rentable area of the Property is 112,000 square
feet.
See attached Drive-Through Rider
ARTICLE 2
BASE RENT
Tenant shall pay Landlord monthly Base Rent of Ten Thousand and No/100
Dollars ($10,000), in advance on or before the first day of each calendar month
during the Term, except that Base Rent for the first full calendar month for
which Base Rent shall be due, shall be paid when Tenant executes this Lease. If
the Term commences on a day other than the first day of a calendar month, or
ends on a day other than the last day of a calendar month, then the Base Rent
for such month shall be prorated on the basis of 1/30th of the month, Base Rent
for each day of such month.
See Rider Two.
ARTICLE 3
ADDITIONAL RENT
(A) Taxes. Tenant shall pay Landlord an amount equal to Tenant's
Prorata Share of Taxes in excess of $1.00 ("Tax Stop") per square foot of
rentable area of the Property. The terms "Taxes" and "Tenant's Prorata Share"
shall have the meanings specified therefor in Article 25.
(B) Operating Expenses. Tenant shall pay Landlord an amount equal to
Tenant's Prorata Share of Operating Expenses in excess of $7.00 ("Expense Stop")
per square foot of rentable area of the Property. The terms "Operating Expenses"
and "Tenant's Prorata Share" shall have the meanings specified therefor in
Article 25.
(C) Manner of Payment. CPI Escalation Amounts, Taxes, and Operating
Expenses shall be paid in the following manner:
(i) Landlord may reasonably estimate in advance the amounts
Tenant shall owe for Taxes and Operating Expenses for any full or partial
calendar year of the Term. In such event, Tenant shall pay such estimated
amounts, on a monthly basis, on or before the first day of each
1
<PAGE> 2
calendar month, together with Tenant's payment of Base Rent. Such estimate may
be reasonably adjusted from time to time by Landlord.
(ii) Within 120 days after the end of each calendar year, or
as soon thereafter as practicable, Landlord shall provide a statement (the
"Statement") to Tenant showing: (a) the amount of actual Taxes and Operating
Expenses for such calendar year, with a listing of amounts for major categories
of Operating Expenses, (b) any amount paid by Tenant towards Taxes and Operating
Expenses during such calendar year on an estimated basis, (c) any revised
estimate of Tenant's obligations for Taxes and Operating Expenses for the
current calendar year, and (d) any increased CPI Escalation Amount.
(iii) If the Statement shows that Tenant's estimated payments
were less than Tenant's actual obligations for Taxes and Operating Expenses for
such year, Tenant shall pay the difference. If the Statement shows an increase
in Tenant's estimated payments for the current calendar year, Tenant shall pay
the difference between the new and former estimates for the period from January
I of the current calendar year through the month in which the Statement is sent.
Tenant shall make such payments within thirty (30) days after Landlord sends the
Statement.
(iv) If the Statement shows that Tenant's estimated payments
exceeded Tenant's actual obligations for Taxes and Operating Expenses, Tenant
shall receive a credit for the difference against payments of Rent next due. If
the Term shall have expired and no further Rent shall be due, Tenant shall
receive a refund of such difference, within thirty (30) days after Landlord
sends the Statement.
(v) If the Statement shows an Increased CPI Escalation Amount,
Tenant shall pay the difference between the former CPI Escalation Amount and the
increased CPI Escalation Amount for the period from January 1 of the year in
which Landlord sends the Statement, through the month in which the Statement is
sent, within thirty (30) days after Landlord sends the Statement. Tenant shall
thereafter pay Base Rent, as increased by the CPI Escalation Amount set forth in
the Statement.
(vi) So long as Tenant's obligations hereunder are not
materially adversely affected thereby, Landlord reserves the right to reasonably
change, from time to time, the manner or timing of the foregoing payments. In
lieu of providing one Statement covering Taxes, Operating Expenses and CPI
Escalation Amounts, Landlord may provide separate statements at the same or
different times. No delay by Landlord in providing the Statement (or separate
statements) shall be deemed a default by Landlord or a waiver of Landlord's
right to require payment of Tenant's obligations for actual or estimated Taxes
or Operating Expenses, or CPI Escalation Amounts. In no event shall a decrease
in Taxes or Operating Expenses or a decrease in the CPI ever decrease the
monthly Base Rent, or give rise to a credit in favor of Tenant. Tenant
acknowledges that, except as may be separately represented to Tenant in writing
signed by Landlord, the Expense Stop and Tax Stop do not necessarily reflect
actual Taxes or Operating Expenses for any given calendar year.
(D) Proration. If the Term commences other than on January 1, or ends
other than on December 31, Tenant's obligations to pay estimated and actual
amounts towards Taxes and Operating Expenses for such first or final calendar
years shall be prorated to reflect the portion of such years included in the
Term. Such proration shall be made by multiplying the total estimated or actual
(as the case may be) Taxes and Operating Expenses, for such calendar years, as
well as the Tax Stop and Expense Stop amounts, by a fraction, the numerator of
which shall be the number of days of the Term during such calendar year, and the
denominator of which shall be 365.
(E) Landlord's Records. Landlord shall maintain records respecting
Taxes and Operating Expenses and determine the same in accordance with sound
accounting and management practices, consistently applied. Although this Lease
contemplates the computation of Taxes and Operating Expenses on a cash basis,
Landlord shall make reasonable and appropriate accrual adjustments to ensure
that each calendar year includes substantially the same recurring items.
Landlord reserves the right to change to a full accrual system of accounting so
long as the same is consistently applied and Tenant's obligations are not
materially adversely affected. Tenant or its representative shall have the
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right to examine such records upon reasonable prior notice specifying such
records Tenant desires to examine, during normal business hours at the place or
places where such records, are normally kept by sending such notice no later
than forty-five (45) days following the furnishing of the Statement. Tenant may
take exception to matters included in Taxes or Operating Expenses, or Landlord's
computation of Tenant's Prorata Share of either, by sending notice specifying
such exception and the reasons therefor to Landlord no later than thirty (30)
days after Landlord makes such records available for examination. Such Statement
shall be considered final, except as to matters to which exception is taken
after examination of Landlord's records In the foregoing manner and within the
foregoing times. Tenant acknowledges that Landlord's ability to budget and incur
expenses depends on the finality of such Statement, and accordingly agrees that
time is of the essence of this Paragraph. If Tenant takes exception to any
matter contained in the Statement as provided herein. Landlord shall refer the
matter to an independent certified public accountant, whose certification as to
the proper amount shall be final and conclusive as between Landlord and Tenant.
Tenant shall promptly pay the cost of such certification unless such
certification determines that Tenant was overbilled by more than 2%, Pending
resolution of any such exceptions In the foregoing manner, Tenant shall continue
paying Tenant's Prorata Share of Taxes and Operating Expenses in the amounts
determined by Landlord, subject to adjustment after any such exceptions are so
resolved.
(F) Rent and Other Charges. Base Rent, Taxes, Operating Expenses, CPI
Escalation Amounts, and any other amounts which Tenant Is or becomes obligated
to pay Landlord under this Lease or other agreement entered in connection
herewith, are sometimes herein referred to collectively as "Rent," and all
remedies applicable to the non-payment o Rent shall be applicable thereto. Rent
shall be paid at any office maintained by Landlord or its agent at the Property,
or at such other place as Landlord may designate.
ARTICLE 4
COMMENCEMENT OF TERM
The Commencement Date set forth in Article 1 shall be delayed and Rent
shall be abated until sixty (60) days from the date the Tenant receives
regulatory approval from the Florida Department of Banking and the Federal
Deposit Insurance Corporation.
If the Commencement Date is delayed, the Expiration Date shall not be
similarly extended, unless landlord shall so elect (in which case, the parties
shall confirm the same in writing). During any period that Tenant shall be
permitted to enter the Premises prior to the Commencement Date other than to
occupy the same (e.g., to perform alterations or improvements), Tenant shall
comply with all terms and provisions of this Lease, except those provisions
requiring the payment of Rent. If Tenant shall be permitted to enter the
Premises prior to the Commencement Date for the purpose of occupying the same,
Rent shall commence on such date, and if Tenant shall commence occupying only a
portion of the Premises prior to the Commencement Date, Rent shall be prorated
based on the number of rentable square feet occupied by Tenant. Landlord shall
permit early entry, provided the Premises are legally available and any work
required under this Lease or any separate agreement entered in connection
herewith has been completed.
ARTICLE 5
CONDITION OF PREMISES
Tenant has Inspected the Premises, Property, Systems and Equipment (as
defined in Article 25), or has, had in opportunity to do so, and agrees to
accept the same "as is" without any agreements, representations, understandings
or obligations on the part of Landlord to perform any alterations, repairs or
improvements except as expressly provided in any separate agreement that may be
signed by the parties.
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ARTICLE 6
USE AND RULES
Tenant shall use the Premises for offices and no other purpose
whatsoever, in compliance with all applicable laws and without disturbing or
interfering with any other tenant or occupant of the Property. Tenant shall not
use the Premises in any manner so as to cause a cancellation of Landlord's
insurance policies, or an increase in the premiums thereunder, Tenant shall
comply with all rules set forth in Rider One attached hereto (the "Rules").
Landlord shall have the right to reasonably amend such Rules and supplement the
same with other reasonable Rules (not expressly inconsistent with (his Lease)
relating to the Property, or the promotion of safety, care, cleanliness or good
order therein, and all such amendments or new Rules shall be binding upon Tenant
after five (5) days notice thereof to Tenant. All Rules shall be applied on a
non-discriminatory basis, but nothing herein shall be construed to give Tenant
or any other Person (as defined In Article 25) any claim, demand or cause of
action against Landlord arising out of the violation of such Rules by any other
tenant, occupant, or visitor of the Property, or out of the enforcement or
waiver of the Rules by Landlord in any particular instance.
ARTICLE 7
SERVICES AND UTILITIES
Landlord shall provide the following services and utilities (the cost
of which shall be included in Operating Expenses unless otherwise stated herein
or in any separate rider hereto):
(A) Electricity for standard office lighting fixtures, and equipment
and accessories customary for offices (up to 280 hours per month) where: (1) the
connected electrical load of all of the same does not exceed an average of 4
watts per square foot of the Premises (or such lesser amount as may be
available, based on the safe and lawful capacity of the existing electrical
circuit(s) and facilities serving the Premises), (2) the electricity will be at
nominal 120 volts, single phase (or 110 volts, depending on available service in
the Building), and (3) the safe and lawful, capacity of the existing electrical
circuit(s) serving the Premises is not exceeded.
(B) Heat and air-conditioning to provide a temperature required, in
Landlord's reasonable opinion and in accordance with applicable law, for
occupancy of the Premises under normal business operations, from 8:00 a.m. until
6:00 p.m. Monday through Friday, except on Holidays (as defined in Article 25).
Landlord shall not be responsible for inadequate air-conditioning or ventilation
to the extent the same occurs because Tenant uses any item of equipment
consuming more than 500 watts at rated capacity without providing adequate
air-conditioning and ventilation therefor.
(C) Water for drinking, lavatory and toilet purposes at those points of
supply provided for nonexclusive general use of other tenants at the Property.
(D) Customary office cleaning and trash removal service Monday through
Friday or Sunday through Thursday in and about the Premises.
(E) Operatorless passenger elevator service (if the Property has such
equipment serving the Premises) and freight elevator service (if the Property
has such equipment serving the Premises, and subject to scheduling by Landlord)
in common with Landlord and other tenants and their contractors, agents and
visitors.
(F) Landlord shall seek to provide such extra utilities or services as
Tenant may from time to time request, if the same are reasonable and feasible
for Landlord to provide and do not involve modifications or additions to the
Property or existing Systems and Equipment (as defined in Article 25), and if
Landlord shall receive Tenant's request within a reasonable period prior to the
time such extra utilities or services are required. Landlord may comply with
written or oral requests by any officer or employee of Tenant, unless Tenant
shall notify Landlord of, or Landlord shall request, the names of authorized
individuals (up to 3 for each floor on which the Premises are
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located) and procedures for written requests. Tenant shall, for such extra
utilities or services, pay such charges as Landlord shall from time to time
reasonably establish. All charges for such extra utilities or services shall be
due at the same time as the installment of Base Rent with which the same are
billed, or if billed separately, shall be due within twenty (20) days after such
billing.
Landlord may install and operate meters or any other reasonable system
for monitoring or estimating any services or utilities used by Tenant in excess
of those required to be provided by Landlord under this Article (including a
system for Landlord's engineer to reasonably estimate any such excess usage). If
such system indicates such excess services or utilities, Tenant shall pay
Landlord's reasonable charges for installing and operating such system and any
supplementary air-conditioning, ventilation, heat, electrical or other systems
or equipment (or adjustments or modifications to the existing Systems and
Equipment), and Landlord's reasonable charges for such amount of excess services
or utilities used by Tenant.
Landlord does not warrant that any services or utilities will be free
from shortages, failures, variations, or interruptions caused by repairs,
maintenance, replacements, improvements, alterations, changes of service,
strikes, lockouts, labor controversies, accidents, inability to obtain services,
fuel, steam, water or supplies, governmental requirements or requests, or other
causes beyond Landlord's reasonable control. None of the same shall be deemed an
eviction or disturbance of Tenant's use and possession of the Premises or any
part thereof, or render Landlord liable to Tenant for abatement of Rent, or
relieve Tenant from performance of Tenant's obligations under this Lease.
Landlord in no event shall be liable for damages by reason of loss of profits,
business interruption or other consequential damages.
ARTICLE 8
ALTERATIONS AND LIENS
Tenant shall make no additions, changes, alterations or Improvements
(the "Work") to the Premises or the Systems and Equipment (as defined In Article
25) pertaining to the Premises without the prior written consent of Landlord.
Landlord may impose reasonable requirements as a condition of such consent
including without limitation the submission of plans and specifications for
Landlord's prior written approval, obtaining necessary permits, posting bonds
obtaining insurance, prior approval of contractors, subcontractors and
suppliers, prior receipt of copies of all contracts and subcontracts, contractor
and subcontractor lien waivers, affidavits listing all contractors,
subcontractors and suppliers use of union labor (if Landlord uses union labor),
affidavits from engineers acceptable to Landlord stating that the Work will not
adversely affect the Systems and Equipment or the structure of the Property, and
requirements as to the manner and times in which such Work shall be done. All
Work shall be performed in a good and workmanlike manner and all materials used
shall be of a quality comparable to or better than those in the Premises and
Property and shall be in accordance with plans and specifications approved by
Landlord, and Landlord may require that all such Work be performed under
Landlord's supervision, In all cases, Tenant shall pay Landlord a reasonable fee
to cover Landlord's overhead in reviewing Tenant's plans and specifications and
performing any supervision of the Work. If Landlord consents or supervises, the
same shall not be deemed a warranty as to the adequacy of the design,
workmanship or quality of materials, and Landlord hereby expressly disclaims any
responsibility or liability for the same. Landlord shall under no circumstances
have any obligation to repair, maintain or replace any portion of the Work. See
Rider Five
Tenant shall keep the Property and Premises free from any mechanic's,
materialman's of similar lions or other such encumbrances in connection with any
Work on or respecting the Premises not performed by or at the request of
Landlord and shall indemnity and hold Landlord harmless from and against any
claims, liabilities, judgments, or costs (including attorneys' fees) arising out
of the same or in connection therewith. Tenant shall give Landlord notice at
least twenty (20) days prior to the commencement of any Work on the Premises (or
such additional time as may be necessary under applicable Laws), to afford
Landlord the opportunity of posting and recording appropriate notices of
non-responsibility Tenant shall remove any such lien or encumbrance by bond or
otherwise within thirty (30) days after written notice by Landlord, and if
Tenant shall fail to do so, Landlord may pay the amount necessary to remove such
lien or encumbrance without being
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responsible for investigating the validity thereof. The amount so paid shall be
deemed additional Rent under this Lease payable upon demand without limitation
as to other remedies available to Landlord under this Lease. Nothing contained
in this Lease shall authorize Tenant to do any act which shall subject
Landlord's title to the Property or Premises to any liens or encumbrances
whether claimed by operation of law or express or implied contract. Any claim to
a lien or encumbrance upon the Property or Premises arising in connection with
any Work on or respecting the Premises not performed by or at the request of
Landlord shall be null and void, or at Landlord's option shall attach only
against Tenant's interest in the Premises and shall in all respects be
subordinate to Landlord's title to the Property and Premises.
ARTICLE 9
REPAIRS
Except for customary cleaning and trash removal provided by Landlord
under Article 7, and damage covered under Article 10, Tenant shall keep the
Premises in good and sanitary condition, working order and repair (including
without limitation, carpet, wall-covering, doors, plumbing and other fixtures,
equipment, alterations and improvements whether installed by Landlord or
Tenant). In the event that any repairs, maintenance or replacements are
required, Tenant shall promptly arrange for them either through Landlord for
such reasonable charges as Landlord may from time to time establish, or such
controls as Landlord generally uses at the Property or such other contractors as
Landlord shall first approve in writing, and in a first class, workmanlike
manner approved by Landlord in advance in writing. If Tenant does not promptly
make such arrangements, Landlord may, but need not, make such repairs,
maintenance and replacements, and the costs paid of incurred by Landlord
therefor shall be reimbursed by Tenant promptly after request by Landlord.
Tenant shall indemnity Landlord and pay for any repairs, maintenance and
replacements to areas of the Property outside the Premises, caused, in whole or
in part, as a result of involving any furniture, fixtures, or other property to
or from the Premises, or by Tenant or its employees, agents, contractors, or
visitors (notwithstanding anything to the contrary contained in this Lease).
Except as provided in the preceding sentence, or for damage covered under
Article 10, Landlord shall keep the common areas of the Property in good and
sanitary condition, working order and repair (the cost of which shall be
included in Operating Expenses, as described in Article 25, except as limited
therein).
ARTICLE 10
CASUALTY DAMAGE
If the Premises or any common areas of the Property providing access
thereto shall be damaged by fire or other casualty, Landlord shall use available
insurance proceeds to restore the same. Such restoration shall be to
substantially the condition prior to the casualty, except for modifications
required by zoning and building codes and other Laws or by any Holder (as
defined In Article 25), any other modifications to the common areas deemed
desirable by Landlord (provided access to the Premises is not materially
impaired), and except that Landlord shall not be required to repair of replace
any of Tenant's furniture, furnishings, fixtures or equipment, or any
alterations or improvements in excess of any work performed or paid for by
Landlord under any separate agreement signed by the parties in connection
herewith. Landlord shall not be liable for any inconvenience or annoyance to
Tenant or its visitors, or injury to Tenant's business resulting In any way from
such damage or the repair thereof. However, Landlord shall allow Tenant a
proportionate abatement of Rent during the time and to the extent the Premises
are unfit for occupancy for the purposes permitted under this Lease and not
occupied by Tenant as a result thereof (unless Tenant or its employees or agents
caused the damage). Notwithstanding the foregoing to the contrary, Landlord may
elect to terminate this Lease by notifying Tenant in writing of such termination
within sixty (60) days after the date of damage (such termination notice to
include a termination date providing at least ninety (90) days for Tenant to
vacate the Premises), if the Property shall be materially damaged by Tenant or
its employees or agents, or if the Property shall be damaged by fire or other
casualty of cause such that: (a) repairs to the Premises and access thereto
cannot reasonably be completed within 120 days after the casualty without the
payment of overtime or other premiums, (b) more than 25% of the Premises is
affected by the damage, and fewer than 24 months remain in the Term, or any
material damage occurs to the Premises during the last 12 months of the Term,
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(c) any Holder (as defined in Article 25) shall require that the insurance
proceeds or any portion thereof be used to retire the Mortgage debt (or shall
terminate the ground lease, as the case may be), or the damage is not fully
covered by Landlord's insurance policies, or (d) the cost of the repairs,
alterations, restoration or improvement work would exceed 25% of the replacement
value of the Building, or the nature of such work would make termination of this
Lease necessary or convenient. Tenant agrees that Landlord's obligation to
restore, and the abatement of Rent provided herein, shall be Tenant's sole
recourse In the event of such damage, and waives any other rights Tenant may
have under any applicable law to terminate the Lease by reason of damage to the
Premises or Property. Tenant acknowledges that this Article represents the
entire agreement between the parties respecting damage to the Premises or
Property.
ARTICLE 10A:
Notwithstanding Article 10 or the Lease to the contrary, Tenant may
terminate this Lease if Tenant is unable to use all or a substantial
portion of the Premises as a result of fire or other casualty not
caused by Tenant or its employees or agents, and: (a) Landlord fails to
commence restoration work to the Premises and access thereto within
sixty (60) days after the damage occurs, or (b) Landlord fails to
substantially complete such work within 180 days after commencing the
same (or if the Premises contains more than 5,000 rentable square feet,
then an additional 30 days for each additional 5,000 rentable square
feet), or such additional time as may be necessary due to strikes,
lockouts or other labor troubles, shortages of equipment or materials,
governmental requirements, power shortages or outages or other causes
beyond Landlord's reasonable control, or (c) such work is reasonably
estimated (which estimate Landlord shall provide within 60 days
following the casualty), to take more than 180 days to substantially
complete after being commenced (or if the Premises contains more than
5,000 rentable square feet, then an additional 30 days for each
additional 5,000 rentable square feet), or (d) more than 25% of the
Premises is affected by the damage, and fewer than 24 months remain in
the Term. In order to exercise any of the foregoing termination rights,
Tenant must send Landlord at least sixty (60) days (but not more than
120 days) advance notice specifying the basis for termination, and such
notice must be given no later than thirty (30) days following the
occurrence of the condition serving as the basis for the termination
right invoked by Tenant. Such termination rights shall not be available
to Tenant if: (i) Landlord substantially completes the repairs to the
Premises and access thereto within sixty (60) days after Tenant's
notice, or (ii) Landlord provides Tenant with new premises under
Article 22(E) or otherwise and access thereto within sixty (60) days
after Tenant's notice. Notwithstanding anything to the contrary
contained herein, if Tenant, or its officers, employees, contractors,
invitees or agents delay Landlord in performing the repairs, Landlord
shall have additional time to complete the work equal to such delay and
Tenant shall pay Landlord all Rent for the period or such delay.
ARTICLE 11
INSURANCE, SUBROGATION, AND WAIVER OF CLAIMS
Tenant shall maintain during the Term comprehensive (or commercial)
general liability insurance, with limits of not less than $1,000,000 combined
single limit for personal injury, bodily injury or death, or property damage or
destruction (including loss of use thereof) for any one occurrence. Tenant shall
also maintain during the Term, worker compensation insurance as required by
statute, and primary, noncontributory, "all-risk" property damage insurance
covering Tenant's personal property, business records, fixtures and equipment,
for damage or other loss caused by fire or other casualty or cause including,
but not limited to, vandalism and malicious mischief, theft, water damage of any
type, including sprinkler leakage, bursting or stoppage of pipes, explosion,
business interruption, and other insurable risks in amounts not less than the
full insurable replacement value of such property and full insurable value of
such other interests of Tenant (subject to reasonable deductible amounts).
Landlord shall, as part of Operating Expenses, maintain during the Term
comprehensive (or commercial) general liability insurance, with limits of not
less than $1,000,000 combined single limit for personal injury, bodily injury or
death, or property damage or destruction (including loss of use thereof) for any
one occurrence. Landlord shall also, as part of Operating Expenses, maintain
during the Term worker compensation insurance as required by statute, and
primary, non-contributory, extended coverage or "all-risk" property damage
insurance,
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in an amount equal to at least ninety percent (90%) of the full insurable
replacement value of the Property (exclusive of the costs of excavation,
foundations and footings, and such risks required to be covered by Tenant's
insurance, and subject to reasonable deductible amounts), or such other amount
necessary to prevent Landlord from being a co-insured, and such other coverage
is Landlord shall deem appropriate or that may be required by any Holder (as
defined in Article 25).
Tenant shall provide Landlord with certificates evidencing such
coverage (and with respect to liability coverage showing Landlord and JMB
Properties Company as additional insureds) prior to the Commencement Date, which
shall state that such insurance coverage may not be changed or cancelled without
at least twenty (20) days' prior written notice to Landlord, and shall provide
renewal certificates to Landlord at least twenty (20) days prior to expiration
of such policies. Landlord may periodically, but not more often than every five
years, require that Tenant reasonably increase the aforementioned coverage.
Except as provided to the contrary herein, any insurance carried by Landlord or
Tenant shall be for the sole benefit of the party carrying such insurance. Any
insurance policies hereunder may be "blanket policies." All insurance required
hereunder shall be provided by responsible insurers and Tenant's insurer shall
be reasonably acceptable to Landlord. By this Article, Landlord and Tenant
intend that their respective property loss risks shall be borne by responsible
insurance carriers to the extent above provided, and Landlord and Tenant hereby
agree to look solely to, and seek recovery only from, their respective insurance
carriers in the event of a property loss to the extent that such coverage is
agreed to be provided hereunder. The parties each hereby waive all rights and
claims against each other for such losses, and waive all rights of subrogation
of their respective insurers, provided such waiver of subrogation shall not
affect the right of the insured to recover thereunder. The parties agree that
their respective insurance policies are now, or shall be, endorsed such that
said waiver of subrogation shall not affect the right of the insured to recover
thereunder, so long as no material additional premium is charged therefor.
ARTICLE 12
CONDEMNATION
If the whole or any material part of the Premises or Property shall be
taken by power of eminent domain or condemned by any competent authority for any
public or quasi-public use or purpose, or if any adjacent property or street
shall be so taken or condemned, or reconfigured or vacated by such authority in
such manner as to require the use, reconstruction or remodeling of any part of
the Premises or Property, or if Landlord shall grant a deed or other instrument
in lieu of such taking by eminent domain or condemnation, Landlord shall have
the option to terminate this Lease upon ninety (90) days notice, provided such
notice is given no later than 180 days after the date of such taking,
condemnation, reconfiguration, vacation, deed or other instrument. Tenant shall
have reciprocal termination rights if the whole or any material part of the
Premises is permanently taken. or if access to the Premises is permanently
materially impaired. Landlord shall be entitled to receive the entire award or
payment in connection therewith, except that Tenant shall have the right to file
any separate claim available to Tenant for any taking of Tenant's personal
property and fixtures belonging to Tenant and removable by Tenant upon
expiration of the Term, and for moving expenses (so long as such claim does not
diminish the award available to Landlord or any Holder, and such claim is
payable separately to Tenant). All Rent shall be apportioned as of the date of
such termination, or the date of such taking, whichever shall first occur. If
any part of the Premises shall be taken, and this Lease shall not be so
terminated, the Rent shall be proportionately abated.
ARTICLE 13
RETURN OF POSSESSION
At the expiration or earlier termination of this Lease or Tenant's
right of possession, Tenant shall surrender possession of the Premises in the
condition required under Article 9, ordinary wear and tear excepted, and shall
surrender all keys, any key cards, and any parking stickers or cards, to
Landlord and advise Landlord as to the combination of any locks or vaults then
remaining In the Premises, and shall remove all trade fixtures and personal
property. All improvements, fixtures and other items in or upon the Premises
(except trade fixtures and personal property belonging to Tenant), whether
installed by Tenant or Landlord, shall be Landlord's property and shall remain
upon the Premises, all without compensation, allowance or credit to Tenant.
However, if prior to
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such termination or within ten (10) days thereafter Landlord so directs by
notice, Tenant shall promptly remove such of the foregoing items as are
designated in such notice and restore the Premises to the condition prior to the
installation of such items; provided, Landlord shall not require removal of
customary office Improvements Installed pursuant to any separate agreement
signed by both parties in connection with entering this Lease (except as
expressly provided to the contrary therein), or installed by Tenant with
Landlord's written approval (except as expressly required by Landlord in
connection with granting such approval). Tenant shall fail to perform any
repairs or restoration, or fail to remove any items from the Premises required
hereunder. Landlord may do so, and Tenant shall pay Landlord the cost thereof
upon demand. All property removed from the Premises by Landlord pursuant to any
provisions of this Lease or any Law may be handled or stored by Landlord at
Tenant's expense, and Landlord shall in no event be responsible for the value,
preservation or safekeeping thereof. All property not removed from the Premises
or retaken from storage by Tenant within thirty (30) days after expiration or
earlier termination of this Lease or Tenant's right to possession. shall at
Landlord's option be conclusively deemed to have been conveyed by Tenant to
Landlord as if by bill of sale without payment by Landlord. Unless prohibited by
applicable Law, Landlord shall have a lien against such property for the costs
incurred in removing and storing the same.
ARTICLE 14
HOLDING OVER
Unless Landlord expressly agrees otherwise in writing, Tenant shall pay
Landlord 150% of the amount of Rent then applicable (or the highest amount
permitted by Law, whichever shall be less) prorated on a per diem basis for each
day Tenant shall retain possession of the Premises or any part thereof after
expiration or earlier termination of this Lease, together with all damages
sustained by Landlord on account thereof. The foregoing provisions shall not
serve as permission for Tenant to hold-over, nor serve to extend the Term
(although Tenant shall remain bound to comply with all provisions of this Lease
until Tenant vacates the Premises, and shall be subject to the provisions of
Article 13). Notwithstanding the foregoing to the contrary, at any time before
or after expiration or earlier termination of the Lease, Landlord may serve
notice advising Tenant of the amount of Rent and other terms required, should
Tenant desire to enter a month-to-month tenancy (and if Tenant shall hold over
more than one full calendar month after such notice, Tenant shall thereafter be
deemed a month-to-month tenant, on the terms and provisions of this Lease then
in effect, as modified by Landlord's notice, and except that Tenant shall not be
entitled to any renewal or expansion rights contained in this Lease or any
amendments hereto).
ARTICLE 15
NO WAIVER
No provision of this Lease will be deemed waived by either party unless
expressly waived in writing signed by the waiving party. No waiver shall be
implied by delay or any other act or omission of either party. No waiver by
either party of any provision of this Lease shall be deemed a waiver of such
provision with respect to any subsequent matter relating to such provision, and
Landlord's consent or approval respecting any action by Tenant shall not
constitute a waiver of the requirement for obtaining Landlord's consent or
approval respecting any subsequent action. Acceptance of Rent by Landlord shall
not constitute a waiver of any breach by Tenant of any term or provision of this
Lease. No acceptance of a lesser amount than the Rent herein stipulated shall be
deemed a waiver of Landlord's right to receive the full amount due, nor shall
any endorsement or statement on any check or payment or any letter accompanying
such check or payment be deemed an accord and satisfaction, and Landlord may
accept such check or payment without prejudice to Landlord's right to recover
the full amount due. The acceptance of Rent or of the performance of any other
term or provision from any Person other than Tenant, including any Transferee,
shall not constitute a waiver of Landlord's right to approve any Transfer.
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ARTICLE 16
ATTORNEYS' FEES AND JURY TRIAL
In the event of any litigation between the parties, the prevailing
party shall be entitled to obtain, as part of the judgment, all reasonable
attorneys' fees, costs and expenses incurred in connection with such litigation
except as may be limited by applicable Law. In the interest of obtaining a
speedier and less costly hearing of any dispute, the parties hereby each
irrevocably waive the right to trial by jury.
ARTICLE 17
PERSONAL PROPERTY TAXES, RENT TAXES AND OTHER TAXES
Tenant shall pay prior to delinquency all taxes, charges or other
governmental impositions assessed against or levied upon Tenant's fixtures,
furnishings, equipment and personal property located in the Premises, and any
Work to the Premises under Article 8. Whenever possible, Tenant shall cause all
such items to be assessed and billed separately from the property of Landlord.
In the event any such items shall be assessed and billed with the property of
Landlord, Tenant shall pay Landlord its share of such taxes, charges or other
governmental impositions within thirty (30) days after Landlord delivers a
statement and a copy of the assessment or other documentation showing the amount
of such impositions applicable to Tenant's property. Tenant shall pay any rent
tax or sales tax, service tax, transfer tax or value added tax, or any other
applicable tax on the Rent or services herein or otherwise respecting this
Lease.
ARTICLE 18
REASONABLE APPROVALS
Whenever Landlord's approval or consent is expressly required under
this Lease (including Article 21) or any other agreement between the parties,
Landlord shall not unreasonably withhold or delay such approval or consent
(reasonableness shall be a condition to Landlord's enforcement of such consent
or approval requirement, and not a covenant) except for matters affecting the
structure, safety or security of the Property, or the appearance of the Property
from any common or public areas.
ARTICLE 19
SUBORDINATION, ATTORNMENT AND MORTGAGEE PROTECTION
This Lease is subject and subordinate to all Mortgages (as defined in
Article 25) now or hereafter placed upon the Property, and all other
encumbrances and matters of public record applicable to the Property. If any
foreclosure proceedings are initiated by any Holder or a deed in lieu is granted
(or if any ground lease is terminated), Tenant agrees upon written request of
any such Holder or any purchaser at foreclosure sale, to attorn and pay Rent to
such party and to execute and deliver any instruments necessary or appropriate
to evidence or effectuate such attornment (provided such Holder or purchaser
shall agree to accept this Lease and not disturb Tenant's occupancy, so long as
Tenant does not default and fail to cure within the time permitted hereunder).
However, in the event of attornment, no Holder shall be; (i) liable for any act
or omission of Landlord, or subject to any offsets or defenses which Tenant
might have against Landlord (prior to such Holder becoming Landlord under such
attornment), (ii) liable for any security deposit or bound by any prepaid Rent
not actually received by such Holder, or (iii) bound by any future modification
of this Lease not consented to by such Holder. Any Holder (as defined in Article
25) may elect to make this Lease prior to the lien of its Mortgage, by written
notice to Tenant, and if the Holder of any prior Mortgage shall require, this
Lease shall be prior to any subordinate Mortgage. Tenant agrees to give any
Holder by certified mail, return receipt requested, a copy of any notice of
default served by Tenant upon Landlord, provided that prior to such notice
Tenant has been notified in writing (by way of service on Tenant of a copy of an
assignment of leases, or otherwise) of the address of such Holder. Tenant
further agrees that if Landlord shall have failed to cure such default within
the times permitted Landlord for cure under this Lease, any such Holder whose
address has been provided to
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Tenant shall have an additional period of thirty (30) days in which to cure (or
such additional time as may be required due to causes beyond such Holder's
control, including time to obtain possession of the Property by power of sale or
judicial action). Tenant shall execute such documentation as Landlord may
reasonably request from time to time, in order to confirm the matters set forth
in this Article in recordable form.
ARTICLE 20
ESTOPPEL CERTIFICATE
Tenant shall from time to time, within twenty (20) days after written
request from Landlord, execute, acknowledge and deliver a statement (i)
certifying that this Lease is unmodified and in full force and effect or, if
modified, stating the nature of such modification and certifying that this Lease
as so modified, is in full force and effect (or if this Lease is claimed not to
be in force and effect, specifying the ground therefor) and any dates to which
the Rent has been paid in advance, and the amount of any Security Deposit, (ii)
acknowledging that there are not, to Tenant's knowledge, any uncured defaults on
the part of Landlord hereunder, or specifying such defaults if any are claimed,
and (iii) certifying such other matters as Landlord may reasonably request, or
as may be requested by Landlord's current or prospective Holders, insurance
carriers, auditors, and prospective purchasers. Any such statement may be relied
upon by any such parties. If Tenant shall fail to execute and return such
statement within the time required herein, Tenant shall be deemed to have agreed
with the matters set forth therein.
ARTICLE 21
ASSIGNMENT AND SUBLETTING
(A) Transfers. Tenant shall not, without the prior written consent of
Landlord, which consent shall not be unreasonably withhold, as further described
below: (i) assign, mortgage, pledge, hypothecate, encumber, or permit any lien
to attach to, or otherwise transfer, this Lease or any interest hereunder, by
operation of law or otherwise, (ii) sublet the Premises or any part thereof, or
(iii) permit the use of the Premises by any Persons (as defined in Article 25)
other than Tenant and its employees (all of the foregoing are hereinafter
sometimes referred to collectively as "Transfers" and any Person to whom any
Transfer is made or sought to be made is hereinafter sometimes referred to as a
"Transferee"). If Tenant shall desire Landlord's consent to any Transfer, Tenant
shall notify Landlord in writing, which notice shall include: (a) the proposed
effective date (which shall not be less than 30 nor more than 180 days after
Tenant's notice), (b) the portion of the Premises to be Transferred (herein
called the "Subject Space"), (c) the terms of the proposed Transfer and the
consideration therefor, the name and address of the proposed Transferee, and a
copy of all documentation pertaining to the proposed Transfer, and (d) current
financial statements of the proposed Transferee certified by an officer, partner
or owner thereof, and any other information to enable Landlord to determine the
financial responsibility, character, and reputation of the proposed Transferee,
nature of such Transferee's business and proposed use of the Subject Space, and
such other information as Landlord may reasonably require. Any Transfer made
without complying with this Article shall, at Landlord's option, be null, void
and of no effect, or shall constitute a Default under this Lease. Whether or not
Landlord shall grant consent, Tenant shall pay $300.00 towards Landlord's review
and processing expenses, as well as any reasonable legal fees incurred by
Landlord, within thirty (30) days after written request by Landlord.
Notwithstanding anything to the contrary in Article 21, Tenant may permit the
Premises to be used by, or may sublease the Premises or assign this Lease to any
party which directly or indirectly, (i) wholly owns or controls Tenant, (ii) is
wholly owned or controlled by Tenant, (iii) is under common ownership or control
with Tenant, or (iv) into which Tenant or any of the foregoing parties is
merged, consolidated or reorganized. or to which all or substantially all of
Tenant's assets or any such other party's assets are sold, without Landlord's
consent, provided: (a) Landlord shall receive a copy of the executed transfer
document promptly after execution, (b) Tenant shall remain liable under this
Lease and (c) the Transferee shall expressly assume Tenant's obligations under
this Lease.
(B) Approval. Landlord will not unreasonably withhold its consent (as
provided in Article 18) to any proposed Transfer of the Subject Space to the
Transferee on the terms specified in Tenant's notice. The parties hereby agree
that it shall be reasonable under this Lease and under
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any applicable Law for Landlord to withhold consent to any proposed Transfer
where one or more of the following applies (without limitation as to other
reasonable grounds for withholding consent): (i) the Transferee is of a
character or reputation or engaged in a business which is not consistent with
the quality of the Property, or would be a significantly less prestigious
occupant of the Property than Tenant, (ii) the Transferee intends to use the
Subject Space for purposes which are not permitted under this Lease, (iii) the
Subject Space is not regular in shape with appropriate means of ingress and
egress suitable for normal renting purposes, (iv) the Transferee is either a
government (or agency or instrumentality thereof) or an occupant of the
Property, (v) the proposed Transferee does not have a reasonable financial
condition in relation to the obligations to be assumed in connection with the
Transfer, or (vi) Tenant has committed and failed to cure a Default at the time
Tenant requests consent to the proposed Transfer.
(C) Transfer Premium. If Landlord consents to a Transfer, and as a
condition thereto which the parties hereby agree is reasonable, Tenant shall pay
Landlord fifty percent (50%) of any Transfer Premium derived by Tenant from such
Transfer. "Transfer Premium" shall mean all rent, additional rent or other
consideration paid by such Transferee in excess of the Rent payable by Tenant
under this Lease (on a monthly basis during the Term, and on a per rentable
square foot basis, if less than all of the Premises is transferred), after
deducting the reasonable expenses incurred by Tenant for any changes,
alterations and improvements to the Premises, any other economic concessions or
services provided to the Transferee, and any customary brokerage commissions
paid in connection with the Transfer. If part of the consideration for such
Transfer shall be payable other than in cash, Landlord's share of such non-cash
consideration shall be in such form as is reasonably satisfactory to Landlord.
The percentage of the Transfer Premium due Landlord hereunder shall be paid
within ten (10) days after Tenant receives any Transfer Premium from the
Transferee.
(D) Recapture. Notwithstanding anything to the contrary contained in
this Article, Landlord shall have the option, by giving written notice to Tenant
within thirty (30) days after receipt of Tenant's notice of any proposed
Transfer, to recapture the Subject Space. Such recapture notice shall cancel and
terminate this Lease with respect to the Subject Space as of the date stated in
Tenant's notice as the effective date of the proposed Transfer (or at Landlord's
option, shall cause the Transfer to be made to Landlord or its agent, in which
event the parties shall execute the Transfer documentation promptly thereafter).
If this Lease shall be cancelled with respect to less than the entire Premises,
the Rent reserved herein shall be prorated on the basis of the number of
rentable square feet retained by Tenant in proportion to the number of rentable
square feet contained in the Premises, this Lease as so amended shall continue
thereafter in full force and effect, and upon request of either party, the
parties shall execute written confirmation of the same.
(E) Terms of Consent. If Landlord consents to a Transfer: (a) the terms
and conditions of this Lease, including among other things, Tenant's liability
(or the Subject Space, shall in no way be deemed to have been waived or
modified, (b) such consent shall not be deemed consent to any further Transfer
by either Tenant or a Transferee, (c) no Transferee shall succeed to any rights
provided in this Lease or any amendment hereto to extend the Term of this Lease,
expand the Premises, or lease additional space, any such rights being deemed
personal to Tenant, (d) Tenant shall deliver to Landlord promptly after
execution, an original executed copy of all documentation pertaining to the
Transfer in form reasonably acceptable to Landlord, and (e) Tenant shall furnish
upon Landlord's request a complete statement, certified by an independent
certified public accountant, or Tenant's chief financial officer, setting forth
in detail the computation of any Transfer Premium Tenant has derived and shall
derive from such Transfer. Landlord or its authorized representatives shall have
the right at all reasonable times to audit the books, records and papers of
Tenant relating to any Transfer, and shall have the right to make copies
thereof. If the Transfer Premium respecting any Transfer shall be found
understated, Tenant shall within thirty (30) days after demand pay the
deficiency, and if understated by more than 2%, Tenant shall pay Landlord's
costs of such audit. Any sublease hereunder shall be subordinate and subject to
the provisions of this Lease and if this Lease shall be terminated during the
term of any sublease. Landlord shall have the right to: (i) treat such sublease
as cancelled and repossess the Subject Space by any lawful means or (ii) require
that such subtenant attorn to and recognize Landlord as its landlord under any
such sublease. If Tenant shall Default and fail to cure within the time
permitted for cure under Article 23(A), Landlord is hereby irrevocably
authorized, as Tenant's agent and attorney-in-fact, to direct any Transferee to
make all payments under or in connection with the Transfer directly to Landlord
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(which Landlord shall apply towards Tenant's obligations under this Lease) until
such Default is cured.
(F) Certain Transfers. For purposes of this Lease the term "Transfer"
shall also include (a) if Tenant is in partnership, the withdrawal or change,
voluntary, involuntary or by operation of law, of a majority of the partner, or
a transfer of a majority of partnership interests, within a twelve month period,
or the dissolution of the partnership, and (b) if Tenant is a closely hold
corporation (i.e., whose stock is not publicly held and not traded through an
exchange or over the counter), the dissolution, merger, consolidation or other
reorganization of Tenant, or within a twelve month period: (i) the sale or other
transfer of more than an aggregate of 50% of the voting shares of Tenant (other
than to immediate family members by reason of gift or death) or (ii) the sale,
mortgage, hypothecation or pledge of more than an aggregate of 50% of Tenant's
net assets.
ARTICLE 22
RIGHTS RESERVED BY LANDLORD
Except to the extent expressly limited herein, Landlord reserves full rights to
control the Property (which rights may be exercised without subjecting Landlord
to claims for constructive eviction, abatement of Rent, damages or other claims
of any kind), including more particularly, but without limitation, the following
rights:
(A) To change the name or street address of the Property; install and
maintain signs on the exterior and interior of the Property, retain at all
times, and use in appropriate instances, keys to all doors within and into the
Premises; grant to any Person the right to conduct any business or render any
service at the Property, whether or not it is the same or similar to the use
permitted Tenant by this Lease; and have access for Landlord and other tenants
of the Property to any mail chutes located on the Premises according to the
rules of the United States Postal Service, subject to Landlord compliance with
Tenant's reasonable security procedures.
(B) To enter the Premises at reasonable hours for reasonable purposes,
including inspection and supplying cleaning service or other services to be
provided Tenant hereunder, to show the Premises to current and prospective
mortgage lenders, ground lessors, insurers, and prospective purchasers, tenants
and brokers, at reasonable hours, and if Tenant shall abandon the Premises at
any time, or shall vacate the same during the last three (3) months of the Term,
to decorate. remodel, repair, or alter the Premises, subject to Landlord's
compliance with Tenant's reasonable security procedures.
(C) To limit or prevent access to the Property, shut down elevator
service, activate elevator emergency controls, or otherwise take such action or
preventative measures deemed necessary by Landlord for the safety of tenants or
other occupants of the Property or the protection of the Property and other
property located thereon or therein, in case of fire, invasion, insurrection,
riot, civil disorder, public excitement or other dangerous condition, or threat
thereof.
(D) To decorate and to make alterations, additions and improvements,
structural or otherwise, in or to the Property or any part thereof and any
adjacent building, structure, parking facility, land, street or alley (including
without limitation changes and reductions in corridors, lobbies, parking
facilities and other public areas and the installation of kiosks, planters,
sculptures, displays, escalators, mezzanines, and other structures, facilities,
amenities and features therein, and changes for the purpose of connection with
or entrance into or use of the Property in conjunction with any adjoining or
adjacent building or buildings, now existing or hereafter constructed). In
connection with such matters, or with any other repairs, maintenance,
improvements or alterations, in or about the Property, Landlord may erect
scaffolding and other structures reasonably required, and during such operations
may enter upon the Premises and take into and upon or through the Premises, all
materials required to make such repairs, maintenance, alterations or
improvements, and may close public entry ways, other public areas, restrooms,
stairways or corridors.
(E) In connection with entering the Premises to exercise any of the
foregoing rights, Landlord shall: (a) provide reasonable advance written or oral
notice to Tenant's on-site manager
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or other appropriate person (except in emergencies. or for routine cleaning or
other routine matters), and (b) take reasonable steps to minimize any
interference with Tenant's business.
ARTICLE 23
LANDLORD'S REMEDIES
(A) Default. The occurrence of any one or more of the following events
shall constitute a "Default" by Tenant, which if not cured within any applicable
time permitted for cure below, shall give rise to Landlord's remedies set forth
in Paragraph (B), below: (i) failure by Tenant to make when due any payment of
Rent, unless such failure is cured within ten (10) days written notice; (ii)
failure by Tenant to observe or perform any of the terms or conditions of this
Lease to be observed or performed by Tenant other than the payment of Rent, or
as provided below, unless such failure is cured within thirty (30) days after
notice, or such shorter period expressly provided elsewhere in this Lease
(provided, if the nature of Tenant's failure is such that more time is
reasonably required in order to cure, Tenant shall not be in Default if Tenant
commences to cure within such period and thereafter reasonably seeks to cure
such failure to completion); (iii) failure by Tenant to comply with the Rules,
unless such failure is cured within five (5) days attar notice (provided, if the
nature of Tenant's failure is such that more time is reasonably required in
order to cure. Tenant shall not be in Default if Tenant commences to cure within
such period and thereafter reasonably seeks to cure such failure to completion);
(iv) vacation of all or a substantial portion of the Premises for more than
thirty (30) consecutive days, or the failure to take possession of the Premises
within sixty (60) days after the Commencement Date, (v) (a) making by Tenant or
any guarantor of this Lease ("Guarantor") of any general assignment for the
benefit of creditors, (b) filing by or against Tenant or any Guarantor of a
petition to have Tenant or such Guarantor adjudged a bankrupt or a petition for
reorganization or arrangement under any law relating to bankruptcy (unless, in
the case of a petition filed against Tenant or such Guarantor, the same is
dismissed within sixty (60) days), (c) appointment of a trustee or receiver to
take possession of substantially all of Tenant's assets located on the Premises
or of Tenant's interest in this Lease, where possession is not restored to
Tenant within thirty (30) days, (d) attachment, execution or other judicial
seizure of substantially all of Tenant's assets located on the Premises or of
Tenant's interest in this Lease, (e) Tenant's or any Guarantor's convening of a
meeting of its creditors or any class thereof for the purpose of effecting a
moratorium upon or composition of its debts, or (f) Tenant's or any Guarantor's
insolvency or admission of an inability to pay its debts as they mature; (vi)
any material misrepresentation herein, or material misrepresentation or omission
in any financial statements or other materials provided by Tenant or any
Guarantor in connection with negotiating or entering this Lease or in connection
with any Transfer under Article 21, (vii) cancellation of any guaranty of this
Lease by any Guarantor. Failure by Tenant to comply with the same term or
condition of this Lease on three occasions during any twelve (12) month period
shall cause any failure to comply with such term or condition during the
succeeding twelve (12) month period, at Landlord's option, to constitute an
incurable Default. If Landlord has given Tenant notice of each such failure with
ten (10) days after such failure occurs. The notice and cure periods provided
herein are in lieu of, and not in addition to, any notice and cure periods
provided by Law.
(B) Remedies. If a default occurs and is not cured within any
applicable time permitted under paragraph (a), landlord shall have the rights
and remedies hereinafter set forth, which shall be distinct, separate and
cumulative with and In addition to any other right or remedy allowed under any
Law or other provisions of this Lease:
(i) Landlord may terminate this Lease, repossess the Premises
by detainer suit, summary proceedings or other lawful means and recover as
damages a sum of money equal to: (a) any unpaid Rent as of the termination date
including interest at the Default Rate (as defined in Article 25), (b) any
unpaid Rent which would have accrued after the termination date through the time
of award including interest at the Default Rate, less such loss of Rent that
Tenant proves could have been reasonably avoided, (c) any unpaid Rent which
would have accrued after the time of award during the balance of the Term, less
such loss of Rent that Tenant proves could be reasonably avoided, and (d) any
other amounts necessary to compensate Landlord for all damages proximately
caused by Tenant's failure to perform its obligations under this Lease,
including without limitation all Costs of Reletting (as defined in Paragraph F).
For purposes of computing the amount of Rent herein that would have accrued
after the time of award, Tenant's Prorata Share of Taxes and
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Operating Expenses, and CPl Escalation Amounts, shall be projected, based upon
the average rate of increase, if any, in such items from the Commencement Date
through the time of award.
(ii) If applicable law permits, Landlord may terminate
Tenant's right of possession and repossess the Premises by detainer suit,
summary proceedings or other lawful means, without terminating this Lease (and
if such law permits, and Landlord shall not have expressly terminated the Lease
in writing, any termination shall be deemed a termination of Tenant's right of
possession only). In such event, Landlord may recover: (a) any unpaid Rent as of
the date possession is terminated, including interest at the Default Rate, (b)
any unpaid Rent which accrues during the Term from the date possession is
terminated through the time of award (or which may have accrued from the time of
any earlier award obtained by Landlord through the time of award), including
interest at the Default Rate, less any Net Re-Letting Proceeds (as defined in
Paragraph F) received by Landlord during such period, and less such loss of Rent
that Tenant proves could have been reasonably avoided, and (c) any other amounts
necessary to compensate Landlord for all damages proximately caused by Tenant's
failure to perform its obligations under this Lease, including without
limitation, all Costs of Reletting (as defined in Paragraph F). Landlord may
bring suits for such amounts or portions thereof, at any time or times as the
same accrue or after the same have accrued, and no suit or recovery of any
portion due hereunder shall be deemed a waiver of Landlord's right to collect
all amounts to which Landlord is entitled hereunder, nor shall the same serve as
any defense to any subsequent suit brought for any amount not theretofor reduced
to judgment.
(C) Mitigation of Damages. If Landlord terminates this Lease or
Tenant's right to possession, Landlord shall use reasonable efforts to mitigate
Landlord's damages, and Tenant shall be entitled to submit proof of such failure
to mitigate as a defense to Landlord's claims hereunder. If Landlord has not
terminated this Lease or Tenant's right to possession, Landlord shall have no
obligation to mitigate. and may permit the Premises to remain vacant or
abandoned, in such case, Tenant may seek to mitigate damages by attempting to
sublease the Premises or assign this Lease (subject to Article 21).
(D) Specific Performance, Collection of Rent and Acceleration. Landlord
shall at all times have the rights and remedies (which shall be cumulative with
each other and cumulative and in addition to those rights and remedies available
under Paragraph (B), above or any law or other provision of this Lease), without
prior demand or notice except as required by applicable law: (i) to seek any
declaratory, injunctive or other equitable relief, and specifically enforce this
Lease. or restrain or enjoin a violation or breach of any provision hereof, and
(ii) to sue for and collect any unpaid Rent which has accrued.
(E) Late Charges and Interest. Tenant shall pay, as additional Rent, a
service charge of Two Hundred Dollars ($200.00) for bookkeeping and
administrative expenses, if Rent is not received within five (5) business days
after its due date. In addition, any Rent paid more than five (5) days after due
shall accrue interest from the due date at the Default Rate (as defined in
Article 25), until payment is received by Landlord. Such service charge and
interest payments shall not be deemed consent by Landlord to late payments, nor
a waiver of Landlord's right to insist upon timely payments at any time, nor a
waiver of any remedies to which Landlord is entitled as a result of the late
payment of Rent.
(F) Certain Definitions. "Net Re-Letting Proceeds" shall mean the total
amount of rent and other consideration paid by any Replacement Tenants, less all
Costs of Re-Letting, during a given period of time. "Costs of Re-Letting" shall
include without limitation all reasonable costs and expenses incurred by
Landlord for any repairs, maintenance, changes, alterations and improvements to
the Premises, brokerage commissions, advertising costs, attorneys' fees, any
customary free rent periods or credits, tenant improvement allowances, take-over
lease obligations and other customary, necessary or appropriate economic
incentives required to enter leases with Replacement Tenants, and costs of
collecting rent from Replacement Tenants. "Replacement Tenants" shall mean any
Persons (as defined in Article 25) to whom Landlord re-lets the Premises or any
portion thereof pursuant to this Article.
(G) Other Matters. No re-entry or repossession, repairs, changes,
alterations and additions, reletting, acceptance of keys from Tenant, or any
other action or omission by Landlord
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shall be construed as an election by Landlord to terminate this Lease or
Tenant's right to possession, or accept a surrender of the Premises, nor shall
the same operate to release the Tenant in whole or in part from any of Tenant's
obligations hereunder, unless express written notice of such intention is sent
by Landlord or its agent to Tenant. To the fullest extent permitted by law, all
rent and other consideration paid by any Replacement Tenants shall be applied:
first, to the Costs of Re-Letting, second, to the payment of any Rent
theretofore accrued, and the residue, if any, shall be held by Landlord and
applied to the payment of other obligations of Tenant to Landlord as the same
become due (with any remaining residue to be retained by Landlord). Rent shall
be paid without any prior demand or notice therefor (except as expressly
provided herein) and without any deduction, and without any deduction, set-off
or counterclaim, or relief from any valuation or appraisement laws. Landlord may
apply payments received from Tenant to any obligations of Tenant then accrued,
without regard to such obligations as may be designated by Tenant. Landlord
shall be under no obligation to observe or perform any provision of this Lease
on its part to be observed or performed which accrues after the date of any
Default by Tenant hereunder not cured within the times permitted hereunder. The
times set forth herein for the curing of Defaults by Tenant are of the essence
of this Lease. Tenant hereby irrevocably waives any right otherwise available
under any Law to redeem or reinstate this Lease.
ARTICLE 24
LANDLORD'S RIGHT TO CURE
If Landlord shall fail to perform any term or provision under this
Lease required to be performed by Landlord, Landlord shall not be deemed to be
in default hereunder nor subject to any claims for damages of any kind, unless
such failure shall have continued for a period of thirty (30) days after written
notice thereof by Tenant; provided, if the nature of Landlord's failure is such
that more than thirty (30) days are reasonably required in order to cure,
Landlord shall not be in default if Landlord commences to cure such failure
within such thirty (30) day period, and thereafter reasonably seeks to cure such
failure to completion. The aforementioned periods of time permitted for Landlord
to cure shall be extended for any period of time during which Landlord is
delayed in, or prevented from, curing due to fire or other casualty, strikes,
lock-outs or other labor troubles, shortages of equipment or materials,
governmental requirements, power shortages or outages, acts or omissions by
Tenant or other Persons and other causes beyond Landlord's reasonable control.
If Landlord shall fail to cure within the times permitted for cure herein,
Landlord shall be subject to such remedies as may be available to Tenant
(subject to the other provisions of this Lease); provided, in recognition that
Landlord must receive timely payments of Rent and operate the Property, Tenant
shall have no right of self-help to perform repairs or any other obligation of
Landlord, and shall have no right to withhold, set-off, or abate Rent.
ARTICLE 25
CAPTIONS, DEFINITIONS AND SEVERABILITY
The captions of the Articles and Paragraphs of this Lease are for
convenience of reference only and shall not be considered or referred to in
resolving questions of interpretation. If any term or provision of this Lease
shall be found invalid, void, illegal, or unenforceable with respect to any
particular person by a court of competent jurisdiction, it shall not affect,
impair or invalidate any other terms or provisions hereof, or its enforceability
with respect to any other person, the parties hereto agreeing that they would
have entered into the remaining portion of this Lease notwithstanding the
omission of the portion or portions adjudged invalid, void, illegal, or
unenforceable with respect to such Person.
(A) "Building" shall mean the structure identified in Article 1 of this
Lease.
(B) "CPI" shall mean the Consumer Price Index for All Urban Consumers,
All Items (Base year 1982-1984 = 100) published by the United States Department
of Labor, Bureau of Labor Statistics (or if a separate index is published by the
Bureau of Labor Statistics for a metropolitan area within 100 miles of the
Property, then such metropolitan index). If the Bureau of Labor Statistics
substantially revises the manner in which the CPI is determined, an adjustment
shall be made in the revised Index which would produce results equivalent as
nearly as possible to those which would
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be obtained hereunder if the CPI were not so revised. If the 1982-1984 average
shall no longer be used as an index of 100, such change shall constitute a
substantial revision. If the CPI becomes unavailable to the public because
publication is discontinued, or otherwise, Landlord shall substitute therefor a
comparable Index based upon changes in the cost of living or purchasing power of
the consumer dollar published by a governmental agency, major bank, other
financial institution, university or recognized financial publisher. If the CPI
is available on a monthly (or alternating monthly) basis, the CPI for the months
in which (or immediately preceding, as the case may be) the Commencement Date
and Adjustment Date respectively occur shall be used.
(C) "Default Rate" shall mean eighteen percent (18%) per annum, or the
highest rate permitted by applicable Law, whichever shall be less.
(D) "Holder" shall mean the holder of any Mortgage at the time in
question, and where such Mortgage is a ground lease, such term shall refer to
the ground lessor.
(E) "Holidays" shall mean all federally observed holidays, including
New Year's Day, President's Day, Memorial Day, Independence Day, Labor Day,
Veterans' Day, Thanksgiving Day, Christmas Day, and to the extent of utilities
or services provided by union members engaged at the Property, such other
holidays observed by such unions.
(F) "Landlord" and "Tenant" shall be applicable to one or more persons
as the case may be, and the singular shall include the plural, and the neuter
shall include the masculine and feminine, and if there be more than one, the
obligations thereof shall be joint and several. For purposes of any provisions
indemnifying or limiting the liability of Landlord, the term "Landlord" shall
include Landlord's present and future partners, beneficiaries, trustees,
officers, directors, employees, shareholders, principals, agents, affiliates,
successors and assigns.
(G) "Law" shall mean all federal, state, county and local governmental
and municipal laws, statutes, ordinances, rules, regulations, codes, decrees,
orders and other such requirements, applicable equitable remedies and decisions
by courts in cases where such decisions are considered binding precedents in the
state in which the Property is located, and decisions of federal courts applying
the Laws of such State.
(H) "Mortgage" shall mean all mortgages, deeds of trust, ground leases
and other such encumbrances now or hereafter placed upon the Property or
Building, or any part thereof, and all renewals, modifications, consolidations,
replacements or extensions thereof, and all indebtedness now or hereafter
secured thereby and all interest thereon.
(I) "Operating Expenses" shall mean all expenses, costs and amounts
(other than Taxes) of every kind and nature which Landlord shall pay during any
calendar year any portion of which occurs during the Term, because of or in
connection with the ownership, management, repair, maintenance, restoration and
operation of the Property, including without limitation, any amounts paid for:
(a) utilities for the Property, including but not limited to electricity, power,
gas, steam, oil or other fuel, water, sewer, lighting, heating, air conditioning
and ventilating, (b) permits, licenses and certificates necessary to operate,
manage and lease the Property, (c) insurance applicable to the Property, not
limited to the amount of coverage Landlord is required to provide under this
Lease, (d) supplies, tools, equipment and materials used in the operation,
repair and maintenance of the Property, (e) accounting, legal, inspection,
consulting, concierge and other services, (f) any equipment rental (or
installment equipment purchase or equipment financing agreements), or management
agreements (including the cost of any management fee actually paid thereunder
and the fair rental value of any office space provided thereunder, up to
customary and reasonable amounts), (g) wages, salaries and.other compensation
and benefits (including the fair value of any parking privileges provided) for
all persons engaged in the operation, maintenance or security of the Property,
and employer's Social Security taxes, unemployment taxes or insurance, and any
other taxes which may be levied on such wages, salaries, compensation and
benefits, (h) payments under any easement, operating agreement, declaration,
restrictive covenant, or instrument pertaining to the sharing of costs in any
planned development, and (i) operation, repair, and maintenance of all systems
and equipment and components thereof (including replacement of components),
janitorial service, alarm and security service, window cleaning, trash removal,
elevator maintenance, cleaning of walks, parking facilities. and building walls,
removal of ice and snow, replacement of wall and
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floor coverings, ceiling tiles and fixtures in lobbies, corridors, restrooms and
other common or public areas or facilities, maintenance and replacement of
shrubs, trees, grass, sod and other landscaped items, irrigation systems,
drainage facilities, fences, curbs, and walkways, re-paving and re-striping
parking facilities, and roof repair. If the Property is not fully occupied
during all or a portion of any calendar year, Landlord may, in accordance with
sound accounting and management practices, determine the amount of variable
Operating Expenses (i.e. those items which vary according to occupancy levels)
that would have been paid had the Property been fully occupied, and the amount
so determined shall be deemed to have been the amount of variable Operating
Expenses for such year. Notwithstanding the foregoing, Operating Expenses shall
not, however, include:
(i) depreciation, interest and amortization on Mortgages, and
other debt costs or ground lease payments, if any; legal fees in connection with
leasing, tenant disputes or enforcement of leases; real estate brokers' leasing
commissions improvements or alterations to tenant spaces; the cost of providing
any service directly to and paid directly by, any tenant, any costs expressly
excluded from Operating Expenses elsewhere in this Lease; costs of any items to
the extent Landlord receives reimbursement from insurance proceeds or from a
third party (such proceeds to be deducted from Operating Expenses in the year in
which received); and
(ii) capital expenditures, except those: (a) made primarily to
reduce Operating Expenses, or to comply with any laws or other governmental
requirements, or (b) for replacements (as opposed to additions or new
Improvements) of non-structural items located in the common areas of the
Property required to keep such areas in good condition, provided, all such
permitted capital expenditures (together with reasonable financing charges)
shall be amortized for purposes of this Lease over the shorter of: (i) their
useful lives, (ii) the period during which the reasonably estimated savings in
Operating Expenses equals the expenditures, or (iii) three (3) years.
(J) "Person" shall mean an individual, trust, partnership, joint
venture, association, corporation, and any other entity.
(K) "Property" shall mean the Building, and any common or public areas
or facilities, easements, corridors, lobbies. sidewalks, loading areas,
driveways, landscaped areas, skywalks, parking garages and lots, and any and all
other structures or facilities operated or maintained in connection with or for
the benefit of the Building, and all parcels or tracts of land on which all or
any portion of the Building or any of the other foregoing items are located. and
any fixtures, machinery, equipment, apparatus, systems and equipment, furniture
and other personal property located thereon or therein and used in connection
therewith, whether title is held by Landlord or its affiliates. Possession of
areas necessary for utilities, services, safety and operation of the Property,
including the Systems and Equipment (as defined in Article 25), fire stairways,
perimeter walls, space between the finished ceiling of the Premises and the slab
of the floor or roof of the Property thereabove, and the use thereof together
with the right to install, maintain, operate, repair and replace the Systems and
Equipment, including any of the same in, through, under or above the Premises in
locations that will not materially interfere with Tenant's use of the Premises,
are hereby excepted and reserved by Landlord, and not demised to Tenant. If the
Building shall be part of a complex, development or group of buildings or
structures collectively owned or managed by Landlord or its affiliates or
collectively managed by Landlord's managing agent, the Property shall, at
Landlord's option also be deemed to include such other of those buildings or
structures as Landlord shall from time to time designate, and shall initially
include such buildings and structures (and related facilities and parcels on
which the same are located) as Landlord shall have incorporated by reference to
the total square footage of the Property in Article 1.
(L) "Rent" shall have the meaning specified therefor in Article 3(G).
(M) "Systems and Equipment" shall mean any plant, machinery,
transformers, duct work, cable, wires, and other equipment, facilities, and
systems designed to supply heat, ventilation, air conditioning and humidity or
any other services or utilities, or comprising or serving as any component or
portion of the electrical, gas, steam, plumbing, sprinkler. communications,
alarm, security, or fire/life/safety systems or equipment, or any other
mechanical, electrical, electronic, computer or other systems or equipment for
the Property.
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(N) "Taxes" shall mean all federal, state, county, or local
governmental or municipal taxes, fees, charges or other impositions of every
kind and nature, whether general, special, ordinary or extraordinary (including
without limitation, real estate taxes, general and special assessments, transit
taxes, water and sewer rents, taxes based upon the receipt of rent including
gross receipts or sales taxes applicable to the receipt of rent or service or
value added taxes (unless required to be paid by Tenant under Article 17),
personal property taxes imposed upon the fixtures, machinery, equipment,
apparatus, Systems and Equipment, appurtenances, furniture and other personal
property used in connection with the Property which Landlord shall pay during
any calendar year, any portion of which occurs during the Term (without regard
to any different fiscal year used by such government or municipal authority)
because of or in connection with the ownership, leasing and operation of the
Property. Notwithstanding the foregoing, there shall be excluded from Taxes all
excess profits taxes, franchise taxes, gift taxes, capital stock taxes,
inheritance and succession taxes, estate taxes, federal and state income taxes,
and other taxes to the extent applicable to Landlord's general or net income (as
opposed to rents, receipts or income attributable to operations at the
Property). If the method of taxation of real estate prevailing at the time of
execution hereof shall be, or has been altered, so as to cause the whole or any
part of the taxes now, hereafter or heretofor levied, assessed or imposed on
real estate to be levied, assessed or imposed on Landlord, wholly or partially,
as a capital levy or otherwise, or on or measured by the rents received
therefrom, then such new or altered taxes attributable to the Property shall be
included within the term "Taxes," except that the same shall not include any
enhancement of said tax attributable to other income of Landlord. Any expenses
incurred by Landlord in attempting to protest, reduce or minimize Taxes shall be
included in Taxes in the calendar year such expenses are paid. Tax refunds shall
be deducted from Taxes in the year they are received by Landlord, but if such
refund shall relate to taxes paid in a prior year of the Term, and the Lease
shall have expired, Landlord shall mail Tenant's Prorata Share of such net
refund (after deducting expenses and attorneys' fees), up to the amount Tenant
paid towards Taxes during such year, to Tenant's last known address. If Taxes
for any period during the Term or any extension thereof, shall be increased
after payment thereof by Landlord, for any reason including without limitation
error or reassessment by applicable governmental or municipal authorities,
Tenant shall pay Landlord upon demand Tenant's Prorata Share of such increased
Taxes. Tenant shall pay increased Taxes whether Taxes are increased as a result
of increases in the assessment or valuation of the Property (whether based on a
sale, change in ownership or refinancing of the Property or otherwise),
increases in the tax rates, reduction or elimination of any rollbacks or other
deductions available under current law, scheduled reductions of any tax
abatement, as a result of the elimination, invalidity or withdrawal of any tax
abatement or for any other cause whatsoever. Notwithstanding the foregoing, if
any Taxes shall be paid based on assessments or bills by a governmental or
Municipal authority using a fiscal year other than a calendar year, Landlord may
elect to average the assessments or bills for the subject calendar year, based
on the number of months of such calendar year included in each such assessment
or bill.
(O) "Tenant's Prorata Share" of Taxes and Operating Expenses shall be
the rentable area of the Premises divided by the rentable area of the Property
on the last day of the calendar year for which Taxes or Operating Expenses are
being determined, excluding any parking facilities. Tenant acknowledges that the
"rentable area of the Premises" under this Lease includes the usable area,
without deduction for columns or projections, multiplied by a load or conversion
factor to reflect a share of certain areas which may include lobbies, corridors,
mechanical, utility, janitorial, boiler and service rooms and closets,
restrooms, and other public, common and service areas. Except as provided
expressly to the contrary herein, the "rentable area of the Property" shall
include all rentable area of all space leased or available for lease at the
Property, which Landlord may reasonably re-determine from time to time, to
reflect re-configurations, additions or modifications to the Property. If the
Property or any development of which it is a part shall contain non-office uses.
Landlord shall have the right to determine in accordance with sound accounting
and management principles, Tenant's Prorata Share of Taxes and Operating
Expenses for only the office portion of the Property or of such development, in
which event Tenant's Prorata Share shall be based on the ratio of the rentable
area of the Premises to the rentable area of such office portion. Similarly, if
the Property shall contain tenants who do not participate in all or certain
categories of Taxes or Operating Expenses on a prorata basis, Landlord may
exclude the amount of Taxes or Operating Expenses, or such categories of the
same, as the case may be, attributable to such tenants, and exclude the rentable
area of their premises, in computing Tenant's Prorata Share. If the Property
shall be part of or shall include a complex, development or group of buildings
or structures collectively owned or managed by Landlord or its affiliates or
collectively managed by Landlord's
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managing agent, Landlord may allocate Taxes and Operating Expenses within such
complex, development or group, and between such buildings and structures and the
parcels on which they are located, in accordance with sound accounting and
management principles. In the alternative, Landlord shall have the right to
determine, in accordance with sound accounting and management principles,
Tenant's Prorata Share of Taxes and Operating Expenses based upon the totals of
each of the same for all such buildings and structures, the land constituting
parcels on which the same are located, and all related facilities, including
common areas and easements, corridors, lobbies, sidewalks, elevators, loading
areas, parking facilities and driveways and other appurtenances and public
areas, in which event Tenant's Prorata Share shall be based on the ratio of the
rentable area of the Premises to the rentable area of all such buildings.
ARTICLE 26
CONVEYANCE BY LANDLORD AND LIABILITY
In case Landlord or any successor owner of the Property or the Building
shall convey or otherwise dispose of any portion thereof in which the Premises
are located, to another Person (and nothing herein shall be construed to
restrict or prevent such conveyance or disposition), such other person shall
thereupon be and become landlord hereunder and shall be deemed to have fully
assumed and be liable for all obligations of this Lease to be performed by
Landlord which first arise after the date of conveyance, including the return of
any Security Deposit, and Tenant shall attorn to such other Person, and Landlord
or such successor owner shall, from and after the date of conveyance, be free of
all liabilities and obligations hereunder not then incurred. The liability of
Landlord to Tenant for any default by Landlord under this Lease or arising in
connection herewith or with Landlord's operation, management, leasing, repair,
renovation, alteration, or any other matter relating to the Property or the
Premises, shall be limited to the interest of Landlord in the Property (and the
rental proceeds thereof). Tenant agrees to look solely to Landlord's interest in
the Property (and the rental proceeds thereof) for the recovery of any judgment
against Landlord, and Landlord shall not be personally liable for any such
judgment or deficiency after execution thereon. The limitations of liability
contained in this Article shall apply equally and inure to the benefit of
Landlord's present and future partners, beneficiaries, officers, directors,
trustees, shareholders. agents and employees, and their respective partners,
heirs, successors and assigns. Under no circumstances shall any present or
future general or limited partner of Landlord (if Landlord is a partnership), or
trustee or beneficiary (if Landlord or any partner of Landlord is a trust) have
any liability for the performance of Landlord's obligations under this Lease.
Notwithstanding the foregoing to the contrary, Landlord shall have personal
liability for insured claims, beyond Landlord's interest in the Property (and
rental proceeds thereof), to the extent of Landlord's liability insurance
coverage available for such claims.
ARTICLE 27
INDEMNIFICATION
Except to the extent arising from the intentional or negligent acts of
Landlord or Landlord's agents or employees, Tenant shall defend, indemnify and
hold harmless Landlord from and against any and all claims, demands,
liabilities, damages, judgments, orders, decrees, actions, proceedings, fines,
penalties, costs and expenses, including without limitation, court costs and
attorneys' fees arising from or relating to any loss of life, damage or injury
to person, property or business occurring in or from the Premises, or caused by
or in connection with any violation of this Lease or use of the Premises or
Property by, or any other act or omission of Tenant, any other occupant of the
Premises, or any of their respective agents, employees, contractors or guests.
Without limiting the generality of the foregoing, Tenant specifically
acknowledges that the indemnity undertaking herein shall apply to claims in
connection with or arising out of any "Work" as described in Article 8, the
installation, maintenance, use or removal of any "Lines" located in or serving
the Premises as described in Article 29, and the transportation, use, storage,
maintenance, generation, manufacturing, handling, disposal, release or discharge
of any "Hazardous Material" as described in Article 30 (whether or not any of
such matters shall have been theretofor approved by Landlord), except to the
extent that any of the same arises from the intentional or expressly negligent
acts of Landlord or Landlord's agents or employees.
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ARTICLE 27A:
Except to the extent arising from the intentional or negligent acts or
Tenant, or Tenant's agents or employees, Landlord shall defend,
indemnify and hold harmless Tenant from and against any and all claims,
demands, liabilities, damages, judgments, orders, decrees, actions,
proceedings, fines, penalties, costs and expenses, including without
limitation, court costs and attorneys' fees arising from or relating to
any loss of life, damage or injury to person, property or business to
the extent caused by or in connection with any violation or this Lease
or use of the Premises or Property by, or any intentional or negligent
acts or, Landlord or Landlord's agents or employees.
ARTICLE 28
SAFETY AND SECURITY DEVICES, SERVICES AND PROGRAMS
The parties acknowledge that safety and security devices, services and
programs provided by Landlord, if any, while intended to determine and ensure
safety, may not in given instances prevent theft or other criminal acts, or
ensure safety of persons or property. The risk that any safety. or security
device, service or program may not be effective, or may malfunction, or be
circumvented by a criminal, is assumed by Tenant with respect to Tenant's
property and interests, and Tenant shall obtain insurance coverage to the extent
Tenant desires protection against such criminal acts and other losses, as
further described in Article 11. Tenant agrees to cooperate in any reasonable
safety or security program developed by Landlord or required by Law.
ARTICLE 29
COMMUNICATIONS AND COMPUTER LINES
Tenant may install, maintain, replace, remove or use any communications
or computer wires, cables and related devices (collectively the "Lines") at the
Property in or serving the Premises, provided: (a) Tenant shall obtain
Landlord's prior written consent, use an experienced and qualified contractor
approved in writing by Landlord, and comply with all of the other provisions of
Article 8, (b) any such installation, maintenance, replacement, removal or use
shall comply with all Laws applicable thereto and good work practices, and shall
not interfere with the use of any then existing Lines at the Property, (c) an
acceptable number of spare Lines and space for additional Lines shall be
maintained for existing and future occupants of the Property, as determined in
Landlord's reasonable opinion, (d) if Tenant at any time uses any equipment that
may create an electromagnetic field exceeding the normal insulation ratings of
ordinary twisted pair riser cable or cause radiation higher than normal
background radiation, the Lines therefor (including riser cables) shall be
appropriately insulated to prevent such excessive electromagnetic fields or
radiation, (e) as a condition to permitting the installation of new Lines,
Landlord may require that Tenant remove existing Lines located in or serving the
Premises, (f) Tenant's rights shall be subject to the rights of any regulated
telephone company, and (g) Tenant shall pay all costs in connection therewith.
Landlord reserves the right to require that Tenant remove any Lines located in
or serving the Premises which are installed in violation of these provisions, or
which are at any time in violation of any laws or represent a dangerous or
potentially dangerous condition (whether such Lines were installed by Tenant or
any other party), within three (3) days after written notice.
Landlord may (but shall not have the obligation to): (i) install new
Lines at the Property, (ii) create additional space for Lines at the Property,
and (iii) reasonably direct, monitor and/or supervise the installation,
maintenance, replacement and removal of, the allocation and periodic
reallocation of available space (if any) for, and the allocation of excess
capacity (if any) on, any Lines now or hereafter installed at the Property by
Landlord, Tenant or any other party (but Landlord shall have no right to monitor
or control the information transmitted through such Lines). Such rights shall
not be in limitation of other rights that may be available to Landlord by law or
otherwise. If Landlord exercises any such rights, Landlord may charge Tenant for
the costs attributable to Tenant, or may include those costs and all other costs
in Operating Expenses under Article 25 (including without limitation, costs for
acquiring and installing Lines and risers to accommodate new Lines and spare
Lines, any associated computerized system and software for maintaining records
of Line connections, and the fees of any consulting engineers and other
experts); provided, any capital
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expenditures included in Operating Expenses hereunder shall be amortized
(together with reasonable finance charges) over the period of time prescribed by
Article 25.
Notwithstanding anything to the contrary contained in Article 13,
Landlord reserves the right to require that Tenant remove any or all Lines
installed by or for Tenant within or serving the Premises upon termination of
this Lease, provided Landlord notifies Tenant prior to or within thirty (30)
days following such termination. Any Lines not required to be removed pursuant
to this Article shall, at Landlord's option, become the property of Landlord
(without payment by Landlord). If Tenant fails to remove such Lines as required
by Landlord, or violates any other provision of this Article, Landlord may,
after twenty (20) days written notice to Tenant, remove such Lines or remedy
such other violation at Tenant's expense (without limiting Landlord's other
remedies available under this Lease or applicable Law). Tenant shall not,
without the prior written consent of Landlord in each instance, grant to any
third party a security interest or lien in or on the Lines, and any such
security interest or lien granted without Landlord's written consent shall be
null and void. Except to the extent arising from the intentional or negligent
acts of Landlord or Landlord's agents or employees, Landlord shall have no
liability for damages arising from, and Landlord does not warrant that the
Tenant's use of any Lines will be free from the following (collectively called
"Line Problems"): (x) any eavesdropping or wire-tapping by unauthorized parties,
(y) any failure of any Lines to satisfy Tenant's requirements, or (z) any
shortages, failures, variations, interruptions, disconnections, loss or damage
caused by the installation, maintenance, replacement, use or removal of Lines by
or for other tenants or occupants at the Property, by any failure of the
environmental conditions or the power supply for the Property to conform to any
requirements for the Lines or any associated equipment, or any other problems
associated with any Lines by any other cause. Under no circumstances shall any
Line Problems be deemed an actual or constructive eviction of Tenant, render
Landlord liable to Tenant for abatement of Rent, or relieve Tenant from
performance of Tenant's obligations under this Lease. Landlord in no event shall
be liable for damages by reason of loss of profits, business interruption or
other consequential damage arising from any Line Problems.
ARTICLE 30
HAZARDOUS MATERIALS
Tenant shall not transport, use, store, maintain, generate,
manufacture, handle, dispose, release of discharge any "Hazardous Material" (as
defined below) upon or about the Property, nor permit Tenant's employees,
agents, contractors and other occupants of the Premises to engage in such
activities upon or about the Property. However, the foregoing provisions shall
not prohibit the transportation to and from, and use, storage, maintenance and
handling within, the Premises of substances customarily used in offices (or such
other business or activity expressly permitted to be undertaken in the Premises
under Article 6), provided: (a) such substances shall be used and maintained
only in such quantities as are reasonably necessary for such permitted use of
the Premises, strictly in accordance with applicable Law and the manufacturers'
instructions therefor, (b) such substances shall not be disposed of, released or
discharged on the Property. and shall be transported to and from the Premises in
compliance with all applicable Laws, and as Landlord shall reasonably require,
(c) if any applicable law or Landlord's trash removal contractor requires that
any such substances be disposed of separately from ordinary trash, Tenant shall
make arrangements at Tenant's expense for such disposal directly with a
qualified and licensed disposal company at a lawful disposal site (subject to
scheduling and approval by Landlord), and shall ensure that disposal occurs
frequently enough to prevent unnecessary storage of such substances in the
Premises, and (d) any remaining such substances shall be completely, properly
and lawfully removed from the Property upon expiration or earlier termination of
this Lease.
Tenant shall promptly notify Landlord of: (i) any enforcement, cleanup
or other regulatory action taken or threatened by any governmental or regulatory
authority with respect to the presence of any Hazardous Material on the Premises
or the migration thereof from or to other property, (ii) any demands or claims
made or threatened by any party against Tenant or the Premises relating to any
loss or injury resulting from any Hazardous Material, (iii) any release,
discharge of nonroutine, improper or unlawful disposal or transportation of any
Hazardous Material on or from the premises, and (iv) any matters where Tenant is
required by Law to give a notice to any governmental or regulatory authority
respecting any Hazardous Material on the Premises. Landlord shall have the
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right (but not the obligation) to join and participate, as a party, in any legal
proceedings of actions affecting the Premises initiated in connection with any
environmental, health or safety law. At such times as Landlord may reasonably
request, Tenant shall provide Landlord with a written list identifying any
Hazardous Material then used, stored, or maintained upon the Premises, the use
and approximate quantity of each such material, a copy of any material safety
data sheet ("MSDS") issued by the manufacturer therefor, written information
concerning the removal, transportation and disposal of the same, and such other
information as Landlord may reasonably require or as may be required by law. The
term "Hazardous Material" for purposes hereof shall mean any chemical,
substance, material or waste or component thereof which is now or hereafter
listed, defined or regulated as a hazardous or toxic chemical, substance,
material or waste or component thereof by any federal, state or local governing
or regulatory body having jurisdiction. or which would trigger any employee or
community "right-to-know" requirements adopted by any such body, or for which
any such body has adopted any requirements for the preparation or distribution
of an MSDS.
If any Hazardous Material is released, discharged or disposed of by
Tenant or any other occupant of the Premises, or their employees, agents or
contractors, on or about the Property in violation of the foregoing provisions,
Tenant shall immediately, properly, and in compliance with applicable laws clean
up and remove the Hazardous Material from the Property and any other affected
property and clean, or replace any affected personal property (whether or not
owned by Landlord), at Tenant's expense. Such clean up and removal work shall be
subject to Landlord's prior written approval (except in emergencies), and shall
include, without limitation, any testing, investigation, and the preparation and
implementation of any remedial action plan required by any governmental body
having jurisdiction or reasonably required by Landlord. If Tenant shall fail to
comply with the provisions of this Article within five (5) days after written
notice by Landlord, or such shorter time as may be required by law or in order
to minimize any hazard to persons or properly, Landlord may (but shall not be
obligated to) arrange for such compliance directly or as Tenant's agent through
contractors or other parties selected by Landlord, at Tenant's expense (without
limiting Landlord's other remedies under this Lease or applicable Law). If any
Hazardous Material is released, discharged or disposed of on or about the
Property and such release, discharge or disposal is not caused by Tenant or
other occupants of the Premises, or their employees, agents or contractors, such
release, discharge or disposal shall be deemed casualty damage under Article 10
to the extent that the Premises or common areas serving the Premises are
affected thereby; in such case, Landlord and Tenant shall have the obligations
and rights respecting such casualty damage provided under Article 10.
See Article 30A
Article 30A:
To Landlord's actual knowledge, Landlord has received no notices of
violations of environmental laws from governmental authorities
affecting the Premises that are currently uncured.
Landlord shall promptly notify Tenant after Landlord has received
notice of: (i) any enforcement, cleanup or other regulatory action
taken or threatened by any governmental or regulatory authority with
respect to the presence of any Hazardous Material on or affecting the
Premises or common areas of the Property serving the Premises involving
a material health risk for occupants of the Premises, (ii) any
discharge or non-routine, improper or unlawful disposal or
transportation of any Hazardous Material affecting the Premises or
common areas of the Property serving the Premises involving a material
health risk for occupants of the Premises, and (iii) any matters where
Landlord is required by law or by a governmental or regulatory agency
to give a notice to Tenant respecting Hazardous Materials at the
Property or which involve a material health risk for occupants of the
Premises.
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ARTICLE 31
MISCELLANEOUS
(A) Each of the terms and provisions of this Lease shall be binding
upon and inure to the benefit of the parties hereto, their respective heirs,
executors, administrators, guardians, custodians, successors and assigns,
subject to the provisions of Article 21 respecting Transfers.
(B) Neither this Lease nor any memorandum of lease or short form lease
shall be recorded by Tenant.
(C) This Lease shall be construed in accordance with the laws of the
state in which the Property is located.
(D) All obligations or rights of either party arising during or
attributable to the period ending upon expiration or earlier termination of this
Lease shall survive such expiration or earlier termination.
(E) Landlord agrees that, if Tenant timely pays the Rent and performs
the terms and provisions hereunder, and subject to all other terms and
provisions of this Lease, Tenant shall hold and enjoy the Premises during the
Term, free of lawful claims by any person acting by or through Landlord.
(F) This Lease does not grant any legal rights to "light and air"
outside the Premises not any particular view of city scape visible from the
Premises.
(G) If the Commencement Date is delayed in accordance with Article 4
for more than one year, Landlord may declare this Lease null and void, and if
the Commencement Date is so delayed for more than seven years, this Lease shall
thereupon become null and void without further action by either party.
ARTICLE 32
OFFER
The submission and negotiation of this Lease shall not be deemed an
offer to enter the same by Landlord, but the solicitation of such an offer by
Tenant. Tenant agrees that its execution of this Lease constitutes a firm offer
to enter the same which may not be withdrawn for a period of thirty (30) days
atler delivery to Landlord (or such other period as may be expressly provided in
any other agreement signed by the parties). During such period and in reliance
on the foregoing Landlord may, at Landlord's option (and shall if required by
applicable Law), deposit any security deposit and Rent, and proceed with any
plans, specifications, alterations or improvements, and permit Tenant to enter
the Premises, but such acts shall not be deemed an acceptance of Tenant's offer
to enter this Lease, and such acceptance shall be evidenced only by Landlord
signing and delivering this Lease to Tenant.
ARTICLE 33
NOTICES
Except as expressly provided to the contrary in this Lease, every
notice or other communication to be given by either party to the other with
respect hereto or to the Premises or Property, shall be in writing and shall not
be effective for any purpose unless the same shall be served personally or by
national air courier service, or United States certified mail, return receipt
requested, postage prepaid, addressed, if to Tenant, at the address first set
forth in the Lease until the Commencement Date, and thereafter to the Tenant at
the Premises, and if to Landlord, at the address at which the last payment of
Rent was required to be made and to or such other address or addresses as Tenant
or Landlord may from time to time designate by notice given as above provided.
Every notice or other communication hereunder shall be deemed to have been given
as of the third business day following the date of such mailing (or as of any
earlier date evidenced by a receipt from such
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national air courier service or the United States Postal Service) or imnediately
if personally delivered. Notices not sent in accordance with the foregoing shall
be of no force or effect until received by the foregoing parties at such
addresses required herein.
ARTICLE 34
REAL ESTATE BROKERS
Tenant represents that Tenant has dealt only with CB Commercial &
Duncan Realty (whose commission, if any, shall be paid by Landlord pursuant to
separate agreement) as broker, agent or finder in connection with this Lease and
agrees to indemnity and hold Landlord harmless from all damages, judgments,
liabilities and expenses (including reasonable attorneys' fees) arising from any
claims or demands of any other broker, agent or finder with whom Tenant has
dealt for any commission or fee alleged to be due in connection with its
participation in the procurement of Tenant or the negotiation with Tenant of
this Lease.
ARTICLE 35
SECURITY DEPOSIT
Upon execution of this Lease by Landlord and Tenant, Tenant shall
transfer to Landlord the sun of One Hundred Thousand Dollars ($100,000.00) as a
security deposit pending regulatory approval and granting of a Bank Charter by
the Florida Department of Banking and the Certificate of Insurance from the
Federal Deposit Insurance Corporation. If said approval is not obtained by
Tenant prior to the last day of September year 1998, such deposit shall be
non-refundable and shall be forfeited to Landlord. If regulatory approval is
obtained by Tenant, Landlord shall, within ten (10) days after return said
deposit, in full, to Tenant upon completion and evidence of payment for Tenant's
improvements and evidence that Tenant has $10,000,000 paid in capital.
ARTICLE 36
ENTIRE AGREEMENT
This Lease, together with Riders One through Seven, and Schedule A and
the documents captioned Parking Agreement and Drive-Through Facility Rider
(WHICH COLLECTIVELY ARE HEREBY INCORPORATED WHERE REFERRED TO HEREIN AND MADE A
PART HEREOF AS THOUGH FULLY SET FORTH), contains all the terms and provisions
between Landlord and Tenant relating to the matters set forth herein and no
prior or contemporaneous agreement or under standing pertaining to the same
shall be of any force or effect, except any such contemporaneous agreement
specifically referring to and modifying this Lease, signed by both parties.
Without limitation as to the generality of the foregoing, Tenant hereby
acknowledges and agrees that Landlord's leasing agents and field personnel are
only authorized to show the Premises and negotiate terms and conditions for
leases subject to Landlord's final approval, and are not authorized to make any
agreements, representations, understanding or obligations, binding upon
Landlord, respecting the condition of the Premises or Property, suitability of
the same for Tenant's business, or any other matter, and no such agreements,
representations, understandings or obligations not expressly contained herein or
in such contemporaneous agreement shall be of any force or effect. Neither this
Lease, nor any Riders or Exhibits referred to above may be modified, except in
writing signed by both parties.
WITNESSES: ATTESTATION
(Two for each signatory required
if Property is in Florida)
/s/ John G. Squires LANDLORD /s/ Marx Realty & Improvement, Agent
- ----------------------------- ------------------------------------
JOHN G. SQUIRES
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<PAGE> 26
TENANT Southern Community Bancorp
------------------------------------
By: /s/ John G. Squires
------------------------------------
Name Typed: John G. Squires
----------------------------------
Title: President
--------------------------------------
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RIDER ONE
RULES
1. On Saturdays, Sundays and Holidays, and on other days between the
hours of 6:00 P.M. and 8:00 A.M. the following day, or such other hours as
Landlord shall determine from time to time, access to the Property and/or to the
passageways, entrances, exits, shipping areas, halls, corridors, elevators or
stairways and other areas in the Property may be restricted and access gained by
use of a key to the outside doors of the Property, or pursuant to such security
procedures Landlord may from time to time impose. All such areas, and all roofs,
are not for use of the general public and Landlord shall in all cases retain the
right to control and prevent access thereto by all persons whose presence in the
judgment of Landlord shall be prejudicial to the safety, character, reputation
and interests of the Property and its tenants provided, however, that nothing
herein contained shall be construed to prevent such access to persons with whom
Tenant deals in the normal course of Tenant's business unless such persons are
engaged in activities which are illegal or violate these Rules. No Tenant and no
employee or invitees of Tenant shall enter into areas reserved for the exclusive
use of Landlord, its employees or invitees. Tenant shall keep doors to corridors
and lobbies closed except when persons are entering or leaving.
2. Tenant shall not point, display, inscribe, maintain or affix any
sign, placard, picture, advertisement, name, notice, lettering or direction on
any part of the outside of inside of the Property, or on any part of the inside
of the Premises which can be seen from the outside of the Premises, without the
prior consent of Landlord, and then only such name or names or matter and in
such color, size, style, character and material as may be first approved by
Landlord in writing. Landlord shall prescribe the suite number and
identification sign for the Premises (which shall be prepared and installed by
Landlord at Tenant's expense). Landlord reserves the right to remove at Tenant's
expense all matter not so installed or approved without notice to Tenant.
3. Tenant shall not in any manner use the name of the Property for any
purpose other than that of the business address of the Tenant, or use any
picture or likeness of the Property, in any letterheads, envelopes, circulars,
notices, advertisements, containers or wrapping material without Landlord's
express consent in writing.
4. Tenant shall not place anything or allow anything to be placed in
the Premises near the glass of any door, partition, wall or window which may be
unsightly from outside the Premises, and Tenant shall not place or permit to be
placed any article of any kind on any window ledge or on the exterior walls.
Blinds, shades, awnings or other forms of inside or outside window ventilators
or similar devices, shall not be placed in or about the outside windows in the
Premises except to the extent, if any, that the character, shape, color,
material and make thereof is first approved by the Landlord.
5. Furniture, freight and other large or heavy articles, and all other
deliveries may be brought into the Property only at times and in the manner
designated by Landlord, and always at the Tenant's sole responsibility and risk.
Landlord may impose reasonable charges for use of freight elevators after or
before business hours. All damage done to the Property by moving or maintaining
such furniture, freight or articles shall be repaired by Landlord at Tenant's
expense. Landlord may inspect items brought into the Property or Premises with
respect to weight or dangerous nature. Landlord may require that all furniture,
equipment, cartons and similar articles removed from the Premises or the
Property be listed and a removal permit therefor first be obtained from
Landlord. Tenant shall not take or permit to be taken in or out of other
entrances or elevators of the Property, any item normally taken, or which
Landlord otherwise reasonably requires to be taken, in or out through service
doors or on freight elevators. Tenant shall not allow anything to remain in or
obstruct in any way, any lobby, corridor, sidewalk, passageway, entrance, exit,
hall, stairway, shipping area, or other such area. Tenant shall move all
supplies, furniture and equipment as soon as received directly to the Premises,
and shall move all such items and waste (other than waste customarily removed by
Property employees) that are at any time being taken from the Premises directly
to the areas designated for disposal. Any hand-carts used at the Property shall
have rubber wheels.
6. Tenant shall not overload any floor or part thereof in the Premises,
or Property, including any public corridors or elevators therein bringing in or
removing any large or heavy
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articles, and Landlord may direct and control the location of safes and all
other heavy articles and require supplementary supports at Tenant's expense of
such material and dimensions as Landlord may deem necessary to properly
distribute the weight.
7. Tenant shall not attach or permit to be attached additional locks or
similar devices to any door or window, change existing locks or the mechanism
thereof, or make or permit to be made any keys for any door other than those
provided by Landlord. If more than two keys for one lock are desired, Landlord
will provide them upon payment therefor by Tenant. Tenant, upon termination of
its tenancy, shall deliver to the Landlord all keys of offices, rooms and toilet
rooms which have been furnished Tenant or which the Tenant shall have had made
and in the event of loss of any keys so furnished shall pay Landlord therefor.
8. If Tenant desires signal, communication, alarm or other utility or
similar service connections installed or changed, Tenant shall not install or
change the same without the prior approval of Landlord, and then only under
Landlord's direction at Tenant's expense. Tenant shall not install in the
Premises any equipment which requires more electric current than Landlord is
required to provide under this Lease, without Landlord's prior approval, and
Tenant shall ascertain from Landlord the maximum amount of load or demand for or
use of electrical current which can safely be permitted in the Premises, taking
into account the capacity of electric wiring in the Property and the Premises
and the needs of tenants of the Property, and shall not in any event connect a
greater load than such safe capacity.
9. Tenant shall not obtain for use upon the Premises ice, drinking
water, towel, janitor and other similar services, except from persons approved
by the Landlord. Any person engaged by Tenant to provide janitor or other
services shall be subject to direction by the manager or security personnel of
the Property.
10. The toilet rooms, urinals, wash bowls and other such apparatus
shall not be used for any purpose other than that for which they were
constructed and no foreign substance of any kind whatsoever shall be thrown
therein and the expense of any breakage, stoppage or damage resulting from the
violation of this Rule shall be borne by the Tenant who, or whose employees or
invitees shall have caused it.
11. The janitorial closets, utility closets, telephone closets, broom
closets, electrical closets, storage closets, and other such closets, rooms and
areas shall be used only for the purposes and in the manner designated by
Landlord, and may not be used by tenants, or their contractors, agents,
employees, or other parties without Landlord's prior written consent.
12. Landlord reserves the right to exclude or expel from the Property
any person who, in the judgment of Landlord, is intoxicated or under the
influence of liquor or drugs, or who shall in any manner do any act in violation
of any of these Rules. Tenant shall not at any time manufacture, sell, use or
give away, any spirituous, fermented, intoxicating or alcoholic liquors on the
Premises, nor permit any of the same to occur (except in connection with
occasional social or business events conducted in the Premises which do not
violate any laws nor bother or annoy any other tenants). Tenant shall not at any
time sell, purchase or give away, food in any form by or to any of Tenant's
agents or employees or any other parties on the Premises, nor permit any of the
same to occur (other than in lunch rooms or kitchens for employees as may be
permitted or installed by Landlord, which does not violate any Laws or bother or
annoy any other tenant).
13. Tenant shall not make any room-to-room canvass to solicit business
or information or to distribute any article or material to or from other tenants
or occupants of the Property and shall not exhibit, sell or offer to sell, use,
rent or exchange any products or services in or from the Premises unless
ordinarily embraced within the Tenant's use of the Premises specified in the
Lease.
14. Tenant shall not waste electricity, water, heat or air conditioning
or other utilities or services, and agrees to cooperate fully with Landlord to
assure the most effective and energy efficient operation of the Property and
shall not allow the adjustment (except by Landlord's authorized Property
personnel) of any controls. Tenant shall keep corridor doors closed and shall
not open any windows, except that if the air circulation shall not be in
operation, windows which are openable may be opened with Landlord's consent. As
a condition to claiming any deficiency in the
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air-conditioning or ventilation services provided by Landlord, Tenant shall
close any blinds or drapes in the Premises to prevent or minimize direct
sunlight.
15. Tenant shall conduct no auction, fire or "going out of business
sale" or bankruptcy sale in or from the Premises, and such prohibition shall
apply to Tenant's creditors.
16. Tenant shall cooperate and comply with any reasonable safety or
security programs, including fire drills and air raid drills and the appointment
of "fire wardens" developed by Landlord for the Property, or required by Law.
Before leaving the Premises unattended, Tenant shall close and securely lock all
doors or other means of entry to the Premises and shut off all lights and water
faucets in the Premises (except heat to the extent necessary to prevent the
freezing or bursting of pipes).
17. Tenant will comply with all municipal, county, state, federal or
other government laws, statutes, codes, regulations and other requirements,
including without limitation, environmental, health, safety and police
requirements and regulations respecting the Premises, now or hereinafter in
force, at its sole cost, and will not use the Premises for any immoral purposes.
18. Tenant shall not (i) carry on any business, activity or service
except those ordinarily embraced within the permitted use of the Premises
specified in the Lease and more particularly, but without limiting the
generality of the foregoing, shall not (ii) install or operate any internal
combustion engine, boiler, machinery, refrigerating, heating or air conditioning
equipment in or about the Premises, (iii) use the Premises for housing, lodging
or sleeping purposes or for the washing of clothes, (iv) place any radio or
television antennae other than inside of the Premises, (v) operate or permit to
be operated any musical or sound producing instrument or device which may be
heard outside the Premises, (vi) use any source of power other than electricity,
(vii) operate any electrical or other device from which may emanate electrical
or other waves which may interfere with or impair radio, television, microwave,
or other broadcasting or reception from or in the Property or elsewhere, (viii)
bring or permit any bicycle or other vehicle or dog (except in the company of a
blind person or except where specifically permitted) or other animal or bird in
the Property, (ix) make or permit objectionable noise or odor to emanate from
the Premises, (x) do anything in or about the Premises tending to create or
maintain a nuisance or do any act tending to injure the reputation of the
Property, (xi) throw or permit to be thrown or dropped any article from any
window or other opening in the Property, (xii) use or permit upon the Premises
anything that will invalidate or increase the rate of insurance on any policies
of insurance now or hereafter carried on the Property or violate the
certificates of occupancy issued for the premises or the Property, (xiii) use
the Premises for any purpose, or permit upon the Premises anything, that may be
dangerous to persons or property (including but not limited to flammable oils,
fluids, paints, chemicals, firearms or any explosive articles or materials), or
(xiv) do or permit anything to be done upon the Premises in any way tending to
disturb any other tenant at the Property or the occupants of neighboring
property.
19. If the Property shall now or hereafter contain a building garage,
parking structure or other parking area or facility, the following Rules shall
apply in such areas or facilities:
(i) Parking shall be available in areas designated generally
for tenant parking, for such daily or monthly charges as Landlord may establish
from time to time, or as may be provided in any Parking Agreement attached
hereto (which, when signed by both parties as provided therein, shall thereupon
become effective). In all cases, parking for Tenant and its employees and
visitors shall be on a "first come, first served," unassigned basis with
Landlord and other tenants at the Property, and their employees and visitors,
and other Persons (as defined in Article 25 of the Lease) to whom Landlord shall
grant the right or who shall otherwise have the right to use the same, all
subject to these Rules, as the same may be amended or supplemented, and applied
on a non-discriminatory basis, all as further described in Article 6 of the
Lease. Notwithstanding the foregoing to the contrary, Landlord reserves the
right to assign specific spaces, and to reserve spaces for visitors, small cars,
handicapped individuals, and other tenants, visitors of tenants or other
persons, and Tenant and its employees and visitors shall not park in any such
assigned or reserved spaces. Landlord may restrict or prohibit full size vans
and other large vehicles.
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(ii) In case of any violation of these provisions, Landlord
may refuse to permit the violator to park, and may remove the vehicle owned or
driven by the violator from the Property without liability whatsoever, at such
violator's risk and expense. Landlord reserves the right to close all or a
portion of the parking areas or facilities in order to make repairs or perform
maintenance services, or to alter, modify, re-stripe or renovate the same, or if
required by casualty, strike, condemnation, act of God, law or governmental
requirement, or any other reason beyond Landlord's reasonable control. In the
event access is denied for any reason, any monthly parking charges shall be
abated to the extent access is denied, as Tenant's sole recourse. Tenant
acknowledges that such parking areas or facilities may be operated by an
independent contractor not affiliated with Landlord, and Tenant acknowledges
that in such event, Landlord shall have no liability for claims arising through
acts or omissions of such independent contractor, if such contractor is
reputable.
(iii) Hours shall be 6 A.M. to 8 P.M., Monday through Friday,
and 10:00 to 1:00 P.M. on Saturdays, or such other hours as may be reasonably
established by Landlord or its parking operator from time to time; cars must be
parked entirely within the stall lines, and only small cars may be parked in
areas reserved for small cars; all directional signs and arrows must be
observed; the speed limit shall be 5 miles per hour; spaces reserved for
handicapped parking must be used only by vehicles properly designated; every
parker is required to park and lock his own car; washing. waxing, cleaning or
servicing of any vehicle is prohibited; parking spaces may be used only for
parking automobiles; parking is prohibited in areas: (a) not striped or
designated for parking, (b) aisles, (c) where "no parking" signs are posted, (d)
on ramps, and (e) loading areas and other specially designated areas. Delivery
trucks and vehicles shall use only those areas designated therefor.
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OFFICE RENT STEP-UPS
RIDER TWO
Notwithstanding anything to the contrary contained in the Lease, the
parties agree as follows. The term "Lease Year" herein means each twelve month
period or portion thereof during the Term, commencing with the Commencement Date
without regard to calendar years.
A. Commencing with the second Lease Year, monthly Base Rent shall be increased
to $13,000.00
B. Commencing with the third Lease Year, monthly Base Rent shall be increased
to $15.500.00
C. Commencing with the fourth Lease Year, monthly Base Rent shall be increased
to $18,000.00
D. Commencing with the fifth Lease Year, monthly Base Rent shall be increased
to $18,000.00
E. Commencing with the sixth Lease Year, monthly Base Rent shall be increased
to $18,000.00
F. Commencing with the seventh Lease Year, monthly Base Rent shall be
increased to $18,000.00
G. Commencing with the eighth Lease Year, monthly Base Rent shall be increased
to $18,000.00
H. Commencing with the ninth Lease Year, monthly Base Rent shall be increased
to $18.000.00
I. Commencing with the tenth Lease Year, monthly Base Rent shall be increased
to $18,000.00
LANDLORD: /s/ Marx Realty Improvement, Agent
------------------------------------
By:
------------------------------------------
By:
------------------------------------------
TENANT: Southern Community Bancrop
--------------------------------------
By: /s/ John G. Squires
------------------------------------------
IN THE EVENT THAT TENANT IS UNABLE TO SECURE THE NECESSARY PERMITS FOR A ROOF
SIGN OR ELECTS NOT TO HAVE ONE, THE MONTHLY RENTAL SHALL BE REDUCED BY $3,000.00
FOR EACH OF THE ABOVE MONTHS.
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RIDER THREE
SIGNAGE
THE RENTAL SET FORTH IN RIDER 2 INCLUDED the amount Tenant shall pay $36,000.00
per year for exclusive signage rights on the exterior of the building INCLUDING
rooftop signage. In addition, Tenant shall have the right to place one sign in
the lobby of the premises as indicated.
Tenant shall prepare and submit for Landlord's approval its proposed
design, materials and construction for such Signage ON THE EXTERIOR AT THE
LEASED PREMISES INCLUDING THE DRIVE IN AND EXCLUSIVE PARKING. The design,
materials and construction of all Signage shall be subject to Landlord's
approval. The erection and maintenance of all Signage shall be performed by
Landlord at the sole expense of Tenant and shall at all times be in compliance
with any and al1 applicable laws, ordinances and regulations governing such
Signage. In the event, however, that one or more of the Signage shall be
prohibited by any applicable law, ordinance or regulation, no such prohibition
shall give rise to, or create, any recourse by Tenant against Landlord either in
the form of a credit against rent, alternate signage rights or any other right,
remedy or benefit. SEE RIDER TWO
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OPTION TO EXTEND
LANDLORD'S QUOTED RATES
RIDER FOUR
Tenant is hereby granted an option to extend the Term for TWO additional
periods of five consecutive Lease Years ("Extension Period"), on the same terms
and conditions in effect under the Lease immediately prior to the Extension
Period except that Tenant shall have no further right to extend, and monthly
Base Rent shall be increased to such rate ("Extension Rate") AS REPRESENTS THE
INCREASE IN THE CONSUMER PRICE INDEX OVER THE CALENDAR YEAR 1998 OVER $180,000
PLUS SIGN RENTAL IF ANY.
The term "Lease Years" herein means each twelve month annual period, commencing
with the first day of the Extension Period without regard to calendar years.
The option to extend may be exercised only by giving Landlord written
notice thereof no earlier than one year and no later than six months prior to
the commencement of the Extension Period. Said exercise shall, at Landlord's
election, be null and void if Tenant is in default under the Lease at the date
of said notice or at any time thereafter and prior to commencement of the
Extension Period. Within thirty (30) days after receiving Tenant's notice
exercising such option to extend, Landlord shall provide Tenant notice of the
Extension Rate. If such Extension Rate is higher than Tenant desires, Tenant may
revoke its exercise of such option to extend, by written notice to Landlord
given no later than five (5) days after Landlord's notice providing the
Extension Rate, notwithstanding anything to the contrary herein contained. If
Tenant shall not revoke its exercise of the option, and shall dispute the rate
provided by Landlord, Tenant shall pay the rate provided by Landlord until the
matter is resolved (by litigation or otherwise), subject to retroactive
adjustment after the matter is so resolved.
If Tenant shall fail to exercise or shall revoke the option herein
provided, said option shall terminate, and shall be null and void and of no
further force and effect. Tenant's exercise of said option shall not operate to
cure any default by Tenant of any of the terms or provisions in the Lease, nor
to extinguish or impair any rights or remedies of Landlord arising by virtue of
such default. If the Lease or Tenant's right to possession of the Premises shall
terminate in any manner whatsoever before Tenant shall exercise the option
herein provided, or if Tenant shall have subleased or assigned all or any
portion of the Premises, then immediately upon such termination, sublease or
assignment, the option herein granted to extend the Term, shall simultaneously
terminate and become null and void. Such option is personal to Tenant. Under no
circumstances whatsoever shall the assignee under a complete or partial
assignment of the Lease, or a subtenant under a sublease of t he Premises, have
any right to exercise the option to extend granted herein. Time is of the
essence of this provision.
A sublease or assignment pursuant to the provisions on page 9A shall not operate
so as to deprive Tenant of the Option to Extend contained herein.
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RIDER FIVE
Tenant shall renovate the premises entirely at its own expense. Plans and
specifications for said renovation shall be developed by Tenant and submitted to
Landlord for approval prior to commencement of construction.
LANDLORD AGREES THAT IT SHALL NOT RENT ANY PORTION OF THE GROUND FLOOR DURING
THE TERM OF THIS LEASE FOR BANKING PURPOSES OR PERMIT ANY TENANT ENGAGED IN THE
BANKING BUSINESS TO HAVE A SIGN ON THE EXTERIOR OF THE BUILDING SO LONG AS THE
TENANT OR ITS SUBTENANT IS ENGAGED IN THE BANKING BUSINESS.
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RIDER SIX
Americans with Disabilities Act. The parties acknowledge that the Americans with
Disabilities Act of 1990 (42 U.S.C 12101 et. seq.) and regulations and
guidelines promulgated thereunder, as all of the same may be amended and
supplemented from time to time (collectively referred to herein as the "ADA")
establish requirements for business operations, accessibility and barrier
removal, and that such requirements may or may not apply to the Premises and the
Building, depending on, among other things: (1) whether Tenant's business Is
deemed a "public accommodation" or "commercial facility,"(2) whether such
requirements are "readily achievable" and (3) whether a given alteration affects
a "primary function area" or triggers "path of travel" requirements. The parties
hereby agree that (a) Landlord shall be responsible for ADA Title III compliance
In the common areas of the Building (except as provided below) and such costs
shall be a part of Operating Expenses hereunder, (b) Tenant shall be including
any leasehold Improvements or other work to be performed under or in connection
with the Lease and (c) Landlord may perform, or require that Tenant perform, and
Tenant shall be solely responsible for the cost, or ADA Title III "path of
travel" requirements triggered by alterations in or to the Premises. In addition
Tenant shall be solely responsible for requirements under Title I of ADA
relating to Tenant's employees.
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<PAGE> 36
FLORIDA PROPERTY RIDER
RIDER SEVEN
FLORIDA DISCLOSURE STATEMENT
1. Agency Disclosure.
As a consideration of referring to the parties of a certain proposed lease
(hereinafter) referred to as the "Lease" to be made between MARX REALTY &
IMPROVEMENT CO., INC. as Landlord and Southern Community Bank as Tenant for
the letting of 10,000 sq. ft. of the 250 N. Orange Building in Orlando,
Florida.
2. Transaction Broker Notice.
Florida real estate licensees who desire to operate as a transaction broker
are required by Section 475.25(l)(q), Florida Statutes, to give written
notice to all parties or parties agent to the real estate transaction. This
notice is to place the parties on notice that the licensee will be
operating as a transaction broker and to describe the licensee's role as
transaction broker.
A licensee who facilitates a brokerage transaction between a seller/lessor
and a buyer/lessee without representing either party except the duties of
accounting and to use skill, care and diligence.
A transaction broker is required to treat the seller/lessor and
buyer/lessee with honesty and fairness, and shall disclose all known facts
materially affecting the value of the property to the seller/lessor and
buyer/lessee (referring to residential property only).
The TRANSACTION BROKER NOTICE has been adopted by the Florida Real Estate
Commission and is required by Rule 10.037 of the rules of the Commission.
The FREC Form is TBNL-1 (landlords/tenants).
This notice does not require signatures or landlord or tenant.
3. Compensation.
The Attached Schedule "A" shall become a part of this proposed lease
agreement and is inclusive of and describes the Brokerage Agreement between
CB Commercial Real Estate and Duncan Realty, Inc.
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<PAGE> 1
EXHIBIT 10.7
LEASE
THIS LEASE is made and entered into this 30th day of November, 1998 by
and between PATRICK J. ARMSTRONG, ("Lessor") and SOUTHERN COMMUNITY BANCORP
("Lessee").
1. PREMISES: In consideration of the rents, covenants, and promises
contained herein, and upon the agreements contained in this Lease, Lessor leases
to Lessee, and Lessee rents from Lessor the real property located at 254 S.R.
436 West, Altamonte Springs, Florida on which is located that certain building
containing approximately four thousand one hundred and eighty two (4,182) square
feet and parking area on which Lessee intends to operate a bank and drive
through windows (the "Premises") described in Exhibit "A" which is attached
hereto and made a part hereof.
2. TERM: Subject to the terms, provisions, and conditions hereof, this
Lease shall commence on the date Lessor delivers the Premises to Lessee (the
"Commencement Date"), and shall continue for twenty (20) years thereafter. Such
date shall be confirmed by execution of the Commencement Date Confirmation in
the form as set forth in Exhibit "B."
3. RENT: Lessee agrees to pay to Lessor, its successors or assigns, at
1101 North Lake Destiny Road, Suite 450, Maitland, Florida 32751 or such other
address as may be designated to Lessee in writing by Lessor, rent (the "Rent")
for the Premises, at the following rates and times:
LEASE YEAR: MONTHLY RENT:
Commencement Date through March 31, 1999 $6,250.00
April 1, 1999 through Lease Year 5 $10,070.00
Lease Year Six $10,473.00
Lease Year Seven $10,892.00
Lease Year Eight $11,327.00
Lease Year Nine $11,780.00
Lease Year Ten $12,252.00
Lease Year Eleven $12,742.00
Lease Year Twelve $13,251.00
Lease Year Thirteen $13,781.00
Lease Year Fourteen $14,333.00
Lease Year Fifteen $14,906.00
Lease Year Sixteen $15,502.00
Lease Year Seventeen $16,122.00
Lease Year Eighteen $16,767.00
Lease Year Nineteen $17,438.00
Lease Year Twenty $18,135.00
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Monthly installments of Rent, plus applicable sales tax, are payable in
advance on the first (1st) day of each calendar month during the Term of this
Lease. All Rent payments and other charges required to be paid under this Lease,
no matter how described, shall be paid by Lessee to Lessor at Lessor's address,
or such other person and/or address as Lessor may designate in writing. In the
event Lessee fails to pay any Rent or other charges due under this Lease within
ten (10) days of the due date of said Rent or other charges, Lessee shall pay to
Lessor a late charge of five percent (5%) of the amount overdue.
If the Term commences on a day other than the first (1st) day of a
calendar month or ends on a day other than the last day of a calendar month, the
Rent, real estate taxes and any other amounts payable on a monthly basis shall
be prorated on a per diem basis for such partial calendar months. If the Term
commences other than on January 1st, or ends other than on December 31, Lessee's
obligation to pay amounts toward real property taxes for such first (1st) or
final calendar year shall be prorated on a per diem basis to reflect that
portion of such years included in the Term.
4. RENEWAL OPTION: Provided Lessee is not in default of any provision
or condition of this' Lease, the Lessee is granted the option to renew this
Lease for two (2) additional terms of five (5) years each, by giving written
notice to Lessor of its intent to so elect not less than one hundred eighty
(180) days before the end of the then applicable Term of this Lease.
LEASE YEAR MONTHLY RENT
Twenty One $18,861.00
Twenty Two $19,615.00
Twenty Three $20,400.00
Twenty Four $21,216.00
Twenty Five $22,065.00
Twenty Six $22,947.00
Twenty Seven $23,865.00
Twenty Eight $24,820.00
Twenty Nine $25,812.00
Thirty $26,845.00
5. CONDITION OF PREMISES - CONSTRUCTION: Lessee shall have the right to
renovate or remove any existing improvements located on the Premises as of the
Commencement of the Term of this Lease; and, at any time and from time to time
during the Term of this Lease to renovate and repair the building located on the
Premises for Lessee's intended use of the Premises and to maintain, alter,
remodel, reconstruct, rebuild, replace and remove same, subject to the following
conditions:
A. The cost of any construction, reconstruction, demolition,
or any change, alteration, or improvements shall be paid for by Lessee. It is
anticipated that the initial renovations to the existing improvements located on
the Premises will be approximately Four Hundred and Fifty Thousand Dollars
($450,000.00).
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B. The Premises shall at all times, be kept free of all
construction and other liens as hereinafter more specifically provided.
C. Lessee shall furnish Lessor copies of all site plans and
architects drawings showing the proposed interior and exterior appearance and
dimension of the proposed improvements for the Leased Premises. Lessor shall
have the fight to approve the final site plan for the Leased Premises, which
approval shall not be unreasonably withheld or delayed. In the event Lessor
fails to provide Lessee with any written response within five (5) days of
Lessor's receipt of the final site plan, Lessor shall be deemed to have approved
the site plan as submitted by Lessee. If Lessor has disapproved the site plan
and has specified the reasons why, Lessee agrees to such changes as may be
necessary to obtain Lessor's approval and Lessee shall revise the site plan as
applicable, and resubmit such revised site plan to Lessor within five (5) days
following the date of Lessor's notice of disapproval. Such procedures for notice
of disapproval and specific reasons shall be repeated with respect to any
revisions to the site plan, until such site plan with each of Lessor and
Lessee's acting reasonably and in good faith, is approved.
D. Lessor shall be notified in writing within seven (7) days
prior to commencement of any construction at the Premises. Within ninety (90)
days after completion of renovation and construction at the Premises, Lessor
shall be furnished an as-built set of plans and specifications for the building
located on the Premises.
E. Lessor shall cooperate and assist Lessee, if required, in
obtaining all necessary approvals and permits.
6. USE OF PREMISES: Lessee shall use and occupy the Premises during the
Term of this Lease solely for the purpose of operating a bank with drive through
windows (the "Intended Use"), and for no other purpose or purposes without the
prior written consent of Lessor which consent shall not be unreasonably
withheld, or delayed. Lessee agrees to comply with all applicable laws,
ordinances and regulations of any governmental body having jurisdiction over the
Premises.
7. COVENANT OF TITLE AND QUIET ENJOYMENT: Lessor covenants that Lessor
is well seized of and has good title and right to lease the Premises, and does
warrant and will defend the title thereto. Upon payment by the Lessee of the
Rents herein provided, and upon the observance and performance of all the
covenants, terms and conditions on Lessee's part to be observed and performed,
Lessee shall peaceably and quietly hold and enjoy the Premises for the term
hereby demised without hindrance or interruption by Lessor or any other person
or persons lawfully or equitably claiming by, through or under the Lessor,
subject, nevertheless to the terms and conditions of this Lease, and any
mortgages to which this Lease is subordinate.
8. REPAIRS AND MAINTENANCE: Lessee shall keep and maintain in good
order, condition and repair (including replacement of parts and equipment if
necessary) the Premises and every part thereof and any and all appurtenances
thereto wherever located, including, without limitation, the interior, exterior,
roof and foundation of the Premises, the heating and air conditioning systems,
the parking lot, driveways, sidewalks, all plumbing and sanitary sewage
facilities within or about the Premises, including free flow up to the main
water and sewer lines, fixtures, electrical
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systems, sprinkler systems, interior and exterior walls, floors and ceilings.
Lessee's obligations shall include periodic interior and exterior painting as
needed. Lessee shall keep and maintain the Premises in a clean, sanitary and
safe condition in accordance with applicable laws and all directions, rules and
regulations of the health officer, fire marshal, building inspector, or other
proper officials of the governmental agencies having jurisdiction, at the sole
cost and expense of Lessee, and Lessee shall comply with all requirements of
law, ordinance and otherwise, affecting said Premises. If Lessee refuses or
neglects to commence and to complete repairs promptly and adequately, Lessor
may, at its option, make and complete said repairs and Lessee shall pay the cost
thereof to Lessor upon demand. At the time of the expiration of the tenancy
created herein, Lessee shall surrender the Premises in good condition,
reasonable wear and tear, loss by fire or other unavoidable casualty excepted.
Lessee shall keep the Premises free from any and all liens arising out
of any work performed, materials furnished or obligations incurred by or for
Lessee, and agrees to bond against or discharge any mechanic's or materialman's
lien within thirty (30) days after written request therefore by Lessor and shall
reimburse Lessor for any and all costs and expenses which may be incurred by
Lessor by reason of the filing of any such liens and/or the removal of same.
Such reimbursement to be made within thirty (30) days after receipt by Lessee
from Lessor of a statement setting forth the amount of such costs and expenses.
The failure of Lessee to pay any such amount to Lessor within said thirty (30)
day period shall carry with it the same consequences as failure to pay any
installment of rental.
9. UTILITIES AND SERVICES: Lessee shall pay or cause to be paid all
charges for water, heat, gas, electricity, sanitary sewer and any and all other
utilities used upon the Premises throughout the Term of this Lease, including
any connection or water and sewer impact fees.
10. ESTOPPEL LETTER, ATTORNMENT AND SUBORDINATION:
A. ESTOPPEL LETTER. Each party agrees that within ten (10)
days after request therefor by the other to execute in recordable form and
delivered to the other a statement, in writing, certifying (a) that this Lease
is full force and effect, (b) the date of commencement of the term of this
Lease, (c) that rent is paid currently without any off-set or defense thereto,
(d) the amount of rent, if any, paid in advance, and (e) that there are no
uncured defaults by the other party or stating those claimed by the other party,
provided that, in fact such facts are accurate and ascertainable.
B. ATTORNMENT. Lessee shall, in the event any proceedings are
brought for the foreclosure of or in the event of exercise of the power of sale
under any mortgage made by Lessor covering the Premises, attorn to the purchaser
upon any such foreclosure or sale and recognize such purchaser as the Lessor
under this Lease.
C. SUBORDINATION. Lessee agrees that this Lease shall, at the
request of the Lessor, be subordinate to all mortgages or deeds of trust that
may hereafter be placed upon said Premises and to any and all advances to be
made thereunder, and to the interest thereon, and all renewals, replacements and
extensions thereof. Lessee agrees that, upon the request of Lessor, any
mortgagee, or any trustee, it shall execute whatever instruments may be required
to carry out the
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intent of this Paragraph so long as the Lessee is furnished with a
non-disturbance agreement in such form as may reasonably be required by Lessee.
11. ALTERATIONS, TRADE FIXTURES, AND EQUIPMENT: Lessee shall have the
right during, the continuance of this Lease to make such Interior and exterior
alterations, changes, and improvements to the Premises as may be proper and
necessary for the conduct of Lessee's business and for the full beneficial use
of the Premises, provided that Lessee shall first acquire Lessors prior written
approval, which approval shall not be unreasonably withheld or delayed and
Lessee shall pay all costs and expenses thereof and make such alterations,
changes, and improvements in a good and workmanlike manner and in accordance
with all federal, state, municipal, and local statutes, laws, ordinances, codes,
and regulations applicable to the Premises.
All alterations, additions and improvements made by Lessee shall be
deemed to have attached to the Leasehold and to have become the property of
Lessor upon such attachment, and upon expiration of this Lease or any renewal
term thereof, the Lessee shall not remove any such alterations, additions and
improvements.
Lessor, however, agrees that all moveable trade fixtures, furniture, or
other personal property of whatever-kind and nature kept on the Premises by
Lessee shall not become the property of the Lessor or a part of the realty,
unless permanently affixed to the Premises and may be removed by Lessee without
damage to the Premises, in their discretion, at any time, and from time to time
during the Term of this Lease and any renewals. Upon request of Lessee, Lessor
shall execute and deliver any consent or waiver forms submitted by any vendors,
lessors, chattel mortgagees, or holders or owners of any moveable trade
fixtures, furniture, or other personal property of any kind and description kept
on the Premises setting forth the fact that the Lessor waives, in favor of such
vendor, lessor, chattel mortgagee, or any holder or owner of any lien, claim,
interest or other right therein superior to that of such vendor, lessor, chattel
mortgagee, owner, or holder. Lessor shall further acknowledge that the property
covered by such consent or waiver forms is personal property and is not to
become a part of the realty and that such property may be removed from the
Premises by the vendor, lessor, chattel mortgagee, owner, or holder at any time
upon default by Lessee or its assignees or sublessees in the terms of such
chattel mortgage or other similar documents free and clear of any claim or lien
of the Lessor.
12. SIGNS: Lessee, may, upon prior written approval of Lessor, lawfully
erect signs, concerning the business of the occupant of the Premises, on the
exterior face of the front parapet wall or upon any other appropriate location,
and agrees to maintain said sign(s) in a good state of repair and save the
Lessor harmless from any loss, cost, or damage as a result of the erection,
maintenance, existence, or removal of the same, and shall repair any damage
which may have been caused by the erection, existence, maintenance, or removal
of such sign(s).
13. TAXES. INSURANCE AND INDEMNITY:
A. LESSEE'S TAX OBLIGATION. Lessee shall be liable for and
shall pay all taxes levied against personal property and trade fixtures placed
by Lessee in or about the Premises.
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Lessee agrees to pay all real property taxes, special taxes,
or assessments, including street improvement liens, if any, levied or assessed
upon or against the Premises during the Term of this Lease and furnish Lessor
with receipted copies of the paid tax bills on or before March 15th of each year
during the Term of this Lease.
For the fraction of the tax year at the beginning or end of
the Term of this Lease, or any extension, Lessee's obligation shall be prorated
as of the commencement or end of the Term, or any extensions. For any such
fraction of a tax year at the beginning of the Term of this Lease, Lessee agrees
to reimburse Lessor for its portion of such taxes within thirty (30) days after
presentation to Lessee of receipted copies of the paid tax bill covering the
same. For any such fraction of a tax year at the end of the Term of this Lease,
or any extension, Lessor agrees to reimburse Lessee for Lessor's portion of such
taxes within thirty (30) days after presentation to Lessor of receipted copies
of the paid tax bill.
Lessee agrees to pay all sales and use taxes levied upon the
use and occupancy of the Premises together with the Rent as hereinabove provided
and to pay any additional sales and use taxes levied upon any additional rent
that may become due under this Lease as provided herein together with such
additional rent as and when the same becomes due and payable.
Lessee shall have the right to contest the amount or validity
of any such tax levied by appropriate legal proceedings. Lessor shall, upon
request, Join in any such proceedings if Lessee determines that it shall be
necessary or convenient for Lessor to do so in order for Lessee to prosecute
such proceedings properly. Any fees or other costs incurred by virtue of such
contest shall be borne by the Lessee. Anything herein to the contrary
notwithstanding, as a condition precedent to the contesting of any taxes by
Lessee hereunder, Lessee, will either pay or upon demand by Lessor, shall escrow
with Lessor any such sums as deemed by Lessor to be reasonably necessary to
prevent any sale of the Premises for non-payment of said taxes and/or to pay any
fines or penalties ultimately assessed against the Premises as a result of such
contest. Any funds required to be escrowed with Lessor with respect to any
contest of taxes shall be held in an interest bearing account.
B. LIABILI1Y INSURANCE. Lessee shall, during the entire term
hereof, keep in full force and effect a policy of public liability and property
damage insurance with respect to the Premises and the business operated by
Lessee in which the limits of public liability shall be not less than One
Million Dollars ($1,000,000.00) per person and One Million Dollars
($1,000,000.00) for more than one (1) person in any one (1) accident and in
which the limit of property damage liability shall be not less than One Million
Dollars ($1,000,000.00). The policy shall name Lessor, any other parties in
interest designated by Lessor, and Lessee as insured, and shall contain a clause
that the insurer will not cancel or change the insurance without first giving
the Lessor thirty (30) days prior written notice. Such insurance may be
furnished by Lessee under any blanket policy carried by it or under a separate
policy therefor. The insurance shall be with an insurance company approved by
Lessor and a copy of the paid-up policy evidencing such insurance or a
certificate of insurer certifying to the issuance of such policy shall be
delivered to Lessor upon execution of this Lease by Lessee and upon renewals not
less than thirty (30) days prior to the expiration of such coverage.
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C. OTHER INSURANCE. Lessee, during the term hereof, agrees to
carry, at its expense, insurance against fire, vandalism, malicious mischief,
and such other perils as are from time to time included in a standard extended
coverage endorsement, and special extended coverage for loss due to sinkholes in
an amount equal to one hundred percent (100%) of the replacement cost of the
Premises. Such insurance shall also include rent insurance in an amount equal to
the rental payments and other sums payable under this Lease for a period of
twelve (12) months commencing with the date of any abatement of rent. Lessor and
his mortgagees shall be named as an additional insured in all such insurance
policies. The insurance shall be with an insurance company approved by Lessor
and a copy of the paid up policy evidencing such insurance or a certificate of
the insurer certifying to the issuance of such policy, shall be delivered to the
Lessor upon execution of this Lease by Lessee and upon renewals not less than
thirty (30) days prior to the expiration of such coverage.
D. COVENANT TO HOLD HARMLESS. Lessee shall indemnify and save
Lessor harmless from and against any and all claims, actions, damages, liability
and expense in connection wit ' h loss of life, personal injury and/or damage to
property arising from or out of any occurrences in, upon or at the Premises,
other than that resulting from the gross negligence or intentional act of the
Lessor. In case Lessor shall, without fault on its part, be made a party to any
litigation commenced by or against Lessee, the Lessee shall protect and hold
Lessor harmless and shall pay all costs, expenses and reasonable attorney fees
incurred or paid by Lessor in connection with such litigation.
14. DAMAGE TO OR DESTRUCTION OF PREMISES: If the Premises shall be
damaged or rendered totally or partially un-tenantable by fire or other
casualty, the Lessee shall, within thirty (30) days from the date of said damage
or destruction, commence to repair or replace said improvements, according to
the original plans and specifications so that the Lessee may continue with
occupancy and the same shall be completed within one hundred eighty (180) days
thereafter. Provided, however, in the event the Premises shall be totally
destroyed by fire or other casualty, the Lessee shall have the option not to
rebuild the Premises and to terminate this Lease be giving written notice to
Lessor of its election to so terminate, such notice to be given within thirty
(30) days after the occurrence of such damage or destruction. Lessee's
obligation to pay for the cost of rebuilding or repairing any such damage or
destruction to the improvements located at the Premises shall be limited to the
insurance monies payable by reason of such damage or destruction. Provided,
however, if the cost of repairing or replacing said improvements exceed the
amount of the insurance proceeds as the result of Tenant's desire to construct a
building at the Premises which exceeds that which was located at the Premises
prior to such casualty, it shall be Lessee's responsibility to pay all
additional monies necessary for such repairs or replacements. However, it is
further agreed that the rent herein required to be paid shall abate during said
period of untenantability or if the improvements shall be damaged but not
rendered untenantable thereby, the rental shall abate in an amount proportionate
to the decrease in the utility of the Premises.
It is agreed by the parties that if the building cannot be replaced or
repaired within one hundred eighty (180) days after such damage to the building,
due to the inability of either party to obtain materials or labor needed,
strikes, or acts of God or governmental restrictions that would prohibit, limit,
or delay said construction, then the time for completion of said repairs and
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replacements shall be extended accordingly, provided, however', that in any
event, if the repair or replacement of the building has not been completed
within a period of three hundred sixty five (365) days from the date of such
damage or destruction, then either Lessor or Lessee may, at its option, elect to
terminate this Lease.
15. EMINENT DOMAIN: If the whole or any part of the Premises shall be
taken for any public or quasi public use under any statute or by right of
eminent domain or by deed in lieu thereof, Lessee reserves unto itself the right
to prosecute its claim for any award based upon injury caused to its leasehold
interest by such taking, without impairing any rights of Lessor for the taking
of or injury to the reversion.
In the event a part of the Premises shall be taken and that (1) the
part so taken includes the building on the Premises or any part thereof, or (2)
the part so taken shall consist of twenty five percent (25%) or more of the
total parking area; or (3) such part so taken shall result in cutting off direct
access from the Premises to any adjacent street or highway, then and in any such
event, Lessee may at any time either prior to or within a period of sixty (60)
days after the date when possession of the Premises shall be required by the
taking authority, elect to terminate this Lease. In the event neither Lessor or
Lessee shall exercise such option to terminate this Lease or in the event that a
part of the Premises shall be taken under circumstances under which the Lessee
will have no such option, then the Lessor shall, at its own cost and expense and
with reasonable promptness, restore the remaining portion of the Premises to the
extent necessary to reconstitute the improvements thereon as a complete
architectural unit, susceptible to the same use as that which was in effect
immediately prior to such taking and the rental payable under the provisions of
this Lease shall be equitably reduced according to the decrease in the utility
of the Premises for Lessee's intended use and the effect thereof upon the
business of the Lessee.
16. ASSIGNMENT AND SUBLETTING: Lessee shall not, without the prior
written consent of Lessor, which consent shall not be unreasonably withheld,
assign this Lease, or sublet the Premises or any part thereof.
A. Notwithstanding the foregoing provisions, Lessee may,
without Lessor's consent:
1. Sublet any part of the Premises to any affiliate
or wholly owned subsidiary of Lessee; or
2. Assign this Lease to any parent, affiliate, or
wholly owned subsidiary of Lessee; or
3. Assign this Lease to a corporation, or subsidiary
of a corporation, into which Lessee is merged or consolidated, or to which all
or substantially all of Lessee's assets (provided this Lease is not the sole or
most substantial asset of Lessee) and business as a continuing concern are
transferred, or to any corporation which controls or is controlled by Lessee or
is under common control with Lessee provided, that in any of such events the
corporation or its subsidiary succeeding to Lessee has a net worth computed in
accordance with generally accepted accounting
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principles equal to or greater than (1) the net worth of Lessee at the date
immediately prior to such merger, consolidation or transfer, or (2) the net
worth of Lessee on the date of this Lease, whichever is greater.
B. Notwithstanding Paragraph 16A above, Lessee shall not sell
its corporate stock to accomplish the assignment of this Lease that would be
otherwise prohibited by the terms hereof or would circumvent Lessor's
requirements and restrictions with respect to assignment or subleasing. Any such
assignment of this Lease shall not be permitted, unless the entity purchasing
Lessee's corporate stock continues with the usual business of the Lessee then in
existence prior to any such sale.
17. DEFAULT BY LESSEE:
A. DEFAULT. Lessee shall be in default hereunder if (a) Lessee
fails to pay, when due, any installment of rent and any other sums due under
this Lease and such default shall continue for more than ten (10) days after
written notice from Lessor to Lessee (not more than two (2) notices required for
any calendar year); or (b) Lessee fails to observe and perform any of the other
terms, covenants and/or conditions of this Lease and such default shall continue
for more than thirty (30) days after written notice from Lessor to Lessee. If
the nature of a default under (b) above is such that it cannot reasonably be
cured within the aforesaid cure period, and work thereon shall be commenced
within said period and diligently prosecuted to completion, then Lessor's rights
under Paragraph 17A shall be inapplicable.
If at any time during the term there shall be filed by or
against Lessee or any successor Lessee then in possession, in any court pursuant
to any statute either of the United States or of any state, a petition (i) in
bankruptcy, (ii) for reorganization, (iii) for the appointment of a receiver, or
(iv) for an arrangement under the Bankruptcy Acts, or of a similar type of
proceeding, then Lessee shall be in default and shall immediately quit and
surrender the Premises to Lessor, but Lessee shall continue liable for the
payment of rent and all other sums due hereunder.
B. LESSOR'S RIGHTS UPON DEFAULT. In the event of default by
Lessee, Lessor may (a) cure Lessee's default at Lessee's cost and expense,
and/or (b) re-enter the Premises and remove all persons and all or any property
therefrom, by any suitable action or proceeding at law, or by force or
otherwise, without being liable for any prosecution therefore or damages
therefrom, and repossess and enjoy the Premises, with all additions, alterations
and improvements, and Lessor may, at its option, repair, alter, remodel and/or
change the character of the Premises as it may deem fit, and/or (c) at any time
relet the Premises or any part or parts thereof, as the agent of Lessee or in
Lessor's own right, and/or (d) terminate this lease upon not less than three (3)
days written notice to Lessee. The exercise by Lessor of any right granted in
this Paragraph shall not relieve Lessee from the obligation to make all rental
payments, and to fulfill all other covenants required by this Lease, at the time
and in the manner provided herein, and if Lessor so desires all current and
future rent and other monetary obligations due hereunder less the fair rental
value of the Premises shall become immediately due and payable. Lessee
throughout the remaining term hereof shall pay Lessor, no later than the last
day of each month during the term, the then current excess, if any, of the sum
of the unpaid rentals and costs to Lessor resulting from such default by Lessee,
over the proceeds, if any,
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received by Lessor from such reletting, if any, but Lessor shall have no
liability to account to Lessee for any excess. If Lessor attempts to relet the
premises, Lessor shall be the sole judge as to whether or not a proposed Lessee
is suitable and acceptable.
In the event of a breach by Lessee of any of the covenants or
provisions hereof, Lessor shall have, in addition to any other remedies which it
may have, the right to invoke any remedy allowed at law or in equity to enforce
Lessor's rights.
C. NON-WAIVER PROVISIONS. The failure of Lessor to insist upon
a strict performance of any of the terms, conditions and covenants herein shall
not be deemed to be a waiver of any rights or remedies that Lessor may have and
shall not be deemed a waiver of any subsequent breach or default in the terms,
conditions and covenants herein contained except as may be expressly waived in
writing.
The maintenance of any action or proceeding to recover
possession of the Premises, or any installment or installments of rent or any
other monies that may be due or become due from Lessee to Lessor, shall not
preclude Lessor from thereafter instituting and maintaining subsequent actions
or proceedings for the recovery of possession of the Premises or of any other
monies that may be due or become due from Lessee. Amy entry or re-entry by
Lessor shall not be deemed to absolve or discharge Lessee from liability
hereunder.
18. BANKRUPTCY OR INSOLVENCY:
A. LESSEE'S INTEREST NOT TRANSFERABLE. Neither this Lease, nor
any interest therein nor any estate thereby created shall pass to any trustee or
receiver or assignee for the benefit of creditors or otherwise by operation of
law.
B. LESSEE'S OBLIGATION TO AVOID CREDITORS' PROCEEDINGS. Lessee
shall not cause or give cause for the institution of legal proceedings seeking
to have Lessee adjudicated bankrupt, reorganized or rearranged under the
bankruptcy laws of the United States, and shall not cause or give cause for the
appointment of a trustee or receiver for the assets of Lessee and shall not make
any assignment for the benefit of creditors, or become or be adjudicated
insolvent. The allowance of any petition under the bankruptcy law, or the
appointment of a trustee shall be conclusive evidence that Lessee caused, or
gave cause for the above-mentioned proceedings, unless such allowance of the
petition, or the appointment of a trustee or receiver, is vacated within thirty
(30) days after such allowance or appointment. In the event the estate created
hereby shall be taken in execution or by other process of law, or if Lessee
shall be adjudicated insolvent or bankrupt pursuant to the provisions of any
state or federal insolvency or bankruptcy act, or if a receiver or trustee of
the property of Lessee shall be appointed by reason of the insolvency or
inability of Lessee to pay its debts, or if any assignment shall be made of the
Property of Lessee for the benefits of creditors, then and in such events,
Lessor may, at its option, terminate this Lease and all rights of Lessee
hereunder, by giving to Lessee notice in writing of the election of Lessor to so
terminate.
19. LESSOR'S ACCESS TO PREMISES. Lessor shall have reasonable rights of
access to the Premises upon reasonable notice to Lessee, for the purpose of
inspecting the condition
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thereof from time to time throughout the term of this Lease and any renewals
thereof and to show the Premises to prospective purchasers or mortgagees. Lessor
shall also have the right during the last three (3) months of the Lease term or
any renewal thereof to show the Premises to any prospective tenant at reasonable
times during business hours.
20. SURRENDER OF PREMISES: Lessee covenants and agrees to deliver up
and surrender to the Lessor the possession of the Premises upon the expiration
of this Lease or its termination, as herein provided, in as good condition and
repair as the same shall be at the commencement of said term or may have been
put by either the Lessor or the Lessee during the continuance thereof, ordinary
wear and tear excepted.
If the Lessee shall remain in possession of all or any part of the
Premises after the expiration of the term of this Lease or renewal thereof, then
the Lessee shall be deemed a Lessee of the Premises from month-to-month at
double the then rental and subject to all the terms and provisions hereof.
21. MISCELLANEOUS:
A. CONDITIONS AND COVENANTS. All of the provisions of this
Lease shall be deemed as running with the land, and construed to be "conditions"
as well as "covenants" as though the words specifically expressing or imparting
covenants and conditions were used in each separate provision.
B. NO WAIVER OF BREACH. No failure by either Lessor or Lessee
to insist upon the strict performance by the other of any covenant, agreement,
term or conditions of this Lease, or to exercise any right or remedy consequent
upon a breach thereof shall constitute a waiver of any such breach or of such
covenant, agreement, term or condition. No waiver of any breach shall affect or
alter this Lease, but each and every covenant, condition, agreement, and term of
this Lease shall continue in full force and effect with respect to any other
existing or subsequent breach.
C. TIME OF ESSENCE. Time is of the essence of this Lease, and
each provision.
D. COMPUTATION OF TIME. The time in which any act provided by
this Lease is to be done, is computed by excluding the first day and including
the last, unless the last day is a Saturday, Sunday or legal holiday, and then
it is also excluded.
E. INDEMNIFICATION. Unless caused or resulting from the
negligence of Lessor, its agents, servants or employees, the Lessor shall not be
liable for any damage or injury to any person or property whether it be the
person or property of Lessee or Lessee's employees, agents, guests, invitees or
any other persons whomsoever by reason of Lessee's occupancy of the Premises or
because of fire, flood, windstorm, Acts of God or for any other reason. Lessee
agrees to indemnify, defend and save harmless the Lessor from and against any
and all loss, damage, claim, demand, liability or expense by reason of injury or
death of any person or damage to or loss of property which may arise or be
claimed to have arisen as a result of the occupancy or use of the
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<PAGE> 12
Premises by Lessee, or in any way arising on account of any injury or damage
caused to any person or property on, in or about the Premises.
F. ENVIRONMENTAL INDEMNIFICATION BY LESSEE. Lessee hereby
agrees to indemnify, reimburse, defend and hold harmless Lessor, its officers,
directors, employees, successors and assigns from and against any and all
demands, claims, civil or criminal actions or causes of action, liens,
assessments, civil or criminal penalties or fines, losses, damages, liabilities,
obligations, costs, disbursements, expenses or fees of every kind and nature
(including but without limitation, clean-up costs, attorneys, consultants, or
expert fees and disbursements and costs of litigation at trial and appellate
levels) which may be imposed upon, incurred by or asserted or ordered against
Lessor directly or indirectly resulting from any act or activities of Lessee,
its agents, employees, invitees or contractors, at, on or about the Premises
which contaminate air, soils, service waters or ground waters, over, on, or
under the Premises.
Further, Lessor shall and hereby agrees to indemnify, protect,
defend and hold harmless Lessee and its stockholders, directors, officers,
employees, successors and assigns, from and against any and all costs, claims,
judgments, damages, penalties, fines, taxes, costs, liabilities, losses and
expenses arising at any time during and after the Term of this Lease as a result
of or in connection with any activities of the Lessor or its tenants, employees,
agents or contractors on the Premises and with respect to any Hazardous
Substances located on the Premises as of the date of the commencement of this
Lease.
G. SUCCESSORS IN INTEREST. Each and all of the covenants,
conditions and restrictions in this Lease shall inure to the benefit of and
shall be binding upon the successors in interest, encumbrances, assigns,
transferees, subtenants, licensee, and other successors in interest of Lessee.
H. ENTIRE AGREEMENT. This Lease contains the entire agreement
of the parties with respect to the matters covered by this Lease, and no other
agreement, statement, or promise made by any party, or to any employee, officer,
or agent of any party, which is not contained in this Lease, shall be binding or
valid.
I. PARTIAL INVALIDITY. If any term, covenant, condition or
provision of this Lease is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the provisions shall remain in
full force and effect and shall in no way be affected, impaired, or invalidated.
J. RELATIONSHIP OF PARTIES. Nothing contained in this Lease
shall be deemed or construed by the parties or by any third person to create the
relationship of principal and agent or of a partnership or of joint venture or
of any association between Lessor and Lessee, and neither the method of
computation of rent nor any other provisions contained in the Lease nor any acts
of the parties shall be deemed to create any relationship between Lessor and
Lessee, other than the relationship of lessor and lessee.
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<PAGE> 13
K. INTERPRETATION AND DEFINITIONS. The language in all parts
of this Lease shall in all cases, be simply construed according to its fair
meaning and not strictly for or against Lessor or Lessee. Unless otherwise
provided space in this Lease, or unless the context otherwise requires, the
following definitions and rules of construction shall apply to this Lease:
1. NUMBER AND GENDER. In this Lease, the neuter
gender includes the feminine and masculine, and the singular number includes the
plural, and the word "person" includes a corporation, partnership, firm, or
association wherever the context so requires.
2. MANDATORY AND PERMISSIVE: "Shall," "will" and
"agrees" are mandatory; "may" is permissive.
3. CAPTIONS: Captions of the articles, sections, and
paragraphs of this Lease are for convenience and reference only, and the words
contained therein shall in no way be held to explain, modify, amplify, or aid in
the interpretation, construction, or meaning of the provisions of this Lease.
4. TERMS INCLUDES EXTENSIONS: All references to the
Term of this Lease or the Lease Term shall include any extensions of such Lease
Term.
5. PARTIES: Parties shall include the Lessor and
Lessee named in this Lease.
6. SUBLESSEE: As used herein, the word "sublessee"
shall mean and include, in addition to a sublessee and subtenant, a licensee,
concessionaire, or other occupancy of a user of any portion of the Premises or
buildings or improvements thereon.
L. ATTORNEY'S FEES. In the event either Lessor or Lessee shall
bring any action or proceedings for damages for an alleged breach of any
provision of this Lease, to recover rents, or to enforce, protect, or establish
any right or remedy of either party, the prevailing party shall be entitled to
recover as a part of such action or proceedings, reasonable attorney's fees and
court costs, both at trial and appeal.
M. MODIFICATION. This Lease is not subject to modification
except in writing.
N. DELIVERY OF RENT AND NOTICES - METHOD AND TIME. All Rent or
other sums, notices, demands, or requests from one party to another may be
personally delivered or sent by mail, certified or registered, postage prepaid,
to -the addresses stated in this Section and shall be deemed to have been given
at the time of personal delivery, or if by mail, at the end of the second
business day following the date of mailing. All Rent and other sums payable by
Lessee to Lessor shall be in lawful money, delivered in person or mail to Lessor
at 1101 North Lake Destiny Road, Suite 450, Maitland, Florida 32751, and all
notices, demands or requests from Lessee to Lessor shall be given to Lessor at
the same address. All notices, demands or requests from Lessor to Lessee shall
be given to Lessee at 250 North Orange Avenue, Orlando, Florida 32801. Each
party shall have the right, from time to time, to designate a different address
by notice given in conformity with this Article.
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<PAGE> 14
If more than one Lessor or Lessee is named in this Lease, service or any notice
on any of the Lessees or Lessors shall be deemed service on all of the Lessees
or Lessors, respectively.
O. BROKER'S COMMISSION. Each of the parties represents and
warrants that there are no claims for brokers' commissions or finders' fees in
connection with the execution of this Lease. Each of the parties agrees to
indemnify the other against all liabilities arising from any such claim.
P. COUNTERPARTS. This Lease may be executed by the parties in
several counterparts, each of which shall be deemed to be an original copy.
Q. RECORDING. The parties shall, simultaneously with the
execution of this Lease, execute, acknowledge and record in the Public Records
of Seminole County, Florida, a suitable Short Form Lease incorporating the terms
and conditions of this Lease and containing the express provisions relative to
liens and easements as herein required.
R. ADDITIONAL RENT. In the event Lessee shall fail to make
payments of any sums required to be paid by Lessee under this Lease other than
the payment of Rent to Lessor or shall fail to perform any of its obligations
hereunder, Lessor, at it's sole option, may pay any such sums or perform such
obligations on Lessee's behalf without questioning the amount or validity of the
items paid after ten (10) days prior written notice to Lessee of Lessor's intent
to pay such sums or perform said obligations. All sums advanced for the
foregoing purposes shall be deemed "Additional Rent" and the amount thereof
together with applicable sales taxes thereon shall be paid by Lessee to Lessor
on the first day of the month following the advance together with interest
thereon from the date of advancement until payment in full at the highest rate
permitted under applicable law, provided, however, in the event there is no such
highest rate applicable, or in the event said highest rate is otherwise
indeterminable, parties hereto agree that the applicable rate shall be eighteen
percent (18%) per annum.
[THIS SPACE WAS INTENTIONALLY LEFT BLANK]
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<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have set their hands to
duplicates hereof, this 30th day of November, 1998.
LESSOR:
/s/ Patrick J. Armstrong
-----------------------------------------
PATRICK J. ARMSTRONG
Date: November 30, 1998
LESSEE:
SOUTHERN COMMUNITY BANCORP
By: /s/ John G. Squires
--------------------------------------
Printed Name: John G. Squires
Title: President
Date: November 30, 1998
15
<PAGE> 16
EXHIBIT "A"
Begin at the Northwest comer of Lot 4, Block A, REPLAT OF WESTMONTE, Section 14,
Township 21 South, Range 29 East, Seminole County, Florida, as recorded in Plat
Book 22, Page 98, thence run N 88(degree)00'36" E along the North line of said
Lot 4, 194.44 feet to the point of curVATURE of a curve concave Southwesterly,
said curve having a central angle of 92(degree)52'58" and a radius of 25.00
feet, thence along the arc of said curve 40.53 feet to the point of tangency,
said point being on the Westerly Right of Way line of Westmonte Drive, thence
S 00(degree)53'34" W along said Right of Way line 56.93 feet to the point of
curvature of a curve concave Easterly, said curve having a central angle of
28(degree)43'14" and a radius of 240.00 feet, thence along the arc of said curve
119.05 feet tO A point on curve, thence S 88(degree)00'36" W 249.59 feet to the
Westerly line of Lot 4, thence N 00(degrEE)41'28" E 200.00 feet to the Point of
Beginning.
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<PAGE> 17
EXHIBIT "B"
COMMENCEMENT DATE CONFIRMATION
DECLARATION BY LESSOR AND LESSEE AS TO DATE OF DELIVERY AND
ACCEPTANCE OF POSSESSION OF PREMISES
Attached to and made a part of the Lease dated the 30th day of November, 1998,
entered into and by PATRICK J. ARMSTRONG, as LESSOR, and SOUTHERN COMMUNITY
BANCORP as LESSEE.
LESSOR AND LESSEE do hereby declare that possession of the Premises was accepted
by LESSEE on the 4th day of December, 1998. The Lease is now in full force and
effect as of the date hereof. The Lease Commencement Date is hereby established
as December 4, 1998. The Term of the Lease shall terminate on December 4, 2018.
LESSOR:
/s/ Patrick J. Armstrong
- ----------------------------------
PATRICK J. ARMSTRONG
Date: December 4, 1998
LESSEE:
SOUTHERN COMMUNITY BANCORP
By: /s/ John G. Squires
-------------------------------
Printed Name: John G. Squires
Title: President
Date: December 4, 1998
17
<PAGE> 18
FIRST AMENDMENT TO LEASE
THIS FIRST AMENDMENT TO LEASE made and entered into this 3rd day of
December, 1998, by and between PATRICK J. ARMSTRONG ("Lessor") and SOUTHERN
COMMUNITY BANKCORP ("Lessee").
W I T N E S S E T H:
WHEREAS, Lessor and Lessee heretofore entered into a Lease Agreement
dated November 30, 1998 (the "Lease") for the premises located at 254 S.R. 436
West, Altamonte Springs, Florida, as further described in the Lease, together
with all buildings, structures and other improvements now or hereafter located
thereon and the appurtenances thereof (the "Premises"); and
WHEREAS, Lessor and Lessee wish to amend the Lease as hereinafter
provided.
NOW, THEREFORE, in consideration of the covenants, conditions,
stipulations and provisions herein contained, it is covenanted and agreed by and
between the Lessor and Lessee as follows:
1. PARAGRAPH 5 - CONDITIONS OF PREMISES - CONSTRUCTION. This
paragraph is hereby amended by adding the following additional
paragraph:
f. Notwithstanding anything to the contrary herein,
Tenant shall have no right to destroy or remove the
renovated building from the Premises as mentioned
herein, without the prior written consent of Lessor
and the then existing mortgagee, if any, which from
time to time may have a lien on the Premises.
2. Except as modified herein, the Lease between Lessor and Lessee
dated November 30, 1998, and all of its terms and conditions,
shall apply and the Lease shall remain in full force and
effect.
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<PAGE> 19
IN WITNESS WHEREOF, the Lessor and Lessee have executed this First
Amendment to Lease, the day and year first above written.
LESSOR:
/s/ Patrick J. Armstrong
-------------------------------------
PATRICK J. ARMSTRONG
Date: December 3, 1998
LESSEE:
SOUTHERN COMMUNITY BANCORP
By: /s/ John G. Squires
----------------------------------
Printed Name: John G. Squires
Title: President
Date: November 30, 1998
2
<PAGE> 20
SECOND AMENDMENT TO LEASE
THIS SECOND AMENDMENT TO LEASE made and entered into this 10th day of
February, 1999, by and between PATRICK J. ARMSTRONG ("Lessor") and SOUTHERN
COMMUNITY BANCORP ("Lessee").
W I T N E S S E T H:
WHEREAS, Lessor and Lessee heretofore entered into a Lease Agreement
dated November 30, 1998 as amended by First Amendment to Lease, dated December
3, 1998 (the "Lease") for the premises located at 254 S.R. 436 West, Altamonte
Springs, Florida, as further described in the Lease, together with all
buildings, structures and other improvements now or hereafter located thereon
and the appurtenances thereof (the "Premises"); and
WHEREAS, Lessor and Lessee wish to further amend the Lease as
hereinafter provided.
NOW, THEREFORE, in consideration of the covenants, conditions,
stipulations and provisions herein contained, it is covenanted and agreed by and
between the Lessor and Lessee as follows:
1. PARAGRAPH 2. TERM: Paragraph 2, Term is deleted in its
entirety and replaced with the following:
PARAGRAPH 2 - TERM: Subject to the terms, provisions, and
conditions hereof, this Lease shall commence on the date
Lessor delivers the Premises to Lessee (the "Commencement
Date") and shall continue for ten (10) years thereafter. Such
date shall be confirmed by execution of the Commencement Date
Confirmation in the form as set forth in Exhibit "B" which is
attached to the Lease.
2. PARAGRAPH 3. RENT: Paragraph 3, Rent is deleted in its
entirety and replaced with the following:
PARAGRAPH 3. RENT: Lessee agrees to pay to Lessor, its
successors or assigns, at 1101 North Lake Destiny Road, Suite
450, Maitland, Florida 32751 or such other address as may be
designated to Lessee in writing by Lessor, rent (the "Rent")
for the Premises, at the following rates and times:
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<PAGE> 21
LEASE YEAR MONTHLY RENT
Commencement Date through March 31, 1999 $6,250.00
April 1, 1999 through Lease Year 5 $10,070.00
Lease Year Six $10,473.00
Lease Year Seven $10,892.00
Lease Year Eight $11,327.00
Lease Year Nine $11,780.00
Lease Year Ten $12,252.00
Monthly installments of Rent, plus applicable sales tax, are
payable in advance on the first (1st) day of each calendar
month during the Term of this Lease. All Rent payments and
other charges required to be paid under this Lease, no matter
how described, shall be paid by Lessee to Lessor at Lessor's
address, or such other person and/or address as Lessor may
designate in writing. In the event Lessee falls to pay any
Rent or other charges due under his Lease within ten (10) days
of the due date of said Rent or other charges, Lessee shall
pay to Lessor a late charge of five percent (5%) of the amount
overdue.
If the Term commences on a day other than the first (1st) day
of a calendar month or ends on a day other than the last day
of a calendar month, the Rent, real estate taxes and any other
amounts payable on a monthly basis shall be prorated on a per
diem basis for such partial calendar months.
If the Term commences other than on January 1st, or ends other
than on December 31, Lessee's obligation to pay amounts toward
real property taxes for such first (1st) or final calendar
year shall be prorated on a per diem basis to reflect that
portion of such years included in the Term.
3. PARAGRAPH 4. RENEWAL OPTION: Paragraph 4 - Renewal Option is
deleted in its entirety and replaced with the following:
PARAGRAPH 4. RENEWAL OPTION: Provided Lessee is not in default
of any provision or condition of this Lease, the Lessee is
granted the option to renew this Lease for four (4) additional
terms of five (5) years each, by giving written notice to
Lessor of its intent to so elect not less than one hundred
eighty (180) days before the end of the then applicable Term
of this Lease.
LEASE YEAR MONTHLY RENT
---------- ------------
Lease Year Eleven $12,742.00
Lease Year Twelve $13,251.00
Lease Year Thirteen $13,781.00
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<PAGE> 22
Lease Year Fourteen $14,333.00
Lease Year Fifteen $14,906.00
Lease Year Sixteen $15,502.00
Lease Year Seventeen $16,122.00
Lease Year Eighteen $16,767.00
Lease Year Nineteen $17,438.00
Lease Year Twenty $18,135.00
Lease Year Twenty One $18,861.00
Lease Year Twenty Two $19,615.00
Lease Year Twenty Three $20,400.00
Lease Year Twenty Four $21,216.00
Lease Year Twenty Five $22,065.00
Lease Year Twenty Six $22,947.00
Lease Year Twenty Seven $23,865.00
Lease Year Twenty Eight $24,820.00
Lease Year Twenty Nine $25,812.00
Lease Year Thirty $26,845.00
4. The following additional Paragraph is added to the Lease:
Paragraph 22, OPTION TO PURCHASE: Provided this Lease is in
full force and effect and Lessee is not in default, Lessor
does hereby grant and convey to Lessee an irrevocable Option
(the "Purchase Option") to purchase the Premises, together
with all rights, easements and interests appertaining to the
Premises upon the terms, conditions and limitations as
hereinafter set forth.
A. OPTION TERM AND EXERCISE. The term of the Purchase
Option (the "Option Term") shall initially commence one
hundred fourteen (114) months after the Commencement Date of
this Lease, and if the Purchase Option has not then been duly
exercised, shall terminate at 5:00 p.m. Eastern Time on the
expiration of the initial ten (10) year term of this Lease.
Also, the Lessee shall have the option to Purchase the
Premises during the last six (6) months of each five (5) year
Option Term should the Lessee exercise its Option(s) to Renew
the Lease as provided in Paragraph 4 hereof. Should the Lessee
fail to exercise the Purchase Option for the Premises within
the times as herein above provided, the Purchase Option and
those portions of this Lease relating thereto shall lapse and
be of no further force and effect, and neither Lessor nor
Lessee shall have any further rights or obligations under this
Lease with respect to the Purchase Option. Lessee may exercise
the Purchase Option only during the Option Term(s) and then
only by actual delivery of notice to Lessor at Lessor's then
current address (the "Option Exercise Notice"). The date of
actual delivery of the Option Exercise Notice to Lessor is
herein referred to as the "Option Exercise Date." If the
Purchase Option is timely exercised, the Closing under the
Purchase Option (the
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<PAGE> 23
"Option Closing") shall take place on such date as may be
specified by Lessee by notice delivered to Lessor, but in no
event will the Option Closing occur later than the expiration
of the then Term of the Lease. If Lessee does not duly and
timely designate the time, date and place of the option
Closing, then the Option Closing shall occur at 10:00 a.m.
Eastern Time in the offices of Kenneth F. Oswald, Attorney at
Law, Suite 110, 600 Courtland Street, Orlando, Florida 32804,
on (a) the last day of the then Term of the Lease, or (b) if
such last day of the then Term of the Lease is not a business
day, then on the first business day thereafter. The Closing
Date duly and timely specified by notice from Lessee, if not
so specified, the date specified in the preceding sentence, as
applicable, is herein referred to as the "Option Closing
Date." Upon duly and timely exercise of the Purchase Option,
this Lease shall constitute the Agreement between Lessor and
Lessee for purchase and sale of the Premises, together with
all rights, interests and easements appertaining to the
Premises. Notwithstanding the foregoing, this Lease, and
Lessees rights and obligations hereunder, shall remain in full
force and effect until the Option Closing Date.
B. OPTION PURCHASE PRICE AMOUNT. The total purchase
price (the "Option Purchase Price") for the Premises shall be
the fair market value of the Premises. Within twenty (20) days
following the date of the Option Exercise Notice, Lessor and
Lessee shall each appoint an MAI Appraiser and shall mutually
agree upon a third (3rd) MAI Appraiser (the "Appraisers") each
of which shall be qualified and licensed to business in the
State of Florida to determine the fair market value of the
Premises. Within thirty (30) days after the appointment of the
Appraisers, the Appraisers shall notify both Lessor and
Lessee, in writing, of their findings. Lessor and Lessee shall
then take the average of the valuations of the three (3)
Appraisers in determining the fair market value of the
Premises and the Option Purchase Price. Lessor and Lessee will
each pay for the cost of the Appraiser which they select and
the cost of the third (3rd) Appraiser shall be equally shared
by Lessor and Lessee.
C. OBJECTIONS TO TITLE. Lessee shall have thirty (30)
days from the Option Exercise Date in which to examine title
to the Premises and to furnish Lessor a statement of
objections to title to the Premises, which objections, if they
exist on the Option Closing Date, would make Lessor unable to
convey good, marketable and insurable title to the Premises as
required herein below. After Lessor's receipt of such written
statement of objections (the "Title Objection Notice") Lessor
shall have thirty (30) days or until the Option Closing Date,
whichever is later, in which to cure all such objections. If
Lessee does not timely deliver the Title Objection Notice to
Lessor, Lessee shall be deemed to have waived its right to
object to the status of title to the Premises. If Lessee
timely delivers to Lessor its Title Objection Notice, any
title objection not contained therein shall be deemed to have
been waived. At or prior to the Option Closing, Lessor shall
pay all nonassurnable
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<PAGE> 24
indebtedness secured by the Premises and obtain cancellation
of all loan instruments affecting the Premises; all such
obligations may be paid by either Lessor or Lessee from the
Option Purchase Price.
D. CONVEYANCE OF PROPERTY. Lessor shall convey to
Lessee, by general warranty deed (the "Option Deed") good and
marketable fee simple title to the Premises insurable as such
by a major, national title insurance company satisfactory to
Lessee and licensed to do business in the State of Florida, at
standard rates, subject only to (i) ad valorem taxes and
assessments not then due and payable, (ii) zoning ordinances
and all other applicable laws, (iii) general utility easements
of record as of the Option Closing Date servicing the
Premises, (iv) mortgages being assumed by Lessee and (v) all
other easements, covenants, restrictions and other matters of
record encumbering or affecting title to the Premises as of
the Option Closing Date which are either not timely objected
to by Lessee in writing, or which are hereafter entered into
by Lessor in connection with the operation of the Premises
with the consent of Lessee, which consent shall not be
unreasonably withheld (collectively, the "Permitted Title
Exceptions").
E. TRANSACTIONAL EXPENSES. Lessor shall pay for the
cost of title examination fees and title insurance premiums
relating to any title insurance policy, and documentary stamps
and, Lessee shall pay the costs to record the Option Deed, as
well as the cost of any survey which Lessee may elect to
obtain. Any and all expenses, including, but not limited to,
prepayment premiums, release fees and recording fees, if any,
incurred in connection with the release by any mortgagee of
the Premises from any nonassumable loan in connection with the
sale pursuant to the Option shall be paid by Lessor. Lessee
shall pay all other recording fees payable in connection with
the Option Closing. Each party shall pay its own attorneys for
all fees and expenses. All other closing costs shall be born
by the party incurring the same.
F. OPTION CLOSING DOCUMENTS. At the Option Closing
and subject to the terms and conditions of this Lease, Lessor
shall execute and deliver or shall cause to be executed and
delivered, as applicable, to the Lessee a general warranty
deed, any documentation necessary to evidence the cancellation
or termination of any deed of trust, mortgage or security deed
encumbering the Premises, and any and all other documents and
certificates reasonably required to be executed and delivered
by Lessee's title insurer or otherwise customarily given or
executed in the State of Florida by a seller of property
similar to the Premises.
G. LESSEE DEFAULT. If Lessee shall fail to close the
purchase and sale of the Premises as hereinabove provided
following delivery of an Option
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<PAGE> 25
Exercise Notice, Lessor shall have the right to seek and
obtain specific performance of the terms and provisions of
this Option.
H. LESSOR'S DEFAULT. If the purchase and sale of the
Premises shall fail to close as hereinabove provided due to
circumstances or conditions which constitute a default by
Lessor of its obligation to sell the Premises upon the terms
and conditions set forth herein, Lessee shall have the night
to seek and obtain specific performance of the terms and
provisions of this Option.
Except as modified herein, the Lease between Lessor and Lessee dated November
30, 1998, as amended, and all of its terms and conditions, shall apply and the
Lease shall remain in full force and effect.
IN WITNESS WHEREOF, the Lessor and Lessee have executed this Second
Amendment to Lease, the day and year first above written.
LESSOR:
/s/ Patrick J. Armstrong
---------------------------------
PATRICK J. ARMSTRONG
Date: February 10, 1999
LESSEE:
SOUTHERN COMMUNITY BANCORP
By: /s/ John G. Squires
---------------------------------
Printed Name: John G. Squires
Title: President
Date: February 10, 1999
6
<PAGE> 1
EXHIBIT 10.8
ELECTRONIC DATA PROCESSING AGREEMENT
This Agreement is made and entered into this 12th day of August, 1998 by and
between First Commerce Technologies, Inc, ("FCT"), Lincoln, Nebraska,
hereinafter referred to as Processor, and Southern Community Bancorp,
hereinafter referred to as Client, and supercedes any and all other prior such
Agreements upon the following terms and conditions:
1. SERVICES.
Processor will provide to Client the electronic data processing
services described in attached Addendum A.
2. FEES AND CHARGES.
Client agrees to pay processor, via the ACH network on the fifteenth
day of each month, processing fees as set forth on Addendum B for
services performed the previous month. Processor, at its option, may
impose a charge of 1 1/2% per month on account balances not paid by the
due date. Charges for services performed for the Client by the
Processor which are not specified in Addendum B will be at a price and
upon the terms and conditions agreed to by the parties at the time the
Client requests such services.
In order to adjust for the effects of inflation, after the first twelve
months of this Agreement, and semi-annually thereafter, all fees and
charges reflected in this Agreement will be increased, but not
decreased, based on changes in the Consumer Price Index for All Urban
Consumers - Other Goods and Services (the "CPI-U") as published by the
U.S. Department of Labor, Bureau of Labor Statistics. The first
adjustment to be made at the beginning of the thirteenth month will be
equal to the percent of change over the one-year period for the twelve
consecutive most recent months of information published. This annual
adjustment will not be less than 4% nor more than 8%. Subsequent
semi-annual adjustments will reflect the CPI-U change in each
respective six month period and will not be less than 2% nor more than
4% in any one period.
In addition to the charges described above, Client agrees to pay for
any sales, use, or other tax or charge, levied or assessed upon or as a
result of the performance of any service pursuant to this Agreement or
materials furnished with respect to this Agreement, except taxes based
on Processor's income.
3. TERM.
The original term of this Agreement shall be for a period of five (5)
years beginning on October 1, 1998.
4. INPUT DATA.
<PAGE> 2
Client will provide Processor input data in a format acceptable to or
designated by Processor. Input data shall be complete and correct, in a
condition suitable for machine processing and compatible with the data
processing equipment and programs of Processor. If the data submitted
by the Client to the Processor are incorrect, incomplete, or not in the
form designated by Processor, Client will pay processor for any
additional work performed to correct or complete the data.
Processor may rely upon any data, information, or instructions provided
by Client. If any error results from incorrect input supplied by
Client, Client shall be responsible for discovering and reporting such
error and supplying the data necessary to correct such error.
5. DELIVERY SCHEDULE.
Client will deliver input data to the Processor as established by
Addendum C. This schedule will be subject to mutually agreed upon
changes based upon the need and convenience of the Client and the
Processor. The priority for processing Client's data will be
established by Processor in accordance with a policy of providing
reasonable and efficient delivery of services to all Clients.
6. CONTACT REPRESENTATIVE.
Client will designate a qualified individual who will handle all
relations with the Processor. At the time of the conversion, Processor
will train the contact representative in the use of the data processing
system(s).
7. CONVERSION.
At the time of conversion, Processor will balance the computer produced
conversion reports to Client's general books. Client will train other
personnel and new personnel in the use of the data processing system(s)
and to balance each computerized report to the Client's general books.
8. SYSTEM MODIFICATION.
The Processor will notify the Client of changes in the system which
affect procedures or reports and require Client to take action with
respect to such changes. These notifications shall be in the form of
addenda to the User Manual.
9. ELECTRONIC TRANSACTIONS.
Client authorizes Processor to facilitate the origination and receipt
of transactions to and from the National Automated Clearing House
Association (ACH). Client shall comply with all rules, regulations, and
operating procedures of the ACH or its operators as in effect from
time-to-time and shall enter into all agreements required by the ACH or
its operators. All entries into the system shall be under the route
transit identification number of a financial
2
<PAGE> 3
institution to be designated by Client and all clearing and settlement
for such entries shall be conducted through such Financial institution
10. LAWS; REGULATIONS.
Client shall be responsible for determining the applicability of all
state and federal laws and regulations including, but not limited to,
laws and regulations governing interest rates, charges, penalties,
disclosures, timing, applicable law and conflict of laws, and to adopt
standards, policies, practices and procedures consistent with such laws
and regulations. Processor assumes no responsibility with respect to
such determinations and expressly limits its obligation to processing
data supplied to Client in accordance with this Agreement.
11. IRS FILING.
Client represents to Processor that it has complied with all laws,
regulations, procedures, and requirements in attempting to secure
correct Tax Identification Numbers (TINs) for Client's payees and
agrees to attest to this compliance by affidavit provided annually.
Client authorizes Processor to act as Client's agent and sign on
Client's behalf any affidavit required by the Internal Revenue Service
with respect to TINs.
Client acknowledges that Processor's execution of IRS Affidavits on
Client's behalf does not relieve Client of responsibility to provide
accurate TINs or liability for any penalties which may be assessed for
failure to comply with TIN requirements.
12. CONFIDENTIALITY.
Processor shall hold in confidence all information received by it in
the course of rendering services designated herein relating to the
Client's assets, liabilities, or the assets, liabilities, business or
affairs of any of the Client's customers. Processor may disclose Client
information pursuant to (1) any law of the United States or any state;
(2) the order of any court or governmental agency; (3) the rules and
regulations of any governmental agency; (4) any subpoena; or (5) any
rule of discovery in connection with any civil or criminal action. Upon
termination Processor shall return to Client all information in its
possession in whatever form held.
13. OWNERSHIP.
All data, documentation, specifications, tapes and programs furnished
by the Client shall remain the property of the Client. Files,
documentation and records developed by the Processor from data
furnished by the Client shall be the property of the Processor and
shall remain the property of the Processor upon termination of this
Agreement. All specifications, tapes, and programs, used or developed
by Processor in connection with this Agreement (except those furnished
by Client) are and shall remain the sole property of Processor.
14. RISK OF LOSS.
3
<PAGE> 4
Client will deliver and/or transmit the required input to Processor at
Client's expense and pay the cost of delivery and/or transmission back
to Client. Client will maintain source data and other backup media
sufficient for file and input data recreation in order to mitigate
against the possibility of loss of input data and Client data
maintained by Processor.
Processor will bear the risk of loss with respect to items in its
custody, but only to the extent of the cost to replace or repair the
material on which the items or records are recorded.
Processor will bear no risk of loss for items that are not
machine-readable, including, but not limited to, mutilated currency,
food coupons, bond coupons, credit card merchant receipts, and foreign
checks.
15. CATASTROPHIC LOSS OR MALFUNCTION.
Processor will maintain industry acceptable procedures for emergency
processing in the event of catastrophic hardware loss or malfunction.
16. INSURANCE.
Throughout the term of the agreement, Processor shall maintain
insurance coverage (or shall be self insured) for losses from fire,
disaster, and other causes contributing to interruption of these
services. The proceeds of such insurance shall be payable to Processor.
Nothing in this agreement shall be construed as to permit Client to
receive any of such proceeds, or to be named as an additional loss
payee under any insurance policy.
17. DISCLAIMER OF WARRANTIES.
PROCESSOR DISCLAIMS ALL WARRANTIES, WHETHER WRITTEN, ORAL,
EXPRESSED, OR IMPLIED INCLUDING, WITHOUT LIMITING THE GENERALITY
OF THE FOREGOING, ANY WARRANTY OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE.
18. INDEMNIFICATION.
Except for losses, liabilities, damages, costs or expenses as might be
incurred or to which Processor may be subjected by reason of its own
negligence or willful misconduct, Client agrees to indemnify and hold
the Processor harmless from all loss, liability, costs, damages and
expenses (including reasonable attorney's fees) to which Processor may
be subjected, or which may be incurred in connection with any claim by
third parties which may arise out of or as a result of this Agreement
or the performance by Processor of services hereunder.
19. LIMITATION OF LIABILITY.
4
<PAGE> 5
Processor agrees to perform data processing services herein in a
commercially reasonable manner, which is similar to the services
provided by it to its other Clients, and no other or higher degree of
care. In no event shall the Processor, its employees or agents be
liable for any failure or delay in processing due to fire, flood, other
natural catastrophe, the failure of data processing or handling
equipment, strike or other causes beyond Processor's reasonable
control. PROCESSOR, ITS AGENTS OR EMPLOYEES WILL IN NO EVENT BE LIABLE
FOR ANY INDIRECT, INCIDENTAL, OR CONSEQUENTIAL DAMAGES INCURRED BY
CLIENT INCLUDING, BUT NOT LIMITED TO, LOSS OF INTEREST, LOSS OF INCOME,
OR LOSS OF BUSINESS OPPORTUNITY REGARDLESS OF WHETHER PROCESSOR WAS
ADVISED OF THE POSSIBLE OCCURRENCE OF SUCH DAMAGES.
20. INFORMATION TO THIRD PARTIES.
Processor will furnish data processing information to such regulatory
authorities, auditors, or examiners or such other parties as requested
by Client in writing. Client will pay any fees incurred for producing
such information.
21. FINANCIAL INFORMATION.
Processor shall, upon available to the Client, upon request, an annual
report on the financial condition of the Processor.
22. AUDIT.
Processor shall, upon request, provide Client one (1) copy of the
report resulting from the third party review by Processor's independent
certified public accountants. Processor shall, upon request, make
available for Client's review a current copy of Processor's Disaster
Recovery Plan. Client (or a Representative of the Client) shall have
the right to perform additional audit procedures on Processor. Client
assumes responsibility for all costs associated with the performance of
Client's additional audit procedures, including expenses incurred by
Processor related to such procedures.
23. CONTINUATION AFTER TERM.
This Agreement shall automatically renew for successive contract terms
equal to the original term, unless written notice is delivered by
either Client or Processor to be other at least nine (9) months prior
to the expiration of the original term hereof or any renewal or
extension thereof.
24. EARLY TERMINATION.
Client may terminate the Agreement before expiration of the original
term of this Agreement, upon satisfaction of each of the following
conditions: (a) Client shall have been acquired by another financial
institution; (b) within six months after it is acquired Client shall
have
5
<PAGE> 6
notified Processor in writing of its intention to terminate, with such
notice providing for a termination date not less than one year
thereafter; and (c) Client shall have paid Processor a fee, which shall
accompany the foregoing termination notice, equal to 40% of the
scheduled processing fee which would have been paid from the actual
termination date through the original term of the Agreement. For any
portion of the processing fee which may be volume sensitive as set
forth on Addendum B, the termination charge for such portion shall be
based on the average processing fee assessed for the three (3) calendar
months immediately preceding the month of notice. Client may terminate
the Item Processing Services portion of the Agreement only at any time
after the first year of service with written notification of its
intention to terminate, with such notice providing for a termination
date not less than one year thereafter. Article ( c ) of Paragraph 24
Early termination shall continue to be in effect.
25. DEFAULT.
If Client is in default of any of its obligations hereunder, including
nonpayment of processing fees, Processor may, at its option and in
addition to all other remedies, immediately terminate the Agreement as
to future obligations without further notice.
26. DISPOSITION OF CLIENT DATA.
At the expiration of this Agreement, Processor may dispose of any data
left by Client unless written instructions for disposition, are
received within ten (10) days of the termination date. Client shall pay
any expense incurred and disposing of or transferring the data to
another processor.
27. USER MANUAL.
Processor agrees to provide Client with one copy of the User Manual for
each application. Client agrees to abide by the procedures,
instructions, and conditions set forth in the User's Manual. Processor
may periodically amend and/or update the User's Manual, and will
provide Client with documentation regarding such amendments and
updates.
28. YEAR 2000 STATEMENT.
FCT acknowledges the responsibility for assuring that its active
systems effectively handle Year 2000 conditions. As such, FCT is making
the necessary adjustments to appropriate systems to accommodate the
calendar rollover to the year 2000. In addition, a significant testing
program is being implemented to ensure that our mission critical
applications process Year 2000 dates correctly.
29. MISCELLANEOUS.
6
<PAGE> 7
A. ADDENDA All addenda and other schedules or
exhibits attached to or referred to in
this Agreement shall be deemed to be a
part of this Agreement as if fully set
forth.
B. NOTICES All notices required or permitted under
this Agreement shall be given in writing
and shall be deemed given when mailed,
first class, postage prepaid, addressed to
the party at the address set forth in
connection with the party's signature or
such other address as any party shall
provide to the other by notice.
C. USE OF SERVICES Client will use the services provided
under this Agreement only for its own
internal business purposes and will not
sell or otherwise provide, directly or
indirectly, any such services or any
portion thereof to any third party.
D. ENTIRE AGREEMENT This Agreement, together with the Addenda
hereto, constitutes, the entire agreement
between Processor and Client with respect
to the subject matter hereof. There are no
restrictions, promises, warranties,
covenants, or undertakings other than
those expressly set forth herein. This
Agreement supersedes all prior
negotiations, agreements, and undertakings
between the parties with respect to such
subject matter.
IN WITNESS WHEREOF, the parties have entered into this Agreement as of the date
first above written and have executed the Agreement on the date set forth in
connection with their respective signatures.
FIRST COMMERCE TECHNOLOGIES, INC. SOUTHERN COMMUNITY BANCORP
126 N. 11th Street, P.O. Box 82414 250 N. Orange Avenue
Lincoln, Nebraska 69508 Orlando, Florida 32801
Signature: /s/ J. MICHAEL TADLOCK Signature: /s/ STEPHEN R. JEUCK
------------------------- ----------------------
Print Name: J. Michael Tadlock Print Name: Stephen R. Jeuck
Title: Senior Vice President Title: Secretary and CFO
Date: August 17, 1998 Date: August 12, 1998
7
<PAGE> 8
ADDENDUM A
This is an Addendum to the Electronic Data Processing Agreement dated August 12,
1998. Processor will provide the following services to client as set forth in
the User's Manual.
STANDARD APPLICATIONS included in the "base fee" on Addendum B:
Demand Deposit Accounting (DDA)
Certificates Of Deposit (CDS)
Individual Retirement Accounting (IRA)
Loan Accounting System (LAS)
General Ledger System (GLS)
Client Services Information (CSI)
Tax Reporting System (TRS)
Funds Transfer System (FTS)
Card Management System (CMS)
Online input and inquiry transactions
ADDITIONAL APPLICATIONS included on Addendum B:
Item Processing Services (Schedule A)
View/Print/Archive Report Software
Call Report Preparation Software
PC Teller Software
Mortgage Loan Accounting (Investor Reporting)
Image Capture and Statement Preparation Services
New Account Platform Software (Loans)
8
<PAGE> 9
ACH Origination Software
FCT Safety Deposit Software
FTI Fixed Asset Control
FTI Accounts Payable
MicroSoft Access
FIRST COMMERCE TECHNOLOGIES, INC. SOUTHERN COMMUNITY BANCORP
126 N. 11th Street, P.O. Box 82414 250 N. Orange Avenue
Lincoln, Nebraska 69508 Orlando, Florida 32801
Signature: /s/ J. MICHAEL TADLOCK Signature: /s/ STEPHEN R. JEUCK
------------------------- ----------------------
Print Name: J. Michael Tadlock Print Name: Stephen R. Jeuck
Title: Senior Vice President Title: Secretary and CFO
Date: August 17, 1998 Date: August 12, 1998
9
<PAGE> 10
ADDENDUM B
This is an Addendum to the Electronic Data Processing Agreement dated August 12,
1998. Processing will be provided as follows:
Data Center Services processing with full on-line input and inquiry
with transmission to Client's facility of all reports, statements, and
special forms.
PROCESSING FEES will be paid by Client to the Processor for the applications
listed on Addendum A.
BASE FEE
The following base monthly processing fee applies to the STANDARD
APPLICATIONS listed on Addendum A.
BASE MONTHLY PROCESSING FEE: $1,260.00
Up to 1,500 accounts Included in Base Fee
1,501 to 10,000 accounts $0.60 per account
Over 10,000 accounts $0.55 per account
All ADDITIONAL APPLICATIONS listed on Addendum A will be charged based
on fees provided in Schedule A or contracted for separately.
ADDITIONAL FEES:
1) Monthly ATM Processing Fees: 1 ATM at $220 Per ATM
The monthly fee for ATM service includes the cost of a modem and
related maintenance and line monitoring, and unlimited transactions and
authorizations.
2) All phone line charges, drops and installation fees. Charges are passed
on to the user bank in relationship to amounts charged by provider, and
may be adjusted periodically.
3) Transportation of data and/or items to and from the data center.
Charges are passed on to the user bank in relationship to the amounts
charged by provider, and may be adjusted periodically.
4) Equipment purchases and maintenance, leased equipment and repairs are
contracted for separately.
5) A one-time conversion fee of $9,000.00 will be assessed for the initial
conversion of applications. This will include initial training of your
employees on the various applications, reports, and on-line systems.
Ongoing training seminars may be attended for the fee as published for
the individual class.
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<PAGE> 11
6) Custom forms may be printed on bank premise at bank expense. In an
In-Bank printing environment, user bank is responsible for all paper
and forms printed in bank. Purchasing of supplies, stock paper,
statements, and special forms may be made through FCT to get quantity
pricing.
7) AD FRADs, modems, modem sharing devices, and converters for telephone
communications are leased and contracted for separately.
8) Item Processing Services (Schedule A).
9) FCT's OnLine System (Online input and inquiry transactions) 10
OnLine PC workstations at $5.00 per workstation per month 1
branch at $2,000.00 per branch (implementation fee)
View/Print/Archive Report Software
FPreports 1 server connect at $25.00 per connect per month
3 viewer access workstations at $3.00 per
workstation per month
10) PC Teller Software
4 PC workstations at $25.00 per workstation per month
1 branch at $3,000.00 per branch (implementation fee)
11) Rembrandt Loan Documentation System(bank asset size less than
$50 Million)
Implementation fee $12,600.00
Monthly fee $300.00
12) Call Report Preparation Software
13) Mortgage Loan Accounting (Investor Reporting)
14) Image Capture and Statement Preparation Services
15) ACH Origination Software
16) FCT Safety Deposit Software
17) Fixed Asset Control
1 license at $90/mo per license
18) FTI Accounts Payable
1 license at $46/mo per license
19) MicroSoft Access
1 license $20/mo per workstation
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<PAGE> 12
The pricing set forth in this Addendum B will be adjusted for increased volume
as reflected above. If through acquisitions, mergers or other means Client
significantly increases the number of accounts, volume of transactions or number
of branches, Processor reserves the right to adjust the monthly processing fee
of this Agreement with mutual agreement of the Client.
FIRST COMMERCE TECHNOLOGIES, INC. SOUTHERN COMMUNITY BANCORP
126 N. 11th Street, P.O. Box 82414 250 N. Orange Avenue
Lincoln, Nebraska 69508 Orlando, Florida 32801
Signature: /s/ J. MICHAEL TADLOCK Signature: /s/ STEPHEN R. JEUCK
------------------------ -----------------------
Print Name: J. Michael Tadlock Print Name: Stephen R. Jeuck
Title: Senior Vice President Title: Secretary and CFO
Date: August 17, 1998 Date: August 12, 1998
12
<PAGE> 13
ADDENDUM C
This is an Addendum to an Electronic Data Processing Agreement dated August 12,
1998 .
Delivery schedules as of the date of this Addendum are as follows:
Client shall have available for courier pick up all input data to be
delivered to the Orlando Item Processing Center by 5:30 p.m. each day
Monday through Friday.
Processor shall deliver bry courier all output data on or before 8:00
a.m. each day Tuesday through Saturday.
FIRST COMMERCE TECHNOLOGIES, INC. SOUTHERN COMMUNITY BANCORP
126 N. 11th Street, P.O. Box 82414 250 N. Orange Avenue
Lincoln, Nebraska 69508 Orlando, Florida 32801
Signature: /s/ J. MICHAEL TADLOCK Signature: /s/ STEPHEN R. JEUCK
----------------------- ----------------------
Print Name: J. Michael Tadlock Print Name: Stephen R. Jeuck
Title: Senior Vice President Title: Secretary and CFO
Date: August 17, 1998 Date: August 12, 1998
13
<PAGE> 14
FIRST COMMERCE TECHNOLOGIES, INC.
SCHEDULE A
ITEM PROCESSING SERVICES
FEE SCHEDULE
<TABLE>
<CAPTION>
SERVICE DESCRIPTION UNIT SERVICE FEE
- ------------------- ---- -----------
<S> <C> <C>
ITEM CAPTURE
Inclearing Item Capture..............................Per Item.......................................... $0.010
Proof of Deposit (POD) Item Capture..................Per Item ..........................................$0.015
Transit/Clearing Item Capture & Cash Letter Sort ....Per Item .........................................$0.011
Proof of Dcposit MICR Encoding ......................Per Item ..........................................0.0245
Bulk File/Safekeeping/Item Destruction ..............Per Item .........................................$0.0083
Reject/Re-Entry ...................................Per Item ...........................................$0.05
CHECK ARCHIVAL
Microfilm (Image @ 0.005) ...........................Per Item ..........................................$0.003
Dial up Access (Check, Images) ......................Per Month.........................................$195.00
Check Photocopy .....................................Per Item............................................$0.50
Check Research Services .............................Per Hour ..........................................$23.50
Fax Services ........................................Per Page ...........................................$1.25
RETURN ITEM PROCESSING
Exception Item Pull/Qualification (NSF, Stops, etc.)..Per Item...........................................$0.35
Return Item Cash Letter Prepared......................Per Item ...........................................0.03
STATEMENT RENDERING
Printed Statement.....................................Per Page .........................................$0.105
Truncated Statement DDA & Savings. ...................Per Account........................................$0.10
Image Statement DDA...................................Per Account........................................$0.15
Non-Truncated Statement DDA ..........................Per Account........................................$0.30
Statement Inserts.....................................Per Insert........................................$0.013
OPTIONAL SERVICES
PC Image Software & Setup ............................Per PC.......................................... $750.00
CD-ROM Archival (25,000 iterns per CD) ...............Per CD............................................$25.00
Postage & Pre-Sorting ................................Per Envelope . ..................................At Cost
Courier Services .....................................Per Delivery ....................................At Cost
</TABLE>
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<PAGE> 15
DeNovo bank fees for Backroom and Item Processing assume that total items do not
exceed 30,000. Total items include both on-us and over the counter (transit)
items. After total items exceed 30,000, the bank will be accessed per item fees
based on the current published fee schedule, as listed below. Special pricing
for the first 9-month period will be accessed at $1,000.00 per month. In the
10th month and through the 30,000-item tier, the item-processing fee will be
accessed at $1,500.00. Services to include: item capture, amount field encoding,
item pull and qualification, and statement preparation. All items will be
captured on image for research. Any fees for research, photocopies, faxes or
postage will be billed at cost.
FIRST COMMERCE TECHNOLOGIES, INC. SOUTHERN COMMUNITY BANCORP
126 N. 11th Street, P.O. Box 82414 250 N. Orange Avenue
Lincoln, Nebraska 69508 Orlando, Florida 32801
Signature: /s/ J. MICHAEL TADLOCK Signature: /s/ STEPHEN R. JEUCK
------------------------ ----------------------
Print Name: J. Michael Tadlock Print Name: Stephen R. Jeuck
Title: Senior Vice President Title: Secretary and CFO
Date: August 17, 1998 Date: August 12, 1998
15
<PAGE> 1
EXHIBIT 10.9
SOUTHERN COMMUNITY BANCORP
RESTRICTED STOCK AGREEMENT
THIS AGREEMENT, made effective as of January 1, 1999 (the "Date of
Grant"), is delivered by Southern Community Bancorp, a Florida corporation (the
"Company"), to Charlie W. Brinkley, Jr. (the "Executive"), who is the chief
executive officer of the Company.
WHEREAS, the Board of Directors of the Company (the "Board") adopted a
Restricted Stock Plan (the "Plan") on February 17, 2000, as a part of the
Executive's overall compensation; and
WHEREAS, the Plan provides for the grant of shares of restricted stock
by the Company to the Executive in an amount not to exceed, in the aggregate,
fifty thousand (50,000) shares of the Common Stock of the Company, par value
$1.00 per share (the "Stock"), in accordance with the terms and provisions of
this restricted stock agreement (the "Agreement"); and
WHEREAS, the Board has determined that it is in the best interests of
the Company to grant the restricted stock as provided herein;
NOW, THEREFORE, the Company and the Executive agree as follows:
1. GRANT OF RESTRICTED STOCK.
Subject to the terms and conditions hereinafter set forth, and in
consideration for the Executive's performance of services to the Company, the
Company, with the approval and at the direction of the Board, hereby grants to
the Executive up to an aggregate of fifty thousand (50,000) shares of the Stock
(the "Grant") pursuant to the Restricted Stock Grant and Vesting Schedule
attached hereto as Exhibit "A" (the "Vesting Schedule"). The Executive shall be
vested in and shall become the owner of record of the number of shares set forth
in the Vesting Schedule as of the date set forth in the Vesting Schedule. Such
vested shares are hereinafter referred to as the "Restricted Shares."
2. TERMS AND CONDITIONS OF THE RESTRICTED SHARES.
(a) During the term of his employment by the Company or its
subsidiary Southern Community Bank (the "Subsidiary"), Executive shall be the
owner and holder of record of such number of the Restricted Shares as shall have
become vested in accordance with the Vesting Schedule and shall be entitled to
receive all dividends and other distributions payable with respect to such
Restricted Shares, but he shall not transfer any of the Restricted Shares, and
such shares shall not be transferrable on the books and records of the Company.
The certificate or certificates evidencing such shares shall bear a legend
referring to the restrictions contained in this Agreement.
(b) Notwithstanding the foregoing and notwithstanding
the Vesting Schedule, in
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<PAGE> 2
the event that a majority of the outstanding shares of the Company's Stock are
acquired in a merger or other transaction requiring prior approval under the
Bank Holding Company Act of 1956, as amended (the "BHCA"), the maximum aggregate
number of shares of the Stock that may be granted to Executive hereunder shall
be granted immediately and shall be fully vested, and Executive shall have the
right to transfer such shares to the resulting Company or other acquirer, and he
shall be entitled to receive the same consideration for the Stock so transferred
as is paid to other shareholders of the Company for their shares of the Stock.
(c) If Executive's employment by the Company is terminated
prior to January 1, 2011 other than "for cause" as defined below, all of the
shares of the Stock granted to Executive prior to the date of such termination
pursuant the Vesting Schedule shall be immediately and fully vested and shall be
transferrable by Executive without restriction.
(d) If Executive's employment is terminated by the Board of
Directors of the Company for cause, Executive shall forfeit all rights to the
Stock except for the Restricted Shares which are vested pursuant to the Vesting
Schedule as of the date of such termination.
(e) For purposes of this Section, a termination of employment
or dismissal "for cause" means termination of employment resulting from
Executive's willful violation of law or any rule, regulation or order issued by,
or any agreement with, any regulatory agency having jurisdiction over the
Company or the Subsidiary; any conduct or practice on the part of Executive
which is determined by any regulatory agency having jurisdiction over the
Company or the Subsidiary to constitute an unsafe or unsound practice; any
willful neglect or refusal to carry out the lawful policies of the Company or
the Subsidiary; or directives of the Board of Directors with respect to the
operations and management of the Company or the Subsidiary; any unexcused
absence from the Subsidiary for a period in excess of twenty (20) consecutive
business days; or any impairment of Executive's physical ability to perform his
usual duties and functions resulting from his abuse of or addiction to alcohol
or any controlled substance.
3. ISSUANCE OF CERTIFICATES.
On the date specified in the Vesting Schedule, or as soon
thereafter as is practicable, the Company shall cause to be delivered to the
Executive a certificate or certificates for the Restricted Shares in
consideration for his services to the Company in the preceding calendar year.
The obligation of the Company to deliver the certificates shall, however, be
subject to the condition that if at any time the Company shall determine in its
discretion that the consent or approval of any governmental regulatory body is
necessary or desirable as a condition of, or in connection with, the issuance of
the Restricted Shares, the certificates shall not be issued unless such consent
or approval shall have been obtained free of any conditions not acceptable to
the Board.
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<PAGE> 3
4. ADJUSTMENT OF AND CHANGES IN STOCK OF THE COMPANY.
(a) Subject to the provisions of Sections 2 and 6, any shares
of the Restricted Stock which have been issued to or which have vested in the
Executive pursuant to this Agreement, shall be identical to all other shares of
the Stock, and the Executive shall be entitled to the same rights and privileges
and shall be subject to the same restrictions and conditions as are other
shareholders with respect to their shares of the Stock. In the case of any
rights offering to purchase shares of the Stock, Executive shall have the same
rights and shall be subject to the same restrictions and conditions with respect
to the Restricted Shares as are other persons with respect to their shares of
the Stock; provided, however, that any such shares purchased by Executive shall
not become Restricted Shares and shall not be subject to the provisions of this
Agreement.
(b) In the event of any reorganization, recapitalization,
reclassification, or any other change in the corporate structure or shares of
capital stock of the Company, including any stock split, reverse stock split,
stock dividend, subdivision or combination of shares, or rights offering with
respect to the capital stock of the Company, the number of shares of the Stock
covered by the Plan which have not vested in accordance with the Vesting
Schedule shall be proportionately adjusted to reflect the change and to prevent
any substantial dilution or enlargement of the benefits provided by the Plan. In
the event of any dispute between the Company and Executive as to the precise
amount of such adjustment, the determination of the certified public accountants
who customarily audit the books and records of the Company shall be
determinative.
5. RIGHTS OF EXECUTIVE.
The Executive and any personal representative or legal guardian shall
be, and shall have all of the rights and privileges of, a stockholder of the
Company with respect to any shares of the Restricted Stock which have vested in
accordance with the Vesting Schedule.
6. NON-TRANSFERABILITY OF RESTRICTED SHARES.
Except as provided in Section 2(b) of this Agreement, during the
Executive's employment by the Company or the Subsidiary the Restricted Shares
shall be held only by the Executive or any guardian or legal representative of
the Executive, and the Restricted Shares shall not be transferable except, in
case of the death of the Executive, by will or the laws of descent and
distribution; neither shall the Restricted Shares be subject to attachment,
execution or other similar process. Notwithstanding the foregoing, the Executive
may, with the prior written consent of the Company, transfer the Restricted
Shares to the trustee of any revocable trust established for the benefit of
members of his immediate family. Any such transfer shall be subject to the right
of the Company or its assignee to repurchase the Restricted Shares pursuant to
the provisions of Section 2 of this Agreement. In the event of: (a) any attempt
by the Executive to alienate, assign, pledge, hypothecate or otherwise dispose
of the Restricted Shares, except as provided herein; or (b) the levy of any
attachment, execution or similar process upon the rights or interests hereby
conferred, the Company may terminate the Grant by notice to the Executive, and
the Grant shall thereupon become null and void with respect to any non-vested
shares.
3
<PAGE> 4
7. AMENDMENT OF GRANT.
The Grant may be amended by the Board at any time: (a) if the Board
determines, in its sole discretion, that such amendment is necessary or
advisable in the light of any addition to or change in the Bank Holding Company
Act of 1956, as amended, or in the rules or regulations issued thereunder, or in
any federal or state securities law or other law or regulation, which change
occurs after the Date of Grant and by its terms applies to the Grant; or (b)
other than in the circumstances described in clause (a), with the consent of the
Executive.
8. TAX EFFECT ON EXECUTIVE.
The Executive acknowledges that the federal income tax treatment of his
receipt of the Restricted Shares hereunder and the subsequent sale of any
Restricted Shares are subject to change and can be affected by the Executive's
holding period of the Restricted Shares. The Company makes no representations or
warranties as to such income tax ramifications to Executive, and has advised
Executive to seek independent tax counsel prior to receipt of any Restricted
Shares or sale of any Restricted Shares received under this Agreement.
9. NOTICE.
Any notice to the Company provided for in this Agreement shall be
addressed to it in care of its Secretary at its executive offices at 250 North
Orange Avenue, Orlando, Florida 32801, and any notice to the Executive shall be
addressed to the Executive at the address shown below. Any notice shall be
deemed to be duly given if and when properly addressed and posted by registered
or certified mail, postage prepaid.
10. GOVERNING LAW.
The validity, construction, interpretation and effect of this Agreement
shall be governed by and determined in accordance with the law of the State of
Florida, except to the extent preempted by federal law, which shall govern to
the extent of such preemption.
11. SOLE AGREEMENT; AMENDMENT.
This Agreement is the sole agreement between the Company and Executive
concerning the issuance of the Restricted Shares and supersedes any prior
agreement between them relating to shares of the Stock. This Agreement shall be
subject to any amendment or modification necessary to ensure compliance by the
Company with federal and state banking and securities laws as provided in
Section 7. In all other respects, this Agreement may be amended only by a
subsequent written agreement signed by an authorized officer of the Company and
by Executive.
IN WITNESS WHEREOF, the Company has caused its duly authorized officers
to execute and attest this Agreement, and the Executive has signed accepting the
terms of this Agreement, effective as of the Date of Grant.
4
<PAGE> 5
SOUTHERN COMMUNITY BANCORP
By: /s/ JOHN G. SQUIRES
-------------------------------
John G. Squires, President
ACCEPTED AND AGREED TO:
/s/ CHARLIE W. BRINKLEY, JR.
-------------------------------
Charlie W. Brinkley, Jr., Executive
537 Spring Club Drive
Altamonte Springs, Florida 32714
5
<PAGE> 6
EXHIBIT "A"
VESTING SCHEDULE
If, and subject to the condition that, Executive is employed by the
Company as of the dates indicated below, the rights granted in the foregoing
Agreement shall vest in Executive, and as of such dates he shall have the rights
of a shareholder of the Company with respect to such number of the Restricted
Shares as is provided below:
SHARES OF STOCK CUMULATIVE NUMBER OF RESTRICTED
DATE OF GRANT GRANTED(1) SHARES VESTED(2)
------------- --------------- -------------------------------
January 1, 1999 5,000 0
January 1, 2000 5,000 250
January 1, 2001 5,000 1,000
January 1, 2002 5,000 4,917
January 1, 2003 5,000 11,250
January 1, 2004 5,000 18,750
January 1, 2005 5,000 25,000
January 1, 2006 5,000 30,000
January 1, 2007 5,000 35,000
January 1, 2008 5,000 40,000
January 1, 2009 45,000
January 1, 2010 48,333
January 1, 2011 50,000
- --------
(1) Shares of the Stock shall be granted after January 1, 2003, in the sole
discretion of the Board based upon the performance of the Company.
(2) Shares of the Stock granted on January 1, 1999 and January 1, 2000, shall
vest over a five year period, from the Date of Grant, with 5% of the total
number of such shares being vested on the first anniversary of the Date of
Grant, an additional 10% of such shares being vested on the second
anniversary, an additional 35% of such shares being vested on the third
anniversary, and an additional 25% of such shares being vested on the
fourth and fifth anniversaries, respectively, of the Date of Grant.
Shares of the Stock granted on or after January 1, 2001 shall vest
ratably over a three year period from the Date of Grant, with 33% of such shares
being vested on the first anniversary of such date, an additional 33% of such
shares being vested on the second anniversary, and the remainder of such shares
being vested on the third anniversary of the Date of Grant.
6
<PAGE> 1
EXHIBIT 21.1
LIST OF SUBSIDIARIES OF REGISTRANT
Southern Community Bank, a Florida bank
Southern Community Insurance Agency, Inc., a Florida corporation
<PAGE> 1
EXHIBIT 23.1
ACCOUNTANTS' CONSENT
The Board of Directors
Southern Community Bancorp
Orlando, Florida
We consent to the use of our report dated January 26, 2000 relating to
the consolidated balance sheets as of December 31, 1999 and 1998 and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for the year ended December 31, 1999 and for the period from December 15,
1998 (commencement of banking operations) to December 31, 1998 of Southern
Community Bancorp and to the use of our name under the caption of "Experts," in
the Registration Statement on Form SB-2 of Southern Community Bancorp.
/s/ Hacker, Johnson, Cohen & Grieb PA
HACKER, JOHNSON, COHEN & GRIEB PA
Tampa, Florida
April 25, 2000
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 4,520
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 11,998
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 61,984
<ALLOWANCE> 621
<TOTAL-ASSETS> 83,864
<DEPOSITS> 65,063
<SHORT-TERM> 6,000
<LIABILITIES-OTHER> 963
<LONG-TERM> 0
884
0
<COMMON> 0
<OTHER-SE> 10,954
<TOTAL-LIABILITIES-AND-EQUITY> 83,864
<INTEREST-LOAN> 2,716
<INTEREST-INVEST> 398
<INTEREST-OTHER> 285
<INTEREST-TOTAL> 3,399
<INTEREST-DEPOSIT> 1,169
<INTEREST-EXPENSE> 1,186
<INTEREST-INCOME-NET> 2,213
<LOAN-LOSSES> 609
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,216<F1>
<INCOME-PRETAX> (1,496)
<INCOME-PRE-EXTRAORDINARY> (1,496)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (942)
<EPS-BASIC> (1.10)
<EPS-DILUTED> (1.10)
<YIELD-ACTUAL> 5.71
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 12
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 621
<ALLOWANCE-DOMESTIC> 621
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
<FN>
<F1>Other expense includes: salaries and employee benefits of $1,465, occupancy of
$804, data processing of $127, advertising of $174, and other expenses which
totaled $646.
</FN>
</TABLE>
