-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, L0vIqV80qxWEVN5pEuaMlouDt46VmA7lUgj6jsdPCbP28TVjP18o7pePgCwMSnpO HhAAqkhzAMfi/di48rY8Ew== 0000950144-99-011393.txt : 19990924 0000950144-99-011393.hdr.sgml : 19990924 ACCESSION NUMBER: 0000950144-99-011393 CONFORMED SUBMISSION TYPE: SB-2/A PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19990923 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GREENVILLE FIRST BANCSHARES INC CENTRAL INDEX KEY: 0001090009 STANDARD INDUSTRIAL CLASSIFICATION: BLANK CHECKS [6770] IRS NUMBER: 582459561 STATE OF INCORPORATION: SC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SB-2/A SEC ACT: SEC FILE NUMBER: 333-83851 FILM NUMBER: 99715932 BUSINESS ADDRESS: STREET 1: 1805 LAURENS RD CITY: GREENVILLE STATE: SC ZIP: 29607 BUSINESS PHONE: 8642417806 MAIL ADDRESS: STREET 1: 1805 LAURENS RD CITY: GREENVILLE STATE: SC ZIP: 29607 SB-2/A 1 GREENVILLE FIRST BANCSHARES, INC. 1 As filed with the SEC on September 23, 1999 Registration No. 333-83851 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------------- AMENDMENT NO. 1 FORM SB-2 REGISTRATION STATEMENT Under THE SECURITIES ACT OF 1933 ---------------------------- GREENVILLE FIRST BANCSHARES, INC. (Exact name of registrant as specified in its charter) South Carolina 6021 58-2459561 - ------------------------------- --------------------------- ------------------- (State or other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer Incorporation or Organization) Classification Code Number) Identification No.)
1805 Laurens Road Greenville, South Carolina 29607 (864) 241-7806 (Address and Telephone Number of Intended Principal Place of Business) ---------------------------- R. Arthur Seaver, Jr. Chief Executive Officer 1805 Laurens Road Greenville, South Carolina 29607 (864) 241-7806 (Name, Address, and Telephone Number of Agent For Service) ---------------------------- Copies of all communications, including copies of all communications sent to agent for service, should be sent to: Neil E. Grayson, Esq. Boyd C. Campbell, Jr., Esq. C. Russell Pickering, Esq. Smith Helms Mulliss & Moore, L.L.P. J. Brennan Ryan, Esq. 201 North Tryon Street Nelson Mullins Riley & Scarborough, L.L.P. 30th Floor 999 Peachtree Street, N.E., Suite 1400 Charlotte, North Carolina 28202 Atlanta, Georgia 30309 (704) 343-2000 (404) 817-6000 (704) 334-8467 (Fax) (404) 817-6225 (Fax) APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after this Registration Statement becomes effective. If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, check the following box and list the Securities Act of 1933 registration statement number of the earlier effective registration statement for the same offering. [ ] ______ If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act of 1933, check the following box and list the Securities Act of 1933 registration statement number of the earlier effective registration statement for the same offering. [ ] ___________________ If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act of 1933, check the following box and list the Securities Act of 1933 registration statement number of the earlier effective registration statement for the same offering. [ ] ___________________ If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. [ ] -------------------------------- CALCULATION OF REGISTRATION FEE ================================================================================
========================================================================================================= PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE OFFERING AGGREGATE REGISTRATION SECURITIES TO BE REGISTERED REGISTERED PER SHARE PRICE FEE - --------------------------------------------------------------------------------------------------------- Common Stock, $.01 par value.... 1,380,000 $10.00 $13,800,000 $3,836* =========================================================================================================
* Previously paid =============================================================================== The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to such Section 8(a), may determine. 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 SEC is effective. This prospectus is not an offer to buy these securities in any state where the offer or sale is not permitted. THIS IS A PRELIMINARY PROSPECTUS AND IS NOT YET COMPLETE. SEPTEMBER 23, 1999 GREENVILLE FIRST BANCSHARES, INC. A proposed bank holding company for [BANK LOGO HERE] GREENVILLE FIRST BANK, N.A. (IN ORGANIZATION) 1,200,000 Shares of Common Stock $10.00 per share ------------------------------- We are offering shares of common stock of Greenville First Bancshares, Inc. to fund the start-up of a new community bank, Greenville First Bank, N.A., in organization. Greenville First Bancshares, Inc. will be the holding company and sole owner of the bank. The bank will be headquartered in Greenville County, South Carolina, and we expect to open the bank in the fourth quarter of 1999 or the first quarter of 2000. This is our first offering of stock to the public, and there is no public market for our shares. This is a firm commitment underwriting. The maximum purchase is 5% of the offering, although we may at our discretion accept subscriptions for more. We will request that quotations for the common shares be reported on the Nasdaq OTC Bulletin Board under the symbol "GVBK" or "GVFB". THIS IS A NEW BUSINESS. AS WITH ALL NEW BUSINESSES, AN INVESTMENT WILL INVOLVE RISKS. IT IS NOT A DEPOSIT OR AN ACCOUNT AND IS NOT INSURED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY. YOU SHOULD NOT INVEST IN THIS OFFERING UNLESS YOU CAN AFFORD TO LOSE SOME OR ALL OF YOUR INVESTMENT. SOME OF THE RISKS OF THIS INVESTMENT ARE DESCRIBED UNDER THE HEADING "RISK FACTORS" BEGINNING ON PAGE 6. NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED WHETHER THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PER SHARE TOTAL --------- ----- Public Offering Price............... $10.00 $12,000,000 Underwriter's Discount.............. $ .63 $ 756,000 Proceeds to Greenville First Bancshares ......................... $ 9.37 $11,244,000
We will pay an underwriter's discount of $.35 on shares sold to our officers and directors and other investors which we have identified, up to 30% of the offering, and $.75 on all other shares sold. The underwriter's discount shown in the table reflects a blended rate based on the assumption that 30% of the shares will have the lower discount. Wachovia Securities has the right to purchase up to an additional 180,000 shares at $10.00 per share, less the underwriter's discount of $.75 per share, within 30 days from the date of this prospectus to cover over-allotments. THE UNDERWRITER EXPECTS TO DELIVER THE SHARES OF COMMON STOCK ON __________, 1999. [WACHOVIA LOGO HERE] ___________ ____, 1999 3 GREENVILLE FIRST BANCSHARES, INC. GREENVILLE FIRST BANK, N.A. (IN ORGANIZATION) PROPOSED MARKET AREA [INSERT MAP OF SOUTH CAROLINA AND GREENVILLE COUNTY SHOWING MARKET AREA] 4 SUMMARY We encourage you to read the entire prospectus carefully before investing. Unless otherwise stated, all information in this prospectus assumes that the underwriter will not exercise its over-allotment option. GREENVILLE FIRST BANCSHARES AND GREENVILLE FIRST BANK We incorporated Greenville First Bancshares, Inc. in March of 1999 to organize and serve as the holding company for Greenville First Bank, a new national bank proposed to be located in Greenville County. The bank will focus on the local community, emphasizing personal service to individuals and businesses in Greenville County. On September 21, 1999, we received preliminary approval from the Office of the Comptroller of the Currency to open the new bank. Final approval is conditioned upon our raising the required minimum capital, receipt of FDIC approval, and the implementation of proper bank regulatory policies and procedures. We have also filed for deposit insurance for the bank with the FDIC, and we will file for approval of the Federal Reserve Board to become a bank holding company and acquire all of the stock of the new bank. We expect to receive all final regulatory approvals and open the bank for business in the fourth quarter of 1999 or the first quarter of 2000. WHY WE ARE ORGANIZING A NEW BANK IN GREENVILLE COUNTY Greenville County has a growing and dynamic economic environment that we believe will support Greenville First Bank. It is South Carolina's most populous county with over 340,000 residents, and its growth in median household income and population have consistently outpaced that of the rest of South Carolina. The county and surrounding area is home to several large manufacturing and engineering concerns which provide a stable business foundation and a skilled labor force. In February 1999, the unemployment rate was approximately 3%. One factor in this growth is Greenville County's strategic location on I-85 between Atlanta and Charlotte. Within 12 months, the Southern Connector toll road should be completed. That road will connect I-85 and I-385 through the bank's service area, which we expect to promote additional growth and commercial development. We believe that there is an opportunity in Greenville County for a new locally managed bank focused on the community and personalized service to individuals and local businesses. The county's bank and thrift deposits grew over the last five years at an average annual rate of 6.8%, and should continue to grow with the community and its economy. The current trend of consolidation in the banking industry has led to the acquisition of several locally owned community banks in the Greenville County area by large regional and super-regional banks, and caused a decrease over the last two years in the number of financial institutions in the area. Despite the consolidation trend and growth of deposits in the area, excluding the effect of recent acquisitions, deposits at the large banks actually fell from 1997 to 1998. We believe that this indicates many residents in the area prefer the community bank experience to that provided by the larger and more impersonal regional and super-regional banks. We believe that the combination of fewer financial institutions, positive deposit growth rate, good economic conditions, and the consolidation of existing community banks into larger banks creates an excellent environment for a new community oriented bank. Taking advantage of this opportunity, Greenville First Bank will be the first independent bank organized in the City of Greenville in over ten years. We will emphasize personal service and the client relationship. We will foster client relationships by establishing "relationship teams" composed of senior officers who will work directly with individual clients to match specific loan and deposit specialties with their needs. We will emphasize our local ownership and management and our strong ties to the Greenville County community. Our target market will be primarily individuals and small- to medium-sized businesses who desire a consistent and professional relationship with a local banker. We believe our client oriented approach will appeal to the individuals and small businesses in Greenville County and will stand in contrast to the "one size fits all" philosophies of our larger competitors. 3 5 OUR BOARD OF DIRECTORS AND MANAGEMENT Greenville First Bancshares was founded by ten local business leaders who have lived in Greenville for many years. They are also community leaders and serve on numerous charitable and service organizations throughout Greenville County. We believe our directors' long-standing ties to the community and their significant business experience will provide Greenville First Bank with the ability to effectively assess and address the needs of our proposed market area. Our Board of Directors consists of the following: - Andrew B. Cajka, Jr. - Rudolph G. Johnstone, III - Mark A. Cothran - Keith J. Marrero - Leighton M. Cubbage - James B. Orders, III - Fred Gilmer, Jr. - R. Arthur "Art" Seaver, Jr. - Tecumseh Hooper, Jr. - William B. Sturgis We have attracted a strong management team with many years of banking experience and service to the Greenville area. Our management team currently consists of the following individuals: - Art Seaver will serve as the president and chief executive officer for the holding company and the bank. He has over 13 years of banking experience in the Greenville area. Until he began preparations to open Greenville First Bank, he served as an executive officer at Greenville National Bank, which was acquired by Regions Bank in 1998. - Fred Gilmer, Jr. will serve as our senior vice president. Mr. Gilmer has over 40 years of experience in the financial services industry in the Greenville area. He was most recently the executive officer in charge of client relations for Greenville National Bank. - Jim Austin will serve as our senior vice president and chief financial officer. Mr. Austin has 20 years of experience in the financial services industry in the Greenville area, including 12 years as senior vice president and controller of American Federal Bank. We are in the process of assembling our management team. We are looking for individuals who reside in the Greenville area and have significant local banking experience and a history of service to the community. Because of the recent merger and acquisition activity in the market, we believe there is an abundance of local experienced banking executives who would be interested in joining our community banking effort. PRODUCTS AND SERVICES We plan to offer most of the products and services offered by larger banks by utilizing modern delivery systems coupled with personalized service. Our lending services will include consumer loans and lines of credit, commercial and business loans and lines of credit, residential and commercial real estate loans, and construction loans. We will competitively price our deposit products which will include checking accounts, savings accounts, money market accounts, certificates of deposit, commercial checking accounts, and IRAs. We will also provide cashier's checks, credit cards, cash management services, safe deposit boxes, travelers checks, direct deposit, automatic drafts, and U.S. Savings Bonds. We intend to deliver our services though a variety of methods, including ATMs, banking by mail, telephone banking, internet banking, drive through banking, and courier services for commercial customers throughout Greenville County. THE OFFERING AND OWNERSHIP BY MANAGEMENT We are offering 1,200,000 shares of our common stock for $10.00 per share. Our organizers and executive officers intend to purchase 238,500 shares, which represents 19.9% of the shares outstanding after the offering. To compensate them for their financial risk and efforts in organizing the bank, our organizers will 4 6 receive warrants to purchase one share of common stock for $10.00 per share for every two shares they purchase in this offering. We hope to sell the remaining shares to individuals and businesses in Greenville County who share our desire to support a new local community bank. The number of shares of common stock offered does not include the exercise of the underwriter's over-allotment option to purchase up to 180,000 shares of our common stock. USE OF PROCEEDS We will use the first $8,500,000 we raise in this offering to capitalize Greenville First Bank. This is the minimum amount of capital our banking regulators will require for us to open the bank. We will use the remaining net proceeds of the offering to pay our expenses of this offering and of organizing the holding company and the bank, and to provide general working capital for the holding company. The bank will use the funds it receives from Greenville First Bancshares to pay expenses, lease and furnish its offices, and provide working capital to operate the bank. For more detailed information see "Use of Proceeds" on page 10. WE DO NOT INITIALLY PLAN TO PAY DIVIDENDS Because we are a new business, we will not pay dividends in the foreseeable future. We intend to use all available earnings to fund the continued operation and growth of the bank. LOCATION OF OFFICES Our temporary executive offices are located at 1805 Laurens Road, Greenville, South Carolina 29607. Our telephone number is (864) 679-9000. Our permanent office will be located at the corner of Haywood Road and Halton Road in Greenville, South Carolina. During construction of our main office, we will utilize a modular bank facility located on the same site. We plan to open for business in this temporary modular office in the fourth quarter of 1999 or the first quarter of 2000. Within the first four years of operation, we also plan to open two "service centers" located strategically in our primary service area. These service centers will perform limited bank functions including deposit and ATM services. We believe these service centers will expand our market presence and provide additional convenience to our customers. We will need to obtain regulatory approval before we can open these centers. We believe that these facilities will adequately serve the bank's needs for its first four years of operation. 5 7 RISK FACTORS The following is a summary of some of the risks which we will encounter in starting and operating the new bank. We may face other risks as well, which we have not anticipated. An investment in our common stock involves a significant degree of risk and you should not invest in the offering unless you can afford to lose some or all of your investment. Please read the entire prospectus for a more thorough discussion of the risks of an investment in our common stock. SOUTH CAROLINA STATE LAW AND ANTI-TAKEOVER DEVICES WE HAVE ADOPTED WILL SIGNIFICANTLY LIMIT THE ABILITY OF OTHERS TO ACQUIRE US. In many cases, shareholders receive a premium for their shares when a company is purchased by another. However, under South Carolina law no other financial institution may acquire control of Greenville First Bancshares until we have been in existence for five years. In addition, state and federal law and our articles of incorporation and bylaws make it difficult for anyone to purchase Greenville First Bancshares without approval of our board of directors. For a discussion of some of these provisions, please see "Description of Capital Stock - Anti-takeover Effects" on page 36. WE ARE A NEW BUSINESS AND CANNOT BE SURE WHETHER WE WILL BE SUCCESSFUL. Neither Greenville First Bancshares nor Greenville First Bank has any operating history. The operations of new businesses are always risky. Because Greenville First Bank has not yet opened, we do not have historical financial data and similar information which would be available for a financial institution that has been operating for several years. WE EXPECT TO INCUR CUMULATIVE LOSSES FOR AT LEAST TWO YEARS AND THERE IS A RISK WE MAY NEVER BECOME PROFITABLE. In order for us to become profitable, we will need to attract a large number of customers to deposit and borrow money. This will take time. We expect to incur large initial expenses and may not be profitable for several years. Although we expect to become profitable in our second year, there is a risk that we may never become profitable and that you will lose part or all of your investment. WE CANNOT OPEN THE BANK FOR BUSINESS UNTIL WE RECEIVE REGULATORY APPROVALS, WHICH ARE AT THE DISCRETION OF OUR REGULATORY AGENCIES. We cannot begin operations until we receive all required regulatory approvals. Although we have received preliminary approval from the Office of the Comptroller of the Currency to open the bank, and have filed an application with the FDIC for deposit insurance, we will not receive all required final approvals until we satisfy all requirements for new banks imposed by state and federal regulatory agencies. We expect to receive final approvals by the fourth quarter of 1999 or the first quarter of 2000, but it may take longer. If we ultimately do not open, we anticipate that we will dissolve the company, and return to our investors all funds remaining after paying the expenses incurred through such time. ANY DELAY IN OPENING GREENVILLE FIRST BANK WILL RESULT IN ADDITIONAL LOSSES. We intend to open the bank in the fourth quarter of 1999 or the first quarter of 2000. If we do not receive all necessary regulatory approvals as planned, the bank's opening will be delayed or may not occur at all. If the bank's opening is delayed, our organizational and pre-opening expenses will increase. Because the bank would not be open and generating revenue, these additional expenses would cause our accumulated losses to increase. 6 8 WE WILL DEPEND HEAVILY ON ART SEAVER, AND OUR BUSINESS WOULD SUFFER IF SOMETHING WERE TO HAPPEN TO HIM OR IF HE WERE TO LEAVE. Art Seaver will be our president and chief executive officer. He will provide valuable services to us, and he would be difficult to replace. We have an employment agreement with Mr. Seaver and carry $600,000 of insurance on his life payable to the bank. Nevertheless, if he were to leave, our business would suffer. THE OFFERING PRICE OF $10.00 WAS DETERMINED ARBITRARILY AND IT WILL FLUCTUATE ONCE THE SHARES BECOME FREELY TRADED AFTER THE OFFERING. Because we do not have any history of operations, we determined the price arbitrarily. The offering price is essentially the book value of the shares prior to deduction for expenses of the offering and the organization of the bank. The offering price may not be indicative of the present or future value of the common stock. As a result, the market price of the stock after the offering may be more susceptible to fluctuations than it otherwise might be. The market price will be affected by our operating results, which could fluctuate greatly. These fluctuations could result from expenses of operating and expanding the bank, trends in the banking industry, economic conditions in our market area, and other factors which are beyond our control. If our operating results are below expectations, the market price of the common stock would probably fall. WE WILL NOT HAVE A LARGE NUMBER OF SHAREHOLDERS OR A LARGE NUMBER OF SHARES OUTSTANDING AFTER THE OFFERING, WHICH MAY LIMIT YOUR ABILITY TO SELL OR TRADE THE SHARES AFTER THE OFFERING. Initially, there will be no established market for our common stock. After the offering, we will encourage broker-dealers to match buy and sell orders for our common stock on the Over-the-Counter Bulletin Board. However, the trading markets on the OTC Bulletin Board lack the depth, liquidity, and orderliness necessary to maintain a liquid market. We do not expect a liquid market for our common stock to develop for several years, if at all. A public market having depth and liquidity depends on having enough buyers and sellers at any given time. Because this a relatively small offering, we do not expect to have enough shareholders or outstanding shares to support an active trading market. Accordingly, investors should consider the potential illiquid and long-term nature of an investment in our common stock. WE WILL FACE STRONG COMPETITION FOR CUSTOMERS FROM LARGER AND MORE ESTABLISHED BANKS WHICH COULD PREVENT US FROM OBTAINING CUSTOMERS AND MAY CAUSE US TO HAVE TO PAY HIGHER INTEREST RATES TO ATTRACT CUSTOMERS. We will encounter strong competition from existing banks and other types of financial institutions operating in the Greenville County area and elsewhere. Some of these competitors have been in business for a long time and have already established their customer base and name recognition. Most are larger than we will be and have greater financial and personnel resources than we will have. Some are large super-regional and regional banks, like First Union Bank, BB&T, Carolina First, Bank of America, and Wachovia. These institutions offer services, such as extensive and established branch networks and trust services, that we either do not expect to provide or will not provide for some time. Due to this competition, we may have to pay higher rates of interest to attract deposits. In addition, competitors that are not depository institutions are generally not subject to the extensive regulations that will apply to our bank. See "Proposed Business - Marketing Opportunities- Competition" on page 16 and "Supervision and Regulation" starting on page 23. AN ECONOMIC DOWNTURN, ESPECIALLY ONE AFFECTING GREENVILLE COUNTY, SOUTH CAROLINA, COULD REDUCE OUR CUSTOMER BASE, OUR LEVEL OF DEPOSITS, AND DEMAND FOR FINANCIAL PRODUCTS SUCH AS LOANS. As a holding company for a community bank, our ultimate success will be dependent on the economy of the community. We will operate in Greenville County, South Carolina, and in particular the central area of the county, which includes the City of Greenville. While the economy in this area has been strong in recent years, an economic downturn in the area would hurt our business. 7 9 AS A BANK, OUR PROFITABILITY DEPENDS ON THE INTEREST RATES WHICH WE PAY ON DEPOSITS AND COLLECT ON LOANS. INTEREST RATES HAVE HISTORICALLY VARIED GREATLY AND WE CANNOT PREDICT OR CONTROL THEM. Our profitability depends, in large part, on the difference between the income we earn on loans and other assets and the interest we pay on deposits and other borrowings. This difference is largely determined by interest rates. Interest rates will be affected by the local, national, and international economies and by the credit policies of monetary authorities, particularly the Federal Reserve Board of Governors. Interest rates have historically varied widely and we cannot control or predict them. Large moves in interest rates may decrease or eliminate our profitability. WE MAY NOT BE ABLE TO COMPETE WITH OUR LARGER COMPETITORS FOR LARGER CUSTOMERS BECAUSE OUR LENDING LIMITS WILL BE LOWER THAN THEIRS. We will be limited in the amount we can loan a single borrower by the amount of the bank's capital. The legal lending limit is 15% of the bank's capital and surplus. We expect that our initial legal lending limit will be approximately $1,275,000 immediately following the offering, but we intend to impose an internal limit on the bank of 80% of this amount, or approximately $1,000,000. Until the bank is profitable, our capital will continue to decline and therefore our lending limit. Our lending limit will be significantly less than the limit for most of our competitors and may affect our ability to seek relationships with larger businesses in our market area. We intend to accommodate larger loans by selling participations in those loans to other financial institutions. WE ARE AUTHORIZED TO ISSUE PREFERRED STOCK WHICH, IF ISSUED, MAY ADVERSELY AFFECT YOUR VOTING RIGHTS AND REDUCE THE MARKET PRICE OF OUR COMMON STOCK. We are authorized by our articles of incorporation to issue shares of preferred stock without the consent of our shareholders. Preferred stock, when issued, may rank senior to common stock with respect to voting rights, payment of dividends, and amounts received by shareholders upon liquidation, dissolution, or winding up. The existence of rights which are senior to common stock may reduce the price of our shares. We do not have any plans to issue any shares of preferred stock at this time. GOVERNMENT REGULATION MAY HAVE AN ADVERSE EFFECT ON OUR PROFITABILITY AND GROWTH. We will be subject to extensive federal and state government supervision and regulation. Our ability to grow and achieve profitability may be adversely affected by state and federal laws and regulations that limit a bank's right to make loans, purchase securities, and pay dividends. These laws are intended primarily to protect Greenville First Bank's depositors and are not for the benefit of shareholders. In addition, the burdens and restrictions imposed by federal and state banking regulations may place us at a competitive disadvantage to competitors who are less regulated. Future legislation or governmental policy could also adversely affect the banking industry and Greenville First Bank's operations. See "Supervision and Regulation" on page 23. THE EXERCISE OF WARRANTS AND STOCK OPTIONS WILL CAUSE STOCK DILUTION AND MAY ADVERSELY AFFECT THE VALUE OF OUR COMMON STOCK. The organizers and officers may exercise warrants and options to purchase common stock, which would result in the dilution of your proportionate interests in Greenville First Bancshares. Upon completion of the offering, we will issue to the organizers warrants to purchase one share of common stock at $10.00 per share for every two shares they purchase in the offering. If the organizers purchase 238,500 shares in the offering, we will issue warrants to purchase an additional 116,250 shares of common stock to them. In addition, after the offering, we expect to adopt a stock option plan which will permit us to grant options to our officers, directors, and employees. We anticipate that we will initially authorize the issuance of a number of shares under the stock option plan equal to 15% of the shares outstanding after the offering. We do not intend to issue stock options with an exercise price less than the fair market value of the common stock on the date of grant. 8 10 WE MAY NEED TO RAISE ADDITIONAL CAPITAL WHICH COULD DILUTE YOUR OWNERSHIP. Although we do not believe we will need additional capital during the next twelve months to start and maintain our planned business activities, we may need additional capital in the future to support our business, expand our operations, or maintain our minimum net capital requirements as set forth by our applicable bank regulatory agencies. There is no assurance that we will be able to sell additional shares to raise that capital. If we do sell additional shares of common stock in the future to raise capital, the sale could significantly dilute your ownership interest. WE MAY NOT ALLOCATE ALL OF THE NET PROCEEDS IN THE MOST PROFITABLE MANNER. After capitalizing Greenville First Bank with $8,500,000, we will have broad discretion in allocating a total of approximately $2,600,000, or 22% of the gross proceeds of the offering. Initially we plan to invest these proceeds in United States government securities or deposit them with the bank, and in the long term we intend to use them for general corporate purposes. We cannot predict the extent we will allocate these funds to income-generating assets, capital assets, or liquidity. Although we intend to utilize these funds to serve Greenville First Bancshares' best interest, we cannot assure you that our allocation will ultimately reflect the most profitable application of these proceeds. IT IS POSSIBLE THAT OUR COMPUTER SYSTEMS OR THOSE OF OUR PROCESSING VENDORS OR LOAN CUSTOMERS COULD FAIL TO OPERATE ON JANUARY 1, 2000. Like many financial institutions, we will rely upon computers for conducting our business and for information systems processing. There is concern among industry experts that on January 1, 2000, computers will be unable to read or interpret the new year and there may be widespread computer malfunctions. We will generally rely on software and hardware developed by independent third parties to provide our information systems. We will request warranties about Year 2000 compliance from the primary third party hardware and software system providers we use. We believe that our other internal systems and software, including our network connections, will be programmed to comply with Year 2000 requirements, although there is a risk they may not comply. Based on information currently available, we believe that we will not incur significant expenses in connection with the Year 2000 issue. The Year 2000 issue may also negatively affect the business of our customers. We intend to include Year 2000 readiness in our lending criteria to minimize this risk. However, we cannot be certain that this will eliminate the issue, and any financial difficulties our customers experience as a result of Year 2000 issues could impair their ability to repay loans to the bank. There is a possibility that we may not open the bank until after January 1, 2000, at which time we believe that most of the uncertainty surrounding the Year 2000 issue should be resolved. In this event, our risks associated with computer malfunctions should be greatly reduced, but we will still seek to ensure that our computer systems and our major vendors' and clients' computer systems are in compliance and functioning properly. For more information on Year 2000 issues, please refer to page 14. FORWARD-LOOKING STATEMENTS This prospectus contains certain "forward-looking statements" concerning Greenville First Bancshares and Greenville First Bank and their operations, performance, financial conditions, and likelihood of success. These statements are based on many assumptions and estimates. Our actual results will depend on many factors about which we are unsure, including those discussed above. Many of these risks and factors are beyond our control. The words "may," "would," "could," "will," "expect," "anticipate," "believe," "intend," "plan," and "estimate," and similar expressions identify such forward-looking statements. The most significant of these risks, uncertainties, and other factors are discussed under the heading "Risk Factors" beginning on page 6 of this prospectus. We urge you to carefully consider these factors prior to making an investment. 9 11 USE OF PROCEEDS We estimate that we will receive net proceeds of $11,113,000 from the sale of 1,200,000 shares of common stock in the offering, after deducting underwriting discounts and commissions and estimated organizational and offering expenses. If the underwriter exercises its over-allotment option in full, we will receive $1,665,000 in additional proceeds. We have established a line of credit in the amount of $600,000 at the prime rate to pay pre-opening expenses of the holding company and the bank prior to the completion of the offering. We intend to pay off this line of credit with proceeds that we receive from this offering. The following two paragraphs describe our proposed use of proceeds based on our present plans and business conditions. USE OF PROCEEDS BY GREENVILLE FIRST BANCSHARES The following table shows the anticipated use of the proceeds by Greenville First Bancshares. We describe the bank's anticipated use of proceeds in the following section. As shown, we will use $8,500,000 to capitalize the bank. We will initially invest the remaining proceeds in United States government securities or deposit them with Greenville First Bank. In the long-term, we will use these funds for operational expenses and other general corporate purposes, including the provision of additional capital to the bank, if necessary. We may also use the proceeds to expand, for example by opening additional facilities or acquiring other financial institutions. We currently plan to open two limited operation "service centers" in the Greenville area in the next four years. We do not have any other definitive plans for expansion.
Total ------------ Gross proceeds from offering.................................. $ 12,000,000 Underwriter's discount........................................ $ 756,000 Expense of organizing Greenville First Bancshares............. $ 25,000 Expense of offering........................................... $ 106,000 Investment in capital stock of the bank....................... $ 8,500,000 ------------ Remaining proceeds............................................ $ 2,613,000 ============
10 12 USE OF PROCEEDS BY GREENVILLE FIRST BANK The following table shows the anticipated use of the proceeds by Greenville First Bank. All proceeds received by the bank will be in the form of an investment in the bank's capital stock by Greenville First Bancshares as described above. During the 10 month period between the opening of the bank and the completion of our permanent facilities, we will conduct operations from a modular facility. This facility will require an initial payment of $13,050, a monthly lease payment for the modular unit of $5,880, and a monthly lease payment for the land of $500. When completed, we will then move into our permanent facility at an initial base rent payment of $16,667 per month. We expect our main office to be completed by August 2000. The table shows the cost of the temporary and permanent facilities for a period of twelve months from the completion of the offering. Furniture, fixtures, and equipment will be capitalized and amortized over the life of the lease or over the estimated useful life of the asset. The bank will use the remaining proceeds to make loans, purchase securities, and otherwise conduct the business of the bank.
Total ----------- Investment by Greenville First Bancshares in the bank's capital stock................................. $ 8,500,000 Organizational and pre-opening expenses of the bank..... $ 500,000 Furniture, fixtures and equipment....................... $ 247,000 Initial payment and lease of temporary facilities and $ 76,850 land (10 months)........................................ Lease of permanent facilities (2 months)................ $ 33,330 Construction of leasehold improvements.................. $ 65,000 ----------- Remaining proceeds...................................... $ 7,577,820 ===========
11 13 CAPITALIZATION The following table shows Greenville First Bancshares' capitalization as of June 30, 1999, and the pro forma consolidated capitalization of Greenville First Bancshares' and the bank as adjusted to give effect to the sale of 1,200,000 shares in this offering, after deducting the underwriter's discount and expenses of the offering. Greenville First Bancshares' capitalization as of June 30, 1999 reflects the purchase of ten shares by Art Seaver for $10.00 per share. These shares will be redeemed after the offering. After the offering, we will have 1,200,000 shares outstanding. The "As Adjusted" column reflects the estimated cost of organizing Greenville First Bancshares and organizing and preparing to open Greenville First Bank through the expected opening date, which should be in the fourth quarter of 1999 or the first quarter of 2000. See "Use of Proceeds" above.
As Adjusted For June 30, 1999 The Offering ------------- ------------ SHAREHOLDERS' EQUITY: Common Stock, par value $.01 per share; 10,000,000 shares authorized; 10 shares issued and outstanding; 1,200,000 shares issued and outstanding as adjusted ........................ $ 0.10 $ 12,000 Preferred Stock, par value $.01 per share; 10,000,000 shares authorized; no shares issued and outstanding 0 0 Additional paid-in capital .......................... $ 99.90 $ 11,101,000 Deficit accumulated during the pre-opening stage .... $(152,109) $ (500,000) --------- ------------ Total shareholders' equity (deficit) ................ $(152,009) $ 10,613,000 ============ Book value per share ................................ $ N/A $ 8.84 ========= ============
DIVIDEND POLICY We expect initially to retain all earnings to operate and expand the business. It is unlikely that we will pay any cash dividends in the near future. Our ability to pay any cash dividends will depend primarily on Greenville First Bank's ability to pay dividends to Greenville First Bancshares, which depends on the profitability of the bank. In order to pay dividends, the bank must comply with the requirements of all applicable laws and regulations. See "Supervision and Regulation - The Bank - Dividends" on page 26 and "Supervision and Regulation - The Bank - Capital Regulations" on page 27. In addition to the availability of funds from the bank, our dividend policy is subject to the discretion of our board of directors and will depend upon a number of factors, including future earnings, financial condition, cash needs, and general business conditions. 12 14 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF OPERATION GENERAL Greenville First Bancshares was formed to organize and own all of the capital stock of Greenville First Bank. On September 21, 1999, we received preliminary approval from the Office of the Comptroller of the Currency to open the new bank. We have also filed for deposit insurance for the bank with the FDIC. Whether the charter is issued and deposit insurance is granted will depend upon, among other things, compliance with legal requirements imposed by the Office of the Comptroller of the Currency and the FDIC, including capitalization of the bank with at least $8,500,000 of capital. Upon preliminary approval from the FDIC, we will file an application with the Federal Reserve to become a bank holding company, which must be approved before we can acquire the capital stock of the bank. We expect to receive all final regulatory approvals by the fourth quarter of 1999 or the first quarter of 2000. FINANCIAL RESULTS As of June 30, 1999, Greenville First Bancshares had total assets of $56,440, consisting primarily of cash and deferred organization and offering costs. Greenville First Bancshares incurred a net loss of $152,109 for the period from its inception in February of 1999 through June 30, 1999. EXPENSES On completion of the offering and opening of the bank, we expect we will have incurred the following expenses: - $756,000 in commissions to the underwriter, which will be deducted from the proceeds of the offering. - $106,000 in other expenses of the offering, which will be subtracted from the proceeds of the offering. - $25,000 in expenses of organizing Greenville First Bancshares, which will be charged against the income of Greenville First Bancshares. - $500,000 in expenses to organize and prepare to open Greenville First Bank, consisting principally of salaries, overhead and other operating costs, which will be charged against the income of Greenville First Bank. Prior to our completion of this offering, these expenses will be funded by a $600,000 line of credit at the prime rate. We will use the proceeds of this offering to repay amounts due under our line of credit. We anticipate that the proceeds of the offering will be sufficient to satisfy the corporation's financial needs for at least the next 12 months. OFFICES AND FACILITIES Our main office will be located on a 1.3 acre site at the corner of Haywood Road and Halton Road in Greenville, South Carolina. We intend to construct a 14,000 square foot building there to serve as our main office. Halton Properties, Inc., a company owned by one of the organizers and directors of Greenville First Bancshares, will finance the purchase of the site and the construction of the main building at a total expected cost of approximately $1,623,000. Upon completion of the main office, which we expect to occur in the third quarter of 2000, we will lease the land and building for 20 years at an initial base rent of $16,667 per month. Prior to the completion of our main office, we will utilize a temporary modular bank facility located on the same site. During this period, we will lease the site from Halton Properties for $500 per month and the modular facility from a third party lessor for $5,880 per month. We plan to open the temporary office in the fourth quarter of 1999 or the first quarter of 2000. Within the first four years of operation, we also plan to open two "service centers" located strategically in our primary service area. These service centers will perform limited bank functions. They will 13 15 expand our market presence and provide additional convenience to our customers. We believe that these facilities will adequately serve the bank's needs for its first four years of operation. LIQUIDITY AND INTEREST RATE SENSITIVITY Greenville First Bank, like most banks, will depend on its net interest income for its primary source of earnings. Net interest income is roughly the difference between the interest we charge on our loans and receive from our investments our assets, and the interest we pay on deposits, our liabilities. Movements in interest rates will cause our earnings to fluctuate. To lessen the impact of these margin swings, we intend to structure our balance sheets so that we can reprice the rates applicable to our assets and liabilities in roughly equal amounts at approximately the same time. We will manage the bank's asset mix by regularly evaluating the yield, credit quality, funding sources, and liquidity of its assets. We will manage the bank's liability mix by expanding our deposit base and converting assets to cash as necessary. If there is an imbalance in our ability to reprice assets and liabilities at any point in time, our earnings may increase or decrease with changes in the interest rate, creating interest rate sensitivity. Liquidity refers to our ability to provide steady sources of funds for loan commitments and investment activities, as well as to maintain sufficient funds to cover deposit withdrawals and payment of debt and operating obligations. We will manage our liquidity by actively monitoring the bank's sources and uses of funds to meet cash flow requirements and maximize profits. Other than this offering, we know of no trends, demands, commitments, events, or uncertainties that should result in, or are reasonably likely to result in, Greenville First Bancshares' or the bank's liquidity increasing or decreasing in any material way in the foreseeable future. However, if the bank is open before January 1, 2000, we expect to increase our cash on hand because consumer uncertainty about the Year 2000 may cause a higher than normal rate of deposit withdrawal. CAPITAL ADEQUACY Capital adequacy for banks and bank holding companies is regulated by the Office of the Comptroller of the Currency, the Federal Reserve Board of Governors, and the FDIC. The primary measures of capital adequacy are (i) risk-based capital guidelines and (ii) the leverage ratio. Changes in these guidelines or in our levels of capital can affect our ability to expand and pay dividends. Please see "Capital Regulations" on page 27 for a more detailed discussion. YEAR 2000 ISSUES Like most financial institutions, we will rely upon computers for the daily conduct of our business and for information systems processing. There is concern among industry experts that on January 1, 2000 some computers will be unable to "read" the new year resulting in computer malfunctions. We will be generally relying on independent third parties for our information processing needs. We have entered into an agreement with The InterCept Group, Inc. to process our daily account and transactional data; to provide our teller, accounting, and internet computer systems; and to provide our ATM switching and processing services. We plan to request and review Year 2000 testing protocols and results from The InterCept Group and each of our primary vendors. We plan to receive Year 2000 warranties from each vendor confirming their Year 2000 compliance, although the remedies available under such agreements generally include standard disclaimers of and limitations of liability and specifically exclude special, incidental, indirect, and consequential damages. The InterCept Group is an established provider of bank processing and software services to more than 100 financial institutions. The products and services we will receive from The InterCept Group will not materially differ from the products and services provided to these other institutions. Most of these other institutions have or are in the process of investigating the Year 2000 compliance of The InterCept Group in accordance with regulatory mandates. Because of this scrutiny, we do not believe that The InterCept Group will have any material Year 2000 issues related to the products or services we will receive from them. 14 16 Our customers may also have Year 2000 issues. We may incur losses if these issues affect our loan customer's ability to repay their loans or if they suffer material harm to their businesses as a result. Prior to January 1, 2000, we intend to request certification from each commercial borrower that their systems are Year 2000 compliant and that they do not expect to be adversely affected by the year change. Although these certifications will be helpful, it would be very difficult for us to accurately assess the Year 2000 readiness of any borrower. There is a possibility that we may not open the bank until after January 1, 2000, at which time we believe that most of the uncertainty surrounding the Year 2000 issue should be clarified. In this event, our risks associated with computer malfunctions should be greatly reduced, but we will still seek to ensure that our computer systems and our major vendors' and clients' computer systems are in compliance and functioning properly. 15 17 PROPOSED BUSINESS GENERAL We initiated activity to form Greenville First Bank in February 1999 and incorporated Greenville First Bancshares as a South Carolina corporation on March 29, 1999, to function as a holding company to own and control all of the capital stock of Greenville First Bank. We initially will engage in no business other than owning and managing the bank. We have chosen this holding company structure because we believe it will provide flexibility that would not otherwise be available. Subject to Federal Reserve Board debt guidelines, the holding company structure can assist the bank in maintaining its required capital ratios by borrowing money and contributing the proceeds to the bank as primary capital. Additionally, a holding company may engage in certain non-banking activities that the Federal Reserve Board has deemed to be closely related to banking. Although we do not presently intend to engage in other activities, we will be able to do so with a proper notice or filing to the Federal Reserve if we believe that there is a need for these services in our market area and that such activities could be profitable. On September 21, 1999, we received preliminary approval from the Office of the Comptroller of the Currency to open the new bank. Final approval is conditioned upon our raising the required minimum capital, receipt of FDIC approval, and the implementation of proper bank regulatory policies and procedures. We have also filed for deposit insurance for the bank with the FDIC, and we will file for approval of the Federal Reserve Board to become a bank holding company and acquire all of the stock of the new bank. Subject to receiving final regulatory approvals from these agencies, we plan to open the bank in the fourth quarter of 1999 or the first quarter of 2000, and will engage in a general commercial and consumer banking business as described below. MARKETING OPPORTUNITIES Service Area. Our primary service area will consist of Greenville County, South Carolina. We expect initially to draw a large percentage of our business from the central portion of Greenville County, within a ten mile radius of our main office. This principal service area is bounded by Rutherford Road to the north, Poinsett Highway to the west, Mauldin Road and Butler Road to the south, and Highway 14 and Batesville Road to the east. Included in this area is the highest per capita income tract in the county. Our expansion plans include the development of two "service centers" located along the periphery of our service area. These service centers will extend the market reach of our bank, and they will increase our personal service delivery capabilities to all of our customers. This area will also benefit from the construction of the Southern Connector, a toll road connecting I-85 and I-385 through southwestern Greenville County, which is predicted to open within the next 12 months. Completion of this road is expected to promote rapid commercial development along the corridor. We plan to take advantage of existing contacts and relationships with individuals and companies in this area to more effectively market the services of the bank. Economic and Demographic Factors. Greenville County's median household income, household growth, and population growth trends have consistently outpaced growth trends in the rest of South Carolina. Greenville County is South Carolina's most populous county. Between 2000 and 2010, Greenville County's population is expected to increase by 10.2% to almost 400,000 people. The five county metropolitan area, which includes Greenville, Spartanburg, Anderson, Cherokee, and Pickens counties, is a business and high technology manufacturing center, and it boasts a large engineering firm presence. Major employers in the metropolitan area include: BMW, Michelin, Bi-Lo, Kemet Electronics, and Fluor Daniel, one of the largest engineering firms in the world. Greenville County has more engineers per capita than any other county in the United States. In February 1999, the unemployment rate in the area was 3.04%. Competition. The banking business is highly competitive. The bank will compete as a financial intermediary with other commercial banks, savings and loan associations, credit unions, finance companies, and money market mutual funds operating in the Greenville County area and elsewhere. In 1998, there were more than 130 banking offices, representing 18 financial institutions, operating in Greenville County and holding over 16 18 $5 billion in deposits. Many of these competitors are well established in the Greenville County area. Most of them have substantially greater resources and lending limits than the bank will have and many of these competitors offer services, such as extensive and established branch networks and trust services, that we either do not expect to provide or will not provide initially. Our competitors include large super-regional financial institutions like First Union Bank, Bank of America, BB&T, and Wachovia, large regional financial institutions like Carolina First Bank, and local community banks like Summit National Bank, First Savers Bank, Palmetto Bank, and New Commerce Bank, a new community bank which recently opened an office in Simpsonville, South Carolina and plans to open another office in Mauldin in the third quarter of 1999. We believe that the opportunity created by recent mergers, our management team, and the economic and demographic dynamics of our service area combined with our business strategy will allow us to gain a meaningful share of the area's $5 billion in deposits. BUSINESS STRATEGY Management Philosophy. Greenville First Bank will be the first independent bank organized in the city of Greenville in over ten years. Because there are few locally owned banks left in Greenville, we believe we can offer a unique banking alternative for the market by offering a higher level of customer service and a management team more focused on the needs of the community than most of our competitors. We believe that this approach will be enthusiastically supported by the community. The bank will use the theme "Welcome to Hometown Banking," and it will actively promote it in our target market. While the bank will have the ability to offer a breadth of products similar to large banks, we will emphasize the client relationship. We believe that the proposed community focus of the bank will succeed in this market, and that the area will react favorably to the bank's emphasis on service to small businesses, individuals, and professional concerns. Operating Strategy. In order to achieve the level of prompt, responsive service that we believe will be necessary to attract customers and to develop Greenville First Bank's image as a local bank with an individual focus, we will employ the following operating strategies: - Experienced Senior Management. We have retained senior management with many years of experience in the financial services industry within our primary market area. Our senior management team currently consists of the following individuals: - Art Seaver will lead the management teams as the president and chief executive officer for both Greenville First Bancshares and Greenville First Bank. He has lived in Greenville for over 25 years and has over 13 years of banking experience in the Greenville area. Mr. Seaver began his banking career in 1986 with C&S National Bank and in 1992 joined Greenville National Bank. As senior vice president and executive officer, he was primarily responsible for business development, deposit product offerings, communication systems, and strategic planning. Mr. Seaver left Greenville National Bank in February 1999 following its acquisition by Regions Bank. - Fred Gilmer, Jr. will be a senior vice president for both Greenville First Bancshares and Greenville First Bank. Mr. Gilmer has over 40 years of experience in the financial services industry in the Greenville area. Mr. Gilmer was one of the original 13 employees of Southern Bank and Trust Company in 1961. His career also includes management positions with South Carolina Federal and First Savings Bank. He was most recently the executive officer in charge of client relations for Greenville National Bank. - Jim Austin will be chief financial officer and senior vice president for both Greenville First Bancshares and Greenville First Bank. He has lived in Greenville for over 21 years and has over 20 years of experience in the financial services industry in the Greenville area. Mr. Austin was with KPMG Peat Marwick for 5 years specializing in bank audits, then for 12 years with American Federal Bank as Senior Vice President and Controller. His career also 17 19 includes management positions with Regional Management Corporation and Homegold Financial, Inc. - Other Executives. We are in the process of assembling a management team with significant banking experience. We expect these officers to be individuals who reside in the Greenville area and have local banking experience and a history of service to the community. Because of the recent merger and acquisition activity in the market, we believe there is an abundance of local experienced banking executives who would be interested in joining our community banking effort. - Community-Oriented Board of Directors. Our management team will operate under the direction of our board of directors. As described in the Management Section beginning on page 30, our directors are long time residents and businessmen in the Greenville area, with significant community involvement. These directors are dedicated to the success of the bank, and will play a key part in marketing the new bank in the community. - Client Relationship Management. Greenville First Bank will use a client-based philosophy. This philosophy is the basis of our relationship management initiative. We will focus on the overall relationship with each client as opposed to the general product "push" approach used by larger banks. To implement this strategy, we will establish "relationship teams" consisting of a senior vice president team leader/primary lender, and another senior officer who specializes in matching deposit specialties with clients' needs. With administrative assistance, our relationship teams will be able to provide clients with specific and consistent bankers who are responsible for managing their entire relationship. Executive officers' performance will be measured in part by their ability to maintain and cultivate client relationships. We believe this structure will ensure effective responsiveness to our clients' financial needs, a hallmark of the community approach to banking. - Convenience Oriented Service Centers and ATMs. Within the first four years of operation, we plan to open two non-traditional "service centers" located strategically in our primary service area. These "service centers" will provide limited bank functions, including deposit and ATM services. Loan production services will remain concentrated in our main office. We believe these "service centers" will expand our market presence and provide additional convenience to our customers. The bank will provide additional convenience through strategically placed ATMs. - Local Services and Decision Making. Clients will enjoy a professional bank environment with access to their specific bank officer and relationship team. We will emphasize local decision-making with experienced bankers, attention to lower employee turnover, and professional and responsive service. - Capitalize on Need for Community Banks. The current trend of consolidation in the banking industry has led to the recent acquisition of three locally owned community banks in the Greenville County area of South Carolina by large national and regional banks headquartered outside of Greenville County. In 1998, over 90% of the total deposits were controlled by financial institutions headquartered outside of the area. Despite the market-share dominance of larger super-regional and regional banks, excluding the acquisition of local banks in the area, total deposits for these large banks actually fell from 1997 to 1998, while total deposits during the same period increased 3%. We believe these numbers reflect the desire of the residents of this area for a community bank relationship, and that they will support our new local bank as a result. - Focus on Under-Serviced Market Sector. Although size gives larger banks advantages in competing for business from large corporations, including higher lending limits and the ability to offer services in other areas of South Carolina and Greenville County, we believe that there is a void in the community banking market in the Greenville County area and that we can successfully fill this void. We will not compete with large institutions for the primary banking relationships of large corporations, but will compete for niches in this business and for the consumer business of their 18 20 employees. We will also focus on small- to medium-sized businesses and their employees. This includes retail, service, wholesale distribution, manufacturing, and international businesses. We intend to attract such businesses based on relationships and contacts which the bank's directors and management have outside our core service area. LENDING ACTIVITIES General. We intend to emphasize a range of lending services, including real estate, commercial, and equity-line and consumer loans to individuals and small- to medium-sized businesses and professional concerns that are located in or conduct a substantial portion of their business in the bank's market area. We will compete for these loans with competitors who are well established in the Greenville County area and have greater resources and lending limits. As a result, we may have to charge lower interest rates to attract borrowers. The well established banks in the Greenville County area will make proportionately more loans to medium- to large-sized businesses than we will. Many of the bank's anticipated commercial loans will likely be made to small- to medium-sized businesses which may be less able to withstand competitive, economic, and financial conditions than larger borrowers. Loan Approval and Review. The bank's loan approval policies will provide for various levels of officer lending authority. When the amount of aggregate loans to a single borrower exceeds that individual officer's lending authority, the loan request will be considered and approved by an officer with a higher lending limit or the officers' loan committee. The bank will establish an officers' loan committee that has lending limits, and any loan in excess of this lending limit will be approved by the directors' loan committee. The bank will not make any loans to any director, officer, or employee of the bank unless the loan is approved by the board of directors of the bank and is made on terms not more favorable to such person than would be available to a person not affiliated with the bank. The bank currently intends to adhere to Federal National Mortgage Association and Federal Home Loan Mortgage Corporation guidelines in its mortgage loan review process, but may choose to alter this policy in the future. The bank expects to sell residential mortgage loans that it originates on the secondary market. Loan Distribution. We estimate that our initial percentage distribution of our loans for the first year will be as follows: Real Estate 50% Commercial Loans 35% Equity Line and Consumer Loans 15%
These are estimates only. Our actual deposit and loan distribution will depend on our customers and vary initially and over time. Allowance for Loan Losses. We will maintain an allowance for loan losses, which we will establish through a provision for loan losses charged against income. We will charge loans against this allowance when we believe that the collectibility of the principle is unlikely. The allowance will be an estimated amount that we believe will be adequate to absorb losses inherent in the loan portfolio based on evaluations of its collectibility. We anticipate that initially our allowance for loan losses will equal approximately 1% of the average outstanding balance of our loans. Over time, we will base the loan loss reserves on our evaluation of factors such as changes in the nature and volume of the loan portfolio, overall portfolio quality, specific problem loans and commitments, and current anticipated economic conditions that may affect the borrower's ability to pay. 19 21 Lending Limits. The bank's lending activities will be subject to a variety of lending limits imposed by federal law. In general, the bank will be subject to a legal limit on loans to a single borrower equal to 15% of the bank's capital and unimpaired surplus. Different limits may apply in certain circumstances based on the type of loan or the nature of the borrower, including the borrower's relationship to the bank. These limits will increase or decrease as the bank's capital increases or decreases. The bank will initially have a self-imposed loan limit of $1,000,000, which represents approximately 80% of our legal lending limit of $1,275,000. Unless the bank is able to sell participations in its loans to other financial institutions, the bank will not be able to meet all of the lending needs of loan customers requiring aggregate extensions of credit above these limits. Credit Risk. The principal credit risk associated with each category of loans is the creditworthiness of the borrower. Borrower creditworthiness is affected by general economic conditions and the strength of the manufacturing, services, and retail market segments. General economic factors affecting a borrower's ability to repay include interest, inflation, and employment rates and the strength of local and national economy, as well as other factors affecting a borrower's customers, suppliers, and employees. Real Estate Loans. We expect that loans secured by first or second mortgages on real estate will make up 50% of the bank's loan portfolio. These loans will generally fall into one of three categories: commercial real estate loans, construction and development loans, or residential real estate loans. Each of these categories is discussed in more detail below, including their specific risks. Home equity loans are not included because they are classified as consumer loans, which are discussed below. Interest rates for all categories may be fixed or adjustable, and will more likely be fixed for shorter-term loans. The bank will generally charge an origination fee for each loan. Real estate loans are subject to the same general risks as other loans. They are particularly sensitive to fluctuations in the value of real estate, which is generally the underlying security for real estate loans. On first and second mortgage loans we would typically not advance more than 80% of the lesser of the cost or appraised value of the property. We will require a valid mortgage lien on all real property loans along with a title lien policy which insures the validity and priority of the lien. We will also require borrowers to obtain hazard insurance policies and flood insurance if applicable. We will have the ability to originate some real estate loans for sale into the secondary market. We can limit our interest rate and credit risk on these loans by locking the interest rate for each loan with the secondary investor and receiving the investor's underwriting approval prior to originating the loan. - Commercial Real Estate Loans. Commercial real estate loans will generally have terms of five years or less, although payments may be structured on a longer amortization basis. We will evaluate each borrower on an individual basis and attempt to determine its business risks and credit profile. We will attempt to reduce credit risk in the commercial real estate portfolio by emphasizing loans on owner-occupied office and retail buildings where the loan-to-value ratio, established by independent appraisals, does not exceed 80%. We will also generally require that debtor cash flow exceed 115% of monthly debt service obligations. We will typically review all of the personal financial statements of the principal owners and require their personal guarantees. These reviews generally reveal secondary sources of payment and liquidity to support a loan request. - Construction and Development Real Estate Loans. We will offer adjustable and fixed rate residential and commercial construction loans to builders and developers and to consumers who wish to build their own home. The term of construction and development loans will generally be limited to eighteen months, although payments may be structured on a longer amortization basis. Most loans will mature and require payment in full upon the sale of the property. Construction and development loans generally carry a higher degree of risk than long term financing of existing properties. Repayment depends on the ultimate completion of the project and usually on the sale of the property. Specific risks include: 20 22 - cost overruns; - mismanaged construction; - inferior or improper construction techniques; - economic changes or downturns during construction; - a downturn in the real estate market; - rising interest rates which may prevent sale of the property; and - failure to sell completed projects in a timely manner. We will attempt to reduce risk by obtaining personal guarantees where possible, and by keeping the loan-to-value ratio of the completed project below specified percentages. We may also reduce risk by selling participations in larger loans to other institutions when possible. - Residential Real Estate Loans. Residential real estate loans will generally have longer terms up to 30 years. We will offer fixed and adjustable rate mortgages, and we intend to sell some or all of the residential real estate loans that we generate in the secondary market. By selling these loans in the secondary market, we can significantly reduce our exposure to credit risk because the loans will be underwritten through a third party agent without any recourse against the bank. Commercial Loans. The bank will make loans for commercial purposes in various lines of businesses. Equipment loans will typically be made for a term of five years or less at fixed or variable rates, with the loan fully amortized over the term and secured by the financed equipment and with a loan-to-value ratio of 80% or less. We will focus our efforts on commercial loans of less than $500,000. Working capital loans will typically have terms not exceeding one year and will usually be secured by accounts receivable, inventory, or personal guarantees of the principals of the business. For loans secured by accounts receivable or inventory, principal will typically be repaid as the assets securing the loan are converted into cash, and in other cases principal will typically be due at maturity. Trade letters of credit, standby letters of credit, and foreign exchange will be handled through a correspondent bank as agent for the bank. We expect to also offer small business loans utilizing government enhancements such as the Small Business Administration's 7(a) program and SBA's 504 programs, and Appalachian Development Council. These loans will typically be partially guaranteed by the government which may help to reduce the bank's risk. Government guarantees of SBA loans will not exceed 80% of the loan value, and will generally be less. Consumer Loans. The bank will make a variety of loans to individuals for personal and household purposes, including secured and unsecured installment loans and revolving lines of credit such as credit cards. Installment loans typically will carry balances of less than $50,000 and be amortized over periods up to 60 months. Consumer loans may be offered on a single maturity basis where a specific source of repayment is available. Revolving loan products will typically require monthly payments of interest and a portion of the principal. Consumer loans are generally considered to have greater risk than first or second mortgages on real estate. We will also offer home equity loans. Our underwriting criteria for and the risks associated with home equity loans and lines of credit will generally be the same as those for first mortgage loans. Home equity lines of credit will typically have terms of 15 years or less, will typically carry balances less than $125,000, and may extend up to 100% of the available equity of each property. DEPOSIT SERVICES We intend to offer a full range of deposit services that are typically available in most banks and savings and loan associations, including checking accounts, commercial accounts, savings accounts, and other time deposits of various types, ranging from daily money market accounts to longer-term certificates of deposit. The transaction accounts and time certificates will be tailored to our principal market area at rates competitive to those offered in the Greenville County area. In addition, we intend to offer retirement account services, such as IRAs. We intend to solicit these accounts from individuals, businesses, and other organizations. 21 23 Deposit Distribution. We estimate that our initial percentage distribution of our deposits for the first year will be as follows: Demand Deposit 12% Savings & Money Market 32% Time and Savings Deposits 5% CD's under $100,000 34% CD's over $100,000 17% OTHER BANKING SERVICES We anticipate that the bank will offer other bank services including cash management services such as sweep accounts for commercial businesses. In addition, lines of credit, 24-hour telephone banking and PC/ internet delivery are being developed. We will offer drive up ATMs, safe deposit boxes, direct deposit of payroll and social security checks, U.S. Savings Bonds, travelers checks, and automatic drafts for various accounts. We plan for the bank to become associated with the Honor and Cirrus ATM networks that may be used by the bank's customers throughout the country. We believe that by being associated with a shared network of ATMs, we will be better able to serve our clients and will be able to attract clients who are accustomed to the convenience of using ATMs, although we do not believe that maintaining this association will be critical to our success. We intend to begin offering these services shortly after opening the bank. We also plan to offer a debit card and VISA credit card services through a correspondent bank as an agent for the bank. We do not expect the bank to exercise trust powers during its initial years of operation. MARKET SHARE In 1998, deposits in Greenville County exceeded $5 billion. The average annual growth rate in deposits in Greenville County over the last five years was 6.8%. Based on a growth rate of 4%, the deposits in Greenville County will grow to approximately $6.2 billion by 2004. Our plan over the next five years is to reach a 1.7% market share with deposits in excess of $100 million. Of course, there can be no assurances that we will accomplish these objectives. EMPLOYEES We anticipate that, upon commencement of operations, the bank will have approximately 14 full time employees and one part time employee. By the end of 2000, we anticipate that it will have approximately 22 full time employees and one part time employee operating out of the bank's permanent facility. Greenville First Bancshares, as the holding company for the bank, will not have any employees other than its officers. LEGAL PROCEEDINGS Neither Greenville First Bancshares, Greenville First Bank, nor any of their properties are subject to any material legal proceedings. 22 24 SUPERVISION AND REGULATION Both Greenville First Bancshares and Greenville First Bank are subject to extensive state and federal banking laws and regulations which impose specific requirements or restrictions on and provide for general regulatory oversight of virtually all aspects of operations. These laws and regulations are generally intended to protect depositors, not shareholders. The following summary is qualified by reference to the statutory and regulatory provisions discussed. Changes in applicable laws or regulations may have a material effect on our business and prospects. Beginning with the enactment of the Financial Institution Report Recovery and Enforcement Act in 1989 and following with the FDIC Improvement Act in 1991, numerous additional regulatory requirements have been placed on the banking industry in the past several years, and additional changes have been proposed. Our operations may be affected by legislative changes and the policies of various regulatory authorities. We cannot predict the effect that fiscal or monetary policies, economic control, or new federal or state legislation may have in the future on our business and earnings. GREENVILLE FIRST BANCSHARES Because it will own the outstanding capital stock of the bank, Greenville First Bancshares will be a bank holding company under the federal Bank Holding Company Act of 1956 and the South Carolina Banking and Branching Efficiency Act. Our activities will also be governed by the Glass-Steagall Act of 1933. The Bank Holding Company Act. Under the Bank Holding Company Act, Greenville First Bancshares will be subject to periodic examination by the Federal Reserve and required to file periodic reports of its operations and any additional information that the Federal Reserve may require. Our activities at the bank and holding company level will be limited to: - banking, and managing or controlling banks; - furnishing services to or performing services for its subsidiaries; and - engaging in other activities that the Federal Reserve determines to be so closely related to banking and managing or controlling banks as to be a proper incident thereto. Investments, Control, and Activities. With certain limited exceptions, the Bank Holding Company Act requires every bank holding company to obtain the prior approval of the Federal Reserve before: - acquiring substantially all the assets of any bank; - acquiring direct or indirect ownership or control of any voting shares of any bank if after such acquisition it would own or control more than 5% of the voting shares of such bank (unless it already owns or controls the majority of such shares); or - merging or consolidating with another bank holding company. In addition, and subject to certain exceptions, the Bank Holding Company Act and the Change in Bank Control Act, together with regulations thereunder, require Federal Reserve approval prior to any person or company acquiring "control" of a bank holding company. Control is conclusively presumed to exist if an individual or company acquires 25% or more of any class of voting securities of the bank holding company. Control is rebuttably presumed to exist if a person acquires 10% or more, but less than 25%, of any class of voting securities and either Greenville First Bancshares has registered securities under Section 12 of the Securities Exchange Act of 1934 or no other person owns a greater percentage of that class of voting securities immediately after the transaction. We will register our common stock under the Securities Exchange Act of 1934. The regulations provide a procedure for challenge of the rebuttable control presumption. Under the Bank Holding Company Act, a bank holding company is generally prohibited from engaging in, or acquiring direct or indirect control of more than 5% of the voting shares of any company engaged in nonbanking activities unless the Federal Reserve Board, by order or regulation, has found those activities to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. Some of the 23 25 activities that the Federal Reserve Board has determined by regulation to be proper incidents to the business of a bank holding company include: - making or servicing loans and certain types of leases; - engaging in certain insurance and discount brokerage activities; - performing certain data processing services; - acting in certain circumstances as a fiduciary or investment or financial adviser; - owning savings associations; and - making investments in certain corporations or projects designed primarily to promote community welfare. The Federal Reserve Board imposes certain capital requirements on Greenville First Bancshares under the Bank Holding Company Act, including a minimum leverage ratio and a minimum ratio of "qualifying" capital to risk-weighted assets. These requirements are described below under "Capital Regulations." Subject to its capital requirements and other restrictions, Greenville First Bancshares is able to borrow money to make a capital contribution to the bank, and these loans may be repaid from dividends paid from the bank to Greenville First Bancshares. Our ability to pay dividends will be subject to regulatory restrictions as described below in "The Bank - Dividends." Greenville First Bancshares is also able to raise capital for contribution to the bank by issuing securities without having to receive regulatory approval, subject to compliance with federal and state securities laws. Source of Strength; Cross-Guarantee. In accordance with Federal Reserve Board policy, Greenville First Bancshares will be expected to act as a source of financial strength to the bank and to commit resources to support the bank in circumstances in which Greenville First Bancshares might not otherwise do so. Under the Bank Holding Company Act, the Federal Reserve Board may require a bank holding company to terminate any activity or relinquish control of a nonbank subsidiary, other than a nonbank subsidiary of a bank, upon the Federal Reserve Board's determination that such activity or control constitutes a serious risk to the financial soundness or stability of any subsidiary depository institution of the bank holding company. Further, federal bank regulatory authorities have additional discretion to require a bank holding company to divest itself of any bank or nonbank subsidiary if the agency determines that divestiture may aid the depository institution's financial condition. Glass-Steagall Act. We will also be restricted by the provisions of the Glass-Steagall Act, which prohibit Greenville First Bancshares from owning subsidiaries that are engaged principally in the issue, flotation, underwriting, public sale, or distribution of securities. The interpretation, scope, and application of the provisions of the Glass-Steagall Act currently are being considered and reviewed by regulators and legislators, and the interpretation and application of those provisions have been challenged in the federal courts. South Carolina State Regulation. As a bank holding company registered under the South Carolina Banking and Branching Efficiency Act, we are subject to limitations on sale or merger and to regulation by the South Carolina Board of Financial Institutions. Prior to acquiring the capital stock of a national bank, we are not required to obtain the approval of the Board, but we must notify them at least 15 days prior to doing so. Prior to engaging in the acquisition of nonbanking institutions or state chartered banks, we must receive the Board's approval, and we must file periodic reports with respect to our financial condition and operations, management, and intercompany relationships between Greenville First Bancshares and its subsidiaries. THE BANK The bank will operate as a national banking association incorporated under the laws of the United States and subject to examination by the Office of the Comptroller of the Currency. Deposits in the bank will be insured by the FDIC up to a maximum amount, which is generally $100,000 per depositor subject to aggregation rules. 24 26 The Office of the Comptroller of the Currency and the FDIC will regulate or monitor virtually all areas of the bank's operations, including: - security devices and procedures; - adequacy of capitalization and loss reserves; - loans; - investments; - borrowings; - deposits; - mergers; - issuances of securities; - payment of dividends; - interest rates payable on deposits; - interest rates or fees chargeable on loans; - establishment of branches; - corporate reorganizations; - maintenance of books and records; and - adequacy of staff training to carry on safe lending and deposit gathering practices. The Office of the Comptroller of the Currency requires the bank to maintain specified capital ratios and imposes limitations on the bank's aggregate investment in real estate, bank premises, and furniture and fixtures. The Office of the Comptroller of the Currency will also require the bank to prepare quarterly reports on the bank's financial condition and to conduct an annual audit of its financial affairs in compliance with its minimum standards and procedures. Under the FDIC Improvement Act, all insured institutions must undergo regular on site examinations by their appropriate banking agency. The cost of examinations of insured depository institutions and any affiliates may be assessed by the appropriate agency against each institution or affiliate as it deems necessary or appropriate. Insured institutions are required to submit annual reports to the FDIC, their federal regulatory agency, and state supervisor when applicable. The FDIC Improvement Act directs the FDIC to develop a method for insured depository institutions to provide supplemental disclosure of the estimated fair market value of assets and liabilities, to the extent feasible and practicable, in any balance sheet, financial statement, report of condition or any other report of any insured depository institution. The FDIC Improvement Act also requires the federal banking regulatory agencies to prescribe, by regulation, standards for all insured depository institutions and depository institution holding companies relating, among other things, to the following: - internal controls; - information systems and audit systems; - loan documentation; - credit underwriting; - interest rate risk exposure; and - asset quality. National banks and their holding companies which have been chartered or registered or have undergone a change in control within the past two years or which have been deemed by the Office of the Comptroller of the Currency or the Federal Reserve Board to be troubled institutions must give the Office of the Comptroller of the Currency or the Federal Reserve Board 30 days prior notice of the appointment of any senior executive officer or director. Within the 30 day period, the Office of the Comptroller of the Currency or the Federal Reserve Board, as the case may be, may approve or disapprove any such appointment. Deposit Insurance. The FDIC establishes rates for the payment of premiums by federally insured banks and thrifts for deposit insurance. A separate Bank Insurance Fund and Savings Association Insurance Fund are maintained for commercial banks and savings associations with insurance premiums from the industry used to 25 27 offset losses from insurance payouts when banks and thrifts fail. In 1993, the FDIC adopted a rule which establishes a risk-based deposit insurance premium system for all insured depository institutions. Under this system, until mid-1995 depository institutions paid to Bank Insurance Fund or Savings Association Insurance Fund from $0.23 to $0.31 per $100 of insured deposits depending on its capital levels and risk profile, as determined by its primary federal regulator on a semiannual basis. Once the Bank Insurance Fund reached its legally mandated reserve ratio in mid-1995, the FDIC lowered premiums for well-capitalized banks, eventually eliminating premiums for well-capitalized banks, with a minimum semiannual assessment of $1,000. However, in 1996 Congress enacted the Deposit Insurance Funds Act of 1996, which eliminated even this minimum assessment. It also separated the Financial Corporation assessment to service the interest on its bond obligations. The amount assessed on individual institutions, including the bank, by Financial Corporation assessment is in addition to the amount paid for deposit insurance according to the risk-related assessment rate schedule. Increases in deposit insurance premiums or changes in risk classification will increase the bank's cost of funds, and we may not be able to pass these costs on to our customers. Transactions With Affiliates and Insiders. The bank will be subject to the provisions of Section 23A of the Federal Reserve Act, which places limits on the amount of loans or extensions of credit to, or investments in, or certain other transactions with, affiliates and on the amount of advances to third parties collateralized by the securities or obligations of affiliates. The aggregate of all covered transactions is limited in amount, as to any one affiliate, to 10% of the bank's capital and surplus and, as to all affiliates combined, to 20% of the bank's capital and surplus. Furthermore, within the foregoing limitations as to amount, each covered transaction must meet specified collateral requirements. Compliance is also required with certain provisions designed to avoid the taking of low quality assets. The bank will also be subject to the provisions of Section 23B of the Federal Reserve Act which, among other things, prohibits an institution from engaging in certain transactions with certain affiliates unless the transactions are on terms substantially the same, or at least as favorable to such institution or its subsidiaries, as those prevailing at the time for comparable transactions with nonaffiliated companies. The bank will be subject to certain restrictions on extensions of credit to executive officers, directors, certain principal shareholders, and their related interests. Such extensions of credit (i) must be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with third parties and (ii) must not involve more than the normal risk of repayment or present other unfavorable features. Dividends. A national bank may not pay dividends from its capital. All dividends must be paid out of undivided profits then on hand, after deducting expenses, including reserves for losses and bad debts. In addition, a national bank is prohibited from declaring a dividend on its shares of common stock until its surplus equals its stated capital, unless there has been transferred to surplus no less than one-tenth of the bank's net profits of the preceding two consecutive half-year periods (in the case of an annual dividend). The approval of the Office of the Comptroller of the Currency is required if the total of all dividends declared by a national bank in any calendar year exceeds the total of its net profits for that year combined with its retained net profits for the preceding two years, less any required transfers to surplus. Branching. National banks are required by the National Bank Act to adhere to branch office banking laws applicable to state banks in the states in which they are located. Under current South Carolina law, the bank may open branch offices throughout South Carolina with the prior approval of the Office of the Comptroller of the Currency. In addition, with prior regulatory approval, the bank will be able to acquire existing banking operations in South Carolina. Furthermore, federal legislation has recently been passed which permits interstate branching. The new law permits out-of-state acquisitions by bank holding companies, interstate branching by banks if allowed by state law, and interstate merging by banks. Community Reinvestment Act. The Community Reinvestment Act requires that, in connection with examinations of financial institutions within their respective jurisdictions, the Federal Reserve, the FDIC, or the Office of the Comptroller of the Currency, shall evaluate the record of each financial institution in meeting the credit needs of its local community, including low and moderate income neighborhoods. These factors are also considered in evaluating mergers, acquisitions, and applications to open a branch or facility. Failure to adequately meet these criteria could impose additional requirements and limitations on the bank. 26 28 Other Regulations. Interest and other charges collected or contracted for by the bank are subject to state usury laws and federal laws concerning interest rates. The bank's loan operations are also subject to federal laws applicable to credit transactions, such as: - the federal Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers; - the Home Mortgage Disclosure Act of 1975, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves; - the Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit; - the Fair Credit Reporting Act of 1978, governing the use and provision of information to credit reporting agencies; - the Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; and - the rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws. The deposit operations of the bank also are subject to: - the Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; and - the Electronic Funds Transfer Act and Regulation E issued by the Federal Reserve Board to implement that act, which governs automatic deposits to and withdrawals from deposit accounts and customers' rights and liabilities arising from the use of automated teller machines and other electronic banking services. Capital Regulations. The federal bank regulatory authorities have adopted risk-based capital guidelines for banks and bank holding companies that are designed to make regulatory capital requirements more sensitive to differences in risk profiles among banks and bank holding companies and account for off-balance sheet items. The guidelines are minimums, and the federal regulators have noted that banks and bank holding companies contemplating significant expansion programs should not allow expansion to diminish their capital ratios and should maintain ratios in excess of the minimums. We have not received any notice indicating that either Greenville First Bancshares or Greenville First Bank is subject to higher capital requirements. The current guidelines require all bank holding companies and federally-regulated banks to maintain a minimum risk-based total capital ratio equal to 8%, of which at least 4% must be Tier 1 capital. Tier 1 capital includes common shareholders' equity, qualifying perpetual preferred stock, and minority interests in equity accounts of consolidated subsidiaries, but excludes goodwill and most other intangibles and excludes the allowance for loan and lease losses. Tier 2 capital includes the excess of any preferred stock not included in Tier 1 capital, mandatory convertible securities, hybrid capital instruments, subordinated debt and intermediate term-preferred stock, and general reserves for loan and lease losses up to 1% of risk-weighted assets. Under these guidelines, banks' and bank holding companies' assets are given risk-weights of 0%, 20%, 50%, or 100%. In addition, certain off-balance sheet items are given credit conversion factors to convert them to asset equivalent amounts to which an appropriate risk-weight applies. These computations result in the total risk-weighted assets. Most loans are assigned to the 100% risk category, except for first mortgage loans fully secured by residential property and, under certain circumstances, residential construction loans, both of which carry a 50% rating. Most investment securities are assigned to the 20% category, except for municipal or state revenue bonds, which have a 50% rating, and direct obligations of or obligations guaranteed by the United States Treasury or United States Government agencies, which have a 0% rating. The federal bank regulatory authorities have also implemented a leverage ratio, which is equal to Tier 1 capital as a percentage of average total assets less intangibles, to be used as a supplement to the risk-based 27 29 guidelines. The principal objective of the leverage ratio is to place a constraint on the maximum degree to which a bank holding company may leverage its equity capital base. The minimum required leverage ratio for top-rated institutions is 3%, but most institutions are required to maintain an additional cushion of at least 100 to 200 basis points. The FDIC Improvement Act established a new capital-based regulatory scheme designed to promote early intervention for troubled banks which requires the FDIC to choose the least expensive resolution of bank failures. The new capital-based regulatory framework contains five categories of compliance with regulatory capital requirements, including "well capitalized," "adequately capitalized," "undercapitalized," "significantly undercapitalized," and "critically undercapitalized." To qualify as a "well capitalized" institution, a bank must have a leverage ratio of no less than 5%, a Tier 1 risk-based ratio of no less than 6%, and a total risk-based capital ratio of no less than 10%, and the bank must not be under any order or directive from the appropriate regulatory agency to meet and maintain a specific capital level. Initially, we will qualify as "well capitalized." Under the FDIC Improvement Act regulations, the applicable agency can treat an institution as if it were in the next lower category if the agency determines (after notice and an opportunity for hearing) that the institution is in an unsafe or unsound condition or is engaging in an unsafe or unsound practice. The degree of regulatory scrutiny of a financial institution increases, and the permissible activities of the institution decreases, as it moves downward through the capital categories. Institutions that fall into one of the three undercapitalized categories may be required to do some or all of the following: - submit a capital restoration plan; - raise additional capital; - restrict their growth, deposit interest rates, and other activities; - improve their management; - eliminate management fees; or - divest themselves of all or a part of their operations. Bank holding companies controlling financial institutions can be called upon to boost the institutions' capital and to partially guarantee the institutions' performance under their capital restoration plans. These capital guidelines can affect us in several ways. If we grow the bank's loan portfolio at a rapid pace, its capital may be depleted too quickly and a capital infusion from the holding company may be required, which could impact our ability to pay dividends. Our capital levels will initially be more than adequate; however, rapid growth, poor loan portfolio performance, poor earnings performance, or a combination of these factors could change our capital position in a relatively short period of time. The FDIC Improvement Act requires the federal banking regulators to revise the risk-based capital standards to provide for explicit consideration of interest-rate risk, concentration of credit risk, and the risks of untraditional activities. We are uncertain what effect these regulations would have. Failure to meet these capital requirements would mean that a bank would be required to develop and file a plan with its primary federal banking regulator describing the means and a schedule for achieving the minimum capital requirements. In addition, such a bank would generally not receive regulatory approval of any application that requires the consideration of capital adequacy, such as a branch or merger application, unless the bank could demonstrate a reasonable plan to meet the capital requirement within a reasonable period of time. Enforcement Powers. The Financial Institution Reform Recovery and Enforcement Act expanded and increased civil and criminal penalties available for use by the federal regulatory agencies against depository institutions and certain "institution-affiliated parties." Institution-affiliated parties primarily include management, employees, and agents of a financial institution, as well as independent contractors and consultants such as attorneys and accountants and others who participate in the conduct of the financial institution's affairs. These practices can include the failure of an institution to timely file required reports or the filing of false or misleading information or the submission of inaccurate reports. Civil penalties may be as high as $1,000,000 a day for such 28 30 violations. Criminal penalties for some financial institution crimes have been increased to twenty years. In addition, regulators are provided with greater flexibility to commence enforcement actions against institutions and institution-affiliated parties. Possible enforcement actions include the termination of deposit insurance. Furthermore, banking agencies' power to issue cease-and-desist orders were expanded. Such orders may, among other things, require affirmative action to correct any harm resulting from a violation or practice, including restitution, reimbursement, indemnification's or guarantees against loss. A financial institution may also be ordered to restrict its growth, dispose of certain assets, rescind agreements or contracts, or take other actions as determined by the ordering agency to be appropriate. Recent Legislative Developments. From time to time, various bills are introduced in the United States Congress with respect to the regulation of financial institutions. Some of these proposals, if adopted, could significantly change the regulation of banks and the financial services industry. We cannot predict whether any of these proposals will be adopted or, if adopted, what effect these would have. Effect of Governmental Monetary Policies. Our earnings are affected by domestic economic conditions and the monetary and fiscal policies of the United States government and its agencies. The Federal Reserve Bank's monetary policies have had, and are likely to continue to have, an important impact on the operating results of commercial banks through its power to implement national monetary policy in order, among other things, to curb inflation or combat a recession. The monetary policies of the Federal Reserve Board have major effects upon the levels of bank loans, investments and deposits through its open market operations in United States government securities and through its regulation of the discount rate on borrowings of member banks and the reserve requirements against member bank deposits. It is not possible to predict the nature or impact of future changes in monetary and fiscal policies. 29 31 MANAGEMENT GENERAL The following table sets forth the number and percentage of outstanding shares of common stock we expect to be beneficially owned by the organizers and executive officers after the completion of this offering. All of our organizers will serve as directors. The addresses of our organizers are the same as the address of the bank. Prior to the offering, Art Seaver purchased ten shares of common stock for $10.00 per share. We will redeem this stock after the offering. This table includes shares based on the "beneficial ownership" concepts as defined by the SEC. Beneficial ownership includes spouses, minor children, and other relatives residing in the same household, and trusts, partnerships, corporations or deferred compensation plans which are affiliated with the principal. This table does not reflect warrants that will be granted to each organizer to purchase one share of common stock for every two shares of common stock purchased by the organizers during the offering because these warrants will not be exercisable within 60 days of the date of this prospectus.
SHARES ANTICIPATED TO BE OWNED FOLLOWING THE OFFERING -------------------------------- NAME OF BENEFICIAL OWNER NUMBER PERCENT ------------------------ ------ ------- DIRECTORS AND EXECUTIVE OFFICERS James M. Austin, III 6,000 0.50% Andrew B. Cajka, Jr. 10,000 0.83% Mark A. Cothran 25,000 2.08% Leighton M. Cubbage 60,000 5.00% Fred Gilmer, Jr. 16,000 1.33% Tecumseh Hooper, Jr. 15,000 1.25% Rudolph G. Johnstone, III 10,500 0.88% Keith J. Marrero 4,000 0.33% James B. Orders, III 20,000 1.67% R. Arthur Seaver, Jr. 12,000 1.00% William B. Sturgis 60,000 5.00% All directors and executive officers as a 238,500 19.88% group (11 persons)
EXECUTIVE OFFICERS AND DIRECTORS OF GREENVILLE FIRST BANCSHARES The following table sets forth biographical information about our executive officers and directors. The CEO and president, senior vice presidents, chief financial officer, and directors of Greenville First Bancshares will also hold these same positions with Greenville First Bank. Greenville First Bancshares' articles of incorporation provide for a classified board of directors so that, as nearly as possible, one-third of the directors are elected each year to serve three-year terms. The terms of office of the classes of directors expire as follows: Class I at the 2000 annual meeting of shareholders, Class II at the 2001 annual meeting of shareholders, and Class III at the 2002 annual meeting of shareholders. Executive officers serve at the discretion of the board of directors. 30 32
POSITION WITH NAME AGE GREENVILLE FIRST BANCSHARES ---- --- --------------------------- James M. Austin, III 42 Senior Vice President, CFO Andrew B. Cajka, Jr. 40 Director Mark A. Cothran 41 Director Leighton M. Cubbage 46 Director Fred Gilmer, Jr. 63 Director, Senior Vice President Tecumseh Hooper, Jr. 52 Director Rudolph G. Johnstone, III , M.D. 39 Director Keith J. Marrero 39 Director James B. Orders, III 46 Director, Chair R. Arthur Seaver, Jr. 35 Director, CEO, President William B. Sturgis 64 Director
James "Jim" M. Austin, III will be the senior vice president and chief financial officer of Greenville First Bank. He has over 20 years of experience in the financial services industry. From 1978 to 1983, Mr. Austin was employed by KPMG Peat Marwick specializing in bank audits. Mr. Austin was employed for 12 years with American Federal Bank as controller and senior vice president responsible for the financial accounting and budgeting. From 1995 until 1997, Mr. Austin was the senior vice president and chief financial officer of Regional Management Corporation, a 58-office consumer finance company where he was responsible for the finance and operations area of the company. From 1997 until July 1999, he was the director of corporate finance for Homegold Financial, a national sub-prime financial service company that specializes in mortgage loan originations. Mr. Austin is a 1978 graduate of the University of South Carolina with degrees in accounting and finance. He is also a Certified Public Accountant and graduate of the University of Georgia's Executive Management's Savings Bank program. He is a graduate of Leadership Greenville and is active in the First Presbyterian Church. He has served on the community boards of River Place Festival, Junior Achievement, and Pendleton Place, and he is the past president of the Financial Manager's Society of South Carolina and former board member of the Young Manager's Division of the Community of Financial Institutions of South Carolina. Andrew B. Cajka , Class III Director, is the founder and president of Southern Hospitality Group, LLC, a hotel management and development company in Greenville, South Carolina. Prior to starting his own business, Mr. Cajka was a managing member of Hyatt Hotels Corporation from 1986 until 1998. He is a graduate of Bowling Green State University in 1982. Mr. Cajka is currently on the board of directors for the Greenville Chamber of Commerce and past president of the downtown area council. He is a member of the Greenville Hospital Foundation Board, past chairman of the Children's Hospital, Board of Trustee member and chairman of the Foundation at St. Joseph High School, past chairman of the Greenville Tech Hospitality Board, board member of the Urban League, and past chairman of the Greenville Convention and Visitors Bureau. Mark A. Cothran, Class I Director, is the president and principal owner of Cothran Company, Inc., a real estate construction and development company in Greenville, South Carolina. He has been with Cothran Company, Inc. since 1986. Mr. Cothran received his bachelors degree in finance and banking from the University of South Carolina in 1980 and is a licensed real estate broker in the State of South Carolina. He is currently on the board of directors of the Greenville Chamber of Commerce and member of their economic development board. He is past president of the state chapter of NAIOP and past member of the Advisory Board of Greenville National Bank. Leighton M. Cubbage, Class II Director, was the co-founder, president, and chief operating officer of Corporate Telemanagement Group in Greenville, South Carolina from 1989 until 1995, when the company was acquired by LCI International. Since 1995, Mr. Cubbage has been a private investor maintaining investment interests in a telecommunications company, a car dealership, and a trucking company. He is a 1977 graduate of Clemson University with a bachelors degree in political science. Mr. Cubbage is on the board of directors for the Greenville United Way, a member of the Greenville Technical College Foundation Board, and a member of the Clemson University Entrepreneurial Board. 31 33 Fred Gilmer, Jr, Class III Director, will be the senior vice president of Greenville First Bancshares and Greenville First Bank. He is a seasoned banker with over 40 years of experience in the financial industry. He was the executive officer in charge of client relations for Greenville National Bank from 1994 until April 1999, when he resigned to help organize Greenville First Bank. Mr. Gilmer has held executive positions with three other banks in the Greenville area between 1959 and 1995. He graduated from the University of Georgia in 1958, and the LSU Graduate School of Banking of the South in Baton Rouge, Louisiana in 1970. Mr. Gilmer is very active in the Greenville community. He is a graduate of Leadership Greenville and presently serves numerous organizations, including the Greenville Rotary Club, Greenville Chamber of Commerce, YMCA, and the First Presbyterian Church. He is a past board member of Family Children Service, Goodwill Industries, Downtown Area Council, Greenville Little Theater, Greenville Cancer Society, South Carolina Arthritis Foundation, Freedom Weekend Aloft, and the Greenville Chamber of Commerce. Tecumseh "Tee" Hooper, Jr., Class III Director, is the president of IKON Office Solutions in Greenville, South Carolina. He is also a director of Homegold, Inc., a sub-prime mortgage lender and a director of Peregrine Energy, Inc., an energy management company. From 1994 until 1997, he served as a director of Carolina Investors, a savings and loan institution. Mr. Hooper graduated from The Citadel in 1969 with a degree in business administration, and he received a Masters in Business Administration from the University of South Carolina in 1971. Mr. Hooper has served the community as a member of the Greenville County Development Board, the Greenville Chamber of Commerce, and the board of directors for Camp Greenville, as well as the vice chairman of communications for the United Way. Mr. Hooper also serves on the board of directors for Leadership Greenville, Leadership South Carolina, and the YMCA Metropolitan. Rudolph "Trip" G. Johnstone, III, M.D., Class I Director, is a physician practicing with the Cross Creek Asthma, Allergy and Immunology medical clinic. He graduated from Washington & Lee University in 1982 with a degree in biology and from the Medical University of South Carolina in 1986. Mr. Johnstone is active with the Greenville Art Museum and served on the consulting board to Greenville National Bank from 1995 until 1998, when it was acquired by Regions Bank. Keith J. Marrero, Class I Director, is the principal and owner of AMI Architects, an architectural firm located in Greenville, South Carolina that was founded in 1988. He is a registered architect with the South Carolina and Louisiana Boards of Architectural Examiners and the National Council of Architectural Registration Boards. Mr. Marrero is a previous advisory board member of BB&T. He graduated from the University of Notre Dame with a bachelors degree in Architecture in 1983. Mr. Marrero was appointed by former Governor David Beasley to the board of directors of the South Carolina Legacy Trust Fund. He is also an executive committee member of the Greenville Chamber of Commerce, serving as vice chairman of Minority Business. Mr. Marrero is also an advisory board member of the Bi-Lo Center and serves on the Historic Architecture Review Board for the City of Greenville. James B. Orders, III, Class II Director, is the Chairman of the Board for Greenville First Bancshares. He is the president of Park Place Corporation, a company engaged in the manufacture and sale of bedding and other furniture to the wholesale market. Mr. Orders is chairman of Comfortaire Corporation and a director of Orders Realty Co., Inc., a real estate development and management company that is a wholly owned subsidiary of Park Place Corporation. He attended Clemson University from 1970 until 1974. Mr. Orders is the past president of the Downtown Rotary Club, a past member of the advisory board of Greenville National Bank, and a past member of the advisory board of Carolina First Bank. In addition, he is a member of the Lay Christian Association Board and the Downtown Soccer Association Board. R. Arthur "Art" Seaver, Jr., Class I Director, will be the president and chief executive officer of Greenville First Bank. He has over 13 years of banking experience. From 1986 until 1992, Mr. Seaver held various positions with The Citizens & Southern National Bank of South Carolina, including assistant vice president of corporate banking. From 1992 until February 1999, he was with Greenville National Bank, which was acquired by Regions Bank in 1998. He was the senior vice president in charge of Greenville National Bank's liability portion of the balance sheet prior to leaving to form the proposed Greenville First Bank. Mr. Seaver is a 1986 graduate of Clemson University with a bachelors degree in Finance and a 1999 graduate of the BAI Graduate School of Community Bank Management. He is very active in the Greenville community, where he works with numerous 32 34 organizations, including Leadership Greenville, the South Carolina Network of Business and Education Partnership, Junior Achievement, the Greenville Convention and Visitors Bureau, the United Way, and the First Presbyterian Church. William B. Sturgis, Class II Director, held various executive positions with W.R. Grace & Co. from 1984 until his retirement in 1997, including executive vice president of W.R. Grace's worldwide packaging operations and president of its North American Cryovac Division. Mr. Sturgis graduated from Clemson University in 1957 with a degree in chemical engineering and is a graduate of the Advanced Management Program at Harvard. He is active with Clemson University, serving on the Foundation Board, the President's Advisory Council, and the Engineering Advisory Board. He is also an advisory board member of the Peace Center and a member of the Downtown Rotary Club and Presbyterian Community Foundation. Family Relationships. Dr. Johnstone is Mr. Gilmer's stepson. No other director has a family relationship with any other director or executive officer of Greenville First Bancshares. EMPLOYMENT AGREEMENTS We have entered into an employment agreement with Art Seaver for a three-year term, pursuant to which he will serve as the president, the chief executive officer, and a director of Greenville First Bancshares and Greenville First Bank. Mr. Seaver will be paid an initial salary of $123,000, plus his yearly medical insurance premium. He shall receive an annual increase in his salary equal to the previous year's salary times the increase in the Consumer Price Index during the previous year. The board of directors may increase Mr. Seaver's salary above this level, but not below it. He is entitled to receive a bonus of $10,000 upon the opening of the bank and will be eligible to receive an annual bonus of up to 5% of the net pre-tax income of the bank, if the bank meets performance goals set by the board. He will be eligible to participate in any management incentive program of the bank or any long-term equity incentive program and will be eligible for grants of stock options and other awards thereunder. Upon the closing of the offering (or as soon thereafter as an appropriate stock option plan is adopted by the company), Mr. Seaver will be granted options to purchase a number of shares of common stock equal to 5% of the number of shares sold in this offering. These options will vest over a five-year period and will have a term of ten years. Additionally, Mr. Seaver will participate in the bank's retirement, welfare, and other benefit programs and is entitled to a life insurance policy and an accident liability policy and reimbursement for automobile expenses, club dues, and travel and business expenses. Mr. Seaver's employment agreement also provides that following termination of his employment and for a period of twelve months thereafter, he may not (a) compete with the company, the bank, or any of its affiliates by, directly or indirectly, forming, serving as an organizer, director or officer of, or consultant to, or acquiring or maintaining more than 1% passive investment in, a depository financial institution or holding company thereof if such depository institution or holding company has one or more offices or branches within radius of thirty miles from the main office of the company or any branch office of the company, (b) solicit major customers of the bank for the purpose of providing financial services, or (c) solicit employees of the bank for employment. If Mr. Seaver terminates his employment for good cause as that term is defined in the employment agreement or if he is terminated following a change in control of Greenville First Bancshares as defined in the agreement, he will be entitled to severance compensation of his then current monthly salary for a period of 12 months, plus accrued bonus, and all outstanding options and incentives shall vest immediately. DIRECTOR COMPENSATION We intend to pay each of our ten directors $200 for each meeting they attend and $50 for each committee meeting they attend. During the first year we expect to have 12 directors meetings. We expect nine directors to attend each meeting for total directors' fees for the year of $21,600. We also expect to hold 64 committee meetings during the first year. We expect four directors to attend each committee meeting for total fees for the year of $12,800. 33 35 STOCK OPTION PLAN After the offering, we expect to adopt a stock option plan which will permit Greenville First Bancshares to grant options to its officers, directors, and employees. We anticipate that we will initially authorize the issuance of a number of shares under the stock option plan equal to 15% of the shares outstanding after the offering. We do not intend to issue stock options at less than the fair market value of the common stock on the date of grant. STOCK WARRANTS The organizers have invested significant time and effort to form Greenville First Bancshares and Greenville First Bank, and they have individually guaranteed a $600,000 line of credit to Greenville First Bancshares to cover organizational expenses. In recognition of the financial risk and efforts they have undertaken in organizing the bank, each organizer will also receive, for no additional consideration, a warrant to purchase one share of common stock at a purchase price of $10.00 per share for every two shares purchased by that organizer in the offering. Executive officers who are not organizers will not receive warrants. The warrants, which will be represented by separate warrant agreements, will vest over a three year period beginning one year from the date of the completion of the offering and will be exercisable in whole or in part during the ten year period following that date. The warrants and shares issued pursuant to the exercise of such warrants will not be transferable and are subject to compliance with applicable securities laws. If the Office of the Comptroller of the Currency or the FDIC issues a capital directive or other order requiring the bank to obtain additional capital, the warrants will be forfeited if not immediately exercised. The organizers plan to purchase approximately 238,500 shares of common stock for a total investment of $2,385,000. As a result, the organizers will own approximately 19.9% of the common stock outstanding upon completion of the offering. If each organizer exercises his warrant in full, the organizers' ownership of Greenville First Bancshares will increase to 27.0% of the outstanding common stock. ADDITIONAL ORGANIZER PURCHASES Although they have not promised to do so, the organizers may purchase additional shares in the offering, including up to 100% of the offering. All shares purchased by the organizers will be for investment and not intended for resale. Because purchases by the organizers may be substantial, you should not assume that the sale of a specified offering amount indicates the merits of this offering. EXCULPATION AND INDEMNIFICATION Greenville First Bancshares's articles of incorporation contain a provision which, subject to limited exceptions, limits the liability of a director for any breach of duty as a director. There is no limitation of liability for: - a breach of duty involving appropriation of a business opportunity; - an act or omission which involves intentional misconduct or a knowing violation of law; - any transaction from which the director derives an improper personal benefit; or - as to any payments of a dividend or any other type of distribution that is illegal under Section 33-8-330 of the South Carolina Business Corporation Act of 1988. In addition, if such act is amended to authorize further elimination or limitation of the liability of director, then the liability of each director shall be eliminated or limited to the fullest extent permitted by such provisions, as so amended, without further action by the shareholders, unless the law requires such action. The provision does not limit the right of the company or its shareholders to seek injunctive or other equitable relief not involving payments in the nature of monetary damages. 34 36 Greenville First Bancshares's bylaws contain provisions which provide indemnification to directors that is broader than the protection expressly mandated in Sections 33-8-510 and 33-8-520 of the South Carolina Business Corporation Act. To the extent that a director or officer has been successful, on the merits or otherwise, in the defense of any action or proceeding brought by reason of the fact that such person was a director or officer, Sections 33-8-510 and 33-8-520 would require Greenville First Bancshares to indemnify these persons against expenses, including attorney's fees, actually and reasonably incurred in connection with the matter. The South Carolina Business Corporation Act expressly allows Greenville First Bancshares to provide for greater indemnification rights to its officers and directors, subject to shareholder approval. Our board of directors also has the authority to extend to officers, employees, and agents the same indemnification rights held by directors, subject to all of the accompanying conditions and obligations. The board of directors intends to extend indemnification rights to all of its executive officers. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of Greenville First Bancshares pursuant to the foregoing provisions, or otherwise, Greenville First Bancshares has been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS INTERESTS OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS We expect to have banking and other transactions in the ordinary course of business with the organizers, directors, and officers and their affiliates, including members of their families or corporations, partnerships, or other organizations in which such organizers, officers, or directors have a controlling interest, on substantially the same terms, including price, or interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated parties. These transactions are also restricted by our regulatory agencies, including the Federal Reserve Board. For a discussion of the Federal Reserve Board regulations, please see "Transactions with Affiliates and Insiders" on page 26. These transactions are not expected to involve more than the normal risk of collectibility nor present other unfavorable features. Loans to individual directors and officers must also comply with the bank's lending policies, regulatory restrictions, and statutory lending limits, and directors with a personal interest in any loan application will be excluded from the consideration of such loan application. We intend for all of our transactions with organizers or other affiliates to be on terms no less favorable than could be obtained from an unaffiliated third party and to be approved by a majority of our disinterested directors. LEASE AND CONSTRUCTION OF MAIN OFFICE We expect to lease our bank's main facility from Halton Properties, LLC for a term of 20 years at an initial rental rate of $16,667 per month. Mark A. Cothran, one of our directors, is a 50% owner of Halton Properties, LLC. One of our other directors, Keith J. Marrero, is an architect and is designing the facility. Mr. Marrero will be paid approximately $70,000 for his architectural services. Halton Properties, LLC is purchasing the land and building the bank facility on the land to our specifications. We expect to complete construction of our main facility by August 2000, at which time we will begin to pay rent in the amount of $16,667 per month. Prior to completion of the permanent bank facility, we will lease a modular bank facility on a month to month basis for an initial payment of $13,050 and a monthly lease rate of $5,880. The modular facility will be located on the same site as out future main office, and we will pay $500 per month in rent to Halton Properties, LLC for the use of this site prior to completion of the main office. We have conducted two separate appraisals of the lease and the property, which includes Mr. Marrero's architectural services, to ensure that the terms of the proposed lease are on substantially the same terms as those prevailing at the time for comparable transactions with unrelated parties. 35 37 LOAN GUARANTEE Each of the directors has guaranteed the $600,000 line of credit used to pay organizing expenses for the bank and holding company. DESCRIPTION OF CAPITAL STOCK OF GREENVILLE FIRST BANCSHARES GENERAL The authorized capital stock of Greenville First Bancshares consists of 10,000,000 shares of common stock, par value $0.01 per share, and 10,000,000 shares of preferred stock, par value $0.01 per share. The following summary describes the material terms of Greenville First Bancshares's capital stock. Reference is made to the articles of incorporation of Greenville First Bancshares which is filed as an exhibit to the Registration Statement of which this prospectus forms a part, for a detailed description of the provisions summarized below. COMMON STOCK Holders of shares of the common stock are entitled to receive such dividends as may from time to time be declared by the board of directors out of funds legally available for distribution. We do not plan to declare any dividends in the immediate future. See "Dividend Policy" on page 12. Holders of common stock are entitled to one vote per share on all matters on which the holders of common stock are entitled to vote and do not have any cumulative voting rights. Shareholders have no preemptive, conversion, redemption, or sinking fund rights. In the event of a liquidation, dissolution, or winding-up of the company, holders of common stock are entitled to share equally and ratably in the assets of the company, if any, remaining after the payment of all debts and liabilities of the company and the liquidation preference of any outstanding preferred stock. The outstanding shares of common stock are, and the shares of common stock offered by the company hereby when issued will be, fully paid and nonassessable. The rights, preferences and privileges of holders of common stock are subject to any classes or series of preferred stock that the company may issue in the future. PREFERRED STOCK Greenville First Bancshares' articles of incorporation provide that the board of directors is authorized, without further action by the holders of the common stock, to provide for the issuance of shares of preferred stock in one or more classes or series and to fix the designations, powers, preferences, and relative, participating, optional and other rights, qualifications, limitations, and restrictions thereof, including the dividend rate, conversion rights, voting rights, redemption price, and liquidation preference, and to fix the number of shares to be included in any such classes or series. Any preferred stock so issued may rank senior to the common stock with respect to the payment of dividends or amounts upon liquidation, dissolution or winding-up, or both. In addition, any such shares of preferred stock may have class or series voting rights. Upon completion of this offering, we will not have any shares of preferred stock outstanding. Issuances of preferred stock, while providing the company with flexibility in connection with general corporate purposes, may, among other things, have an adverse effect on the rights of holders of common stock. For example, the issuance of any preferred stock with voting or conversion rights may adversely affect the voting power of the holders of common stock, and could have the effect of decreasing the market price of the common stock. We do not plan to issue any shares of preferred stock, and will not issue preferred stock to organizers on terms more favorable than those on which it issues preferred stock to shareholders other than organizers. ANTI-TAKEOVER EFFECTS The provisions of the articles, the bylaws, and South Carolina law summarized in the following paragraphs may have anti-takeover effects and may delay, defer, or prevent a tender offer or takeover attempt that a shareholder might consider to be in such shareholder's best interest, including those attempts that might result in a premium over the market price for the shares held by shareholders, and may make removal of management more difficult. 36 38 Restriction on Acquisition. Sections 34-25-50 and 34-25-240 of the Code of Laws of South Carolina prohibit a company from "acquiring" Greenville First Bancshares or Greenville First Bank until the bank has been in existence and continuous operation for five years. Control Share Act. Greenville First Bancshares has specifically elected to opt out of a provision of South Carolina law which may deter or frustrate unsolicited attempts to acquire South Carolina corporations. This statute, commonly referred to as the "Control Share Act" applies to public corporations organized in South Carolina, unless the corporation specifically elects to opt out. The Control Share Act generally provides that shares of a public corporation acquired in excess of specific thresholds will not possess any voting rights unless such voting rights are approved by a majority vote of the corporation's disinterested shareholders. Authorized but Unissued Stock. The authorized but unissued shares of common stock and preferred stock will be available for future issuance without shareholder approval. These additional shares may be used for a variety of corporate purposes, including future public offerings to raise additional capital, corporate acquisitions, and employee benefit plans. The existence of authorized but unissued and unreserved shares of common stock and preferred stock may enable the board of directors to issue shares to persons friendly to current management, which could render more difficult or discourage any attempt to obtain control of Greenville First Bancshares by means of a proxy contest, tender offer, merger or otherwise, and thereby protect the continuity of the company's management. Number of Directors. The bylaws provide that the number of directors shall be fixed from time to time by resolution by at least a majority of the directors then in office, but may not consist of fewer than five nor more than 25 members. Initially we will have ten directors. Classified Board of Directors. Our articles and bylaws divide the board of directors into three classes of directors serving staggered three-year terms. As a result, approximately one-third of the board of directors will be elected at each annual meeting of shareholders. The classification of directors, together with the provisions in the Articles and bylaws described below that limit the ability of shareholders to remove directors and that permit the remaining directors to fill any vacancies on the board of directors, will have the effect of making it more difficult for shareholders to change the composition of the board of directors. As a result, at least two annual meetings of shareholders may be required for the shareholders to change a majority of the directors, whether or not a change in the board of directors would be beneficial and whether or not a majority of shareholders believe that such a change would be desirable. Number, Term, and Removal of Directors. We currently have ten directors, but our bylaws authorize this number to be increased or decreased by our board of directors. Our directors are elected to three year terms by a plurality vote of our shareholders. Our bylaws provide that our shareholders, by a majority vote of those entitled to vote in an election of directors, or our board of directors, by a unanimous vote, excluding the director in question, may remove a director with or without cause. Our bylaws provide that all vacancies on our board may be filled by a majority of the remaining directors for the unexpired term. Advance Notice Requirements for Shareholder Proposals and Director Nominations. The bylaws establish advance notice procedures with regard to shareholder proposals and the nomination, other than by or at the direction of the board of directors or a committee thereof, of candidates for election as directors. These procedures provide that the notice of shareholder proposals must be in writing and delivered to the secretary of the company no earlier than 30 days and no later than 60 days in advance of the annual meeting. Shareholder nominations for the election of directors must be made in writing and delivered to the secretary of the company no later than 90 days prior to the annual meeting, and in the case of election to be held at a special meeting of shareholders for the election of directors, the close of business on the seventh day following the date on which notice of the meeting is first given to shareholders. We may reject a shareholder proposal or nomination that is not made in accordance with such procedures. Nomination Requirements. Pursuant to the bylaws, we have established nomination requirements for an individual to be elected as a director, including that the nominating party provide (i) notice that such party intends 37 39 to nominate the proposed director; (ii) the name of and biographical information on the nominee; and (iii) a statement that the nominee has consented to the nomination. The chairman of any shareholders' meeting may, for good cause shown, waive the operation of these provisions. These provisions could reduce the likelihood that a third party would nominate and elect individuals to serve on the board of directors. TRANSFER AGENT The transfer agent and registrar for the common stock will be SunTrust Bank. SHARES ELIGIBLE FOR FUTURE SALE Upon completion of this offering, we will have 1,200,000 shares of common stock outstanding. The shares sold in this offering will be freely tradable, without restriction or registration under the Securities Act of 1933, except for shares purchased by "affiliates" of Greenville First Bancshares, which will be subject to resale restrictions under the Securities Act of 1933. An affiliate of the issuer is defined in Rule 144 under the Securities Act of 1933 as a person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with the issuer. Rule 405 under the Securities Act of 1933 defines the term "control" to mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of the person whether through the ownership of voting securities, by contract or otherwise. Directors will likely be deemed to be affiliates. These securities held by affiliates may be sold without registration in accordance with the provisions of Rule 144 or another exemption from registration. In general, under Rule 144, an affiliate of the company or a person holding restricted shares may sell, within any three-month period, a number of shares no greater than 1% of the then outstanding shares of the common stock or the average weekly trading volume of the common stock during the four calendar weeks preceding the sale, whichever is greater. Rule 144 also requires that the securities must be sold in "brokers' transactions," as defined in the Securities Act of 1933, and the person selling the securities may not solicit orders or make any payment in connection with the offer or sale of securities to any person other than the broker who executes the order to sell the securities. This requirement may make the sale of the common stock by affiliates of Greenville First Bancshares pursuant to Rule 144 difficult if no trading market develops in the common stock. Rule 144 also requires persons holding restricted securities to hold the shares for at least one year prior to sale. UNDERWRITING Subject to the terms and conditions of the underwriting agreement among us and the underwriter named below, the underwriter has agreed to purchase from us, and we have agreed to sell to the underwriter, the number of shares of common stock listed opposite the underwriter's name below.
Number of Firm Number of Over- Underwriter Shares Allotment Shares ----------- ------ ---------------- Wachovia Securities, Inc................................... 1,200,000 180,000
The underwriting agreement provides that the underwriter's obligations are subject to approval of certain legal matters by counsel and to various other conditions customary in a firm commitment underwritten public offering. The underwriter is required to purchase and pay for the shares offered by this prospectus other than those covered by the over-allotment option described below. The underwriting discount that will apply to shares not purchased by our directors and executive officers in this offering will equal 7.5% of the public offering price listed on the cover page of this prospectus, or $.75 per share. The underwriting discount that will apply to shares purchased in this offering by our directors and executive officers and certain other investors recommended by our directors and executive officers, up to 30% of the offering, will equal 3.5% of the public offering price, or $.35 per share. 38 40 The underwriter proposes to offer the common stock directly to the public at the public offering price of $10.00 per share and to certain securities dealers at the price less a concession not in excess of $____ per share. The underwriter may allow, and the selected dealers may reallow, a concession not in excess of $___ per share to certain other broker and dealers. We expect that the shares of common stock will be ready for delivery on or about ________, 1999. After the offering, the offering price and other selling terms may change. The public offering price was determined by negotiations between us and the underwriter based on several factors. These factors included prevailing market conditions, the price to earnings and price to book value multiples of comparable publicity traded companies and Greenville First Bank's growth potential and cash flow and earnings prospects. We have granted the underwriter an option, exercisable within 30 days after the date of this prospectus, to purchase up to 180,000 additional shares of common stock to cover over-allotments, if any, at the public offering price listed on the cover page of this prospectus, less the 7.5% underwriting discount. The underwriter may purchase these shares only to cover over-allotments made in connection with this offering. The underwriter does not intend to sell shares of common stock to any account over which it exercises discretionary authority. We, and our directors and executive officers, have each agreed with the underwriter that we will not sell, contract to sell, or otherwise dispose of any shares of common stock or any securities that can be converted into or exchanged for shares of common stock for a period of 180 days from the date of this prospectus without the underwriter's prior written consent, except in limited circumstances. The underwriter may on occasion be a customer of, engage in transactions with, and perform services for us and Greenville First Bank in the ordinary course of business. We have agreed to indemnify the underwriter against certain liabilities, including liabilities under the Securities Act of 1933, as currently in effect, or to contribute to payments that the underwriter may be required to make in connection with these liabilities. In connection with this offering, the underwriter may purchase and sell common stock in the open market. These transactions may include over-allotment and stabilizing transactions, and purchases to cover syndicate short positions created in connection with this offering. Stabilizing transactions consist of certain bids or purchases for the purpose of preventing or retarding a decline in the market price of the common stock, and syndicate short positions involve the underwriter's sale of a greater number of shares of common stock than it is required to purchase from us in the offering. These activities may stabilize, maintain or otherwise affect the market price of the common stock, which may be higher than the price that might otherwise prevail in the open market. The underwriter may effect these transactions on the Nasdaq OTC Bulletin Board or otherwise and may discontinue them at any time. 39 41 LEGAL MATTERS The validity of the common stock offered hereby will be passed upon for Greenville First Bancshares by Nelson Mullins Riley & Scarborough, L.L.P., Atlanta, Georgia and Greenville, South Carolina. Legal matters related to the shares of common stock offered by this prospectus will be passed upon for Wachovia Securities by Smith Helms Mulliss & Moore, L.L.P., Charlotte, North Carolina. EXPERTS Greenville First Bancshares's financial statements dated June 30, 1999 and for the period from February 1999 (inception), until June 30, 1999 have been audited by Elliott Davis & Company, L.L.P., as stated in their report appearing elsewhere herein, and have been so included in reliance on the report of this firm given upon their authority as an expert in accounting and auditing. ADDITIONAL INFORMATION We have filed with the SEC a registration statement on Form SB-2 (together with all amendments, exhibits, schedules and supplements thereto, the "Registration Statement"), under the Securities Act of 1933 and the rules and regulations thereunder, for the registration of the common stock offered hereby. This prospectus, which forms a part of the Registration Statement, does not contain all of the information set forth in the Registration Statement. For further information with respect to Greenville First Bancshares, Greenville First Bank, and the common stock, you should refer to the Registration Statement and the exhibits thereto. You can examine and obtain copies of the Registration Statement at the Public Reference Section of the SEC, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a Web site at http://www.sec.gov that contains all of the reports, proxy and information statements and other information regarding registrants that file electronically with the SEC using the EDGAR filing system, including Greenville First Bancshares. We have filed or will file various applications with the Office of the Comptroller of the Currency and the FDIC. You should only rely on information in this prospectus and in our related Registration Statement in making an investment decision. If other available information is inconsistent with information in this prospectus, including information in public files or provided by the Office of the Comptroller of the Currency and the FDIC, such other information is superseded by the information in this prospectus. Projections appearing in the applications to such agencies were based on assumptions that the organizers believed were reasonable at the time, but which may have changed or otherwise be wrong. Greenville First Bancshares and Greenville First Bank specifically disclaim all projections for purposes of this prospectus and caution prospective investors against placing reliance on them for purposes of making an investment decision. Statements contained in this prospectus regarding the contents of any contract or other document referred to are not necessarily complete. If such contract or document is an exhibit to the Registration Statement, you may obtain and read such document or contract for more information. As a result of this offering, Greenville First Bancshares will become a reporting company subject to the full informational requirements of the Securities Exchange Act of 1934. We will fulfill our obligations with respect to such requirements by filing periodic reports and other information with the SEC. We will furnish our shareholders with annual reports containing audited financial statements and with quarterly reports for the first three quarters of each fiscal year containing unaudited summary financial information. Our fiscal year ends on December 31. 40 42 GREENVILLE FIRST BANCSHARES, INC (A DEVELOPMENT STAGE ENTERPRISE) GREENVILLE, SOUTH CAROLINA CONTENTS
Page REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT F-2 FINANCIAL STATEMENTS Balance sheet F-3 Statement of operations F-4 Statement of changes in owners' equity F-5 Statement of cash flows F-6 NOTES TO FINANCIAL STATEMENTS F-7
F-1 43 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS The Directors GREENVILLE FIRST BANCSHARES, INC. Greenville, South Carolina We have audited the accompanying balance sheet of GREENVILLE FIRST BANCSHARES, INC. (a development stage enterprise) as of June 30, 1999 and the related statements of operations, changes in organizers' deficit and cash flows for the period from February 22, 1999 (date of inception) through June 30, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of GREENVILLE FIRST BANCSHARES, INC. (a development stage enterprise) as of June 30, 1999 and the results of its operations and its cash flows for the period from February 22, 1999 through June 30, 1999 in conformity with generally accepted accounting principles. /s/ Elliot, Davis & Company, LLP - -------------------------------- Greenville, South Carolina July 8, 1999 F-2 44 GREENVILLE FIRST BANCSHARES, INC (A DEVELOPMENT STAGE ENTERPRISE) BALANCE SHEET JUNE 30, 1999 ASSETS Cash and cash equivalents $ 31,625 Computer equipment 1,855 Deferred stock offering costs 22,960 --------- Total assets $ 56,440 ========= LIABILITIES AND ORGANIZERS' DEFICIT LIABILITIES Line of credit $ 200,000 Interest payable 3,249 Salaries payable 5,200 --------- 208,449 COMMITMENTS AND CONTINGENCIES - Notes 2 and 3 ORGANIZERS' DEFICIT Preferred stock, par value $.01 per share, 10,000,000 shares authorized, no shares issued Common stock, par value $.01 per share, 20,000,000 shares authorized Additional paid-in capital 100 Retained deficit accumulated during the development stage (152,109) Total liabilities and organizers' deficit $ 56,440 =========
The accompanying notes are an integral part of this financial statement. F-3 45 GREENVILLE FIRST BANCSHARES, INC. (A DEVELOPMENT STAGE ENTERPRISE) STATEMENT OF OPERATIONS FOR THE PERIOD FROM FEBRUARY 22, 1999 (DATE OF INCEPTION) THROUGH JUNE 30, 1999 EXPENSES Salaries and payroll taxes $ 68,966 Professional fees 38,000 Marketing 24,523 Insurance 4,721 Rent 2,400 Telephone and supplies 4,174 Interest 3,248 Other 6,077 --------- Loss before provision for income taxes (152,109) PROVISION FOR INCOME TAXES -- --------- Net loss $(152,109) =========
The accompanying notes are an integral part of this financial statement. F-4 46 GREENVILLE FIRST BANCSHARES, INC. (A DEVELOPMENT STAGE ENTERPRISE) STATEMENT OF CHANGES IN ORGANIZERS' DEFICIT FOR THE PERIOD FROM FEBRUARY 22, 1999 (DATE OF INCEPTION) THROUGH JUNE 30, 1999
RETAINED DEFICIT ACCUMULATED ADDITIONAL DURING THE COMMON STOCK PAID-IN DEVELOPMENT SHARES AMOUNT CAPITAL STAGE TOTAL ------ ------ ------- --------------- -------------- PROCEEDS FROM THE SALE OF STOCK TO ORGANIZERS 100 $ -- $ 100 $ -- $ 100 NET LOSS -- -- -- $ (152,109) $ (152,109) ----- ----------- ---- --------------- -------------- BALANCE, JUNE 30, 1999 100 $ -- $100 $ (152,109) $ (152,009) ===== =========== ==== =============== ==============
The accompanying notes are an integral part of this financial statement. F-5 47 GREENVILLE FIRST BANCSHARES, INC. (A DEVELOPMENT STAGE ENTERPRISE) STATEMENT OF CASH FLOWS FOR THE PERIOD FROM FEBRUARY 22,1999 (DATE OF INCEPTION) THROUGH JUNE 30, 1999 NET CASH USED FOR PRE-OPERATING ACTIVITIES Net loss $ (152,109) Deferred stock offering costs (22,960) Interest payable 3,249 Salaries payable 5,200 --------------- Net cash used for pre-operating activities (166,620) --------------- INVESTING ACTIVITIES Purchase of computer equipment (1,855) --------------- FINANCING ACTIVITIES Proceeds from borrowings on line of credit 200,000 Proceeds from issuance of stock to organizer 100 --------------- Net cash provided by financing activities 200,100 --------------- Net increase in cash 31,625 CASH AND CASH EQUIVALENTS, FEBRUARY 22, 1999 (DATE OF INCEPTION) -- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 31,625 ===============
The accompanying notes are an integral part of this financial statement. F-6 48 GREENVILLE FIRST BANCSHARES, INC. (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES GREENVILLE FIRST BANCSHARES, INC. (the "Company") is a South Carolina corporation organized for the purpose of owning and controlling all of the capital stock of GREENVILLE FIRST BANK (in organization) (the "Bank"). The Bank is being organized as a national bank under the laws of the United States with the purpose of becoming a new bank to be located in Greenville County, South Carolina. The Company has filed a charter application with the OCC and an application for deposit insurance with the FDIC. Provided that the applications are timely approved and the necessary capital is raised, it is expected that banking operations will commence in January 2000. The Company is a development stage enterprise as defined by Statement of Financial Accounting Standard No. 7, "Accounting and Reporting by Development Stage Enterprises", as it devotes substantially all its efforts to establishing a new business. The Company's planned principal operations have not commenced and revenue has not been recognized from the planned principal operations. The Company intends to sell 1,200,000 shares of its common stock at $10 per share. The offering will raise $11,113,000 net of estimated underwriting discounts and commissions and offering expenses. The directors and executive officers of the Company plan to purchase 238,500 shares of common stock at $10 per share, for a total of $2,385,000. Upon purchase of these shares, the Company will issue stock warrants to the organizers to purchase up to an additional 116,250 shares of common stock. Additionally, the underwriter may exercise the over-allotment option and purchase up to 180,000 additional shares of common stock. The remaining shares will be sold through a public offering. The Company will use $8.5 million of the proceeds to capitalize the proposed Bank. YEAR-END The Company has adopted a fiscal year ending on December 31, effective for the period ending December 31, 1999. A minimal amount of transactions occurred prior to the Company's incorporation have been combined in these financial statements for ease of presentation. ESTIMATES The financial statements include estimates and assumptions that effect the Company's financial position and results of operations and disclosure of contingent assets and liabilities. Actual results could differ from these estimates. CASH EQUIVALENTS The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The Company places its temporary cash investments with high credit quality financial institutions. At times such investments may be in excess of the FDIC insurance limits. DEFERRED STOCK OFFERING COSTS Deferred stock offering costs are expenses incurred by the Company in connection with the offering and issuance of its stock. The deferred stock offering costs will be deducted from the Company's additional paid-in capital after the stock offering. If the stock offering is deemed unsuccessful, all deferred stock offering costs will be charged to operations during the period in which the offering is deemed unsuccessful. ORGANIZATION COSTS Organization costs include incorporation, legal and consulting fees incurred in connection with establishing the Company. In accordance with Statement of Position (SOP) 98-5, "Reporting on the Costs of Start-Up Activities," organization costs are expensed when incurred. F-7 49 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES, CONTINUED INCOME TAXES Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to differences between the financial reporting and income tax bases of assets and liabilities. At June 30, 1999, no taxable income has been generated and therefore, no tax provision has been included in these financial statements. NOTE 2 - LINE OF CREDIT The Company has established a $600,000 line of credit with an individual to fund operating expenses of the Company during the development stage. The line is uncollateralized and is guaranteed by the organizers. The line bears interest at the prime rate and expires February 28, 2000. As of June 30, 1999, $200,000 is outstanding on this line of credit. NOTE 3 - COMMITMENTS AND CONTINGENCIES The Company has engaged a law firm to assist in preparing and filing all organizational, incorporation, and bank applications and to assist in preparing stock offering documents and consummating the Company's initial offering. The aggregate cost of the services is expected to approximate $40,000. The Company leases temporary office space under a month-to-month operating lease requiring monthly payments of $800. Additionally, the Company has entered into a 12-month operating lease for a modular unit to temporarily serve as its first commercial bank office. The lease requires monthly payments of approximately $5,880. The Company has also entered into an operating lease for the property of its first commercial bank office for $500 a month. Future plans are to construct its main building on this site and to lease the building and property for $16,667 per month for 20 years. The Company has engaged a bank consultant to assist in establishing the Bank and bank holding company. The aggregate cost of the services is expected to approximate $45,000. The Company has entered into an employment agreement with its president and chief executive officer that includes a three year compensation term, annual bonus, incentive program, stock option plan and a one-year non-compete agreement upon early termination. The Company has entered into an agreement with a data processor to provide ATM services, item processing and general ledger processing. Components of this contract include minimum charges based on volume and include initial setup costs of approximately $56,200. NOTE 4 - RELATED PARTY TRANSACTIONS One of the organizers of the Company owns the land where the Company will lease the land and building for use as its main office (Note 3). F-8 50 =============================================================================== TABLE OF CONTENTS
Page Summary ..........................................3 Risk Factors......................................6 Forward Looking Statements........................9 Use of Proceeds .................................10 Capitalization...................................12 Dividend Policy .................................12 Plan of Operation................................13 Proposed Business................................16 Supervision and Regulation.......................23 Management.......................................30 Certain Relationships and Related Transactions...35 Description of Capital Stock.....................36 Underwriting.....................................38 Legal Matters....................................40 Experts..........................................40 Additional Information ..........................40 Index to Financial Statements ..................F-1
-------------------------- YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT. WE HAVE NOT AUTHORIZED ANYONE TO GIVE ANY INFORMATION THAT IS DIFFERENT. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. THE INFORMATION IN THIS PROSPECTUS IS COMPLETE AND ACCURATE AS OF THE DATE ON THE COVER, BUT THE INFORMATION MAY CHANGE IN THE FUTURE. UNTIL ____________________, ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALER'S OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITER, AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. 1,200,000 SHARES COMMON STOCK GREENVILLE FIRST BANCSHARES, INC. A PROPOSED BANK HOLDING COMPANY FOR [BANK LOGO HERE] GREENVILLE FIRST BANK, N.A. (IN ORGANIZATION) ----------- PROSPECTUS ----------- [WACHOVIA LOGO HERE] ___, 1999 ================================================================================ 51 PART II INDEMNIFICATION OF DIRECTORS AND OFFICERS Item 24. Indemnification of Directors and Officers Greenville First Bancshares' articles of incorporation contain a provision which, subject to certain limited exceptions, limits the liability of a director to Greenville First Bancshares or its shareholders for any breach of duty as a director. There is no limitation of liability for: a breach of duty involving appropriation of a business opportunity of Greenville First Bancshares; an act or omission which involves intentional misconduct or a knowing violation of law; any transaction from which the director derives an improper personal benefit; or as to any payments of a dividend or any other type of distribution that is illegal under Section 33-8-330 of the South Carolina Business Corporation Act of 1988 (The "Corporation Act"). In addition, if at any time the Corporation Act shall have been amended to authorize further elimination or limitation of the liability of director, then the liability of each director of Greenville First Bancshares shall be eliminated or limited to the fullest extent permitted by such provisions, as so amended, without further action by the shareholders, unless the provisions of the Corporation Act require such action. The provision does not limit the right of Greenville First Bancshares or its shareholders to seek injunctive or other equitable relief not involving payments in the nature of monetary damages. Greenville First Bancshares' bylaws contain certain provisions which provide indemnification to directors that is broader than the protection expressly mandated in Sections 33-8-510 and 33-8-520 of the Corporation Act. To the extent that a director or officer has been successful, on the merits or otherwise, in the defense of any action or proceeding brought by reason of the fact that such person was a director or officer, Sections 33-8-510 and 33-8-520 of the Corporation Act would require Greenville First Bancshares to indemnify those persons against expenses (including attorney's fees) actually and reasonably incurred in connection with that action or proceeding. The Corporation Act expressly allows Greenville First Bancshares to provide for greater indemnification rights to its officers and directors, subject to shareholder approval. Insofar as indemnification for liabilities arising under the Corporation Act may be permitted to directors, officers, and controlling persons in the articles of incorporation or bylaws, or otherwise, we have been advised that in the opinion of the SEC for matters under the securities laws, such indemnification is against public policy as expressed in the Corporation Act and is, therefore, unenforceable. The board of directors also has the authority to extend to officers, employees and agents the same indemnification rights held by directors, subject to all of the accompanying conditions and obligations. The board of directors has extended or intends to extend indemnification rights to all of its executive officers. We have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee, or agent against any liability asserted against him or incurred by him in any such capacity, whether or not we would have the power to indemnify him against such liability under the bylaws. II-1 52 Item 25. Other Expenses of Issuance and Distribution. Estimated expenses (other than underwriting commissions) of the sale of the shares of common stock are as follows: Registration Fee $ 3,836 NASD Filing Fee 1,880 Printing and Engraving 25,000 Legal Fees and Expenses 40,000 Accounting Fees 5,000 Blue Sky Fees and Expenses 15,000 Miscellaneous Disbursements 15,284 ----------- TOTAL $ 106,000 ===========
Item 26. Recent Sales of Unregistered Securities. From inception, Greenville First Bancshares has issued a total of 10 shares of its common stock to one of its organizers. The price per share was $10.00 for a total purchase price of $100.00. There were no underwriting discounts or commissions paid with respect to these transactions. These shares will be redeemed at $10.00 per share after the offering. All sales were exempt under Section 4(2) of the Securities Act of 1933. Item 27. Exhibits. 1. Form of Underwriting Agreement between Greenville First Bancshares and Wachovia Securities 3.1. Articles of Incorporation, as amended** 3.2. Bylaws** 4.1. See Exhibits 3.1 and 3.2 for provisions in Greenville First Bancshares's Articles of Incorporation and Bylaws defining the rights of holders of the common stock** 4.2. Form of certificate of common stock** 5.1. Opinion Regarding Legality** 10.1. Employment Agreement dated July 27, 1999 between Greenville First Bancshares and Art Seaver 10.2. Lease Agreement dated ________, 1999 between Greenville First Bank and Halton Properties, LLC* 10.3 Data Processing Services Agreement dated June 28, 1999 between Greenville First Bancshares and the Intercept Group** 10.4 Form of Stock Warrant Agreement** 10.5 Promissory Note dated February 22, 1999 from Greenville First Bancshares, Inc. in favor of John J. Meindl, Jr.** 23.1. Consent of Independent Public Accountants 23.2. Consent of Nelson Mullins Riley & Scarborough, L.L.P. (appears in its opinion filed as Exhibit 5.1)** 24.1. Power of Attorney (filed as part of the signature page to the Registration Statement)** 27.1. Financial Data Schedule (for electronic filing purposes) * To be filed by Amendment ** Previously filed II-2 53 Item 28. Undertakings. The undersigned Company will: (a)(1) File, during any period in which it offers or sells securities, a post-effective amendment to this registration statement to: (i) Include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement; and (iii) Include any additional or changed material information on the plan of distribution. (2) For determining liability under the Securities Act of 1933, treat each post-effective amendment as a new registration statement of the securities offered, and the offering of the securities at that time to be the initial bona fide offering. (3) File a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering. (b) Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to directors, officers and controlling persons of Greenville First Bancshares pursuant to the provisions described in Item 24 above, or otherwise, Greenville First Bancshares has been advised that in the opinion of the SEC for matters under the securities laws, such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. If a claim for indemnification against such liabilities (other than the payment by Greenville First Bancshares of expenses incurred or paid by a director, officer or controlling person of Greenville First Bancshares in the successful defense of any action, suit, or proceeding) is asserted by such director, officer, or controlling person in connection with the securities being registered, Greenville First Bancshares will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. II-3 54 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Greenville, State of South Carolina, on September 22, 1999. GREENVILLE FIRST BANCSHARES, INC. By: /s/ R. Arthur Seaver, Jr. --------------------------------- R. Arthur Seaver, Jr. Chief Executive Officer KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints R. Arthur Seaver, Jr. and he is the true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto such attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that such attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following in the capacities and on the dates indicated.
Signature Title Date - --------- ----- ---- * - ----------------------------------- Andrew B. Cajka Director September 22, 1999 * - ----------------------------------- Mark A. Cothran Director September 22, 1999 * - ----------------------------------- Leighton M. Cubbage Director September 22, 1999 * - ----------------------------------- Tecumseh Hooper, Jr. Director September 22, 1999 * - ----------------------------------- Rudolph G. Johnstone, III, M.D. Director September 22, 1999 * - ----------------------------------- Keith J. Marrero Director September 22, 1999
55 * - ----------------------------------- James B. Orders, III Director, Chairman September 22, 1999 * - ----------------------------------- William B. Sturgis Director September 22, 1999 /s/ R. Arthur Seaver, Jr. - ----------------------------------- R. Arthur Seaver, Jr. Director, Chief Executive September 22, 1999 Officer and President (principal executive officer) (principal financial and accounting officer) * - ----------------------------------- Fred Gilmer, Jr. Director, Senior Vice President September 22, 1999 /s/ R. Arthur Seaver, Jr. - ----------------------------------- * As Attorney-in Fact
56 EXHIBIT INDEX
EXHIBIT DESCRIPTION - ------- ----------- 1. Form of Underwriting Agreement between Greenville First Bancshares and Wachovia Securities 3.1. Articles of Incorporation, as amended** 3.2. Bylaws** 4.1. See Exhibits 3.1 and 3.2 for provisions in Greenville First Bancshares's Articles of Incorporation and Bylaws defining the rights of holders of the common stock** 4.2. Form of certificate of common stock** 5.1. Opinion Regarding Legality** 10.1. Employment Agreement dated July 27, 1999 between Greenville First Bancshares and Art Seaver 10.2. Lease Agreement dated ________, 1999 between Greenville First Bank and Halton Properties, LLC* 10.3 Data Processing Services Agreement dated June 28, 1999 between Greenville First Bancshares and the Intercept Group** 10.4 Form of Stock Warrant Agreement** 10.5 Promissory Note dated February 22, 1999 from Greenville First Bancshares, Inc. in favor of John J. Meindl, Jr.** 23.1. Consent of Independent Public Accountants 23.2. Consent of Nelson Mullins Riley & Scarborough, L.L.P. (appears in its opinion filed as Exhibit 5.1)** 24.1. Power of Attorney (filed as part of the signature page to the Registration Statement)** 27.1 Financial Data Schedule (for electronic filing purposes)
* To be filed by Amendment ** Previously filed EX-1 2 FORM OF UNDERWRITING AGREEMENT 1 Exhibit 1 GREENVILLE FIRST BANCSHARES, INC. COMMON STOCK UNDERWRITING AGREEMENT _________________, 1999 WACHOVIA SECURITIES, INC. As representative of the several Underwriters named in Schedule I hereto, c/o Wachovia Securities, Inc. IJL Financial Center 201 North Tryon Street Charlotte, North Carolina 28202 Ladies and Gentlemen: Greenville First Bancshares, Inc., a South Carolina corporation (the "Company") and proposed holding company for Greenville First Bank, N.A., a national banking association (the "Bank"), proposes, subject to the terms and conditions stated herein, to issue and sell to the underwriters named in Schedule I hereto (the "Underwriters") an aggregate of 1,200,000 shares of common stock, par value $.01 per share (the "Common Stock"), of the Company (the "Firm Shares"), and, at the election of the Underwriters, subject to the terms and conditions stated herein, to sell to the Underwriters up to 180,000 additional shares of Common Stock (the "Optional Shares") solely to cover overallotments, if any (the Firm Shares and the Optional Shares that the Underwriters elect to purchase pursuant to Section 2 hereof are collectively called the "Shares"). 1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to, and agrees with each of the Underwriters that: (a) A registration statement on Form SB-2 (File No. 333-_____) with respect to the Shares, has been filed by the Company with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Securities Act"). Copies of the registration statement and any amendments thereto, including any post-effective amendments, have been delivered by the Company to you, and have been declared effective by the Commission in such form. No other document with respect to the registration statement or any post effective amendment thereto has been filed with the Commission; and no stop order suspending the effectiveness of the registration statement has been issued and no proceeding for that purpose has been instituted or threatened by the Commission. Any preliminary prospectus included in the registration statement or filed with the Commission pursuant to Rule 424 of the Rules and Regulations of the Commission under the Securities Act (the "Rules and Regulations"), is 1 2 herein called a "Preliminary Prospectus." The various parts of such registration statement, including the prospectus, Part II, all financial schedules and exhibits thereto, and including the information contained in the form of final prospectus filed with the Commission pursuant to Rule 424(b) under the Securities Act, and deemed by virtue of Rule 430A under the Securities Act to be part of the registration statement at the time it was declared effective, as amended at the time such part became effective, are herein called collectively the "Registration Statement," and the final prospectus, in the form first filed pursuant to Rule 424(b), is herein called the "Prospectus." (b) No order preventing or suspending the use of any Prospectus, including any Preliminary Prospectus, has been issued and no proceeding for that purpose has been instituted or threatened by the Commission or the securities authority of any state or other jurisdiction. No stop order suspending the effectiveness of the Registration Statement or any part thereof has been issued and no proceeding for that purpose has been instituted or threatened or, to the best knowledge of the Company, contemplated by the Commission or the securities authority of any state or other jurisdiction. (c) Each Prospectus filed as part of the Registration Statement as originally filed or as part of any amendment thereto complied when so filed in all material respects with the requirements applicable to it under the Securities Act and the Rules and Regulations and none of such documents contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and any further amendment or supplement thereto, when such documents become effective or are filed with the Commission, as the case may be, will conform in all material respects to the requirements of the Securities Act, and the Rules and Regulations and will not contain an untrue statement of material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by an Underwriter through Wachovia Securities, Inc. (the "Representative") expressly for use therein. When the Registration Statement or any amendment thereto was declared effective, and at each Time of Delivery (as hereinafter defined), it (i) contained all statements required to be stated therein in accordance with, and complied or will comply in all material respects with the requirements of the Securities Act and the Rules and Regulations and (ii) did not include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein not misleading. When the Prospectus or any amendment or supplement thereto is filed with the Commission pursuant to Rule 424(b) (or, if the Prospectus or such amendment or supplement is not required to be so filed, when the Registration Statement or the amendment thereto containing such amendment or supplement to the Prospectus was or is declared effective) and at each Time of Delivery, the Prospectus, as amended or supplemented at any such time (i) contained or will contain all statements required to be stated therein in accordance with, and complied or will comply in all material respects with the requirements of, the Securities Act and the Rules and Regulations and (ii) did not or will not include any untrue statement of a material fact or omit to state any material fact 2 3 necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. (d) The descriptions in the Registration Statement and the Prospectus of statutes, rules, regulations, legal and governmental proceedings or contracts and other documents that are required to be so described are accurate and fairly present the information required to be shown; and there are no statutes, rules, regulations or legal or governmental proceedings required to be described in the Registration Statement or the Prospectus that are not described as required and no contracts or documents of a character that are required to be described in the Registration Statement or the Prospectus or to be filed as exhibits to the Registration Statement that are not described and filed as required. (e) The Company has been duly incorporated, is validly existing as a corporation under the laws of the State of South Carolina and has full power and authority to own or lease its properties and conduct its business as described in the Prospectus. The Bank is a national banking association in organization under the laws of the United States of America and, upon the issuance of a charter by the Office of the Comptroller of the Currency ("OCC"), will have full power and authority to own or lease its properties and conduct its business as described in the Prospectus. The Company has full power and authority to enter into this Agreement and to perform its obligations hereunder. Neither the Company nor the Bank is required to be qualified to transact business as a foreign corporation under the laws of any other jurisdiction. (f) The capitalization of the Company is as disclosed under the caption "Capitalization" in the Prospectus. All of the issued shares of capital stock of the Company have been duly authorized and validly issued, are fully paid and nonassessable and conform to the description of the capital stock under the caption "Description of Capital Stock of the Company" contained in the Prospectus. None of the issued shares of capital stock of the Company has been issued or is owned or held in violation of any preemptive or similar rights, and no person or entity (including any holder of outstanding shares of capital stock of the Company or its subsidiary) has any preemptive or other rights to subscribe for any of the Shares. None of the shares of capital stock of the Bank has been issued. (g) Upon the issuance of a charter by the OCC and the payment for the capital stock of the Bank, all of the issued shares of the Bank will be duly authorized and validly issued, fully paid, and, except as may be applicable under the National Bank Act, nonassessable and will be owned beneficially by the Company free and clear of all liens, security interests, pledges, charges, encumbrances, defects, shareholders' agreements, voting trusts, equities or claims of any nature whatsoever. The Company has made application (i) to the Board of Governors of the Federal Reserve System to become a bank holding company; 3 4 (ii) to the OCC, to charter a national bank; and (iii) to the Federal Deposit Insurance Corporation for Federal Deposit Insurance for Bank deposits (collectively, the "Regulatory Approvals"). The Company and the Bank have obtained or have filed for all other material licenses, consents and approvals, and have satisfied or have taken all action required at this time to satisfy all material eligibility and other similar requirements imposed by federal and state regulatory bodies, administrative agencies or other governmental bodies, agencies or officials, in each case applicable to the conduct of the business in which they are engaged or are contemplated to be engaged as described in the Registration Statement. With respect to the Regulatory Approvals, as well as all other material licenses, consents and approvals, and any other similar requirements that the Company or the Bank does not have at this time, (i) all applications therefor are complete, accurate, and have been filed with the appropriate regulatory authorities, (ii) the Company has received preliminary notice that each application for Regulatory Approval will be approved, and (iii) the Company knows of no reason why the same will not be received or satisfied prior to the time the same are required. Other than the Bank, the Company does not own, directly or indirectly, any capital stock or other equity securities of any corporation or any ownership interest in any partnership, joint venture or other association. (h) Except as disclosed in the Prospectus, there are no outstanding (i) securities or obligations of the Company or the Bank convertible into or exchangeable for any capital stock of the Company or the Bank, (ii) warrants, rights or options to subscribe for or purchase from the Company or the Bank any such capital stock or any such convertible or exchangeable securities or obligations, or (iii) obligations of the Company or the Bank to issue any shares of capital stock, any such convertible or exchangeable securities or obligations, or any such warrants, rights or options. (i) Since the date as of which information is given in the Prospectus, neither the Company nor the Bank has sustained any material loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as disclosed in or contemplated by the Prospectus. (j) Since the date as of which information is given in the Prospectus, (i) neither the Company nor the Bank has incurred any liabilities or obligations, direct or contingent, or entered into any transactions, not in the ordinary course of business, that are material to the Company and the Bank, (ii) the Company has not purchased any of its outstanding capital stock or declared, paid or otherwise made any dividend or distribution of any kind on its capital stock, (iii) there has not been any change in the capital stock, long-term debt or short-term debt of the Company or the Bank (except with respect to such changes in the balance due under the Company's line of credit described in the Prospectus), and (iv) there has not been any material adverse change, or any development involving a prospective material adverse change, in or affecting the financial position, general affairs, management, business or prospects of the Company and the Bank, in each case other than as disclosed in or contemplated by the Prospectus. 4 5 (k) The consolidated financial statements of the Company, together with related notes and schedules as set forth in the Registration Statement, conform to the requirements of the Securities Act and the Rules and Regulations. Such financial statements fairly present the consolidated financial position of the Company at the respective dates indicated in accordance with generally accepted accounting principles applied on a consistent basis for the periods indicated. The Company and the Bank have no material contingent obligations which are not disclosed in the Company's financial statements which are included in the Registration Statement. Elliott, Davis & Company, L.L.P. whose report is included in the Registration Statement, are independent accountants as required by the Securities Act and the Rules and Regulations. (l) The Shares to be sold by the Company hereunder have been duly authorized and, when issued and delivered against payment therefor as provided therein, will be validly issued and fully paid and nonassessable and will conform to the description of the Common Stock contained in the Prospectus; and all corporate action required to be taken for the authorization, issuance and sale of the Shares has been validly taken. The Underwriters will receive good and marketable title to the Shares to be issued and delivered hereunder, free and clear of all liens, encumbrances, claims, security interests, restrictions, shareholders' agreements and voting trusts whatsoever. The certificates evidencing the Shares will be in due and proper form and will comply with all applicable legal requirements. (m) There are no contracts, agreements or understandings between the Company and any person granting such person the right to require the Company to file a registration statement under the Securities Act with respect to any securities of the Company owned or to be owned by such person or to require the Company to include such securities in the securities registered pursuant to the Registration Statement or any securities being registered pursuant to any other registration statement filed by the Company under the Securities Act. (n) Neither the Company nor the Bank is, or (with or without the giving of notice or passage of time or both) would be: (i) in violation of its Articles of Incorporation, Articles of Association, Bylaws or other governing instruments; or (ii) in default under any indenture, mortgage, deed of trust, loan agreement, lease or other agreement or instrument to which the Company or the Bank is a party or to which any of their respective properties or assets are subject, except, in the case of clause (ii) above, where such default would not have a material adverse effect on either the Company or the Bank. (o) The issue and sale of the Shares and the performance of this Agreement and the consummation of the transactions herein contemplated will not conflict with, or (with or without the giving of notice or the passage of time or both) result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement, lease or other agreement or instrument to which the Company or the Bank is a party or to which any of their respective properties or 5 6 assets is subject, nor will such action conflict with or violate any provision of the Articles of Incorporation, Articles of Association, Bylaws or other governing instruments of the Company or the Bank, or any statute, rule or regulation or any order, judgment or decree of any court or governmental agency or body having jurisdiction over the Company or the Bank or any of their respective properties or assets. (p) The Company and the Bank have good and marketable title in fee simple to all real property, if any, and good title to all personal property owned by them, in each case free and clear of all liens, security interests, pledges, charges, encumbrances, mortgages and defects, except such as are disclosed in the Prospectus or such as do not materially and adversely interfere with the operations of the Company and the Bank; and any real property and buildings held under lease by the Company or the Bank are held under valid, subsisting and enforceable leases, with such exceptions as are disclosed in the Prospectus or are not material and do not interfere with the operations of the Company or the Bank. (q) No consent, approval, authorization, order or declaration of or from, or registration, qualification or filing with, any court or governmental agency or body or third party is required for the issue and sale of the Shares or the consummation of the transactions contemplated by this Agreement, except (i) the registration of the Shares under the Securities Act and such as may be required by the National Association of Securities Dealers, Inc. (the "NASD") and under state securities or blue sky laws in connection with the offer, sale and distribution of the Shares by the Underwriters, and (ii) as required in connection with the Regulatory Approvals. (r) Other than as disclosed in the Prospectus, there is no litigation, arbitration, claim, proceeding (formal or informal) or investigation pending or, to the knowledge of any director or executive officer of the Company, threatened (or any reasonable basis therefor) in which the Company or the Bank is a party or of which any of their respective properties or assets are the subject which, if determined adversely to the Company or the Bank, would individually or in the aggregate have a material adverse effect on the financial position, general affairs, management, business or prospects of the Company and the Bank. (s) This Agreement has been duly authorized, executed and delivered by the Company and constitutes the valid and binding agreement of the Company enforceable against the Company in accordance with its terms subject, as to enforcement, to applicable bankruptcy, insolvency, reorganization and moratorium laws and other laws relating to or affecting the enforcement of creditors' rights generally and to general equitable principles, and except as the enforceability of rights to indemnity and contribution under this Agreement may be limited under applicable securities laws or the public policy underlying such laws. (t) Neither the Company nor any of its officers, directors or affiliates has (i) taken, directly or indirectly, any action designed to cause or result in, or that has constituted or might reasonably be expected to constitute, the stabilization or 6 7 manipulation of the price of any security of the Company to facilitate the sale or resale of the Shares or (ii) since the filing of the Registration Statement (A) sold, bid for, purchased or paid anyone any compensation for soliciting purchases of, the Shares or (B) paid or agreed to pay to any person any compensation for soliciting another to purchase any other securities of the Company. (u) None of the Company, the Bank, nor, to the knowledge of the Company, any director or executive officer, agent, employee or other person acting on behalf of the Company or the Bank has (i) used or authorized the use of, any corporate or other funds for unlawful payments, or contributions, (ii) made unlawful expenditures relating to political activity to government officials, or (iii) established or maintained any unlawful or unrecorded funds in violation of any federal, state, or local law or regulation, including Section 30A of the Exchange Act. None of the Company, the Bank, nor, to the knowledge of the Company, any director or executive officer of the Company or the Bank has accepted or received any unlawful contributions or payments. (v) The Company has obtained for the benefit of the Company and the Underwriters from each of its directors and executive officers a written agreement (the "Lockup Agreements") that for a period of 180 days from the date of the Prospectus such director or officer will not, without your prior written consent, offer, pledge, sell, contract to sell, grant any option for the sale of, or otherwise dispose of (or announce any offer, pledge, sale, grant of an option to purchase or other disposition), directly or indirectly, any shares of Common Stock or securities convertible into, or exercisable or exchangeable for, shares of Common Stock. (w) The Bank, upon the issuance of a charter by the OCC, will not be prohibited, directly or indirectly, from paying any dividends to the Company, from making any other distributions on the Bank's capital stock, from repaying to the Company any loans or advances to the Bank or from transferring the Bank's property or assets to the Company, except under federal regulations as disclosed in the Prospectus. (x) The Company and the Bank have filed all material foreign, federal, state and local tax returns that are required to be filed by them and have paid all taxes shown as due on such returns as well as all other taxes, assessments and government charges that are due and payable; and no deficiency with respect to any such return has been assessed or proposed in any material respects. All tax liabilities have been adequately provided for in the financial statements of the Company. (y) The Company is not, nor will it become as a result of transactions contemplated hereby, and does not intend to conduct its business in a manner that would cause it to become an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940. 2. PURCHASE AND SALE OF SHARES. Subject to the terms and conditions herein set forth, (a) the Company agrees to issue and sell to each of the Underwriters, and each of the Underwriters agree, severally and not jointly, to purchase from the Company the number of 7 8 Firm Shares set opposite the name of such Underwriter in Schedule 1 hereto, at the following purchase prices: (i) with respect to the Firm Shares not purchased by the Company's directors, executive officers and certain other investors identified in writing by the Company, as described in (ii) below, at a purchase price of $9.25 per share, and (ii) with respect to the Firm Shares purchased by the Company's directors, executive officers and certain other investors identified in writing by the Company, but only up to a maximum of 360,000 Firm Shares, at a purchase price of $9.65 per share, (b) in the event and to the extent that the Underwriters shall exercise the election to purchase Optional Shares as provided below, the Company agrees to issue and to sell to each of the Underwriters, and each of the Underwriters agree, severally and not jointly, to purchase from the Company, at a purchase price of $9.25 per share, that portion of the number of Optional Shares as to which such election shall have been exercised (to be adjusted by you so as to eliminate fractional shares) determined by multiplying such number of Optional Shares by a fraction, the numerator of which is the maximum number of Optional Shares that such Underwriter is entitled to purchase as set forth opposite the name of such Underwriter in Schedule I hereto and the denominator of which is the maximum number of the Optional Shares that all of the Underwriters are entitled to purchase hereunder. The Company hereby grants to the Underwriters the right to purchase at its election in whole or in part from time to time up to 180,000 Optional Shares, at the purchase price of $9.25 per share for the sole purpose of covering over-allotments in the sale of Firm Shares. Any such election to purchase Optional Shares may be exercised by written notice from you to the Company, given from time to time within a period of 30 calendar days after the date of this Agreement and setting forth the aggregate number of Optional Shares to be purchased and the date on which the Optional Shares are to be delivered, as determined by you but in no event earlier than the First Time of Delivery (as hereinafter defined) or, unless you and the Company otherwise agree in writing earlier than two or later than ten business days after the date of such notice. In the event you elect to purchase all or a portion of the Optional Shares, the Company agrees to furnish or cause to be furnished to you the certificates, letters and opinions, and to satisfy all conditions set forth in Section 7 hereof at each Subsequent Time of Delivery (as hereinafter defined). 3. OFFERING BY THE UNDERWRITERS. Upon the authorization by you of the release of the Shares, the several Underwriters propose to offer the Shares for sale upon the terms and conditions disclosed in the Prospectus. 4. DELIVERY OF SHARES; CLOSING. Certificates in definitive form for the Shares to be purchased by each Underwriter hereunder, and in such denominations and registered in such names as the Representative may request upon at least 48 hours prior notice to the Company shall be delivered by or on behalf of the Company to you for your account against payment by you of the purchase price therefor by official bank check or checks (payable in next day funds unless closing is on a Friday in which case it shall be payable in same day funds), payable to the order of the Company. The closing of the sale and purchase of the Shares shall be held at the offices of Smith Helms Mulliss & Moore, LLP, Charlotte, North Carolina. The time and date of such delivery and payment shall be, with respect to the Firm Shares, at 10:00 a.m., Charlotte, North Carolina time, on the 3rd (or if the Firm Shares are priced, as contemplated by Rule 15c6-1(c) under the Exchange Act, after 4:30 p.m., Washington, D.C. 8 9 time, the 4th) full business day after the execution of this Agreement or at such other legally permissible time and date as you and the Company may agree upon in writing, and, with respect to the Optional Shares, at 10:00 a.m., Charlotte, North Carolina time, on the date specified by you in the written notice given by you of the Underwriters' election to purchase all or part of such optional shares, or at such other time and date as you and the Company may agree upon in writing. Such time and date for delivery of the Firm Shares is herein called the "First Time of Delivery," such time and date for delivery of the Optional Shares, if not the First Time of Delivery, is herein called a "Subsequent Time of Delivery," and each such time and date for delivery is herein called a "Time of Delivery." The Company will make such certificates available for checking and packaging at least 24 hours prior to each Time of Delivery at your office at the address set forth above or such other location designated by you to the Company. If the Representative so elects, delivery of the Firm Shares and the Optional Shares, if any, may be made by credit through full fast transfer to the accounts at the Depositary Trust Company designated by the Representative. 5. COVENANTS OF THE COMPANY. The Company covenants and agrees with the Underwriters: (a) The Company shall comply with the provisions of and make all requisite filings with the Commission pursuant to and in accordance with Rule 430A and subparagraph (1) (or, if applicable and if consented to by you, subparagraph (4)) of Rule 424(b) not later than the earlier of (i) the second business day following the execution and delivery of this Agreeme__ or (ii) the date on which the Prospectus is first used after the Registration Statement is declared effective. The Company will advise you promptly of any such filing pursuant to Rules 430A or 424(b). (b) The Company will not file with the Commission the Prospectus or any amendment or supplement to the Prospectus or any amendment to the Registration Statement unless you have received a reasonable period of time to review any such proposed amendment or supplement and consented to the filing thereof and will use its best efforts to cause any such amendment to the Registration Statement to be declared effective as promptly as possible. Upon the request of the Representative or counsel for the Representative, the Company will promptly prepare and file with the Commission, in accordance with the Rules and Regulations, any amendments to the Registration Statement or amendments or supplements to the Prospectus that may be necessary or advisable in connection with the distribution of the Shares by the Underwriters and will use its best efforts to cause any such amendment to the Registration Statement to be declared effective as promptly as possible. If required, the Company will file any amendment or supplement to the Prospectus with the Commission in the manner and within the time period required by Rule 424(b) under the Securities Act. The Company will advise the Representative, promptly after receiving notice thereof, of the time when the Registration Statement or any amendment thereto has been filed or declared effective or the Prospectus or any amendment or supplement thereto has been filed and will provide evidence to the Representative of each such filing or effectiveness. 9 10 (c) The Company will advise you promptly after receiving notice or obtaining knowledge of (i) the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or any part thereof or any order preventing or suspending the use of any Preliminary Prospectus or the Prospectus or any amendment or supplement thereto, (ii) the suspension of the qualification of the Shares for offer or sale in any jurisdiction or of the initiation or threatening of any proceeding for any such purpose, or (iii) any request made by the Commission or any securities authority of any other jurisdiction for amending the Registration Statement, for amending or supplementing the Prospectus or for additional information. The Company will use its best efforts to prevent the issuance of any such stop order and, if any such stop order is issued, to obtain the withdrawal thereof as promptly as possible. (d) If during the period in which a prospectus is required by law to be delivered by an Underwriter or dealer, any events shall have occurred as a result of which, in the judgment of the Company or the opinion of the Underwriters, the Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, or if for any reason it is necessary during such same period to amend or supplement the Prospectus to comply with the Securities Act or the Rules and Regulations or any law, the Company will promptly notify you and upon your request (but at the Company's expense) prepare and file with the Commission and any state or other governmental securities commissions in jurisdictions where the Shares have been sold by the Underwriters, an amendment or supplement to the Prospectus that corrects such statement or omission or effects such compliance and will furnish without charge to each Underwriter and to any dealer in securities, as many copies of such amended or supplemented Prospectus as you may from time to time reasonably request. Neither your consent to, nor the Underwriter's delivery of, any such amendment or supplement shall constitute a waiver of any of the conditions set forth in Section 7. (e) The Company promptly from time to time will take such action as you may reasonably request to qualify the Shares for offering and sale under the securities or blue sky laws of such jurisdictions as you may request and will continue such qualifications in effect for as long as may be necessary to complete the distribution of the Shares, provided that in connection therewith the Company shall not be required to qualify as a foreign corporation or to file a general consent to service of process in any jurisdiction. In the event that the qualification of the Shares in any jurisdiction is suspended, the Company shall so advise the Representative promptly in writing. (f) The Company will deliver to, or upon the order of, the Representative, from time to time, as many copies of the Preliminary Prospectus as the Representative may reasonably request. The Company will deliver to, or upon the order of, the Representative, during the period when delivery of a Prospectus is required under the Securities Act, as many copies of the Prospectus in final form, or as thereafter amended or supplemented, as the Representative may reasonably request. The Company will deliver to the Representative at or before the Time of Delivery, four signed copies of the 10 11 Registration Statement and all amendments thereto including all exhibits filed therewith, and will deliver to the Representative such number of copies of the Registration Statement (including such number of copies of the exhibits filed therewith that may be reasonably requested), and of all amendments thereto, as the Representative may reasonably request. (g) The Company will, from time to time, after the effective date of the Registration Statement file with the Commission such reports as are required by the Securities Act, the Exchange Act and the Rules and Regulations, and shall also file with foreign, state and other governmental securities commissions in jurisdictions where the Shares have been sold by the Underwriters such reports as are required to be filed by the securities acts and the regulations of those jurisdictions. (h) As soon as practicable, but in any event not later than the last day of the thirteenth month after the effective date of the Registration Statement, the Company will make generally available to its security holders an earnings statement (which need not be audited) in reasonable detail covering a period of at least 12 consecutive months beginning after the effective date of the Registration Statement, complying with Section 11(a) of the Securities Act and the Rules and Regulations and will advise you in writing when such statement has been so made available. (i) The Company will, for a period of five years from the Time of Delivery, deliver to the Representative copies of annual reports and copies of all other documents, reports and information furnished by the Company to its shareholders or filed with the NASD or any securities exchange pursuant to the requirements of such exchange or with the Commission pursuant to the Securities Act or the Exchange Act. The Company will deliver to the Representative similar reports with respect to significant subsidiaries, as that term is defined in the Rules and Regulations, which are not consolidated in the Company's financial statements. (j) During the period beginning from the date hereof and continuing to and including the date 180 days after the date of the Prospectus, the Company will not, without your prior written consent, offer, pledge, issue, sell, contract to sell, grant any option for the sale of, or otherwise dispose of (or announce any offer, pledge, sale, grant of an option to purchase or other disposition), directly or indirectly, any shares of Common Stock or securities convertible into, exercisable or exchangeable for, shares of Common Stock, except as provided in Section 2 and except as described in the Prospectus. (k) Neither the Company nor any of its officers, directors or affiliates will (i) take, directly or indirectly, prior to the closing of the purchase and sale of the Shares, any action designed to cause or to result in, or that might reasonably be expected to constitute, the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the Shares, (ii) sell, bid for, purchase or pay anyone any compensation for soliciting purchases of, the Shares or (iii) pay or agree to 11 12 pay to any person any compensation for soliciting another to purchase any other securities of the Company. (l) The Company will apply the net proceeds from the offering in the manner set forth under the heading "Use of Proceeds" in the Prospectus, including the capitalization of the Bank, and will timely report such use of proceeds pursuant to Item 701 of Regulation S-B and S-K in its periodic reports filed pursuant to Section 13(a) and 15(d) of the Exchange Act in accordance with Rule 463 of the Securities Act or any successor provision. (m) If at any time during the 60-day period after the Registration Statement becomes effective, any rumor, publication or event relating to or affecting the Company shall occur as a result of which in your reasonable opinion the market price of the Common Stock has been or is likely to be materially affected (regardless of whether such rumor, publication or event necessitates a supplement to or amendment of the Prospectus) and after written notice from you advising the Company to the effect set forth above, the Company agrees to forthwith prepare, consult with you concerning the substance of, and disseminate a press release or other public statement, reasonably satisfactory to you, responding to or commenting on such rumor, publication or event. (n) The Company will cause the Shares to be quoted on the Nasdaq OTC Bulletin Board at each Time of Delivery and for at least one year from the date hereof. 6. EXPENSES. The Company will pay all costs and expenses incident to the performance of its obligations under this Agreement, whether or not the transactions contemplated hereby are consummated or this Agreement is terminated pursuant to Section 10 hereof, including without limitation all costs and expenses incident to (i) the fees, disbursements and expenses of the Company's counsel and accountants in connection with the registration of the Shares under the Securities Act and all other expenses in connection with the preparation, printing and filing of the Registration Statement (including all amendments thereto), any Preliminary Prospectus, the Prospectus and any amendments and supplements thereto, this Agreement and any blue sky memoranda; (ii) the delivery of copies of the foregoing documents to the Underwriters; (iii) the filing fees of the Commission and the National Association of Securities Dealers, Inc. relating to the Shares; (iv) the preparation, issuance and delivery to the Underwriters of any certificates evidencing the Shares, including transfer agent's and registrar's fees; (v) the qualification of the Shares for offering and sale under state securities and blue sky laws, including filing fees and fees and disbursements of counsel for the Underwriters relating thereto; (vi) any expenses of listing the Shares on the Nasdaq OTC Bulletin Board; (vii) any expenses for travel, lodging and meals incurred by the Company and any of its officers, directors and employees in connection with any meetings with prospective investors in the Shares. It is understood, however, that, except as provided in this Section, Section 8 and Section 10 hereof, the Underwriters will pay all of their own costs and expenses, including the fees of their counsel (other than those related to qualification of the Shares under state securities or blue sky laws), stock transfer taxes on resale of any of the Shares by them, and any advertising expenses relating to the offer and sale of the Shares. 12 13 7. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The obligations of the Underwriters hereunder to purchase and pay for the Shares to be delivered at each Time of Delivery shall be subject, in their discretion, to the accuracy of the representations and warranties of the Company contained herein as of the date hereof and as of such Time of Delivery, to the accuracy of the statements of Company officers made pursuant to the provisions hereof, to the performance by the Company of its covenants and agreements hereunder, and to the following additional conditions precedent: (a) The Registration Statement as amended to date shall have become effective prior to the execution of this Agreement or at such later date and/or time as shall have been consented to by you in writing. The Prospectus and any amendment or supplement thereto shall have been filed with the Commission pursuant to Rule 424(b) within the applicable time period prescribed for such filing and in accordance with Section 5(a) of this Agreement; no stop order suspending the effectiveness of the Registration Statement or any part thereof shall have been issued and no proceedings for that purpose shall have been instituted, threatened or, to the knowledge of the Company and the Representative, contemplated by the Commission; and all requests for additional information on the part of the Commission shall have been complied with to your satisfaction. (b) Smith Helms Mulliss & Moore, L.L.P., counsel for the Underwriters, shall have furnished to you such opinion or opinions, dated such Time of Delivery, with respect to the incorporation of the Company, the validity of the Shares being delivered at such Time of Delivery, the Registration Statement, the Prospectus, and other related matters as you may reasonably request and which are customary, and the Company shall have furnished to such counsel such documents as they request for the purpose of enabling them to pass upon such matters. (c) You shall have received an opinion, dated such Time of Delivery, of Nelson Mullins Riley & Scarborough, L.L.P., counsel for the Company in form and substance satisfactory to you and your counsel, to the effect that: (i) The Company has been duly incorporated and is validly existing as a corporation under the laws of the State of South Carolina and has the corporate power and authority to own or lease its properties and conduct its business as described in the Registration Statement and the Prospectus and to enter into this Agreement and perform its obligations hereunder. The Company is duly qualified to transact business as a foreign corporation in states where required and where failure to so qualify would have a material adverse effect on the Company. (ii) The Company has received evidence of the receipt of each of the Regulatory Approvals. (iii) The Bank is a national banking association in organization under the laws of the United States of America and, upon the issuance of a charter by the OCC, will have the corporate power and authority to own or lease its 13 14 properties and conduct its business as described in the Registration Statement and the Prospectus. (iv) The Company's authorized, issued and outstanding capital stock is as disclosed under the caption "Capitalization" in the Prospectus. None of the issued shares have been issued in violation of or subject to any preemptive rights provided for by law, agreement or the Company's Articles of Incorporation or Bylaws. (v) Upon the issuance of a charter by the OCC, all of the shares of capital stock of the Bank will be issued to the Company free and clear of any liens, claims or encumbrances of any kind, and the Bank will become a wholly owned subsidiary of the Company. (vi) The Shares to be sold by the Company have been duly authorized and, when issued and delivered against payment therefor as provided herein, will be validly issued and fully paid and nonassessable and will conform to the description of the Common Stock contained in the Prospectus. The Underwriters will receive valid title to the Shares to be issued and delivered by the Company pursuant to this Agreement, free and clear of all liens, encumbrances, claims, security interests, restrictions, shareholders' agreements and voting trusts whatsoever. (vii) To the knowledge of such counsel, the Company does not have outstanding any options to purchase, or any rights or warrants to subscribe for, or any securities or obligations convertible into, or any contracts or commitments to issue or sell any capital stock, and there are no preemptive rights or other rights to subscribe for or purchase any capital stock of the Company, or any restriction upon the transfer of, the Shares pursuant to the Company's Articles of Incorporation or Bylaws or any agreement or other instrument to which the Company is a party or by which it may be bound, except as described in the Prospectus. To the knowledge of such counsel, neither the filing of the Registration Statement nor the offer or sale of the Shares as contemplated by this Agreement gives rise to any rights for or relating to the registration of any Common Stock or any other securities of the Company. (viii) The issue and sale of the Shares being issued at such Time of Delivery and the performance of this Agreement and the consummation of the transactions herein contemplated will not conflict with, or (with or without the giving of notice or the passage of time or both) result in a breach or violation of any of the terms or provisions of, or constitute a default under any document or agreement which is an Exhibit to the Registration Statement, or violate any provision of the Articles of Incorporation, Articles of Association, Bylaws or other governing instruments of the Company or the Bank or any statute, rule or regulation or, to such counsel's knowledge after diligent inquiry, any order, judgment or decree of any court or governmental agency or body having 14 15 jurisdiction over the Company or the Bank or any of their respective properties or assets. (ix) No consent, approval, authorization or order from, or registration, qualification or filing with, any governmental agency or body or third party is required for the issue and sale of the Shares or the consummation of the transactions contemplated by this Agreement, except (a) the registration of the Shares under the Securities Act and such as may be required by the NASD and under state securities or blue sky laws in connection with the offer, sale and distribution of the Shares by the Underwriters, and (b) as required in connection with the Regulatory Approvals. (x) This Agreement has been duly authorized, executed and delivered by the Company and constitutes the valid and binding agreement of the Company enforceable against the Company in accordance with its terms subject, as to enforcement, to applicable bankruptcy, insolvency, reorganization and moratorium laws and other laws relating to or affecting the enforcement of creditors' rights generally and to general equitable principles, and except as the enforceability of rights to indemnity and contribution under this Agreement may be limited under applicable securities laws or the public policy underlying such laws. (xi) The Company and the Bank have obtained or have filed for all licenses, consents and approvals, and have satisfied or have taken all action required at this time to satisfy all eligibility and other similar requirements imposed by federal and state regulatory bodies, administrative agencies or other governmental bodies, agencies or officials, in each case necessary for the conduct of the business in which they are engaged or are contemplated to be engaged as described in the Prospectus (except where the failure to have any such licenses, consents, and approvals, or to have satisfied or taken such action to satisfy the requirements, individually or in the aggregate, would not have a material adverse effect on the business, properties, operations, or financial condition of the Company or its subsidiaries, taken as a whole). With respect to any necessary licenses, consents and approvals, and any necessary eligibility and other similar requirements that the Company or the Bank does not have at this time, (i) all applications therefor are, to such counsel's knowledge, complete and accurate, and have been filed with the appropriate regulatory authorities, and (ii) counsel knows of no reason why the same will not be received or satisfied prior to the time the same are required to conduct business as described in the Prospectus. (xii) To such counsel's knowledge after diligent inquiry, there is not pending or threatened any action, suit, proceeding, inquiry or investigation, to which the Company or the Bank is a party, or to which property of the Company or the Bank is subject, before or brought by any court or governmental agency or body. 15 16 (xiii) To the knowledge of such counsel, neither the Company nor the Bank is in violation of any law, ordinance, administrative or governmental rule or regulation applicable to the Company or the Bank, or any decree of any court or governmental agency or body having jurisdiction over the Company or the Bank, except where such violation does not and will not have a material adverse effect on the Company and the Bank as a whole. (xiv) The Registration Statement and the Prospectus and each amendment or supplement thereto (other than the financial statements and schedules and other financial information included therein, as to which such counsel need express no opinion), as of their respective effective or issue dates, complied as to form in all material respects with the requirements of the Securities Act and the Rules and Regulations. The descriptions in the Registration Statement and the Prospectus of statutes, rules and regulations are accurate and fairly present the information required to be shown; and such counsel does not know of any statutes, rules, regulations or legal or governmental proceedings required to be described in the Registration Statement or Prospectus that are not described as required or of any contracts or documents of a character required to be described in the Registration Statement or Prospectus or to be filed as exhibits to the Registration Statement which are not described and filed as required. (xv) The Registration Statement and all post-effective amendments thereto have become effective under the Securities Act; any required filing of the Prospectus pursuant to Rule 430A and Rule 424(b) has been made in the manner and within the time period required by such rules; and to such counsel's knowledge no stop order suspending the effectiveness of the Registration Statement or any part thereof has been issued and, to such counsel's knowledge, no proceedings for that purpose have been instituted or threatened or are contemplated by the Commission. (i) The Company is not, and will not be as a result of the consummation of the transactions contemplated by this Agreement, an "investment company," or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940. Such counsel shall also state that no facts have come to their attention which lead them to believe that, as of its effective date, the Registration Statement or any further amendment thereto made by the Company prior to the date hereof (other than the financial statements and related schedules therein or other 16 17 financial data derived from accounting records, as to which they need express no opinion) contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading or that, as of its date, the Prospectus or any further amendment or supplement thereto made by the Company prior to the date hereof (other than the financial statements and related schedules therein or other financial data derived from accounting records, as to which they need express no opinion) contained an untrue statement of a material fact or omitted to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading or that, as of the date hereof, either the Registration Statement or the Prospectus or any further amendment or supplement thereto made by the Company prior to the date hereof (other than the financial statements and related schedules therein or other financial data derived from accounting records, as to which they need express no opinion) contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. In rendering any such opinion, such counsel may rely, as to matters of fact, to the extent such counsel deem proper, on certificates of responsible officers of the Company and public officials. (d) You shall have received from Elliott, Davis & Company, L.L.P., letters dated, respectively, the date of this Agreement and the effective date of the most recently filed post-effective amendment to the Registration Statement and also at each Time of Delivery, in form and substance satisfactory to you, containing statements and information of the type ordinarily included in accountants' "comfort letters" to underwriters with respect to the financial statements and certain financial information contained in the Registration Statement and the Prospectus. (e) You shall have received on each Time of Delivery a certificate or certificates of the Chief Executive Officer and the President of the Company to the effect that: (i) the representations and warranties of the Company in Section 1 of this Agreement are true and correct, as if made at and as of the First Time of Delivery or the Subsequent Time of Delivery, as the case may be, and the Company has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied at or prior to the Time of Delivery and as to such other matters as you may reasonably request; (ii) no stop order suspending the effectiveness of the Registration Statement has been issued, and no proceedings for that purpose have been initiated or are pending, or to their knowledge, contemplated under the Securities Act; (iii) all filings required by Rule 424 and Rule 430A of the Rules and Regulations have been made; (iv) they have carefully examined the Registration Statement and the Prospectus, and any amendments or supplements thereto, and in his or her opinion, such documents do not include any untrue statement of a material fact or 17 18 omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances under which they were made; and (v) since the effective date of the Registration Statement, there has occurred no event required to be set forth in an amendment or supplement to the Registration Statement or the Prospectus which has not been so set forth. (f) Since the date of the latest audited financial statements included in the Prospectus, neither the Company nor the Bank shall have sustained (i) any loss or interference with their respective businesses from fire, explosion, flood, hurricane or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as disclosed in or contemplated by the Prospectus, or (ii) any change, or any development involving a prospective change (including without limitation a change in management or control of the Company), in or affecting the position (financial or otherwise), results of operations, net worth or business prospects of the Company and the Bank, otherwise than as disclosed in or contemplated by the Prospectus (including any amendment), the effect of which, in either such case, is in your judgment so material and adverse as to make it unpracticable or inadvisable to proceed with the purchase, sale and delivery of the Shares being delivered at such Time of Delivery as contemplated by the Registration Statement, as amended as of the date hereof. (g) Subsequent to the date hereof there shall not have occurred any of the following: (i) any suspension or limitation in trading in securities generally on the New York Stock Exchange or the over-the-counter market (other than normal market breaks or cooling periods), or any setting of minimum prices for trading on such exchange, or if trading in any securities of the Company has been suspended by the Commission, or limitations on prices for trading (other than limitations on hours or numbers of days of trading) have been fixed, or maximum ranges for prices for securities have been required, by the Nasdaq OTC Bulletin Board or the NASD or by order of the Commission or any other governmental authority; (ii) a moratorium on commercial banking activities in New York declared by either federal or state authorities; (iii) any major outbreak or major escalation of hostilities involving the United States, declaration by the United States of a national emergency (other than with respect to natural disasters) or war or any other national or international calamity or emergency or any material adverse change in general economic, political or financial conditions if the effect of any such event specified in this clause (iii) in your judgment makes it impracticable or inadvisable to proceed with the purchase, sale and delivery of the Shares being delivered at such Time of Delivery as contemplated by the Registration Statement. (h) The Shares shall be approved for quotation on the Nasdaq OTC Bulletin Board when issued. (i) The Company shall have furnished the Representative with evidence of its receipt of each of the Regulatory Approvals. 18 19 (j) The Representative shall have received the Lockup Agreements as described in Section 1(v). 8. INDEMNIFICATION AND CONTRIBUTION. (a) The Company agrees to indemnify and hold harmless each Underwriter against any losses, claims, damages or liabilities, joint or several, to which such Underwriter may become subject, under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue statement made by the Company in Section 1 of this Agreement; (ii) any untrue statement or alleged untrue statement of any material fact contained in (A) the Registration Statement or any amendment thereto, any Preliminary Prospectus or the Prospectus or any amendment or supplement thereto, or (B) any application or other document, or any amendment or supplement thereto, executed by the Company or based upon written information furnished by or on behalf of the Company filed in any jurisdiction in order to qualify the Shares under the securities or blue sky laws thereof or filed with the Commission or any securities association or securities exchange (each an "Application"); or (iii) the omission or alleged omission to state in the Registration Statement or any amendment thereto, any Preliminary Prospectus, the Prospectus or any amendment or supplement thereto, or any Application, material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse each Underwriter for any legal or other expenses reasonably incurred by such Underwriter in connection with investigating, defending against or appearing as a third-party witness in connection with any such loss, claim, damage, liability or action; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in the Registration Statement or any amendment thereto, any Preliminary Prospectus, the Prospectus or any amendment or supplement thereto or any Application in reliance upon and in conformity with written information furnished to the Company by any Underwriter. The Company will not, without the prior written consent of each Underwriter, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action, suit or proceeding (or related cause of action or portion thereof) in respect of which indemnification may be sought hereunder (whether or not such Underwriter is a party to such claim, action, suit or proceeding), unless such settlement, compromise or consent includes an unconditional release of such Underwriter from all liability arising out of such claim, action, suit or proceeding or related cause of action or portion thereof. (b) Each Underwriter agrees to indemnify and hold harmless the Company and its officers, directors, agents, representatives and affiliates against any losses, claims, damages or liabilities to which the Company or its officers, directors, agents, representatives and affiliates may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement or any amendment thereto, any Preliminary Prospectus, the Prospectus or any amendment or supplement thereto or any Application or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to 19 20 the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by the Underwriter through the Representative expressly for use therein; and will reimburse the Company for any legal or other expenses reasonably incurred by the Company in connection with investigating or defending any such loss, claim, damage, liability or action. (c) Promptly after receipt by an indemnified party under subsection (a) and (b) above of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify the indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party otherwise than under such subsection. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party); provided, however, that if the defendants in any such action included the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be one or more legal defenses available to it or other indemnified parties which are different from or additional to those available to the indemnifying party, the indemnifying party shall not have the right to assume the defense of such action on behalf of such indemnified party and such indemnified party shall have the right to select separate counsel to defend such action on behalf of such indemnified party. After such notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof and approval by such indemnified party of counsel appointed to defend such action, the indemnifying party will not be liable to such indemnified party under this Section 8 for any legal or other expenses, other than reasonable costs of investigation, subsequently incurred by such indemnified party in connection with the defense thereof, unless (i) the indemnified party shall have employed separate counsel in accordance with the proviso to the next preceding sentence (it being understood, however, that in connection with such action the indemnifying party shall not be liable for the expenses of more than one separate counsel (in addition to local counsel) in any one action or separate but substantially similar actions in the same jurisdiction arising out of the same general allegations or circumstances, which separate counsel shall be designated by the Representative in the case of indemnity arising under paragraph (a) of this Section 8) or (ii) the indemnifying party has authorized the employment of counsel for the indemnified party at the expense of the indemnifying party. Nothing in this Section 8(c) shall preclude an indemnified party from participating at its own expense in the defense of any such action so assumed by the indemnifying party. (d) If the indemnification provided for in this Section 8 is unavailable to or insufficient to hold harmless an indemnified party under subsection (a) or (b) above in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriter on the other from the offering of the Shares. If, however, the 20 21 allocation provided by the immediately preceding sentence is not permitted by applicable law or if the indemnified party failed to give the notice required under subsection (c) above, then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company on the one hand and the Underwriter on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Underwriter on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company bear to the total underwriting discounts, and commissions received by the Underwriters. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or the Underwriters on the other and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Underwriters agree that it would not be just and equitable if contributions pursuant to this subsection (d) were determined by pro rata allocation (even if the Underwriters were treated as one for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this subsection (d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subsection (d), the Underwriter shall not be required to contribute any amount in excess of the amount by which the total price at which the Shares underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. (e) The obligations of the Company under this Section 8 shall be in addition to any liability which the Company may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls any Underwriter within the meaning of the Securities Act; and the obligations of the Underwriters under this Section 8 shall be in addition to any liability which the Underwriters may otherwise have and shall extend, upon the same terms and conditions, to each officer and director of the Company and to each person, if any, who controls the Company within the meaning of The Securities Act. 9. DEFAULT OF UNDERWRITERS. (a) If any Underwriter defaults in its obligation to purchase Shares at a Time of Delivery, you may in your discretion arrange for you or another party, or other parties to purchase such shares on the terms contained herein. If within 36 hours after such default by any Underwriter you do not arrange for the purchase of such Shares, the Company shall be entitled to a further period of 36 hours within which to procure another party or other parties satisfactory to you to purchase such Shares on such terms. In the event that, within the respective prescribed periods, you notify the Company that you have so 21 22 arranged for the purchase of such Shares, or the Company notifies you that it has so arranged for the purchase of such Shares, you or the Company shall have the right to postpone a Time of Delivery for a period of not more than 7 days in order to effect whatever change is made necessary thereby in the Registration Statement or the Prospectus, or in any other documents or arrangements, and the Company agrees to file promptly any amendments to the Registration Statement or the Prospectus that in your opinion may thereby be made necessary. The cost of preparing, printing and filing any such amendments shall be paid for by the Underwriters. The term "Underwriter" as used in this Agreement shall include any person substituted under this Section with effect as if such person had originally been a party to this Agreement with respect to such Shares. (b) If, after giving effect to any arrangements for the purchase of the Shares of a defaulting Underwriter or Underwriters by you and the Company as provided in subsection (a) above, the aggregate number of such Shares which remains unpurchased does not exceed one-eleventh of the aggregate number of Shares to be purchased at such Time of Delivery, then the Company shall have the right to require each non-defaulting Underwriter to purchase the number of Shares which such Underwriter agreed to purchase hereunder at such Time of Delivery and, in addition, to require each non-defaulting Underwriter to purchase its pro rata share (based on the number of Shares which such Underwriter agreed to purchase hereunder) of the Shares of such defaulting Underwriter or Underwriters for which such arrangements have not been made, but nothing herein shall relieve a defaulting Underwriter from liability for its default. 10. TERMINATION. (a) This Agreement may be terminated with respect to the Shares or any Optional Shares in the sole discretion of the Representative by notice to the Company given prior to the First Time of Delivery or any Subsequent Time of Delivery, respectively, in the event that (i) any condition to the obligations of the Underwriters set forth in Section 7 hereof has not been satisfied, or (ii) the Company shall have failed, refused or been unable to deliver the Shares or to perform all obligations and satisfy all conditions on its part to be performed or satisfied hereunder at or prior to such Time of Delivery, in either case other than by reason of a default by any of the Underwriters. If this Agreement is terminated pursuant to this Section 10(a), the Company will reimburse the Underwriters upon demand for all out-of-pocket expenses (including counsel fees and disbursements) that shall have been incurred by it in connection with the proposed purchase and sale of the Shares. (b) If, after giving effect to any arrangements for the purchase of the Shares of a defaulting Underwriter or Underwriters by you and the Company as provided in Section 10(a), the aggregate number of such Shares which remain unpurchased exceeds one-eleventh of the aggregate number of Shares to be purchased at such Time of Delivery, or if the Company shall not exercise the right described in Section 9(b) to require non-defaulting Underwriters to purchase Shares of a defaulting Underwriter or Underwriters, then this Agreement (or, with respect to a Subsequent Time of Delivery, the obligations of the Underwriters to purchase and of the Company to sell the Optional Shares) thereupon will terminate, without liability on the part of any nonfaulting Underwriter or the Company, except for the expenses to be borne by the Company and the Underwriters as provided in Section 6 hereof and the indemnity and contribution agreements in Section 8 hereof; but nothing herein shall relieve a defaulting Underwriter from liability for its default. 22 23 11. SURVIVAL. The respective indemnities, agreements, representations, warranties and other statements of the Company, its officers and the Underwriter, as set forth in this Agreement or made by or on behalf of them, respectively, pursuant to this Agreement, shall remain in full force and effect, regardless of any investigation (or any statement as to the results thereof) made by or on behalf of the Underwriter or any controlling person referred to in Section 8(e) or the Company, or any officer or director or controlling person of the Company referred to in Section 8(e), and shall survive delivery of and payment for the Shares. The respective agreements, covenants, indemnities and other statements set forth in Sections 6, 8 and 13 hereof shall remain in full force and effect, regardless of any termination or cancellation of this Agreement. 12. NOTICES. All communications hereunder shall be in writing and, if sent to the Underwriter, shall be mailed, delivered or telegraphed and confirmed in writing to Wachovia Securities, Inc., IJL Financial Center, 201 North Tryon Street, Charlotte, North Carolina 28202, Attention: Corporate Finance Department (with a copy to Ronald W. Goff at Wachovia Securities, Inc., Resurgens Plaza, 945 E. Paces Ferry Road, Atlanta, Georgia 30326, and Boyd C. Campbell, Jr. at Smith Helms Mulliss & Moore L.L.P., 201 North Tryon Street, Charlotte, North Carolina 28202), and if sent to the Company, shall be mailed, delivered or telegraphed and confirmed in writing to the Company at 1805 Laurens Road, Greenville, South Carolina 29607, Attention: President and Chief Executive Officer (with a copy to C. Russell Pickering, Esq., Nelson Mullins Riley & Scarborough, L.L.P., 999 Peachtree Street, N.E., Suite 1400, Atlanta, Georgia 30309). 13. RIGHT OF FIRST REFUSAL. The Company grants to the Representative an unconditional right of first refusal to serve as exclusive or lead advisor to the Company on all corporate finance transactions undertaken or considered by the Company for three years from the effective date of the Prospectus. The Representative shall not be entitled to more than one payment or fee in exchange for the waiver or termination of this right of first refusal, and any payment or fee to waive or terminate the right of first refusal shall be paid in cash and will not exceed the greater of (a) one percent (1%) of the aggregate purchase price of the Shares purchased pursuant to this Agreement, and (b) five percent (5%) of the underwriting discount or commission paid in connection with the future financing (including any overallotment option that my be exercised). 14. REPRESENTATIVE. You will act for the several Underwriters in connection with the transactions contemplated by this Agreement, and any action under this Agreement taken by you will be binding upon all the Underwriters. 15. BINDING EFFECT. This Agreement shall be binding upon, and inure solely to the benefit of, each Underwriter and the Company and to the extent provided in Sections 8 and 10 hereof, the officers and directors and controlling persons referred to therein and their respective heirs, executors, administrators, successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No purchaser of any of the Shares from the Underwriters shall be deemed a successor or assign by reason merely of such purchase. 23 24 16. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of North Carolina without giving effect to any provisions regarding conflicts of laws. 17. COUNTERPARTS. This Agreement may be executed by any one or more of the parties hereto in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument. 18. If the foregoing is in accordance with your understanding of our agreement, please sign and return to us one of the counterparts hereof, and upon the acceptance hereof by Wachovia Securities, Inc., this letter will constitute a binding agreement among the Underwriters and the Company. Very truly yours, GREENVILLE FIRST BANCSHARES, INC. By: ---------------------------------------- Name: R. Arthur Seaver, Jr. Title: Chief Executive Officer and President WACHOVIA SECURITIES, INC. By: -------------------------------------- Name: ------------------------------ Title: ------------------------------ 24 25 SCHEDULE I GREENVILLE FIRST BANCSHARES, INC. 1,200,000 SHARES COMMON STOCK
NUMBER OF OPTIONAL SHARES TOTAL NUMBER OF TO BE PURCHASED FIRM SHARES TO IF MAXIMUM UNDERWRITER BE PURCHASED OPTION EXERCISED - ----------- ------------ ---------------- Wachovia Securities, Inc.
Total 25 EX-10.1 3 EMPLOYMENT AGREEMENT / R. ARTHUR SEAVER 1 EXHIBIT 10.1 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (this "Agreement") dated as of July 27, 1999, is made by and between Greenville First Bancshares, Inc., a South Carolina corporation (the "Employer" or the "Company") which is the proposed bank holding company for Greenville First Bank (Proposed), a proposed national bank (the "Bank"), and R. Arthur Seaver, Jr., an individual resident of South Carolina (the "Executive"). The Employer is in the process of organizing the Bank, and the Executive has agreed to serve as President and Chief Executive Officer of the Bank and the Company. Upon organization of the Bank, the Employer and the Executive contemplate that this Agreement will be assigned by the Employer to the Bank and that the Bank will assume the duties of the Company hereunder (except pursuant to Section 3). Following any such assignment, the term "Employer" as used herein from time to time shall refer to the Bank. The Employer recognizes that the Executive's contribution to the growth and success of the Bank during its organization and initial years of operations will be a significant factor in the success of the Bank. The Employer desires to provide for the employment of the Executive in a manner which will reinforce and encourage the dedication of the Executive to the Bank and promote the best interests of the Bank and its shareholders. The Executive is willing to serve the Employer on the terms and conditions herein provided. Certain terms used in this Agreement are defined in Section 17 hereof. In consideration of the foregoing, the mutual covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows: 1. Employment. The Employer shall employ the Executive, and the Executive shall serve the Employer, as President and Chief Executive Officer of the Bank and the Company upon the terms and conditions set forth herein. The Executive shall also serve on the Board of Directors of the Company and the Bank. The Executive shall have such authority and responsibilities consistent with his position as are set forth in the Company's or the Bank's Bylaws or assigned by the Company's or the Bank's Board of Directors (the "Board") from time to time. The Executive shall devote his full business time, attention, skill and efforts to the performance of his duties hereunder, except during periods of illness or periods of vacation and leaves of absence consistent with Bank policy. The Executive may devote reasonable periods to service as a director or advisor to other organizations, to charitable and community activities, and to managing his personal investments, provided that such activities do not materially interfere with the performance of his duties hereunder and are not in conflict or competitive with, or adverse to, the interests of the Company or the Bank. 2. Term. Unless earlier terminated as provided herein, the Executive's employment under this Agreement shall commence on the date hereof and be for a term (the "Term") of three years. At the end of each year of the Term, the Term shall be extended for an additional year so that the remaining term shall continue to be three years; provided that the Executive or the Bank may at any time, by written notice, fix the Term to a finite term of three years commencing with the year of the notice. Notwithstanding the foregoing, the Term of employment hereunder will end on the date that the Executive attains the retirement age, if any, specified in the Bylaws of the Bank for directors of the Bank. 3. Compensation and Benefits. (a) Starting February 15, 1999, the Employer shall pay the Executive an initial annual base salary of $123,000, plus his yearly medical insurance premium. Executive shall receive a minimum annual increase in his base salary equal to the previous year's base salary times the increase in the Consumer Price Index during the previous year as stated in a nationally recognized financial news source such as the Wall Street Journal (the "Mandatory Annual Increase"). The Board (or an appropriate committee of the Board) shall review the Executive's performance and salary at least annually and may increase the Executive's base salary above the Mandatory Annual Increase if it determines in its sole discretion that an additional increase is appropriate. 2 (b) The Executive shall receive a cash bonus in the amount of $10,000 on the date that the Bank opens for business (the "Opening Date"). For each anniversary of the Opening Date thereafter, the Executive shall be eligible to receive a cash bonus equaling up to 5% of the net pretax consolidated income of the Company (determined in accordance with generally accepted accounting principals) if the Bank achieves certain performance levels established by the board of directors from time to time (the "Bonus Plan"). (c) The Executive shall participate in the Bank's long-term equity incentive program and be eligible for the grant of stock options, restricted stock, and other awards thereunder or under any similar plan adopted by the Company. As soon as an appropriate stock option plan is adopted by the Board, the Company shall grant to the Executive an option to purchase a number of shares of Common Stock equal to 5% of the number of shares sold in the offering. The award agreement for the stock option shall provide that one-fifth of the shares subject to the option will vest on each of the first five anniversaries of the Opening Date, but only if the Executive remains employed by the Company on such date, and shall contain other customary terms and conditions. Nothing herein shall be deemed to preclude the granting to the Executive of warrants or options under a director option plan in addition to the options granted hereunder. (d) The Executive shall participate in all retirement, welfare and other benefit plans or programs of the Employer now or hereafter applicable generally to employees of the Employer or to a class of employees that includes senior executives of the Employer. (e) The Employer shall provide the Executive with a term life insurance policy providing for death benefits totaling $300,000 payable to the Executive's spouse and heirs (and may provide for additional death benefits of up to $700,000 payable to the Employer), and the Executive shall cooperate with the Employer in the securing and maintenance of such policy. The Employer shall also pay for an accident liability policy on the Executive totaling $1,000,000 to protect the Employer from damages or lawsuits resulting from injuries to third parties caused by the Executive. (f) The Employer shall provide the Executive with an automobile either owned or leased by the Company of a make and model appropriate to the Executive's status. The total cost of this automobile, including lease payments, if any, insurance, taxes and other expenses associated with the automobile, shall not exceed $700 per month. (g) In addition, commencing on the Opening Date, the Employer shall obtain a membership in and pay the initiation fee (not to exceed $10,000) for and the dues pertaining to an area country club and shall designate the Executive as the authorized user of such membership for so long as the Executive remains the President and CEO of the Employer and this Agreement remains in force. (h) The Employer shall reimburse the Executive for reasonable travel and other expenses related to the Executive's duties which are incurred and accounted for in accordance with the normal practices of the Employer. 4. Termination. (a) The Executive's employment under this Agreement may be terminated prior to the end of the Term only as follows: (i) upon the death of the Executive; (ii) upon the disability of the Executive for a period of 180 days which, in the opinion of the Board of Directors, renders him unable to perform the essential functions of his job and for which reasonable accommodation is unavailable. For purposes of this Agreement, a "disability" is defined as a physical or mental impairment that substantially limits one or 2 3 more major life activities, and a "reasonable accommodation" is one that does not impose an undue hardship on the Employer; (iii) by the Employer for Cause upon delivery of a Notice of Termination to the Executive; (iv) by the Executive for Good Reason upon delivery of a Notice of Termination to the Employer within a 90-day period beginning on the 30th day after the occurrence of a Change in Control or within a 90-day period beginning on the one year anniversary of the occurrence of a Change in Control; (v) by the Employer if its effort to organize the Bank is abandoned; and (vi) by the Executive effective upon the 30th day after delivery of a Notice of Termination. (a) If the Executive's employment is terminated because of the Executive's death, the Executive's estate shall receive any sums due him as base salary and/or reimbursement of expenses through the end of the month during which death occurred, plus any bonus earned or accrued under the Bonus Plan through the date of death (including any amounts awarded for previous years but which were not yet vested) and a pro rata share of any bonus with respect to the current fiscal year which had been earned as of the date of the Executive's death. (b) During the period of any incapacity leading up to the termination of the Executive's employment as a result of disability, the Employer shall continue to pay the Executive his full base salary at the rate then in effect and all perquisites and other benefits (other than any bonus) until the Executive becomes eligible for benefits under any long-term disability plan or insurance program maintained by the Employer, provided that the amount of any such payments to the Executive shall be reduced by the sum of the amounts, if any, payable to the Executive for the same period under any disability benefit or pension plan of the Employer or any of its subsidiaries. Furthermore, the Executive shall receive any bonus earned or accrued under the Bonus Plan through the date of incapacity (including any amounts awarded for previous years but which were not yet vested) and a pro rata share of any bonus with respect to the current fiscal year which had been earned as of the date of the Executive's incapacity. (c) If the Executive's employment is terminated for Cause as provided above, or if the Executive resigns (except for a termination of employment pursuant to Section 4(e)), the Executive shall receive any sums due him as base salary and/or reimbursement of expenses through the date of such termination. (d) If the Executive's employment is terminated by the Executive pursuant to clause (iv) of Section 4(a), in addition to other rights and remedies available in law or equity, the Executive shall be entitled to the following: (i) the Employer shall pay the Executive in cash within fifteen days of the Termination Date severance compensation in an amount equal to 100% of his then current monthly base salary each month for twelve months from the Termination Date, plus any bonus earned or accrued under the Bonus Plan through the Termination Date (including any amounts awarded for previous years but which were not yet vested) and a pro rata share of any bonus with respect to the current fiscal year which had been earned as of the Termination Date. (ii) for the period from the Termination Date through the date that the Executive attains the age of 65 (the "Continuation Period"), the Employer shall at its expense continue on behalf of the Executive and his dependents and beneficiaries the life insurance, disability, medical, dental, and hospitalization benefits provided (x) to the Executive at any time during the 90-day period prior to the Change in Control or at any time thereafter or (y) to other similarly situated executives who continue in the employ of the Employer during the Continuation Period. Such 3 4 coverage and benefits (including deductibles and costs) shall be no less favorable to the Executive and his dependents and beneficiaries than the most favorable of such coverages and benefits during any of the periods referred to above. The Employer's obligation hereunder with respect to the foregoing benefits shall be limited to the extent that the Executive obtains any such benefits pursuant to a subsequent employer's benefit plans, in which case the Employer may reduce the coverage of any benefits it is required to provide the Executive hereunder as long as the aggregate coverages and benefits of the combined benefit plans is no less favorable to the Executive than the coverages and benefits required to be provided hereunder. This subsection (ii) shall not be interpreted so as to limit any benefits to which the Executive or his dependents or beneficiaries may be entitled under any of the Employer's employee benefit plans, programs, or practices following the Executive's termination of employment, including, without limitation, retiree medical and life insurance benefits; and (iii) the restrictions on any outstanding incentive awards (including restricted stock) granted to the Executive under the Company's or the Bank's long-term equity incentive program or any other incentive plan or arrangement shall lapse and become 100% vested, all stock options and stock appreciation rights granted to the Executive shall become immediately exercisable and shall become 100% vested, all performance units granted to the Executive shall become 100% vested, and the restrictive covenants contained in Section 9 shall not apply to the Executive. (e) If the Executive's employment is terminated pursuant to clause (v) of Section 4(a), the Employer shall pay to the Executive severance compensation in an amount equal to 100% of his then current monthly base salary each month for six months from the date of termination. (f) If the Employer terminates the Executive's employment other than pursuant to clauses (i), (ii), (iii) or (v) of Section 4(a), the Employer shall pay to the Executive severance compensation in an amount equal to 100% of his then current monthly base salary each month for twelve months from the date of termination, plus any bonus earned or accrued under the Bonus Plan through the date of termination (including any amounts awarded for previous years but which were not yet vested) and a pro rata share of any bonus with respect to the current fiscal year which had been earned as of the date of the Executive's termination. (g) With the exceptions of the provisions of this Section 4, and the express terms of any benefit plan under which the Executive is a participant, it is agreed that, upon termination of the Executive's employment, the Employer shall have no obligation to the Executive for, and the Executive waives and relinquishes, any further compensation or benefits (exclusive of COBRA benefits). At the time of termination of employment, the Employer and the Executive shall enter into a mutually satisfactory form of release acknowledging such remaining obligations and discharging both parties, as well as the Employer's officers, directors and employees with respect to their actions for or on behalf of the Employer, from any other claims or obligations arising out of or in connection with the Executive's employment by the Employer, including the circumstances of such termination. (h) In the event that the Executive's employment is terminated for any reason, the Executive shall (and does hereby) tender his resignation as a director of the Employer and effective as of the date of termination. (j) The parties intend that the severance payments and other compensation provided for herein are reasonable compensation for the Executive's services to the Employer and shall not constitute "excess parachute payments" within the meaning of Section 280G of the Internal Revenue Code of 1986 and any regulations thereunder. In the event that the Employer's independent accountants acting as auditors for the Employer on the date of a Change in Control determine that the payments provided for herein constitute "excess parachute payments," then the compensation payable hereunder shall be increased, on a tax gross-up basis, so as to reimburse the Executive for the tax payable by the Executive, pursuant to Section 4999 of the Internal Revenue Code, on such "excess parachute payments," taking into account all taxes payable by the Executive with respect to such tax gross-up payments hereunder, so that the Executive shall be, after payment of all taxes, in the same financial position as if no taxes under Section 4999 had been imposed upon him. 4 5 5. Ownership of Work Product. The Employer shall own all Work Product arising during the course of the Executive's employment (prior, present or future). For purposes hereof, "Work Product" shall mean all intellectual property rights, including all Trade Secrets, U.S. and international copyrights, patentable inventions, and other intellectual property rights in any programming, documentation, technology or other work product that relates to the Employer, its business or its customers and that employee conceives, develops, or delivers to the Employer at any time during his employment, during or outside normal working hours, in or away from the facilities of the Employer, and whether or not requested by the Employer. If the Work Product contains any materials, programming or intellectual property rights that the Executive conceived or developed prior to, and independent of, the Executive's work for the Employer, the Executive agrees to point out the pre-existing items to the Employer and the Executive grants the Employer a worldwide, unrestricted, royalty-free right, including the right to sublicense such items. The Executive agrees to take such actions and execute such further acknowledgments and assignments as the Employer may reasonably request to give effect to this provision. 6. Protection of Trade Secrets. The Executive agrees to maintain in strict confidence and, except as necessary to perform his duties for the Employer, the Executive agrees not to use or disclose any Trade Secrets of the Employer during or after his employment. "Trade Secret" means information, including a formula, pattern, compilation, program, device, method, technique, process, drawing, cost data or customer list, that: (i) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. 7. Protection of Other Confidential Information. In addition, the Executive agrees to maintain in strict confidence and, except as necessary to perform his duties for the Employer, not to use or disclose any Confidential Business Information of the Employer during his employment and for a period of 24 months following termination of the Executive's employment. "Confidential Business Information" shall mean any internal, non-public information (other than Trade Secrets already addressed above) concerning the Employer's financial position and results of operations (including revenues, assets, net income, etc.); annual and long-range business plans; product or service plans; marketing plans and methods; training, educational and administrative manuals; customer and supplier information and purchase histories; and employee lists. The provisions of Sections 6 and 7 above shall also apply to protect Trade Secrets and Confidential Business Information of third parties provided to the Employer under an obligation of secrecy. 8. Return of Materials. The Executive shall surrender to the Employer, promptly upon its request and in any event upon termination of the Executive's employment, all media, documents, notebooks, computer programs, handbooks, data files, models, samples, price lists, drawings, customer lists, prospect data, or other material of any nature whatsoever (in tangible or electronic form) in the Executive's possession or control, including all copies thereof, relating to the Employer, its business, or its customers. Upon the request of the Employer, employee shall certify in writing compliance with the foregoing requirement. 9. Restrictive Covenants. (a) No Solicitation of Customers. During the Executive's employment with the Employer and for a period of 12 months thereafter, the Executive shall not (except on behalf of or with the prior written consent of the Employer), either directly or indirectly, on the Executive's own behalf or in the service or on behalf of others, (A) solicit, divert, or appropriate to or for a Competing Business, or (B) attempt to solicit, divert, or appropriate to or for a Competing Business, any person or entity that is or was a customer of the Employer or any of its Affiliates on the date of termination and is located in the Territory and with whom the Executive has had material contact. This restriction does not apply after a Change in Control. (b) No Recruitment of Personnel. During the Executive's employment with the Employer and for a period of 12 months thereafter, the Executive shall not, either directly or indirectly, on the Executive's own behalf or in the service or on behalf of others, (A) solicit, divert, or hire away, or (B) attempt to solicit, divert, or hire away, to any Competing Business located in the Territory, any employee of or consultant to the Employer or any of its Affiliates engaged or experienced in the Business, regardless of whether the employee or consultant is full-time 5 6 or temporary, the employment or engagement is pursuant to written agreement, or the employment is for a determined period or is at will. This restriction does not apply after a Change in Control. (c) Non-Competition Agreement. During the Executive's employment with the Employer and for a period of 12 months thereafter, the Executive shall not (without the prior written consent of the Employer) compete with the Employer or any of its Affiliates by, directly or indirectly, forming, serving as an organizer, director or officer of, or consultant to, or acquiring or maintaining more than a 1% passive investment in, a depository financial institution or holding company therefor if such depository institution or holding company has one or more offices or branches located in the Territory. Notwithstanding the foregoing, the Executive may serve as an officer of or consultant to a depository institution or holding company therefor even though such institution operates one or more offices or branches in the Territory, if the Executive's employment does not directly involve, in whole or in part, the depository financial institution's or holding company's operations in the Territory. This restriction does not apply after a Change in Control. 10. Independent Provisions. The provisions in each of the above Sections 9(a), 9(b), and 9(c) are independent, and the unenforceability of any one provision shall not affect the enforceability of any other provision. 11. Successors; Binding Agreement. The rights and obligations of this Agreement shall bind and inure to the benefit of the surviving corporation in any merger or consolidation in which the Employer is a party, or any assignee of all or substantially all of the Employer's business and properties. The Executive's rights and obligations under this Agreement may not be assigned by him, except that his right to receive accrued but unpaid compensation, unreimbursed expenses and other rights, if any, provided under this Agreement which survive termination of this Agreement shall pass after death to the personal representatives of his estate. 12. Notice. For the purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or sent by certified mail, return receipt requested, postage prepaid, addressed to the respective addresses last given by each party to the other; provided, however, that all notices to the Employer shall be directed to the attention of the Employer with a copy to the Secretary of the Employer. All notices and communications shall be deemed to have been received on the date of delivery thereof. 13. Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of South Carolina without giving effect to the conflict of laws principles thereof. Any action brought by any party to this Agreement shall be brought and maintained in a court of competent jurisdiction in State of South Carolina. 14. Non-Waiver. Failure of the Employer to enforce any of the provisions of this Agreement or any rights with respect thereto shall in no way be considered to be a waiver of such provisions or rights, or in any way affect the validity of this Agreement. 15. Enforcement. The Executive agrees that in the event of any breach or threatened breach by the Executive of any covenant contained in Section 9(a), 9(b), or 9(c) hereof, the resulting injuries to the Employer would be difficult or impossible to estimate accurately, even though irreparable injury or damages would certainly result. Accordingly, an award of legal damages, if without other relief, would be inadequate to protect the Employer. The Executive, therefore, agrees that in the event of any such breach, the Employer shall be entitled to obtain from a court of competent jurisdiction an injunction to restrain the breach or anticipated breach of any such covenant, and to obtain any other available legal, equitable, statutory, or contractual relief. Should the Employer have cause to seek such relief, no bond shall be required from the Employer, and the Executive shall pay all attorney's fees and court costs which the Employer may incur to the extent the Employer prevails in its enforcement action. 16. Saving Clause. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. If any provision or clause of this Agreement, or portion thereof, shall be held by any court or other tribunal of 6 7 competent jurisdiction to be illegal, void, or unenforceable in such jurisdiction, the remainder of such provision shall not be thereby affected and shall be given full effect, without regard to the invalid portion. It is the intention of the parties that, if any court construes any provision or clause of this Agreement, or any portion thereof, to be illegal, void, or unenforceable because of the duration of such provision or the area or matter covered thereby, such court shall reduce the duration, area, or matter of such provision, and, in its reduced form, such provision shall then be enforceable and shall be enforced. The Executive and the Employer hereby agree that they will negotiate in good faith to amend this Agreement from time to time to modify the terms of Sections 9(a), 9(b), and 9(c), the definition of the term "Territory," and the definition of the term "Business," to reflect changes in the Employer's business and affairs so that the scope of the limitations placed on the Executive's activities by Section 9 accomplishes the parties' intent in relation to the then current facts and circumstances. Any such amendment shall be effective only when completed in writing and signed by the Executive and the Employer. 17. Certain Definitions. (a) "Affiliate" shall mean any business entity controlled by, controlling or under common control with the Employer. (b) "Business" shall mean the operation of a depository financial institution, including, without limitation, the solicitation and acceptance of deposits of money and commercial paper, the solicitation and funding of loans and the provision of other banking services, and any other related business engaged in by the Employer or any of its Affiliates as of the date of termination. (c) "Cause" shall consist of any of (A) the commission by the Executive of a willful act (including, without limitation, a dishonest or fraudulent act) or a grossly negligent act, or the willful or grossly negligent omission to act by the Executive, which is intended to cause, causes or is reasonably likely to cause material harm to the Employer (including harm to its business reputation), (B) the indictment of the Executive for the commission or perpetration by the Executive of any felony or any crime involving dishonesty, moral turpitude or fraud, (C) the material breach by the Executive of this Agreement that, if susceptible of cure, remains uncured ten days following written notice to the Executive of such breach, (D) the receipt of any form of notice, written or otherwise, that any regulatory agency having jurisdiction over the Employer intends to institute any form of formal or informal (e.g., a memorandum of understanding which relates to the Executive's performance) regulatory action against the Executive or the Employer or the Employer (provided that the Board of Directors determines in good faith, with the Executive abstaining from participating in the consideration of and vote on the matter, that the subject matter of such action involves acts or omissions by or under the supervision of the Executive or that termination of the Executive would materially advance the Employer's compliance with the purpose of the action or would materially assist the Employer in avoiding or reducing the restrictions or adverse effects to the Employer related to the regulatory action); (E) the exhibition by the Executive of a standard of behavior within the scope of his employment that is materially disruptive to the orderly conduct of the Employer's business operations (including, without limitation, substance abuse or sexual misconduct) to a level which, in the Board of Directors' good faith and reasonable judgment, with the Executive abstaining from participating in the consideration of and vote on the matter, is materially detrimental to the Employer's best interest, that, if susceptible of cure remains uncured ten days following written notice to the Executive of such specific inappropriate behavior; or (F) the failure of the Executive to devote his full business time and attention to his employment as provided under this Agreement that, if susceptible of cure, remains uncured 30 days following written notice to the Executive of such failure. (d) "Change in Control" shall mean the occurrence during the Term of any of the following events, unless such event is a result of a Non-Control Transaction: (i) The individuals who, as of the date of this Agreement, are members of the Board of Directors of the Employer (the "Incumbent Board") cease for any reason to constitute at least fifty percent of the Board of Directors of the Employer; provided, however, that if the election, or nomination for election by the Employer's shareholders, of any new director was approved in advance by a vote of at least fifty percent of the Incumbent Board, such new director shall, for purposes of this Agreement, be considered as a member of the Incumbent Board; provided, further, that no individual shall be considered a member of the Incumbent Board if such individual initially 7 8 assumed office as a result of either an actual or threatened "Election Contest" (as described in Rule 14a-11 promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"), or other actual or threatened solicitation of proxies or consents by or on behalf of any person other than the Board of Directors of the Employer (a "Proxy Contest"), including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest. (ii) An acquisition (other than directly from the Employer) of any voting securities of the Employer (the "Voting Securities") by any "Person" (as the term "person" is used for purposes of Section 13(d) or 14(d) of the Exchange Act) immediately after which such Person has "Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of the combined voting power of the Employer's then outstanding Voting Securities; provided, however, that in determining whether a Change in Control has occurred, Voting Securities which are acquired in a Non-Control Acquisition shall not constitute an acquisition which would cause a Change in Control. (iii) Approval by the shareholders of the Employer of: (i) a merger, consolidation, or reorganization involving the Employer; (ii) a complete liquidation or dissolution of the Employer; or (iii) an agreement for the sale or other disposition of all or substantially all of the assets of the Employer to any Person (other than a transfer to a Subsidiary). (iv) A notice of an application is filed with the Office of Comptroller of the Currency (the "OCC") or the Federal Reserve Board or any other bank or thrift regulatory approval (or notice of no disapproval) is granted by the Federal Reserve, the OCC, the Federal Deposit Insurance Corporation, or any other regulatory authority for permission to acquire control of the Employer or any of its banking subsidiaries. (e) "Competing Business" shall mean any business that, in whole or in part, is the same or substantially the same as the Business. (f) "Good Reason" shall mean the occurrence after a Change in Control of any of the events or conditions described in subsections (i) through (viii) hereof: (i) a change in the Executive's status, title, position or responsibilities (including reporting responsibilities) which, in the Executive's reasonable judgment, represents an adverse change from his status, title, position or responsibilities as in effect at any time within ninety days preceding the date of a Change in Control or at any time thereafter; the assignment to the Executive of any duties or responsibilities which, in the Executive's reasonable judgment, are inconsistent with his status, title, position or responsibilities as in effect at any time within ninety days preceding the date of a Change in Control or at any time thereafter; any removal of the Executive from or failure to reappoint or reelect him to any of such offices or positions, except in connection with the termination of his employment for Disability or Cause, as a result of his death, or by the Executive other than for Good Reason, or any other change in condition or circumstances that in the Executive's reasonable judgment makes it materially more difficult for the Executive to carry out the duties and responsibilities of his office than existed at any time within ninety days preceding the date of Change in Control or at any time thereafter; (ii) a reduction in the Executive's base salary or any failure to pay the Executive any compensation or benefits to which he is entitled within five days of the date due; (iii) the Employer's requiring the Executive to be based at any place outside a 30-mile radius from the executive offices occupied by the Executive immediately prior to the Change in Control, except for reasonably required travel on the Employer's business which is not materially greater than such travel requirements prior to the Change in Control; (iv) the failure by the Employer to (A) continue in effect (without reduction in 8 9 benefit level and/or reward opportunities) any material compensation or employee benefit plan in which the Executive was participating at any time within ninety days preceding the date of a Change in Control or at any time thereafter, unless such plan is replaced with a plan that provides substantially equivalent compensation or benefits to the Executive, or (B) provide the Executive with compensation and benefits, in the aggregate, at least equal (in terms of benefit levels and/or reward opportunities) to those provided for under each other employee benefit plan, program and practice in which the Executive was participating at any time within ninety days preceding the date of a Change in Control or at any time thereafter; (v) the insolvency or the filing (by any party, including the Employer) of a petition for bankruptcy of the Employer, which petition is not dismissed within sixty days; (vi) any material breach by the Employer of any material provision of this Agreement; (vii) any purported termination of the Executive's employment for Cause by the Employer which does not comply with the terms of this Agreement; or (viii) the failure of the Employer to obtain an agreement, satisfactory to the Executive, from any successor or assign to assume and agree to perform this Agreement, as contemplated in Section 11 hereof. Any event or condition described in clause (i) through (viii) above which occurs prior to a Change in Control but which the Executive reasonably demonstrates (A) was at the request of a third party, or (B) otherwise arose in connection with, or in anticipation of, a Change in Control which actually occurs, shall constitute Good Reason for purposes of this Agreement, notwithstanding that it occurred prior to the Change in Control. The Executive's right to terminate his employment for Good Reason shall not be affected by his incapacity due to physical or mental illness. (g) "Non-Control Transaction" shall mean a transaction described below: (i) the shareholders of the Employer, immediately before such merger, consolidation or reorganization, own, directly or indirectly, immediately following such merger, consolidation or reorganization, at least 50% of the combined voting power of the outstanding voting securities of the corporation resulting from such merger, consolidation or reorganization (the "Surviving Corporation") in substantially the same proportion as their ownership of the Voting Securities immediately before such merger, consolidation or reorganization; and (ii) immediately following such merger, consolidation or reorganization, the number of directors on the board of directors of the Surviving Corporation who were members of the Incumbent Board shall at least equal the number of directors who were affiliated with or appointed by the other party to the merger, consolidation or reorganization. (h) "Territory" shall mean a radius of thirty miles from (i) the main office of the Employer or (ii) any branch office of the Employer. (i) "Notice of Termination" shall mean a written notice of termination from the Employer of the Executive which specifies an effective date of termination, indicates the specific termination provision in this Agreement relied upon, and sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. 18. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto and supersedes all prior agreements, if any, understandings and arrangements, oral or written, between the parties hereto with respect to the subject matter hereof. 9 10 19. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the Employer has caused this Agreement to be executed and its seal to be affixed hereunto by its officers thereunto duly authorized, and the Executive has signed and sealed this Agreement, effective as of the date first above written. GREENVILLE FIRST BANCSHARES, INC. ATTEST: By: /s/ E. B. Kish By: /s/ James B. Orders III ------------------------ ------------------------------- Name: Ellen B. Kish Title: Chairman ----------------------- EXECUTIVE /s/ R. Arthur Seaver, Jr. ----------------------------------- R. Arthur Seaver, Jr. 10 EX-23.1 4 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS 1 EXHIBIT 23.1 ELLIOTT, DAVIS & COMPANY, L.L.C. Certified Public Accountants CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS We hereby consent to the incorporation by reference of our report dated July 8, 1999, relating to the financial statements of Greenville First Bancshares, Inc. in Amendment No. 1 to the Registration statement of Form SB-2 and Prospectus, and to the reference to our firm therein under the caption "Experts." /s/ Elliott, Davis & Company, L.L.P. ------------------------------------ ELLIOTT, DAVIS & COMPANY, L.L.P. Greenville, South Carolina September 22, 1999 INTERNATIONALLY - MOORE STEPHENS ELLIOTT DAVIS, LLC 870 S. PLEASANTBURG DRIVE POST OFFICE BOX 6258 GREENVILLE, SOUTH CAROLINA 29606-6286 TELEPHONE (864) 242-3370 TELEFAX (864) 232-7161 EX-27.1 5 FINANCIAL DATA SCHEDULE
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL STATEMENTS OF GREENVILLE FIRST BANCSHARES, INC. BY ELLIOT, DAVIS & COMPANY, LLP DATED JULY 8, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REGISTRATION STATEMENT ON FORM SB-2 ORIGINALLY FILED ON JUNE 27, 1999, FILE NO. 333-8385 OTHER DEC-31-1999 FEB-02-1999 JUN-30-1999 31,625 0 0 0 0 0 0 0 0 56,440 0 0 208,449 0 0 0 100 0 56,440 0 0 0 0 0 3,249 0 0 0 0 (152,109) (152,109) 0 0 (152,109) 0 0 0 0 0 0 0 0 0 0 0 0 0 0
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