HOMETOWN COMMUNITY BANCSHARES, INC. - S-1 - 20040914 - BUSINESS
PROPOSED BUSINESS
GENERAL
We were incorporated as a Georgia corporation on May 12, 2004, primarily
to own and control all of the capital stock of Hometown Community Bank. We
initially will engage in no business other than owning and managing Hometown
Community Bank. Hometown Community Bank is being organized as a state banking
association under the laws of the State of Georgia, and, subject to regulatory
approval, Hometown Community Bank will engage in a commercial banking business
from its location in the Braselton/Oakwood area, with deposits insured by the
FDIC. Hometown Community Bank may not commence business until the Georgia
Department issues a charter for Hometown Community Bank and the FDIC grants
deposit insurance to Hometown Community Bank. There is no assurance that
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Hometown Community Bank will be successful in receiving regulatory approval and
satisfying any conditions that may be imposed upon Hometown Community Bank by
the Georgia Department or the FDIC prior to the commencement of its business.
MARKETING FOCUS
Given recent announced and actual acquisitions of financial institutions
in Hall, Gwinnett, Barrow and Jackson Counties and the rapid population growth
in the Braselton/Oakwood corridor, the organizers believe there is a gap or
vacancy in the local banking market. The organizers believe that there is a
need for, and that the community will enthusiastically support, a new locally
owned and operated commercial bank in the Braselton/Oakwood corridor. However,
size gives the larger banks certain advantages in competing for business from
large corporations. These advantages include higher lending limits and the
ability to offer services in other areas of Atlanta and the four county area.
As a result, we generally will not attempt to compete for the banking
relationships of large corporations, but will concentrate our efforts on small
businesses, professionals and homeowners.
We plan to emphasize Hometown Community Bank's local ownership, community
bank nature and ability to provide more personalized service than its
competition. We believe our commitment to the Braselton/Oakwood market coupled
with a dedication to personal service by local management, relationship banking
and local decision makers will set Hometown Community Bank apart from its
competitors. We believe that this area will react favorably to Hometown
Community Bank's emphasis on personalized banking services to small-to-medium
businesses, developers, contractors, subcontractors, suppliers, homeowners and
consumers. However, no assurances in this respect can be given.
LOCATION AND SERVICE AREA
Hometown Community Bank will be temporarily located at 74 Lagree Duck Road,
Braselton, Georgia. See "Facilities" below. Hometown Community Bank will
primarily serve an area within a ten-mile radius from the intersection of
Highway 53 and Interstate 85 and the intersection of Highway 53 and Interstate
985 and is generally bounded to the North by Gainesville Georgia, to the West by
Buford, Georgia, to the South by Winder, Georgia and to the East by Maysville,
Georgia.
Unique to Hometown Community Bank will be two bank site locations within a
mile radius of two major interstate highways and adjacent to a single highway
that will connect the branches. I-85 intersects Highway 53 in Braselton at exit
129. I-985 intersects Highway 53 in Oakwood at exit 16. Hometown Community
Bank plans to locate on Highway 53 in Braselton and Oakwood. It is
approximately 12 miles on Highway 53 between I-85 in Braselton and I-985 in
Oakwood. The bank will market aggressively to potential bank customers along
this corridor and its connector roads.
Hometown Community Bank is being formed to take advantage of the growth in
this market area. On April 8, 2004, the U.S. Census Bureau released a study of
the one hundred fastest growing counties in America from April 1, 2000 to July
1, 2003. All four of the counties that lie within our market, Barrow (41st),
Gwinnett (55th), Jackson (79th) and Hall (98th) are among the 100 fastest
growing counties in America. According to the U.S. Census Bureau, the State of
Georgia grew 6.09% from April 1, 2000 to July 1, 2003. The counties of Barrow,
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Gwinnett, Jackson and Hall grew 15.90%, 14.43%, 13.01% and 12.05%, respectively,
during this same time period.
According to the U.S. Census Bureau, the resident population of the four
county area exceeded 929,000 as of July 2003. Between 1990 and July 2003, the
four county area population has averaged a 6.15% growth rate annually, or an
aggregate change of 83.03%. The population is projected to grow to 1,129,000 by
2010, an annual growth rate of 21.46%, compared to the projected annual growth
rate for the State of Georgia of only 10.45%. In 1999, the estimated median age
in Barrow, Gwinnett, Hall and Jackson Counties was 32.5, 32.5, 32.2, and 34.6
years old, respectively and the estimated median household income in Barrow,
Gwinnett, Hall and Jackson Counties was $45,019, $60,537, $44,908, and $40,349,
respectively.
POPULATION AND GROWTH RATES
Average Average
Annual Estimated Annual
2000 2003 Growth Rate 2010 Growth Rate
---- ---- ----------- ---- -----------
Barrow 46,144 53,479 5.30% 65,763 3.28%
Gwinnett 588,448 673,345 4.81% 820,960 3.13%
Hall 139,277 156,101 4.03% 184,185 2.57%
Jackson 41,589 46,998 4.34% 58,540 3.51%
Georgia 8,186,453 8,684,715 2.03% 9,592,370 1.49%
________
Source: U.S. Census Bureau
Source: Governor's Office of Planning and Budget
The town of Braselton and the city of Oakwood have also experienced growth.
According to the U.S. Census Bureau, the population of the State of Georgia grew
by 4.37% to 8,544,005 from April 2000 to July 2002. During the same time period,
the population of Braselton grew by 24.38% to 1,500 and the population of
Oakwood grew by 10.08% to 2,960.
Source: The Northeast Georgia Regional Development Center
Source: Georgia Mountains Regional Development Center, 2004
Source: Population Division, U.S. Census Bureau
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The Northeast Georgia Regional Development Center (NEGRDC), formed in 1963
to serve 12 counties and 54 municipal governments in the Northeast Georgia
Region, created a comprehensive plan for the town of Braselton that was adopted
on November 18, 2003. According to this plan, over 1,100 new jobs have been
created in Braselton since 2000, and the town currently houses over 2,000
employment opportunities indicating its regional importance as an employment
center. Since 1996, there have been four major plant openings in Braselton
producing a total of 863 new jobs. Year One, Inc. employs 160 people and
produces restoration auto parts. King's Delight employs 238 people and is a
poultry processing plant. Mayfield Dairy Farms, Inc. employs 195 people and is
a dairy processing plant. Finally, Haverty Furniture Company, Inc. opened its
North Georgia Distribution Center in Braselton and employs 270 people. In
addition, the emergence of Chateau Elan as a major tourist destination has
provided Braselton with a steady stream of income generated by the tourism
industry. Its geographic location, situated along Interstate 85 and within the
Atlanta Metropolitan area, has made it accessible not only to north Georgia
residents, but also to out of state tourists as well. The hotel estimates that
a total of 550,000 people visit all of the amenities (hotel, winery, spa,
convention center) annually, illustrating the local importance of the resort.
Braselton is also home to the Panoz Auto Development Company, a manufacturer of
limited production, high performance automobiles. The company began in 1989,
producing a small number of custom-built cars made to order to a select few
clientele. By 1996, the factory went into full production of the hand-built
automobiles. That same year the company created Panoz Motor Sports, and began
work on cars built for auto racing.
According to the NEGRDC Braselton Comprehensive Plan, Braselton currently
has an abundance of developable industrially and residentially zoned land that
will continue to attract businesses and developers looking to establish
themselves within a vibrant local economy. Projects under construction in
Braselton include Traditions of Braselton and the Georgia Distribution Center.
Traditions of Braselton is an upscale residential master-planned golf community
that sits on 1,140 acres off of Highway 124 4.5 miles east of Braselton.
According to the Jackson County Herald newspaper, Traditions of Braselton is
the largest residential development ever in Jackson County and is expected to
market 1,500 lots. The Georgia Distribution Center is a 265 acre, 3.5 million-
square-foot industrial park under development in the northwest corner of the
intersection of Highway 53 and I-85 in Braselton, less than a mile from our
planned Braselton location. The front part of the property is being marketed
as retail.
The Georgia Mountains Regional Development Center, formed in 1962 to serve
13 counties and 38 municipalities in the Georgia Mountains Region, estimates
rapid employment growth in Oakwood over the next decade per the Oakwood
comprehensive plan. Leading the growth will be the manufacturing and services
sectors.
Current commercial growth within two miles of the Highway 53 and I-985
interchange in Oakwood includes Martin Road Crossing, a development of nine
commercial lots on over 16 acres at the intersection of Highway 53 and Martin
Road.
One exit north on I-85 from our proposed Braselton site and in our market
area is Pendergrass. Michigan Automotive Compressor (MAC), a Toyota Industries-
Denso Corp. joint-venture company, plans to manufacture auto air compressors at
a new plant in Pendergrass. The 185,000-square foot manufacturing facility will
involve a capital investment of between $60 million and $100 million, company
officials have said. MAC believes 120 new jobs with an average annual salary of
$60,000 will be created at the plant. The MAC plant will be built on a 152-acre
tract, near the U.S. Highway 129 exit on I-85. Construction is slated to begin
in the fall, with the plant's grand opening set for 2005. Other Pendergrass
developments in the planning stage are an industrial park with 300,000 square
feet of industrial space located on 270 acres and two residential developments
with a combined 500 lots. Documents for these new subdivisions and the
industrial park have been submitted to the Georgia Department of Community
Affairs for review as "developments of regional impact."
The Braselton/Oakwood corridor is dependent on the industries of real
estate development, farming, distribution, manufacturing, services and tourism.
Residents of the Braselton/Oakwood corridor generally need lines of credit for
liquidity, residential real estate construction and permanent financing. The
commercial sector of the economy is oriented toward real estate development.
Real estate acquisition and development lending will be important to the success
of Hometown Community Bank. The community is experiencing rapid growth in
commercial sectors offering services to residents and visitors. The services
and tourist related industries need working capital and mortgage financing to
support their growth. In addition, the expanding number of retail and
professional businesses will require both unsecured and collateral-based
commercial lending.
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DEPOSITS
Hometown Community Bank intends to offer a full range of deposit services
that are typically available in most banks and savings and loan associations,
including checking accounts, NOW 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 Hometown Community Bank's principal market area at rates
competitive to those offered in the Braselton/Oakwood corridor. In addition,
Hometown Community Bank intends to offer certain retirement account services,
such as Individual Retirement Accounts (IRAs). All deposit accounts will be
insured by the FDIC up to the maximum amount allowed by law (generally, $100,000
per depositor subject to aggregation rules). Hometown Community Bank intends to
solicit these accounts from individuals, professionals and businesses in the
Braselton/Oakwood corridor.
LENDING ACTIVITIES
General. Hometown Community Bank intends to emphasize a range of lending
services, including commercial, real estate, and consumer loans, to small-to-
medium sized businesses and professional concerns and individuals that are
located in or conduct a substantial portion of their business in Hometown
Community Bank's market area.
Commercial Loans. The organizers currently anticipate that loans for
commercial purposes in various lines of businesses will be one of the primary
components of Hometown Community Bank's loan portfolio. The principal economic
risk associated with each category of anticipated loans, including commercial
loans, is the creditworthiness of Hometown Community Bank's borrowers, which in
turn is affected by general economic conditions and the strength of the services
and retail market segments. Commercial loans may require more careful
management in order to limit the risks associated with them. The well-
established banks in the Braselton/Oakwood corridor will make proportionately
more loans to medium-to-large sized businesses than Hometown Community Bank.
Many of Hometown Community Bank's anticipated commercial loans will likely be
made to small-to-medium sized businesses that may be less able to withstand
competitive, economic, and financial conditions than larger borrowers.
Commercial lending will include loans to entrepreneurs, professionals, and
small-to-medium businesses. Small business products will include: working
capital and lines of credit; business term loans to purchase fixtures and
equipment, for site acquisition or business expansion; inventory, accounts
receivable, and purchase-order financing; and construction loans for owner
occupied buildings. Hometown Community Bank plans to place particular emphasis
on loans averaging under $500,000.
Real Estate Loans. Hometown Community Bank expects to focus its real
estate activity in five areas: (1) commercial and residential real estate
development and construction loans; (2) home improvement loans; (3) home equity
lines; (4) conforming and nonconforming mortgages; and (5) owner occupied
commercial real estate loans in the Braselton/Oakwood corridor. These loans
include certain commercial loans where Hometown Community Bank takes a security
interest in real estate out of an abundance of caution and not as the principal
collateral for the loan, but will exclude home equity loans, which are
classified as consumer loans. Loan terms generally will be limited to five
years or less, although payments may be structured on a longer amortization
basis. Interest rates may be fixed or adjustable. Hometown Community Bank will
generally charge an origination fee.
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Management 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 85%. In addition, Hometown Community Bank may require personal
guarantees of the principal owners of the property backed with a review by
Hometown Community Bank of the personal financial statements of the principal
owners. The principal economic risk associated with each category of
anticipated loans, including real estate loans, is the creditworthiness of
Hometown Community Bank's borrowers. The risks associated with real estate
loans vary with many economic factors, including employment levels and
fluctuations in the value of real estate, new job creation trends and tenant
vacancy rates. Hometown Community Bank will compete for real estate loans with
a number of bank competitors that are well established in the Braselton/Oakwood
corridor. Most of these competitors have substantially greater resources and
lending limits than Hometown Community Bank. As a result, Hometown Community
Bank may have to charge lower interest rates to attract borrowers. See
"Competition" below.
Hometown Community Bank may also originate loans for sale into the
secondary market. Hometown Community Bank intends to limit interest rate risk
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.
Consumer Loans. Hometown Community Bank will make a variety of loans to
individuals for personal and household purposes, including secured and unsecured
installment loans, home improvement loans, and automobile loans. These loans
will be amortized over a period not exceeding 60 months. The revolving loans
will typically bear interest at a fixed or adjustable rate and require monthly
payments of interest and a portion of the principal balance. The underwriting
criteria for home equity loans and lines of credit will generally be the same as
applied by Hometown Community Bank when making a first mortgage loan, as
described above, and home equity lines of credit will typically expire ten years
or less after origination. As with the other categories of loans, the principal
economic risk associated with consumer loans is the creditworthiness of Hometown
Community Bank's borrowers, and the principal competitors for consumer loans
will be the established banks in the Braselton/Oakwood corridor.
Loan Approval and Review. Hometown Community 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. Hometown Community Bank will establish a
loan committee of the Board of Directors (the "Loan Committee") and any loan in
excess of the highest officer's lending limit must be approved by the Loan
Committee. Hometown Community Bank will not make any loans to any director,
officer, or employee of Hometown Community Bank unless the loan is approved by
the Loan Committee and is made on terms not more favorable to such person than
would be available to a person not affiliated with Hometown Community Bank.
Lending Limits. Hometown Community Bank's lending activities will be
subject to a variety of lending limits imposed by federal law. While differing
limits apply in certain circumstances based on the type of loan or the nature
of the borrower (including the borrower's relationship to Hometown Community
Bank), in general Hometown Community Bank will be subject to a loan-to-one-
borrower limit of an amount equal to 15% of Hometown Community Bank's unimpaired
capital and surplus, or 25% of the unimpaired capital and surplus if the
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excess over 15% is approved by the board of directors of Hometown Community Bank
and is fully secured by readily marketable collateral. Based on the proposed
minimum initial capitalization of Hometown Community Bank and its projected pre-
opening expenses, Hometown Community Bank's initial lending limit will be
approximately $1,000,000 for loans not fully secured or approximately $1,750,000
for loans fully secured by collateral. Hometown Community Bank has not yet
established any minimum or maximum loan limits other than the statutory lending
limits described above. These limits will increase or decrease as Hometown
Community Bank's capital increases or decreases as a result of earnings or
losses, among other reasons. Unless Hometown Community Bank is able to sell
participations in its loans to other financial institutions, it will not be able
to meet all of the lending needs of loan customers requiring aggregate
extensions of credit above these limits.
OTHER BANKING SERVICES
Other anticipated bank services include payroll checks cashed for
customers, bank-by-mail and bank-by-phone services, cashiers checks, Travelers
Cheques and U.S. Savings Bonds, direct deposit of payroll and government benefit
checks, after-hours depository, wire transfer services, debit cards, safe
deposit boxes, internet banking for commercial customers and Seniors Accounts.
Hometown Community Bank plans to become associated with a shared network of
automated teller machines that may be used by Bank customers throughout Georgia
and other regions. Hometown Community Bank does not plan to initially offer
Mastercard and VISA credit card services but may in the future offer such
services through a correspondent bank as an agent for Hometown Community Bank.
Hometown Community Bank does not plan to exercise trust powers during its
initial years of operation. Hometown Community Bank may in the future offer a
full-service trust department, but cannot do so without the prior approval of
the Georgia Department.
COMPETITION
The banking business is highly competitive. Hometown Community Bank will
compete as a financial intermediary with other commercial banks, savings and
loan associations, credit unions, and money market mutual funds operating in the
Atlanta area. As of September 2004, the Braselton area was served by five
commercial banks with a total of five branches. In addition, another bank is
attempting to obtain a charter in Braselton. A number of these competitors are
well established in the Braselton/Oakwood corridor. Most of them have
substantially greater resources and lending limits than Hometown Community Bank
and offer certain services, such as extensive and established branch networks
and trust services, that Hometown Community Bank either does not expect to
provide or will not provide initially. As a result of these competitive
factors, Hometown Community Bank may have to pay higher rates of interest to
attract deposits.
FACILITIES
We plan on building a banking facility to be constructed in Braselton,
Georgia, at the intersection of Highway 53 and New Cut Road. This facility will
house Hometown Community Bank's office. Construction on the facility will begin
shortly after Hometown Community Bank breaks escrow. The building is expected
to include approximately 6,500 square feet of office space. Prior to completion
of the facility, Hometown Community Bank will operate in a temporary facility at
the site. We currently lease space at 74 Lagree Duck Road, Braselton, Georgia,
30517.
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EMPLOYEES
Hometown Community Bancshares anticipates that, upon commencement of
operations, Hometown Community Bank will have approximately ten full-time
employees and one part-time employees. Hometown Community Bancshares will not
have any employees other than its officers, none of whom will initially receive
any remuneration for their services to Hometown Community Bancshares. Sean
Childers, the proposed President and Chief Executive Officer of Hometown
Community Bank is currently employed by Hometown Community Bancshares as its
President and Chief Executive Officer to head the organizational effort for
Hometown Community Bank. See "Management - Employment Agreements."
LEGAL PROCEEDINGS
There are no material legal proceedings to which Hometown Community
Bancshares or Hometown Community Bank or any of their properties are subject.
HOLDING COMPANY STRUCTURE
We initially will engage in no business other than owning and managing
Hometown Community Bank. We believe that our holding company structure provides
flexibility to Hometown Community Bank that would not otherwise be available.
The holding company structure can assist Hometown Community Bank in maintaining
its required capital ratios because, subject to compliance with Federal Reserve
Board debt guidelines, we may borrow money and contribute the proceeds to
Hometown Community Bank as primary capital. Moreover, a holding company may
engage in certain non-banking activities that the Federal Reserve Board has
deemed to be closely related to banking in which Hometown Community Bank cannot
engage directly. See "Supervision and Regulation." Although we have no present
intention of engaging in any of these activities, if circumstances should lead
us to believe that there is a need for these services in Hometown Community
Bank's market area and that such activities could be profitably conducted, we
would have the flexibility of commencing these activities upon filing a notice
or application with the Federal Reserve Board.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
As of July 31, 2004, we had total assets of approximately $5,778. These
assets consisted of cash and interest bearing deposits in banks of $778 and a
retainer of $5,000. Our liabilities at July 31, 2004, were $82,021, and
consisted of amounts owed for a bank line of credit, legal and consultant work.
We had a net loss from February 12, 2004 (our inception date), through
July 31, 2004, of $126,243. This loss resulted primarily from legal and
consultant fees incurred in support of activities related to the initial
organization of Hometown Community Bancshares and Hometown Community Bank.
These activities included (without limitation) the preparation of an application
with the Georgia Department for a state bank charter and an application with the
FDIC for federal deposit insurance, and the preparation of a registration
statement for the offering of our common stock. To facilitate payment of debts
and to continue the pre-opening activities, the Organizers formed HBB, LLC on
February 12, 2004. The LLC was funded by initial capital contributions to the
LLC that were transferred to Hometown Community Bancshares, Inc. upon its
formation on May 12, 2004 and HBB, LLC was dissolved.
Assuming that the offering is successfully completed, Hometown Community
Bancshares' initial activities will be devoted to organizing Hometown Community
Bank and opening and commencing the business of Hometown Community Bank. These
organizational activities will include completing all required steps for
approval from the Georgia Department for a state bank charter, equipping the
office of Hometown Community Bank, hiring qualified personnel to work in the
various offices of Hometown Community Bank, conducting public relations
activities on behalf of Hometown Community Bank, developing prospective business
contacts for Hometown Community Bank and Hometown Community Bancshares, and
taking other actions necessary for a successful bank opening.
Because Hometown Community Bancshares is in the organizational stage, it
has had no operations from which to generate revenues and, until Hometown
Community Bank opens for business, Hometown Community Bancshares' only source of
revenues will be interest earned on subscriptions. Because these revenues will
be less than the expenses incurred in connection with activities related to the
initial organization of Hometown Community Bancshares and Hometown Community
Bank, Hometown Community Bancshares will incur a net loss through the date of
the opening of Hometown Community Bank. In addition, Hometown Community
Bancshares anticipates incurring continuing operating losses during Hometown
Community Bank's early stages of operations.
At least $7,500,000 of the proceeds of this offering will be used to
capitalize Hometown Community Bank and any remainder will be used to pay
organizational expenses of Hometown Community Bancshares and provide working
capital, including additional capital for investment in Hometown Community Bank,
if needed. See "Use of Proceeds." Hometown Community Bancshares believes that
this amount will be sufficient to fund the activities of Hometown Community Bank
in its initial stages of operation and that Hometown Community Bank will
generate sufficient income from operations to fund its activities on an on-going
basis for at least five years. In addition, Hometown Community Bancshares
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believes that income from the operations of Hometown Community Bank will be
sufficient to fund the activities of Hometown Community Bancshares on an on-
going basis for at least five years. However, there can be no assurance that
either Hometown Community Bank or Hometown Community Bancshares will achieve any
particular level of profitability.
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MANAGEMENT
GENERAL
The following table sets forth the respective names, ages, positions with
Hometown Community Bancshares and Hometown Community Bank, and anticipated
subscriptions of the organizers (each of whom is also a director), executive
officers and others. The organizers may elect to purchase more than the shares
indicated below. The only outstanding shares are place-holding shares owned by
the current directors of Hometown Community Bancshares. These place-holding
shares will be redeemed by Hometown Community Bancshares.
Percentage Percentage
Position of of
With Anticipated Outstanding Outstanding
Company/ Subscription Minimum Maximum
Bank (1)(2) (3) (4)
---- ------ ----- -----
Amyn A. Meghani (33) Chairman of the Board 50,000 6.3% 4.2%
Ted A. Murphy (67) Vice Chairman of the 10,000 1.3% 0.8%
Board
C. Sean Childers (36) President, Chief 10,000 1.3% 0.8%
Executive Officer
and Director
Martha Martin (64) Director 15,000 1.9% 1.3%
Dr. Terry H. Elrod (43) Director 19,000 2.4% 1.6%
Chandra Kant I. Director 25,000 3.1% 2.1%
"C.K." Patel (47)
Melvin "Monk" Tolbert (64) Director 12,500 1.6% 1.0%
All directors and
executive officers,
as a group 141,500 17.7% 11.8%
___________
(1) All shares presently owned by the organizers were purchased at a price of
$10.00 per share, the same price at which shares are being offered to the
public.
(2) All of such purchases will be at a price of $10.00 per share, the same
price at which shares are being offered to the public. Organizers may
purchase up to 100% of the shares in the offering, if necessary, for
Hometown Community Bancshares to achieve the minimum capital requirement
and also may decide to purchase additional shares in the offering even if
the minimum offering is fully subscribed. Any shares purchased by the
organizers in excess of their original commitment will be purchased for
investment and not with a view to the resale of such shares. Although each
organizer has agreed with the other organizers that he will subscribe for
the number of shares indicated above, neither the organizers nor any other
subscriber will be obligated to purchase shares except pursuant to a valid
subscription agreement executed after receipt of this Prospectus. This
table includes shares which are expected to be beneficially owned by the
organizers upon completion of the offering.
(3) Assumes that the minimum number of 800,000 shares are sold in this
offering.
(4) Assumes that the maximum number of 1,200,000 shares are sold in this
offering.
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All of the organizers will serve as directors of Hometown Community
Bancshares and Hometown Community Bank. Biographical information concerning
the organizers is set forth below.
AMYN A. MEGHANI is the owner of Dunhill Developers LLC, a commercial and
residential real estate developer, and the majority shareholder of Tabo's
Enterprises, Inc., a dry goods and check cashing store located in downtown
Jefferson, Georgia. Mr. Meghani also owns and leases two truck stop/convenience
stores in Fulton County and owns commercial property in Jackson County, Dekalb
County and Whitfield County, Georgia. Mr. Meghani was born in India and came
to the United States in 1990 to fulfill the all American dream of becoming an
entrepreneur. Mr. Meghani began his career working in the retail industry for
several convenience stores in metro Atlanta. Mr. Meghani used his savings to
purchase Tabo's, a convenience store in 1995. Through either Tabo's or Dunhill,
Mr. Meghani has developed, operated and/or sold various residential and
commercial real properties and businesses in Georgia, including in Fulton, Hall
and Jackson Counties. Today, Mr. Meghani's businesses directly or indirectly
employ over thirty people.
Mr. Meghani and his businesses are actively involved in his community.
Tabo's is a Partner in Education with Jefferson High School and actively
supports and sponsors all of the sports' activities of the school. They donate
generously to and are a corporate sponsor for the Relay for Life team in
Jefferson, the St. Jude Walk for Life charity in Braselton and other local
charities and organizations. Mr. Meghani is an honored recipient of the MLK
Service Award from the Jackson County Chamber of Commerce and is an active
member of the Georgia, Jackson County and Gwinnett County Chambers of Commerce.
Mr. Meghani recently moved from Jefferson to the Sugarloaf community in
Gwinnett County and is married with two children who attend Greater Atlanta
Christian School.
TED A. MURPHY was born and raised in East Point, Fulton County, Georgia.
He attended Russell High in East Point and Georgia State College for two years.
Mr. Murphy has over 45 years of commercial bank experience. Mr. Murphy served
as Chief Executive Officer, President and Board member in community banks in
Georgia for over 25 years. Mr. Murphy was president of his high school class
his senior year. Mr. Murphy began working for The First National Bank of
Atlanta in 1954 during his junior year in high school working in numerous
operations departments and was employed full time after graduating. Mr. Murphy
joined The C & S National Bank in 1961 in the branch network and later was
transferred to the Auditing Department. In 1966 he assisted in opening a new C
& S Bank affiliate in Roswell, GA. as Cashier in charge of Branch Operations.
In December 1968, Mr. Murphy joined the Citizens Bank of Alpharetta as a Senior
Loan Officer and in 1970 opened Citizens Bank of Clarkston (later Citizens
Dekalb Bank) as President, CEO and later Chairman of the Board. Mr. Murphy
remained there until 1987 when First Union National Bank purchased the bank.
At First Union, Mr. Murphy served as a Senior Area Manager in charge of all
Dekalb County Branches. In September 1988, Mr. Murphy was encouraged to start
a new bank in Tucker, Georgia along with several of his previous board members.
Mr. Murphy opened Dekalb State Bank (later Community Bank of Georgia) in August
of 1991. Mr. Murphy served as President and Chief Executive Officer of
Community Bank of Georgia and was a member of its board of directors until its
merger with First Sterling (now Main Street Bank) on May 23, 1999. Mr. Murphy
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served on the Board of Directors of the merged company and as President of
Community Bank of Georgia after the merger until his retirement on December 31,
2000.
Mr. Murphy has enjoyed community banking and has served the following
community organizations; Director of Alpharetta Jaycees, Member of the Dekalb
Chamber of Commerce, President of the Clarkston Business Association, District
Captain of the Dekalb County American Heart Association, Co-Chairman (Central
Dekalb)-American Cancer Society, Board Member of MARR (Metro-Atlanta Recovery
Residences-Drug Abuse), Board Chairman of The HUB (Psychological assistance for
needy families), Treasurer of the Dekalb County Schools Foundation, Partner in
Education-Brockett Elementary School, Board member- Atlanta Hospital Hospitality
Association, and the President of Stone Mountain Rotary Club.
Mr. Murphy is married to Bonnie S. Murphy and they have two sons and four
daughters. They enjoy 13 grandchildren and two great-grandchildren. They
reside in Cleveland, Georgia where they built their retirement home in 2001.
Mr. Murphy enjoys (when time permits) golf, gardening, exercise and woodworking.
C. SEAN CHILDERS is the President and Chief Executive Officer of Hometown
Community Bancshares and the proposed President and Chief Executive Officer of
Hometown Community Bank. Mr. Childers grew up and resides in South Hall County
where he lives on property that has been his family's home for five generations.
Mr. Childers holds an Associate of Arts in Business Administration from
Gainesville College and a Bachelor of Science in Consumer Economics from the
University of Georgia. In addition, Mr. Childers is a graduate of Louisiana
State University's Graduate School of Banking. Mr. Childers has over 13 years of
banking experience, most recently as Senior Vice President- Retail Banking
Services of Gainesville Bank & Trust, the lead bank in the $1 billion community
bank holding company, GB&T Bancshares. Mr. Childers has extensive experience in
credit, strategic planning, risk management, business development, public
relations, asset/liability management, bank investment strategies, compliance
and management of branch operations. Mr. Childers has attracted customers and
originated loans throughout Hometown Community Bank's primary service area.
Mr. Childers began his banking career in 1991 with First National Bank of
Gainesville as the assistant branch manager in the Oakwood branch. Mr. Childers
left the First National Bank of Gainesville in 1995 and joined GB&T as branch
manager of the Oakwood branch where he was responsible for all facets of branch
management and operations. In 1999, Mr. Childers was promoted to Real Estate
Lending Services within GB&T where he was responsible for originating commercial
and residential acquisition and development loans, commercial and residential
construction loans and commercial and consumer loans to developers and
contractors. In 2003, Mr. Childers was again promoted within GB&T to Senior
Vice President- Retail Banking Services where he was responsible for the
profitability and support of an eight branch retail banking system in addition
to the internet banking and credit card divisions. The eleven lenders in the
branches under his management originated and processed a variety of loans
including consumer loans, commercial and residential real estate acquisition &
development loans, commercial and residential real estate construction loans and
commercial loans. All loans made within the Retail Division were approved by Mr.
Childers. Mr. Childers sat on the eight member officer's loan committee and
recommended loans to the director's loan committee. He was a member of GB&T's
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Asset-Liability Committee and a member of the bank's Electronic Data Processing
Steering Committee.
Mr. Childers is active in his community. He is a member of the South Hall
Rotary Club and has served as President, Director and Secretary of the Club and
was the 1999 Rotarian of the Year. Mr. Childers has served the Gainesville
College Alumni Association as Secretary, Vice President and is currently the
second term President. Mr. Childers is a graduate of the 2003-2004 New
Leadership Hall County Class. Mr. Childers, his wife Karen (a fourth generation
Hall County resident) and their two children attend St. Gabriel's Episcopal
Church in Oakwood.
MARTHA MARTIN was born in Gainesville, Georgia, and grew up in Forsyth
County before moving to Hoschton, Georgia in 9th grade. Mrs. Martin graduated
from and was senior class President of Braselton/Jackson County High School.
After graduation from Marsh Business School, Mrs. Martin worked for Gainesville
National Bank in 1959 and 1960. Mrs. Martin entered the trucking industry as an
employee in 1960 and bought her first truck in 1966. Today, Mrs. Martin is the
President and owner of Phil-Mart Transportation, a long distance carrier that
operates twenty-two trucks that move goods between Atlanta, Georgia and Chicago,
Illinois. Mrs. Martin also owns rental properties in Hall, White, Henry and
Jackson Counties.
Mrs. Martin has a distinguished career of community service. Mrs. Martin
served on the Jackson County Industrial Development Authority (IDA) from 1988
until 2002 having served at various times as Secretary, Treasurer, Vice Chairman
and Chairman of the Authority. Mrs. Martin now serves as co-chairman of the
Women in Business of the Jackson County Chamber of Commerce, Treasurer of the
Braselton Women's Club, President elect-elect of the Rotary Club of Braselton,
and serves on the Board of the Georgia Motor Truckers Association, the Braselton
Area Safety and Service Fund and the Traffic Club of Gainesville. Mrs. Martin
is a member of the Braselton Business Association, the Jackson County Chamber of
Commerce, the Barrow County Chamber of Commerce, the Braselton-West Jackson
Friends of the Library and the Tara Place Homeowners Association.
Mrs. Martin and her husband of 45 years have two children and one
grandchild and have homes in Hoschton and on the lake in Gainesville. The
Martin family belongs to Zion Baptist Church in Braselton and attends New Bridge
Baptist Church when in Gainesville. An avid NASCAR fan, Mrs. Martin owns a
condominium at Atlanta Motor Speedway, sponsors drivers at three tracks, and
spends what little free time she has traveling to different racetracks during
the NASCAR season.
DR. TERRY H. ELROD was born in Gainesville, Georgia, raised in Maysville,
Georgia, attended Maysville Elementary School, and graduated as the 1979
valedictorian of Commerce High School. Dr. Elrod attended Gordon Junior College
in Barnesville, Georgia, graduating with an Associate of Arts degree in
Psychology and from West Georgia College in Carrollton, Georgia with a Bachelor
of Arts in Biology, minoring in Chemistry and Physics. Dr. Elrod's classroom
accomplishments were recognized at Gordon Junior College by being named Student
Athlete of the Year in 1981 and also at West Georgia College having been awarded
Biology Student of the Year in 1982 and Student Athlete of the Year in 1983.
Dr. Elrod was selected as Captain of his intercollegiate baseball teams both at
Gordon Junior College and at West Georgia College. Dr. Elrod then served as an
assistant baseball coach at West Georgia, before his acceptance into the Dental
33
School at the Medical College of Georgia. Dr. Elrod graduated in the top 10 in
his class from the Medical College of Georgia School of Dentistry with a
Doctorate of Dental Medicine in 1988.
Dr. Elrod first entered into dental practice in Gainesville, Georgia as an
associate partner in 1988. Dr. Elrod and his business partner now own and
operate dental practices in Tucker, Georgia and Lilburn, where Dr. Elrod has
been practicing for 13 years. Dr. Elrod is currently President of Elrod &
Price, PC and Vice President of Parson's Plantation Property Owners Association.
Dr. Elrod is also a current member of the American Dental Association, Georgia
Dental Association, Northern District Dental Society, Hinman Dental Society, and
the American Diabetes Association.
Dr. Elrod is married with two children who attend Greater Atlanta Christian
School. The Elrod family attends North Point Community Church in Alpharetta,
Georgia.
CHANDRA KANT I. "C.K." PATEL is a second-generation hotelier, whose hotel
experience ranges from his first independent property in Commerce, Georgia,
which he purchased in 1982, to owning and operating full-service Holiday Inns.
In 1996, Mr. Patel helped open Quantum National Bank, the first bank owned by
Indian Americans in the Southeast. The bank has grown its assets tremendously
since then. As a founding director, Mr. Patel served on the Quantum National
Bank's Board of Directors as chairman of its Funds Management Committee and as a
member of its Loan Committee.
Mr. Patel is a founding member of Asian American Hotel Owners Association
(AAHOA) and has served on the AAHOA board of directors for many years. AAHOA
is the fastest-growing hospitality organization in the United States. Founded
in 1989, AAHOA has grown from 100 to 8,000 members including a 30 percent
increase in membership since April 2003. Mr. Patel has served in many roles
within AAHOA, including as chair and co-chair of the Education Committee, as a
member of the Membership Growth and Benefits Committee, and as a member of the
Resource Development Committee. In 2001, Mr. Patel chaired the E-Commerce
Committee during which time he proved to be a strong advocate of Web-based
technology for greater communication within the association and building
alliances with vendors and business partners for the procurement of lodging
products. In his role as deputy chairman of the US Disaster Domestic Fund, Mr.
Patel also worked to develop "101,000 Room Nights Drive for America" to benefit
deployed military personnel. Mr. Patel lives in Atlanta with his wife and two
children.
MELVIN "MONK" TOLBERT was born and raised in Jefferson, Georgia and moved
to Pendergrass, Georgia in 1970. He graduated from Jefferson High School in 1958
and Georgia State University in 1967 and served in the Georgia National Guard
from 1958-1966. Mr. Tolbert was employed by Sherwin Williams Paint Co. and the
Ivan Allan Co. from 1960-1970. In 1970, Mr. Tolbert and his family secured a
franchise for OTASCO Home & Auto in Jefferson where he was employed with the
store until 1990. Mr. Tolbert co-founded and worked for Tolbert Financial
Services, a retail lender of primarily uncollateralized loans of between $100
and $3,000, from 1990 until 2003 when the company was sold to World Finance.
From 1995-1997, Mr. Tolbert and family owned and managed Mortgage Services of
Georgia, a residential mortgage broker. In 1991, the family formed Professional
Realty, where Mr. Tolbert continues to manage commercial and sell residential
properties. Mr. Tolbert became a Graduate of REALTOR Institute in 1997.
Graduate REALTOR Institute represents the most recognized professional
designation in the real estate industry. The designation is conferred on
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qualified individuals by the various state associations of REALTORS, with the
National Association of REALTORS educational standards assuring excellence among
the curricula.
Mr. Tolbert is committed to serving his community. Mr. Tolbert is past
President of the Jefferson Area Merchants Association, past President of the
Jefferson Rotary Club, and past Director of the I-85 Board of Realtors. Mr.
Tolbert served on the Pendergrass City Council from 2000 until 2002 when he
became Mayor. Mr. Tolbert is currently serving his second term as Mayor of
Pendergrass. Mr. Tolbert is also a member of the Board of Directors of the
Jackson County Chamber of Commerce and is a member of the Jackson County Mayors
Association.
EMPLOYMENT AGREEMENTS
We have entered into an employment agreement with Sean Childers pursuant
to which Mr. Childers will serve as the President and Chief Executive Officer
of Hometown Community Bancshares and the proposed President and Chief Executive
Officer of Hometown Community Bank. The employment agreement provides for a
starting salary of $135,000 per annum. In addition, Mr. Childers will be
eligible to receive warrants for the purchase of stock in the same capacity as
each organizer and up to 25,000 stock options, exercisable at the initial
offering price of Hometown Community Bancshares' common stock. Mr. Childers
will participate in and receive medical, dental, and disability coverage as
provided to employees of Hometown Community Bank. In addition, Hometown
Community Bank will reimburse Mr. Childers for reasonable out-of-pocket expenses
incurred in the fulfilling of his duties and will pay other expenses as approved
by the Board, including membership fees or dues for social and civic clubs and
professional organizations. The employment agreement is terminable immediately
for cause (as defined in the employment agreement) or upon the death or complete
disability of Mr. Childers. The employment agreement may also be terminated by
mutual agreement of the parties. In addition, Mr. Childers may not disclose any
confidential information (as defined in the employment agreement) regarding
Hometown Community Bancshares or Hometown Community Bank or its business.
We have entered into a consulting agreement with Ted Murphy pursuant to
which Mr. Murphy will serve as a consultant to Hometown Community Bank. The
consulting agreement provides for a monthly compensation of $5,000 per month.
In addition, Mr. Murphy will be eligible to receive up to 5,000 stock options,
exercisable at the initial offering price of Hometown Community Bancshares'
common stock. In addition, Hometown Community Bank will reimburse Mr. Murphy for
reasonable out-of-pocket expenses incurred in the fulfilling of his duties. The
consulting agreement is terminable immediately for cause (as defined in the
consulting agreement) or upon the death or complete disability of Mr. Murphy.
In addition, Hometown Community Bank may terminate the consulting agreement
without cause. The consulting agreement may also be terminated by mutual
agreement of the parties. The consulting agreement will automatically terminate
within twelve months of the date that efforts to obtain a charter for the
operation of its banking corporation have ceased. In addition, Mr. Murphy may
not disclose any confidential information (as defined in the employment
agreement) regarding Hometown Community Bancshares or Hometown Community Bank or
its business.
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STOCK BENEFIT PLANS AND WARRANTS
We plan to establish a stock incentive plan that will allow us to grant
stock options to employees, officers, directors, and others who contribute
significantly to our success and the success of Hometown Community Bank. We
will reserve 120,000 shares of our common stock for issuance under the stock
incentive plan, including the shares issuable to Messrs. Childers and Murphy
under their respective employment/consulting agreements.
Once Hometown Community Bank opens for business, we plan to grant stock
options to purchase 10,000 shares of our common stock to Robert M. Martin and
grant stock options to purchase 2,500 shares of our common stock to Byron
Richardson for their assistance with the organization of Hometown Community
Bank. If for any reason the Options described above are not awarded to Mr.
Richardson within three months of the date the Bank is chartered or 30 days
after the issuance of stock certificates, whichever is earlier, then Hometown
Community Bancshares shall immediately pay Mr. Richardson an amount equal to
$1.25 per option.
In consideration of their efforts in organizing Hometown Community Bank
and Hometown Community Bancshares and their commitment to serve as the initial
directors, we intend, subject to regulatory approval, to issue to each organizer
warrants to purchase shares of our common stock at the original offering price
of $10.00 per share to be exercised at any time within ten years of the opening
date of Community Bank. Each organizer will be awarded one warrant for each
share purchased. Based on the proposed purchases by the organizers, the
organizers will be granted a total of 141,500 warrants for the organizers as a
group. The warrants will vest in three equal annual installments beginning on
the first anniversary of Hometown Community Bank's opening for business and
ending on the third anniversary of Hometown Community Bank's opening for
business, contingent upon continued service on our Board of Directors and the
Board of Directors of Hometown Community Bank. If Hometown Community Bank's
capital falls below regulatory minimums established by the Georgia Department
and the FDIC, the Georgia Department can direct that the warrants must be
exercised or forfeited. The Warrants are not transferable.
DIRECTOR COMPENSATION
We do not intend to pay, nor permit Hometown Community Bank to pay,
directors' fees in the initial years of operation.
INTERESTS OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
The Board is comprised of highly educated and ethical members of the
community. Each one recognizes the potential problems inherent in engaging the
businesses in which they are involved to provide services or goods to Hometown
Community Bank. As such, the Board will evaluate each service and good to make
sure that there is not any impropriety, in actuality or appearance. All Board
members must attend seminars and other educational sessions conducted by bank
trade organizations to help ensure that they are educated and knowledgeable
about banking and their responsibilities as Board members. No transaction is
completed without full and open discussion of the terms of the transaction,
copies of all documents being provided to each Board member and open discussion
among the Board members. The interested Board member cannot vote on the
proposed transaction or contract and may, at the sole discretion of the other
Board members, be excused during the Board discussion. On a continuing basis,
36
any Board member may ask questions or raise concerns about any contract with a
Board member and such concerns or questions will be addressed promptly.
We have entered into an option agreement with Amyn Meghani, our Chairman
and an organizer and proposed Chairman of Hometown Community Bank, to acquire
a parcel of real property on which we plan on constructing the headquarters of
Hometown Community Bank. Our Board of Directors has retained an independent MAI
appraiser to determine that the purchase amount is at fair market value. The
option to purchase at the negotiated price expires on January 31, 2005. Our
Board of Directors is aware of this related party transaction and unanimously
approved the option from Mr. Meghani subject to market value confirmation from
an independent MAI appraisal. Mr. Meghani was not present for the vote on the
transaction.
For the first six months of operation, Hometown Community Bank will operate
from a leased or purchased modular bank building located on the site of the
headquarters. The modular bank building will be leased or purchased from an
unrelated party. The organizers will construct a headquarters facility that
Hometown Community Bank will occupy sometime during the second half of the first
year of operation. The headquarters facility will be owned by Hometown
Community Bank. The purchase of the real estate will be subject to appraisals
and approval by the appropriate regulators.
We and Hometown Community Bank may have banking and other transactions in
the ordinary course of business with organizers, directors, and officers of
Hometown Community Bancshares and Hometown Community Bank 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. Such transactions are not expected to
involve more than the normal risk of collectability nor present other
unfavorable features to Hometown Community Bancshares and Hometown Community
Bank. Hometown Community Bank is subject to a limit on the aggregate amount it
could lend to its directors and officers and Hometown Community Bancshares'
directors and officers as a group equal to its unimpaired capital and surplus
(or, under a regulatory exemption available to banks with less than $100 million
in deposits, twice that amount), loans to individual directors and officers must
also comply with Hometown Community Bank's lending policies and statutory
lending limits, and directors with a personal interest in any loan application
will be excluded from the consideration of such loan application.
EXCULPATION AND INDEMNIFICATION
Our Articles of Incorporation contain a conditional provision which,
subject to certain exceptions described below, eliminates the liability of a
director to us or our shareholders for monetary damages for any breach of duty
as a director. This provision does not eliminate such liability to the extent
the director (i) appropriated, in violation of his duties, any of our business
opportunities, (ii) engaged in intentional misconduct or a knowing violation of
law, (iii) permitted any unlawful distribution, or (iv) derived an improper
personal benefit.
37
Our Bylaws require us to indemnify any person who was, is, or is threatened
to be made defendant or respondent in any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal, administrative, or
investigative, by reason of service by such person as a director of Hometown
Community Bancshares or Hometown Community Bank or any other corporation which
he served as such at our request. Except as noted in the next paragraph,
directors are entitled to be indemnified against judgments, penalties, fines,
settlements, and reasonable expenses actually incurred by the director in
connection with the proceeding. Directors are also entitled to have us advance
any such expenses prior to final disposition of the proceeding, upon delivery of
a written affirmation by the director of his good faith belief that the standard
of conduct necessary for indemnification has been met and a written undertaking
to repay the amounts advanced if it is ultimately determined that the standard
of conduct has not been met.
Under the Bylaws, indemnification will be disallowed if it is established
that the director (i) appropriated, in violation of his duties, any of our
business opportunities, (ii) engaged in willful misconduct or a knowing
violation of law, (iii) permitted any unlawful distribution, or (iv) derived an
improper personal benefit. In addition to our Bylaws, Section 18-2-852 of the
Georgia Business Corporation Code requires that a corporation indemnify a
director "who was wholly successful, on the merits or otherwise, in the defense
of any proceeding to which he or she was a party because he or she was a
director of the corporation against reasonable expenses incurred by the director
in connection with the proceeding." The Corporation Code also provides that
upon application of a director a court may order indemnification if it
determines that the director is entitled to such indemnification under the
applicable standard of the Corporation Code.
We also have 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. We have extended or intends to extend
indemnification rights to all of our executive officers. We may enter into
indemnity agreements with our directors and officers.
DESCRIPTION OF CAPITAL STOCK OF HOMETOWN COMMUNITY BANCSHARES
GENERAL
Our authorized capital stock consists of 10,000,000 shares of common stock,
par value $.01 per share, and 1,000,000 shares of special stock, no par value
per share. The following summary describes our capital stock. Reference is
made to our Articles of Incorporation, which are filed as an exhibit to the
registration statement of which this prospectus forms a part, for a detailed
description of the provisions thereof summarized below.
COMMON STOCK
Holders of shares of 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 therefor. We do not plan to declare any dividends in the
immediate future. See "Dividend Policy." Holders of common stock are entitled
38
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. Holders of
common stock have no preemptive, conversion, redemption or sinking fund rights.
In the event of a liquidation, dissolution or winding-up of us, holders of
common stock are entitled to share equally and ratably in our assets, if any,
remaining after the payment of all of our debts and liabilities and the
liquidation preference of any outstanding special stock. The outstanding shares
of common stock are, and the shares of common stock offered by us 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
special stock that we may issue in the future.
There currently is no market for the shares, and, although we have filed a
registration statement with the SEC to register the issuance of the common stock
in the offering under the Securities Act of 1933, it is not likely that any
trading market will develop for the shares in the future. There are no present
plans for the common stock to be traded on any stock exchange or in the over-
the-counter market.
SPECIAL STOCK
The 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 the special stock in one or more classes
or series and to fix the preferences, limitations, and relative rights thereof,
and to fix the number of shares to be included in any such classes or series.
Any special 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 special stock may have class or series
voting rights. Upon completion of this offering, we will not have any shares of
special stock outstanding. Issuances of special stock, while providing us with
flexibility in connection with general corporate purposes, may, among other
things, have an adverse effect on the rights of holders of common stock, and in
certain circumstances such issuances could have the effect of decreasing the
market price of the common stock. We have no present plan to issue any shares
of special stock.
CERTAIN ANTITAKEOVER EFFECTS
The provisions of the Articles of Incorporation, the Bylaws and the
Corporation Code summarized in the following paragraphs may be deemed to have
antitakeover 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.
Authorized but Unissued Stock. The authorized but unissued shares of
common stock and special 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 special 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 Hometown Community Bancshares by means of a proxy contest,
tender offer, merger or otherwise, and thereby protect the continuity of
Hometown Community Bancshares' management.
39
Advance Notice Requirements for Shareholder Proposals. The Bylaws
establish advance notice procedures with regard to proposals raised, other than
by or at the direction of the Board of Directors, at any meeting of the
shareholders of Hometown Community Bancshares. These procedures provide that the
notice of shareholder proposals must be in writing and be received by the
Secretary of Hometown Community Bancshares on or before the later to occur of
(i) 14 days prior to the meeting or (ii) 5 days after notice of the meeting is
provided to the shareholders. We may reject a shareholder proposal that is not
made in accordance with such procedures.
Certain Nomination Requirements. Pursuant to the Bylaws, we have
established certain nomination requirements for an individual to be elected as
a director of Hometown Community Bancshares at any annual or special meeting of
the shareholders, including that the nominating party provide us within a
specified time prior to the meeting (i) notice that such party intends to
nominate the proposed director; (ii) the name and certain biographical
information on the nominee; and (iii) a statement that the nominee has consented
to the nomination. The chairman of any shareholders' meeting may, for good
cause shown, waive the operation of these provisions. These provisions could
reduce the likelihood that a third party would nominate and elect individuals to
serve on the Board of Directors.
Consideration of Other Constituencies in Mergers. The Corporation Code
grants the Board of Directors the discretion, when considering whether a
proposed merger or similar transaction is in the best interests of Hometown
Community Bancshares and its shareholders, to take into account the effect of
the transaction on the employees, customers, suppliers, and creditors of
Hometown Community Bancshares and upon the communities in which the offices of
Hometown Community Bancshares are located.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, Hometown Community Bancshares will have
a minimum of 800,000 and a maximum of 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, except for shares
purchased by "affiliates" of Hometown Community Bancshares, which will be
subject to resale restrictions under the Securities Act. An affiliate of the
issuer is defined in Rule 144 under the Securities Act 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
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 of Hometown Community Bancshares and Hometown Community
Bank 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 Hometown Community Bancshares
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
40
Securities Act, 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 Hometown
Community 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.
SUPERVISION AND REGULATION
Hometown Community Bancshares and Hometown Community Bank will be
extensively regulated under federal and state laws and regulations. These laws
and regulations generally are intended to protect depositors, not shareholders.
The following is a summary description of certain provisions of selected laws
and regulations that affect bank holding companies and banks. To the extent
that the following summary describes statutory or regulatory provisions, it is
qualified in its entirety by reference to the particular statutory and
regulatory provisions. Any change in applicable laws or regulations may have a
material effect on the business and prospects of Hometown Community Bancshares
and Hometown Community Bank.
Beginning with the enactment of the Financial Institutions Reform, Recovery
and Enforcement Act of 1989 ("FIRREA") and following with the Federal Deposit
Insurance Corporation Improvement Act of 1991 ("FDICIA"), numerous additional
regulatory requirements have been placed on the banking industry in the past ten
years, and additional changes have been proposed. The banking industry has also
changed significantly as a result of the passage of the Riegle-Neal Interstate
Banking and Branching Efficiency Act of 1994 (the "Interstate Banking Act") and
the Financial Services Modernization Act of 1999. Our operations may be
affected by legislative changes and new policies of various regulatory
authorities. We cannot predict the nature or the extent of the effect on its
business and earnings that fiscal or monetary policies, economic conditions, or
new federal or state legislation may have in the future.
HOMETOWN COMMUNITY BANCSHARES
We will be a bank holding company within the meaning of the Federal Bank
Holding Company Act of 1956, as amended (the "BHCA"). Under the BHCA, we will
be subject to periodic examination by the Federal Reserve and will be required
to file periodic reports of our operations and such additional information as
the Federal Reserve may require.
INVESTMENTS, CONTROL AND ACTIVITIES. With certain limited exceptions, the
BHCA requires every bank holding company to obtain prior approval of the Federal
Reserve:
* to acquire the ownership or control of more than 5% of any class
of voting stock of any bank not already controlled by it;
* for it or any subsidiary (other than a bank) to acquire all or
substantially all of the assets of a bank; and
* to merge or consolidate with any other bank holding company.
41
In addition, and subject to certain exceptions, the BHCA and the Change in
Bank Control Act, together with regulations thereunder, require Federal Reserve
approval (or, depending on the circumstances, no notice of disapproval) 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
presumed to exist, subject to rebuttal, if a person acquires 10% or more but
less than 25% of any class of voting securities and either the bank holding
company has registered securities under Section 12 of the Exchange Act or no
other person will own a greater percentage of that class of voting securities
immediately after the transaction. Applicable regulations provide a procedure
for challenge of the rebuttable control presumption.
The BHCA further provides that the Federal Reserve may not approve any
transaction that would result in a monopoly, or the effect of which may be
substantially to lessen competition in any section of the country, or that in
any other manner would be in restraint of trade, unless the transaction's
anticompetitive effects are clearly outweighed by the public interest. The
Federal Reserve is also required to consider the financial and managerial
resources and future prospects of the bank holding companies and banks concerned
and the convenience and needs of the community to be served.
Under the Federal Reserve Act, subsidiary banks of a bank holding company
are subject to certain restrictions on extensions of credit to the bank holding
company or its subsidiaries, on investments in their securities and on the use
of their securities as collateral for loans to any borrower. These regulations
and restrictions may limit our ability to obtain funds from Hometown Community
Bank for our cash needs, including funds for the payment of dividends, interest
and operating expenses. Further, federal law prohibits a bank holding company
and its subsidiaries from engaging in certain tie-in arrangements in connection
with any extension of credit, lease or sale of property, or the furnishing of
services.
PERMITTED ACTIVITIES. Until recently, the BHCA generally prohibited bank
holding companies from engaging in activities other than banking or managing or
controlling banks or other permissible subsidiaries and from acquiring or
retaining direct or indirect control of any company engaged in any activities
other than those activities determined by the Federal Reserve to be so closely
related to banking or managing or controlling banks as to be a proper incident
thereto. In determining whether a particular activity is permissible, the
Federal Reserve considered whether the performance of such an activity
reasonably could be expected to produce benefits to the public that outweigh
possible adverse effects.
The Federal Reserve has determined that the following are among the
activities permissible for bank holding companies:
* factoring accounts receivable;
* acquiring or servicing loans;
* leasing personal property;
* conducting discount securities brokerage activities;
* performing certain data processing services;
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* acting as agent or broker in selling credit life insurance and
certain other types of insurance in connection with credit
transactions; and
* performing certain insurance underwriting activities
Despite prior approval, the Federal Reserve has the power to order a
holding company or its subsidiaries to terminate any activity or to terminate
its ownership or control of any subsidiary when it has reasonable cause to
believe that continuation of such activity or such ownership or control
constitutes a serious risk to the financial safety, soundness, or stability of
any bank subsidiary of that bank holding company.
NEW LEGISLATION. Changes to federal law that took effect in March 2000,
and new regulations to implement these changes, allow qualifying bank holding
companies to become financial holding companies that may affiliate with
securities firms and insurance companies and engage in other activities that are
financial in nature. Activities that are financial in nature include:
* securities underwriting;
* dealing and market making;
* sponsoring mutual funds and investment companies;
* insurance underwriting and agency;
* merchant banking activities; and
* activities that the Federal Reserve determines to be closely related
to banking.
For Hometown Community Bancshares to qualify to become a financial holding
company, its depository institution subsidiaries must be well capitalized and
well managed and must have a Community Reinvestment Act rating of at least
"satisfactory." In addition, we will file an election with the Federal Reserve
to become a financial holding company and give the Federal Reserve 30 days
written notice prior to engaging in a permitted financial activity. Although we
do not have any immediate plans to file such an election, our holding company
structure will give us the flexibility to make such an election if deemed
appropriate in the future.
The federal law that took effect in March 2000 also contains provisions
that directly impact the following activities and operations of the Hometown
Community Bank:
* Any insurance activities;
* The activities of and qualifications for any of Hometown Community
Bank's financial subsidiaries; and
* Its privacy policies and practices concerning disclosure of consumer
information.
SOURCE OF STRENGTH; CROSS-GUARANTEE. Under Federal Reserve policy, a bank
holding company is expected to act as a source of financial strength to its bank
subsidiaries and to commit resources to support these subsidiaries. This
support may be required at times when, absent such policy, the bank holding
company might not otherwise provide such support. Under this policy, a bank
holding company may be required to loan money to its subsidiary banks in the
form of capital notes or other instruments that qualify for capital under
regulatory rules. Under the BHCA, the Federal Reserve also may require a bank
holding company to terminate any activity or relinquish control of a non-bank
subsidiary (other than a non-bank subsidiary of a bank) upon the Federal
43
Reserve'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.
Federal bank regulatory agencies have additional discretion to require a
bank holding company to divest itself of any bank or non-bank subsidiary if the
agency determines that divestiture may aid the depository institution's
financial condition. Hometown Community Bank may be required to indemnify, or
cross-guarantee, the FDIC against losses it incurs with respect to any other
bank controlled by us, which in effect will make our equity investments in
healthy bank subsidiaries available to the FDIC to assist any failing or failed
bank subsidiary we may have.
STATE REGULATION. Our activities will be subject to certain provisions of
The Financial Institutions Code of Georgia and regulations issued pursuant to
such code. These provisions are administered by the Georgia Department, which
has concurrent jurisdiction with the Federal Reserve over our activities. The
laws and regulations administered by the Georgia Department are generally
consistent with, or supplemental to, the federal laws and regulations discussed
herein.
HOMETOWN COMMUNITY BANK
As a banking corporation organized under the laws of the State of Georgia,
Hometown Community Bank will be subject to supervision and examination by the
Georgia Department and the Federal Deposit Insurance Corporation (the "FDIC").
Deposits in Hometown Community Bank will be insured by the FDIC up to a maximum
amount (generally $100,000 per depositor, subject to aggregation rules). The
Georgia Department and the FDIC will regulate or monitor all areas of Hometown
Community Bank's commercial banking operations, including security devices and
procedures, adequacy of capitalization and loan loss reserves, loans,
investments, borrowings, deposits, mergers, consolidations, reorganizations,
issuance of securities, payment of dividends, interest rates, establishment of
branches, and other aspects of its operations. These agencies will require
Hometown Community Bank to maintain certain capital ratios and impose
limitations on Hometown Community Bank's aggregate investment in real estate,
bank premises and furniture and fixtures. Hometown Community Bank will be
required by the FDIC to prepare quarterly reports on Hometown Community Bank's
financial condition and to conduct an annual audit of its financial affairs in
compliance with minimum standards and procedures prescribed by the FDIC.
Under FDICIA, all insured depository institutions must undergo periodic on-
site examination by the appropriate federal 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. All insured institutions are required to submit
annual reports to the FDIC and the appropriate federal agency (or state
supervisor when applicable). FDICIA also directs the FDIC to develop with other
appropriate agencies 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 other report of any insured
depository institution.
FDICIA also requires the federal banking regulatory agencies to prescribe,
by regulation, standards for all insured depository institutions and depository
44
institution holding companies relating, among other things, to: (i) internal
controls, information systems and audit systems; (ii) loan documentation; (iii)
credit underwriting; (iv) interest rate risk exposure; and (v) asset quality.
COMMUNITY REINVESTMENT ACT. The Community Reinvestment Act (the "CRA")
requires that, in connection with examinations of financial institutions within
their respective jurisdictions, the Federal Reserve, the FDIC, and any other
federal banking agency, shall evaluate the record of the financial institution
in meeting the credit needs of its local community, including low and moderate
income neighborhoods. A financial institution's CRA record is considered in
evaluating applications to the agencies for mergers, acquisitions, and new
branch facilities. Failure to comply with the CRA could submit a financial
institution to additional requirements and limitations.
OTHER RULES AND REGULATIONS. Interest and other charges collected or
contracted for by Hometown Community Bank are subject to state usury laws and
federal laws concerning interest rates. For example, under the Soldiers' and
Sailors' Civil Relief Act of 1940, a lender is generally prohibited from
charging an annual interest rate in excess of 6% on any obligation for which
the borrower is a person on active duty with the United States military.
Hometown Community 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;
* Soldiers' and Sailors' Civil Relief Act of 1940, governing the
repayment terms of, and property rights underlying, secured
obligations of persons in military service; and
* The rules and regulations of the various federal agencies charged
with the responsibility of implementing these federal laws.
In addition, the Georgia Fair Lending Act ("GAFLA") imposes certain
restrictions and procedural requirements on most mortgage loans made in the
state of Georgia, including home equity loans and lines of credit. However, on
August 5, 2003, the Office of the Comptroller of the Currency (the "OCC"), the
primary federal regulator for national banks, determined that federal law
preempts the entirety of GAFLA as to national banks and their operating
subsidiaries. GAFLA contains a provision that preempts GAFLA as to state banks
in the event that the OCC determines that federal law preempts GAFLA as to
national banks. Therefore, the Hometown Community Bank is exempt from the
requirements of GAFLA.
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The deposit operations of Hometown Community Bank are subject to:
* The Right to Financial Privacy Act, which imposes a duty to maintain
confidentiality of consumer financial records and prescribes
procedures for complying with administrative subpoenas of financial
records; and
* The Electronic Funds Transfer Act and Regulation E issued by the
Federal Reserve to implement that act, which govern automatic
deposits to and withdrawals from deposit accounts and customers'
rights and liabilities arising from the use of automated teller
machines and other electronic banking services.
Hometown Community Bank's commercial transactions will also be subject to
the provisions of Georgia law governing such transactions. These laws include
the Uniform Commercial Code and other provisions of the Georgia Code Annotated.
DEPOSIT INSURANCE
The deposits of Hometown Community Bank will be insured to a maximum of
$100,000 per depositor, subject to aggregation rules. The FDIC establishes
rates for the payment of premiums by federally insured banks and thrifts for
deposit insurance. Since 1993, insured depository institutions like Hometown
Community Bank have paid for deposit insurance under a risk-based premium
system. The deposit accounts held by Hometown Community Bank are insured by
the FDIC to a maximum of $100,000 for each insured member (as defined by law
and regulation). The FDIC uses a risk-based assessment system for insured
depository institutions that takes into account the risks attributable to
different categories and concentrations of assets and liabilities. The system
assigns an institution to one of three capital categories: (a) well capitalized;
(b) adequately capitalized; and (c) undercapitalized. These three categories
are substantially similar to the prompt corrective action categories described
above, with the "undercapitalized" category including institutions that are
undercapitalized, significantly undercapitalized, and critically
undercapitalized for prompt corrective action purposes. An institution is also
assigned by the FDIC to one of three supervisory subgroups within each capital
group. The supervisory subgroup to which an institution is assigned is based
on a supervisory evaluation provided to the FDIC by the institution's primary
federal regulator and information which the FDIC determines to be relevant to
the institution's financial condition and the risk posed to the deposit
insurance funds (which may include, if applicable, information provided by the
institution's state supervisor). An institution's insurance assessment rate is
then determined based on the capital category and supervisory category to which
it is assigned. Insurance of deposits may be terminated by the FDIC upon a
finding that the financial institution has engaged in unsafe and unsound
practices, is in an unsafe or unsound condition to continue operations, or has
violated any applicable law, regulation, rule, order, or condition imposed by
the FDIC.
Based on Hometown Community Bank's anticipated initial risk classification,
Hometown Community Bank will not be required to pay an assessment for deposit
insurance during its initial year of operation. However, Hometown Community
Bank will be required to pay Bank Insurance Fund Financing Corporation ("FICO")
assessments after it opens for business. For the 2nd quarter of 2004, the FICO
assessment rate was 1.54 cents per $100 of assessable deposits. This assessment
46
rate can change based on the interest costs of bonds issued by FICO to fund the
resolution of failed thrifts from 1987 to 1991.
DIVIDENDS
We are a legal entity separate and distinct from Hometown Community Bank.
Our principal source of cash flow, including cash flow to pay dividends to our
shareholders, will be dividends from Hometown Community Bank. The amount of
dividends that may be paid by Hometown Community Bank to us will depend on
Hometown Community Bank's earnings and capital position and is limited by
various federal and state statutory and regulatory limitations. In addition,
the Federal Reserve has stated that bank holding companies should refrain from
or limit dividend increases or reduce or eliminate dividends under circumstances
in which the bank holding company fails to meet minimum capital requirements or
in which its earnings are impaired.
As a Georgia banking corporation, Hometown Community Bank will be permitted
to pay cash dividends on its outstanding capital stock out of its earnings
without any requirement to notify the Georgia Department or request the approval
of the Georgia Department under the following conditions:
* Total classified assets at the most recent examination of Hometown
Community Bank, the conclusions of which may have been presented to
the Board of Directors, do not exceed 80% of Tier 1 Capital plus the
Allowance for Loan Losses as reflected as such examination;
* The aggregate amount of dividends declared or anticipated to be
declared in the calendar year does not exceed 50% of the net
profits, after taxes but before dividends, for the previous calendar
year;
* The ratio of Tier 1 Capital to Adjusted Total Assets shall not be
less than 6%.
Any dividend to be declared by Hometown Community Bank at a time when each
of the foregoing conditions does not exist must be approved, in writing, by the
Georgia Department prior to the payment thereof. Under FDICIA, Hometown
Community Bank will not be permitted to pay a dividend if, after paying the
dividend, Hometown Community Bank would be undercapitalized. See "Capital
Adequacy" below.
Furthermore, among the expected conditions to any approval by the Georgia
Department of Hometown Community Bank's Articles of Incorporation will be a
requirement that Hometown Community Bank's Board of Directors adopt resolutions
committing: (i) that Hometown Community Bank will not pay dividends until it
has recovered its start-up losses and is cumulatively profitable, and (ii) that
Hometown Community Bank will maintain a Tier 1 Leverage Ratio of not less than
8% during its first three years of operation.
In addition to the availability of funds from Hometown Community Bank, our
future dividend policy is subject to the discretion of our Board of Directors
and will depend upon a number of factors, including future earnings, financial
47
condition, cash needs and general business conditions. If we should declare
dividends in the future, the amount of such dividends cannot be estimated at
this time and we cannot know whether such dividends would continue for future
periods.
CAPITAL ADEQUACY
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;
* account for off-balance sheet exposure; and
* minimize disincentives for holding liquid assets.
The resulting capital ratios represent qualifying capital as a percentage
of total risk-weighted assets and 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 well in
excess of the minimums.
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. The degree of regulatory
scrutiny of a financial institution will increase, and the permissible
activities of the institution will decrease as it moves downward through the
capital categories. Bank holding companies controlling financial institutions
can be called upon to boost the institution's capital and to partially guarantee
the institution's performance under their capital restoration plans. Tier 1
capital includes shareholders' equity, qualifying perpetual special stock and
minority interests in equity accounts of consolidated subsidiaries, but excludes
goodwill and most other intangible assets and excludes the allowance for loan
and lease losses. Tier 2 capital includes the excess of any special stock not
included in Tier 1 capital, mandatory convertible securities, hybrid capital
instruments, subordinated debt and intermediate-term special stock and general
reserves for loan and lease losses up to 1.25% of risk-weighted assets.
Under the guidelines, banks' and bank holding companies' assets are given
risk-weights of 0%, 20%, 50% and 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 will apply. 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.
Failure to meet federal capital guidelines could subject a bank to a
variety of enforcement remedies, including the termination of deposit insurance
by the FDIC, and to certain restrictions on its business.
48
The Federal Reserve also has implemented a leverage ratio, which is Tier 1
capital as a percentage of average total assets less intangible assets, to be
used as a supplement to the risk-based guidelines. The principal objective of
the leverage ratio is to place a constraint on the maximum degree to which a
bank holding company may leverage its equity capital base. The Federal Reserve
has established a minimum 3% leverage ratio of Tier 1 capital to total assets
for the most highly rated bank holding companies and insured banks. All other
bank holding companies and insured banks will be required to maintain a leverage
ratio of 3% plus an additional cushion of at least 100 to 200 basis points
depending on the risk profile of the institution and other factors. The
tangible Tier 1 Leverage ratio is the ratio of a banking organization's Tier 1
capital, less all intangibles, to total assets, less all intangibles.
FDICIA established a capital-based regulatory plan designed to promote
early intervention for troubled banks and requires the FDIC to choose the least
expensive resolution of bank failures. The 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%. The bank must also not be under any order
or directive from the appropriate regulatory agency to meet and maintain a
specific capital level.
Under FDICIA, regulators must take prompt corrective action against
depository institutions that do not meet minimum capital requirements. FDICIA
and the related regulations establish five capital categories as shown in the
following table:
Total Risk- Tier I Risk- Tier I
Classification Based Capital Based Capital Leverage
-------------- ------------- ------------- --------
Well Capitalized (1) 10% 6% 5%
Adequately Capitalized (1) 8% 4% 4% (2)
Undercapitalized (3) <8% <4% <4%
Significantly Undercapitalized (3) <6% <3% <3%
Critically Undercapitalized (3) - - <2%
___________
(1) An institution must meet all three minimums.
(2) 3% for composite 1-rated institutions, subject to appropriate federal
banking agency guidelines.
(3) An institution is classified as undercapitalized if it is below the
specified capital level for any of the three capital measures.
A depository institution may be deemed to be in a capitalization category
that is lower than is indicated by its actual capital position if it receives a
less than satisfactory examination rating in any one of four categories. As a
49
depository institution moves downward through the capitalization categories, the
degree of regulatory scrutiny will increase and the permitted activities of the
institution will decrease. Action may be taken by a depository institution's
primary federal regulator against an institution that falls into one of the
three undercapitalized categories, including the requirement of filing a capital
plan with the institution's primary federal regulator, prohibition on the
payment of dividends and management fees, restrictions on executive
compensation, and increased supervisory monitoring. Other restrictions may be
imposed on the institution either by its primary federal regulator or by the
FDIC, including requirements to raise additional capital, sell assets or sell
the institution.
We and Hometown Community Bank are expected to be adequately capitalized
according to their federal regulatory capital requirements after the offering.
In addition to the federal regulatory capital requirements which will be
applicable to Hometown Community Bank, the Georgia Department is expected to
require Hometown Community Bank's Board of Directors to commit, as a condition
to the Georgia Department's approval of Hometown Community Bank's Articles of
Incorporation, to maintain Hometown Community Bank's Tier 1 Leverage Capital
Ratio at not less than 8% during Hometown Community Bank's first three years of
operation commencing upon the effective date of the Permit to begin Business
(the "Permit") issued by the Georgia Department.
INTERSTATE BANKING AND BRANCHING RESTRICTIONS
Pursuant to the Riegle-Neal Interstate Banking and Branching Efficiency Act
of 1994 (the "Riegle-Neal Act"), effective September 29, 1995, an adequately
capitalized and adequately managed bank holding company may acquire a bank
across state lines, without regard to whether such acquisition is permissible
under state law. A bank holding company is considered to be "adequately
capitalized" if it meets all applicable federal regulatory capital standards.
While the Riegle-Neal Act precludes a state from entirely insulating its
banks from acquisition by an out-of-state holding company, a state may still
provide that a bank may not be acquired by an out-of-state company unless the
bank has been in existence for a specified number of years, not to exceed five
years. Additionally, the Federal Reserve may not approve an interstate
acquisition which would result in the acquirer's controlling more than 10% of
the total amount of deposits of insured depository institutions in the United
States with 30% or more of the deposits in the home state of the target bank.
A state may waive the 30% limit based on criteria that does not discriminate
against out-of-state institutions. The limitations do not apply to the initial
entry into a state by a bank holding company unless the state has a deposit
concentration cap that applies on a nondiscriminatory basis to in-state or out-
of-state bank holding companies making an initial acquisition.
The Riegle-Neal Act also provides that, beginning on June 1, 1997, banks
with different home states may merge, unless a particular state opts out of the
statute. Consistent with the Riegle-Neal Act, Georgia adopted legislation in
1996 which has permitted interstate bank mergers since June 1, 1997.
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In addition, beginning June 1, 1997, the Riegle-Neal Act has permitted
national and state banks to establish de novo branches in another state if there
is a law in that state which applies equally to all banks and expressly permits
all out-of-state banks to establish de novo branches. However, in 1996, Georgia
adopted legislation which opts out of this provision. The Georgia legislation
provides that, with the prior approval of the Georgia Department, after July 1,
1996, a bank may establish three new or additional de novo branch banks anywhere
in Georgia and, beginning July 1, 1998, a bank may establish new or additional
branch banks anywhere in the state with prior regulatory approval.
RESTRICTIONS ON TRANSACTIONS WITH AFFILIATES
We and Hometown Community Bank will be subject to the provisions of Section
23A of the Federal Reserve Act. Section 23A places limits on the amount of:
* loans or extensions of credit to affiliates;
* investment in affiliates;
* the purchase of assets from affiliates, except for real and personal
property exempted by the Federal Reserve;
* loans or extensions of credit to third parties collateralized by the
securities or obligations of affiliates; and
* any guarantee, acceptance or letter of credit issued on behalf of an
affiliate.
The total amount of the above transactions is limited in amount, as to any
one affiliate, to 10% of a bank's capital and surplus and, as to all affiliates
combined, to 20% of a bank's capital and surplus. In addition to the limitation
on the amount of these transactions, each of the above transactions must also
meet specified collateral requirements. We will also be required to comply with
other provisions designed to avoid the taking of low-quality assets.
We and Hometown Community Bank will also be subject to the provisions of
Section 23B of the Federal Reserve Act which, among other things, prohibit an
institution from engaging in the above transactions with affiliates unless the
transactions are on terms substantially the same, or at least as favorable to
the institution or its subsidiaries, as those prevailing at the time for
comparable transactions with nonaffiliated companies.
Hometown Community Bank is also subject to restrictions on extensions of
credit to its executive officers, directors, principal shareholders and their
related interests. These extensions of credit: (1) must be made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with third parties; and (2)
must not involve more than the normal risk of repayment or present other
unfavorable features.
PRIVACY
Financial institutions are required to disclose their policies for
collecting and protecting confidential information. Customers generally may
prevent financial institutions from sharing nonpublic personal financial
information with nonaffiliated third parties except under narrow circumstances,
such as the processing of transactions requested by the consumer. Additionally,
51
financial institutions generally may not disclose consumer account numbers to
any nonaffiliated third party for use in telemarketing, direct mail marketing or
other marketing to consumers.
ANTI-TERRORISM LEGISLATION
In the wake of the tragic events of September 11, 2001, the President
signed the Uniting and Strengthening America by Providing Appropriate Tools
Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act of 2001. Under
the USA PATRIOT Act, financial institutions are subject to prohibitions against
specified financial transactions and account relationships as well as enhanced
due diligence and "know your customer" standards in their dealings with certain
financial institutions and bank customers. Section 326 of the Act, and
regulations implementing this Section, requires Hometown Community Bank to
establish and maintain thereafter, a written Customer Identification Program
("CIP") as a part of the bank's Bank Secrecy Act program. Hometown Community
Bank plans to adopt and implement a CIP to comply with the Act and its
implementing regulations.
CONSUMER CREDIT REPORTING LEGISLATION.
On December 4, 2003, the President signed the Fair and Accurate Credit
Transactions Act (the "FACT Act"). The FACT Act amends the Fair Credit Report
Act ("the FCRA") to require, among other things, that:
* financial institutions develop policies and procedures to identify
potential identity theft and, upon the request of a consumer, place
a fraud alert in the consumer's credit file stating that the
consumer may be the victim of identity theft or other fraud;
* lenders using consumer reports provide a new notice to consumers if
the lenders use risk-based credit pricing programs;
* entities that furnish information to consumer reporting agencies
implement procedures and policies regarding the accuracy and
integrity of the furnished information and regarding the correction
of previously furnished information that is later determined to be
inaccurate; and
* mortgage lenders disclose credit scores to mortgage loan applicants.
The FACT Act also generally prohibits a business that receives consumer
information from an affiliate from using that information for solicitations for
marketing purposes, unless the consumer is first provided a notice and an
opportunity to direct the business not to use the information for such purposes.
Certain FACT Act requirements are effective in February 2004, while others
are not effective until the fourth quarter of 2004, or even later. Both
Hometown Community Bancshares and Hometown Community Bank will implement
policies and procedures to comply with the applicable requirements of the FCRA,
as amended by the FACT Act, prior to the effective dates of each of the
requirements.
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PROPOSED LEGISLATION AND REGULATORY ACTION
New regulations and statutes are regularly proposed that contain wide-
ranging proposals for altering the structure, regulations and competitive
relationships for the nation's financial institutions. We cannot predict
whether or in what form any proposed regulation or statute will be adopted
or the extent to which our business may be affected by any new regulation or
statute.
EFFECT OF GOVERNMENTAL MONETARY POLICES
Our earnings are affected by domestic economic conditions and the monetary
and fiscal policies of the United States government and its agencies. The
Federal Reserve Bank's monetary policies have had, and are likely to continue
to have, an important impact on the operating results of commercial banks
through its power to implement national monetary policy in order, among other
things, to curb inflation or combat a recession. The monetary policies of the
Federal Reserve affect the levels of bank loans, investments and deposits
through its control over the issuance of United States government securities,
its regulation of the discount rate applicable to member banks and its influence
over reserve requirements to which member banks are subject. We cannot predict
the nature or impact of future changes in monetary and fiscal policies.
LEGAL MATTERS
The validity of the issuance of the shares of the common stock offered
hereby will be passed upon for us by Morris Manning & Martin LLP, Atlanta,
Georgia.
EXPERTS
Our financial statements at July 31, 2004, and for the period from February
12, 2004 (inception) until July 31, 2004, have been audited by Nichols, Cauley &
Associates, L.L.C., Atlanta, Georgia (the "Accountant"), independent certified
public accountants, as stated in the Accountants' report appearing elsewhere
herein, and have been so included in reliance on the report of such firm given
upon the Accountant's authority as an expert in accounting and auditing.
REPORTS TO SHAREHOLDERS
We are not a reporting company as defined by the SEC. We will furnish our
shareholders with annual reports containing audited financial information for
each fiscal year and will distribute quarterly reports for the first three
quarters of each fiscal year containing unaudited summary financial information.
Our fiscal year ends on December 31.
ADDITIONAL INFORMATION
We have filed with the SEC a Registration Statement under the Securities
Act of 1933 with respect to the common stock offered hereby. This prospectus
does not contain all of the information set forth in the registration statement,
certain parts of which are omitted in accordance with the rules and regulations
of the SEC. For further information with respect to us and the common stock,
53
reference is made to the registration statement and the exhibits thereto.
Copies of the registration statement may be obtained at prescribed rates from
the public reference facilities of the Securities and Exchange Commission,
Public Reference Room, 450 Fifth Street, N.W., Washington, DC 20549, or by
calling 1-800-SEC-0330. The SEC maintains a World Wide Web site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants, such as Hometown Community Bancshares,
that file electronically with the SEC.
We and our organizers have filed or will file various applications with the
Federal Deposit Insurance Corporation, the Federal Reserve Bank of Atlanta, and
the Georgia Department of Banking and Finance. Prospective investors should
rely only on information contained in this prospectus and in our related
registration statement in making an investment decision. To the extent that
other available information not presented in this prospectus, including
information in public files and records maintained by the Federal Deposit
Insurance Corporation, the Federal Reserve Bank of Atlanta, and the Georgia
Department of Banking and Finance, is inconsistent with information presented in
this prospectus, such other information is superseded by the information
presented in this prospectus. Projections appearing in the applications were
based on assumptions that we or the organizers believed were reasonable, but as
to which no assurances can be made. We specifically disaffirm those projections
for purposes of this prospectus and cautions prospective investors against
placing any reliance on them for purposes of making an investment decision.
54
APPENDIX F
HOMETOWN COMMUNITY BANCSHARES, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
JULY 31, 2004
F-1
APPENDIX F
HOMETOWN COMMUNITY BANCSHARES, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL REPORT
TABLE OF CONTENTS
-----------------
PAGE
----
INDEPENDENT AUDITOR'S REPORT F-3
FINANCIAL STATEMENTS
Balance Sheet F-4
Statement of Operations F-5
Statement of Stockholders' Deficit F-6
Statement of Cash Flow F-7
Notes to Financial Statements F-8
F-2
APPENDIX F
[LOGO OF NICHOLS, CAULEY
& ASSOCIATES, LLC]
[LETTERHEAD OF NICHOLS, CAULEY & ASSOCIATES, LLC]
INDEPENDENT AUDITOR'S REPORT
To the Organizers
Hometown Community Bancshares, Inc. (A Development Stage Company)
Braselton, Georgia
We have audited the accompanying balance sheet of Hometown Community Bancshares,
Inc. (a development stage company) as of July 31, 2004, and the related
statements of operations, stockholders' deficit, and cash flows for the period
May 12, 2004 (inception), to July 31, 2004. 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 the standards of the Public Company
Accounting Oversight Board (United States). 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 Hometown Community Bancshares,
Inc. as of July 31, 2004, and the results of its operations and its cash flows
from May 12, 2004 (inception), to July 31, 2004, in conformity with United
States generally accepted accounting principles.
/s/Nichols, Cauley & Associates, LLC
Atlanta, Georgia
August 31, 2004
Reply to: 2970 Clairmont Road, NE
Atlanta, GA 30329-4440
800-823-1224
Fax 404-214-1302
atlanta@nicholscauley.com
F-3
APPENDIX F
HOMETOWN COMMUNITY BANCSHARES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
JULY 31, 2004
ASSETS
Cash $ 778
Other assets 5,000
---------
Total assets $ 5,778
=========
LIABILITIES AND STOCKHOLDERS' DEFICIT
LIABILITIES
Line of credit $ 42,500
Other liabilities 39,521
---------
Total liabilities 82,021
---------
STOCK HOLDERS' DEFICIT
Common stock, 10,000,000 shares authorized,
$.01 par value, 5,000 shares issued and outstanding 50
Special stock, 1,000,000 share of authorized, no par
value, no shares issued or outstanding --
Paid-in-capital 49,950
Deficit accumulated during the development stage (126,243)
---------
Total stockholders' deficit (76,243)
---------
Total liabilities and stockholders' deficit $ 5,778
=========
See accompanying independent auditors' report and notes to financial statements.
F-4
APPENDIX F
HOMETOWN COMMUNITY BANCSHARES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM MAY 12, 2004,
DATE OF INCEPTION, TO JULY 31, 2004
Expenses:
Professional and consulting fees $ 113,960
Other operating expenses 12,283
---------
Total expenses 126,243
---------
Net loss and deficit accumulated
during the development stage $(126,243)
=========
See accompanying independent auditors' report and notes to financial statements.
F-5
APPENDIX F
HOMETOWN COMMUNITY BANCSHARES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE PERIOD FROM MAY 12, 2004,
DATE OF INCEPTION, TO JULY 31, 2004
Common Deficit Accumulated
Stock Paid-in during the
Par Value Capital Development Stage Total
--------- ------- ----------------- -----
Issuance of Common
Stock $ 50 $ 49,950 $ -- $ 50,000
Net Loss -- -- (126,243) (126,243)
---- -------- --------- ---------
Balance, July 31, 2004 $ 50 $ 49,950 $(126,243) $ (76,243)
==== ======== ========= =========
See accompanying independent auditors' report and notes to financial statements.
F-6
APPENDIX F
HOMETOWN COMMUNITY BANCSHARES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM MAY 12, 2004,
DATE OF INCEPTION, TO JULY 31, 2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (126,243)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Increases in other assets (5,000)
Increases in other liabilities 39,521
----------
Net cash used in operating activities (91,722)
----------
CASH FLOWS FROM INVESTING ACTIVITIES --
----------
CASH FLOWS FROM FINANCING ACTIVITIES
Advances from line of credit 42,500
Proceeds from issuance of common stock 50,000
----------
Net cash provided by financing activities 92,500
----------
Net increase in cash 778
Cash at inception --
----------
Cash at July 31, 2004 $ 778
==========
See accompanying independent auditors' report and notes to financial statements.
F-7
APPENDIX F
HOMETOWN COMMUNITY BANCSHARES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JULY 31, 2004
1. ORGANIZATION
Hometown Community Bancshares, Inc. (the "Bank") is preparing an
application to operate as a bank holding company organized under the laws
of the State of Georgia and through its wholly owned subsidiary (proposed)
Hometown Community Bank to conduct a general banking business in Jackson
County, Georgia. The Bank's applications to the Georgia Department of
Banking and Finance and the Federal Deposit Insurance Corporation (FDIC)
are in process of being prepared. If approved the Bank will be an insured
bank and a member of the Bank Insurance Fund.
The Bank is a development stage enterprise as defined by Statement of
Financial Accounting Standards No. 7, Accounting and Reporting by
Development Stage Enterprises, as it devotes substantially all its efforts
to establishing a new business. The Bank's planned principal operations
have not commenced and revenue has not been recognized from the planned
principal operations.
Activities since inception have consisted primarily of the Bank's
organizers engaging in organizational and preopening activities necessary
to prepare the applications for regulatory approvals and to prepare to
commence business as a financial institution.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements have been prepared on the accrual basis in
accordance with generally accepted accounting principles.
Organization and Stock Offering Costs
Organization costs have been expensed as incurred in accordance with
Statement of Position 98-5, Reporting on the Costs of Start-Up Activities.
Stock offering costs are expected to be incurred for organization costs and
stock offering costs.
F-8
APPENDIX F
HOMETOWN COMMUNITY BANCSHARES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JULY 31, 2004
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those
estimates.
Income Taxes
The Bank will be subject to Federal and state income taxes when taxable
income is generated. No income taxes have been accrued because of operating
losses incurred during the preopening period.
Fiscal Year
The Bank will adopt a calendar year for both financial reporting and tax
reporting purposes.
Cash and Cash Equivalents
For purposes of the statement of cash flows the Bank considers all liquid
assets with a maturity of less than three months to be cash and cash
equivalents.
3. RELATED PARTY TRANSACTIONS
To facilitate payment of debts and to continue the preopening activities,
the Organizers formed HBB, LLC (the "Partnership"). The Partnership was
funded by initial capital contributions to the LLC that were transferred
to Hometown Community Bancshares, Inc. upon its formation. The initial
capital contributions were for the purpose of paying organizational and
preopening expenses on behalf of the Bank and expenses of the proposed
common stock offering until the Bank could establish a line of credit to
fund the additional expenses.
The Bank has received an initial line of credit that is guaranteed by the
organizing directors.
F-9
APPENDIX F
HOMETOWN COMMUNITY BANCSHARES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JULY 31, 2004
4. COMMITMENTS
The Bank and its predecessor partnership, HBB, LLC have entered into legal
and consulting contracts for professional services rendered and to be
rendered in conjunction with regulatory filings, stock issuance and other
services necessary in the development stage of the Bank. The total
obligation under these contracts is $270,000 of which $116,079 had been
expensed at July 31, 2004.
5. INCOME TAXES
There is no current income tax provision (benefits). Deferred income tax
assets and liabilities are determined using the liability (or balance
sheet) method. Under this method, the net deferred tax asset or liability
is determined based on the tax effects of the differences between the book
and tax bases of the various balance sheet assets and liabilities and gives
current recognition to changes in tax rates and laws. At July 31, 2004, the
Bank's deferred tax assets have been reduced to $-0- by a valuation
allowance since the realization of these deferred tax assets is dependent
on future taxable income.
6. LINE OF CREDIT
The Bank has entered into a line of credit with $100,000 available for
draws of which $42,500 had been drawn at July 31, 2004. The note bears
interest at Wall Street Journal rate minus .5%. The note is guaranteed by
the shareholders and secretary of the Bank.
7. SUBSEQUENT EVENTS
The Bank has entered into a contract with its Vice-Chairman to serve as a
consultant to the Board of Directors for 2 years beginning August 2004 at
an amount of $5,000 per month.
Subsequent to July 31, 2004 two additional shareholders/directors each
purchased 1,000 shares of common stock at $10 per share.
The line of credit was increased to $250,000.
F-10
APPENDIX A
HOMETOWN COMMUNITY BANCSHARES, INC.
SUBSCRIPTION AND INVESTMENT AGREEMENT
Hometown Community Bancshares, Inc.
74 Lagree Duck Road
Braselton, Georgia 30517
Ladies and Gentlemen:
You have informed me that Hometown Community Bancshares, Inc., a Georgia
corporation (the "Company"), is offering up to 1,200,000 shares of its Common
Stock, par value $.01 per share (the "Common Stock"), at a price of $10.00 per
share payable as provided herein and as described in and offered pursuant to
the Prospectus furnished with this Subscription and Investment Agreement to the
undersigned (the "Prospectus").
1. SUBSCRIPTION. Subject to the terms and conditions hereof, the
undersigned hereby tenders this subscription, together with payment in United
States currency by check, bank draft, or money order payable to "Nexity Bank,
NA, Escrow Account for Hometown Community Bancshares, Inc." the amount indicated
below (the "Funds"), representing the payment of $10.00 per share for the number
of shares of Common Stock indicated below. The total subscription price must be
paid at the time the Subscription and Investment Agreement is executed.
2. ACCEPTANCE OF SUBSCRIPTION. It is understood and agreed that the
Company shall have the right to accept or reject this subscription in whole or
in part, for any reason whatsoever. The Company may reduce the number of shares
for which the undersigned has subscribed, indicating acceptance of less than all
of the shares subscribed on its written form of acceptance.
3. ACKNOWLEDGMENTS. The undersigned hereby acknowledges that he or she
has received a copy of the Prospectus. This Subscription and Investment
Agreement creates a legally binding obligation and the undersigned agrees to be
bound by the terms of this Subscription and Investment Agreement.
4. REVOCATION. The undersigned agrees that once this Subscription and
Investment Agreement is tendered to the Company, it may not be withdrawn and
that the Subscription and Investment Agreement shall survive the death or
disability of the undersigned.
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR
DEPOSITS ACCOUNTS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
A-1
APPENDIX A
Please indicate in the space provided below the exact name or names and
address in which the stock certificate representing shares subscribed for
hereunder should be registered.
__________________________________ _________________________________
Number of Shares Subscribed for Name or Names of Subscribers
(minimum 1,000 shares) (Please Print)
$_________________________________ _________________________________
Total Subscription Price at $10.00 Please indicate form of ownership
per share (funds must be enclosed) desired (individual, joint tenants
with right of survivorship, tenants
in common, trust, corporation,
partnership, custodian, etc.)
Date: ____________________________ _________________________________
Signature of Subscriber(s)*
_________________________________ _________________________________
Social Security Number or Signature of Subscriber(s)*
Federal Taxpayer Identification Number
Street (Residence) Address:
_________________________________
_________________________________
City, State and Zip Code
*When signing as attorney, trustee, administrator, or guardian, please give
your full title as such. If a corporation, please sign in full corporate name
by president or other authorized officer. In the case of joint tenants or
tenants in common, each owner must sign.
FEDERAL INCOME TAX BACKUP WITHHOLDING
In order to prevent the application of federal income tax backup
withholding, each subscriber must provide the Escrow Agent with a correct
Taxpayer Identification Number ("TIN"). An individual's social security number
is his or her TIN. The TIN should be provided in the space provided in the
Substitute Form W-9, which is set forth below.
Under federal income tax law, any person who is required to furnish his or
her correct TIN to another person, and who fails to comply with such
requirements, may be subject to a $50 penalty imposed by the IRS.
A-2
APPENDIX A
Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If backup withholding results in an overpayment of taxes, a refund
may be obtained from the IRS. Certain taxpayers, including all corporations,
are not subject to these backup withholding and reporting requirements.
If the shareholder has not been issued a TIN and has applied for a TIN or
intends to apply for a TIN in the near future, "Applied For" should be written
in the space provided for the TIN on the Substitute Form W-9.
SUBSTITUTE FORM W-9
Under penalties of perjury, I certify that: (i) The number shown on this
form is my correct Taxpayer Identification Number (or I am waiting for a
Taxpayer Identification Number to be issued to me), and (ii) I am not subject
to backup withholding because: (a) I am exempt from backup withholding; or (b)
I have not been notified by the Internal Revenue Service ("IRS") that I am
subject to backup withholding as a result of a failure to report all interest
or dividends; or (c) the IRS has notified me that I am no longer subject to
backup withholding.
You must cross out item (ii) above if you have been notified by the IRS
that you are subject to backup withholding because of underreporting interest
or dividends on your tax return. However, if after being notified by the IRS
that you were subject to backup withholding you received another notification
from the IRS that you are not longer subject to backup withholding, do not cross
out item (ii).
Each subscriber should complete this section.
__________________________________ _________________________________
Signature of Subscriber Signature of Subscriber
__________________________________ _________________________________
Printed Name Printed Name
__________________________________ _________________________________
Social Security or Taxpayer/Employer Social Security or Taxpayer/Employer
Identification No. Identification No.
TO BE COMPLETED BY THE COMPANY:
Accepted as of ___________________, 20__, as to _______ares.
HOMETOWN COMMUNITY BANCSHARES, INC.
By: ___________________________________
Sean Childers
President and Chief Executive Officer
A-3
No dealer, salesperson or other person
has been authorized to give any information
or to make any representations other than
those contained in this Prospectus in
connection with the offer made hereby. If
given or made, such information and
representations must not be relied upon as
having been authorized by us. This
Prospectus does not constitute an offer to
sell or solicitation of an offer to buy any
of the securities offered hereby in any
jurisdiction to any person to whom it is
unlawful to make such offer in such
jurisdiction. Neither the delivery of this
Prospectus nor any sale made hereunder at
any time shall under any circumstances
create any implication that the information
herein is correct at any time after the date
hereof.
TABLE OF CONTENTS
Page
Prospectus Summary.........................2
Risk Factors...............................5
Hometown Community Bancshares and
Hometown Community Bank..................9
The Offering..............................10
Use of Proceeds...........................13
Capitalization............................15
Selected Financial Data...................16
Dividend Policy...........................16
Proposed Business.........................16
Management's Discussion and
Analysis of Financial Condition
and Results of Operations...............24
Management................................25
Description of Capital Stock of
Hometown Community Bancshares...........32
Supervision and Regulation................34
Legal Matters.............................44
Experts...................................44
Reports to Shareholders...................44
Additional Information....................45
Financial Statements.....................F-1
Subscription and Investment Agreement....A-1
_______________________________
Until __________, 2004, all dealers
effecting transactions in these securities,
whether or not participating in this offering,
may be required to deliver a prospectus. This
is in addition to the obligation of dealers to
deliver a prospectus when acting as
underwriters and with respect to their unsold
allotments or subscriptions.
1,200,000 Shares
HOMETOWN COMMUNITY BANCSHARES, INC.
A Proposed Holding Company For
Common Stock
PROSPECTUS
September __, 2004
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. 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..................................... $1,520.40
Blue Sky Fees and Expenses........................... $10,979.60
Printing and Engraving............................... $14,000.00
Legal Fees and Expenses.............................. $25,000.00
Accounting Fees and Expenses......................... $7,000.00
Consulting Fees and Expenses......................... $75,000.00
Escrow Agent Fees.................................... $1,500.00
Miscellaneous Disbursements.......................... $5,000.00
-----------
TOTAL EXPENSES $140,000.00
===========
ITEM 14. Indemnification of Directors and Officers.
The Bylaws of Hometown Community Bancshares require us to indemnify any
person who was, is, or is threatened to be made a named defendant or respondent
in any threatened, pending, or completed action, suit, or proceeding, whether
civil, criminal, administrative, or investigative, by reason of service by such
person as a director of Hometown Community Bancshares or Hometown Community Bank
or any other corporation which he served as such at the request of Hometown
Community Bancshares. Except as noted in the next paragraph, directors are
entitled to be indemnified against judgments, penalties, fines, settlements, and
reasonable expenses actually incurred by the director in connection with the
proceeding. Directors are also entitled to have Hometown Community Bancshares
advance any such expenses prior to final disposition of the proceeding, upon
delivery of a written affirmation by the director of his good faith belief that
the standard of conduct necessary for indemnification has been met and a written
undertaking to repay the amounts advanced if it is ultimately determined that
the standard of conduct has not been met.
Under the Bylaws, indemnification will be disallowed if it is established
that the director (i) appropriated, in violation of his duties, any business
opportunity of Hometown Community Bancshares, (ii) engaged in willful misconduct
or a knowing violation of law, (iii) permitted any unlawful distribution, or
(iv) derived an improper personal benefit. In addition to the Bylaws of
Hometown Community Bancshares, Section 18-2-852 of the Georgia Business
Corporation Code (the "Corporate Code") requires that a corporation indemnify a
director who is wholly successful, on the merits or otherwise, in the defense
of any proceeding to which he or she was a party because he or she is or was a
director of the corporation against reasonable expenses incurred by the director
in connection with the proceeding. The Corporate Code also provides that upon
application of a director a court may order indemnification if it determines
that the director is entitled to such indemnification under the applicable
standard of the Corporate Code.
II-1
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.
Hometown Community Bancshares has the power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of Hometown Community Bancshares against any liability asserted against
him or incurred by him in any such capacity, whether or not Hometown Community
Bancshares would have the power to indemnify him against such liability under
the bylaws.
ITEM 15. Recent Sales of Unregistered Securities.
On June 5, 2004, we issued 5,000 shares of the Common Stock of Hometown
Community Bancshares to five of the organizers in a limited offering exempt
under Section 4(2) of the Securities Act for an aggregate consideration of
$50,000. On August 13, 2004, we issued 1,000 shares of the Common Stock of
Hometown Community Bancshares to an additional organizer in a limited offering
exempt under Section 4(2) of the Securities Act for the consideration of
$10,000. On August 20, 2004, we issued 1,000 shares of the Common Stock of
Hometown Community Bancshares to an additional organizer in a limited offering
exempt under Section 4(2) of the Securities Act for the consideration of
$10,000. No underwriters were involved and no underwriting commissions or
discounts were paid.
ITEM 16. Exhibits and Financial Statement Schedules.
(a) Exhibits.
3.1. Articles of Incorporation.
3.2. Bylaws.
4.1. See exhibits 3.1 and 3.2 for provisions of Hometown Community
Bancshares' Articles of Incorporation and Bylaws Defining the
Rights of Shareholders.
5.1. Opinion of Morris, Manning, & Martin, LLP, Counsel to the
Registrant, as to the legality of the shares being registered.
10.1. Employment Agreement by and between Hometown Community Bancshares
and Sean Childers, dated September 1, 2004.
10.2. Form of Escrow Agreement by and between Nexity Bank, NA and
Hometown Community Bancshares.
10.3. Consulting Agreement by and between Hometown Community Bancshares
and Ted Murphy, dated August 16, 2004.
10.4 Option Agreement by and between Hometown Community Bancshares and
Dunhill Developers, LLC, dated September 2, 2004.
23.1. Consent of Nichols, Cauley & Associates, L.L.C.
23.2. Consent of Morris, Manning, & Martin, LLP (included in Exhibit
5.1).
24.1. Powers of Attorney (included on signature page).
(b) Financial Statement Schedules.
II-2
None.
ITEM 17. Undertakings.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of Hometown Community Bancshares pursuant to the provisions described in
Item 14 above, or otherwise, Hometown Community Bancshares has been advised that
in the opinion of the Securities and Exchange Commission (the "SEC") such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by Hometown Community Bancshares of
expenses incurred or paid by a director, officer or controlling person of
Hometown Community 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, Hometown Community 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 Act and will be governed by the final adjudication of such
issue.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the SEC pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent
no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
(2) That, for the purpose of determining any liability under the Act,
each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
II-3
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-4
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 Braselton, State of
Georgia, on September 14, 2004.
HOMETOWN COMMUNITY BANCSHARES, INC.
By: /s/ C. Sean Childers
-------------------------------------
C. Sean Childers
President and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints C. Sean Childers and Robert M. Martin, and each
of them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution for him and in his name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and 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 each of said attorney-in-fact
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 persons in the
capacities and on the dates indicated.
Signature Title Date
/s/ Amyn A. Meghani Chairman of the Board September 14, 2004
------------------------------
Amyn A. Meghani
/s/ C. Sean Childers President, Chief Executive September 14, 2004
------------------------------ Officer and Director
C. Sean Childers [Principal Executive Officer,
Principal Financial Officer
and Principal Accounting Officer]
/s/ Martha Martin Director September 14, 2004
------------------------------
Martha Martin
/s/ Dr. Terry H. Elrod Director September 14, 2004
------------------------------
Dr. Terry H. Elrod
/s/ Chandra Kant I. "CK" Patel Director September 14, 2004
------------------------------
Chandra Kant I. "CK" Patel
/s/ Melvin "Monk" Tolbert Director September 14, 2004
------------------------------
Melvin "Monk" Tolbert
/s/ Ted A. Murphy Vice Chairman of the Board September 14, 2004
------------------------------
Ted A. Murphy
II-5
EXHIBIT INDEX
3.1. Articles of Incorporation.
3.2. Bylaws.
4.1. See exhibits 3.1 and 3.2 for provisions of Hometown Community
Bancshares' Articles of Incorporation and Bylaws Defining the
Rights of Shareholders.
5.1. Opinion of Morris Manning & Martin LLP, Counsel to the Registrant,
as to the legality of the shares being registered.
10.1. Employment Agreement by and between Hometown Community Bancshares
and Sean Childers, dated September 1, 2004.
10.2. Form of Escrow Agreement by and between Nexity Bank, NA and
Hometown Community Bancshares.
10.3. Consulting Agreement by and between Hometown Community Bancshares
and Ted Murphy, dated August 16, 2004.
10.4. Option Agreement by and between Hometown Community Bancshares and
Dunhill Developers, LLC, dated September 2, 2004.
23.1. Consent of Nichols, Cauley & Associates, L.L.C
23.2. Consent of Morris Manning & Martin LLP (included in Exhibit 5.1).
24.1. Powers of Attorney (included on signature page).
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
HOMETOWN COMMUNITY BANCSHARES, INC.
I.
The name of the Corporation is:
Hometown Community Bancshares, Inc.
II.
The Corporation shall have authority to issue 10,000,000 shares of common
stock, $0.01 par value per share, and 1,000,000 shares of special stock, no
par value per share, any part or all of which shares of special stock may be
established and designated from time to time by the Board of Directors in such
series and with such preferences, limitations, and relative rights as may be
determined by the Board of Directors.
III.
The initial registered office of the Corporation shall be at 6454 Highway
53 N, Braselton, Jackson County, Georgia 30517. The initial registered agent
of the Corporation shall be Robert M. Martin.
IV.
The name and address of the incorporator is:
Amanda S. Epstein, Esq.
Morris, Manning & Martin, L.L.P.
1600 Atlanta Financial Center
3343 Peachtree Road, N.E.
Atlanta, Georgia 30326
V.
The mailing address of the initial principal office of the Corporation is:
Hometown Community Bancshares, Inc.
6454 Highway 53 N
Braselton, Georgia 30517
VI.
No director of the Corporation shall have personal liability to the
Corporation or to its shareholders for monetary damages for breach of fiduciary
duty of care or other duty as a director, except that this Article VI shall not
eliminate or limit the liability of a director: (i) for any appropriation, in
violation of his duties, of any business opportunity of the Corporation; (ii)
for acts or omissions which involve intentional misconduct or a knowing
violation of law; (iii) for the types of liability set forth in Section 14-2-832
of the Georgia Business Corporation Code; or (iv) for any transaction from which
the director received an improper personal benefit. Neither the amendment nor
repeal of this Article VI, nor the adoption of any provision of the Articles of
Incorporation of the Corporation inconsistent with this Article VI, shall
eliminate or reduce the effect of this Article VI in respect of any act or
failure to act, or any cause of action, suit or claim that, but for this Article
VI, would accrue or arise prior to any amendment, repeal or adoption of such an
inconsistent provision. If the Georgia Business Corporation Code is
subsequently amended to provide for further limitations on the personal
liability of directors of corporations for breach of duty of care or other duty
as a director, then the personal liability of the directors of the Corporation
shall be so further limited to the greatest extent permitted by the Georgia
Business Corporation Code.
VII.
The Board of Directors, any committee of the Board of Directors and any
individual Director, in discharging the duties of their respective positions
and in determining what is believed to be in the best interest of the
Corporation, may in their sole discretion consider the interests of the
employees, customers, suppliers and creditors of the Corporation and its
subsidiaries, the communities in which offices or other establishments of the
Corporation and its subsidiaries are located, and all other factors such
Directors consider pertinent, in addition to considering the effects of any
action on the Corporation and its shareholders. Notwithstanding the foregoing,
this Article VII shall not be deemed to provide any of the foregoing
constituencies any right to be considered in any such discharging of duties or
determination.
VIII.
Any action required or permitted to be taken at a shareholders' meeting
maybe taken without a meeting if the action is taken by all of the shareholders
entitled to vote on the action, or by persons who would be entitled to vote at
a meeting those shares having voting power to cast not less than the minimum
number (or numbers, in the case of voting by groups) of votes that would be
necessary to authorize or take such actions at a meeting at which all shares
entitled to vote were present and voted. The action must be evidenced by one
or more written consents describing the action taken, signed by shareholders
entitled to take action without a meeting and delivered to the Corporation for
inclusion in the minutes or filing with the corporate records. All voting
shareholders of record who did not participate in taking the action shall be
given written notice of the action not more than 10 days after the taking of
action without a meeting. An action by less than unanimous consent may not be
taken with respect to any election of directors as to which shareholders would
be entitled to cumulative voting.
-2-
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Incorporation the 12th day of May, 2004.
/s/ Amanda S. Epstein
-------------------------
Amanda S. Epstein
Incorporator
-3-
EXHIBIT 3.2
BYLAWS
OF
HOMETOWN COMMUNITY BANCSHARES, INC.
Effective May 25, 2004
BYLAWS
OF
HOMETOWN COMMUNITY BANCSHARES, INC.
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE ONE Office 1
1.1 Registered Office and Agent 1
1.2 Principal Office 1
1.3 Other Offices 1
ARTICLE TWO Shareholders' Meetings 1
2.1 Place of Meetings 1
2.2 Annual Meetings 1
2.3 Special Meetings 1
2.4 Notice of Meetings 2
2.5 Waiver of Notice 2
2.6 Voting Group; Quorum; Vote Required to Act 2
2.7 Voting of Shares 3
2.8 Proxies 3
2.9 Presiding Officer 3
2.10 Adjournments 4
2.11 Conduct of Meeting 4
2.12 Action of Shareholders Without a Meeting 4
2.13 Matters Considered at Annual Meeting 4
ARTICLE THREE Board of Directors 5
3.1 General Powers 5
3.2 Number, Election and Term of Office 5
3.3 Removal of Directors 5
3.4 Vacancies 5
3.5 Compensation 6
3.6 Committees of the Board of Directors 6
3.7 Qualification of Directors 6
3.8 Certain Nomination Requirements 6
ARTICLE FOUR Meetings of the Board of Directors 7
4.1 Regular Meetings 7
4.2 Special Meetings 7
4.3 Place of Meetings 7
4.4 Notice of Meetings 7
4.5 Quorum 7
4.6 Vote Required for Action 7
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4.7 Participation by Conference Telephone 8
4.8 Action of Directors Without a Meeting 8
4.9 Adjournments 8
4.10 Waiver of Notice 8
ARTICLE FIVE Officers 8
5.1 Officers 8
5.2 Term 9
5.3 Compensation 9
5.4 Removal 9
5.5 Chairman of the Board 9
5.6 Chief Executive Officer 9
5.7 President 9
5.8 Vice Presidents 10
5.9 Secretary 10
5.10 Treasurer 10
ARTICLE SIX Distributions and Dividends 10
ARTICLE SEVEN Shares 10
7.1 Share Certificates 10
7.2 Rights of Corporation with Respect to Registered Owners 11
7.3 Transfers of Shares 11
7.4 Duty of Corporation to Register Transfer 11
7.5 Lost, Stolen, or Destroyed Certificates 11
7.6 Fixing the Record Date 11
7.7 Record Date if None Fixed 12
ARTICLE EIGHT Indemnification 12
8.1 Indemnification of Directors 12
8.2 Indemnification of Others 12
8.3 Other Organizations 12
8.4 Advances 13
8.5 Non-Exclusivity 13
8.6 Insurance 13
8.7 Notice 14
8.8 Security 14
8.9 Amendment 14
8.10 Agreements 14
8.11 Continuing Benefits 14
8.12 Successors 14
8.13 Severability 15
8.14 Additional Indemnification 15
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ARTICLE NINE Miscellaneous 15
9.1 Inspection of Books and Records 15
9.2 Fiscal Year 15
9.3 Corporate Seal 15
9.4 Annual Statements 15
9.5 Notice 15
9.6 Election of "Fair Price" Statute 16
9.7 Election of "Business Combination" Statute 16
ARTICLE TEN Amendments 16
iii
BYLAWS
OF
HOMETOWN COMMUNITY BANCSHARES, INC.
References in these Bylaws (these "Bylaws") to "Articles of Incorporation"
are to the Articles of Incorporation of HOMETOWN COMMUNITY BANCSHARES, INC., a
Georgia corporation (the "Corporation"), as amended and restated from time to
time.
All of these Bylaws are subject to contrary provisions, if any, of the
Articles of Incorporation (including provisions designating the preferences,
limitations, and relative rights of any class or series of shares), the Georgia
Business Corporation Code (the "Code"), and other applicable law, as in effect
on and after the effective date of these Bylaws. References in these Bylaws to
"Sections" shall refer to sections of the Bylaws, unless otherwise indicated.
ARTICLE ONE
OFFICE
1.1 REGISTERED OFFICE AND AGENT. The Corporation shall maintain a
registered office and shall have a registered agent whose business office is
the same as the registered office.
1.2 PRINCIPAL OFFICE. The principal office of the Corporation shall be
at the place designated in the Corporation's annual registration with the
Georgia Secretary of State.
1.3 OTHER OFFICES. In addition to its registered office and principal
office, the Corporation may have offices at other locations either in or outside
the State of Georgia.
ARTICLE TWO
SHAREHOLDERS' MEETINGS
2.1 PLACE OF MEETINGS. Meetings of the Corporation's shareholders may
be held at any location inside or outside the State of Georgia designated by the
Board of Directors or any other person or persons who properly call the meeting,
or if the Board of Directors or such other person or persons do not specify a
location, at the Corporation's principal office.
2.2 ANNUAL MEETINGS. The Corporation shall hold an annual meeting of
shareholders, at a time determined by the Board of Directors, to elect directors
and to transact any business that properly may come before the meeting. The
annual meeting may be combined with any other meeting of shareholders, whether
annual or special.
2.3 SPECIAL MEETINGS. Special meetings of shareholders of one or more
classes or series of the Corporation's shares may be called at any time by the
Board of Directors, the Chairman of the Board, the Chief Executive Officer or
1
the President, and shall be called by the Corporation upon the written request
(in compliance with applicable requirements of the Code) of the holders of
shares representing not less than fifty percent (50%) or more of the votes
entitled to be cast on each issue proposed to be considered at the special
meeting. The business that may be transacted at any special meeting of
shareholders shall be limited to that proposed in the notice of the special
meeting given in accordance with Section 2.4 (including related or incidental
matters that may be necessary or appropriate to effectuate the proposed
business).
2.4 NOTICE OF MEETINGS. In accordance with Section 9.5 and subject to
waiver by a shareholder pursuant to Section 2.5, the Corporation shall give
written notice of the date, time, and place of each annual and special
shareholders' meeting no fewer than 10 days nor more than 60 days before the
meeting date to each shareholder of record entitled to vote at the meeting.
The notice of an annual meeting need not state the purpose of the meeting unless
these Bylaws require otherwise. The notice of a special meeting shall state
the purpose for which the meeting is called. If an annual or special
shareholders' meeting is adjourned to a different date, time, or location, the
Corporation shall give shareholders notice of the new date, time, or location
of the adjourned meeting, unless a quorum of shareholders was present at the
meeting and information regarding the adjournment was announced before the
meeting was adjourned; provided, however, that if a new record date is or must
be fixed in accordance with Section 7.6, the Corporation must give notice of
the adjourned meeting to all shareholders of record as of the new record date
who are entitled to vote at the adjourned meeting.
2.5 WAIVER OF NOTICE. A shareholder may waive any notice required by
the Code, the Articles of Incorporation, or these Bylaws, before or after the
date and time of the matter to which the notice relates, by delivering to the
Corporation a written waiver of notice signed by the shareholder entitled to the
notice. In addition, a shareholder's attendance at a meeting shall be (a) a
waiver of objection to lack of notice or defective notice of the meeting unless
the shareholder at the beginning of the meeting objects to holding the meeting
or transacting business at the meeting, and (b) a waiver of objection to
consideration of a particular matter at the meeting that is not within the
purpose stated in the meeting notice, unless the shareholder objects to
considering the matter when it is presented. Except as otherwise required by
the Code, neither the purpose of nor the business transacted at the meeting
need be specified in any waiver.
2.6 VOTING GROUP; QUORUM; VOTE REQUIRED TO ACT. (a) Unless otherwise
required by the Code or the Articles of Incorporation, all classes or series
of the Corporation's shares entitled to vote generally on a matter shall for
that purpose be considered a single voting group (a "Voting Group"). If either
the Articles of Incorporation or the Code requires separate voting by two or
more Voting Groups on a matter, action on that matter is taken only when voted
upon by each such Voting Group separately. At all meetings of shareholders,
any Voting Group entitled to vote on a matter may take action on the matter only
if a quorum of that Voting Group exists at the meeting, and if a quorum exists,
the Voting Group may take action on the matter notwithstanding the absence of a
quorum of any other Voting Group that may be entitled to vote separately on the
matter. Unless the Articles of Incorporation, these Bylaws, or the Code
provides otherwise, the presence (in person or by proxy) of shares representing
2
a majority of votes entitled to be cast on a matter by a Voting Group shall
constitute a quorum of that Voting Group with regard to that matter. Once a
share is present at any meeting other than solely to object to holding the
meeting or transacting business at the meeting, the share shall be deemed
present for quorum purposes for the remainder of the meeting and for any
adjournments of that meeting, unless a new record date for the adjourned meeting
is or must be set pursuant to Section 7.6 of these Bylaws.
(b) Except as provided in Section 3.4, if a quorum exists, action on a
matter by a Voting Group is approved by that Voting Group if the votes cast
within the Voting Group favoring the action exceed the votes cast opposing the
action, unless the Articles of Incorporation, a provision of these Bylaws that
has been adopted pursuant to Section 14-2-1021 of the Code (or any successor
provision), or the Code requires a greater number of affirmative votes.
2.7 VOTING OF SHARES. Unless otherwise required by the Code or the
Articles of Incorporation, each outstanding share of any class or series having
voting rights shall be entitled to one vote on each matter that is submitted to
a vote of shareholders.
2.8 PROXIES. A shareholder entitled to vote on a matter may vote in
person or by proxy pursuant to an appointment executed in writing by the
shareholder or by his or her attorney-in-fact. An appointment of a proxy shall
be valid for 11 months from the date of its execution, unless a longer or
shorter period is expressly stated in the proxy.
2.9 PRESIDING OFFICER. Except as otherwise provided in this Section 2.9,
the Chairman of the Board, and in his or her absence or disability the Chief
Executive Officer, and in his or her absence or disability the President, shall
preside at every shareholders' meeting (and any adjournment thereof) as its
chairman, if either of them is present and willing to serve. If neither the
Chairman of the Board, nor the Chief Executive Officer nor the President is
present and willing to serve as chairman of the meeting, and if the Chairman
of the Board has not designated another person who is present and willing to
serve, then a majority of the Corporation's directors present at the meeting
shall be entitled to designate a person to serve as chairman. If no director
of the Corporation is present at the meeting or if a majority of the directors
who are present cannot be established, then a chairman of the meeting shall be
selected by a majority vote of (a) the shares present at the meeting that would
be entitled to vote in an election of directors, or (b) if no such shares are
present at the meeting, then the shares present at the meeting comprising the
Voting Group with the largest number of shares present at the meeting and
entitled to vote on a matter properly proposed to be considered at the meeting.
The chairman of the meeting may designate other persons to assist with the
meeting.
2.10 ADJOURNMENTS. At any meeting of shareholders (including an adjourned
meeting), a majority of shares of any Voting Group present and entitled to vote
at the meeting (whether or not those shares constitute a quorum) may adjourn the
meeting, but only with respect to that Voting Group, to reconvene at a specific
time and place. If more than one Voting Group is present and entitled to vote
on a matter at the meeting, then the meeting may be continued with respect to
any such Voting Group that does not vote to adjourn as provided above, and such
Voting Group may proceed to vote on any matter to which it is otherwise entitled
to do so; provided, however, that if (a) more than one
3
Voting Group is required to take action on a matter at the meeting and (b) any
one of those Voting Groups votes to adjourn the meeting (in accordance with the
preceding sentence), then the action shall not be deemed to have been taken
until the requisite vote of any adjourned Voting Group is obtained at its
reconvened meeting. The only business that may be transacted at any reconvened
meeting is business that could have been transacted at the meeting that was
adjourned, unless further notice of the adjourned meeting has been given in
compliance with the requirements for a special meeting that specifies the
additional purpose or purposes for which the meeting is called. Nothing
contained in this Section 2.10 shall be deemed or otherwise construed to limit
any lawful authority of the chairman of a meeting to adjourn the meeting.
2.11 CONDUCT OF THE MEETING. At any meeting of shareholders, the chairman
of the meeting shall be entitled to establish the rules of order governing the
conduct of business at the meeting.
2.12 ACTION OF SHAREHOLDERS WITHOUT A MEETING. Action required or
permitted to be taken at a meeting of shareholders may be taken without a
meeting if the action is taken by all shareholders entitled to vote on the
action or, if permitted by the Articles of Incorporation, by persons who would
be entitled to vote at a meeting shares having voting power to cast the
requisite number of votes (or numbers, in the case of voting by groups) that
would be necessary to authorize or take the action at a meeting at which all
shareholders entitled to vote were present and voted. The action must be
evidenced by one or more written consents describing the action taken, signed
by shareholders entitled to take action without a meeting, and delivered to the
Corporation for inclusion in the minutes or filing with the corporate records.
Where required by Section 14-2-704 or other applicable provision of the Code,
the Corporation shall provide shareholders with written notice of actions taken
without a meeting.
2.13 MATTERS CONSIDERED AT ANNUAL MEETINGS. Notwithstanding anything to
the contrary in these Bylaws, the only business that may be conducted at an
annual meeting of shareholders shall be business brought before the meeting
(a) by or at the direction of the Board of Directors prior to the meeting,
(b) by or at the direction of the Chairman of the Board, the Chief Executive
Officer or the President, or (c) by a shareholder of the Corporation who is
entitled to vote with respect to the business and who complies with the notice
procedures set forth in this Section 2.13. For business to be brought properly
before an annual meeting by a shareholder, the shareholder must have given
timely notice of the business in writing to the Secretary of the Corporation.
To be timely, a shareholder's notice must be delivered or mailed to and received
at the principal offices of the Corporation, not less than 60 days before the
date of the meeting at which the director(s) are to be elected or the proposal
is to be considered; however, if less than 70 days notice or prior public
disclosure of the date of the scheduled meeting is given or made, notice by the
shareholder, to be timely, must be delivered or received not later than the
close of business on the tenth day following the earlier of the day on which
notice of the date of the meeting is mailed to shareholders or public disclosure
of the date of such meeting is made. A shareholder's notice to the Secretary
shall set forth a brief description of each matter of business the shareholder
proposes to bring before the meeting and the reasons for conducting that
business at the meeting; the name, as it appears on the Corporation's books,
and address of the
4
shareholder proposing the business; the series or class and number of shares
of the Corporation's capital stock that are beneficially owned by the
shareholder; and any material interest of the shareholder in the proposed
business. The chairman of the meeting shall have the discretion to declare to
the meeting that any business proposed by a shareholder to be considered at the
meeting is out of order and that such business shall not be transacted at the
meeting if (i) the chairman concludes that the matter has been proposed in a
manner inconsistent with this Section 2.13 or (ii) the chairman concludes that
the subject matter of the proposed business is inappropriate for consideration
by the shareholders at the meeting.
ARTICLE THREE
BOARD OF DIRECTORS
3.1 GENERAL POWERS. All corporate powers shall be exercised by or under
the authority of, and the business and affairs of the Corporation shall be
managed by, the Board of Directors, subject to any limitation set forth in the
Articles of Incorporation, in bylaws approved by the shareholders, or in
agreements among all the shareholders that are otherwise lawful.
3.2 NUMBER, ELECTION AND TERM OF OFFICE. The number of directors of the
Corporation shall be fixed by resolution of the Board of Directors or of the
shareholders from time to time and, until otherwise determined, shall be two
(2); provided, however, that no decrease in the number of directors shall have
the effect of shortening the term of an incumbent director. Except as provided
elsewhere in this Section 3.2 and in Section 3.4, the directors shall be elected
at each annual meeting of shareholders, or at a special meeting of shareholders
called for purposes that include the election of directors, by a plurality of
the votes cast by the shares entitled to vote and present at the meeting.
Despite the expiration of a director's term, he or she shall continue to serve
until his or her successor, if there is to be any, has been elected and has
qualified.
3.3 REMOVAL OF DIRECTORS. The entire Board of Directors or any
individual director may be removed, with or without cause, by the shareholders,
provided that Directors elected by a particular Voting Group may be removed
only by the shareholders in that Voting Group. Removal action may be taken
only at a shareholder's meeting for which notice of the removal action has been
given. A removed director's successor, if any, may be elected at the same
meeting to serve the unexpired term.
3.4 VACANCIES. A vacancy occurring in the Board of Directors may be
filled for the unexpired term, unless the shareholders have elected a successor,
by the affirmative vote of a majority of the remaining directors, whether or
not the remaining directors constitute a quorum; provided, however, that if the
vacant office was held by a director elected by a particular Voting Group, only
the holders of shares of that Voting Group or the remaining directors elected by
that Voting Group shall be entitled to fill the vacancy; provided further,
however, that if the vacant office was held by a director elected by a
particular Voting Group and there is no remaining director elected by that
Voting Group, the other remaining directors or director (elected by another
Voting Group or Groups) may fill the vacancy during an interim period before the
shareholders of the vacated director's Voting Group act to fill the vacancy. A
5
vacancy or vacancies in the Board of Directors may result from the death,
resignation, disqualification, or removal of any director, or from an increase
in the number of directors.
3.5 COMPENSATION. Directors may receive such compensation for their
services as directors as may be fixed by the Board of Directors from time to
time. A director may also serve the Corporation in one or more capacities
other than that of director and receive compensation for services rendered in
those other capacities.
3.6 COMMITTEES OF THE BOARD OF DIRECTORS. The Board of Directors may
designate from among its members an executive committee or one or more other
standing or ad hoc committees, each consisting of one or more directors, who
serve at the pleasure of the Board of Directors. Subject to the limitations
imposed by the Code, each committee shall have the authority set forth in the
resolution establishing the committee or in any other resolution of the Board
of Directors specifying, enlarging, or limiting the authority of the committee.
3.7 QUALIFICATION OF DIRECTORS. No person elected to serve as a director
of the Corporation shall assume office and begin serving unless and until duly
qualified to serve, as determined by reference to the Code, the Articles of
Incorporation, and any further eligibility requirements established in these
Bylaws.
3.8 CERTAIN NOMINATION REQUIREMENTS. No person may be nominated for
election as a director at any annual or special meeting of shareholders unless
(a) the nomination has been or is being made pursuant to a recommendation or
approval of the Board of Directors of the Corporation or a properly constituted
committee of the Board of Directors previously delegated authority to recommend
or approve nominees for director; (b) the person is nominated by a shareholder
of the Corporation who is entitled to vote for the election of the nominee at
the subject meeting, and the nominating shareholder has furnished written notice
to the Secretary of the Corporation, at the Corporation's principal office, not
less than 60 days before the date of the meeting at which the director(s) are to
be elected or the proposal is to be considered; however, if less than 70 days
notice or prior public disclosure of the date of the scheduled meeting is given
or made, notice by the shareholder, to be timely, must be delivered or received
not later than the close of business on the tenth day following the earlier of
the day on which notice of the date of the meeting is mailed to shareholders or
public disclosure of the date of such meeting is made and the notice (i) sets
forth with respect to the person to be nominated his or her name, age, business
and residence addresses, principal business or occupation during the past five
years, any affiliation with or material interest in the Corporation or any
transaction involving the Corporation, and any affiliation with or material
interest in any person or entity having an interest materially adverse to the
Corporation, and (ii) is accompanied by the sworn or certified statement of the
shareholder that the nominee has consented to being nominated and that the
shareholder believes the nominee will stand for election and will serve if
elected; or (c) (i) the person is nominated to replace a person previously
identified as a proposed nominee (in accordance with the provisions of subpart
(b) of this Section 3.8) who has since become unable or unwilling to be
nominated or to serve if elected, (ii) the shareholder who furnished such
previous identification makes the replacement nomination and delivers to the
Secretary of the Corporation (at the time of or prior to making the replacement
nomination) an affidavit or other sworn statement affirming that the shareholder
6
had no reason to believe the original nominee would be so unable or unwilling,
and (iii) such shareholder also furnishes in writing to the Secretary of the
Corporation (at the time of or prior to making the replacement nomination) the
same type of information about the replacement nominee as required by subpart
(b) of this Section 3.8 to have been furnished about the original nominee. The
chairman of any meeting of shareholders at which one or more directors are to
be elected, for good cause shown and with proper regard for the orderly conduct
of business at the meeting, may waive in whole or in part the operation of this
Section 3.8.
ARTICLE FOUR
MEETINGS OF THE BOARD OF DIRECTORS
4.1 REGULAR MEETINGS. A regular meeting of the Board of Directors shall
be held in conjunction with each annual meeting of shareholders. In addition,
the Board of Directors may, by prior resolution, hold regular meetings at other
times.
4.2 SPECIAL MEETINGS. Special meetings of the Board of Directors may be
called by or at the request of the Chairman of the Board, the Chief Executive
Officer, the President, or any director in office at that time.
4.3 PLACE OF MEETINGS. Directors may hold their meetings at any place
in or outside the State of Georgia that the Board of Directors may establish
from time to time.
4.4 NOTICE OF MEETINGS. Directors need not be provided with notice
of any regular meeting of the Board of Directors. Unless waived in accordance
with Section 4.10, the Corporation shall give at least two days' notice to each
director of the date, time, and place of each special meeting. Notice of a
meeting shall be deemed to have been given to any director in attendance at any
prior meeting at which the date, time, and place of the subsequent meeting was
announced.
4.5 QUORUM. At meetings of the Board of Directors, the greater of (a)
a majority of the directors then in office, or (b) one-third of the number of
directors fixed in accordance with these Bylaws shall constitute a quorum for
the transaction of business.
4.6 VOTE REQUIRED FOR ACTION. If a quorum is present when a vote is
taken, the vote of a majority of the directors present at the time of the vote
will be the act of the Board of Directors, unless the vote of a greater number
is required by the Code, the Articles of Incorporation, or these Bylaws. A
director who is present at a meeting of the Board of Directors when corporate
action is taken is deemed to have assented to the action taken unless (a) he or
she objects at the beginning of the meeting (or promptly upon his or her
arrival) to holding the meeting or transacting business at it; (b) his or her
dissent or abstention from the action taken is entered in the minutes of the
meeting; or (c) he or she delivers written notice of dissent or abstention to
the presiding officer of the meeting before its adjournment or to the
Corporation immediately after adjournment of the meeting. The right of dissent
or abstention is not available to a director who votes in favor of the action
taken.
7
4.7 PARTICIPATION BY CONFERENCE TELEPHONE. Members of the Board of
Directors may participate in a meeting of the Board by means of conference
telephone or similar communications equipment through which all persons
participating may hear and speak to each other. Participation in a meeting
pursuant to this Section 4.7 shall constitute presence in person at the meeting.
4.8 ACTION BY DIRECTORS WITHOUT A MEETING. Any action required or
permitted to be taken at any meeting of the Board of Directors may be taken
without a meeting if a written consent, describing the action taken, is signed
by each director and delivered to the Corporation for inclusion in the minutes
or filing with the corporate records. The consent may be executed in
counterpart, and shall have the same force and effect as a unanimous vote of
the Board of Directors at a duly convened meeting.
4.9 ADJOURNMENTS. A meeting of the Board of Directors, whether or not
a quorum is present, may be adjourned by a majority of the directors present to
reconvene at a specific time and place. It shall not be necessary to give
notice to the directors of the reconvened meeting or of the business to be
transacted, other than by announcement at the meeting that was adjourned, unless
a quorum was not present at the meeting that was adjourned, in which case notice
shall be given to directors in the same manner as for a special meeting. At any
such reconvened meeting at which a quorum is present, any business may be
transacted that could have been transacted at the meeting that was adjourned.
4.10 WAIVER OF NOTICE. A director may waive any notice required by the
Code, the Articles of Incorporation, or these Bylaws before or after the date
and time of the matter to which the notice relates, by a written waiver signed
by the director and delivered to the Corporation for inclusion in the minutes
or filing with the corporate records. Attendance by a director at a meeting
shall constitute waiver of notice of the meeting, except where a director at
the beginning of the meeting (or promptly upon his or her arrival) objects to
holding the meeting or to transacting business at the meeting and does not
thereafter vote for or assent to action taken at the meeting.
ARTICLE FIVE
OFFICERS
5.1 OFFICERS. The officers of the Corporation shall consist of a
President, a Secretary, and a Treasurer, and may include a Chief Executive
Officer separate from the President, each of whom shall be elected or appointed
by the Board of Directors. The Board of Directors may also elect a Chairman of
the Board from among its members. The Board of Directors from time to time may,
or may authorize the Chief Executive Officer or the President to, create and
establish the duties of other offices and may, or may authorize the Chief
8
Executive Officer or the President to, elect or appoint, or authorize specific
senior officers to appoint, the persons who shall hold such other offices,
including one or more Vice Presidents (including Executive Vice Presidents,
Senior Vice Presidents, Assistant Vice Presidents, and the like), one or more
Assistant Secretaries, and one or more Assistant Treasurers. Whether or not
so provided by the Board of Directors, the Chairman of the Board, the Chief
Executive Officer or the President may appoint one or more Assistant
Secretaries, and one or more Assistant Treasurers. Any two or more offices
may be held by the same person.
5.2 TERM. Each officer shall serve at the pleasure of the Board of
Directors (or, if appointed by the Chief Executive Officer, the President, or
a senior officer pursuant to this Article Five, at the pleasure of the Board of
Directors, the Chief Executive Officer, the President, or the senior officer
authorized to have appointed the officer) until his or her death, resignation,
or removal, or until his or her replacement is elected or appointed in
accordance with this Article Five.
5.3 COMPENSATION. The compensation of all officers of the Corporation
shall be fixed by the Board of Directors or by a committee or officer appointed
by the Board of Directors. Officers may serve without compensation.
5.4 REMOVAL. All officers (regardless of how elected or appointed) may
be removed, with or without cause, by the Board of Directors, and any officer
appointed by the Chief Executive Officer, the President, or another senior
officer may also be removed, with or without cause, by the Chief Executive
Officer, the President, or by any senior officer authorized to have appointed
the officer to be removed. Removal will be without prejudice to the contract
rights, if any, of the person removed, but shall be effective notwithstanding
any damage claim that may result from infringement of such contract rights.
5.5 CHAIRMAN OF THE BOARD. The Chairman of the Board (if there be one)
shall preside at and serve as chairman of meetings of the shareholders and of
the Board of Directors (unless another person is selected under Section 2.9 to
act as chairman). The Chairman of the Board shall perform other duties and
have other authority as may from time to time be delegated by the Board of
Directors.
5.6 CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall be
charged with the general and active management of the Corporation, shall see
that all orders and resolutions of the Board of Directors are carried into
effect, shall have the authority to select and appoint employees and agents of
the Corporation, and shall, in the absence or disability of the Chairman of
the Board, perform the duties and exercise the powers of the Chairman of the
Board. The Chief Executive Officer shall perform any other duties and have
any other authority as may be delegated from time to time by the Board of
Directors, and shall be subject to the limitations fixed from time to time by
the Board of Directors.
5.7 PRESIDENT. If there shall be no separate Chief Executive Officer
of the Corporation, then the President shall be the chief executive officer of
the Corporation and shall have all the duties and authority given under these
Bylaws to the Chief Executive Officer. The President shall otherwise be the
chief operating officer of the Corporation and shall, subject to the authority
of the Chief Executive Officer, have responsibility for the conduct and general
supervision of the business operations of the Corporation. The President shall
perform such other duties and have such other authority as may from time to time
be delegated by the Board of Directors or the Chief Executive Officer. In the
absence or disability of the Chief Executive Officer, the President shall
9
perform the duties and exercise the powers of the Chief Executive Officer.
5.8 VICE PRESIDENTS. The Vice President (if there be one) shall, in the
absence or disability of the President, perform the duties and exercise the
powers of the President, whether the duties and powers are specified in these
Bylaws or otherwise. If the Corporation has more than one Vice President, the
one designated by the Board of Directors or the Chief Executive Officer (in that
order of precedence) shall act in the event of the absence or disability of the
President. Vice Presidents shall perform any other duties and have any other
authority as from time to time may be delegated by the Board of Directors, the
Chief Executive Officer, or the President.
5.9 SECRETARY. The Secretary shall be responsible for preparing minutes
of the meetings of shareholders, directors, and committees of directors and for
authenticating records of the Corporation. The Secretary or any Assistant
Secretary shall have authority to give all notices required by law or these
Bylaws. The Secretary shall be responsible for the custody of the corporate
books, records, contracts, and other documents. The Secretary or any Assistant
Secretary may affix the corporate seal to any lawfully executed documents
requiring it, may attest to the signature of any officer of the Corporation,
and shall sign any instrument that requires the Secretary's signature. The
Secretary or any Assistant Secretary shall perform any other duties and have any
other authority as from time to time may be delegated by the Board of Directors,
the Chief Executive Officer, or the President.
5.10 TREASURER. Unless otherwise provided by the Board of Directors, the
Treasurer shall be responsible for the custody of all funds and securities
belonging to the Corporation and for the receipt, deposit, or disbursement of
these funds and securities under the direction of the Board of Directors. The
Treasurer shall cause full and true accounts of all receipts and disbursements
to be maintained and shall make reports of these receipts and disbursements to
the Board of Directors, the Chief Executive Officer and President upon request.
The Treasurer or Assistant Treasurer shall perform any other duties and have any
other authority as from time to time may be delegated by the Board of Directors,
the Chief Executive Officer, or the President.
ARTICLE SIX
DISTRIBUTIONS AND DIVIDENDS
Unless the Articles of Incorporation provide otherwise, the Board of
Directors, from time to time in its discretion, may authorize or declare
distributions or share dividends in accordance with the Code.
ARTICLE SEVEN
SHARES
7.1 SHARE CERTIFICATES. The interest of each shareholder in the
Corporation shall be evidenced by a certificate or certificates representing
shares of the Corporation, which shall be in such form as the Board of Directors
from time to time may adopt in accordance with the Code. Share certificates
shall be in registered form and shall indicate the date of issue, the name of
10
the Corporation, that the Corporation is organized under the laws of the State
of Georgia, the name of the shareholder, and the number and class of shares and
designation of the series, if any, represented by the certificate. Each
certificate shall be signed by the President or a Vice President (or in lieu
thereof, by the Chairman of the Board or Chief Executive Officer, if there be
one) and may be signed by the Secretary or an Assistant Secretary; provided,
however, that where the certificate is signed (either manually or by facsimile)
by a transfer agent, or registered by a registrar, the signatures of those
officers may be facsimiles.
7.2 RIGHTS OF CORPORATION WITH RESPECT TO REGISTERED OWNERS. Prior to
due presentation for transfer of registration of its shares, the Corporation may
treat the registered owner of the shares (or the beneficial owner of the shares
to the extent of any rights granted by a nominee certificate on file with the
Corporation pursuant to any procedure that may be established by the Corporation
in accordance with the Code) as the person exclusively entitled to vote the
shares, to receive any dividend or other distribution with respect to the
shares, and for all other purposes; and the Corporation shall not be bound to
recognize any equitable or other claim to or interest in the shares on the part
of any other person, whether or not it has express or other notice of such a
claim or interest, except as otherwise provided by law.
7.3 TRANSFERS OF SHARES. Transfers of shares shall be made upon the
books of the Corporation kept by the Corporation or by the transfer agent
designated to transfer the shares, only upon direction of the person named in
the certificate or by an attorney lawfully constituted in writing. Before a new
certificate is issued, the old certificate shall be surrendered for cancellation
or, in the case of a certificate alleged to have been lost, stolen, or
destroyed, the provisions of Section 7.5 of these Bylaws shall have been
complied with.
7.4 DUTY OF CORPORATION TO REGISTER TRANSFER. Notwithstanding any of
the provisions of Section 7.3 of these Bylaws, the Corporation is under a duty
to register the transfer of its shares only if: (a) the share certificate is
endorsed by the appropriate person or persons; (b) reasonable assurance is given
that each required endorsement is genuine and effective; (c) the Corporation has
no duty to inquire into adverse claims or has discharged any such duty; (d) any
applicable law relating to the collection of taxes has been complied with; (e)
the transfer is in fact rightful or is to a bona fide purchaser; and (f) the
transfer is in compliance with applicable provisions of any transfer
restrictions of which the Corporation shall have notice.
7.5 LOST, STOLEN, OR DESTROYED CERTIFICATES. Any person claiming a share
certificate to be lost, stolen, or destroyed shall make an affidavit or
affirmation of this claim in such a manner as the Corporation may require and
shall, if the Corporation requires, give the Corporation a bond of indemnity in
form and amount, and with one or more sureties satisfactory to the Corporation,
as the Corporation may require, whereupon an appropriate new certificate may be
issued in lieu of the one alleged to have been lost, stolen or destroyed.
7.6 FIXING OF RECORD DATE. For the purpose of determining shareholders
(a) entitled to notice of or to vote at any meeting of shareholders or, if
necessary, any adjournment thereof, (b) entitled to receive payment of any
distribution or dividend, or (c) for any other proper purpose, the Board of
Directors may fix in advance a date as the record date. The record date may
11
not be more than 70 days (and, in the case of a notice to shareholders of a
shareholders' meeting, not less than 10 days) prior to the date on which the
particular action, requiring the determination of shareholders, is to be taken.
A separate record date may be established for each Voting Group entitled to vote
separately on a matter at a meeting. A determination of shareholders of record
entitled to notice of or to vote at a meeting of shareholders shall apply to any
adjournment of the meeting, unless the Board of Directors shall fix a new record
date for the reconvened meeting, which it must do if the meeting is adjourned to
a date more than 120 days after the date fixed for the original meeting.
7.7 RECORD DATE IF NONE FIXED. If no record date is fixed as provided
in Section 7.6, then the record date for any determination of shareholders that
may be proper or required by law shall be, as appropriate, the date on which
notice of a shareholders' meeting is mailed, the date on which the Board of
Directors adopts a resolution declaring a dividend or authorizing a
distribution, or the date on which any other action is taken that requires a
determination of shareholders.
ARTICLE EIGHT
INDEMNIFICATION
8.1 INDEMNIFICATION OF DIRECTORS. The Corporation shall indemnify and
hold harmless any director of the Corporation (an "Indemnified Person") who was
or is a party, or is threatened to be made a party, to any threatened, pending
or completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative, whether formal or informal, including any
action or suit by or in the right of the Corporation (for purposes of this
Article Eight, collectively, a "Proceeding") because he or she is or was a
director, officer, employee, or agent of the Corporation, against any judgment,
settlement, penalty, fine, or reasonable expenses (including, but not limited
to, attorneys' fees and disbursements, court costs, and expert witness fees)
incurred with respect to the Proceeding (for purposes of this Article Eight, a
"Liability"), provided, however, that no indemnification shall be made for:
(a) any appropriation by a director, in violation of the director's duties, of
any business opportunity of the corporation; (b) any acts or omissions of a
director that involve intentional misconduct or a knowing violation of law;
(c) the types of liability set forth in Code Section 14-2-832; or (d) any
transaction from which the director received an improper personal benefit.
8.2 INDEMNIFICATION OF OTHERS. The Board of Directors shall have the
power to cause the Corporation to provide to officers, employees, and agents
of the Corporation all or any part of the right to indemnification permitted
for such persons by appropriate provisions of the Code. Persons to be
indemnified may be identified by position or name, and the right of
indemnification may be different for each of the persons identified. Each
officer, employee, or agent of the Corporation so identified shall be an
"Indemnified Person" for purposes of the provisions of this Article Eight.
8.3 OTHER ORGANIZATIONS. The Corporation shall provide to each director,
and the Board of Directors shall have the power to cause the Corporation to
provide to any officer, employee, or agent, of the Corporation who is or was
serving at the Corporation's request as a director, officer, partner, trustee,
12
employee, or agent of another corporation, partnership, joint venture, trust,
employee benefit plan, or other enterprise all or any part of the right to
indemnification and other rights of the type provided under Sections 8.1, 8.2,
8.4, and 8.10 of this Article Eight (subject to the conditions, limitations,
and obligations specified in those Sections) permitted for such persons by
appropriate provisions of the Code. Persons to be indemnified may be identified
by position or name, and the right of indemnification may be different for each
of the persons identified. Each person so identified shall be an "Indemnified
Person" for purposes of the provisions of this Article Eight.
8.4 ADVANCES. EXPENSES (including, but not limited to, attorneys' fees
and disbursements, court costs, and expert witness fees) incurred by an
Indemnified Person in defending any Proceeding of the kind described in Sections
8.1 or 8.3, as to an Indemnified Person who is a director of the Corporation,
or in Sections 8.2 or 8.3, as to other Indemnified Persons, if the Board of
Directors has specified that advancement of expenses be made available to any
such Indemnified Person, shall be paid by the Corporation in advance of the
final disposition of such Proceeding as set forth herein. The Corporation shall
promptly pay the amount of such expenses to the Indemnified Person, but in no
event later than 10 days following the Indemnified Person's delivery to the
Corporation of a written request for an advance pursuant to this Section 8.4,
together with a reasonable accounting of such expenses; provided, however, that
the Indemnified Person shall furnish the Corporation a written affirmation of
his or her good faith belief that he or she has met the applicable standard of
conduct and a written undertaking and agreement to repay to the Corporation any
advances made pursuant to this Section 8.4 if it shall be determined that the
Indemnified Person is not entitled to be indemnified by the Corporation for
such amounts. The Corporation may make the advances contemplated by this
Section 8.4 regardless of the Indemnified Person's financial ability to make
repayment. Any advances and undertakings to repay pursuant to this Section
8.4 may be unsecured and interest-free.
8.5 NON-EXCLUSIVITY. Subject to any applicable limitation imposed by
the Code or the Articles of Incorporation, the indemnification and advancement
of expenses provided by or granted pursuant to this Article Eight shall not be
exclusive of any other rights to which a person seeking indemnification or
advancement of expenses may be entitled under any provision of the Articles of
Incorporation, or any Bylaw, resolution, or agreement specifically or in general
terms approved or ratified by the affirmative vote of holders of a majority of
the shares entitled to be voted thereon.
8.6 INSURANCE. The Corporation shall have the power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee, or agent of the Corporation, or who, while serving in such a capacity,
is also or was also serving at the request of the Corporation as a director,
officer, trustee, partner, employee, or agent of any corporation, partnership,
joint venture, trust, employee benefit plan, or other enterprise, against any
Liability that may be asserted against or incurred by him or her in any such
capacity, or arising out of his or her status as such, whether or not the
Corporation would have the power to indemnify him or her against such liability
under the provisions of this Article Eight.
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8.7 NOTICE. If the Corporation indemnifies or advances expenses to a
director under any of Sections 14-2-851 through 14-2-854 of the Code in
connection with a Proceeding by or in the right of the Corporation, the
Corporation shall, to the extent required by Section 14-2-1621 or any other
applicable provision of the Code, report the indemnification or advance in
writing to the shareholders with or before the notice of the next shareholders'
meeting.
8.8 SECURITY. The Corporation may designate certain of its assets as
collateral, provide self-insurance, establish one or more indemnification
trusts, or otherwise secure or facilitate its ability to meet its obligations
under this Article Eight, or under any indemnification agreement or plan of
indemnification adopted and entered into in accordance with the provisions of
this Article Eight, as the Board of Directors deems appropriate.
8.9 AMENDMENT. Any amendment to this Article Eight that limits or
otherwise adversely affects the right of indemnification, advancement of
expenses, or other rights of any Indemnified Person hereunder shall, as to such
Indemnified Person, apply only to Proceedings based on actions, events, or
omissions (collectively, "Post Amendment Events") occurring after such amendment
and after delivery of notice of such amendment to the Indemnified Person so
affected. Any Indemnified Person shall, as to any Proceeding based on actions,
events, or omissions occurring prior to the date of receipt of such notice, be
entitled to the right of indemnification, advancement of expenses, and other
rights under this Article Eight to the same extent as if such provisions had
continued as part of the Bylaws of the Corporation without such amendment.
This Section 8.9 cannot be altered, amended, or repealed in a manner effective
as to any Indemnified Person (except as to Post Amendment Events) without the
prior written consent of such Indemnified Person.
8.10 AGREEMENTS. The provisions of this Article Eight shall be deemed to
constitute an agreement between the Corporation and each Indemnified Person
hereunder. In addition to the rights provided in this Article Eight, the
Corporation shall have the power, upon authorization by the Board of Directors,
to enter into an agreement or agreements providing to any Indemnified Person
indemnification rights substantially similar to those provided in this Article
Eight.
8.11 CONTINUING BENEFITS. The rights of indemnification and advancement
of expenses permitted or authorized by this Article Eight shall, unless
otherwise provided when such rights are granted or conferred, continue as to a
person who has ceased to be a director, officer, employee, or agent and shall
inure to the benefit of the heirs, executors, and administrators of such person.
8.12 SUCCESSORS. For purposes of this Article Eight, the term
"Corporation" shall include any corporation, joint venture, trust, partnership,
or unincorporated business association that is the successor to all or
substantially all of the business or assets of this Corporation, as a result
of merger, consolidation, sale, liquidation, or otherwise, and any such
successor shall be liable to the persons indemnified under this Article Eight
on the same terms and conditions and to the same extent as this Corporation.
14
8.13 SEVERABILITY. Each of the Sections of this Article Eight, and each
of the clauses set forth herein, shall be deemed separate and independent, and
should any part of any such Section or clause be declared invalid or
unenforceable by any court of competent jurisdiction, such invalidity or
unenforceability shall in no way render invalid or unenforceable any other part
thereof or any separate Section or clause of this Article Eight that is not
declared invalid or unenforceable.
8.14 ADDITIONAL INDEMNIFICATION. In addition to the specific
indemnification rights set forth herein, the Corporation shall indemnify each
of its directors and such of its officers as have been designated by the Board
of Directors to the full extent permitted by action of the Board of Directors
without shareholder approval under the Code or other laws of the State of
Georgia as in effect from time to time.
ARTICLE NINE
MISCELLANEOUS
9.1 INSPECTION OF BOOKS AND RECORDS. The Board of Directors shall have
the power to determine which accounts, books, and records of the Corporation
shall be available for shareholders to inspect or copy, except for those books
and records required by the Code to be made available upon compliance by a
shareholder with applicable requirements, and shall have the power to fix
reasonable rules and regulations (including confidentiality restrictions and
procedures) not in conflict with applicable law for the inspection and copying
of accounts, books, and records that by law or by determination of the Board
of Directors are made available. Unless required by the Code or otherwise
provided by the Board of Directors, a shareholder of the Corporation holding
less than two percent of the total shares of the Corporation then outstanding
shall have no right to inspect the books and records of the Corporation.
9.2 FISCAL YEAR. The Board of Directors is authorized to fix the fiscal
year of the Corporation and to change the fiscal year from time to time as it
deems appropriate.
9.3 CORPORATE SEAL. The corporate seal will be in such form as the Board
of Directors may from time to time determine. The Board of Directors may
authorize the use of one or more facsimile forms of the corporate seal. The
corporate seal need not be used unless its use is required by law, by these
Bylaws, or by the Articles of Incorporation.
9.4 ANNUAL STATEMENTS. Not later than four months after the close of
each fiscal year, and in any case prior to the next annual meeting of
shareholders, the Corporation shall prepare (a) a balance sheet showing in
reasonable detail the financial condition of the Corporation as of the close of
its fiscal year, and (b) a profit and loss statement showing the results of its
operations during its fiscal year. Upon receipt of written request, the
Corporation promptly shall mail to any shareholder of record a copy of the most
recent such balance sheet and profit and loss statement, in such form and with
such information as the Code may require.
9.5 NOTICE. (a) Whenever these Bylaws require notice to be given to
any shareholder or to any director, the notice may be given by mail, in person,
by courier delivery, by telephone, or by telecopier, telegraph, or similar
electronic means. Whenever notice is given to a shareholder or director by
15
mail, the notice shall be sent by depositing the notice in a post office or
letter box in a postage-prepaid, sealed envelope addressed to the shareholder
or director at his or her address as it appears on the books of the Corporation.
Any such written notice given by mail shall be effective: (i) if given to
shareholders, at the time the same is deposited in the United States mail; and
(ii) in all other cases, at the earliest of (x) when received or when delivered,
properly addressed, to the addressee's last known principal place of business or
residence, (y) five days after its deposit in the mail, as evidenced by the
postmark, if mailed with first-class postage prepaid and correctly addressed, or
(z) on the date shown on the return receipt, if sent by registered or certified
mail, return receipt requested, and the receipt is signed by or on behalf of the
addressee. Whenever notice is given to a shareholder or director by any means
other than mail, the notice shall be deemed given when received.
(b) In calculating time periods for notice, when a period of time measured
in days, weeks, months, years, or other measurement of time is prescribed for
the exercise of any privilege or the discharge of any duty, the first day shall
not be counted but the last day shall be counted.
9.6 ELECTION OF "FAIR PRICE" STATUTE. The provisions of Sections 14-2-
1110 through 14-2-1113 of the Code, as they may be amended from time to time,
shall apply to the Corporation, to the extent permitted.
9.7 ELECTION OF "BUSINESS COMBINATION" STATUTE. The provisions of
Section 14-2-1131 through 14-2-1133 of the Code, as they may be amended from
time to time, shall apply to the Corporation, to the extent permitted.
ARTICLE TEN
AMENDMENTS
Except as otherwise provided below or under the Code, the Board of
Directors shall have the power to alter, amend, or repeal these Bylaws or
adopt new Bylaws. Notwithstanding any other provision of these Bylaws, the
Corporation's Articles of Incorporation or law, neither Section 2.3, 2.13 or
3.8, nor Article Eight hereof nor this Article Ten may be amended or repealed
except upon the affirmative vote of holders of at least a majority of the total
number of votes of the then outstanding shares of capital stock of the Company
that are entitled to vote generally in the election of directors, voting
together as a single class. Any Bylaws adopted by the Board of Directors may be
altered, amended, or repealed, and new Bylaws adopted, by the shareholders. The
shareholders may prescribe in adopting any Bylaw or Bylaws that the Bylaw or
Bylaws so adopted shall not be altered, amended, or repealed by the Board of
Directors.
Dated: May 25, 2004.
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EXHIBIT 5.1
MORRIS, MANNING & MARTIN, LLP
1600 ATLANTA FINANCIAL CENTER
3343 PEACHTREE ROAD, N.E.
ATLANTA, GEORGIA 30326
(404) 233-7000
September 14, 2004
Hometown Community Bancshares, Inc.
P.O. Box 218
Braselton, Georgia 30517
Re: Registration of 1,200,000 Shares of Common Stock
Ladies and Gentlemen:
We have acted as counsel to Hometown Community Bancshares, Inc. (the
"Company"), a Georgia corporation, in connection with the registration under
the Securities Act of 1933, as amended, pursuant to the Company's Registration
Statement on Form S-1 (the "Registration Statement"), of up to 1,200,000 shares
(the "Shares") of common stock, $.01 par value (the "Common Stock"), of the
Company.
In this capacity, we have examined (1) the Registration Statement, which
is to be filed with the Securities Exchange Commission (the "Commission") on
the date hereof, (2) originals or copies, certified or otherwise identified to
our satisfaction, of corporate records, agreements, documents and other
instruments of the Company relating to the authorization and issuance of the
Shares, and (3) such other matters as we have deemed relevant and necessary as
a basis for the opinion hereinafter set forth.
In conducting our examination, we have assumed the genuineness of all
signatures, the legal capacity of all natural persons, the authenticity of all
documents submitted to us as originals, the conformity to original documents
of all documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such documents.
Based upon the foregoing, and in reliance thereon, and subject to the
limitations and qualifications set forth herein, we are of the opinion that
the Shares are duly authorized, and when the Shares are issued and delivered
to investors, as described in the Registration Statement, the Shares will be
legally and validly issued, fully paid and non-assessable.
We hereby consent to the use of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference to our firm under the heading "Legal
Matters" in the prospectus which is a part of the Registration Statement.
Very truly yours,
MORRIS, MANNING & MARTIN, LLP
/s/ Larry W. Shackelford
Larry W. Shackelford, Esq., Partner
EXHIBIT 10.1
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (the "Agreement") by and between
Hometown Community Bancshares, Inc., a Georgia corporation (the "Company"),
and Sean Childers (the "Executive", and, together with the Company, collectively
referred to herein as the "Parties"), is entered into and effective as of
September 1, 2004 (the "Effective Date").
WHEREAS, the Company desires to employ the Executive as President and Chief
Executive Officer, and the Executive desire to accept said employment by the
Company;
WHEREAS, the Company is in the process of organizing a new Georgia banking
corporation (the "Bank");
WHEREAS, the Company and the Executive have entered into this Agreement in
contemplation of the organization of the Bank, the agreements and covenants
contained herein are intended to inure to the benefit of the Bank, following the
organization of the Bank this Agreement will be assigned by the Company to the
Bank pursuant to the terms hereof, and thereafter the Bank will possess all of
the rights and obligations originally inuring to the Company hereunder;
WHEREAS, the Executive's position is a position of trust and responsibility
with access to Confidential Information, Trade Secrets, and information
concerning employees and customers of the Company, all of which are valuable
assets of the Company and may not be used for any purpose other than the
Company's Business;
WHEREAS, the Company has agreed to employ the Executive upon the terms and
conditions of this Agreement in exchange for the Executive's compliance with the
terms of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, it is agreed:
1. EMPLOYMENT & DUTIES.
A. The Company shall employ the Executive as President and Chief Executive
Officer, in accordance with the terms and conditions set forth in this
Agreement. The Executive accepts employment on the terms set forth herein. The
Executive shall report to the Board.
B. The Executive shall have those duties ("Duties") assigned to, or
normally associated with, the Executive's position and such other duties as may
Executive Employment Agreement
1
otherwise be assigned to the Executive by the Board from time to time.
C. The Executive agrees that the Executive shall at all times faithfully
and to the best of the Executive's ability and experience perform all of the
duties that may be required of the Executive pursuant to the terms of this
Agreement. The Executive shall devote the Executive's full business time to the
performance of the Executive's obligations hereunder. The Executive shall not
render to others any service of any kind for compensation or engage in any
activity which conflicts or interferes with the performance of the Executive's
obligations under this Agreement without the express written consent of the
Board of the Company.
2. COMPENSATION.
A. BASE SALARY. During the term of this Agreement, the Company shall pay
to the Executive a base salary ("Base Salary"), subject to all applicable
withholdings. The initial base salary shall be $135,000. On each annual
anniversary of the Effective Date, the Executive's Base Salary shall be
increased by an amount equal to 5% of the Executive's Base Salary for the year
then ending, such that in the second year Executive's Base Salary shall be
$141,750, in the third year Executive's Base Salary shall be $148,838, in the
fourth year Executive's Base Salary shall be $156,279 and in the fifth year
Executive's Base Salary shall be $164,093. The Executive's Base Salary may be
increased further (but not decreased) annually at the discretion of the Board.
The Executive's Base Salary shall be paid to the Executive in accordance with
the Company's normal payroll practices.
B. PERFORMANCE RELATED BONUS. During the term of this Agreement, the
Executive shall be eligible to receive a Performance-Related Bonus determined
by the Board of Directors in its sole and absolute discretion. The Performance-
Related Bonus shall be subject to all applicable withholdings.
C. PENSION, WELFARE & FRINGE BENEFITS. The Executive shall be entitled to
participate in each "employee welfare benefit plan" (within the meaning of ERISA
Section 3(1)), each "employee pension benefit plan" (within the meaning of ERISA
Section 3(2)), and each "specified fringe benefit plan" (within the meaning of
Code Section 6039D) sponsored or maintained by the Company generally to any
employee of the Company from time to time, subject to the terms and conditions
of such plans and programs. Regardless of whether the Company sponsors or
maintains such a plan, the Company shall provide health insurance coverage to
the Executive or reimburse him for such coverage, and shall reimburse Executive
for the cost of COBRA coverage under his existing health insurance plan at his
previous employer until the earlier of the time that the Company's insurance
plan is in place or such COBRA coverage expires. The Executive shall also be
entitled to any "fringe benefit" (within the meaning of Code Section 132) which
is generally provided to any employee of the Company, subject to the rules in
effect regarding participation in such benefit arrangement. In addition, the
Executive shall be entitled to paid vacation in accordance with the Company's
vacation policies, as they may exist from time to time, which in the case of
Executive shall include four weeks of annual vacation during the term of this
Agreement.
Executive Employment Agreement
2
D. BUSINESS EXPENSES. The Company will reimburse the Executive for all
reasonable ordinary and necessary business-related expenses incurred by the
Executive in the performance of his duties under this Agreement, provided that
the Executive presents invoices or vouchers for such expenses or other evidence
thereof to the Company in accordance with the Company's general reimbursement
policy in effect for executives.
E. AUTOMOBILE. During the period of the Executive's employment with the
Company, the Company shall provide an automobile for the use of the Executive in
the conduct of the Company's business as a condition of his employment. In lieu
of the Company providing an automobile, the Executive may lease an automobile
and the Company will reimburse the Executive for the cost of such lease up to
$500.00 per month and $3,000 in initial down payments and other lease initiation
or acquisition costs, provided that such automobile is appropriate in style and
appearance and consistent with the Company's and the Bank's marketing image.
The Executive will maintain appropriate automobile insurance at all times on the
automobile and provide proof of insurance to the Company. The Employee may also
use the Company provided automobile for reasonable personal use.
F. CLUB INITIATION FEE & MEMBERSHIP DUES. During the period of the
Executive's employment with the Company, the Company shall pay up to $5,000.00
for the Executive to join the club of his choice and will reimburse the
Executive for dues to such club not to exceed $250.00 per month. The Executive
agrees to use club as entertainment for selective Bank clients.
G. OPTIONS. The Company shall grant the Executive options to purchase
25,000 shares of the Company's common stock. The options shall vest in five
equal annual installments beginning on the first anniversary of the Effective
Date, and shall have a term of 10 years. The options shall have an exercise
price equal to the price at which the Company sells shares of its common stock
in its initial public offering. The options shall immediately vest in full upon
a Change in Control.
3. TERM & TERMINATION.
The term of this Agreement shall be five years. Ninety days prior to the
fifth anniversary of the Effective Date, the Executive shall notify Board in
writing whether he desires to extend this Agreement. Following such
notification, the Board in its sole discretion may agree to extend this
Agreement on mutually agreeable terms. This Agreement may be terminated prior
to the end of its scheduled term upon the occurrence of any of the following
events:
A. By the Company, upon the Executive's death;
B. By the Company, upon the Executive's Disability which renders the
Executive unable to perform the essential functions of the Executive's job even
with reasonable accommodation and which has continued for a period of 6 months;
C. By mutual written agreement between the Executive and the Company;
D. By the Company for Cause.
Executive Employment Agreement
3
E. By the Company without Cause. For this purpose, the phrase "without
Cause" shall mean a termination by the Company at any time and for any reason
not permitted pursuant to subsections A-D above;
4. POST TERMINATION PAYMENT OBLIGATIONS.
A. TERMINATION BY THE COMPANY FOR CAUSE. If this Agreement is terminated
pursuant to Section 3.D. of this Agreement, then the Executive shall be entitled
to receive no further compensation and thereafter the Company shall have no
further obligations under this Agreement, but the Executive shall continue to
be bound by Section 7 hereof, and all other post-termination obligations to
which the Executive is subject, including, but not limited to, the obligations
contained in this Agreement.
B. MUTUALLY AGREED TERMINATION. If this Agreement is terminated pursuant
to Section 3.C. of this Agreement, the Executive shall be entitled to any
parting compensation package mutually agreed to by the Parties.
C. TERMINATION BY DEATH OR DISABILITY OF THE EXECUTIVE. If this Agreement
is terminated pursuant to Section 3.A. or 3.B. of this Agreement, then the
Executive (or his estate) shall be entitled to receive the Executive's Base
Salary for six months, and thereafter the Company shall have no further
obligations under this Agreement but the Executive shall, in the case of a
termination pursuant to Section 3.B., continue to be bound by Section 7 and all
other post-termination obligations to which the Executive is subject, including,
but not limited to, the obligations contained in this Agreement.
D. TERMINATION BY THE COMPANY WITHOUT CAUSE. If this Agreement is
terminated pursuant to Section 3.E. of this Agreement, then the Company shall
pay to or provide to the Executive the following:
1. A single lump sum cash separation payment equal to 6 months Base Salary
as in effect as of the date of termination; and
2. Reimbursement of any premiums for COBRA continuation coverage for the
Executive paid by the Executive during the 6 month period beginning on the
date of termination.
These separation payments and benefits set forth in the preceding sentence
shall constitute full satisfaction of the Company's obligations under this
Agreement. The Company's obligation to make the separation payments and
benefits in this subsection D shall be conditioned upon the Executive's:
1. Execution of a Separation and Release Agreement in a form approved by
the Company whereby the Executive releases the Company from any and all
liability and claims of any kind; and
2. Compliance with the provisions of Section 7 hereof and all post-
termination obligations, including, but not limited to, the obligations
contained in this Agreement. However, the "Restricted Period" of Section
7.(D.) (Non-Compete) shall be reduced to the date of termination if
Executive is terminated by the Company without cause.
Executive Employment Agreement
4
E. TERMINATION BY THE COMPANY DUE TO LACK OF MINIMUM CAPITAL RAISE. If
the Board of Directors votes to terminate the effort to organize the Bank due
to the organizers inability to raise the minimum capital as required by the DBF,
then the Company shall pay to or provide to the Executive the following:
1. A single lump sum cash separation payment equal to 4 months Base Salary
as in effect as of the date of termination; and
2. Reimbursement of any premiums for COBRA continuation coverage for the
Executive paid by the Executive during the 4 month period beginning on the
date of termination.
These separation payments and benefits set forth in the preceding sentence
shall constitute full satisfaction of the Company's obligations under this
Agreement. The Company's obligation to make the separation payments and
benefits in this subsection D shall be conditioned upon the Executive's:
1. Execution of a Separation and Release Agreement in a form approved by
the Company whereby the Executive releases the Company from any and all
liability and claims of any kind; and
2. Compliance with the provisions of Section 7 hereof and all post-
termination obligations, including, but not limited to, the obligations
contained in this Agreement. However, the "Restricted Period" of Section 7.
(D.) (Non-Compete) shall be reduced to the date of termination if
Executive is terminated by the Company without cause.
The Company's obligation to make the separation payments set forth in
subsections D & E shall terminate immediately upon any breach by the Executive
of any post-termination obligations to which the Executive is subject.
5. SET OFF.
If the Executive has any outstanding obligations to the Company at the time
this Agreement terminates for any reason, the Executive acknowledges that the
Company is authorized to deduct any amounts owed to the Company from the
Executive's final paycheck and/or from any amounts that would otherwise be due
to the Executive under Section 4 above. However, notwithstanding the foregoing,
this Section 5 shall not apply with respect to loans made in the normal course
of business by the Company or any subsidiary of the Company which are made in
accordance with Regulation O.
6. ASSETS, BOOKS & RECORDS.
The Executive agrees that all files, documents, records, customer lists,
books and other materials or company assets which come into the Executive's use
or possession during the term of this Agreement and which are in any way related
to the Company's business shall at all times remain the property of the Company,
and that upon request by the Company or upon the termination of this Agreement
for any reason, the Executive shall immediately surrender to the Company all
such property and copies thereof.
7. RESTRICTIVE COVENANTS.
The Executive acknowledges that the restrictions contained in this Section
Executive Employment Agreement
5
7 are reasonable and necessary to protect the legitimate business interests of
the Company, and will not impair or infringe upon the Executive's right to work
or earn a living after the Executive's employment with the Company ends.
A. TRADE SECRETS AND CONFIDENTIAL INFORMATION. The Executive represents
and warrants that: (i) the Executive is not subject to any legal or contractual
duty or agreement that would prevent or prohibit the Executive from performing
the Executive's duties for the Company or otherwise complying with this
Agreement, and (ii) the Executive is not in breach of any legal or contractual
duty or agreement, including any agreement concerning trade secrets or
confidential information owned by any other party.
The Executive agrees that the Executive will not: (i) use, disclose, or
reverse engineer the Trade Secrets or the Confidential Information for any
purpose other than the Company's Business, except as authorized in writing by
the Company; (ii) during the Executive's employment with the Company, use,
disclose, or reverse engineer (a) any confidential information or trade secrets
of any former employer or third party, or (b) any works of authorship developed
in whole or in part by the Executive during any former employment or for any
other party, unless authorized in writing by the former employer or third party;
or (iii) upon the Executive's resignation or termination (a) retain Trade
Secrets or Confidential Information, including any copies existing in any form
(including electronic form), which are in the Executive's possession or control,
or (b) destroy, delete, or alter the Trade Secrets or Confidential Information
without the Company's written consent.
The obligations under this subsection A shall: (i) with regard to the Trade
Secrets, remain in effect as long as the information constitutes a trade secret
under applicable law, and (ii) with regard to the Confidential Information,
remain in effect during the Restricted Period.
The confidentiality, property, and proprietary rights protections available
in this Agreement are in addition to, and not exclusive of, any and all other
rights to which the Company is entitled under federal and state law, including,
but not limited to, rights provided under copyright laws, trade secret and
confidential information laws, and laws concerning fiduciary duties.
B. NON-SOLICITATION OF CUSTOMERS. During the Restricted Period, the
Executive will not directly or indirectly solicit any Customer of the Company
for the purpose of providing any goods or services competitive with the
Business. The restrictions set forth in this subsection B apply only to the
Customers with whom the Executive had Contact.
C. NON-RECRUIT OF THE EXECUTIVES. During the Restricted Period, the
Executive will not directly or indirectly solicit, recruit or induce any Company
Executive to (a) terminate his or her employment relationship with the Company
or (b) work for any other person or entity engaged in the Business.
D. NON-COMPETE. During the Restricted Period, the Executive shall not
compete with the Company by serving as a senior or executive officer of any
insured financial institution which competes with the Company anywhere within a
twenty-five mile radius of the Bank headquarters.
Executive Employment Agreement
6
8. WORK PRODUCT.
The Executive's employment duties may include inventing in areas directly
or indirectly related to the business of the Company or to a line of business
that the Company may reasonably be interested in pursuing. All Work Product
arising during the period of the Executive's employment with the Company or
during the Restricted Period shall constitute work made for hire. If (i) any of
the Work Product may not be considered work made for hire, or (ii) ownership of
all right, title, and interest to the legal rights in and to the Work Product
will not vest exclusively in the Company, then, without further consideration,
the Executive assigns all presently-existing Work Product to the Company, and
agrees to assign, and automatically assign, all future Work Product arising
during the period of the Executive's employment with the Company or during the
Restricted Period to the Company.
The Company will have the right to obtain and hold in its own name
copyrights, patents, design registrations, proprietary database rights,
trademarks, rights of publicity, and any other protection available in the Work
Product. At the Company's request, the Executive agrees to perform, during or
after the Executive's employment with the Company, any acts to transfer, perfect
and defend the Company's ownership of the Work Product, including, but not
limited to: (i) executing all documents (including a formal assignment to the
Company) necessary for filing an application or registration for protection of
the Work Product (an "Application"), (ii) explaining the nature of the Work
Product to persons designated by the Company, (iii) reviewing Applications and
other related papers, or (iv) providing any other assistance reasonably required
for the orderly prosecution of Applications.
The Executive agrees to provide the Company with a written description of
any Work Product in which the Executive is involved (solely or jointly with
others) and the circumstances surrounding the creation of such Work Product.
9. LICENSE.
During the Executive's employment and after the Executive's employment with
the Company ends, the Executive grants to the Company an irrevocable,
nonexclusive, worldwide, royalty-free license to: (i) make, use, sell, copy,
perform, display, distribute, or otherwise utilize copies of the Licensed
Materials, (ii) prepare, use and distribute derivative works based upon the
Licensed Materials, and (iii) authorize others to do the same. The Executive
shall notify the Company in writing of any Licensed Materials the Executive
delivers to the Company.
10. RELEASE.
During the Executive's employment and during the Restricted Period, the
Executive consents to the Company's use of the Executive's image, likeness,
voice, or other characteristics in the Company's products or services. The
Executive releases the Company from any cause of action which the Executive has
or may have arising out of the use, distribution, adaptation, reproduction,
broadcast, or exhibition of such characteristics. The Executive represents that
the Executive has obtained, for the benefit of the Company, the same release in
writing from all third parties whose characteristics are included in the
Executive Employment Agreement
7
services, materials, computer programs and other deliverables that the Executive
provides to the Company.
11. INJUNCTIVE RELIEF.
The Executive agrees that if the Executive breaches any provision of
Sections 7, 8 or 9 of this Agreement: (i) the Company would suffer irreparable
harm; (ii) it would be difficult to determine damages, and money damages alone
would be an inadequate remedy for the injuries suffered by the Company, and
(iii) if the Company seeks injunctive relief to enforce this Agreement, the
Executive will waive and will not (a) assert any defense that the Company has
an adequate remedy at law with respect to the breach, (b) require that the
Company submit proof of the economic value of any Trade Secret or Confidential
Information, or (c) require the Company to post a bond or any other security.
Nothing contained in this Agreement shall limit the Company's right to any other
remedies at law or in equity.
12. SEVERABILITY.
The provisions of this Agreement are severable. If any provision is
determined to be invalid, illegal, or unenforceable, in whole or in part, the
remaining provisions and any partially enforceable provisions shall remain in
full force and effect.
13. ATTORNEYS' FEES.
In the event of litigation relating to this Agreement, the prevailing Party
shall be entitled to recover attorneys' fees and costs of litigation in addition
to all other remedies available at law or in equity.
14. WAIVER.
The Company's failure to enforce any provision of this Agreement shall not
act as a waiver of that or any other provision. The Company's waiver of any
breach of this Agreement shall not act as a waiver of any other breach.
15. ENTIRE AGREEMENT.
This Agreement, including EXHIBIT A which is incorporated by reference,
constitutes the entire agreement between the Parties concerning the subject
matter of this Agreement. This Agreement supersedes any prior communications,
agreements or understandings, whether oral or written, between the Parties
relating to the subject matter of this Agreement. Other than terms of this
Agreement, no other representation, promise or agreement has been made with the
Executive to cause the Executive to sign this Agreement.
16. AMENDMENTS.
This Agreement may not be amended or modified except in writing signed by
both Parties.
17. SUCCESSORS & ASSIGNS.
This Agreement shall be assignable to, and shall inure to the benefit of,
the Company's successors and assigns, including, without limitation, the Bank
and successors through merger, name change, consolidation, or sale of a majority
of the Company's stock or assets, and shall be binding upon the Executive. The
Executive shall not have the right to assign the Executive's rights or
obligations under this Agreement. The covenants contained in Section 7 of this
Executive Employment Agreement
8
Agreement shall survive cessation of the Executive's employment with the
Company, regardless of the reason for cessation of the Executive's employment
and regardless of who causes the cessation.
18. GOVERNING LAW.
The laws of the State of Georgia shall govern this Agreement. If Georgia's
conflict of law rules would apply another state's laws, the Parties agree that
Georgia law shall still govern.
19. NO STRICT CONSTRUCTION.
If there is a dispute about the language of this Agreement, the fact that
one Party drafted the Agreement shall not be used in its interpretation.
20. NOTICE.
Whenever any notice is required, it shall be given in writing addressed as
follows:
To the Company:
PO Box 218
Braselton, Georgia 30517
To the Executive:
6275 Gaines Ferry Road
Flowery Branch, GA 30542
Notice shall be deemed given and effective three days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either Party
may change the address for notice by notifying the other party of such change
in accordance with this Section.
21. CONSENT TO JURISDICTION & VENUE.
Any claim other than claims that are required to be arbitrated under
section 26 arising out of or relating to this Agreement shall be (i) brought in
the Superior Court of Jackson County, Georgia, or (ii) brought in or removed to
the United States District Court for the Northern District of Georgia. The
Executive consents to the personal jurisdiction of the courts identified above.
The Executive waives (i) any objection to jurisdiction or venue, and (ii) any
defense claiming lack of jurisdiction or improper venue, in any action brought
in such courts.
22. AFFIRMATION.
EXECUTIVE ACKNOWLEDGES THAT EXECUTIVE HAS CAREFULLY READ THIS AGREEMENT,
THAT EXECUTIVE KNOWS AND UNDERSTANDS ITS TERMS AND CONDITIONS, AND THAT
EXECUTIVE HAS HAD THE OPPORTUNITY TO ASK THE COMPANY ANY QUESTIONS EXECUTIVE
MAY HAVE HAD PRIOR TO SIGNING THIS AGREEMENT.
Executive Employment Agreement
9
23. DEFINITIONS.
Unless otherwise indicated, all capitalized terms used in this Agreement
are defined in the "Definitions" section attached as EXHIBIT A. EXHIBIT A is
hereby incorporated by reference and is included in the definition of
"Agreement."
24. BINDING ARBITRATION.
Except as provided in this section, any dispute, controversy or claim
arising out of or in connection with, or relating to, this Agreement or any
breach or alleged breach hereof, shall be submitted to and settled by binding
arbitration administered by the American Arbitration Association ("AAA") under
its Commercial Arbitration Rules (the "Rules"). Judgment upon the award
rendered by the arbitrator may be entered in any court of competent
jurisdiction. Notwithstanding the then-current Rules, the following shall apply
with respect to arbitration proceedings, unless expressly agreed to otherwise by
the parties:
A. The arbitration proceeding shall be held in Jackson County, Georgia.
The arbitration shall be conducted by a single arbitrator selected in
accordance with the Rules.
B. The arbitrator shall be and remain at all times wholly independent and
impartial.
C. The administrative costs of the arbitration proceeding and the
arbitrator's compensation shall be allocated equally between the parties by
the AAA. The arbitrator shall award to the prevailing party, if any, as
determined by the arbitrator, all fees, expenses, and costs. "Fees,
expenses, and costs" mean all reasonable pre-award expenses of the
arbitration, including without limitation the arbitrator's fees,
administrative fees, travel expenses, out-of-pocket expenses such as
copying and telephone, witness fees, and attorneys' fees and expenses.
D. The decision of the arbitrator shall be in writing, and shall be final
and binding upon the parties.
E. It is the parties' intent that the arbitration process proceed as
quickly as possible. Accordingly, the party filing the demand for
arbitration (the claimant) shall submit a statement of its position along
with all supporting documents and all other documents that it intends to
introduce into evidence at the hearing within 10 business days after the
AAA notifies the parties of the appointment of the arbitrator. The
respondent shall submit a statement of its position along with all
supporting documents and all other documents that it intends to introduce
into evidence at the hearing within 10 business days after receiving the
claimant's statement of position and documents. If the respondent includes
a counterclaim against the claimant, the claimant shall submit a statement
of its position on that counterclaim, along with all supporting documents
and all other documents that it intends to introduce into evidence at the
hearing within 10 business days after receiving the claimant's statement
of position and documents. Each party shall have the right to take one
deposition of the other. No further discovery shall be allowed. A party
will not be allowed to introduce documents into evidence at the hearing
unless they were provided to the other party with its statement of
Executive Employment Agreement
10
position, as described above. In order to be considered timely submitted,
the submission must be delivered by hand delivery on the date it is due, or
dispatched via a recognized overnight delivery service the day before the
submission is due, in such manner that it is reasonable to expect that
delivery will be made on the due date. All such submissions shall
simultaneously be filed with the arbitrator.
F. The arbitration hearing shall be held within 20 business days after
the date the last statement of position is submitted or was due to be
submitted. The arbitrator shall render his or her award within 10 business
days after conclusion of the hearing. The arbitrator shall agree to comply
with this schedule before accepting appointment. However, the time limits
set forth in paragraphs E and G of this section 26 may be extended by
agreement of the parties or by the arbitrator if the arbitrator deems such
extension to be necessary.
G. The arbitrator shall not have the authority to award punitive damages.
H. Any claim or action must be brought within one year after the cause of
action accrues.
Notwithstanding the foregoing provisions of this Section, the parties
hereto acknowledge and agree that the Company shall have the right to pursue any
claim for specific performance, injunction, or other equitable relief in a court
of competent jurisdiction (before or during the pendency of any arbitration, or
otherwise) in the event of any alleged breach of any provision in Sections 7, 8
or 9 of this Agreement.
25. FDIC COMPLIANCE LIMITATION.
If the amounts to be paid to the Executive under this Agreement would cause
the Executive to receive a payment in violation of 12 CFR Section 359 (or the
corresponding provisions of any future regulations promulgated under Section
18(k) of the Federal Deposit Insurance Act (12 U.S.C. Section 1828(k))), then,
after seeking the approval of the FDIC to nonetheless make payment of such
amounts, if such approval is not forthcoming, such amounts shall be limited so
that no violation of such regulations will occur.
26. GOLDEN PARACHUTE LIMITATION.
If amounts to be paid to the Executive under this Agreement would somehow
cause the Executive to be subject to the excise tax imposed by Code Section 4999
on golden parachute payments, then, to the extent that the total "parachute
payments" (as defined in Code Section 280G(b)(2)) which would be made to the
Executive are greater than three times the Executive's "base amount" (as defined
in Code Section 280G(b)(3)), but are less than the Golden Parachute Upper
Limitation, then amounts to be paid under this Agreement which would constitute
"parachute payments" shall be reduced to the extent necessary so that the total
"parachute payments" which would be paid to the Executive shall not exceed three
times the Executive's "base amount." It is the intent of the foregoing
provision that if the Executive would be economically better off, on an after-
tax (federal and state income and federal excise) basis, by receiving less under
this Agreement because of the application of the golden parachute excise tax
under Code Section 4999 to amounts that the Executive receives, then the
Executive's payments hereunder shall be reduced so that the Code Section 4999
Executive Employment Agreement
11
excise tax shall not apply. The Executive shall have complete discretion to
appoint competent tax experts to make the calculations required by this Section,
and the calculations made by such experts shall be final and binding upon both
the Company and the Executive. Any reductions required under this Section shall
come first from cash payments required hereunder.
27. PARTICIPATION AS AN ORGANIZER.
Executive shall serve as an organizer of the Bank on the same terms as the
other organizers thereof, including participating in the filing of all of the
applications submitted by the organizers, contributing $10,000 to the capital of
the Company in return for 1,000 shares of the Company's common stock,
guaranteeing the repayment of up to $100,000 of the Company's organizational
line of credit, purchasing a minimum of 10,000 shares of the Company's common
stock in its initial public offering (net of the 1,000 shares referred to
above), and, on a best efforts basis, identifying and recruiting purchasers of,
or otherwise be primarily responsible for the sale of, at least 100,000
additional shares of the Company's common stock in its initial public offering.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the Effective Date.
THE COMPANY: THE EXECUTIVE:
HOMETOWN COMMUNITY BANCSHARES, INC. SEAN CHILDERS
By: /s/Robert M. Martin /s/C. Sean Childers
------------------------------ ---------------------------------
Robert M. Martin C. Sean Childers
Its: Director, Secretary
------------------------------
Executive Employment Agreement
12
EXHIBIT A
DEFINITIONS
A. "BOARD" shall mean the Board of Directors of Hometown Community Bancshares,
Inc.
B. "BUSINESS" shall mean the business of commercial banking.
C. "CAUSE" shall exist if the Executive (1) materially breaches any provision
of this Agreement and such breach is not cured by the Executive within 30 days
after receipt by the Executive of written notice from the Company of such
breach, (2) engages in gross negligence or willful misconduct, fraud,
dishonesty, or malfeasance that results in material injury to the Company and
has not been cured by the Executive within 30 days after receipt by the
Executive of written notice from the Company of such conduct, (3) engages in
willful, intentional, or grossly negligent failure to (A) perform the
Executive's duties under this Agreement, (B) follow the direction (consistent
with the Executive's duties) of the Board, or (C) to follow the policies,
procedures, and rules of the Company; provided, however, that the Company shall
first give the Executive written notice setting forth with specificity the
reasons that the Company believes the Executive is engaging in a failure under
this clause (3), and shall give the Executive 30 days to cure such failure, (4)
is convicted of, or enters into a plea of guilty or no contest to, (A) a felony
or (B) a crime involving moral turpitude that adversely affects the Company's
reputation in a material way, or (5) is not approved by the DBF, the FDIC, the
Federal Reserve or any other regulatory agency having jurisdiction over the
Company to serve as in the capacities required under this Agreement, or any such
agency subsequently requests the removal of Executive from serving in any of
such capacities.
D. "CHANGE OF CONTROL" means any of the following: (a) any transaction or
series of transactions pursuant to which the Company sells, transfers, leases,
exchanges or disposes of substantially all (i.e., at least 85%) of its assets
for cash or property, or for a combination of cash and property, or for other
consideration; (b) any transaction pursuant to which persons who are not
current shareholders of the Company acquire by merger, consolidation,
reorganization, division or other business combination or transaction, or by a
purchase of an interest in the Company so that after such transaction, the
shareholders of the Company immediately prior to such transaction no longer have
a controlling (i.e., 50% or more) voting interest in the Company; (c) the
individuals who, as of the date of this Agreement, were members of the Board
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that if either the election of any new director
or the nomination for election of any new director by the Company's stockholders
was approved by a vote of at least a majority of the Incumbent Board, such new
director shall be considered as a member of the Incumbent Board; or (d) any
transaction if the Executive and the Company agree in writing prior to such
transaction that such transaction shall constitute a Change of Control for
purposes of this Agreement. However, notwithstanding the foregoing, the
Executive and the Company may agree in writing prior to the occurrence of any
of the foregoing events that such event shall not constitute a Change of Control
for purposes of this Agreement.
E. "COMPANY" means Hometown Community Bancshares, Inc., its parents,
subsidiaries, affiliates and all related companies, as well as their respective
officers, directors, shareholders, employees, agents and any other
representatives.
F. "COMPANY EXECUTIVE" means any person who (i) is employed by the Company at
the time the Executive's employment with the Company ends, (ii) was employed by
Executive Employment Agreement
13
the Company during the last year of the Executive's employment with the Company
(or during the Executive's employment if employed less than a year), or (iii) is
employed by the Company during the Restricted Period.
G. "CONFIDENTIAL INFORMATION" means (a) information of the Company, to the
extent not considered a Trade Secret under applicable law, that (i) relates to
the business of the Company, (ii) possesses an element of value to the Company,
(iii) is not generally known to the Company's competitors, and (iv) would damage
the Company if disclosed, and (b) information of any third party provided to the
Company which the Company is obligated to treat as confidential. Confidential
Information includes, but is not limited to, (i) future business plans, (ii) the
composition, description, schematic or design of products, future products or
equipment of the Company, (iii) communication systems, audio systems, system
designs and related documentation, (iv) advertising or marketing plans, (v)
information regarding independent contractors, employees, clients and customers
of the Company, and (vi) information concerning the Company's financial
structure and methods and procedures of operation. Confidential Information
shall not include any information that (i) is or becomes generally available
to the public other than as a result of an unauthorized disclosure, (ii) has
been independently developed and disclosed by others without violating this
Agreement or the legal rights of any party, or (iii) otherwise enters the public
domain through lawful means.
H. "CONTACT" means any interaction between the Executive and a Customer which
(i) takes place in an effort to establish, maintain, and/or further a business
relationship on behalf of the Company and (ii) occurs during the last year of
the Executive's employment with the Company (or during the Executive's
employment if employed less than a year).
I. "CUSTOMER" means any person or entity to whom the Company has sold its
products or services, or solicited to sell its products or services.
J. "DBF" means the Georgia Department of Banking and Finance.
K. "DISABILITY" means a physical or mental impairment (a physiological
disorder or condition, cosmetic disfigurement, anatomical loss affecting a major
body system and any mental or psychological disorder) that substantially limits
one or more major life activities.
L. "FDIC" means the Federal Deposit Insurance Corporation.
M. "FEDERAL RESERVE" means the Board of Governors of the Federal Reserve
System or any delegate thereof, including without limitation the Federal Reserve
Bank of Atlanta.
N. "GOLDEN PARACHUTE UPPER LIMITATION" means , with respect to the Executive,
that dollar amount of "parachute payments" of the Executive exceeding three
times the Executive's "base amount" (as defined in Code Section 280G(b)(3)),
given the Executive's tax situation, which would, after the application of all
such taxes, yield to the Executive the same after-tax amount as if the
Executive's "parachute payments" were exactly $0.01 less than three times the
Executive's "base amount" (as defined in Code Section 280G(b)(3)), or, in other
words, that dollar amount of "parachute payments" of the Executive exceeding
three times the Executive's "base amount" (as defined in Code Section
280G(b)(3)) at which the negative impact of the additional golden parachute
excise tax is exactly offset by the additional compensation paid to the
Executive. Mathematically, the Golden Parachute Upper Limitation should equal
the "base amount" (as defined in Code Section 280G(b)(3)) of the Executive
multiplied by the following fraction, if the marginal rates of the Executive are
constant:
Executive Employment Agreement
14
3 - 3F - 3S - E
1 - F - S - E
where:
"F" is the highest marginal rate of federal income taxation applicable to the
Executive's "parachute payments" under this Agreement;
"S" is the highest marginal rate of state income taxation applicable to the
Executive's "parachute payments" under this Agreement; and
"E" is the golden parachute excise tax rate applicable to the Executive's
"parachute payments" under this Agreement.
O. "LICENSED MATERIALS" means any materials that the Executive utilizes for
the benefit of the Company, or deliver to the Company or the Company's
customers, which (i) do not constitute Work Product, (ii) are created by the
Executive or of which the Executive is otherwise in lawful possession, and (iii)
the Executive may lawfully utilize for the benefit of, or distribute to, the
Company or the Company's customers.
P. "RESTRICTED PERIOD" means the time period during the Executive's employment
with the Company, and for one year after the Executive's employment with the
Company ends.
Q. "TRADE SECRETS" means information of the Company, and its licensors,
suppliers, clients and customers, without regard to form, including, but not
limited to, technical or non-technical data, a formula, a pattern, a
compilation, a program, a device, a method, a technique, a drawing, a process,
financial data, financial plans, product plans, or a list of actual or potential
customers or suppliers which is not commonly known by or available to the public
and which information (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.
R. "WORK PRODUCT" means (a) any data, databases, materials, documentation,
computer programs, inventions (whether or not patentable), designs, and/or works
of authorship, including but not limited to, discoveries, ideas, concepts,
properties, formulas, compositions, methods, programs, procedures, systems,
techniques, products, improvements, innovations, writings, pictures, audio,
video, images of the Executive, and artistic works, and (b) any subject matter
protected under patent, copyright, proprietary database, trademark, trade
secret, rights of publicity, confidential information, or other property rights,
including all worldwide rights therein, that is or was conceived, created or
developed in whole or in part by the Executive while employed by the Company and
that either (i) is created within the scope of the Executive's employment, (ii)
is based on, results from, or is suggested by any work performed within the
scope of the Executive's employment and is directly or indirectly related to the
business of the Company or a line of business that the Company may reasonably be
interested in pursuing, (iii) has been or will be paid for by the Company, or
(iv) was created or improved in whole or in part by using the Company's time,
resources, data, facilities, or equipment.
Executive Employment Agreement
15
EXHIBIT 10.2
[LETTERHEAD OF NEXITY BANK]
FORM OF
ESCROW AGREEMENT
Relating to Subscriptions for Shares of _________________
This Escrow Agreement (the "Agreement") is made and entered into as of the
____ day of __________, 200___, by and among certain investors (collectively,
the "Investors") who have executed a Subscription Agreement (the "Subscription
Agreement") (and which Subscription Agreement expressly refers to and
incorporates this Escrow Agreement); ________________________, a _____________
corporation (the "Company"); and Nexity Bank (the "Escrow Agent").
WHEREAS, the Investors desire to contribute to the capital of _____________
by purchasing shares of _____________________ common stock, $_______ par value
(the "Shares") pursuant to the terms and conditions set forth in _______________
Private Offering Memorandum dated _____________, 200____ (the "Memorandum"), and
the Subscription Agreement, the form of which is attached hereto; and
WHEREAS, in order to facilitate the purchase of the Shares and the
organization of _________________, the Investors desire that the Escrow Agent
receive, hold and distribute their payments for the Shares in accordance with
the terms hereof.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter set forth, the parties agree as follows:
1. ESCROW DEPOSIT. Each Investor will deliver the funds in payment for the
Shares purchased by such Investor, as set forth in the Subscription
Agreement, to the Company for further delivery to the Escrow Agent.
The Company will collect and deliver to the Escrow Agent appropriate W-9
Forms for each investor.
2. INVESTMENT OF ESCROW DEPOSIT. All funds received by the Escrow Agent
pursuant to this Agreement shall be invested, to the extent practicable,
in deposit accounts or certificates of deposit which are insured by the
Federal Deposit Insurance Corporation or another agency of the United
States government,
short-term securities issued or fully guaranteed by the United States
government, federal funds, or such other investments as the Escrow Agent
and the Company shall agree. The Company shall provide the Escrow Agent
with instructions from time to time concerning in which of the specific
investment instruments described above the Escrowed Funds shall be
invested, and the Escrow Agent shall adhere to such instructions. Unless
and until otherwise instructed by the Company, the Escrow Agent shall by
means of a "Sweep" or other automatic investment program invest the
Escrowed Funds in blocks of $1,000 in federal funds. Interest will
begin accruing no later than the next business day after receipt.
3. DISTRIBUTION OF FUNDS. The Escrow Agent shall distribute the funds held
by it under this Agreement as follows:
a. Upon receipt of (i) funds in the amount of at least $_______________
in payment for Shares, and (ii) a certificate executed by __________
attesting that __________________ has received subscriptions for
such amount and directing the Escrow Agent to distribute all funds
received by the Escrow Agent from the Investors under this Agreement
to the Company, the Escrow Agent shall deliver the funds, by
cashier's check or other form of payment mutually acceptable to the
Company and the Escrow Agent, to the Company, together with the
income earned thereon pursuant to subsection (c) of this Section 3.
No distribution will be made until the last investor deposit has
been made for at least two business days. The Company shall provide
account information and other necessary directions for disbursements
by the Escrow Agent to it under this Agreement. The Escrow Agent
must be provided a copy of the subscription agreement at the signing
of this Escrow Agreement.
b. Upon i) receipt of direction from the Company, to return the funds
to the Investors; or (ii) in the event the Escrow Agent shall have
received less than $______________ or shall have received no
direction or certificate from the Company pursuant to either
subsection (a) or this subsection (b) of this Section 3 on or prior
to __________, 200___(closing date of offering), the Escrow Agent
shall distribute such funds to the Investors, together with the
income earned thereon pursuant to subsection (c) of this Section 3.
The Company may give notice to the Escrow Agent that the Company is
canceling its offer of the Shares prior to _______________, 200___,
and the Escrow Agent shall distribute the funds to the Investors in
accordance with this Agreement.
c. Any income earned on the investment of funds received under this
Agreement will first be applied against the Escrow Agent's fee set
forth in Section 9 hereof and any expense of the Escrow Agent
incurred pursuant to Section 5 hereof. To the extent that such
income exceeds the Escrow Agent's fee and expenses, the Escrow Agent
shall allocate (each Investor shall be allocated his pro rata share
of such excess, calculated according to the amount of funds
delivered to the Escrow Agent by such Investor and the number of
days such Investor's funds have been available for investment by the
Escrow Agent) and distribute such excess to the Investors, in the
event that funds are returned to Investors pursuant to subsection
(b) of this Section. Such excess shall be delivered to the Company,
in the event that the funds received and held hereunder are
delivered to the Company pursuant to subsection (a) of this Section.
4. AUTHORIZATION FOR DISBURSEMENT. The Escrow Agent is hereby authorized
and directed to issue its checks for each disbursement hereunder and the
Escrow Agent shall be relieved of all liability with respect to making
the disbursements in accordance with the provisions hereof.
5. PROFESSIONAL SERVICES USED BY ESCROW AGENT. The Escrow Agent may engage
the services of such attorneys, accountants, and other professionals, as
the Escrow Agent may, in its sole discretion, deem advisable to carry out
its duties under the Agreement. The Company agrees to reimburse the
Escrow Agent for all costs, expenses and professional fees incurred
hereunder which are not covered by income earned on escrowed funds
pursuant to Section 3(c) hereof, including all legal fees and expenses
incurred in the review of this Agreement.
6. LIMIT ON ESCROW AGENT'S RESPONSIBILITY. The Escrow Agent shall have no
duties or obligations hereunder except as expressly set forth herein,
shall be responsible only for the performance of such duties and
obligations, shall not be required to take any action otherwise than in
accordance with the terms hereof and shall not be in any manner liable or
responsible for any loss or damage arising by reason of any act or
omission to act by it hereunder or in connection with any of the
transactions contemplated hereby, including, but not limited to, any loss
that may occur by reason of forgery, false representations, the exercise
of its discretion, or any other reason, except for its gross negligence
or willful misconduct.
7. RELIANCE ON OPINION OF COUNSEL. The Escrow Agent hereunder shall be
entitled to rely upon the advice of its counsel in any action taken in
its capacity as Escrow Agent hereunder and shall be protected from any
liability of any kind for actions taken in reasonable reliance upon such
opinion of its counsel.
8. RESIGNATION. The Escrow Agent may resign at any time upon ten (10) days'
written notice to the Company. Such resignation shall take effect upon
receipt by the Escrow Agent of an instrument of acceptance executed by a
successor escrow agent and subscribed and consented to by the Company,
and the delivery by the Escrow Agent to such successor of any funds held
under this Agreement. The Escrow Agent, if it has not received such an
instrument of acceptance prior to the expiration of ten (10) calendar
days after the giving of notice of resignation, shall be discharged of
its duties and obligations hereunder only upon the deposit of any funds
being held by it under this Agreement into, and the acceptance thereof,
by a court of competent jurisdiction, to which application shall be made
for the appointment of a successor escrow agent so appointed shall
succeed to all of the rights, duties and responsibilities of the Escrow
Agent.
9. ESCROW AGENT'S FEES. The Company agrees to pay Escrow Agent's usual and
customary fees for performing its obligations under the Agreement that
are not covered by income earned on escrowed funds pursuant to Section
3(c) hereof. An $18.00 per check fee will be charged if the escrow
account has to be refunded due to failure to complete the subscription.
10. NOTICE. All notices, certificates and other communications hereunder
shall be in writing and shall be sufficiently given and shall be deemed
given when delivered, postage prepaid, addressed as follows by certified
mail:
To the Escrow Agent: Attention: Mrs. Pam Fretwell
Nexity Bank
3500 Blue Lake Drive
Birmingham, Alabama 35243
To the Investors: to the persons named and at the
addresses listed in the Subscription Agreements
To Company Company
Company Address
Company City, State Zip
Any party may, by notice given hereunder, designate any future or different
addresses to which subsequent notices, certificates, and other communications
shall be sent.
12. BINDING EFFECT. This Agreement shall inure to the benefit of and shall
be binding upon the parties hereto and their respective heirs, executors,
successors, administrators and assigns.
13. SEVERABILITY. In the event any court of competent jurisdiction shall
hold any provision of this Agreement invalid or unenforceable, such
holding shall not invalidate or render unenforceable any other provision
hereof.
14. EXECUTION OF COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be an original, and all of which shall
constitute one and the same instrument.
15. APPLICABLE LAW. This Agreement shall be construed and governed
exclusively by the laws of the State of Alabama, without regard to its
principles of conflicts of law.
16. HEADINGS. The headings used in this Agreement have been prepared for the
convenience of reference only and shall not control, affect the meaning,
or be taken as an interpretation of any provisions of this Agreement.
ESCROW AGENT: NEXITY BANK
By:
Its:
Date:
COMPANY:
By:
Its:
Date:
EXHIBIT 10.3
CONSULTING AGREEMENT
This CONSULTING AGREEMENT (this "Agreement") is made as of August 16th,
2004 (the "Effective Date") by and between Hometown Community Bancshares, Inc.,
a Georgia corporation (the "Company"), and Ted A. Murphy (the "Consultant").
BACKGROUND
The Company is in the process of organizing a new community bank to be
known as Hometown Community Bank (the "Bank") in the Braselton, Georgia area.
The Consultant is Vice Chairman of the Board of Directors of the Company and
an organizer of the Bank. The Consultant has previously served as a Chief
Executive Officer of other community banks, and the Company desires to engage
the Consultant to provide consulting services regarding the organization and
operation of the Bank in accordance with the terms and conditions of this
Agreement, and the Consultant is willing to do so. The Company may assign this
Agreement to the Bank once it has been organized.
Each of the Company and the Consultant agree that the terms, conditions,
and provisions of this Agreement are fair and reasonable and are necessary to
protect the legitimate business interests of each other.
Therefore, in consideration of the mutual promises and covenants set forth
herein and other good and valuable consideration, the receipt and sufficiency
of which are mutually acknowledged, the Company and the Consultant agree as
follows:
1. Consulting Services. Subject to the terms and conditions set forth
in this Agreement, the Company hereby agrees to engage the Consultant as an
independent business consultant. The Consultant shall consult with the Chief
Executive Officer and the Board of Directors with respect to the executive
management of a de novo bank and the organization and operation of the Bank
and such other duties as may otherwise be assigned to the Consultant by the
Board of Directors from time to time for the Term (as defined in Section 2)
("Duties"). In such position, the Consultant shall perform such consulting
service for the Bank diligently and to the reasonable satisfaction of the
Company's Chief Executive Officer and Board of Directors, subject to the
requirement that the Consultant shall be required to be on site at the Bank's
offices one day per week and that the Consultant shall be available for
telephone consultations during other business hours.
2. Term And Termination. The term of the Consultant's engagement under
this Agreement (the "Term") will commence on the Effective Date and continue
until the second anniversary of the Effective Date. The Company may end the
Term earlier under the following circumstances:
(a) in the event of the Consultant's death;
(b) if the Consultant is totally disabled so that he has been unable
to perform his duties and responsibilities hereunder for a period of
60 consecutive days;
(c) if the Company's Board of Directors terminates this Agreement
with "cause" (as defined below); or
(d) if the Consultant materially breaches the terms of this
Agreement and such breach remains uncured after reasonable written
notice of and opportunity to cure such breach;
(e) by mutual written agreement between the Executive and the
Company.
If the Company terminates this Agreement pursuant to this Section 2 prior
to the stated end of the Term, the Consultant (or his representative in the
event of his death) will be entitled to receive payment of all compensation
described herein, except that amounts due under Section 3 will only be due
through the date of termination. The provisions of Sections 5 and 6 hereof
will survive any termination in accordance with their terms. As used in this
Agreement, termination with "cause" means any termination evidenced by a finding
adopted in good faith by the Board of Directors of the Company that the
Consultant (i) willfully and continually failed to substantially perform his
duties under this Agreement (other than a failure resulting from the
Consultant's incapacity due to physical or mental illness) and such failure
continues after written notice to the Consultant providing a reasonable
description of the basis for the determination that the Consultant has failed
to perform his duties, (ii) has been indicted for or has entered into a plea
bargain with respect to a criminal offense other than misdemeanors not
disclosable under the federal securities laws, (iii) has breached this Agreement
in any material respect and such breach is not susceptible to remedy or cure or,
if susceptible to remedy or cure, is not cured or remedied reasonably promptly
after written notice to the Consultant providing a reasonable description of
the breach, (iv) engaged in conduct to the material detriment of the Company
that is dishonest, fraudulent, unlawful or grossly negligent or which is not in
compliance with the Company's Code of Conduct or similar applicable set of
standards of conduct and business practices set forth in writing and provided
to the Consultant prior to such conduct, (v) has been found by any regulatory
authority or similar authority in any jurisdiction in which the Company is
conducting business or intends to submit a proposal or conduct business
unsuitable or unfit to continue to perform his obligations to the Company under
this Agreement, and is the subject of a written notice received by the Company
from such authority of such a finding or (vi) has failed to file appropriate
applications with, provide requested information to, or otherwise fails to
cooperate with, any such authority.
3. Compensation. During the Term, as compensation for the performance
of the Consultant's services under this Agreement, the Company will pay the
Consultant $5,000 per month. The Company shall grant the Consultant options
to purchase 5,000 shares of the Company's common stock. The options shall vest
in two equal annual installments beginning on the first anniversary of the
Effective Date, and shall have a term of 10 years. The options shall have an
exercise price equal to the price at which the Company sells shares of its
common stock in its initial public offering. The options shall immediately vest
in full upon a Change in Control.
-2-
4. Reimbursement Of Expenses.
(a) The Company will reimburse the Consultant for his reasonable
travel expenses if he is directed to travel to any location other
than the Bank's offices as part of his duties. In addition, the
Company will reimburse the Consultant for the cost of obtaining high-
speed broadband internet access at his home, up to a maximum of $50
per month.
5. Restrictive Covenants. In addition to any other covenants, contracts,
or agreements to which the Consultant may be subject, during the Term and for a
period of 6 months from the end thereof, (the "Restricted Period"), the
Consultant will not without the written consent of the Chairman of the Board of
Directors of the Company, directly or indirectly, either as an individual or as
a consultant, partner, officer, director or over 5% shareholder of any Person
(as defined below):
(a) conduct or assist others in conducting any business that is in
competition with the business of the Bank (the "Bank's Business") in
the Bank's Market Area (as defined below);
(b) recruit, hire, assist others in recruiting or hiring, discuss
employment with, or refer to others for employment (collectively
referred to as "Recruiting Activity") any individual who is, or within
the 6-month period immediately preceding the date of any such
Recruiting Activity was, at any time, an employee of or consultant to
the Bank; or
(c) solicit or induce, attempt to induce or assist any other Person
in inducing or attempting to induce, directly or indirectly, any
customer of the Bank in the Market Area with respect to any business
competitive with the Bank's Business.
Consultant agrees and warrants that the scope of this covenant contained
in this Section 5 is reasonable as to time, area, and persons covered and is
necessary to protect the legitimate business interest of the Company. It is
further agreed that such covenant will be regarded as divisible and will be
operative as to time, area, and persons to the extent that it may be so
operative, and if any part of it is declared invalid, unenforceable, or void
as to time, area, or persons covered, the validity and enforceability of the
remainder will not be affected.
The term "Person" as used in this Agreement means an individual,
corporation, association, partnership, trust, or unincorporated organization,
or any governmental or regulatory body or other entity. The term "Market Area"
as used in this Agreement means an area within a 20-mile radius of the Bank's
offices, it being agreed that the Bank will conduct its Business in an area
that encompasses such 20-mile radius area.
6. Confidentiality. The Consultant acknowledges that the trade secrets,
plans, strategies, and technology and processes of the Company and the Bank,
as they may exist from time to time, and information concerning the products,
services, production, reconditioning, development, technology, and all technical
information, procurement and sales activities and procedures, customer,
supplier, or distributor lists, promotion and pricing techniques, and credit and
financial data concerning customers, suppliers, and distributors of the Company
-3-
are valuable, special, and unique assets of the Company and the Bank,
respectively (collectively, the "Confidential Information"). In light of the
competitive nature of the industry in which the business of the Company and the
Bank, is conducted, the Consultant agrees to keep all of the Confidential
Information confidential and not to, except as specifically authorized in
writing by the Company or the Bank, as applicable, or as may be necessary or
appropriate to further the best interests of the Company or the Bank, as
applicable, (i) disclose any Confidential Information to any Person, other than
the Company or the Bank, as applicable, or (ii) make use of any Confidential
Information for his own purposes or for the benefit of any other Person other
than the Company or the Bank, as applicable.
The Consultant acknowledges and agrees that all manuals, drawings,
blueprints, letters, notes, notebooks, reports, books, procedures, forms,
documents, records, or paper or copies thereof pertaining to the operations or
business of the Company or the Bank made or received by the Consultant or made
known to him in any way in connection with his employment and any other
Confidential Information are and will be the exclusive property of the Company
or the Bank, as applicable. The Consultant acknowledges that all such papers
and records will at all times be subject to the control of the Company or the
Bank, as applicable, and the Consultant agrees to surrender the same upon
request of the Company or the Bank, as applicable, and will surrender such no
later than any termination of his duties hereunder.
7. Injunctive Relief. Each party acknowledges that a remedy at law for
any breach or attempted breach of this Agreement will be inadequate, agrees
that each party will be entitled to specific performance and injunctive and
other equitable relief in case of any breach or attempted breach, and agrees
not to use as a defense that any party has an adequate remedy at law. This
Agreement shall be enforceable in a court of equity, or other tribunal with
jurisdiction, by a decree of specific performance, and appropriate injunctive
relief may be applied for and granted in connection herewith. Such remedy shall
not be exclusive and shall be in addition to any other remedies now or hereafter
existing at law or in equity, by statute or otherwise. No delay or omission in
exercising any right or remedy set forth in this Agreement shall operate as a
waiver thereof or of any other right or remedy and no single or partial exercise
thereof shall preclude any other or further exercise thereof or the exercise of
any other right or remedy.
8. Notices. Any notice or other communication required or permitted
under this Agreement shall be in writing and shall be delivered personally,
telegraphed, telexed, sent by facsimile transmission, or sent by certified,
registered, or express mail, postage prepaid. Any such notice shall be deemed
given when so delivered personally, telegraphed, telexed, or sent by facsimile
transmission or, if mailed 5 days after the date of deposit in the United States
mails, to the intended recipient in the case of the Company or the Bank, at its
principal executive office, and in the case of the Consultant, at any address
reflected in the shareholder, customer or employee records of the Company or
the Bank. Either party may by notice given in accordance with this Section 8
to the other party designate another address or person for receipt of notices
under this Agreement. All notices will be deemed to be effective upon delivery
to any agent for personal delivery or upon mailing.
9. Miscellaneous. This Agreement constitutes the entire agreement among
the parties with respect to the subject matter of this Agreement, and there
are no prior written or prior or contemporaneous oral understandings or
agreements relative to this Agreement that are not fully expressed in this
-4-
Agreement. This Agreement may be amended, superseded, cancelled, renewed, or
extended, and the terms hereof may be waived, only by a written instrument
signed by the parties or, in the case of a waiver, by the party waiving
compliance. No delay or omission on the part of either party in exercising
any right, power, or privilege under this Agreement shall operate as a waiver
thereof. Nor shall any waiver on the part of either party of any such right,
power, or privilege, nor any single or partial exercise of any such right,
power, or privilege, preclude any further exercise thereof or the exercise
of any other such right, power, or privilege. No waivers of or exceptions
to any term, condition, or provision of this Agreement, in any one or more
instances, shall be deemed to be, or construed as, a further or continuing
waiver of any such term, condition, or provision. All remedies provided for
in this Agreement will be cumulative and in addition to and not in lieu of any
other remedies available to either party at law, in equity, or otherwise.
This Agreement shall be governed by and construed in accordance with the
substantive laws of the state of Georgia. The Company may assign this Agreement
to the Bank or otherwise in connection with a transfer of substantially all of
the assets of the Company, whether by merger or other means. This Agreement
may be executed by the parties hereto in separate counterparts, each of which
when so executed and delivered shall be an original, but all such counterparts
shall together constitute one and the same instrument.
The parties hereto expressly agree that it is not the intention of any of
them to violate any public policy, statutory or common law rules, regulations,
or decisions of any governmental or regulatory body. If any provision of this
Agreement is judicially or administratively interpreted or construed as being
in violation of any such provision, such sections, sentences, words, clauses,
or combinations thereof shall be inoperative and the remainder of this Agreement
shall remain binding upon the parties hereto.
IN WITNESS WHEREOF, the parties to this Agreement have executed and
delivered this Agreement on the date first above written.
HOMETOWN COMMUNITY BANCSHARES, INC. CONSULTANT:
By: /s/ Robert M. Martin /s/ Ted A. Murphy
------------------------- ---------------------------
Name: Robert M. Martin Ted A. Murphy
Title: Secretary
-5-
EXHIBIT 10.4
OPTION AGREEMENT
THIS OPTION AGREEMENT ("Agreement") is made and entered into this 2nd day
of September, 2004, by and between Dunhill Developers, LLC ("Owner"), a Georgia
limited liability company, and Hometown Community Bancshares, Inc. ("HCBI"), a
Georgia corporation.
W I T N E S S E T H:
IN CONSIDERATION of $10.00 in hand paid, the mutual covenants and promises
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, Owner does
hereby grant unto HCBI an exclusive option (hereinafter called "Option") to
purchase all of Owner's right, title and interest in and to all of that tract or
parcel of land (hereinafter called "Property") described on Exhibit "A" hereto
attached. Owner is granting this Option to HCBI upon the following terms and
conditions:
1. Term. The term of this Option (the "Term") shall be for a period
commencing on the date hereof and continuing through and including January 31,
2005; provided, that if this Option is not exercised as hereinafter provided,
prior to 12:00 midnight (Eastern Time), January 31, 2005, the Option shall
terminate.
2. Exercise of Option. The exercise of the Option shall be accomplished
by HCBI giving written notice of its election to exercise the Option (the
"Exercise Notice") to Owner prior to expiration of the Term. Upon the Exercise
Notice being given, this Agreement shall become a contract of purchase and sale
of the Property. The Exercise Notice shall set forth the date and time of the
Closing.
3. Survey. Owner shall have an accurate survey (the "Survey") of the
Property made, at the expense of Owner, by a registered land surveyor of the
State of Georgia and have the acreage of the Property computed on the basis of
the Survey by acceptable standards of the Georgia Association of Registered Land
Surveyors to one-hundredths of an acre. Owner, upon receipt of the survey,
shall deliver two copies thereof to HCBI. The legal description of the Property
contained in the limited warranty deed to be delivered to HCBI in accordance
with the terms hereof shall be the same as shown on the Survey.
4. Purchase Price. The Purchase Price for the Property shall be Two
Hundred Fifty Thousand and No/100 Dollars ($250,000) per acre. Owner and HCBI
acknowledge that HCBI may not be able to exercise the Option and acquire the
Property unless the Property is appraised by two independent appraisers, one of
which is MAI qualified, at a value of at least $250,000 per acre. The Purchase
Price, as adjusted by the Closing prorations described herein, shall be payable
at the closing of the transaction contemplated by this Agreement (the act of
closing being hereinafter referred to as "Closing" and the date on which closing
occurs being hereinafter referred to as the "Closing Date") by cashier's check
or wire transfer, pursuant to instructions provided to HCBI prior to Closing.
5. Closing. In the event the Option is timely exercised, the Closing
shall be held at the offices of Morris, Manning & Martin, 3343 Peachtree Road,
N.E., 16th Floor, Atlanta, Georgia 30326. If the Exercise Notice does not set
forth a date and time for Closing, then the Closing shall be held on January 31,
2005 at 10:00 a.m. (Eastern Time). Possession of the Property shall be granted
and delivered by Owner to HCBI at the time of Closing.
At the Closing, Owner shall convey to HCBI good, marketable and insurable
fee simple title to the Property subject only to the lien of real property ad
valorem taxes for the current year, not yet due and payable, those matters
listed on Exhibit "B" attached hereto, and any matters that would be shown on a
current and accurate survey of the Property (collectively, the "Permitted Title
Exceptions"). Such conveyance shall be made by execution and delivery to HCBI
by Owner of a limited warranty deed together with all other documents required
herein, including such documentation, if any, as reasonable necessary to
evidence the authority and power of Owner to consummate the transaction. Owner
shall take all actions expressly required by this Agreement to be performed by
Owner at the Closing including but not limited to satisfying and/or discharging
out of Owner's closing proceeds or otherwise at Owner's cost or expense at
Closing all mortgages, deeds to secure debt and other encumbrances necessary to
deliver title to the Property as required hereby. At Closing, in addition to
the foregoing requirements, Owner shall deliver to HCBI (i) an owner's affidavit
in customary form as required by HCBI's title insurance company in order to
remove standard exceptions to HCBI's title insurance policy, (ii) a customary
non-foreign affidavit, and (iii) an affidavit sufficient to satisfy the
requirements of O.C.G.A. Section 48-7-128.
In addition to the above documents, at Closing, Owner shall execute and
deliver to HCBI (and to the extent HCBI's signature is required, HCBI shall
execute and deliver) the following documents; each of which shall be in a form
acceptable to Owner and HCBI:
(a) A non-exclusive assignment to HCBI (with Owner continuing as an
additional beneficiary) of the benefits of all assignable certificates, permits,
licenses, authorizations and approvals, if any, to the extent they relate to
the Property;
(b) To the extent that as of the Closing Date the roads servicing the
Property are not dedicated to the public, an access easement agreement;
(c) To the extent that easements in favor of the applicable utility
providers for the utilities serving the Property are not recorded in the public
records as of the Closing Date, an utility easement agreement; and
(d) An agreement setting forth Owner's and HCBI's obligations
subsequent to the Closing, which shall include without limitation the following:
(i) Construction by Owner of a deceleration lane along Georgia
Highway 53 to allow access into the Property in accordance with all standards
and requirements of the Georgia Department of Transportation, Jackson County,
and the City of Braselton (as applicable) and any other applicable standards
and requirements within 90 days after the Closing Date;
(ii) Construction of access roads from Georgia Highway 53 to the
bank site on the Property, from Lagree Duck Road to the bank site on the
Property, and from New Cut Road to the bank site on the Property, all in
accordance with the site plan for the Property prepared by Owner's engineer and
provided to HCBI, all standards and requirements of the Georgia Department of
Transportation, Jackson County, and the City of Braselton (as applicable) and
any other applicable standards and requirements, and the related granting,
obtaining and conveyance of easements with respect to the same (including the
right to make curb cuts where desired by HCBI) within 30 days after the Closing
Date;
-2-
(iii) Granting of an easement for a sign for the business to be
operated on the Property at the corner of New Cut Road and the access road
described in (ii) above which intersects New Cut Road; and
(iv) Grading, clearing and initial erosion control on the
Property within 30 days after the Closing Date.
In the event Owner and HCBI cannot reach agreement on the terms and
conditions of one or more of the above documents (after exercising good faith
efforts) on or prior to Closing, then (i) if the document(s) upon which
agreement is not reached is solely for the benefit of HCBI, HCBI may waive its
right to be delivered such document and Owner and HCBI shall proceed to Closing
hereunder, (ii) if the document(s) upon which agreement is not reached is solely
for the benefit of Owner, Owner may waive its right to be delivered such
document and HCBI and Owner shall proceed to Closing hereunder, or (iii) in the
case of the document described in Item (d) above, the parties shall be bound by
the terms of Item (d) as set forth herein without regard the execution of a
separate document reciting, restating or revising such terms.
6. Prorations. Ad valorem taxes on the Property for the calendar year
in which Closing occurs shall be prorated at the time of Closing. If the then-
current tax bills are not available, taxes shall be prorated on the basis of the
taxes on the Property for the immediately preceding year subject to adjustment
when the current year tax bill is available. If the Property is a part of a
larger tract, the tax proration should be based upon the total tax bill for such
larger tract divided by the total number of acres included in such tax bill
multiplied by the number of acres contained within the Property. Any and all
assessments, if any, against the Property which are due and payable prior to
Closing shall be paid in full by Owner prior to or at Closing.
7. Costs. HCBI shall pay all recording fees, the cost of HCBI's title
insurance policy, and HCBI's attorneys' fees. Owner shall pay the Georgia
transfer tax due in connection with recording the limited warranty deed, the
cost of satisfying of record any security instruments released at Closing, the
cost of the Survey, and Owner's attorneys' fees.
8. Inspection; Indemnity. At all times during the term of this
Agreement, HCBI or its agents shall have the right to (i) inspect the Property
and all matters relating thereto; and (ii) examine the documents, plans and
information required to be delivered by Owner to HCBI pursuant to this
Agreement. HCBI shall provide Owner with at least 24 hours prior notice (oral
notice shall be acceptable) of any approved inspection, test, investigation or
analysis that Owner or its contractors intend to make on the Property, and Owner
shall have the right to have its representatives present to observe and/or
supervise any permitted inspection, test, investigation or analysis. HCBI shall
pay all costs incurred in making surveys, tests, analyses and investigations of
the Property.
HCBI hereby indemnifies, defends and agrees to hold harmless Owner from any
and all liens, claims, causes of action, losses, damages, expenses, costs and
other liabilities arising out of HCBI's exercise of its right and privilege to
enter upon the Property. This indemnification shall survive the termination or
Closing of this Agreement.
9. Damage or Condemnation. Risk of loss resulting from any condemnation,
eminent domain or expropriation proceeding which is commenced prior to Closing,
and risk of loss to the Property due to any other cause, remains with Owner
until Closing. If, prior to the Closing, all or part of the Property shall be
destroyed, damaged or subjected to a bona fide threat of condemnation,
expropriation or other proceeding, Owner shall so notify HCBI, and HCBI may
elect to (i) cancel this Agreement, in which event all parties shall be relieved
-3-
and released of and from any further duties, obligations, rights or liabilities
hereunder except for those which expressly survive the termination of this
Agreement, or (ii) HCBI may declare this Agreement to remain in full force and
effect and the purchase contemplated herein, subject to such damage or less any
interest taken by eminent domain, expropriation or condemnation, shall be
effected, and at Closing, Owner shall assign, transfer and set over to HCBI all
of the right, title and interest of Owner in and to any awards and insurance
proceeds or claims that have been or that may thereafter be made for such taking
or damage. Owner shall notify HCBI of any and all plans, studies or
notifications of contemplated eminent domain, expropriation or condemnation
within five business days of receipt of such information by owner.
10. Broker. HCBI and Owner hereby represent that no broker has been
contacted in connection with or otherwise involved in the transaction
contemplated by this Agreement, and HCBI and Owner hereby indemnify each other
against, and agree to hold each other harmless from, any liability or claim (and
all expenses, including attorneys' fees, incurred in defending any such claim or
in enforcing this indemnity) for a real estate brokerage commission or similar
fee or compensation, except as set forth herein, arising out of or in any way
connected with any claimed dealings with the indemnitor and relating to this
Agreement or the purchase and sale of the Property. The foregoing indemnity
shall survive the rescission, cancellation, termination, or consummation of this
Agreement. Owner and HCBI shall execute at closing such affidavits and lien
waivers as are appropriate to comply with O.C.G.A. Section 44-14-600 et seq.
11. Representations and Warranties. As a material inducement to HCBI to
enter into this Agreement and as a condition to HCBI's obligations hereunder,
Owner hereby makes the following representations and warranties which are true
and correct as of the date hereof and which shall be true and correct on the
date of Closing:
(a) There is no action, suit or proceeding pending which would
materially affect or delay HCBI's right to construct a retail banking facility
on the Property.
(b) Owner has received no notice of a condemnation proceeding with
regard to all or any part of the Property and to Owner's knowledge, there is no
such proceeding threatened or contemplated by any governmental entity.
(c) Owner is a "United States person" as defined in the Internal
Revenue Code Section 1445(f)(3) and Section 7701(g) and is a Georgia resident,
as defined in O.C.G.A. Section 48-7-128 et. seq.
(d) There are no leases, subleases, other rental or occupancy
agreements or recorded or unrecorded options or similar agreements with respect
to the Property.
12. Notice. All notices shall be in writing and shall be deemed to have
been properly given on the earlier of (i) when delivered in person, (ii) when
deposited in the United States Mail, with adequate postage, and sent by
registered or certified mail with return receipt requested, to the appropriate
party at the address set out below, (iii) when deposited with Federal Express,
Express Mail or other overnight delivery service for next day delivery,
addressed to the appropriate party at the address set out below, or (iv) when
transmitted by facsimile to the facsimile number for each party set forth below
(but only if duplicate notice is also given via one of the methods described in
clauses (i), (ii) or (iii)) .
Owner: Dunhill Developers, LLC
----- 415 Lee Street
-4-
Jefferson, Georgia 30549
Attention: Amyn Meghani, President
Facsimile No. (706) 367-0358
HCBI: Hometown Community Bancshares, Inc.
---- PO Box 218
Braselton, Georgia 30517
Attention: Robert M. Martin, Secretary to the
Board of Directors
Facsimile No. (706) 654-3153
Rejection or other refusal by the addressee to accept, or the inability to
deliver because of a changed address or changed facsimile number of which no
notice was given, shall be deemed to be receipt of the notice sent. Any party
shall have the right, from time to time, to change the address or facsimile
number to which notices to it shall be sent by giving to the other party or
parties at least 10 days prior notice of the changed address or changed
facsimile number.
13. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the substantive and not the conflicts laws of
the State of Georgia.
(b) Counterparts. This Agreement may be executed by the parties hereto
in two or more counterparts and each executed counterpart shall be considered
an original.
(c) Drafting. This Agreement has been negotiated between the parties
and, for construction purposes, shall not be deemed the drafting of any one
party.
(d) Entire Agreements; Amendments. This Agreement embodies the entire
agreement and understanding between the parties relating to the subject matter
hereof and may not be amended, waived or discharged except by an instrument in
writing executed by the party against which enforcement of such amendment,
waiver, or discharge is sought. This Agreement supersedes all prior agreements
and memoranda between HCBI and Owner which relate to the Property. The
invalidity of any one of the covenants, agreements, conditions or provisions of
this Agreement or any portion thereof shall not affect the remaining portions
thereof or any part hereof and this Agreement shall be amended to substitute a
valid provision which reflects the intent of the parties as was set forth in the
invalid provision.
(e) Day for Performance. Wherever herein there is a day or time period
established for performance and such day or the expiration of such time period
is a Saturday, Sunday or holiday, then such time for performance shall be
automatically extended to the next following business day.
(f) Attorneys' Fees. Should any suit be brought to enforce the terms
of this Agreement or any obligation herein, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and expenses therein incurred.
(g) TIME IS OF THE ESSENCE OF THIS AGREEMENT.
(h) Date of this Agreement. The "date of this Agreement" or "date
hereof" wherever used herein shall mean the date the last person of all persons
required to sign this Agreement, shall actually sign this Agreement, as
evidenced by the date beside said party's name.
-5-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed under seal by their duly authorized representatives as of the date
first above written.
OWNER:
Dunhill Developers, LLC, a Georgia limited
liability company
By: /s/Amyn Meghani
--------------------------------------
Amyn Meghani, President
Date: September 2nd, 2004
HCBI:
HOMETOWN COMMUNITY BANCSHARES,INC., a
Georgia corporation,
By: /s/C. Sean Childers
--------------------------------------
C. Sean Childers, President and Chief
Executive Officer
Date: September 2, 2004
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Exhibit A
Property Description
[Insert]
Exhibit B
Permitted Title Exceptions
[Insert]
EXHIBIT 23.1
[LOGO OF NICHOLS, CAULEY
& ASSOCIATES, LLC]
[LETTERHEAD OF NICHOLS, CAULEY & ASSOCIATES, LLC]
NICHOLS, CAULEY & ASSOCIATES, LLC
A Professional Services Firm of:
Certified Public Accountants
Certified Financial Planners(r)
Certified Valuation Analysts
Atlanta / Clarkesville / Dublin / Warner Robins
www.nicholscauley.com
September 14, 2004
To The Organizers
Hometown Community Bancshares, Inc. (A Development Stage Company)
Braselton, Georgia
Dear Sirs:
Nichols, Cauley & Associates, LLC consents to the July 31, 2004 audited
financial statements being included in the S-1 filing.
/s/Nichols, Cauley & Associates, LLC
Reply to: 2970 Clairmont Road, NE
Atlanta, GA 30329-4440
800-823-1224
Fax 404-214-1302
atlanta@nicholscauley.com
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