Exhibit 10
Underwriting Agreement
1,400,000 Shares*
SOUTHCOAST FINANCIAL CORPORATION
Common Stock
UNDERWRITING AGREEMENT
Atlanta, Georgia
October 26, 2005
▇▇▇▇▇▇ ▇▇▇▇▇▇ & Company, Inc.
One Buckhead Plaza
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇.▇. ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Southcoast Financial Corporation, a South Carolina corporation (the
"Company"), proposes, subject to the terms and conditions stated herein, to
issue and sell to ▇▇▇▇▇▇ ▇▇▇▇▇▇ & Company, Inc. (the "Underwriter"), an
aggregate of 1,400,000 shares of its Common Stock, no par value per share (the
"Common Stock"). The aggregate of 1,400,000 shares of Common Stock to be
purchased from the Company are called the "Firm Shares." In addition, the
Company has agreed to sell to the Underwriter, upon the terms and conditions
stated herein, up to an additional 210,000 shares of Common Stock (the
"Additional Shares") to cover over-allotments by the Underwriter, if any. The
Firm Shares and the Additional Shares are collectively referred to in this
Underwriting Agreement as the "Shares."
The Company wishes to confirm as follows its agreement with you in
connection with the purchase of the Shares from the Company.
1. Registration Statement and Prospectus. The Company has (i) prepared and filed
with the Securities and Exchange Commission (the "Commission") in accordance
with the provisions of the Securities Act of 1933, as amended, and the rules and
regulations of the Commission thereunder (collectively, the "1933 Act"), a
registration statement on Form S-l (Commission File No. 333-128247) as amended
*Plus an additional 210,000 shares subject to Underwriter's over-allotment
option.
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by Amendment No.1 on October 13, 2005, including the related preliminary
prospectus or prospectuses. Such registration statement, including the exhibits
thereto and schedules thereto at the time it became effective is called the
"Registration Statement." Promptly after execution and delivery of this
Underwriting Agreement, the Company will prepare and file a prospectus in
accordance with the provisions of Rule 430A ("Rule 430A") and Rule 424 ("Rule
424") of the 1933 Act, as such prospectus is further amended and supplemented
(the "Prospectus"). If the Company files another registration statement with the
Commission to register a portion of the Shares pursuant to Rule 462(b) under the
1933 Act (the "Rule 462 Registration Statement"), then any reference to
"Registration Statement" herein shall be deemed to include the registration
statement on Commission Form S-1 (Commission File No. 333-128247) and the Rule
462 Registration Statement, as each such registration statement may be amended
pursuant to the 1933 Act. The prospectus subject to completion in the form
included in the Registration Statement at the time of effectiveness of such
Registration Statement with the Commission, together with the related
preliminary prospectus, as these may be amended or supplemented from time to
time until the final Prospectus dated of even date herewith is referred to in
this Underwriting Agreement as the "Preliminary Prospectus." All references in
this Underwriting Agreement to the Registration Statement, the Rule 462
Registration Statement, a Preliminary Prospectus or the Prospectus, or any
amendments or supplements to any of the foregoing, shall include any copy
thereof filed with the Commission pursuant to its Electronic Data Gathering,
Analysis and Retrieval System ("▇▇▇▇▇") and Commission Regulation S-T.
2. Agreements to Sell and Purchase. The Company hereby agrees to issue
and sell the Firm Shares to the Underwriter and, upon the basis of and in
reliance on the Company's representations, warranties and agreements herein
contained, and subject to all the terms and conditions set forth herein, the
Underwriter agrees to purchase from the Company at a purchase price of $20.21
per Share (the "Purchase Price per Share") the number of Firm Shares set forth
herein.
The Company hereby also agrees to sell to the Underwriter and, upon the
basis of and in reliance on the Company's representations, warranties and
agreements of the Company herein contained and subject to all the terms and
conditions set forth herein, the Underwriter shall have the right for 30 days
from the date of the Prospectus to purchase from the Company up to 210,000
Additional Shares at the Purchase Price per Share. The Additional Shares may be
purchased solely for the purpose of covering over-allotments, if any, made in
connection with the offering of the Firm Shares. The option to purchase
Additional Shares may be exercised at any time within 30 days after the date of
the Prospectus, but no more than once.
3. Terms of Public Offering. The Company has been advised by you that
you propose to make a public offering of the Shares as soon after the
Registration Statement and this Underwriting Agreement have become effective as
in your judgment is advisable and initially to offer the Shares upon the terms
set forth in the Prospectus.
Not later than 12:00 P.M. Eastern time on the second business day
following the date the Shares are released by the Underwriter for sale to the
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public, the Company shall deliver or cause to be delivered copies of the
Prospectus in such quantities and at such places as the Underwriter shall
request.
4. Delivery of the Shares and Payment Therefor. Delivery to the
Underwriter of the Firm Shares and payment therefor shall be made at the offices
of ▇▇▇▇▇▇ ▇▇▇▇▇▇ & Company, One Buckhead Plaza, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇.▇. ▇▇▇▇▇
▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ at 10:00 AM., Atlanta, Georgia time, on October 31, 2005,
or such other place, time and date not later than 10:00 AM., Atlanta, Georgia
time, on October 31, 2005, as ▇▇▇▇▇▇ ▇▇▇▇▇▇ shall designate by notice to the
Company (the time and date of such closing are called the "Closing Date"). The
place of closing for the Firm Shares and the Closing Date may be varied by
agreement between ▇▇▇▇▇▇ ▇▇▇▇▇▇ and the Company. The Company hereby acknowledges
that circumstances under which ▇▇▇▇▇▇ ▇▇▇▇▇▇ may provide notice to postpone the
Closing Date as originally scheduled include, without limitation, any
determination by the Company or ▇▇▇▇▇▇ ▇▇▇▇▇▇ to recirculate to the public
copies of an amended or supplemented Prospectus or a delay as contemplated by
the provisions of Section 11 hereof.
Delivery to the Underwriter of any Additional Shares and payment for
any Additional Shares to be purchased by the Underwriter shall be made at the
offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇ & Company, One Buckhead Plaza, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇.▇. ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, at 10:00 AM., Atlanta, Georgia time, on such
date or dates (each, an "Additional Closing Date") (which may be the same as the
Closing Date, but shall in no event be earlier than the Closing Date nor earlier
than three nor later than ten business days after the giving of the notice
hereinafter referred to) as shall be specified in a written notice, from ▇▇▇▇▇▇
▇▇▇▇▇▇ to the Company of the Underwriter's determination to purchase a number,
specified in such notice, of Additional Shares. Such notice may be given at any
time within 30 days after the date of the Prospectus and must set forth (i) the
aggregate number of Additional Shares as to which the Underwriter is exercising
the option and (ii) the names and denominations in which the certificates for
which the Additional Shares are to be registered. The place of closing for the
Additional Shares and the Additional Closing Date may be varied by agreement
between ▇▇▇▇▇▇ ▇▇▇▇▇▇ and the Company.
Certificates for the Firm Shares and for any Additional Shares to be
purchased hereunder shall be registered in such names and in such denominations
as you shall request prior to 1:00 P.M., Atlanta, Georgia time, not later than
the second full business day preceding the Closing Date or the Additional
Closing Date, as the case may be. Such certificates shall be made available to
you in Atlanta, Georgia or such other location designated by ▇▇▇▇▇▇ ▇▇▇▇▇▇ for
inspection and packaging not later than 9:30 AM., Atlanta, Georgia time, on the
business day immediately preceding the Closing Date or the Additional Closing
Date, as the case may be. The certificates evidencing the Firm Shares and any
Additional Shares to be purchased hereunder shall be delivered to you by the
Company on the Closing Date or the Additional Closing Date, as the case may be,
against payment by the Underwriter of the purchase price therefor by wire
transfer of immediately available funds to an account specified by the Company
in writing not later than the close of business on the business day immediately
preceding the Closing Date or the Additional Closing Date, as the case may be.
Payment for the Shares sold by the Company hereunder shall be delivered by the
Underwriter to the Company on the Closing Date and each Additional Closing Date.
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5. Covenants and Agreements of the Company.
The Company covenants and agrees with the Underwriter as follows:
(a) The Registration Statement has been declared effective by
Commission order dated October 26, 2005. The Company will use its best efforts
to cause the Registration Statement to be maintained as effective, and will
advise you promptly and, if requested by you, will confirm such advice in
writing (i) if and when the Registration Statement is no longer effective and
the time and date of any filing of any post-effective amendment to the
Registration Statement or any supplement to any Preliminary Prospectus or the
Prospectus and the time and date that any post-effective amendment to the
Registration Statement becomes effective, (ii) if Rule 430A under the 1933 Act
is employed, when the Prospectus has been timely filed pursuant to Rule 424(b)
under the 1933 Act, (iii) of the receipt of any comments of the Commission, or
any request by the Commission for amendments or supplements to the Registration
Statement, any Preliminary Prospectus or the Prospectus or for additional
information, (iv) of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement or of the suspension of
qualification of the Shares for offering or sale in any jurisdiction or the
initiation of any proceeding for such purposes and (v) within the period of time
referred to in Section 5(e) below, of any change in the Company's condition
(financial or other), business, prospects, properties, net worth or results of
operations, or of any event that comes to the attention of the Company that
makes any statement made in the Registration Statement, the Preliminary
Prospectus or the Prospectus (as then amended or supplemented) untrue in any
material respect or that requires the making of any additions thereto or changes
therein in order to make the statements therein (in the case of the Preliminary
Prospectus, in light of the circumstances under which they were made) not
misleading in any material respect, or of the necessity to amend or supplement
the Prospectus (as then amended or supplemented) to comply with the 1933 Act or
any other Law (as defined in Section 6(k) below). If at any time the Commission
shall issue any stop order suspending the effectiveness of the Registration
Statement, the Company will make every reasonable effort to obtain the
withdrawal or lifting of such order at the earliest possible time. The Company
will provide the Underwriter with copies of the form of Prospectus, in such
number as the Underwriter may reasonably request, and file with the Commission
such Prospectus in accordance with Rule 424(b) of the 1933 Act before the close
of business on the first business day immediately following the date hereof.
(b) The Company will furnish to you, without charge, two signed
duplicate originals of the Registration Statement as originally filed with the
Commission and of each amendment thereto, including financial statements and all
exhibits thereto, and will also furnish to you, without charge, such number of
conformed copies of the Registration Statement as originally filed and of each
amendment thereto as you may reasonably request.
(c) The Company will not file any Rule 462 Registration Statement or
any amendment to the Registration Statement or make any amendment or supplement
to the Prospectus unless (i) you shall have previously been advised thereof and
been given a reasonable opportunity to review such filing, amendment or
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supplement and (ii) you have not reasonably objected to such filing, amendment
or supplement after being so advised and having been given a reasonable
opportunity to review such filing, amendment or supplement.
(d) Prior to the execution and delivery of this Underwriting Agreement,
the Company has delivered or will deliver to you, without charge, in such
quantities as you have requested or may hereafter reasonably request, copies of
each form of the Preliminary Prospectus. Consistent with the provisions of
Section 5(e) hereof, the Company consents to the use, in accordance with the
provisions of the 1933 Act and with the securities or Blue Sky laws of the
jurisdictions in which the Shares are offered by the Underwriter and by dealers,
prior to the date of the Prospectus, of each Preliminary Prospectus so furnished
by the Company.
(e) As soon after the execution and delivery of this Underwriting
Agreement as is practicable and thereafter from time to time for such period as
in the reasonable opinion of counsel for the Underwriter a prospectus is
required by the 1933 Act to be delivered in connection with sales by the
Underwriter or a dealer (the "Prospectus Delivery Period"), and for so long a
period as you may request for the distribution of the Shares, the Company will
deliver to the Underwriter and each dealer, without charge, as many copies of
the Prospectus (and of any amendment or supplement thereto) as they may
reasonably request. The Company consents to the use of the Prospectus (and of
any amendment or supplement thereto) in accordance with the provisions of the
1933 Act and with the securities or Blue Sky laws of the jurisdictions in which
the Shares are offered by the Underwriter and by all dealers to whom Shares may
be sold, both in connection with the offering and sale of the Shares and for
such period of time thereafter as the Prospectus is required by the 1933 Act to
be delivered in connection with sales by any Underwriter or dealer. If at any
time prior to the later of (i) the completion of the distribution of the Shares
pursuant to the offering contemplated by the Registration Statement or (ii) the
expiration of prospectus delivery requirements with respect to the Shares under
Section 4(3) of the 1933 Act and Rule 174 thereunder, any event shall occur that
in the judgment of the Company or in the opinion of counsel for the Underwriter
is required to be set forth in the Prospectus (as then amended or supplemented)
or should be set forth therein in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, or if it
is necessary to supplement or amend the Prospectus to comply with the 1933 Act
or any other law, the Company will forthwith prepare and, subject to Sections
5(a) and 5(c) hereof, file with the Commission and use its best efforts to cause
to become effective as promptly as possible an appropriate supplement or
amendment thereto, and will furnish to the Underwriter, without charge, a
reasonable number of copies thereof.
(f) The Company will cooperate with you and counsel for the Underwriter
in connection with the registration or qualification of the Shares for offering
and sale by the Underwriter and by dealers under the securities or Blue Sky laws
of such jurisdictions as you may reasonably designate and will file such
consents to service of process or other documents as may be reasonably necessary
in order to effect and maintain such registration or qualification for so long
as required to complete the distribution of the Shares; provided that in no
event shall the Company be obligated to qualify to do business in any
jurisdiction where it is not now so qualified or to take any action that would
subject it to general service of process in suits, other than those arising out
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of the offering or sale of the Shares, as contemplated by this Underwriting
Agreement and the Prospectus, in any jurisdiction where it is not now so
subject. In the event that the qualification of the Shares in any jurisdiction
is suspended, the Company shall so advise you promptly in writing. The Company
will use its best efforts to qualify or register its Common Stock for sale in
non-issuer transactions under (or obtain exemptions from the application of) the
Blue Sky laws of each state where necessary to permit market making transactions
and secondary trading and will comply with such Blue Sky laws and will continue
such qualifications, registrations and exemptions in effect for a period of not
less than one year after the date hereof.
(g) The Company will make generally available to its security holders a
consolidated earnings statement (in form complying with the provisions of
Commission Rule 158), which need not be audited, covering a twelve-month period
commencing after the effective date of the Registration Statement and the Rule
462 Registration Statement, if any, and ending not later than 15 months
thereafter, as soon as practicable after the end of such period, which
consolidated earnings statement shall satisfy the provisions of Section 11 (a)
of the 1933 Act.
(h) During the Prospectus Delivery Period and for not less than one
year after the date hereof, the Company will file and furnish all documents
required to be filed or furnished with the Commission pursuant to Sections 13,
14 and 15 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and Commission regulations and rules ("Commission Regulations"), in the
manner and within the time periods required by the Exchange Act and Commission
requirements of Nasdaq National Market ("Nasdaq") and the National Association
of Securities Dealers, Inc. (the "NASD") or any national securities exchange
where any Company securities are listed.
(i) During the period beginning on the date hereof and ending five
years from the date hereof, the Company will furnish to you (i) as soon as
available, a copy of each proxy statement, quarterly or annual report or other
report of the Company mailed to shareholders or filed with the Commission, the
NASD or Nasdaq or any national securities exchange and (ii) from time to time
such other information concerning the Company as you may reasonably request.
(j) If this Underwriting Agreement shall terminate or shall be
terminated after execution pursuant to any provision hereof (except pursuant to
a termination under Section 11 hereof, other than clauses (ii), (iv) or (vii))
or if this Underwriting Agreement shall be terminated by the Underwriter because
of any inability, failure or refusal on the part of the Company to perform in
all material respects any agreement herein or to comply in all material respects
with any of the terms or provisions hereof or to fulfill in all material
respects any of the conditions of this Underwriting Agreement, the Company
agrees to reimburse you for all out-of-pocket expenses (including travel
expenses and the fees and expenses of counsel for the Underwriter, but excluding
wages and salaries paid by you) reasonably incurred by you III connection
herewith.
(k) The Company will apply the net proceeds from the sale of the Shares
to be sold by it hereunder in accordance in all material respects with the
statements under the caption "Use of Proceeds" in the Prospectus.
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(l) If Rule 430A under the 1933 Act is employed, the Company will
timely file the Prospectus pursuant to Rule 424(b) under the 1933 Act.
(m) For a period of 90 days after the date of the Prospectus first
filed pursuant to Rule 424(b) under the 1933 Act, without your prior written
consent, the Company will not and will cause each of its subsidiaries to not (i)
directly or indirectly, issue, announce the intention to sell, sell, offer or
contract to sell or otherwise dispose of or transfer any shares of Common Stock
or securities convertible into or exchangeable or exercisable for shares of
Common Stock (collectively, "Company Securities") or any rights to purchase
Company Securities, or file any registration statement under the 1933 Act with
respect to any of the foregoing, or (ii) enter into any swap, forward contract,
or other agreement that transfers, in whole or in part, directly or indirectly,
the economic consequences or risks of ownership of Company Securities whether
any such swap or transaction is to be settled by delivery of Common Stock or
other securities, in cash or otherwise, except to the Underwriter pursuant to
this Underwriting Agreement and except for (x) sales of shares of Common Stock
to employees under the Company's Employee Stock Purchase Plan (as described in
the Prospectus) (y) grants of options pursuant to the Company's 1999 Stock
Option Plan (as described in the Prospectus) and (z) except for issuances of
shares of Common Stock upon the exercise of options outstanding as of the date
hereof under the Company's 1999 Stock Option Plan.
(n) Prior to the Closing Date or the Additional Closing Date, as the
case may be, the Company will furnish to you, as promptly as possible, copies of
any unaudited interim consolidated financial statements of the Company and its
subsidiaries for any period subsequent to the periods covered by the financial
statements appearing in the Prospectus.
(o) The Company will comply with all provisions of the undertakings
contained in the Registration Statement.
(p) The Company will not at any time, directly or indirectly, take any
action designed, or which might reasonably be expected to cause or result in, or
which will constitute, stabilization or manipulation of the price of the shares
of Common Stock to facilitate the sale or resale of any of the Shares.
(q) The Company filed with Nasdaq a notice of sale of additional shares
on September 12, 2005, and will timely file with Nasdaq all documents and
notices required by Nasdaq of companies that have or will issue securities that
are traded on Nasdaq.
(r) The Company shall engage and maintain, at its expense, a transfer
agent and, if necessary under the jurisdiction of its incorporation or the rules
of any national securities exchange on which the Common Stock is listed, a
registrar (which, if permitted by applicable laws and rules may be the same
entity as the transfer agent) for the Common Stock.
(s) The Company will have an annual audit prepared by an accounting
firm that is registered and in good standing with the Public Company Accounting
Oversight Board ("PCAOB") and is "independent" of the Company under the 1933
Act, the Exchange Act and the PCAOB's rules.
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6. Representations and Warranties of the Company.
The Company hereby represents, warrants and covenants to the
Underwriter on the date hereof, and shall be deemed to represent, warrant and
covenant to the Underwriter on the Closing Date and the Additional Closing Date,
as the case may be, and the Underwriter is relying upon, the following:
(a) The Company satisfies all of the requirements of the 1933 Act for
use of Form S-l and for the offering of Shares contemplated hereby. On the
original effective date of the Registration Statement, on the effective date of
the most recent post-effective amendment thereto, if any, the Registration
Statement complied in all material respects with the requirements of the 1933
Act and all Commission Regulations, and did not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading. Each Preliminary
Prospectus and Prospectus included as part of the Registration Statement as
originally filed or as part of any amendment or supplement thereto, or filed
pursuant to Rule 424 under the 1933 Act, complied or will comply when so filed
in all material respects with the provisions of the 1933 Act and Commission
Regulations, provided that this representation and warranty does not apply to
statements in or omissions from such Preliminary Prospectus or Prospectus (or
any amendment or supplement thereto) made in reliance upon and in conformity
with information relating to the Underwriter furnished to the Company in writing
by or on behalf of the Underwriter expressly for use therein, which shall
include only the information contained in "Underwriting - Commissions and
Expenses", "Stabilization" and "- Passive Market Making" sections.
(b) None of the Commission or any securities or Blue Sky authorities of
any state or other jurisdiction has issued any order preventing or suspending
the use of the Registration Statement, any Preliminary Prospectus or the
Prospectus and no proceeding for that purpose has been instituted or threatened
by the Commission or the securities or Blue Sky authorities of any state or
other jurisdiction.
(c) The Company has prepared each of the Registration Statement, any
Rule 462 Registration Statement and any post-effective amendment thereto, the
Preliminary Prospectus and the Prospectus and all amendments or supplements
thereto. The Registration Statement (including any Rule 462 Registration
Statement), in the form in which it became effective and also in such form as it
may be in when any post-effective amendment thereto shall become effective, each
Preliminary Prospectus and the Prospectus, and any supplement or amendment
thereto when filed with the Commission under Rule 424 under the 1933 Act,
complied and will comply as to form in all material respects with the provisions
of the 1933 Act and all applicable Commission Regulations and will not at any
such times contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except that this representation and warranty does not
apply to statements in or omissions from the Registration Statement or the
Prospectus (or any amendment or supplement thereto) made in reliance upon and in
conformity with information relating to the Underwriter furnished to the Company
in writing by or on behalf of the Underwriter through you expressly for use
therein.
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(d) Each Preliminary Prospectus and the Prospectus, if filed by
electronic transmission pursuant to ▇▇▇▇▇ (except as may be permitted by
Regulation S- T under the 1933 Act), was identical (other than any ▇▇▇▇▇
formatting) to the copy thereof delivered to the Underwriter for use in
connection with the offer and sale of the Shares.
(e) All of the Company's filings or reports filed under the 1933 Act
and the Exchange Act, when they were filed (or, if any amendment with respect to
any such document was filed, when such amendment was filed), conformed in all
material respects with the requirements of the 1933 Act or the Exchange Act (as
applicable) and all applicable Commission Regulations, and any additional
reports or filings, when so filed, will, when they are filed, conform in all
material respects with the requirements of the 1933 Act or the Exchange Act (as
applicable) and all applicable Commission Regulations; no such additional filing
or report when it was filed (or, if an amendment with respect to any such
document was filed, when such amendment was filed), contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading; and no such further Incorporated Document, when it is filed, will
contain an untrue statement of a material fact or will omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein not misleading.
(f) The capitalization of the Company is and will be as set forth in
the Prospectus as of the date set forth therein. All the outstanding shares of
Common Stock of the Company have been, and as of the Closing Date and the
Additional Closing Date, as the case may be, will be, duly authorized and
validly issued, fully paid and nonassessable and free of any preemptive or
similar rights. The Shares to be issued and sold to the Underwriter by the
Company hereunder have been duly authorized and, when issued and delivered to
the Underwriter against full payment therefor in accordance with the terms
hereof will be validly issued, fully paid and nonassessable and free of any
preemptive or similar rights. The capital stock of the Company conforms to the
description thereof included in the Registration Statement and the Prospectus
(or any amendment or supplement thereto). The delivery of certificates for the
Shares being sold by the Company against payment therefor pursuant to the terms
of this Underwriting Agreement will pass valid title to the Shares being sold by
the Company, free and clear of any Lien (as defined in Section 6(i) below) or
defect in title, to the Underwriter, which is purchasing such Shares in good
faith and without notice of any Lien or defect in title. The certificates for
the Shares being sold by the Company are in valid and sufficient form.
(g) The Company is a bank holding company under the Bank Holding
Company Act of 1956, as amended (the "BHC Act") and is duly registered as such
with the Board of Governors of the Federal Reserve System (the "Federal
Reserve"). The Company is also subject to regulation and supervision by the
South Carolina State Board of Financial Institutions (the "State Board"). The
Company is duly organized and validly existing as a corporation in good standing
under the laws of the State of South Carolina with full corporate power and
authority to own, lease and operate its properties and to conduct its business
as presently conducted and as described in the Registration Statement and the
Prospectus (and any amendment or supplement thereto), and is duly registered and
qualified to conduct its business and is in good standing in each jurisdiction
or place where the nature of its properties or the conduct of its business
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requires such registration or qualification, except where the failure to so
register or qualify has not had and will not have a material adverse effect on
the condition (financial or otherwise), business, management, properties, net
worth, results of operations or prospects of the Company and its subsidiaries
taken as a whole (a "Material Adverse Effect"). The subsidiaries listed on
Schedule 1 to this Agreement are the Company's only subsidiaries.
(h) Each of the Company's subsidiaries is an entity duly organized and
validly existing and in good standing under the laws of its state of
organization with full entity power and authority to own, lease and operate its
properties and to conduct its business as presently conducted and as described
in the Registration Statement and the Prospectus (and any amendment or
supplement thereto), and is duly registered and qualified to conduct its
business and is in good standing in each jurisdiction or place where the nature
of its properties or the conduct of its business requires such registration or
qualification, except where the failure to so register or qualify has not had
and will not have a Material Adverse Effect. The subsidiaries listed on Schedule
1 to this Agreement are the Company's only subsidiaries.
(i) The issued shares of capital stock or other ownership interests of
each of the Company's subsidiaries have been duly authorized and validly issued,
are fully paid and nonassessable and are owned by the Company, directly or
indirectly, free and clear of any security interests, mortgage, pledge or
negative pledge, hypothecation, lien, encumbrances, or adverse equities or
claims ("Liens"). The Company does not have any subsidiaries and does not own a
material interest in or control, directly or indirectly, any other corporation,
partnership, joint venture, association, trust or other business organization,
except as set forth in the Registration Statement and Schedule 1 hereto. As used
in this Underwriting Agreement, "subsidiaries" shall have the meaning provided
in Commission Rule 405 under the 1933 Act, and includes all direct and indirect
subsidiaries of the Company.
(j) There are no legal or governmental proceedings before or brought
by, any governmental, regulatory, administrative or self-regulatory authority,
arbitral body or court ("Governmental Authority") pending or, to the best
knowledge of the Company, threatened, against the Company or its subsidiaries or
to which the Company or its subsidiaries or any of their properties are subject,
that are required to be described in the Registration Statement or the
Prospectus (or any amendment or supplement thereto), but that are not described
as required therein. Except as described in the Prospectus, there is no claim,
action, suit, proceeding, inquiry (formal or informal), or investigation by or
before any Governmental Authority pending or, to the best knowledge of the
Company, threatened, against or involving the Company or its subsidiaries or any
of their properties, which might individually or in the aggregate prevent or
adversely affect the transactions contemplated by this Underwriting Agreement,
or result in a Material Adverse Effect, nor to the Company's knowledge, is there
any basis for any such claim, action, suit, inquiry, proceeding or
investigation. There are no agreements, contracts, commitments, indentures,
leases, or other documents or instruments (collectively, "Agreements") that are
required to be described in the Registration Statement or the Prospectus (or any
amendment or supplement thereto) or to be filed as an exhibit to or otherwise
included in the Registration Statement that are not described in or filed with
the Registration Statement and the Prospectus as required by the 1933 Act and
the Commission Regulations. All Agreements to which the Company or any of its
subsidiaries is a party have been duly authorized, executed and delivered by the
10
Company or the applicable subsidiary, constitute valid and binding agreements of
the Company or the applicable subsidiary and are enforceable against the Company
or the applicable subsidiary in accordance with the terms thereof, except as
enforceability thereof may be limited by (i) the application of bankruptcy,
receivership, conservatorship, reorganization, insolvency and similar Laws
affecting creditors' rights generally and (ii) equitable principles being
applied at the discretion of a court before which any proceeding may be brought
(the "Bankruptcy and Equity Exception"). Neither the Company nor the applicable
subsidiary has received notice or been made aware that any other party is in
breach of or default to the Company under any Agreement.
(k) Neither the Company nor any of its subsidiaries is (i) in violation
of (A) its articles of incorporation or bylaws, or other organizational
documents ("Organizational Documents"), (B) any law, ordinance, rules and
regulations of, agreements with, and commitments to, orders, rulings, directives
and decrees of, any Governmental Authority (collectively, "Laws"), applicable to
the Company or any of its subsidiaries, the violation of which would have a
Material Adverse Effect; or (ii) in default in any material respect in the
performance of any obligation, agreement or condition contained in (A) any bond,
debenture, lease, note or any other evidence of indebtedness or obligation or
(B) any Agreement (each of (A) and (B), an "Existing Instrument") to which the
Company or any of its subsidiaries is a party or by which any of their
properties may be subject or bound, which default has had or would have a
Material Adverse Effect; and no state of facts exists that constitutes an event
of default on the part of the Company or any of its subsidiaries, or to the
Company's knowledge, an event of default by any other party thereto, or any
event, nonoccurrence, act or omission that, with notice or lapse of time or
both, would constitute an event of default under its Organizational Documents,
any applicable Laws or any Existing Instruments.
(l) The Company's execution and delivery of this Underwriting Agreement
and the performance by the Company of its obligations under this Underwriting
Agreement have been duly and validly authorized by the Company, and this
Underwriting Agreement has been duly executed and delivered by the Company. This
Underwriting Agreement constitutes a valid and legally binding agreement of the
Company, enforceable against the Company in accordance with its terms, except to
the extent enforceability may be limited by the Bankruptcy and Equity Exceptions
and to limitations on the rights to indemnity and contribution hereunder that
exist by virtue of public policy under federal and state securities laws.
(m) None of the offer, issuance and sale of the Shares by the Company,
the execution, delivery or performance of this Underwriting Agreement by the
Company nor the consummation by the Company of the transactions contemplated
hereby (i) requires any consent, approval, authorization or other order of or
registration or filing with, any Governmental Authority (except such as may be
required for the registration of the Shares under the 1933 Act, the listing of
the Shares for trading on Nasdaq and compliance with the securities or Blue Sky
laws of various jurisdictions, all of which have been or will be, effected in
accordance with this Underwriting Agreement), (ii) conflicts with or will
conflict with or constitutes or will constitute a breach of, or a default under,
applicable Laws, the Company's Organizational Documents or any Existing
Instrument to which the Company or any of its subsidiaries is a party or by
which any of its properties may be subject or bound, (iii) violates any Law
applicable to the Company or any of its subsidiaries or any of their properties,
11
or (iv) results in a breach of, default or Debt Repayment Triggering Event (as
defined below) under, or results in the creation or imposition of any Lien upon
any property or assets of the Company or any of its subsidiaries pursuant to, or
requires the consent of any other party to, any Existing Instrument, except for
such conflicts, breaches, defaults or Liens, that will not, individually or in
the aggregate, result in a Material Adverse Effect. A "Debt Repayment Triggering
Event" means any event or condition that gives, or with the giving of notice or
the lapse of time or both would give, the holder of any note, debenture, lease
or other evidence of indebtedness or obligation, whether secured or unsecured
(or any indenture Trustee or other person acting on such holder's behalf) the
right to accelerate any payment or maturity of such indebtedness or obligation,
to require the Company or any of its subsidiaries to repurchase, redeem or repay
all or a portion of such indebtedness or obligation or increase the interest
charges or fees on any such indebtedness or obligation.
(n) Except as described in the Prospectus, and except for options to
purchase capital stock issued pursuant to the Company's 1999 Stock Option Plan
(the "1999 Stock Option Plan") and/or the Company's Employee Stock Purchase Plan
(the "ESPP"), neither the Company nor any of its subsidiaries is a party to or
bound by, and at the Closing Date and the Additional Closing Date, as the case
may be, will not be a party to or bound by, any outstanding options, restricted
stock grants, restricted stock, stock appreciation rights or other rights to
purchase or acquire, or any warrants to subscribe for, or any securities or
obligations convertible into or exchangeable for, or any contracts or
commitments to issue or sell, any shares of Common Stock or any such warrants or
convertible securities or obligations. No holder of securities of the Company
has rights to the registration of any securities of the Company as a result of
or in connection with the filing of the Registration Statement or the
consummation of the transactions contemplated hereby that have not been
satisfied or heretofore waived in writing.
(o) ▇▇▇▇▇▇▇ ▇▇▇▇▇, LLC, which is the independent public accounting firm
that is registered with the PCAOB and that has certified the Company's financial
statements (including the related notes thereto, and the supporting schedules,
if any) filed as part of the Registration Statement and the Prospectus (or any
amendment or supplement thereto), are independent registered public accountants
as required by the 1933 Act, the Exchange Act, Commission Regulations and the
PCAOB.
(p) The consolidated and parent-only financial statements, together
with related schedules, exhibits and notes, included in the Registration
Statement and the Prospectus (and any amendment or supplement thereto), present
fairly the consolidated and parent-only financial condition, results of
operations, cash flows and shareholders' equity of the Company and its
subsidiaries on a consolidated basis and of the Company on a parent only basis
at the respective dates or for the respective periods to which they apply; such
statements and related schedules, exhibits and notes have been prepared in
accordance with United States generally accepted accounting principles and
Commission Regulations consistently applied throughout the periods involved,
except as may be expressly disclosed therein. The financial and statistical
information and data set forth in the Registration Statement and Prospectus is
accurately presented and is consistent with such financial statements and the
books and records of the Company. No other financial statements, exhibits or
schedules are required to be included in the Registration Statement.
12
(q) The Company has a duly constituted audit committee of its Board of
Directors (the "Audit Committee"), composed entirely of members who are
"independent" in accordance with applicable Law, including Federal Deposit
Insurance Act ("FDIA"), Section 36 and applicable regulations thereunder and all
NASD and Nasdaq rules and regulations (collectively, "NASD Rules"). Such Audit
Committee has operated consistent in all material respects with the requirements
of the Securities Act, the Exchange Act, the BHC Act, the FDIA and other
applicable state and federal banking Laws, and the NASD Rules. The Company's
independent accountants have reviewed each Interim Financial Statement in
accordance with the applicable requirements of the Securities Act, the Exchange
Act, the BHC Act, state and federal banking and other Laws, the Audit
Committee's charter, the Commission Regulations and the NASD Rules.
(r) All the Company's reports to the Federal Reserve, including those
on Federal Reserve Forms ▇▇▇-▇, ▇▇▇-▇ (and their respective various
subdesignations) and the various schedules and subreports thereunder, for the
last full five years and any interim periods (the "FRB Reports"), conform in all
material respects to the Federal Reserve's requirements for such reports, and
all of the Subsidiaries' call reports ("Call Reports") submitted to its primary
federal and state regulators conform in all material respects to the Federal
Financial Institutions Examination Council's ("FFIEC") requirements for Call
Reports, and all such FRB Reports and Call Reports conform to the applicable
requirements of Section 37 of the FDIA and applicable regulations thereunder,
and are accurate and complete in all material respects and fairly present in all
material respects the reporting entity's financial condition, earnings, cash
flows (to the extent a statement of cash flows is included pursuant to the
requirements of such forms) and shareholders' equity as of the dates and for the
periods shown consistent with the Financial Statements as of and for the
corresponding dates and periods.
(s) Except as disclosed in the Registration Statement and the
Prospectus (or any amendment or supplement thereto), subsequent to the
respective dates as of which such information is given or included in the
Registration Statement or the Prospectus (or any amendment or supplement
thereto), (i) neither the Company nor any of its subsidiaries has incurred any
material liabilities or obligations, indirect, direct or contingent, matured or
unmatured, or entered into any transaction that is not in the ordinary course of
business, (ii) neither the Company nor any of its subsidiaries has sustained any
material loss or interference with its business or properties from fire, flood,
windstorm, accident or other calamity, whether or not covered by insurance,
(iii) neither the Company nor any of its subsidiaries has paid or declared any
dividends or other distributions with respect to its capital stock and the
Company is not in default under the terms of any class of capital stock of the
Company or any outstanding debt obligations, (iv) there has not been any change
in the authorized or outstanding capital stock of the Company or any material
change in the indebtedness or obligations of the Company or its subsidiaries
(other than in the ordinary course of business) and (v) there has not been any
material adverse change, or any development involving or that may reasonably be
expected to result in a Material Adverse Effect.
(t) All offers and sales of the Company's capital stock and other debt
or other securities prior to the date hereof were made in compliance with the
13
registration requirements or were the subject of an available exemption from the
registration under the 1933 Act and all other applicable state and federal
securities or blue sky Laws, or any actions under the 1933 Act, the Exchange Act
or any state or federa11aws or regulations in respect of any such offers or
sales are effectively barred by waivers or statutes of limitation.
(u) The Company's Common Stock (including the Shares) is registered
pursuant to Section 12(g) of the Exchange Act and is listed on the Nasdaq
National Market under the symbol "SOCB", and the Company has taken no action
designed to, or reasonably likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act or the deli sting of, or
suspension or termination from trading in, the Common Stock on Nasdaq, nor has
the Company received any notification that the Commission or the Nasdaq is
contemplating terminating or suspending such registration, listing, or trading.
(v) The Company has not distributed and will not distribute, and has
not authorized the Underwriter to distribute, any offering material in
connection with the offering and sale of the Shares other than the Preliminary
Prospectus, the Prospectus or other offering material, if any, as permitted by
the 1933 Act.
(w) Other than activity expressly permitted pursuant to Regulation M
under the Exchange Act, the Company has not taken and will not take, directly or
indirectly, any action that constituted, or any action designed to, or that
might reasonably be expected to cause or result in or constitute, under the 1933
Act or otherwise, stabilization or manipulation of the price of any security of
the Company to facilitate the sale or resale of the Shares or for any other
purpose. Except for grants of securities under the 1999 Stock Option Plan and
securities sold to employees under the ESPP, which were duly registered or were
issued in transactions exempt from registration under the 1933 Act, the Company
and its subsidiaries have not offered or sold any shares of Common Stock since
at least April 6, 2005, or any other securities other than Trust Preferred
Securities issued by Southcoast Capital Trust III on August 5, 2005.
(x) The Company and each of its subsidiaries have filed all tax returns
required to be filed (other than certain state or local tax returns, as to which
the failure to file, individually or in the aggregate, would not have a Material
Adverse Effect), which returns are complete and correct, and neither the Company
nor any subsidiary is in default in the payment of any taxes that were payable
pursuant to said returns or any assessments with respect thereto. Except as
disclosed in the Prospectus, all deficiencies asserted as a result of any
federal, state, local or foreign tax audits have been paid or finally settled
and no issue has been raised in any such audit that, by application of the same
or similar principles, reasonably could be expected to result in a proposed
deficiency for any other period not so audited. There are no outstanding
agreements or waivers extending the statutory period of limitation applicable to
any federal, state, local or foreign tax return for any period. On the Closing
Date and the Additional Closing Date, as the case may be, all stock transfer and
other taxes that are required to be paid in connection with the sale of the
Shares to be sold by the Company to the Underwriter will have been fully paid by
the Company and all laws imposing such taxes will have been complied with by the
Company.
14
(y) Except as set forth in the Prospectus, there are no transactions
with "affiliates" (as defined in Commission Rule 405 under the ▇▇▇▇ ▇▇▇) or any
officer, director or security holder of the Company (whether or not an
affiliate) that are required by the 1933 Act or the Exchange Act to be disclosed
in the Registration Statement. Additionally, no relationship, direct or
indirect, exists between the Company or any of its subsidiaries on the one hand,
and the directors, officers, shareholders, customers or suppliers of the Company
or any subsidiary on the other hand, that is required by the 1933 Act or the
Exchange Act to be disclosed in the Registration Statement or the Prospectus
that is not so disclosed.
(z) The Company is not an "investment company" or an "affiliated
person" of, or "promoter" or "principal underwriter" for, an investment company
within the meaning of the Investment Company Act of 1940, as amended (the
"ICA"). The Company is not required, and upon the issuance and sale of the
Shares as herein contemplated and the application of the net proceeds of such
offering and sale as described in the Prospectus will not be required, to
register as an "investment company" nor will it be an entity "controlled" by an
"investment company", as such terms are defined in the ICA and Commission
Regulations.
(aa) Neither the issuance, sale and delivery of the Shares nor the
application of the proceeds thereof by the Company as described in the
Registration Statement and the Prospectus will violate Federal Reserve
Regulations T, U or X.
(bb) Nothing has come to the attention of the Company that has caused
the Company to believe that the statistical and market-related data included in
the Registration Statement and Prospectus is not based on or derived from
sources that are reliable and accurate in all material respects.
(cc) Except as otherwise disclosed in the Prospectus, each of the
Company and its subsidiaries has good and valid title to all property (real,
personal and mixed) described in the Prospectus as being owned by it, free and
clear of all Liens except those Liens that are not materially burdensome and
that have not had and will not result in a Material Adverse Effect. All property
(real, personal and mixed) held under leases by the Company and its subsidiaries
is held under valid, subsisting and enforceable leases with only such exceptions
as in the aggregate are not materially burdensome and have not and will not
result in a Material Adverse Effect.
(dd) Except as otherwise disclosed in the Prospectus, each of the
Company and its subsidiaries has all permits, licenses, franchises, orders,
approvals, consents and authorizations of Governmental Authorities (each, a
"Permit") as are necessary to own its properties and to conduct its business in
the manner described in the Prospectus, subject to such qualifications as may be
set forth in the Prospectus, except where the failure to have obtained any such
Permit has not had and will not have a Material Adverse Effect. Each of the
Company and its subsidiaries has operated and is operating its business in
material compliance with and not in material violation of all of its obligations
with respect to each such Permit and no event has occurred that allows, or after
notice or lapse of time or both would allow, the suspension, revocation or
termination of the Company and its subsidiaries under any such Permit or result
in any other material impairment of the rights of any such Permit, subject in
each case to such qualification as may be set forth expressly in the Prospectus;
and except as disclosed in the Prospectus, such Permits contain no restrictions
15
that have been or will be materially burdensome to the Company or any of its
subsidiaries.
(ee) Except as otherwise disclosed in the Prospectus, each of the
Company and its subsidiaries conduct their respective business in compliance in
all material respects with all Laws applicable to them, including, without
limitation, (i) all regulations and orders of, or agreements with, the Federal
Reserve, the State Board and the Federal Deposit Insurance Corporation ("FDIC"),
and (ii) state and federal Laws governing the offer and extension of credit,
including, without limitation, consumer credit and usury laws, the Truth in
Lending Act, the Equal Credit Opportunity Act, the Fair Housing Act, the
Community Reinvestment Act, the Home Mortgage Disclosure Act, the Bank Secrecy
Act and the USA PATRIOT Act; (iii) all applicable Laws, regulations and orders
related to the offer and sale of investments, insurance, real estate and advice
related thereto, and (iv) none of the Company or any of its subsidiaries has
received any communication from any Governmental Authority asserting that it is
not in compliance with any Law.
(ff) None of the Company nor any of its subsidiaries is a party to or
subject to any order, decree, memorandum or understanding or similar agreement
with, or a commitment letter, supervisory letter or similar submission to, any
Governmental Authority charged with the supervision or regulation of the Company
or any of its subsidiaries or their respective activities, except as has not had
and will not have, individually or in the aggregate, a Material Adverse Effect,
and neither the Company nor any of its subsidiaries has been advised by any
Governmental Authority that such Governmental Authority is contemplating issuing
or requesting (or is considering the appropriateness of issuing or requesting)
any such order, decree, agreement, memorandum or understanding, commitment
letter, supervisory letter or similar submission, except as would not,
individually or in the aggregate, have a Material Adverse Effect.
(gg) The Company and its subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets, (iii) access to
assets is permitted only in accordance with management's general or specific
authorizations, (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences, and (v) the internal accounting controls otherwise
comply with all applicable federal and state banking, securities and other
applicable Laws, including the Federal Deposit Insurance Act and FDIC
regulations thereunder, the Foreign Corrupt Practices Act and the ▇▇▇▇▇▇▇▇-▇▇▇▇▇
Act of 2002 and applicable Commission Regulations thereunder.
(hh) Neither the Company nor any of its subsidiaries, nor, to the
Company's knowledge, any employee or agent of the Company or any of its
subsidiaries, has, directly or indirectly, (i) made any unlawful contribution to
any candidate for political office, or failed to disclose fully any contribution
in violation of law or (ii) made any payment to any federal, state, local or
foreign governmental official, or other person charged with similar public or
16
quasi-public duties, other than payments required or permitted by the laws of
the United States or any jurisdiction thereof or applicable foreign
jurisdictions.
(ii) The Company and its subsidiaries are (i) in compliance with any
and all applicable federal, state, local and foreign Laws relating to the
protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants ("Environmental Laws"), (ii)
have received all Permits required of them under applicable Environmental Laws
to conduct their respective businesses, (iii) are in compliance with all terms
and conditions of any such Permit, and (iv) the Company reasonably has concluded
that it has no liabilities under such Environmental Laws except where such
noncompliance with Environmental Laws such costs or potential costs, or the
failure to receive or to comply with the terms and conditions of any required
Permits have not had and will not have, individually or in the aggregate, a
Material Adverse Effect. Neither the Company nor any of its subsidiaries has
been named as a "potentially responsible party" under the Comprehensive
Environmental Response Compensation and Liability Act of 1980, as amended.
Neither the Company nor any of its subsidiaries owns, leases or occupies any
property that appears on any list of hazardous or superfund sites compiled by
any Governmental Authority.
(jj) Each of the Company and its subsidiaries owns and has full right,
title and interest in and to, or has valid licenses to use, each trade name,
trademark, service ▇▇▇▇, patent, copyright, approval, trade secret and other
similar rights (collectively "Intellectual Property") under which the Company
and its subsidiaries conduct all or any material part of its business, and the
Company has not created or suffered any Lien on, or granted any right or license
with respect to, any such Intellectual Property, except where the failure to own
or obtain a license or right to use any such Intellectual Property has not and
will not have a Material Adverse Effect. There is no claim pending against the
Company or its subsidiaries with respect to any Intellectual Property and the
Company and its subsidiaries have not received notice or otherwise become aware
that any Intellectual Property that it uses or has used in the conduct of its
business infringes upon or conflicts with the rights of any third party. Neither
the Company nor any of its subsidiaries has become aware that any material
Intellectual Property that it uses or has used in the conduct of its business
infringes upon or conflicts with the rights of any third party.
(kk) The Company has procured and delivered Lock-Up Agreements, in the
form of Exhibit A attached hereto, from each of the Company's executive
officers, directors and principal shareholders listed on Exhibit B attached
hereto.
(ll) No officer, director or nominee for director or 5% or greater
shareholder known to the Company based upon a review of public information on
file with the Commission (excluding Babson Capital Management, LLC and ▇▇▇▇▇▇▇
▇▇▇▇▇ Assets Management, L.P.) of the Company has a direct or indirect
affiliation or association with any member of the NASD.
(mm) The Company and each of its subsidiaries maintain insurance on
their respective properties and businesses, including business interruption
insurance with insurers of recognized financial responsibility against such
losses and risks and in such amounts as are prudent and customary in the
businesses in which it is engaged, including hurricane, flood and other storm
damages and business interruption insurance; and none of the Company nor any of
its subsidiaries has reason to believe that it will not be able to renew its
17
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a comparable cost.
(nn) The Company and its subsidiaries and any "employee benefit plan"
(as defined under the Employee Retirement Income Security Act of 1974, as
amended, and the regulations and published interpretations thereunder
(collectively, "ERISA")) established or maintained by the Company, its
subsidiaries or their "ERISA Affiliates" (as defined below) are in compliance in
all material respects with ERISA and all other applicable state and federal
laws. "ERISA Affiliate" means, with respect to the Company or a subsidiary, any
member of any group or organization described in Sections 4l4(b), (c), (m) or
(0) of the Internal Revenue Code of 1986, as amended (the "Code") of which the
Company or such subsidiary is a member. No "reportable event", as defined in
ERISA, has occurred or is reasonably expected to occur with respect to any
employee benefit plan established or maintained by the Company, its subsidiaries
or any of their ERISA Affiliates. No employee benefit plan established or
maintained by the Company, its subsidiaries or any of their ERISA Affiliates, if
such employee benefit plan were terminated, would have any "amount of unfunded
benefit liabilities" (as defined in ERISA). Neither the Company, its
subsidiaries nor any of their ERISA Affiliates has incurred or reasonably
expects to incur any liability under (i) Title IV of ERISA with respect to
termination of, or withdrawal from, any employee benefit plan or (ii) Sections
412, 4971, 4975 or 4980B of the Code. Each employee benefit plan established or
maintained by the Company, its subsidiaries or any of their ERISA Affiliates
that is intended to be qualified under Section 401(a) of the Code is so
qualified and nothing has occurred, whether by action or failure to act, that
would cause the loss of such qualification.
(oo) No forward-looking statement (within the meaning of Section 27 A
of the 1933 Act and Section 2IE of the Exchange Act) included in the
Registration Statement or the Prospectus has been made or reaffirmed without a
reasonable basis or has been disclosed other than in good faith.
(pp) The Company and its subsidiaries have complied and will comply in
all material respects with wage and hour determinations issued by the U.S.
Department of Labor under the Service Contract Act of 1965 and the Fair Labor
Standards Act in paying its employees' salaries, fringe benefits and other
compensation for the performance of work or other duties in connection with
contracts with the U.S. government, and have complied and will comply in all
material respects with the requirements of the Americans with Disabilities Act
of 1990, the Family and Medical Leave Act of 1993, the Civil Rights Act of 1964
(Title VII), the National Labor Relations Act, the Vietnam Era Veteran's
Readjustment Act, the Age Discrimination in Employment Act, as amended by the
Older Workers' Benefit Protection Act, and federal, state and local labor laws,
each as amended except where the failure to comply with any such requirements
has not, and will not, have a Material Adverse Effect. No labor dispute or
disturbance with employees of the Company or any subsidiary exists or, to the
knowledge of the Company, is imminent, contemplated or threatened, and the
Company is not aware of any existing or imminent labor disturbance by the
employees of any of its or any subsidiary's principal suppliers, vendors,
customers or contractors which, in either case, may reasonably be expected to
result in a Material Adverse Effect.
18
(qq) The Company and its directors and officers (in their capacities as
such) are in compliance with the applicable provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act
of 2002, the Commission Regulations thereunder, and the corporate governance and
other rules and requirements of the NASD and Nasdaq and will comply timely with
any such provisions that will become effective in the future, and have made all
required affirmations and filings to each Governmental Authority in connection
therewith.
7. Expenses. Whether or not the transactions contemplated hereby are
consummated or this Underwriting Agreement becomes effective or is terminated,
the Company agrees to payor cause to be paid the following: (i) the fees,
disbursements and expenses of the Company's counsel and accountants in
connection with the registration of the Shares under the 1933 Act and all other
expenses in connection with the preparation, printing and filing of the
Registration Statement and the Prospectus and amendments and supplements thereto
and the mailing and delivering of copies thereof and of any Preliminary
Prospectus to the Underwriter and dealers; (ii) the printing and delivery
(including postage, air freight charges and charges for counting and packaging)
of such copies of the Registration Statement, the Prospectus, each Preliminary
Prospectus, the Blue Sky memoranda, this Underwriting Agreement, and all
amendments or supplements to any of them as may be reasonably requested for use
in connection with the offering and sale of the Shares; (iii) consistent with
the provisions of Section 5(f), all expenses in connection with the
qualification of the Shares for offering and sale under state securities laws or
Blue Sky laws, but not including attorneys' fees and out-of-pocket expenses of
the counsel for the Underwriter in connection therewith; (iv) the filing fees
incident to securing any required review by the NASD of the fairness of the
terms of the sale of the Shares; (v) the fees and expenses associated with
including the Shares for trading on Nasdaq; (vi) the cost of preparing and
delivering certificates for the Shares; (vii) the costs and charges of any
transfer agent or registrar or book-entry depository; (viii) the cost of the tax
stamps, if any, in connection with the issuance and delivery of the Shares to
the Underwriter; (ix) all other fees, costs and expenses referred to in Item 13
of the Registration Statement; and (x) the transportation, lodging, graphics and
other expenses incidental to the Company's preparation for and participation in
the "roadshow" for the offering contemplated hereby. Except as provided in this
Section 7 and in Section 8 hereof, the Underwriter shall pay its own expenses,
including the fees and disbursements of their counsel. In addition, in the event
that the proposed offering is terminated for the reasons set forth in Section
5(j) hereof, the Company agrees to reimburse the Underwriter as provided in
Section 5(j).
8. Indemnification and Contribution. Subject to the limitations in this
paragraph below, the Company agrees to indemnify and hold harmless the
Underwriter, the directors, officers, employees and agents of the Underwriter,
and each person, if any, who controls the Underwriter within the meaning of
Section 15 of the 1933 Act or Section 20 of the Exchange Act from and against
any and all losses, claims, damages, liabilities and expenses, including
reasonable costs of investigation and attorneys' fees and expenses
(collectively, "Damages") arising out of or based upon (i) any untrue statement
or alleged untrue statement of a material fact contained in any Preliminary
Prospectus or in the Registration Statement or the Prospectus or in any
amendment or supplement thereto, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein (in the case of the Prospectus, in light of the circumstances
under which they were made) not misleading, except to the extent that any such
19
Damages arise out of or are based upon an untrue statement or omission or
alleged untrue statement or omission that has been made therein or omitted
therefrom in reliance upon and in conformity with the information furnished in
writing to the Company by or on behalf of the Underwriter, expressly for use in
connection therewith or (ii) any inaccuracy in or breach of the representations
and warranties of the Company contained herein or any failure of the Company to
perform its obligations hereunder or under law; provided, however, that with
respect to any untrue statement or omission made in any Preliminary Prospectus,
the indemnity agreement contained in this paragraph shall not inure to the
benefit of the Underwriter (or to the benefit of any person controlling the
Underwriter or to any officer, director, employee or agent of the Underwriter)
from whom the person asserting any such Damages purchased the Shares concerned
if both (A) a copy of the Prospectus was not sent or given to such person at or
prior to the written confirmation of the sale of such Shares to such person as
required by the 1933 Act and (B) the untrue statement or omission in the
Preliminary Prospectus was corrected in the Prospectus. This indemnification
shall be in addition to any liability that the Company may otherwise have.
In addition to its other obligations under this Section 8, the Company
agrees that, as an interim measure during the pendency of any claim, action,
investigation, inquiry or other proceeding arising out of or based upon any
statement or omission, or any inaccuracy in the representations and warranties
of the Company herein or failure to perform its obligations hereunder, all as
set forth in this Section 8, the Company will reimburse the Underwriter on a
monthly basis for all reasonable legal or other out-of-pocket expenses incurred
in connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding (to the extent documented by
reasonably itemized invoices therefor), notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the obligation
of the Company to reimburse the Underwriter for such expenses and the
possibility that such payments might later be held to have been improper by a
court of competent jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, the Underwriter shall
promptly return it to the Company. Any such interim reimbursement payments that
are not made to the Underwriter within 30 days of a request for reimbursement
shall bear interest compounded daily at a rate determined on the basis of the
base lending rate announced from time to time by The Wall Street Journal from
the date of such request.
If any action or claim shall be brought against the Underwriter or any
person controlling the Underwriter in respect of which indemnity may be sought
against the Company, the Underwriter or such controlling person shall promptly
notify the Company in writing and the Company shall assume the defense thereof,
including the employment of counsel reasonably acceptable to the Underwriter or
such controlling person and the payment of all reasonable fees of and expenses
incurred by such counsel. The Underwriter or any such controlling person shall
have the right to employ separate counsel in any such action and participate in
the defense thereof, but the fees and expenses of such counsel shall be at the
expense of the Underwriter or such controlling person, unless (i) the Company
has agreed in writing to pay such fees and expenses, (ii) the Company has failed
to assume the defense and employ counsel reasonably acceptable to the
20
Underwriter or such controlling person or (iii) the named parties to any such
action (including any impleaded parties) include both the Underwriter or such
controlling person and the Company, and the Underwriter or such controlling
person shall have been advised by its counsel that one or more legal defenses
may be available to the Underwriter that may not be available to the Company, or
that representation of such indemnified party and the Company by the same
counsel would be inappropriate under applicable standards of professional
conduct (whether or not such representation by the same counsel has been
proposed) due to actual or potential differing interests between them (in which
case the Company shall not have the right to assume the defense of such action
on behalf of the Underwriter or such controlling person (but the Company shall
not be liable for the fees and expenses of more than one counsel for the
Underwriter and such controlling persons)). The Company shall not be liable for
any settlement of any such action effected without its written consent, but if
settled with such written consent, or if there be a final judgment for the
plaintiff in any such action, the Company agrees to indemnify and hold harmless
the Underwriter and any such controlling person from and against any loss,
claim, damage, liability or expense by reason of such settlement or judgment,
but in the case of a judgment only to the extent stated in the first paragraph
of this Section 8.
The Underwriter agrees to indemnify and hold harmless the Company, its
directors, its officers who sign the Registration Statement and any person who
controls the Company within the meaning of Section 15 of the 1933 Act or Section
20 of the Exchange Act, to the same extent as the foregoing indemnity from the
Company to the Underwriter, but only with respect to information furnished in
writing by or on behalf of the Underwriter expressly for use in the Registration
Statement, the Prospectus or any Preliminary Prospectus, or any amendment or
supplement thereto, which information only includes the "Underwriting -
Commissions and Expenses", "- Stabilization" and "- Passive Market Making"
sections. If any action or claim shall be brought or asserted against the
Company, any of its directors, any of its officers or any such controlling
person based on the Registration Statement, the Prospectus or any Preliminary
Prospectus, or any amendment or supplement thereto, and in respect of which
indemnity may be sought against the Underwriter pursuant to this paragraph, the
Underwriter shall have the rights and duties given to the Company by the
immediately preceding paragraph (except that if the Company shall have assumed
the defense thereof the Underwriter shall not be required to do so, but may
employ separate counsel therein and participate in the defense thereof, but the
fees and expenses of such counsel shall be at the Underwriter' s expense), and
the Company, its directors, any such officers and any such controlling persons,
shall have the rights and duties given to the Underwriter by the immediately
preceding paragraph.
In any event, the Company will not, without the prior written consent
of the Underwriter, settle or compromise or consent to the entry of any judgment
in any proceeding or threatened claim, action, suit or proceeding in respect of
which the indemnification may be sought hereunder (whether or not the
Underwriter or any person who controls the Underwriter within the meaning of
Section 15 of the 1933 Act or Section 20 of the Exchange Act is a party to such
claim, action, suit or proceeding) unless such settlement, compromise or consent
includes an unconditional release of the Underwriter and such controlling
persons from all liability arising out of such claim, action, suit or
proceeding.
If the indemnification provided for in this Section 8 is unavailable or
insufficient for any reason whatsoever to an indemnified party in respect of any
Damages referred to herein, then an indemnifying party, in lieu of indemnifying
such indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such Damages (i) in such proportion as is
21
appropriate to reflect the relative benefits received by the Company on the one
hand, and the Underwriter on the other hand, from the offering and sale of the
Shares or (ii) if the allocation provided by clause (i) above is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative and
several fault of the Company on the one hand, and the Underwriter on the other
hand, in connection with the statements or omissions that resulted in such
Damages as well as any other relevant equitable considerations. The relative and
several benefits received by the Company on the one hand, and the Underwriter on
the other hand, shall be deemed to be in the same proportion as the total net
proceeds from the offering (before deducting expenses) received by the Company
bear to the total underwriting discounts and commissions received by the
Underwriter, in each case as set forth in the table on the cover page of the
Prospectus; provided that, in the event that the Underwriter shall have
purchased any Additional Shares hereunder, any determination of the relative
benefits received by the Company or the Underwriter from the offering of the
Shares shall include the net proceeds (before deducting expenses) received by
the Company and the underwriting discounts and commissions received by the
Underwriter, from the sale of such Additional Shares, in each case computed on
the basis of the respective amounts set forth in the notes to the table on the
cover page of the Prospectus. The relative fault of the Company on the one hand,
and the Underwriter on the other hand, shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company on the one hand, or by the Underwriter on
the other hand and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Underwriter agree that it would not be just and
equitable if contribution pursuant to this Section 8 was determined by a pro
rata allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of the
Damages referred to in the immediately preceding paragraph shall be deemed to
include, subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 8, the Underwriter shall not be required to contribute any amount in
excess of the amount of the underwriting commissions received by the underwriter
in connection with the Shares underwritten by it and distributed to the public.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the ▇▇▇▇ ▇▇▇) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
Notwithstanding the second paragraph of this Section 8, any Damages for
which an indemnified party is entitled to indemnification or contribution under
this Section 8 shall be paid by the indemnifying party to the indemnified party
as Damages are incurred after receipt of reasonably itemized invoices therefor.
The indemnity, contribution and reimbursement agreements contained in this
Section 8 and the representations and warranties of the Company set forth in
this Underwriting Agreement shall remain operative and in full force and effect,
22
regardless of (i) any investigation made by or on behalf of the Underwriter or
any person controlling the Underwriter, the Company, its directors or officers
or any person controlling the Company, (ii) acceptance of any Shares and payment
therefor hereunder and (iii) any termination of this Underwriting Agreement. A
successor to the Underwriter or any person controlling the Underwriter, or to
the Company, its directors or officers or any person controlling the Company,
shall be entitled to the benefits of the indemnity, contribution and
reimbursement agreements contained in this Section 8.
It is agreed that any controversy arising out of the operation of the
interim reimbursement arrangements set forth in the second paragraph of this
Section 8, including the amounts of any requested reimbursement payments and the
method of determining such amounts, shall be settled by arbitration conducted
pursuant to the Code of Arbitration Procedure of the NASD. Any such arbitration
must be commenced by service of a written demand for arbitration or written
notice of intention to arbitrate, therein electing the arbitration tribunal. In
the event the party demanding arbitration does not make such designation of an
arbitration tribunal in such demand or notice, then the party responding to said
demand or notice is authorized to do so. Such an arbitration would be limited to
the operation of the interim reimbursement provisions contained in the second
and fourth paragraphs of this Section 8, and would not resolve the ultimate
propriety or enforceability of the obligation to reimburse expenses that is
created by the provisions of the second paragraph of this Section 8.
9. Conditions of Underwriter's Obligations. The obligations of the Underwriter
to purchase the Firm Shares hereunder are subject to the following conditions:
(a) The Registration Statement shall have become effective not later
than 12:00 noon, New York City time, on the date hereof, or at such later date
and time as shall be consented to in writing by the Underwriter, and all filings
required by Rules 424, 430A and 462 under the 1933 Act shall have been timely
made.
(b) You shall be reasonably satisfied that since the respective dates
as of which information is given in the Registration Statement and Prospectus,
(i) there shall not have been any change in the capital stock of the Company or
any material change in the indebtedness (other than in the ordinary course of
business) of the Company, (ii) except as set forth or contemplated by the
Registration Statement or the Prospectus, no material oral or written agreement
or other transaction shall have been entered into by the Company that is not in
the ordinary course of business or that could reasonably be expected to result
in a material reduction in the future earnings of the Company, (iii) no loss or
damage (whether or not insured) to the property of the Company shall have been
sustained that had or could reasonably be expected to have a Material Adverse
Effect, (iv) no legal or governmental action, suit or proceeding affecting the
Company or any of its properties that is material to the Company or that affects
or could reasonably be expected to affect the transactions contemplated by this
Underwriting Agreement shall have been instituted or threatened and (v) there
shall not have been any material change in the condition (financial or
otherwise), business, management, results of operations or prospects of the
Company or its subsidiaries that makes it impractical or inadvisable in your
judgment to proceed with the public offering or purchase of the Shares as
contemplated hereby.
23
(c) You shall have received on the Closing Date (and the Additional
Closing Date, if any) an opinion of Haynsworth ▇▇▇▇▇▇▇ ▇▇▇▇, P A, counsel to the
Company, substantially to the effect that:
(i) The Company is a bank holding company duly registered as such with
the Federal Reserve, subject to regulation and supervision of the State Board,
and is a corporation validly existing in good standing under the laws of the
State of South Carolina, with full corporate power and authority and all federal
state and local Permits necessary to own, lease and operate its properties and
to conduct its business as described in the Registration Statement and the
Prospectus (and any amendment or supplement thereto) and to enter into and
perform its obligations under the Underwriting Agreement, and is duly registered
or otherwise qualified to conduct its business as a foreign corporation and is
in good standing in each jurisdiction or place where the nature of its
properties or the conduct of its business requires such registration or
qualification, except where the failure to have such Permits or so register or
qualify does not and will not have a Material Adverse Effect. In the case of
local Permits, counsel may rely upon an officer's certificate of the Company and
shall state in the opinion that nothing to the contrary has come to the
attention of such counsel.
(ii) Each of the Company's subsidiaries is an entity validly existing
in good standing under the laws of the jurisdiction of its organization, with
full corporate power and authority and all federal, state and local Permits
necessary to own, lease and operate its properties and to conduct its business
as described in the Registration Statement and the Prospectus (and any amendment
or supplement thereto), and is duly registered or otherwise qualified to conduct
its business as a foreign corporation and is in good standing in each
jurisdiction or place where the nature of its properties or the conduct of its
business requires such registration or qualification, except where the failure
to have such Permits or so register or qualify does not have a Material Adverse
Effect. In the case of local Permits, counsel may rely upon an officer's
certificate of the Company and shall state in the opinion that nothing to the
contrary has come to the attention of such counsel. All of the outstanding
shares of capital stock (or other equity securities) of each of the Company's
subsidiaries have been duly authorized and validly issued, and are fully paid
and nonassessable, and are owned by the Company directly, or indirectly through
one of the other subsidiaries, free and clear of any Lien and, to the best of
its knowledge, none of the outstanding shares of capital stock of any subsidiary
was issued in violation of the preemptive or similar rights of any
securityholder of such subsidiary.
(iii) The capitalization of the Company conforms in all material
respects to the description thereof contained in the Prospectus under the
caption "Capitalization" and the Shares conform in all material respects to the
description of the Common Stock included in the Prospectus. Except as disclosed
in the Prospectus, the Company is not a party to or bound by any outstanding
options, warrants or similar rights to subscribe for, or contractual obligations
to issue, sell, exchange, transfer or acquire, any of its capital stock or any
securities convertible into or exchangeable for any of such capital stock.
(iv) All shares of capital stock of the Company outstanding prior to
the issuance of the Shares to be issued and sold by the Company hereunder, have
been duly authorized and validly issued, are fully paid and nonassessable and
are free of any preemptive or similar rights that entitle or will entitle any
24
person to acquire any Shares upon the issuance thereof by the Company, and no
such rights will exist as of the Closing Date.
(v) To such counsel's knowledge after reasonable inquiry, all offers
and sales of the Company's capital stock and other securities prior to the date
hereof have been made in compliance with the registration requirements or were
made pursuant to available exemptions from registration under the 1933 Act and
all other applicable state and federal securities or blue sky laws or
regulations.
(vi) To such counsel's knowledge after reasonable inquiry, none of the
Company nor any of its subsidiaries is in violation of or default under, it's
Organizational Documents or any Law, and is not in default in the performance of
any obligation, agreement or condition contained in any Existing Instrument or
any other Agreement or obligation of the Company which are material to the
Company and included as exhibits to the Registration Statement, where the
default has caused or, with notice, the lapse of time or both, would result in a
default, an event of default or Debt Repayment Triggering Event under any
Existing Instrument, Agreement or obligation disclosed in the Registration
Statement or the Prospectus, including the Exhibits.
(vii) None of the offer, sale, issuance or delivery of the Shares by
the Company, the execution, delivery or performance by the Company of this
Underwriting Agreement, compliance by the Company with all provisions hereof or
consummation by the Company of the transactions contemplated hereby (A)
conflicts or will conflict with or constitutes or will constitute a breach of,
or a default under, the Company's Organizational Documents or any material
Existing Instrument to which the Company is a party or by which any of its
properties is bound which are material to the Company and included as exhibits
to the Registration Statement or (B) creates or will result in the creation or
imposition of any Lien upon any property or assets of the Company or (C)
violates or will result in any violation of any existing Law (assuming
compliance with all applicable state securities and Blue Sky laws), that is
known to such counsel and is applicable to the Company or any of its properties.
No holder of securities of the Company has rights to the registration of any
securities of the Company as a result of or in connection with the filing of the
Registration Statement or the consummation of the transactions contemplated
hereby that have not been satisfied or waived in writing.
(viii) Except as described in the Registration Statement or Prospectus,
there is no action, claim, suit, inquiry, proceeding or investigation by or
before any Governmental Authority pending, based upon a review of federal and
South Carolina court records in the counties where the Company conducts
business, or, to the knowledge of such counsel, threatened, against or involving
the Company or its subsidiaries, or the properties of the Company or any of its
subsidiaries: (A) which might individually or in the aggregate prevent or
adversely affect the transactions contemplated by this Underwriting Agreement or
might result in a Material Adverse Effect, nor, to the knowledge of such
counsel, is there any basis for any such action, claim, suit, inquiry,
proceeding or investigation; or (B) that are required to be described in the
Registration Statement or Prospectus (or any amendment or supplement thereto) or
in any Company filing or report filed or furnished under the Exchange Act that
are not described as required therein.
25
(ix) Such counsel has reviewed all Existing Instruments or other
documents or instruments specifically included, described or referred to in the
Registration Statement and the Prospectus, and such Existing Instruments or
other documents or instruments are fairly summarized or disclosed in all
material respects therein, and filed as exhibits thereto as required, and such
counsel does not know of any Agreements, Existing Instruments or other documents
or instruments required to be so summarized or disclosed or filed that have not
been so summarized, disclosed or filed.
(x) No consent, approval, authorization or other order of, or
registration or filing with, any Governmental Authority is required on the part
of the Company (except such as have been obtained under the 1933 Act or such as
may be required under state securities or Blue Sky laws governing the offer,
sale, distribution and issuance of the Shares) for the valid issuance and sale
of the Shares.
(xi) The form of certificate used to evidence the Common Stock is in
due and proper form and complies with all applicable requirements of the
Company's Organizational Documents and the South Carolina Business Corporation
Act of 1988.
(xii) The description of the Company's stock option, stock bonus and
other stock plans or arrangements and the options or other rights granted and
exercised thereunder included in the Prospectus accurately and fairly presents
the information required to be shown with respect to such plans, arrangements,
options and rights; all shares and interests offered thereunder have been duly
registered under the 1933 Act or were exempt from registration under the 1933
Act and all other applicable, securities or Blue Sky laws, and such Registration
Statements have been declared effective and remain effective; and no stop order
suspending the effectiveness of the Registration Statement has been issued under
the 1933 Act and no proceedings for such purpose have been instituted or are
pending or are contemplated or threatened by the Commission. The Company's two
Employee Stock Purchase Plans are qualified under Section 423 of the Code.
(xiii) The Company has all requisite corporate power and authority to
enter into this Underwriting Agreement and to offer, issue, sell and deliver the
Shares to be sold by it as provided herein. This Underwriting Agreement has been
duly authorized, executed and delivered by, and is a valid and binding agreement
of the Company, enforceable against the Company in accordance with its terms,
subject to the Bankruptcy and Equity Exception, to an exception as to the
enforceability of any waiver of trial by jury and to the limitations on
indemnity and contribution that exist by virtue of public policy under federal
or state securities laws.
(xiv) The Shares to be issued and sold to the Underwriter by the
Company hereunder have been duly authorized and, when issued and delivered to
the Underwriter against payment therefor in accordance with the terms hereof,
(A) such Shares will be validly issued, fully paid and nonassessable and free of
any preemptive or similar rights that entitle or will entitle any person to
acquire any Shares upon the issuance thereof by the Company and (B) good and
26
valid title to such Shares, free and clear of any Lien or defect in title of any
nature will pass to the Underwriter.
(xv) The Registration Statement has been declared effective by the
Commission under the 1933 Act. To the best knowledge of such counsel, no stop
order suspending the effectiveness of the Registration Statement has been issued
under the 1933 Act and no proceedings for such purpose have been instituted or
are pending or are contemplated or threatened by the Commission. Any required
filing of the Prospectus and any supplement thereto pursuant to Rule 424 under
the 1933 Act has been made in the manner and within the time period required by
such Rule 424.
(xvi) The Registration Statement, including any Rule 462 Registration
Statement, the Prospectus, and each amendment or supplement to the Registration
Statement and the Prospectus, as of their respective effective, filing (other
than the financial statements and supporting schedules included or in exhibits
to or excluded from the Registration Statement, as to which no opinion need be
given) comply as to form in all material respects with the requirements of the
1933 Act and Commission Regulations and the exhibits thereto are complete and in
compliance with the requirements of the 1933 Act and Commission Regulations.
(xvii) The descriptions included in the Prospectus of statutes,
regulations or legal or governmental proceedings, insofar as they purport to
summarize certain of the provisions thereof, are accurate in all material
respects and fairly present the information required to be presented by the 1933
Act and Commission Regulations.
(xviii) The Company is not, and after giving effect to the offering and
sale of the Shares and the application of the proceeds thereof, as described in
the Prospectus, will not be, an "investment company" or an "affiliated person"
of, or "promoter" or "principal investor" for, an "investment company," as such
terms are defined in the ICA and Commission Regulations.
(xix) Notice of issuance of the Shares has been duly executed and
delivered to Nasdaq, and all the Shares are tradeable.
(xx) The statements (i) in the Prospectus under the captions "Risk
Factors-▇▇▇▇▇ Relating to Our Industry," "Risk Factors - Risk Relating to Our
Common Stock" risks 3 and 4, "Description of Capital Stock," "Dividend Policy"
"Management's Discussion and Analysis and Results of Operations--Liquidity,"
"Business-Legal Proceedings," "Certain Relationships and Related Transactions,"
"Underwriting", "Supervision and Regulation" and (ii) in Item 13, Item 14 and
Item 15 of the Registration Statement, insofar as such statements constitute
matters of law, summaries of legal matters, the Company's articles of
incorporation or bylaw provisions, documents or legal proceedings, or legal
conclusions, have been reviewed by such counsel and fairly present and
summarize, in all material respects, the matters referred to therein.
(xxi) To such counsel's knowledge, neither the Company nor any of its
subsidiaries is a party to or subject to any order, decree, agreement,
memorandum of understanding or similar arrangement with, or a commitment letter,
supervisory letter or similar submission to, any Governmental Authority charged
27
with the supervision or regulation of the Company or its subsidiaries or engaged
in the insurance of deposits, and neither the Company nor any of its
subsidiaries has been advised by any such Governmental Authority that such
Governmental Authority is contemplating issuing or requesting (or is considering
the appropriateness of issuing or requesting) any such order, decree, agreement,
memorandum of understanding, commitment letter, supervisory letter or similar
submission.
(xxii) The Company's depository institution subsidiary is a member in
good standing of the Federal Deposit Insurance system.
(xxiii) With respect to the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of2002:
(A) The Company has adopted a Code of Ethics and Code of Conduct for
senior financial officers meeting the requirements of Commission Rule 406 and an
audit committee charter meeting the requirements of Rule 4350( d) (1 )(C) of the
Nasdaq Marketplace Rules;
(B) The Company's Board of Directors has determined affirmatively that
a majority of its members and all of the members of its compensation, nominating
and audit committees are independent under applicable Nasdaq Marketplace Rules,
and based solely on a review of written representations furnished by such
directors, to our knowledge, no independent director of the Company has any
relationship prohibited under Rule 4200(a)(15)(A) through (G) of the Nasdaq
Marketplace Rules and no audit committee member has any relationship prohibited
under Rule 4350(d)(2)(a)(1) of the Nasdaq Marketplace Rules;
(C) The Board of Directors has adopted a policy regarding the
nominations process pursuant to Rule 4350(b)( 4)(B) of the Nasdaq Marketplace
Rules that provides for the nomination of directors in accordance with such
rules; and
(D) The certifications pursuant to Section 302 and 906 of the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 contained in the Company's periodic reports filed
with the Commission since August 14, 2002 complied as to form in all material
respects with the requirements of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 and the
Commission regulations promulgated thereunder; and that the Company has filed
the required Corporate Governance Certification Form with Nasdaq. Counsel for
the Company is not aware of any pending or threatened actions by Nasdaq that
would affect the listing, trading or quotation of Company shares on Nasdaq.
(xxiv) All shares issued to officers, directors, employees and
consultants since the listing of the Company's Common Stock on the Nasdaq
National Market, other than pursuant to "public offerings" as defined by NASD
Rule IM-4350, were issued in a transaction that either had prior shareholder
approval or did not require shareholder approval under NASD Rule 4350(i).
(xxv) Neither the Company nor any of its subsidiaries has nor have they
permitted any person acting on its or their behalf to, directly or indirectly,
sell, offer for sale or solicit offers to buy or otherwise negotiate in respect
28
of any security (as defined in the 1933 Act) that would or could be integrated
with the sale of the Shares.
In rendering such opinion, counsel may rely, to the extent they deem
such reliance proper, as to matters of fact upon certificates of officers of the
Company and of government officials, provided that counsel shall state their
belief that they and you are justified in relying thereon, and that nothing to
the contrary has come to such counsel's attention. Copies of all such
certificates shall be furnished to you and your counsel on the Closing Date and
the Additional Closing Date, as the case may be. Such counsel may also assume
that, to the extent that their opinion would be based on the laws of the State
of Georgia, the laws of the State of Georgia are the same as the State of South
Carolina.
In addition to the opinion set forth above, such counsel shall state
that during the course of its participation in the preparation of the
Registration Statement and the Prospectus and the amendments thereto, nothing
has come to the attention of such counsel that has caused it to believe or given
it reason to believe that the Registration Statement or the Prospectus or any
amendment thereto (except for the financial statements and other financial and
accounting information contained therein or omitted therefrom as to which no
opinion need be expressed), at the date thereof, contained an untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or that the
Registration Statement or the Prospectus as of the date of the opinion (except
as aforesaid), includes an untrue statement of a material fact or omits to state
a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(d) You shall have received on the Closing Date or Additional Closing
Date, as the case may be, an opinion of ▇▇▇▇▇▇ & Bird LLP, as counsel for the
Underwriter, dated the Closing Date or Additional Closing Date, as the case may
be, with respect to the issuance and sale of the Shares, the Registration
Statement and other related matters as you may reasonably request, and the
Company and its counsel shall have furnished to your counsel such documents as
they may reasonably request for the purpose of enabling them to pass upon such
matters.
(e) You shall have received letters addressed to you and dated the date
hereof the Closing Date and the Additional Closing Date, as the case may be,
from (i) the firm of ▇▇▇▇▇▇▇ ▇▇▇▇▇, LLC, the Company's independent registered
public accounting firm and (ii) the Chief Financial Officer of the Company,
substantially in the forms heretofore approved by you.
(f) (i) No stop order suspending the effectiveness of the Registration
Statement shall have been issued by the Commission and no proceedings for that
purpose shall be pending or, to the knowledge of the Company, shall be
threatened or contemplated by the Commission at or prior to the Closing Date or
Additional Closing Date, as the case may be; (ii) no order suspending the
effectiveness of the Registration Statement or the qualification or registration
of the Shares under the securities or Blue Sky laws of any jurisdiction shall be
in effect and no proceeding for such purpose shall be pending or, to the
knowledge of the Company, threatened or contemplated by the authorities of any
jurisdiction; (iii) any request for additional information on the part of the
29
staff of the Commission or any such authorities shall have been complied with to
the satisfaction of the staff of the Commission or such authorities; (iv) after
the date hereof, no amendment or supplement to the Registration Statement or the
Prospectus shall have been filed unless a copy thereof was first submitted to
you and you did not object thereto in good faith; and (v) all of the
representations and warranties of the Company contained in this Underwriting
Agreement shall be true and correct in all material respects (except for such
representations and warranties qualified by materiality, which representations
and warranties shall be true and correct in all respects) on and as of the date
hereof and on and as of the Closing Date or Additional Closing Date, as the case
may be, as if made on and as of the Closing Date or Additional Closing Date, as
the case may be, and you shall have received a certificate, dated the Closing
Date and signed by the chief executive officer and the chief financial officer
of the Company (or such other officers as are acceptable to you) to the effect
set forth in this Section 9(g) and in Sections 9(b) and 9(i) hereof.
(g) The Company shall not have failed in any material respect at or
prior to the Closing Date or the Additional Closing Date, as the case may be, to
have performed or complied with any of its agreements herein contained and
required to be performed or complied with by it hereunder at or prior to the
Closing Date or Additional Closing Date, as the case may be.
(h) The Company shall have furnished or caused to have been furnished
to you such further certificates and documents as you shall have reasonably
requested.
(i) You shall have received the written Lock-Up Agreements executed by
each of the persons named on Exhibit B hereto, whereby such persons have agreed
not to directly or indirectly (i) sell, offer or contract to sell or otherwise
dispose of or transfer any Company Common Stock, whether now owned or acquired
after the date of the Prospectus or with respect to which the power of
disposition is acquired after the date of the Prospectus, or file any
registration statement under the 1933 Act with respect to the foregoing or (ii)
enter into any swap or other agreement or any other agreement that transfers, in
whole or in part, directly or indirectly, the economic consequences of ownership
of Company Securities whether any such swap or transaction is to be settled by
delivery of Company Securities, in cash or otherwise; other than as provided in
such written commitment before the expiration of 90 days from the Closing Date,
without the prior written consent of ▇▇▇▇▇▇ ▇▇▇▇▇▇ & Company.
All such opinions, certificates, letters and other documents will be in
compliance with the provisions hereof only if they are reasonably satisfactory
in form and substance to you and your counsel.
The obligation of the Underwriter to purchase Additional Shares
hereunder are subject to the satisfaction on and as of the Additional Closing
Date of the conditions set forth in this Section 9, except that, if the
Additional Closing Date is other than the Closing Date, the certificates,
opinions and letters referred to in this Section 9 shall be dated as of the
Additional Closing Date and the opinions called for by paragraphs (c) and (d)
shall be revised to reflect the sale of Additional Shares.
30
If any of the conditions hereinabove provided for in this Section 9
shall not have been satisfied when and as required by this Underwriting
Agreement, this Underwriting Agreement may be terminated by you by notifying the
Company of such termination in writing or by telegram at or prior to such
Closing Date, but you shall be entitled to waive any of such conditions.
10. Effective Date of Agreement. This Underwriting Agreement shall
become effective upon the later of (a) the execution and delivery hereof by the
parties hereto and (b) release of notification of the effectiveness of the
Registration Statement by the Commission; provided, however, that the provisions
of Sections 7 and 8 shall at all times be effective.
11. Termination of Agreement. This Underwriting Agreement shall be
subject to termination in your absolute discretion, without liability on the
part of the Underwriter to the Company by notice to the Company, if prior to the
Closing Date or the Additional Closing Date (if different from the Closing Date
and then only as to the Additional Shares), as the case may be, in your sole
judgment, (i) trading in the Company's Common Stock shall have been suspended by
the Commission or Nasdaq, (ii) trading in securities generally on the Nasdaq,
the New York Stock Exchange, the American Stock Exchange, the Chicago Board
Options Exchange, the Chicago Mercantile Exchange or the Chicago Board of Trade,
shall have been suspended or materially limited, or minimum or maximum prices
shall have been generally established on such exchange, or additional material
governmental restrictions, not in force on the date of this Underwriting
Agreement, shall have been imposed upon trading in securities generally by any
such exchange or market or by order of the Commission or any other Governmental
Authority, (iii) trading of any securities issued by the Company or any of its
subsidiaries shall have been suspended; (iv) a general moratorium on commercial
banking activities shall have been declared by federal authorities or
authorities in the States of Georgia, New York or South Carolina; (v) any
downgrading shall have occurred in the rating accorded the Company's securities
or the deposits of any Company subsidiary by any "nationally recognized
statistical rating organization," as that term is defined by the Commission for
purposes of Rule 436(g)(2) under the 1933 Act; (vi) any such organization shall
have publicly announced that it has under surveillance or review, with possible
negative implications, its rating of any of the Company's or its subsidiaries'
deposits, debt, preferred stock or trust preferred securities; or (vii) there
shall have occurred any outbreak or escalation of hostilities, any terrorist act
or other international or domestic disaster, calamity, crisis or other change in
political, financial or economic conditions or other material event the effect
of which on the financial markets of the United States is such as to make it, in
your judgment, impracticable or inadvisable to market the Shares or to enforce
contracts for the sale of the Shares. Notice of such cancellation shall be
promptly given to the Company and its counsel by telegraph, telecopy or
telephone and shall be subsequently confirmed by letter.
12. Information Furnished by the Underwriter. The Company acknowledges
that "Underwriting - Commissions and Expenses", "- Stabilization" and "- Passive
Market Making" under the caption "Underwriting" in any Preliminary Prospectus,
constitute the only information furnished by or on behalf of the Underwriter
through you or on your behalf as such information is referred to in Sections
6(a) and 8 hereof.
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13. Miscellaneous. Except as otherwise provided in Sections 5 and 12
hereof, notice given pursuant to any of the provisions of this Underwriting
Agreement shall be in writing and shall be delivered:
(i) To the Company
Southcoast Financial Corporation
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: L. ▇▇▇▇▇ ▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to
Haynsworth ▇▇▇▇▇▇▇ ▇▇▇▇, P.A.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(ii) To the Underwriter
▇▇▇▇▇▇ ▇▇▇▇▇▇ & Company, Inc.
▇▇▇▇▇▇ ▇▇▇▇▇▇ Tower,
▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to
▇▇▇▇▇▇ & Bird LLP
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, III
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
This Underwriting Agreement has been and is made solely for the benefit
of the Underwriter, the Company and their respective directors, officers and
controlling persons, and shall be binding upon and inure to the benefit of such
persons and their respective successors, assigns and personal legal
representatives. Nothing in this Underwriting Agreement is intended to or shall
be construed to grant any other person any legal or equitable right, claim or
remedy under or in respect of this Underwriting Agreement or any provisions
hereof. No purchaser of Shares from any Underwriter shall be a successor of the
Underwriter solely by virtue of such purchase.
32
14. Miscellaneous. This Underwriting Agreement shall be governed by and
construed in accordance with the laws of the State of Georgia without reference
to choice of law principles thereunder.
This Underwriting Agreement may be signed in various identical
counterparts, each of which shall be an original, and all of which together
shall constitute one and the same instrument and a signature sent by facsimile
shall have the same force and effect as a manually signed original signature.
This Underwriting Agreement shall be effective when, but only when, at
least one counterpart hereof shall have been executed and delivered by courier,
facsimile, United States mail or overnight delivery service on behalf of each
party hereto to the other party hereto.
The Company and the Underwriter each hereby irrevocably waive any right
they may have to a trial by jury in respect to any claim based upon or arising
out of this Underwriting Agreement or the transactions contemplated hereby.
As used herein, the singular shall include the plural and vice versa,
and a reference to any gender shall include all genders. The terms "include" and
"including" and similar terms shall mean without limitation by reason of
enumeration or otherwise.
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Please confirm that the foregoing correctly sets forth the agreement
between the Company and the Underwriter.
Very truly yours,
SOUTHCOAST FINANCIAL CORPORATION
------------------------------------------------
President and Chief Executive Officer
CONFIRMED AND ACCEPTED as of the date first above written:
▇▇▇▇▇▇ ▇▇▇▇▇▇ & COMPANY, INC.
By:
--------------------------------------------------
Authorized Signatory
34
EXHIBIT A
Form of Lock-Up Agreement
_______ ____ ,2005
SOUTHCOAST FINANCIAL CORPORATION
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ & COMPANY, INC.
One Buckhead Plaza
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇.▇. ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Re: Southcoast Financial Corporation (the "Company") - Restriction
on Stock Sales
Dear Sirs:
This letter is delivered to you pursuant to the Underwriting Agreement
(the "Underwriting Agreement") to be entered into by the Company, as issuer, and
▇▇▇▇▇▇ ▇▇▇▇▇▇ & Company, Inc. (the "Underwriter"). Upon the terms and subject to
the conditions of the Underwriting Agreement, the Underwriter intends to effect
a public offering (the "Offering") of Common Stock, no par value per share, of
the Company (the "Shares"), as described in and contemplated by the registration
statement of the Company on Form S-l, File No. 333-______ (the "Registration
Statement"), as filed with the Securities and Exchange Commission on ________,
2005. Capitalized terms used but not defined herein shall have the meanings
provided in the Underwriting Agreement.
The undersigned recognizes that it is in the best financial interests
of the undersigned, as an officer or director, or as an owner of stock, options,
warrants or other securities of the Company (the "Company Securities"), that the
Company completes the proposed Offering.
The undersigned further recognizes that the Company Securities held by
the undersigned are, or may be, subject to certain restrictions on
transferability, including those imposed by United States federal securities
laws. Notwithstanding these restrictions, the undersigned has agreed to enter
into this letter agreement to further assure the Underwriter that the Company
Securities of the undersigned, now held or hereafter acquired, will not enter
the public market at a time that might impair or adversely affect the
underwriting effort.
Therefore, as an inducement to, and in consideration of, the
Underwriter's agreement to purchase and to make the Offering of the Shares, and
other good and valuable consideration the receipt and sufficiency of which is
35
acknowledged, the undersigned, intending to be legally bound, hereby agrees that
the undersigned will not, for the period commencing on the date hereof and
ending 90 days after the date of the Company's Prospectus relating to the
Offering (the "Lock-Up Period"), without the prior written consent of ▇▇▇▇▇▇
▇▇▇▇▇▇ & Company, Inc., (i) offer, sell, contract to sell, announce the
intention to sell, pledge, grant or sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase or otherwise transfer or dispose of, directly or indirectly,
(collectively, a "Disposition") any Company Securities, or any securities
convertible into or exercisable or exchangeable for, or any rights to purchase
or otherwise acquire, any Company Securities held by the undersigned or acquired
by the undersigned after the date hereof, or that may be deemed to be
beneficially owned by the undersigned (collectively, the "Lock-Up Shares"),
pursuant to the Rules and Regulations promulgated under the Securities Act of
1933, as amended (the "1933 Act"), and the Securities Exchange Act of 1934, as
amended (the "Exchange Act") or any Commission Regulations or (ii) enter into
any swap or other agreement that transfers, in whole or in part, any of the
economic consequences of ownership of the Lock-Up Shares held by the
undersigned, whether any such transaction described in clause (i) or (ii) above
is to be settled by delivery of Company Securities or such other securities, in
cash or otherwise. In addition, the undersigned agrees that, without the prior
written consent of ▇▇▇▇▇▇ ▇▇▇▇▇▇ & Company, Inc., it will not, during the
Lock-Up Period, exercise or seek to exercise or effectuate in any manner any
rights of any nature that the undersigned has or may have hereafter to require
the Company to register under the Act the undersigned's sale, transfer or other
disposition of any of the Lock-Up Shares or other securities of the Company held
by the undersigned, or to otherwise participate as a selling securityholder in
any manner in any registration effected by the Company under the Act, including,
without limitation, under the Registration Statement. The foregoing restrictions
are expressly agreed to preclude the undersigned from engaging in any hedging,
collar (whether or not for any consideration), swap or other transaction that is
designed to or reasonably expected to lead or result in a Disposition of Lock-Up
Shares during the Lock-Up Period, even if such Lock-Up Shares would be disposed
of by someone other than such holder. Such prohibited hedging or other
transactions include any short sale or any purchase, sale or grant of any right
(including any put or call option or reversal or cancellation thereof) with
respect to any Lock-Up Shares or with respect to any security (other than a
broad-based market basket or index) that includes, relates to or derives any
significant part of its value from Lock-Up Shares.
Notwithstanding the agreement not to make any Disposition during the
Lock-Up Period, you have agreed that the foregoing restrictions shall not apply
to:
(1) the Company Securities being offered in the Prospectus
included in the Registration Statement;
(2) any grant or exercise of options pursuant to the Company's
1999 Stock Option Plan and the purchase of shares pursuant to
the Company's ESPP;
(3) transfers of Company Securities as bona fide charitable gifts;
and
36
(4) transfers of Company Securities for estate planning purposes,
including to a family limited partnership or to a trust, for
the direct or indirect benefit of the undersigned or the
undersigned's immediate family.
For purposes of this letter agreement, "immediate family" shall mean any
relationship by blood, marriage or adoption, not more than first cousin. It
shall be a condition to any transfer permitted by (3) and (4) of this paragraph
that (a) each transferee execute a letter agreement in the form of this letter
agreement and (b) any such transfer shall not involve a disposition for value.
It is understood that, if the Underwriting Agreement (other than the
provisions thereof that survive termination) shall terminate or be terminated
prior to payment for and delivery of the Shares, you will release the
undersigned from the obligations under this letter agreement.
In furtherance of the foregoing, the Company and its transfer agent and
registrar are hereby authorized to decline to make any transfer of Lock-Up
Shares if such transfer would constitute a violation or breach of this letter.
This letter agreement shall be binding on the undersigned and the respective
successors, heirs, legatees, personal and legal representatives and assigns of
the undersigned. Capitalized terms used but not defined herein have the
respective meanings assigned to such terms in the Underwriting Agreement.
Very truly yours,
Signature of Securityholder
37
