<PAGE> 1
As filed with the Securities and Exchange Commission on April 9, 1998
Registration No. 333-47597
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST EFFECTIVE AMENDMENT NO. 1
FORM S-4EF
REGISTRATION STATEMENT
Under
The Securities Act of 1933
CLOVER COMMUNITY BANKSHARES, INC.
(Exact name of registrant as specified in its charter)
South Carolina 6711 58-2381062
- ---------------------- ------------------------- -----------------
(State or other (Primary Standard (IRS Employer
Jurisdiction Industrial Identification
of Incorporation or Classification Code No.)
Organization) Number)
124 North Main Street James C. Harris, Jr.
Clover, South Carolina 29710 President and Chief Executive Officer
(803) 222-7660 124 North Main Street
(Address, including zip code, Clover, South Carolina 29710
and telephone number, including (803) 222-7660
area code, of registrant's (Name, address and telephone
principal executive offices and number of agent for service)
principal place of business)
Copy to:
Neil E. Grayson, Esq.
Nelson Mullins Riley & Scarborough, L.L.P.
999 Peachtree Street, Suite 1400
First Union Plaza
Atlanta, Georgia 30309
(404) 817-6000
Fax: (404) 817-6050
Approximate date of commencement of proposed sale of the securities to
the public: As soon as practicable after the effective date of this Registration
Statement and the effective time of the Reorganization Plan attached as Appendix
A to the Proxy Statement/Prospectus forming a part of this Registration
Statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. |X|
CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Title of Each Amount Maximum Maximum Amount of
Class of Securities to be Offering Price Aggregate Registration
to be Registered Registered Per Unit Offering Price Fee
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Stock, $.01 Par Value 1,011,020 (1) $6.47(2) $6,541,299.40(2) $1,982.21(3)
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(1) The shares being registered are proposed to be issued in a share
exchange transaction at the rate of one share for each share of stock of Clover
Community Bank (the "Bank").
(2) Pursuant to Rule 457(f)(2), based upon the book value of the shares
of common stock of the Bank, computed as of December 31, 1997.
(3) Previously paid.
<PAGE> 2
CLOVER COMMUNITY BANKSHARES, INC.
PROSPECTUS
-------------------
CLOVER COMMUNITY BANK
PROXY STATEMENT
FOR A MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 20, 1998
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This Proxy Statement/Prospectus is furnished to shareholders of Clover
Community Bank (the "Bank") in connection with the solicitation of proxies by
the Board of Directors of the Bank for use at the Annual Meeting of Shareholders
to be held April 20, 1998, at the time and place set forth in the accompanying
Notice of Annual Meeting of Shareholders and at any adjournment thereof (the
"Annual Meeting"). This Proxy Statement/ Prospectus and the enclosed form of
proxy are being mailed to the shareholders of the Bank on or about April 9,
1998.
At the Annual Meeting, shareholders will be asked to approve the
reorganization of the Bank into a holding company structure (the
"Reorganization") in accordance with the terms and conditions set forth in the
Reorganization Agreement and Plan of Exchange dated as of March 9, 1998 (the
"Reorganization Plan"), a copy of which is attached as Appendix A to this Proxy
Statement/Prospectus. The Reorganization Plan provides for a statutory share
exchange between the shareholders of the Bank and Clover Community Bankshares,
Inc., a South Carolina corporation recently organized to serve as the holding
company for the Bank (the "Holding Company"). At the effective date of the
Reorganization, each outstanding share of common stock of the Bank will be
exchanged, in a tax-free transaction, for one share of common stock of the
Holding Company (the "Share Exchange"). After consummation of the
Reorganization, the Bank will conduct its business as a wholly-owned subsidiary
of the Holding Company in substantially the same manner and from the same
offices as the Bank did before the Reorganization, and all current shareholders
of the Bank will become shareholders of the Holding Company. See "The Proposed
Reorganization."
The Proxy Statement/Prospectus also serves as the prospectus for the
Holding Company as it relates to the 1,011,020 shares of the Holding Company
common stock, par value $0.01 per share, to be issued to the shareholders of the
Bank in exchange for their shares of Bank common stock. The Holding Company has
filed a Registration Statement under the Securities Act of 1933 with the
Securities and Exchange Commission with respect to the shares of Company common
stock to be issued in connection with the Reorganization.
At the Annual Meeting, you also will vote on the election of all of the
directors of the Bank for the coming year. All of the existing directors of the
Bank have been nominated for reelection.
The principal offices of the Bank and the Holding Company are 124 North
Main Street, Clover, South Carolina 29710 (telephone: (803) 222-7660).
-----------------------------
THIS PROXY STATEMENT IS ALSO DEEMED UNDER FEDERAL SECURITIES LAWS TO BE
A PROSPECTUS BY WHICH THE HOLDING COMPANY OFFERS THE COMMON STOCK WHICH YOU WILL
RECEIVE IN THE REORGANIZATION. THIS IS THE REASON FOR THE STATEMENT IN BOLD-FACE
TYPE BELOW WHICH IS REQUIRED ON ALL PROSPECTUSES.
THE SHARES OF COMMON STOCK OF THE COMPANY TO BE ISSUED UNDER THE
REORGANIZATION PLAN HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION (THE "COMMISSION"), THE FEDERAL DEPOSIT INSURANCE
CORPORATION (THE "FDIC") OR ANY STATE COMMISSION NOR HAS THE COMMISSION, THE
FDIC OR ANY STATE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THE PROXY
STATEMENT/PROSPECTUS. FURTHER, THESE SECURITIES ARE NOT DEPOSITS AND ARE NOT
INSURED BY THE FDIC. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------------------------
The date of this Proxy Statement/Prospectus is April 9, 1998.
<PAGE> 3
CLOVER COMMUNITY BANKSHARES, INC.
PROSPECTUS
--------------------------------
PROXY STATEMENT
for
ANNUAL MEETING OF SHAREHOLDERS OF
CLOVER COMMUNITY BANK
TO BE HELD APRIL 20, 1998
TABLE OF CONTENTS
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Page
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SUMMARY 1
THE PROPOSED REORGANIZATION.................................................3
RIGHTS OF DISSENTING SHAREHOLDERS...........................................7
FEDERAL INCOME TAX CONSEQUENCES.............................................9
DIVIDENDS AND PUBLIC MARKET.................................................9
PRO FORMA CONDENSED FINANCIAL INFORMATION..................................11
BUSINESS OF THE HOLDING COMPANY AND THE BANK...............................12
SUPERVISION AND REGULATION.................................................14
MANAGEMENT; ELECTION OF DIRECTORS..........................................19
PRINCIPAL SHAREHOLDERS OF THE BANK.........................................22
COMPLIANCE WITH THE SECURITIES EXCHANGE ACT OF 1934........................23
RESTRICTIONS ON TRANSFER OF STOCK
RECEIVED BY CERTAIN INDIVIDUALS...................................23
DESCRIPTION OF COMMON STOCK................................................24
FINANCIAL STATEMENTS; REPORT ON FORM F-2...................................24
SHAREHOLDER PROPOSALS......................................................25
LEGAL MATTERS..............................................................25
INDEPENDENT PUBLIC ACCOUNTANTS.............................................25
OTHER MATTERS..............................................................25
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APPENDIX A: Reorganization Agreement and Plan of Exchange
APPENDIX B: South Carolina Dissenters Rights Statute
<PAGE> 4
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT/ PROSPECTUS,
IN CONNECTION WITH THE OFFERS MADE HEREBY, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON. THIS PROXY
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF
AN OFFER TO BUY, ANY SECURITIES IN ANY STATE OR OTHER JURISDICTION TO ANY PERSON
TO WHOM IT IS UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS, NOR ANY OFFER, SOLICITATION OR
DISTRIBUTION MADE HEREUNDER, SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION
THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS AND ARE NOT INSURED BY
THE FDIC. THESE SECURITIES ARE NOT GUARANTEED BY THE BANK OR BY THE HOLDING
COMPANY AND MAY LOSE VALUE.
<PAGE> 5
SUMMARY
The following is a summary of certain information contained in this
Proxy Statement/Prospectus. This summary is not intended to be a complete
statement of all material matters discussed herein and is qualified in its
entirety by reference to the more detailed information contained elsewhere in
this Proxy Statement/Prospectus, the accompanying appendices, and the documents
incorporated by reference. Shareholders are urged to review carefully the entire
Proxy Statement/Prospectus, including the appendices and the other documents
referred to herein.
ANNUAL MEETING
Date, Time, and Place. The Annual Meeting will be held on April 20,
1998, commencing at 7:00 p.m. Eastern standard time at the Bank's principal
office located at 124 North Main Street, Clover, South Carolina 29710.
Purpose. At the Annual Meeting, the shareholders will be asked to
approve the Reorganization pursuant to which the Bank will become a wholly-owned
subsidiary of the Holding Company. In addition, shareholders will vote to elect
directors of the Bank for a one-year term and until their successors are elected
and qualified.
Vote Required, Record Date, and Voting Rights. Approval of the
Reorganization will require the affirmative vote of the holders of at least
two-thirds of the Bank's outstanding stock. The Board of Directors of the Bank
has fixed March 2, 1998 as the record date ("Record Date") for the determination
of holders of Bank stock entitled to receive notice of and vote at the Annual
Meeting. At the close of business on the Record Date, there were issued and
outstanding 1,011,020 shares of Bank common stock entitled to vote at the Annual
Meeting and there were 636 shareholders of record. Holders of Bank common stock
are entitled to one vote for each share held of record upon each matter properly
submitted at the Annual Meeting.
The members of the Bank's Board of Directors believe that the
Reorganization is in the Bank's shareholders' best interest because the Holding
Company will have greater business and investment flexibility than the Bank. For
example, the Holding Company can redeem its own shares, issue shares, and borrow
money without regulatory approval, engage through non-bank subsidiaries in
certain banking-related activities, and acquire other banks and thrifts. See
"THE PROPOSED REORGANIZATION - Reasons for the Reorganization."
The Bank's Board of Directors has unanimously approved the
Reorganization and recommends that the shareholders vote in favor of approval.
The Bank's directors and executive officers beneficially owned 18.7% of the
Bank's outstanding common shares as of the Record Date, and they have indicated
that they will vote their shares in favor of the Reorganization. If they vote in
favor of the Reorganization, only 48% of the remaining shareholders need to vote
in favor of the Reorganization to approve the plan.
Shares represented by proxies properly signed and returned, unless
subsequently revoked, will be voted in accordance with the instructions thereon.
If a proxy is signed and returned without indicating any voting instructions,
the shares represented by the proxy will be voted FOR approval of the
Reorganization, FOR election of each of the nominees listed below under
"Election of Directors," and in the discretion of the holders of the proxies on
any other matters that may properly come before the Annual Meeting. Any proxy
given pursuant to this solicitation may be revoked prior to the Annual Meeting
by delivering an instrument revoking it or by delivering a duly executed proxy
bearing a later date to the secretary of the Bank. A shareholder may elect to
attend the Annual Meeting and vote in person notwithstanding the fact that such
shareholder has a proxy outstanding, and such vote will act to revoke the
previously executed proxy.
All expenses of this solicitation, including the cost of preparing and
mailing this Proxy Statement/Prospectus, will be paid by the Holding Company. In
addition to solicitation by mail, directors, officers and regular employees of
the Bank may solicit proxies by telephone or personal interview, for which they
will receive no compensation in addition to their regular salaries.
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<PAGE> 6
This Proxy Statement/Prospectus was first sent to shareholders of the
Bank on or about April 1, 1998.
BUSINESS
The Bank was incorporated under the laws of the State of South Carolina
as a state chartered bank on August 18, 1987 and commenced operations on October
1, 1987. The Bank operates under the jurisdiction of the South Carolina State
Board of Financial Institutions (the "South Carolina Bank Board"), and its
deposits are insured by the Federal Deposit Insurance Corporation ("FDIC"). The
Bank is not a member of the Federal Reserve System. The Bank engages in a
general commercial banking business, emphasizing the banking needs of
individuals and small to medium-sized business and professional concerns in its
primary service area, and offers a full range of deposit services and short to
medium-term commercial and other loans, as well as various other services from a
single office in Clover, South Carolina. The Bank does not exercise trust powers
nor offer brokerage or other fiduciary services at this time. See "BUSINESS OF
THE HOLDING COMPANY AND THE BANK."
The Holding Company was recently organized at the direction of the Bank
and has not engaged in any active business operations. See "BUSINESS OF THE
HOLDING COMPANY AND THE BANK."
The principal executive offices of the Bank and the Holding Company are
located at 124 North Main Street, Clover, South Carolina 29710. The telephone
number is (803) 222-7660.
OPERATION OF THE BANK AND HOLDING COMPANY AFTER THE REORGANIZATION
If the Reorganization is consummated, the Bank will continue to operate
as a state chartered banking association and engage in the same business and
activities in which it is presently engaged. No change in the officers or
directors of the Bank will occur as a result of the Reorganization and no change
in the ownership of the Bank will occur except any changes as a result of
existing shareholders exercising their dissenter's rights. The Holding Company
will be operated as a bank holding company under the federal Bank Holding
Company Act of 1956 and the bank holding company laws of South Carolina. See
"BUSINESS OF THE COMPANY AND THE BANK," "SUPERVISION AND REGULATION," and
"ELECTION OF DIRECTORS."
RIGHTS OF DISSENTING SHAREHOLDERS
If the Reorganization is consummated, shareholders who dissent will be
entitled, upon compliance with the provisions of Chapter 13 of Title 33 of the
Code of Laws of South Carolina (the "South Carolina Dissenters Rights Statute")
to receive the value of their shares in cash. Any Bank shareholder intending to
assert dissenters' rights may not vote in favor of the Reorganization and must
file a written notice of intent to demand payment for his shares with the
corporate secretary of the Bank before the vote is taken at the Annual Meeting.
A vote against approval of the Reorganization will not, in and of itself,
satisfy the requirements of the South Carolina Dissenters Rights Statute. See
"RIGHTS OF DISSENTING SHAREHOLDERS" and Appendix B.
EFFECT OF REORGANIZATION ON THE BANK'S SHAREHOLDERS
If the Reorganization is consummated, the Bank's shareholders' common
stock will be exchanged for shares of common stock of the Holding Company.
Shareholders should consider carefully the differences in their rights as
shareholders of the Bank and their rights as shareholders of the Holding
Company. For instance, unlike the Bank, the Holding Company's Board of Directors
may authorize the issuance of capital stock without the approval of the South
Carolina State Board of Financial Institutions (the "South Carolina Bank
Board"), and such stock may be issued for property or services as well as for
cash. Although the Holding Company currently has no current plans to do so,
unlike the Bank, the Holding Company is permitted to borrow from third party
institutions and pledge all of the Bank's stock as collateral. If the Holding
Company were to borrow such funds, pledge the Bank stock, and default on the
loan, the Holding Company could forfeit the Bank stock. Except as otherwise
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<PAGE> 7
described in this Proxy Statement/Prospectus, Holding Company shareholders will
have rights generally comparable to their present rights as shareholders of the
Bank. See "THE PROPOSED REORGANIZATION - Effect of Reorganization on the Bank's
Shareholders." Also see "DESCRIPTION OF COMMON STOCK" for a description of
certain significant features of the Holding Company's and Bank's common stock;
and "RESTRICTIONS ON TRANSFER OF STOCK RECEIVED BY CERTAIN INDIVIDUALS" for a
description of resale restrictions applicable to certain holders of Holding
Company stock under the Securities Act of 1933 (the "Securities Act").
REGULATORY APPROVALS
Before the proposed Reorganization is consummated, the Bank and the
Holding Company must notify the South Carolina Bank Board and the Board of
Governors of the Federal Reserve System (or its lawful delegate) ("Federal
Reserve"). If the Reorganization meets certain criteria established by the
Federal Reserve (which the Bank believes it will meet), the Reorganization can
be consummated 30 days after the Federal Reserve receives this notice. Notice
applications will be filed with each of such regulatory authorities in the near
future.
TAX CONSEQUENCES AND ACCOUNTING TREATMENT
Under applicable provisions of the Internal Revenue Code of 1986, as
amended ("Code"), no gain or loss will be recognized for federal income tax
purposes by the Bank, the Holding Company, or the Bank's shareholders who
receive solely stock of the Holding Company in connection with the proposed
Share Exchange. No ruling to that effect will be requested from the Internal
Revenue Service. Cash received by shareholders who exercise their dissenters'
rights will be treated as amounts distributed in redemption of their shares and
will be taxable under the provisions of Section 302 of the Code as either
ordinary income or capital gain or loss, depending upon the circumstances of the
individual shareholder. See "FEDERAL INCOME TAX CONSEQUENCES." The Holding
Company intends to account for the Reorganization under the "pooling of
interests" method of accounting.
THE PROPOSED REORGANIZATION
REORGANIZATION AGREEMENT AND PLAN OF EXCHANGE
The description of the Reorganization set forth in this section does
not purport to be complete and it is qualified in its entirety by reference to
the Reorganization Plan and Plan of Reorganization which is attached hereto as
Appendix A.
DESCRIPTION OF THE REORGANIZATION
The Holding Company is a corporation organized under the laws of the
State of South Carolina. If the Bank's shareholders approve the Reorganization,
the Bank's holding company reorganization will be accomplished pursuant to a
statutory share exchange between the Bank and the Holding Company. The share
exchange will be effective and the Reorganization will be consummated as of the
date specified in the certificate of share exchange issued by the South Carolina
Secretary of State's office.
At the effective date of the Reorganization, each outstanding share of
common stock of the Bank will be exchanged, in a tax-free transaction, for one
share of common stock of the Holding Company. After consummation of the
Reorganization, the Bank will conduct its business as a wholly-owned subsidiary
of the Holding Company in substantially the same manner and from the same
offices as the Bank did before the Reorganization, and all current shareholders
of the Bank will become shareholders of the Holding Company.
As a result of the Reorganization, the Bank's shareholders will become
shareholders of the Holding Company instead of the Bank, the Bank will continue
to exist as a wholly-owned subsidiary of the Holding Company. The articles of
incorporation, bylaws, corporate identity, charter, and officers and directors
of the
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<PAGE> 8
Bank will not be changed as a result of the Reorganization. The Reorganization
will be accounted for as a pooling of interests.
The Holding Company was recently organized at the direction of the
management of the Bank to accomplish the Reorganization. The Bank's directors
are also the directors of the Holding Company and, currently, the sole
shareholders of the Holding Company. In connection with the Reorganization, the
Holding Company will redeem the directors' stock in the Holding Company for the
same consideration paid by them for such stock.
REASONS FOR THE REORGANIZATION
The members of the Bank's Board of Directors believe the Reorganization
is in the best interest of the Bank's shareholders because the Holding Company
will have greater business and investment flexibility than the Bank in several
areas.
First, the Bank can raise capital only by selling unissued shares of
its stock. It must obtain regulatory approval to sell those shares, and such
sales would dilute shareholders' ownership. The Holding Company, on the other
hand, can borrow funds to make capital contributions to the Bank. The Bank can
repay such loans with dividends paid from the Bank to the Holding Company, and
the Holding Company can eliminate the dividends in computing its taxable income
if it and the Bank file a consolidated tax return. If the Holding Company
prefers to raise money by issuing stock, it can do so without regulatory
approval, subject to federal and state securities law requirements. At the
present time, the Bank has no plans to raise additional capital through the
Holding Company.
Second, except in certain unusual circumstances, the Bank is not
permitted to purchase its own stock or to lend money secured by its own stock.
The Holding Company may, within limits, redeem its own stock, and the Bank, as
the Holding Company's subsidiary, may, within limits, make loans secured by
Holding Company stock.
Third, the Holding Company can, either directly or through nonbanking
subsidiaries, engage in a wider variety of banking-related activities than the
Bank. These activities include providing data processing services for the Bank;
leasing buildings and equipment to the Bank; offering discount brokerage
services; providing credit life and other types of insurance; and arranging
commercial real estate equity financing. See "BUSINESS OF THE HOLDING COMPANY
AND THE BANK" and "SUPERVISION AND REGULATION." Although there are no plans at
the present time for the Holding Company to engage in such activities, the Board
of Directors believes that the holding company structure will allow the Bank to
become more responsive to its customers' broadening and changing financial
needs.
In addition to be benefits discussed above, the Reorganization and the
resulting corporate structure will impose certain additional costs and burdens
relating to the Holding Company, including: (i) direct costs of the
Reorganization such as legal fees, accounting fees and printing costs, (ii)
additional administrative burdens of operating the holding company, such as
management time, directors' fees and expenses, (iii) regulation by the Federal
Reserve at the Holding Company level and (iv) Securities Act registration with
and Exchange Act reporting to the Securities and Exchange Commission rather than
to the FDIC. SEE "SUPERVISION AND REGULATION."
In summary, the Bank's Board of Directors believes that the greater
business and investment capabilities of the Holding Company will enable the Bank
to compete more effectively with other financial institutions and will help
place the Bank in a better position for future growth. The Bank's Board of
Directors believes that these advantages to the Reorganization outweigh the
costs of the Reorganization and the additional regulatory and administrative
burdens associated with the Holding Company.
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<PAGE> 9
CONDITIONS TO THE REORGANIZATION
The Reorganization has been unanimously approved by the Boards of
Directors of the Bank and the Holding Company. Consummation of the
Reorganization is conditioned upon approval by holders of two-thirds of the
outstanding shares of the Bank as required by law, and upon the receipt of any
required approvals from regulatory agencies, including the South Carolina Bank
Board and the Federal Reserve.
TERMINATION
The Reorganization Plan may be terminated at any time before the
Effective Date if:
(1) the number of shares of common stock of the Bank voted
against the Reorganization, or in respect of which written notice is
given purporting to dissent from the Reorganization, shall make
consummation of the Reorganization unwise in the opinion of the Bank's
Board of Directors;
(2) any act, suit, proceeding or claim relating to the
Reorganization has been instituted or threatened before any court or
administrative body; or
(3) the Bank's Board of Directors determines that the
Reorganization is inadvisable.
SURRENDER OF CERTIFICATES
Upon consummation of the Reorganization on the Effective Date, the
Bank's shareholders will be furnished instructions for surrendering their
present stock certificates and for replacing any lost, stolen or destroyed
certificates. As of the Effective Date, each certificate representing common
stock of the Bank will be deemed to evidence the right to receive Holding
Company stock as provided by the Reorganization Plan. However, under the terms
of the Reorganization Plan, shareholders who do not surrender their Bank stock
certificates will not be issued certificates representing the shares of Holding
Company common stock they may be entitled to receive and will not be paid
dividends or other distributions. Any such dividends or distributions which such
shareholders would otherwise receive will be held, without interest, for their
accounts until surrender of their Bank stock certificates.
SHAREHOLDER APPROVAL
The affirmative vote of the holders of at least two-thirds of the
outstanding shares of the Bank's common stock entitled to vote at the Annual
Meeting is required for approval of the Reorganization Plan. On the Record Date
for determination of shareholders entitled to notice of and to vote at the
Annual Meeting, the outstanding voting securities of the Bank consisted of
1,011,020 shares of common stock, with the registered holders thereof being
entitled to one vote per share.
EFFECT OF REORGANIZATION ON THE BANK'S SHAREHOLDERS
Generally. If the Reorganization is consummated, the Bank's
shareholders will become holders of the same number of shares of Holding Company
common stock as the number of shares of Bank common stock they held prior to the
Reorganization, and their respective percentage ownership interest in the
Holding Company will be identical to their respective percentage ownership
interest in the Bank (except to the extent that such ownership interest may be
increased by the retirement of shares from Bank shareholders who exercise their
statutory right to dissent). After the Reorganization, the rights and privileges
of former Bank shareholders will be governed by the provisions of the South
Carolina Business Corporation Act rather than the provisions of Title 34 of the
Code of Laws of South Carolina (the "South Carolina Bank Act"). Shareholders
should carefully consider the differences between their rights as shareholders
of the Holding Company and their rights as shareholders of the Bank. The
principal differences are described below.
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<PAGE> 10
Issuance of Additional Capital Stock. The South Carolina Bank Act
provides that the issuance of stock by the Bank is subject to South Carolina
Bank Act approval, and that Bank stock, except for certain limited exceptions,
may be issued only for cash consideration. On the other hand, stock issuances by
the Holding Company will not be subject to such regulatory approval and stock
may be issued by the Holding Company for cash, other property, or services. The
Bank's authorized capital stock consists of 3,000,000 shares of common stock,
par value $1.25 per share, 1,011,020 shares of which are issued and outstanding.
The authorized capital stock of the Holding Company consists of 10,000,000
shares of common stock, par value $.01 per share. After the Reorganization,
1,011,020 of these shares will be issued and outstanding (assuming that the Bank
issues no additional shares before consummation of the Reorganization and that
no shareholders exercise their statutory dissenters' rights), and 8,988,980
shares will be available for issuance without additional shareholder approval.
The Bank's Board of Directors believes that the additional number of authorized
but unissued Holding Company shares is advantageous because it will give the
Holding Company flexibility in issuing additional shares as stock dividends, for
raising additional equity capital, or for acquisitions without requiring a vote
of the shareholders to amend the Holding Company's articles of incorporation to
increase the authorized capital stock. At the present time, there are no plans
or arrangements to issue additional shares.
Voting Rights. In general, shareholders of both the Bank and the
Holding Company are entitled to one vote per share of common stock. However,
shareholders of the Bank currently have the right to cumulate their votes for
directors, and, under the Holding Company's Articles of Incorporation,
shareholders of the Holding Company will not have the right to vote
cumulatively.
Limitation of Liability. The Holding Company's Articles of
Incorporation eliminate the liability of its directors for monetary damages to
the corporation or its shareholders for breach of duty of a director, except for
specified violations including breach of duty of loyalty, intentional
misconduct, knowing violation of law, illegal payment of dividends, or any
transaction from which a director derives an improper personal benefit. These
provisions could result in benefits to Holding Company directors that would not
have been available to Bank directors under similar circumstances. The Bank's
Articles of Association do not contain a similar provision. The Holding
Company's Bylaws provide or allow for indemnification of directors, officers and
employees. The current Bylaws of the Bank also contain a similar provision,
although it is unclear whether such provision would be enforceable under all
circumstances, especially in the context of an enforcement action by the FDIC.
As a result, the limits on liability available to the Holding Company's
directors, officers and employees are generally more favorable to the Holding
Company's directors, officers and employees than the similar provisions
available to the Bank's directors, officers and employees. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers or persons controlling the Holding Company
pursuant to the foregoing provisions, the Holding Company has been informed that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
Consideration of Other Constituencies. The Holding Company's Articles
of Incorporation provide that, in discharging the duties of their respective
positions and in determining what is in the best interests of the Holding
Company, the Board of Directors, committees of the Board of Directors, and
individual directors, in addition to considering the effects of any actions on
the Holding Company and its shareholders, may consider the interests of the
employees, customers, suppliers, creditors, and other constituencies of the
Holding Company and its subsidiaries, the communities and geographical areas in
which the Holding Company and its subsidiaries operate or are located, and all
other factors such directors consider pertinent. The Bank's Articles of
Incorporation do not contain a similar provision.
Qualifications of Directors. Under the Holding Company's Bylaws, no
individual who is or becomes affiliated with another financial institution
having branches or affiliates in York County, South Carolina shall be eligible
to serve as a director if the Board of Directors determines that such
involvement would not be in the Holding Company's best interests. The Bank's
Bylaws do not contain a similar provision. However, a similar restriction exists
under the Depository Institution Management Interlocks Act.
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<PAGE> 11
Restrictions on Resale of Holding Company Stock. Persons who are
"affiliates" of the Bank at the time that the Reorganization Plan is submitted
to the Bank's shareholders for approval and persons who are or become
"affiliates" of the Holding Company will be subject to restrictions on the
resale of their shares of Holding Company common stock under the Securities Act.
In addition, persons receiving Holding Company common stock in transactions not
involving any public offering will be subject to similar restrictions. In
contrast, affiliates of the Bank and persons receiving shares of Bank common
stock in transactions not involving any public offering are not subject to those
resale restrictions under the Securities Act because stock of a bank is exempt
from the registration provisions of the Securities Act pursuant to Section
3(a)(2) thereof. See "RESTRICTIONS ON TRANSFER OF STOCK RECEIVED BY CERTAIN
INDIVIDUALS."
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<PAGE> 12
RIGHTS OF DISSENTING SHAREHOLDERS
If the Reorganization is consummated, shareholders who dissent will be
entitled, upon compliance with the South Carolina Dissenters Rights Statute
(Chapter 13 of Title 33 of the Code of Laws of South Carolina) to receive the
value of their shares in cash. Set forth below is a summary of the procedures
relating to the exercise of dissenters' rights under the South Carolina
Dissenters Rights Statute. The following summary is qualified in its entirety by
reference to the text of the South Carolina Dissenters Rights Statute set forth
in Appendix B and to any amendments to such provisions that may be adopted after
the date of this Proxy Statement/Prospectus. The provisions for exercising
dissenters' rights are complex and must be complied with precisely. Any
shareholder of the Bank intending to dissent from the proposed Reorganization
should consult carefully the text of Appendix B and is also advised to consult
legal counsel.
Any shareholder of the Bank entitled to vote on the Reorganization has
the right to dissent from the Reorganization and receive payment of the fair
value of his shares of the Bank common stock upon compliance with the South
Carolina Dissenters Rights Statute. A shareholder may not dissent as to less
than all of the shares that he beneficially owns, regardless of the number of
accounts maintained for the benefit of such shareholder. A nominee or fiduciary
may not dissent on behalf of any beneficial owner as to less than all of the
shares of such beneficial owner held of record by such nominee or fiduciary. A
beneficial owner asserting dissenters' rights to shares held on his behalf must
notify the Bank in writing of the names and addresses of the record holders of
the shares, if known to him.
Any Bank shareholder intending to assert dissenters' rights may not
vote in favor of the Reorganization and must file a written notice of intent to
demand payment for his shares (the "Objection Notice") with the corporate
secretary of the Bank before the vote is taken at the Annual Meeting. Objection
notices should be forwarded to the following address: Gwen M. Thompson,
Corporate Secretary, Clover Community Bank, 124 North Main Street, Clover, South
Carolina 29710. The Objection Notice must state that the shareholder intends to
demand payment for his shares of the Bank common stock if the Reorganization is
effected. A vote against approval of the Reorganization will not, in and of
itself, constitute an Objection Notice satisfying the requirements of Section
33-13-210 of the South Carolina Dissenters Rights Statute. A Bank shareholder
who returns a signed and otherwise unmarked proxy card will be deemed to have
voted in favor of the Reorganization and will not be entitled to dissent, even
if the shareholder has filed an Objection Notice. If the Reorganization is
approved by the Bank's shareholders at the Annual Meeting, each shareholder who
has properly filed an Objection Notice will be notified by the Bank of such
approval within 10 days after the Annual Meeting (the "Dissenters' Notice"). The
Dissenters' Notice will (i) state where dissenting shareholders must (a) send
the Payment Demand (as defined below) and (b) deposit their Bank common stock
certificates (the "Certificates"); (ii) inform holders of uncertificated shares
of the Bank common stock of the extent of any restrictions on the
transferability of such shares; (iii) be accompanied by a form for demanding
payment that includes the date of the first announcement to the news media or to
shareholders of the terms of the proposed Reorganization; (iv) set a date by
which (x) the Bank must receive the Payment Demand, which may not be fewer than
30 or more than 60 days after the date the Dissenters' Notice is delivered and
(y) the Certificates must be deposited as instructed in the Dissenters' Notice,
which may not be earlier than 20 days after the date the Payment Demand is
received by the Bank; and (v) be accompanied by a copy of the South Carolina
Dissenters Rights Statute. Within the time prescribed in the Dissenters' Notice,
a shareholder electing to dissent must make a demand for payment (the "Payment
Demand"), certify whether he (or the beneficial shareholder on whose behalf he
is asserting dissenters' rights) acquired beneficial ownership of the shares of
the Bank common stock before the date of this Proxy Statement/Prospectus (which
is the date of the first announcement to the Bank's shareholders of the terms of
the Reorganization) and deposit his Certificates in accordance with the terms of
the Dissenter's Notice. Upon filing the Payment Demand and depositing the
Certificates, the shareholder will retain all other rights of a shareholder
until these rights are canceled or modified by the consummation of the
Reorganization. Failure to comply substantially with these procedures will cause
the shareholder to lose his dissenters' rights to payment for the shares.
Consequently, any Bank shareholder who desires to exercise his rights to payment
for his shares is urged to consult legal counsel before attempting to exercise
such rights.
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<PAGE> 13
As soon as the Reorganization is consummated, or upon receipt of a
Payment Demand, the Company shall, pursuant to Section 33-13-250 of the South
Carolina Dissenters Rights Statute, pay to each dissenting shareholder who has
substantially complied with the requirements of the South Carolina Dissenters
Rights Statute the amount that the Holding Company estimates to be the fair
value of the shares of the Bank common stock plus accrued interest. Section
33-13-250 of the South Carolina Dissenters Rights Statute requires that payment
be accompanied by (i) certain of the Bank's financial statements, (ii) a
statement of the Holding Company's estimate of the fair value of the shares and
an explanation of how the Holding Company's estimate of the fair value and the
interest were calculated, (iii) notification of rights to demand additional
payment, and (iv) a copy of the South Carolina Dissenters Rights Statute. As
authorized by Section 33-13-270, the Holding Company may delay any payments with
respect to any shares held by a dissenting shareholder which were not held by
such shareholder on the date of this Proxy Statement/Prospectus of the terms of
the Reorganization, unless the beneficial ownership devolved upon him by
operation of law from a person who was the beneficial owner on such date. Where
payments are so withheld, the South Carolina Dissenters Rights Statute requires
the Holding Company, after the Reorganization, to send to the holder of such
shares an offer to pay the holder an amount equal to the Holding Company's
estimate of their fair value plus accrued interest, together with an explanation
of the calculation of fair value and interest and a statement of the holder's
right to demand additional payment under Section 33-13-280 of the South Carolina
Dissenters Rights Statute.
If the Reorganization is not consummated within 60 days after the date
set for demanding payment and depositing Certificates, the Bank, within the
60-day period, will return the deposited Certificates and release any transfer
restrictions imposed on the uncertificated shares. If, after returning deposited
Certificates and releasing transfer restrictions, the Reorganization is
consummated, the Bank must send a new Dissenters' Notice and repeat the payment
demand procedure.
If the dissenting shareholder believes that the amount paid by the
Holding Company pursuant to Section 33-13-250 of the South Carolina Dissenters
Rights Statute or offered under Section 33-13-270 of the South Carolina
Dissenters Rights Statute is less than the fair value of his shares or that the
interest due is calculated incorrectly, or if the Holding Company fails to make
payment or offer payment (or, if the Reorganization has not been consummated,
the Bank does not return the deposited Certificates or release the transfer
restrictions imposed on uncertificated shares), within 60 days after the date
set in the Dissenters' Notice, then the dissenting shareholder may within 30
days after (i) the Holding Company made or offered payment for the shares or
failed to pay for the shares or (ii) the Bank failed to return deposited
Certificates or release restrictions on uncertificated shares timely, notify the
Holding Company in writing of his own estimate of the fair market value of such
shares (including interest due) and demand payment of such estimate (less any
payment previously received). Failure to notify the Holding Company in writing
of any demand for additional payment within 30 days after the Holding Company
made payment for such shares will constitute a waiver of the right to demand
additional payment.
If the Holding Company and the dissenting shareholder cannot agree on a
fair price within 60 days after the Bank receives such a demand for additional
payment, the Holding Company must institute judicial proceedings to fix (i) the
fair value of the shares and (ii) the accrued interest. The Holding Company must
make all dissenters whose demands for additional payment remain unsettled
parties to the proceeding and all such parties must be served with a copy of the
petition. The court may, in its discretion, appoint an appraiser to receive
evidence and recommend a decision on the question of fair value. The court is
required to issue a judgment for the amount, if any, by which the fair value of
the shares, as determined by the court, plus interest, exceeds the amount paid
by the Holding Company. If the Holding Company does not institute such
proceeding within such 60-day period, the Holding Company shall pay each
dissenting shareholder whose demand remains unsettled the respective amount
demanded by each shareholder.
The court will assess certain costs and expenses of such proceeding
(including reasonable compensation for, and the expenses of, the appraiser)
against the Holding Company, except that the court may assess such costs and
expenses as it deems appropriate against any or all of the dissenting
shareholders if it finds that their demand for additional payment was arbitrary,
vexatious or otherwise not in good faith. The court may award fees and
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<PAGE> 14
expenses of counsel and experts in amounts the court finds equitable (i) against
the Holding Company if the court finds that the Holding Company did not comply
substantially with the relevant requirements of the South Carolina Dissenters
Rights Statute or (ii) against either the Holding Company or any dissenting
shareholder, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith.
FEDERAL INCOME TAX CONSEQUENCES
If the Share Exchange and related transactions take place as described
in the Reorganization Plan and at least 50% of the Bank's outstanding common
stock is exchanged for Holding Company common stock in the Share Exchange:
(1) The Share Exchange between the Bank and the Holding
Company should qualify as a "reorganization" within the meaning of Sections
368(a)(1)(B) of the Code.
(2) Assuming the Share Exchange qualifies as a
"reorganization," no gain or loss will be recognized by the Holding Company or
the Bank as a result of the Share Exchange.
(3) Assuming the Share Exchange qualifies as a
"reorganization," no gain or loss will be recognized by any shareholder of the
Bank upon the exchange of his Bank common stock in the Share Exchange solely for
Holding Company common stock.
(4) Cash received by a shareholder of the Bank who
perfects his dissenters' rights will be treated as having been received by such
shareholder in redemption of his Bank common stock, and such redemption will be
taxable under the provisions of Section 302 of the Code as either ordinary
income or capital gain or loss, depending upon the circumstances of the
individual shareholder.
(5) Assuming the Share Exchange qualifies as a
"reorganization," the aggregate tax basis of the Holding Company common stock
received by a Bank shareholder will be the same as such shareholder's basis in
the Bank common stock exchanged for such Holding Company common stock in the
Share Exchange.
(6) Assuming the Share Exchange qualifies as a
"reorganization," the holding period of the Holding Company common stock
received in the Share Exchange by a Bank shareholder will include the period
during which such shareholder held the Bank common stock exchanged for such
Holding Company common stock, provided that such Bank common stock is held by
such shareholder as a capital asset on the Effective Date.
No ruling will be requested from the Internal Revenue Service ("IRS")
concerning the tax consequences of the Share Exchange. Because no IRS ruling
will be requested, there is a risk that the IRS will determine that the Share
Exchange does not qualify as a "reorganization", resulting in adverse tax
consequences to the Bank, the Holding Company and their shareholders.
The foregoing brief summary is not, and is not intended to be, a
complete analysis of all the federal income tax consequences of the Share
Exchange. SHAREHOLDERS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISERS TO MAKE A
PERSONAL APPRAISAL OF THE FEDERAL INCOME TAX CONSEQUENCES OF THE PROPOSED
TRANSACTION AND IN ORDER TO DETERMINE ANY STATE OR LOCAL TAX CONSEQUENCES OF THE
SHARE EXCHANGE.
DIVIDENDS AND PUBLIC MARKET
The Bank has paid an annual cash dividend since 1991. In 1997 and 1996,
the Bank declared and paid cash dividends of $.50 and $.20 per share,
respectively. In addition, in February 1998 the Bank paid a cash dividend of
$.50 per share to all shareholders of record on February 1, 1998. The Holding
Company's ability to pay any cash dividends to its shareholders will depend
primarily on the Bank's ability to pay dividends to the
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<PAGE> 15
Holding Company. The Bank is subject to regulatory restrictions on the payment
of dividends, including a prohibition of payment of dividends from its capital.
All dividends must be paid out of the undivided profits then on hand, after
deducting expenses, including losses and bad debts. The Bank must also obtain
approval from the South Carolina Bank Board prior to the payment of any
dividends to the Holding Company. In addition, the Bank may not pay a dividend
if, after paying the dividend, the Bank would be undercapitalized. See
"SUPERVISION AND REGULATION--Capital Regulations" below.
The Bank's common stock is not traded on any stock exchange or in the
over-the-counter market, and there is no public trading market for the shares of
the Bank's common stock. It is not anticipated that a market for the Holding
Company's common stock will develop as a result of the Reorganization.
Transactions in the common stock are limited and sporadic and are negotiated
privately between the persons involved in these transactions. Management is not
aware of the prices at which all shares of Common Stock have traded.
As of the date of this Proxy Statement/Prospectus, there were 1,011,020
shares of Bank common stock outstanding held by approximately 636 shareholders
of record, and 80 shares of Holding Company common stock outstanding held by
eight shareholders of record. Upon consummation of the Reorganization, there
will be 1,011,020 shares of Bank common stock outstanding (assuming that no
shareholders exercise their statutory dissenters' rights), as holders of Bank
common stock will become holders of Holding Company common stock. The expenses
of the Reorganization are estimated to be $25,000.
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<PAGE> 16
PRO FORMA CONDENSED FINANCIAL INFORMATION
Because the Holding Company was recently formed to acquire the Bank and
has had no operations of its own, and because the Reorganization is expected to
be accounted for in a manner similar to a pooling of interests, the Holding
Company's consolidated balance sheet immediately after consummation of the
Reorganization will be essentially identical to the Bank's balance sheet with
the following changes: (a) Shareholders' equity will be reduced by the amount of
the expenses of the Reorganization (estimated to be about $25,000); (b)
Shareholders' equity may be further reduced by any amounts that the Holding
Company must pay dissenters. See "Rights of Dissenting Shareholders."
Consummation of the Reorganization will not have any material impact on the
earnings of the Bank and, on a consolidated basis, the pro forma consolidated
results of operations of the Holding Company would be identical to those of the
Bank, with the exception of the estimated expenses of the Reorganization.
The following table sets forth the actual capitalization of the Holding
Company as of March 9, 1998, and the pro forma consolidated capitalization of
the Holding Company and the Bank as of that date using the Bank's actual balance
sheet amounts as of December 31, 1997. The information herein should be read in
conjunction with the financial statements of the Bank from the Bank's 1997
Annual Report to Shareholders, which is being mailed with this Proxy
Statement/Prospectus.
PRO FORMA CONSOLIDATED CAPITALIZATION
<TABLE>
<CAPTION>
Pro Forma
Actual (1) Adjustments Pro Forma
---------- ----------- ---------
<S> <C> <C> <C>
SHAREHOLDERS' EQUITY
Common stock, $.01 par value, $ 1 $ (1)(2) $ -
10,000,000 shares authorized
80 shares issued
1,011,020 shares issued 0 10,110 (3) 10,110
(799)(2)
Additional paid-in capital 799 3,323,861 (3) 3,323,861
(25,000)(4)
Retained earnings - 3,038,658 (3) 3,013,658
Unrealized holding gains and - 167,939 (3) 167,939
losses on available-for-sale
securities
Total shareholders' equity $800 $6,514,768 $6,515,568
==== ========== ==========
</TABLE>
- ---------------------------------
(1) On March 9, 1998, the Board of Directors of the Bank purchased 80
shares of the common stock of the Holding Company for $10.00 per share
after its incorporation on March 4, 1998.
(2) Redemption on the Effective Date of 80 shares of common stock of the
Holding Company purchased by the Board of Directors of the Bank in
connection with the formation of the Holding Company.
(3) Issuance on the Effective Date of 1,011,020 shares of common stock of
the Holding Company in exchange for all of the 1,011,020 outstanding
shares of common stock of the Bank on a one-for-one share basis.
Exchange has been accounted for in a manner similar to a
pooling-of-interests and assumes no cash payments being made to
dissenting shareholders of the Bank. Amounts are derived from the
balance sheet of the Bank as of December 31, 1997.
(4) Assuming $25,000 expenses of the Merger.
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<PAGE> 17
BUSINESS OF THE HOLDING COMPANY AND THE BANK
GENERAL
The Bank was incorporated under the laws of the State of South Carolina
as a state chartered bank on August 18, 1987 and commenced operations on October
1, 1987. The Bank operates under the jurisdiction of the South Carolina Bank
Board, and its deposits are insured by the Federal Deposit Insurance Corporation
("FDIC"). The Bank is not a member of the Federal Reserve System. The Bank
engages in a general commercial banking business, emphasizing the banking needs
of individuals and small to medium-sized business and professional concerns in
its primary service area, and offers a full range of deposit services and short
to medium-term commercial and other loans, as well as various other services
from a single office in Clover, South Carolina. The Bank does not exercise trust
powers nor offer brokerage or other fiduciary services at this time.
The Bank offers the full range of deposit services that are typically
available in most banks and savings and loan associations, including checking
accounts, NOW accounts, savings accounts, and other time deposits of various
types ranging from daily money market accounts to longer-term certificates of
deposit. The transaction accounts and time certificates are tailored to the
Bank's principal market area at rates competitive to those offered in the area.
All deposit accounts are insured by the FDIC up to the maximum amount ($100,000
per depositor, subject to aggregation rules). The Bank solicits these accounts
from individuals, businesses, associations and organizations, and governmental
authorities.
The Bank offers a full range of short to medium-term commercial,
personal, and mortgage loans. Commercial loans include both secured and
unsecured loans for working capital (including inventory and receivables),
business expansion (including acquisition of real estate and improvements), and
purchase of equipment and machinery. Personal (or consumer) loans include
secured and unsecured loans for financing automobiles, home improvements,
education, and personal investments. The Bank also offers mortgage loans secured
by personal residences.
The Bank offers travelers checks, safe deposit boxes, MasterCard and
Visa accounts, ATM cards, and overdraft lines of credit to its customers. The
Bank does not offer trust services. The Bank is a member of regional and
national networks of automated teller machines that may be used by Bank
customers in major cities throughout South Carolina and the United States, as
well as in various cities worldwide.
The Holding Company was recently organized at the direction of the Bank
for the purpose of owning all of the stock of the Bank. It has not engaged in
any active business operations. Upon consummation of the Reorganization, the
Holding Company will be operated as a bank holding company under the federal
Bank Holding Company Act of 1956 and the bank holding company laws of South
Carolina. The Holding Company does not initially intend to engage in any
activities other than owning the stock of the Bank.
MARKET AREA
The Bank's primary service area includes the Clover community in York
County, South Carolina. York County is located in the north central portion of
South Carolina about 75 miles north of Columbia, South Carolina and just
southwest of Charlotte, North Carolina. The county is bounded by North Carolina
to the north, by Lancaster County to the east, by Cherokee County to the west,
and by Chester County to the south. Clover is near the North Carolina line in
the northwest corner of the county. According to the York County Economic
Development Council, as of 1995 the population of York County was 141,302
people, and by the year 2000 the population of Clover is projected to be 19,368.
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<PAGE> 18
COMPETITION
The Bank generally competes with other financial institutions through
the selection of banking products and services offered, the pricing of services,
the level of service provided, the convenience and availability of services, and
the degree of expertise and the personal manner in which services are offered.
South Carolina law permits statewide branching by banks and savings
institutions, and many financial institutions in the state have branch networks.
Consequently, commercial banking in South Carolina is highly competitive.
Furthermore, as a consequence of legislation recently enacted by the United
States Congress, out-of-state banks not previously allowed to operate in South
Carolina may commence operations and compete in the Bank's primary service
areas. Many large banking organizations currently operate in the respective
market areas of the Bank, several of which are controlled by out-of-state
ownership. In addition, competition between commercial banks and thrift
institutions (savings institutions and credit unions) has been intensified
significantly by the elimination of many previous distinctions between the
various types of financial institutions and the expanded powers and increased
activity of thrift institutions in areas of banking which previously had been
the sole domain of commercial banks. Recent legislation, together with other
regulatory changes by the primary regulators of the various financial
institutions, has resulted in the almost total elimination of practical
distinctions between a commercial bank and a thrift institution. Consequently,
competition among financial institutions of all types is largely unlimited with
respect to legal ability and authority to provide most financial services.
The Bank faces increased competition from both federally-chartered and
state-chartered financial and thrift institutions, as well as credit unions,
consumer finance companies, insurance companies, and other institutions in the
Bank's market area. Some of these competitors are not subject to the same degree
of regulation and restriction imposed upon the Bank. Many of these competitors
also have broader geographic markets and substantially greater resources and
lending limits than the Bank and offer certain services such as trust banking
that the Bank does not currently provide. In addition, many of these competitors
have numerous branch offices located throughout the extended market area of the
Bank which may provide these competitors with an advantage in geographic
convenience that the Bank does not have at present. Such competitors may also be
in a position to make more effective use of media advertising, support services,
and electronic technology than can the Bank.
Currently there are two other commercial banks operating in the
community of Clover, which is the Bank's existing primary service area. There
are eight other commercial banks, five credit unions, and one savings
institutions operating in York County.
PROPERTIES
The Bank's principal office is located at are 124 North Main Street,
Clover, South Carolina. This office contains 7,000 square feet and currently
houses all of the operations facilities of the Bank, as well as the Bank's
executive offices and primary banking activities. The Bank believes this office
is adequate to support its operations for the foreseeable future.
EMPLOYEES
The Bank employs approximately 21 full-time employees. The Bank
believes its relations with its employees are good.
LEGAL PROCEEDINGS
In the ordinary course of operations, the Bank is party to various
legal proceedings. Management does not believe that there is any pending or
threatened proceeding against the Bank which, if determined adversely, would
have a material effect on the business, results of operations, or financial
position of the Bank.
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<PAGE> 19
BUSINESS AFTER CONSUMMATION OF THE REORGANIZATION
Upon consummation of the Reorganization, the Bank will be operated as a
wholly-owned subsidiary of the Holding Company. No significant changes are
planned in either the management or the operations of the Bank, and the Bank
will continue to be regulated as a South Carolina state-chartered banking
association.
SUPERVISION AND REGULATION
The Bank is, and the Holding Company will be, subject to state and
federal banking laws and regulations which impose specific requirements or
restrictions on and provide for general regulatory oversight with respect to
virtually all aspects of operations. These laws and regulations are generally
intended to protect depositors, not shareholders. To the extent that the
following summary describes statutory or regulatory provisions, it is qualified
in its entirety by reference to the particular statutory and regulatory
provisions. Any change in applicable laws or regulations may have a material
effect on the business and prospects of the Bank. Beginning with the enactment
of the Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA") and following with the Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA"), numerous additional regulatory requirements
have been placed on the banking industry in the past several years, and
additional changes have been proposed. The banking industry is also likely to
change significantly as a result of the passage of the Riegle-Neal Interstate
Banking and Branching Efficiency Act of 1994 (the "Interstate Banking Act"). The
operations of the Bank may be affected by legislative changes and the policies
of various regulatory authorities. The Bank is unable to predict the nature or
the extent of the effect on its business and earnings that fiscal or monetary
policies, economic control, or new federal or state legislation may have in the
future.
THE BANK
General. The Bank operates as a state bank incorporated under the laws
of the United States and subject to examination by the South Carolina State
Board of Financial Institutions. The South Carolina Bank Board and the FDIC
regulate or monitor virtually all areas of the Bank's operations, including
security devices and procedures, adequacy of capitalization and loss reserves,
loans, investments, borrowings, deposits, mergers, issuances of securities,
payment of dividends, interest rates payable on deposits, interest rates or fees
chargeable on loans, establishment of branches, corporate reorganizations,
maintenance of books and records, and adequacy of staff training to carry on
safe lending and deposit gathering practices. The South Carolina Bank Board
requires the Bank to maintain certain capital ratios and will impose limitations
on the Bank's aggregate investment in real estate, bank premises, and furniture
and fixtures. The Bank is required by the South Carolina Bank Board to prepare
quarterly reports on the Bank's financial condition and to conduct an annual
audit of its financial affairs in compliance with minimum standards and
procedures prescribed by the South Carolina Bank Board.
Under FDICIA, all insured institutions must undergo regular on site
examinations by their appropriate banking agency. The cost of examinations of
insured depository institutions and any affiliates may be assessed by the
appropriate agency against each institution or affiliate as it deems necessary
or appropriate. Insured institutions are required to submit annual reports to
the FDIC and the appropriate agency (and state supervisor when applicable).
FDICIA also directs the FDIC to develop with other appropriate agencies a method
for insured depository institutions to provide supplemental disclosure of the
estimated fair market value of assets and liabilities, to the extent feasible
and practicable, in any balance sheet, financial statement, report of condition
or any other report of any insured depository institution. FDICIA also requires
the federal banking regulatory agencies to prescribe, by regulation, standards
for all insured depository institutions and depository institution holding
companies relating, among other things, to: (i) internal controls, information
systems, and audit systems; (ii) loan documentation; (iii) credit underwriting;
(iv) interest rate risk exposure; and (v) asset quality.
Deposit Insurance. The FDIC establishes rates for the payment of
premiums by federally insured banks and thrifts for deposit insurance. A
separate Bank Insurance Fund ("BIF") and Savings Association Insurance Fund
("SAIF") are maintained for commercial banks and thrifts, respectively, with
insurance premiums from the industry
-15-
<PAGE> 20
used to offset losses from insurance payouts when banks and thrifts fail. Since
1993, insured depository institutions like the Bank have paid for deposit
insurance under a risk-based premium system. Under this system, until mid-1995
depositor institutions paid to BIF or SAIF from $0.23 to $0.31 per $100 of
insured deposits depending on its capital levels and risk profile, as determined
by its primary federal regulator on a semi-annual basis. Once the BIF reached
its legally mandated reserve ratio in mid-1995, the FDIC lowered premiums for
well-capitalized banks, eventually to $.00 per $100, with a minimum semiannual
assessment of $1,000. However, in 1996 Congress enacted the Deposit Insurance
Funds Act of 1996, which eliminated this minimum assessment. It also separated
the Financial Corporation (FICO) assessment to service the interest on its bond
obligations. The amount assessed on individual institutions, including the Bank,
by FICO is in addition to the amount paid for deposit insurance according to the
risk-related assessment rate schedule. Increases in deposit insurance premiums
or changes in risk classification will increase the Bank's cost of funds, and
there can be no assurance that such cost can be passed on the Bank's customers.
Transactions With Affiliates and Insiders. The Bank is subject to the
provisions of Section 23A of the Federal Reserve Act, which place limits on the
amount of loans or extensions of credit to, or investments in, or certain other
transactions with, affiliates and on the amount of advances to third parties
collateralized by the securities or obligations of affiliates. The aggregate of
all covered transactions is limited in amount, as to any one affiliate, to 10%
of the bank's capital and surplus and, as to all affiliates combined, to 20% of
the bank's capital and surplus. Furthermore, within the foregoing limitations as
to amount, each covered transaction must meet specified collateral requirements.
Compliance is also required with certain provisions designed to avoid the taking
of low quality assets.
The Bank is also subject to the provisions of Section 23B of the
Federal Reserve Act which, among other things, prohibit an institution from
engaging in certain transactions with certain affiliates unless the transactions
are on terms substantially the same, or at least as favorable to such
institution or its subsidiaries, as those prevailing at the time for comparable
transactions with non-affiliated companies. The Bank is subject to certain
restrictions on extensions of credit to executive officers, directors, certain
principal shareholders, and their related interests. Such extensions of credit
(i) must be made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
third parties, and (ii) must not involve more than the normal risk of repayment
or present other unfavorable features.
Dividends. The Bank is subject to regulatory restrictions on the
payment of dividends, including a prohibition of payment of dividends from its
capital. All dividends must be paid out of the undivided profits then on hand,
after deducting expenses, including losses and bad debts. The Bank must also
obtain approval from the South Carolina Bank Board prior to the payment of any
dividends to its shareholders. In addition, under FDICIA, the Bank may not pay a
dividend if, after paying the dividend, the Bank would be undercapitalized. See
"--Capital Regulations" below.
Branching. Under current South Carolina law, the Bank may open branch
offices throughout South Carolina with the prior approval of the South Carolina
Bank Board. In addition, with prior regulatory approval, the Bank is able to
acquire existing banking operations in South Carolina. Furthermore, federal
legislation has recently been passed which permits interstate branching. The new
law permits out-of-state acquisitions by bank holding companies (subject to veto
by new state law), interstate branching by banks if allowed by state law,
interstate merging by banks, and de novo branching by banks if allowed by state
law. However, in 1997 North Carolina passed legislation that, in effect,
prohibits de novo branching by South Carolina banks into North Carolina until
1999. See "--Recent Legislative Developments."
Community Reinvestment Act. The Community Reinvestment Act requires
that, in connection with examinations of financial institutions within their
respective jurisdictions, a financial institution's primary federal regulator
(this is the FDIC for the Bank) shall evaluate the record of the financial
institutions in meeting the credit needs of their local communities, including
low and moderate income neighborhoods, consistent with the safe and sound
operation of those institutions. These factors are also considered in evaluating
mergers, acquisitions, and applications to open a branch or facility.
-16-
<PAGE> 21
Other Regulations. Interest and certain other charges collected or
contracted for by the Bank are subject to state usury laws and certain federal
laws concerning interest rates. The Bank's loan operations are also subject to
certain federal laws applicable to credit transactions, such as the federal
Truth-In-Lending Act, governing disclosures of credit terms to consumer
borrowers; the Home Mortgage Disclosure Act of 1975, requiring financial
institutions to provide information to enable the public and public officials to
determine whether a financial institution will be fulfilling its obligation to
help meet the housing needs of the community it serves; the Equal Credit
Opportunity Act, prohibiting discrimination on the basis of race, creed or other
prohibited factors in extending credit; the Fair Credit Reporting Act of 1978,
governing the use and provision of information to credit reporting agencies; the
Fair Debt Collection Act, governing the manner in which consumer debts may be
collected by collection agencies; and the rules and regulations of the various
federal agencies charged with the responsibility of implementing such federal
laws. The deposit operations of the Bank also are subject to the Right to
Financial Privacy Act, which imposes a duty to maintain confidentiality of
consumer financial records and prescribes procedures for complying with
administrative subpoenas of financial records, and the Electronic Funds Transfer
Act and Regulation E issued by the Federal Reserve Board to implement that act,
which governs automatic deposits to and withdrawals from deposit accounts and
customers' rights and liabilities arising from the use of automated teller
machines and other electronic banking services.
THE HOLDING COMPANY
Because it will own the outstanding capital stock of the Bank, the
Holding Company will be a bank holding company within the meaning of the Federal
Bank Holding Company Act of 1956 (the "BHCA") and The South Carolina Bank
Holding Company Act (the "South Carolina Act"). The activities of the Holding
Company will also be governed by the Glass-Steagall Act of 1933 (the
"Glass-Steagall Act").
The BHCA. Under the BHCA, the Holding Company will be subject to
periodic examination by the Federal Reserve and will be required to file
periodic reports of its operations and such additional information as the
Federal Reserve may require. The Holding Company's and the Bank's activities are
limited to banking, managing, or controlling banks; furnishing services to or
performing services for its subsidiaries; and engaging in other activities that
the Federal Reserve determines to be so closely related to banking, managing, or
controlling banks as to be a proper incident thereto.
Investments, Control, and Activities. With certain limited exceptions,
the BHCA requires every bank holding company to obtain the prior approval of the
Federal Reserve before (i) acquiring substantially all the assets of any bank,
(ii) acquiring direct or indirect ownership or control of any voting shares of
any bank if after such acquisition it would own or control more than 5% of the
voting shares of such bank (unless it already owns or controls the majority of
such shares), or (iii) merging or consolidating with another bank holding
company.
In addition, and subject to certain exceptions, the BHCA and the Change
in Bank Control Act, together with regulations thereunder, require Federal
Reserve approval (or, depending on the circumstances, no notice of disapproval)
prior to any person or company acquiring "control" of a bank holding company,
such as the Holding Company. Control is conclusively presumed to exist if an
individual or company acquires 25% or more of any class of voting securities of
the bank holding company. Control is rebuttably presumed to exist if a person
acquires 10% or more but less than 25% of any class of voting securities and
either the Holding Company has registered securities under Section 12 of the
Exchange Act (which the Holding Company will be required to do with respect to
the Common Stock) or no other person will own a greater percentage of that class
of voting securities immediately after the transaction. The regulations provide
a procedure for challenge of the rebuttable control presumption.
Under the BHCA, a bank holding company is generally prohibited from
engaging in, or acquiring direct or indirect control of more than 5% of the
voting shares of any company engaged in, nonbanking activities, unless the
Federal Reserve Board, by order or regulation, has found those activities to be
so closely related to banking or managing or controlling banks as to be a proper
incident thereto. Some of the activities that the Federal Reserve Board has
determined by regulation to be proper incidents to the business of a bank
holding company include making
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<PAGE> 22
or servicing loans and certain types of leases, engaging in certain insurance
and discount brokerage activities, performing certain data processing services,
acting in certain circumstances as a fiduciary or investment or financial
adviser, owning savings associations, and making investments in certain
corporations or projects designed primarily to promote community welfare.
The Federal Reserve Board will impose certain capital requirements on
the Holding Company under the BHCA, including a minimum leverage ratio and a
minimum ratio of "qualifying" capital to risk-weighted assets. These
requirements are described below under "--Capital Regulations." Subject to its
capital requirements and certain other restrictions, the Holding Company will be
able to borrow money to make a capital contribution to the Bank, and such loans
may be repaid from dividends paid from the Bank to the Holding Company (although
the ability of the Bank to pay dividends will be subject to regulatory
restrictions as described below in "--The Bank--Dividends"). The Holding Company
will also be able to raise capital for contribution to the Bank by issuing
securities without having to receive regulatory approval, subject to compliance
with federal and state securities laws. Unlike the Bank, the Holding Company
may, subject to certain limitations, repurchase its own stock.
Source of Strength; Cross-Guarantee. In accordance with Federal Reserve
Board policy, the Holding Company is expected to act as a source of financial
strength to the Bank and to commit resources to support the Bank in
circumstances in which the Holding Company might not otherwise do so. Under the
BHCA, the Federal Reserve Board may require a bank holding company to terminate
any activity or relinquish control of a nonbank subsidiary (other than a nonbank
subsidiary of a bank) upon the Federal Reserve Board's determination that such
activity or control constitutes a serious risk to the financial soundness or
stability of any subsidiary depository institution of the bank holding company.
Further, federal bank regulatory authorities have additional discretion to
require a bank holding company to divest itself of any bank or nonbank
subsidiary if the agency determines that divestiture may aid the depository
institution's financial condition.
Glass-Steagall Act. The Holding Company will also be restricted in its
activities by the provisions of the Glass-Steagall Act, which will prohibit the
Holding Company from owning subsidiaries that are engaged principally in the
issue, flotation, underwriting, public sale, or distribution of securities. The
interpretation, scope, and application of the provisions of the Glass-Steagall
Act currently are being considered and reviewed by regulators and legislators,
and the interpretation and application of those provisions have been challenged
in the federal courts.
South Carolina Act. As a bank holding company registered under the
South Carolina Act, the Holding Company is subject to regulation by the South
Carolina Bank Board. Consequently, the Holding Company must receive the approval
of the South Carolina Bank Board prior to engaging in the acquisition of banking
or nonbanking institutions or assets. The Holding Company must also file with
the South Carolina Bank Board periodic reports with respect to its financial
condition and operations, management, and intercompany relationships between the
Holding Company and its subsidiaries.
CAPITAL REGULATIONS
The federal bank regulatory authorities have adopted risk-based capital
guidelines for banks and bank holding companies that are designed to make
regulatory capital requirements more sensitive to differences in risk profiles
among banks and bank holding companies and account for off-balance sheet items.
The guidelines are minimums, and the federal regulators have noted that banks
and bank holding companies contemplating significant expansion programs should
not allow expansion to diminish their capital ratios and should maintain ratios
in excess of the minimums. The Bank has not received any notice indicating that
it will be subject to higher capital requirements. The current guidelines
require all bank holding companies and federally-regulated banks to maintain a
minimum risk-based total capital ratio equal to 8%, of which at least 4% must be
Tier 1 capital. Tier 1 capital includes common shareholders' equity, qualifying
perpetual preferred stock, and minority interests in equity accounts of
consolidated subsidiaries, but excludes goodwill and most other intangibles and
excludes the allowance for loan and lease losses. Tier 2 capital includes the
excess of any preferred stock not included in Tier 1 capital, mandatory
convertible securities, hybrid capital instruments, subordinated debt and
intermediate term-preferred stock, and general reserves for loan and lease
losses up to 1.25% of risk-weighted assets.
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<PAGE> 23
Under these guidelines, banks' and bank holding companies' assets are
given risk-weights of 0%, 20%, 50%, or 100%. In addition, certain off-balance
sheet items are given credit conversion factors to convert them to asset
equivalent amounts to which an appropriate risk-weight will apply. These
computations result in the total risk-weighted assets. Most loans are assigned
to the 100% risk category, except for first mortgage loans fully secured by
residential property and, under certain circumstances, residential construction
loans, both of which carry a 50% rating. Most investment securities are assigned
to the 20% category, except for municipal or state revenue bonds, which have a
50% rating, and direct obligations of or obligations guaranteed by the United
States Treasury or United States Government agencies, which have a 0% rating.
The federal bank regulatory authorities have also implemented a
leverage ratio, which is equal to Tier 1 capital as a percentage of average
total assets less intangibles, to be used as a supplement to the risk-based
guidelines. The principal objective of the leverage ratio is to place a
constraint on the maximum degree to which a bank holding company may leverage
its equity capital base. The minimum required leverage ratio for top-rated
institutions is 3%, but most institutions are required to maintain an additional
cushion of at least 100 to 200 basis points.
FDICIA established a new capital-based regulatory scheme designed to
promote early intervention for troubled banks which requires the FDIC to choose
the least expensive resolution of bank failures. The new capital-based
regulatory framework contains five categories of compliance with regulatory
capital requirements, including "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized," and "critically
undercapitalized." To qualify as a "well capitalized" institution, a bank must
have a leverage ratio of no less than 5%, a Tier 1 risk-based ratio of no less
than 6%, and a total risk-based capital ratio of no less than 10%, and the bank
must not be under any order or directive from the appropriate regulatory agency
to meet and maintain a specific capital level. Currently, the Bank qualifies as
"well-capitalized."
Under the FDICIA regulations, the applicable agency can treat an
institution as if it were in the next lower category if the agency determines
(after notice and an opportunity for hearing) that the institution is in an
unsafe or unsound condition or is engaging in an unsafe or unsound practice. The
degree of regulatory scrutiny of a financial institution will increase, and the
permissible activities of the institution will decrease, as it moves downward
through the capital categories. Institutions that fall into one of the three
undercapitalized categories may be required to: (i) submit a capital restoration
plan; (ii) raise additional capital; (iii) restrict their growth, deposit
interest rates, and other activities; (iv) improve their management; (v)
eliminate management fees; or (vi) divest themselves of all or a part of their
operations. Bank holding companies controlling financial institutions can be
called upon to boost the institutions' capital and to partially guarantee the
institutions' performance under their capital restoration plans.
Effective January 1, 1997, the FDIC amended the risk-based capital
standards to incorporate a measure for market risk to cover all positions
located in a institution's trading account, and foreign exchange and commodity
positions wherever located. The effect of the rule is that it requires any bank
or bank holding company with significant exposure to market risk to measure the
risk and hold capital commensurate with that risk. Since the Bank does not have
any plans to engage in trading, foreign exchange, or commodity position
activities, the rule is not expected to have an effect on the required Bank
capital levels.
These capital guidelines can affect the Bank in several ways. Rapid
growth, poor loan portfolio performance, or poor earnings performance, or a
combination of these factors, could change the Bank's capital position in a
relatively short period of time, making an additional capital infusion
necessary.
Failure to meet these capital requirements would mean that a bank would
be required to develop and file a plan with its primary federal banking
regulator describing the means and a schedule for achieving the minimum capital
requirements. In addition, such a bank would generally not receive regulatory
approval of any application that requires the consideration of capital adequacy,
such as a branch or merger application, unless the bank could demonstrate a
reasonable plan to meet the capital requirement within a reasonable period of
time.
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<PAGE> 24
ENFORCEMENT POWERS
FIRREA expanded and increased civil and criminal penalties available
for use by the federal regulatory agencies against depository institutions and
certain "institution-affiliated parties" (primarily including management,
employees, and agents of a financial institution, and independent contractors
such as attorneys and accountants and others who participate in the conduct of
the financial institution's affairs). These practices can include the failure of
an institution to timely file required reports or the filing of false or
misleading information or the submission of inaccurate reports. Civil penalties
may be as high as $1,000,000 a day for such violations. Criminal penalties for
some financial institution crimes have been increased to twenty years. In
addition, regulators are provided with greater flexibility to commence
enforcement actions against institutions and institution-affiliated parties.
Possible enforcement actions include the termination of deposit insurance.
Furthermore, FIRREA expanded the appropriate banking agencies' power to issue
cease-and-desist orders that may, among other things, require affirmative action
to correct any harm resulting from a violation or practice, including
restitution, reimbursement, indemnification or guarantees against loss. A
financial institution may also be ordered to restrict its growth, dispose of
certain assets, rescind agreements or contracts, or take other actions as
determined by the ordering agency to be appropriate.
RECENT LEGISLATIVE DEVELOPMENTS
In the 1994 legislative session, South Carolina amended its bank
holding act to allow nationwide interstate banking beginning in 1996. The
Interstate Banking Act, passed by Congress in 1994, allows unrestricted
interstate bank mergers, unrestricted interstate acquisition of banks by bank
holding companies, and interstate de novo branching by banks if allowed by state
law. In 1997, legislation was passed in North Carolina which provides that until
June 1, 1999, an out-of-state bank, such as the Bank, could establish and
maintain a de novo branch in North Carolina or acquire and maintain an existing
branch from another bank only if the laws of the home state of the out-of-state
bank contain reciprocal provisions permitting North Carolina banks to establish
and maintain de novo branches or acquire branches from another bank in that
state. South Carolina law does not contain such reciprocal provisions, and
therefore the North Carolina legislation has the effect of prohibiting the Bank
from establishing a de novo branch in North Carolina prior to June 1, 1999. From
time to time, various bills are introduced in the United States Congress with
respect to the regulation of financial institutions. Certain of these proposals,
if adopted, could significantly change the regulation of banks and the financial
services industry. The Bank cannot predict whether any of these proposals will
be adopted or, if adopted, how these proposals would affect the Bank.
EFFECT OF GOVERNMENTAL MONETARY POLICIES
The earnings of the Bank will be affected by domestic economic
conditions and the monetary and fiscal policies of the United States government
and its agencies. The Federal Reserve Board's monetary policies have had, and
will likely continue to have, an important impact on the operating results of
commercial banks through its power to implement national monetary policy in
order, among other things, to curb inflation or combat a recession. The monetary
policies of the Federal Reserve Board have major effects upon the levels of bank
loans, investments and deposits through its open market operations in United
States government securities and through its regulation of the discount rate on
borrowings of member banks and the reserve requirements against member bank
deposits. It is not possible to predict the nature or impact of future changes
in monetary and fiscal
MANAGEMENT; ELECTION OF DIRECTORS
Pursuant to the Bank's Bylaws, the Bank's shareholders determine at
each annual meeting the number of directors, within a range between seven and
25, to serve on the Board of Directors for the upcoming year. The current Board
of Directors consists of eight members. The Board of Directors recommends that
the shareholders approve eight as the number of directors for the upcoming year
and until the number of directors is set again at a subsequent meeting of the
shareholders. Each of the current eight directors of the Bank has been nominated
for re-election. Set forth below is certain information about the nominees,
including each nominee's age and position with the Bank. It is the intention of
the persons named as proxies in the accompanying proxy to vote FOR the election
of
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<PAGE> 25
the nominees identified below to serve for a one-year term and until their
successors are elected. If any nominee is unable or fails to accept nomination
or election (which is not anticipated), the persons named in the proxy as
proxies, unless specifically instructed otherwise in the proxy, will vote for
the election in his stead of such other person as the Bank's existing Board of
Directors may recommend.
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<PAGE> 26
The directors shall be elected by a plurality of the votes cast at the
Meeting. Abstentions and broker non-votes will not be considered to be either
affirmative or negative votes.
THE BOARD RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE NOMINATED
INDIVIDUALS.
<TABLE>
<CAPTION>
NAME AGE DIRECTOR BUSINESS EXPERIENCE
SINCE DURING PAST FIVE YEARS
<S> <C> <C> <C>
Ruby M. Bennett 73 1987 Secretary and Treasurer, Clover Knits, Inc. (contract knitting);
sister of H. Marvin McCarter; aunt by marriage of James C. Harris, Jr.
Charles R. Burrell 61 1987 Vice President and General Manager, Boyd Tire and Appliance, Inc. (tire and
appliance retailer)
James C. Harris, Jr. 48 1987 President and Chief Executive Officer, Clover Community Bank; nephew by
marriage of Ruby M. Bennett and H. Marvin McCarter
Herbert Kirsh 68 1987 Chairman of the Board, Clover Community Bank (since 1991); previously
owner and President, Kirsh Department Store (clothing store); Representative
South Carolina Legislature
H. Marvin McCarter 67 1987 President, Versatile Knits, Inc. (contract knitting); brother of Ruby
M. Bennett, uncle by marriage of James C. Harris, Jr.
James H. Owen, Jr. 46 1987 Attorney, Haselden, Owen and Boloyan (law firm)
Gwen M. Thompson 44 1987 Cashier (since 1987), Senior Vice President (since 1989), and
Corporate Secretary (since 1990) Clover Community Bank
William C. Turner 66 1987 Vice President, Clover Builders Supply, Inc.; prior thereto, Manager,
Community Cash Stores, Inc. of Clover, South Carolina
</TABLE>
COMPENSATION
The following table shows the aggregate compensation paid by the Bank
to its President during the past three fiscal years. No executives received
aggregate compensation exceeding $100,000 in 1997.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1)
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS ALL OTHER COMPENSATION(2)
- --------------------------- ---- -------- --------- -------------------------
<S> <C> <C> <C> <C>
James C. Harris, Jr. 1997 $84,845 $12,000 $3,400
President, 1996 $81,120 $10,000 $3,288
Chief Executive Officer and
Director 1995 $78,000 $10,000 $3,084
</TABLE>
(1) Includes $2,545, $2,433, and $2,340, paid by the Bank in 1997, 1996 and
1995, respectively, in employer contributions to the Bank's 401K Plan; $855,
$855, and $744, paid by the Bank in 1997, 1996 and 1995 for term life insurance
premiums.
In 1997, directors of the Bank were paid a fee of $325 (expected to be
$350 in 1998) per month for attending directors' meetings. Directors were not
paid (and are not expected to be paid in 1998) any additional amounts for
attending meetings of committees of the Board of Directors.
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<PAGE> 27
TRANSACTIONS WITH MANAGEMENT AND OTHERS
The Bank, in the ordinary course of its business, makes loans to and
has other transactions with directors, officers, principal shareholders, and
their associates. Loans are made on substantially the same terms, including
rates and collateral, as those prevailing at the time for comparable
transactions with other persons and do not involve more than the normal risk of
collectibility or present other unfavorable features. The Bank expects to
continue to enter into transactions in the ordinary course of business on
similar terms with directors, officers, principal shareholders, and their
associates.
During the Bank's last fiscal year, the Bank retained the law firm of
Haselden, Owen and Boloyan, Clover, South Carolina, of which James H. Owen, Jr.,
a director of the Bank, is a partner. Since the Bank was founded, it has
regularly retained this law firm as its counsel and proposes to continue such
relationship in the current year.
BOARD MEETINGS AND COMMITTEES
The Bank's board of directors held 32 meetings in 1997. All directors
attended at least 75% of such meetings and the meetings of each committee of
which they are members. The Board of Directors has established an Audit
Committee and an Executive Committee. Information about the functions, members
and meetings of those committees is set forth below.
Audit Committee. The Audit Committee provides general oversight of
financial reporting and of the adequacy of the internal controls of the Bank.
The Audit Committee functions by meeting with the independent auditors and by
contact with members and management concerned with financial and control
functions. During 1997, the Audit Committee held one meeting. In 1997, the
members of the Audit Committee were Charles R. Burrell, James H. Owen, Jr., H.
Marvin McCarter, and Gwen M. Thompson.
Executive Committee. The Executive Committee acts to review and
recommend salary levels for top management positions, in addition to handling
personnel matters. During 1997, the Executive Committee held two scheduled
meetings. In 1997, the members of the Executive Committee were James H. Owen,
Jr., Herbert Kirsh and Ruby M. Bennett.
The Board has not established a nominating committee.
Upon consummation of the Reorganization, the individuals serving as the
directors of the Holding Company will be the same individuals serving as the
directors of the Bank, and the only executive officer of the Holding Company
will be James C. Harris, Jr.
EMPLOYEES' RETIREMENT SAVINGS PLAN
The Bank has established the Clover Community Bank Employees'
Retirement Savings Plan (the "Plan"), for the exclusive benefit of all eligible
employees and their beneficiaries. Employees are eligible to participate in the
Plan after attaining age 21, completing 12 months of service, and being credited
with 1,000 hours of service during the eligibility computation period. Employees
are allowed to defer their salary up to the maximum dollar amount determined by
the federal government each year. The Bank will match compensation deferred by
the employees up to 6% of their salary and can elect to make discretionary
contributions as well. Employees are fully vested in both the matching and
discretionary contributions after 6 years of service. Funds of the plan are
invested in deposit instruments of the Bank at the same terms and prevailing
market rates as those offered to others.
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<PAGE> 28
PRINCIPAL SHAREHOLDERS OF THE BANK
The following table sets forth as of March 2, 1998, certain information
as to those persons who were known to the Bank to be beneficial owners of more
than 5% of the Bank's outstanding shares, and as to the Bank's shares
beneficially owned by each director and all officers and directors as a group.
<TABLE>
<CAPTION>
Number of Shares Percent of Class
Beneficial Owner Beneficially Owned(1) Beneficially Owned
---------------- --------------------- ------------------
<S> <C> <C>
Ruby M. Bennett 38,000(2) 3.8%
Charles R. Burrell 15,070(3) 1.5%
James C. Harris, Jr. 24,067(4) 2.4%
Herbert Kirsh 25,400(5) 2.5%
H. Marvin McCarter 42,700 4.2%
James H. Owen, Jr. 11,800(6) 1.2%
Gwen M. Thompson 1,650(7) .2%
William C. Turner 28,400(8) 2.8%
All directors and 188,787 18.7%
principal officers as
a group (9 person)
</TABLE>
(1) Information relating to beneficial ownership of Common Stock is based
upon "beneficial ownership" concepts set forth in rules of the SEC
under Section 13(d) of the Securities Exchange Act of 1934. Under these
rules a person is deemed to be a "beneficial owner" of a security if
that person has or shares "voting power," which includes the power to
vote or direct the voting of such security, or "investment power,"
which includes the power to dispose or to direct the disposition of
such security. A person is also deemed to be a beneficial owner of any
security of which that person has the right to acquire beneficial
ownership within sixty days. Under the rules, more than one person may
be deemed to be a beneficial owner of the same securities, and a person
may be deemed to be a beneficial owner of securities as to which he has
no beneficial interest. For instance, beneficial ownership includes
spouses, minor children and other relatives residing in the same
household, and trusts, partnerships, corporations or deferred
compensation plans which are affiliated with the principal.
(2) Includes 400 shares owned by Mrs. Bennett's husband, as to which Mrs.
Bennett disclaims beneficial ownership; and 2,000 shares owned by the
Cary C. Boshamer Foundation, of which Mrs. Bennett is a trustee and
secretary.
(3) Includes 11,070 shares owned by the Boyd Tire & Battery Services, Inc.
Profit Sharing Plan, as to which Mr. Burrell, as trustee of the plan,
disclaims beneficial ownership.
(4) Includes 15,580 shares held in Mr. Harris' IRA account with Stephens,
Inc.
(5) Includes 9,600 shares owned by Mr. Kirsh's wife; 400 shares owned by
Mr. Kirsh's son as to which Mr. Kirsh disclaims beneficial ownership;
and 400 shares owned by Mutual Investors of Clover, an investment club
of which Mr. Kirsh is Secretary and Treasurer.
(6) Includes 2,800 shares owned by James H. Owen, Jr. Profit Sharing Plan;
and 3,200 shares held in Mr. Owen's IRA account.
(7) Includes 50 shares owned by Ms. Thompson's daughter and 50 shares owned
by Ms. Thompson's son.
(8) Includes 8,000 shares owned by the Clover Builders Supply, Inc. of
which Mr. Turner is vice president and co-owner and as to which Mr.
Turner disclaims beneficial ownership; 200 shares held by Mr. Turner as
custodian for a grandson and 200 shares held by Mr. Turner as a
custodian for a granddaughter, as to which Mr. Turner disclaims
beneficial ownership; and 10,000 shares owned by Mr. Turner's wife, as
to which Mr. Turner disclaims beneficial ownership.
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<PAGE> 29
COMPLIANCE WITH THE SECURITIES EXCHANGE ACT OF 1934
As required by Section 16(a) of the Securities Exchange Act of 1934,
the Bank's directors, its executive officers and certain individuals are
required to report periodically their ownership of the Bank's Common Stock and
any changes in ownership to the Federal Deposit Insurance Corporation. Based on
a review of Forms F-7, F-8 and F-8A and any representations made to the Bank, it
appears that all such reports for these persons were filed in a timely fashion
during 1997.
RESTRICTIONS ON TRANSFER OF STOCK
RECEIVED BY CERTAIN INDIVIDUALS
Upon completion of the Reorganization, the Holding Company will have
1,011,020 shares of common stock outstanding, assuming no shareholders exercise
their statutory dissenters' rights. The shares issued in the Reorganization will
be freely tradable, without restriction or registration under the Securities
Act, except for shares issued to "affiliates" of the Bank at the time the
Reorganization is submitted to shareholders of the Bank for their approval and
shares issued to persons who are or become "affiliates" of the Holding Company.
These shares will be subject to resale restrictions under the Securities Act.
An "affiliate" of a company is defined in Rule 144 under the Securities
Act as a person that directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with the company. Rule
405 under the Securities Act defines the term "control" to mean the possession,
direct or indirect, of the power to direct or cause the direction of the
management and policies of the person whether through the ownership of voting
securities, by contract, or otherwise.
Securities held by affiliates may be eligible for sale in the open
market without registration in accordance with the provisions of Rule 144
promulgated under the Securities Act. In general, under Rule 144 a shareholder
(or shareholders whose shares are aggregated) who has beneficially owned for at
least one year, but less than two years, shares privately acquired directly or
indirectly from the Holding Company or from an "affiliate" (in general, a
director, officer or controlling shareholder of the Holding Company), and
persons who are affiliates of the Holding Company, are entitled to sell within
any three-month period a number of shares that does not exceed the greater of 1%
of the total number of outstanding shares of common stock or the average weekly
trading volume in the common stock during the four calendar weeks preceding the
sale and may only sell such shares through unsolicited brokers' transactions. A
shareholder who is not an affiliate of the Holding Company and has not been an
affiliate for at least 90 days and who has beneficially owned shares of common
stock for at least two years is entitled to sell such shares under Rule 144
without regard to the volume limitations and the other restrictions described
above.
Rule 144 also requires that the securities must be sold in "brokers'
transactions," as defined in the Securities Act, and the person selling the
securities may not solicit orders or make any payment in connection with the
offer or sale of the securities to any person other than the broker who executes
the order to sell the securities. This requirement may make the sale of the
common stock of the Holding Company pursuant to Rule 144 difficult if no trading
market develops in the Common Stock. The requirement does not apply to sales of
restricted securities held by non-affiliates for at least two years or to sales
by persons who were affiliates of the Bank at the time of the shareholder vote
on the Reorganization who have held nonrestricted securities for at least two
years (if they are not then affiliates of the Holding Company).
In addition, the protections afforded by Rule 144 are available
generally only if the Holding Company meets the requirement that adequate
current public information be available with respect to it. That requirement is
met generally if the Holding Company (i) has securities registered pursuant to
Section 12 of the Exchange Act or has securities registered pursuant to the
Securities Act, and (ii) has been subject to the periodic reporting
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<PAGE> 30
requirements of the Exchange Act for at least 90 days and has filed all reports
required under specified sections of the Exchange Act for the preceding 12
months (or such shorter period as it is required to have filed such reports).
The Holding Company will be subject to the registration requirements of the
Exchange Act .
Shares of the Bank's common stock held by affiliates of the Bank are
not subject to resale restrictions under the Securities Act because bank stock,
unlike stock of a holding company, is accorded exempt status under Section
3(a)(2) of the Securities Act.
DESCRIPTION OF COMMON STOCK
COMMON STOCK OF THE BANK
The Bank is authorized by its articles of incorporation to issue up to
3,000,000 shares of common stock, par value $1.25 per share, 1,011,020 shares of
which are issued and outstanding. All shares of Bank common stock are entitled
to share equally in dividends from funds legally available therefor when, as and
if declared by the Board of Directors, and upon liquidation or dissolution of
the Bank, whether voluntary or involuntary, to share equally in the assets of
the Bank available for distribution to shareholders. Each holder of common stock
is entitled to one vote for each share held on all matters submitted to the
shareholders and shareholders have the right to cumulative voting for the
election of directors. Cumulative voting in elections of directors increases the
ability of a minority of the Bank's outstanding shares to elect one or more
representative to the Board of Directors. The Bank's Articles of Association
provide that shareholders do not have preemptive rights entitling shareholders
to subscribe for additional shares of common stock in proportion to the number
of shares owned in the event an increase in the common stock is authorized.
There is no redemption right, sinking fund provision, or right of conversion in
existence with respect to the common stock. All outstanding shares of stock of
the Bank are fully paid and nonassessable.
COMMON STOCK OF THE HOLDING COMPANY
The Holding Company is authorized by its articles of incorporation to
issue 10,000,000 shares of common stock, par value $0.01 per share. Assuming
that no shareholders of the Bank exercise their dissenters' rights, after the
Reorganization there will be 1,011,020 shares of common stock issued and
outstanding. All shares of common stock of the Holding Company are entitled to
share equally in dividends from funds legally available therefor, when, as and
if declared by the Board of Directors, and upon liquidation or dissolution of
the Holding Company, whether voluntary or involuntary, to share equally in the
assets of the Holding Company available for distribution to shareholders. Each
holder of common stock is entitled to one vote for each share on all matters
submitted to the shareholders. The shareholders have no preemptive rights, and
there is no cumulative voting, redemption right, sinking fund provision, or
right of conversion in existence with respect to the common stock of the Holding
Company. Because Holding Company shareholders will not have the right to
cumulate their votes in elections of directors, a simple majority of the
outstanding shares will have the power to elect the entire Board of Directors of
the Holding Company. All outstanding shares of common stock of the Holding
Company will be fully paid and nonassessable.
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<PAGE> 31
FINANCIAL STATEMENTS; REPORT ON FORM F-2
The Bank's annual report to shareholders containing financial
statements for the last three years, prepared in accordance with generally
accepted accounting principles, accompany this Proxy Statement/Prospectus. The
financial statements are being furnished as supplemental information only. They
are not part of this Proxy Statement/Prospectus and are not incorporated herein
by reference. Stockholders may obtain copies of the Bank's annual report on Form
10-KSB required to be filed with the Federal Deposit Insurance Corporation under
12 C.F.R. ss. 335.311 for the year ended December 31, 1997, free of charge by
requesting such form in writing from Gwen M. Thompson, Senior Vice President and
Chief Financial Officer Clover Community Bank, 124 North Main Street, Clover,
South Carolina 29710. In addition, 12 C.F.R. Part 350 requires the Bank to
designate and make available to the public upon request its Annual Disclosure
Statement. The accompanying annual report to shareholders is designated as the
Bank's Annual Disclosure Statement and will be made available upon request in
person at an office of the Bank or in writing to Gwen M. Thompson at the address
above.
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<PAGE> 32
SHAREHOLDER PROPOSALS
In addition to any other applicable requirements, for business to be
properly brought before an annual meeting by a shareholder, the shareholder must
have given timely notice thereof in writing to the secretary of the Corporation.
To be timely, a shareholder's notice must be given, either by personal delivery
or by United States mail, postage prepaid, return receipt requested, to the
secretary of the Corporation not less than 30 nor more than 60 days in advance
of the annual meeting (provided, however, that if less than 31 days' notice of
the meeting is given to shareholders, such written notice shall be delivered or
mailed, as prescribed, to the Secretary of Corporation not later than the close
of the tenth day following the day on which notice of the meeting was mailed to
shareholders).
LEGAL MATTERS
The legality of the shares of common stock of the Holding Company to be
issued in the Reorganization has been passed upon by Nelson Mullins Riley &
Scarborough, L.L.P., Atlanta, Georgia.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board has selected Donald G. Jones and Company, P.A., Certified
Public Accountants with offices in Columbia, South Carolina, to serve as the
Bank's independent certified public accountants for 1998. It is expected that
representatives from this firm will be present and available to answer
appropriate questions at the annual meeting, and will have the opportunity to
make a statement if they desire to do so.
OTHER MATTERS
The management of the Bank knows of no matters other than those stated
above which may be brought before the Annual Meeting. However, if any other
matter or matters should properly come before the Annual Meeting, the persons
named in the enclosed proxy will vote such proxy in accordance with their
judgment on such matters.
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<PAGE> 33
APPENDIX A
REORGANIZATION AGREEMENT AND PLAN OF EXCHANGE
THIS REORGANIZATION AGREEMENT AND PLAN OF EXCHANGE (the "Reorganization Plan'),
dated as of the March 9, 1998, is entered into between Clover Community Bank
(the "Bank") and Clover Community Bankshares, Inc. (the "Holding Company").
RECITALS:
The parties acknowledge the following to be true and correct:
1. The Bank is a state bank duly organized under the laws of the State of
South Carolina and has its principal office and place of business in
Clover, South Carolina. The Bank is authorized by its articles of
incorporation to issue up to 3,000,000 shares of common stock, par value
$1.25 per share, 1,011,020 shares of which are issued and outstanding.
2. The Holding Company is a corporation duly organized under the laws of the
State of South Carolina, having its principal place of business in Clover,
South Carolina. As of the Effective Date of the Share Exchange (as such
terms are defined below), the Holding Company will have authorized and
unissued 10,000,000 shares of common stock of a par value of $0.01 per
share. In connection with the formation of the Holding Company, 80 shares
of Holding Company common stock will be issued at $10 per share to the
existing members of the Board of Directors of the Bank. All such shares
will be redeemed at $10 per share upon the Effective Date.
3. The Board of Directors of the Bank and Holding Company desire to establish
a holding company structure pursuant to which the Bank will become a
wholly-owned subsidiary of the Holding Company.
4. A majority of the entire Board of Directors of each of the Bank and the
Holding Company has deemed advisable a share exchange transaction between
the Bank and the Holding Company (the "Share Exchange") in order to
establish the holding company structure and has approved this
Reorganization Plan and authorized its execution.
In consideration of the premises, the Bank and the Holding Company
enter into this Reorganization Plan and prescribe the terms and conditions of
the Share Exchange and the mode of carrying it into effect as follows:
ARTICLE I: THE ACQUIRING CORPORATION
The name of the acquiring corporation is Clover Community Bankshares,
Inc. (the Holding Company). The entity whose shares will be acquired is Clover
Community Bank (the Bank).
ARTICLE II: TERMS AND CONDITIONS OF THE EXCHANGE
1. When the Share Exchange becomes effective, each issued and outstanding
share of common stock of the Bank shall be exchanged for one share of
common stock of the Holding Company. As a result of the Share Exchange,
the Holding Company shall become the sole shareholder of the Bank and
the Bank will continue in existence as a wholly-owned subsidiary of the
Holding Company. The articles of incorporation, bylaws, corporate
identity, charter, and officers and directors of the Bank will not be
changed as a result of the Share Exchange. In addition, the 80 shares
of Holding Company common stock issued at $10 per share to the existing
members of the Board of Directors of the Bank in connection with the
formation of the Holding Company will automatically be redeemed by the
Holding Company on the Effective Date at $10 per share. Consequently,
as a result of the Share Exchange, the existing shareholders of the
Bank will become the only shareholders of the Holding Company and the
Holding Company will have 1,011,020 shares of Common Stock issued and
outstanding (assuming no exercise of dissenters rights).
<PAGE> 34
2. Consummation of the Share Exchange is conditioned upon approval by
holders of two-thirds of the outstanding shares of the Bank as required
by law, and upon the receipt of any required approvals from regulatory
agencies, including the South Carolina Board of Financial Institutions
and the Federal Reserve.
3. The Reorganization Plan shall be submitted to the shareholders of the
Bank for approval at a meeting to be called and held in accordance with
the applicable provisions of law and the Articles of Incorporation and
Bylaws of the Bank. The Bank and the Holding Company shall proceed
expeditiously and cooperate fully in the procurement of any other
consents and approvals and the taking of any other action, and the
satisfaction of all other requirements prescribed by law or otherwise,
necessary for consummation of the Share Exchange at time provided
herein.
4. Upon satisfaction of the requirements of law and the conditions
contained in this Reorganization Plan, the Share Exchange shall become
effective upon the filing of Articles of Share Exchange with the South
Carolina Secretary of State (the "Effective Date").
5. If the Share Exchange becomes effective, the Bank and the Holding
Company shall each pay their own expenses, if any, incurred in the
proposed transaction. If the Share Exchange does not become effective,
the Bank shall pay all reasonable and necessary expenses associated
with the transaction proposed herein.
6. Any shareholder of the Bank who objects to the Share Exchange and who
properly dissents from the Share Exchange pursuant to Chapter 13 of
Title 33 of the Code of Laws of South Carolina shall have the rights of
a "dissenting shareholder" and the right to receive cash for the value
of such dissenting shares.
ARTICLE III: MANNER AND BASIS OF EXCHANGING SHARES
On the Effective Date:
1. Each share of common stock of the Bank issued and outstanding
immediately prior to the Effective Date shall, without any action on
the part of the holder thereof, be converted into the right to receive
one share of capital stock of the Holding Company.
2. Each holder of common stock of the Bank shall cease to be a shareholder
of the Bank and the ownership of all shares of the issued and
outstanding common stock of the Bank shall thereupon automatically vest
in the Holding Company as the acquiring corporation.
3. As of the Effective Date, until surrendered for exchange in accordance
with this Reorganization Plan, each certificate theretofore
representing common stock of the Bank will be deemed to evidence the
right to receive Holding Company stock. However, shareholders who do
not surrender their Bank stock certificates will not be issued
certificates representing the shares of Holding Company common stock
they may be entitled to receive and will not be paid dividends or other
distributions. Any such dividends or distributions which such
shareholders would otherwise receive will be held, without interest,
for their accounts until surrender of their Bank stock certificates.
The Holding Company shall not be obligated to deliver certificates for
shares of Holding Company common stock to any former Bank shareholder
until such shareholder surrenders his or her Bank stock certificates.
4. After the Effective Date, the Bank's shareholders will be furnished
instructions for surrendering their present stock certificates and for
replacing any lost, stolen or destroyed certificates.
ARTICLE IV: TERMINATION
The Reorganization Plan may be terminated, in the sole discretion of
the Bank's Board of Directors, at any time before the Effective Date if:
(1) the number of shares of common stock of the Bank voted
against the Share Exchange, or in respect of which written notice is
given purporting to dissent from the Share Exchange, shall make
<PAGE> 35
consummation of the Share Exchange unwise in the opinion of the Bank's
Board of Directors;
(2) any act, suit, proceeding or claim relating to the Share
Exchange has been instituted or threatened before any court or
administrative body; or
(3) the Bank's Board of Directors determines that the Share
Exchange is inadvisable.
Upon termination by written notice as provided in this Article IV, this
Reorganization Plan shall be void and of no further effect, and there shall be
no liability by reason of this Reorganization Plan or the termination thereof on
the part of either the Bank, the Holding Company, or the directors, officers,
employees, agents or shareholders of either of them.
IN WITNESS WHEREOF, the Bank and the Holding Company have caused this
Reorganization Plan to be executed and attested in counterparts by their duly
authorized officers and directors, and their corporate seals to be hereunto
affixed as of the day and year first above written.
CLOVER COMMUNITY BANK
By:
-----------------------------------------
James C. Harris, Jr., President
CLOVER COMMUNITY BANKSHARES, INC.
By:
-----------------------------------------
James C. Harris, Jr., President
<PAGE> 36
APPENDIX B
CHAPTER 13 OF THE SOUTH CAROLINA BUSINESS CORPORATION ACT
SECTION 33-13-101. DEFINITIONS.
In this chapter:
(1) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by
merger or share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Section 33-13-102 and who exercises that right
when and in the manner required by Sections 33-13-200 through
33-13-280.
(3) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action
to which the dissenter objets, excluding any appreciation or
depreciation in anticipation of the corporate action to which the
dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be
inequitable. The value of the shares is to be determined by techniques
that are accepted generally in the financial community.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by
the corporation on its principal bank loans or, if none, at a rate that
is fair and equitable under all the circumstances.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of
shares to the extent of the rights granted by a nominee certificate on
file with a corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
SECTION 33-13-102. RIGHT TO DISSENT.
A shareholder is entitled to dissent from, and obtain payment of the
fair value of, his shares in the event of any of the following corporate
actions:
(1) communication of a plan of merger to which the corporation is a party
(i) if shareholder approval is required for the merger by Section
33-11-103 or the articles of incorporation and the shareholder is
entitled to vote on the merger or (ii) if the corporation is a
subsidiary that is merged with its parent under Section 33-11-104 or
33-11-108 or if the corporation is a parent that is merged with its
subsidiary under Section 33-11-108;
(2) consummation of a plan of share exchange to which the corporation is a
party as the corporation whose shares are to be acquired, if the
shareholder is entitled to vote on the plan;
(3) consummation of a sale or exchange of all, or substantially all, of the
property of the corporation other than in the usual and regular course
of business, if the shareholder is entitled to vote on the sale or
exchange, including a sale in dissolution, but not including a sale
pursuant to court order or a sale for cash pursuant to a plan by which
all or substantially all of the net proceeds of the sale must be
distributed to the shareholders within one year after the date of sale;
(4) an amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(i) alters or abolishes a preferential right of the shares;
(ii) creates, alters, or abolishes a right in respect of
redemption, including a provision respecting a sinking fund
for the redemption or repurchase, of the shares;
(iii) alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(iv) excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by
dilution through issuance of shares or other securities with
similar voting rights; or
(v) reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to
be acquired for cash under Section 33-6-104; or
<PAGE> 37
(5) the approval of a control share acquisition under Article 1 of Chapter
2 of Title 35;
(6) any corporate action to the extent the articles of incorporation,
bylaws, or a resolution of the board of directors provides that voting
or nonvoting shareholders are entitled to dissent and obtain payment
for their shares.
SECTION 33-13-103. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to
all shares beneficially owned by any one person and notifies the
corporation in writing of the name and address of each person on whose
behalf he asserts dissenters' rights. The rights of a partial dissenter
under this subsection are determined as if the shares to which he
dissents and his other shares were registered in the names of different
shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if he dissents with respect to all shares of
which he is the beneficial shareholder or over which he has power to
direct the vote. A beneficial shareholder asserting dissenters' rights
to shares held on his behalf shall notify the corporation in writing of
the name and address of the record shareholder of the shares, if known
to him.
SECTION 33-13-200. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under Section
33-13-102 is submitted to a vote at a shareholders' meeting, the
meeting notice must state that shareholders are or may be entitled to
assert dissenters' rights under this chapter and be accompanied by a
copy of this chapter.
(b) If corporate action creating dissenters' rights under Section 33-13-102
is taken without a vote of shareholders, the corporation shall notify
in writing all shareholders entitled to assert dissenters' rights that
the action was taken and send them the dissenters' notice described in
Section 33-13-220.
SECTION 33-13-210. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under Section
33-13-102 is submitted to a vote at a shareholders' meeting, a
shareholder who wishes to assert dissenters' rights (1) must give to
the corporation before the vote is taken written notice of his intent
to demand payment for his shares if the proposed action is effectuated
and (2) must not vote his shares in favor of the proposed action. A
vote in favor of the proposed action cast by the holder of a proxy
solicited by the corporation shall not disqualify a shareholder from
demanding payment for his shares under this chapter.
(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for his shares under this chapter.
SECTION 33-13-220. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under Section
33-13-102 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who
satisfied the requirements of Section 33-13-210(a).
(b) The dissenters' notice must be delivered no later than ten days after
the corporate action was taken and must:
(1) state where the payment demand must be sent and where
certificates for certificated shares must be deposited;
(2) inform holders of uncertificated shares to what extent
transfer of the shares is to be restricted after the payment
demand is received;
(3) supply a form for demanding payment that includes the date of
the first announcement to news media or to shareholders of the
terms of the proposed corporate action and requires that the
person asserting dissenters' rights certify whether or not he
or, if he is a nominee asserting dissenters' right on behalf
of a beneficial shareholder, the beneficial shareholder
acquired beneficial ownership of the shares before that date;
(4) set a date by which the corporation must receive the payment
demand, which may not be fewer than thirty nor more than sixty
days after the date the subsection (a) notice is delivered and
set a date by which certificates for certificated shares must
be deposited, which may not be earlier than twenty days after
the demand date; and
(5) be accompanied by a copy of this chapter.
<PAGE> 38
SECTION 33-13-230. SHAREHOLDERS' PAYMENT DEMAND.
(a) A shareholder sent a dissenters' notice described in Section 33-13-220
must demand payment, certify whether he (or the beneficial shareholder
on whose behalf he is asserting dissenters' rights) acquired beneficial
ownership of the shares before the date set forth in the dissenters'
notice pursuant to Section 33-13-220(b)(3), and deposit his
certificates in accordance with the terms of the notice.
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains all other rights of a shareholder until
these rights are canceled or modified by the taking of the proposed
corporate action.
(c) A shareholder who does not comply substantially with the requirements
that he demand payment and deposit his share certificates where
required, each by the date set in the dissenters' notice, is not
entitled to payment for his shares under this chapter.
SECTION 33-13-240. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for payment for them is received until the proposed
corporate action is taken or the restrictions are released under
Section 33-13-260.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until
these rights are canceled or modified by the taking of the proposed
corporate action.
SECTION 33-13-250. PAYMENT.
(a) Except as provided in Section 33-13-270, as soon as the proposed
corporate action is taken, or upon receipt of a payment demand, the
corporation shall pay each dissenter who substantially complied with
Section 33-13-230 the amount the corporation estimates to be the fair
value of his shares, plus accrued interest.
(b) The payment must be accompanied by:
(1) the corporation's balance sheet as of the end of a fiscal year
ending not more than sixteen months before the date of
payment, an income statement for that year, a statement of
changes in shareholders' equity for that year, and the latest
available interim financial statements, if any;
(2) a statement of the corporation's estimate of the fair value of
the shares and an explanation of how the fair value was
calculated;
(3) an explanation of how the interest was calculated;
(4) a statement of the dissenter's right to demand additional
payment under Section 13-33-280; and (5) a copy of this
chapter.
SECTION 33-13-260. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within sixty days
after the date set for demanding payment and depositing share
certificates, the corporation, within the same sixty-day period, shall
return the deposited certificates and release the transfer restrictions
imposed on uncertificated shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a
new dissenters' notice under Section 33-13-220 and repeat the payment
demand procedure.
SECTION 33-13-270. AFTER-ACQUIRED SHARES.
(a) A corporation may elect to withhold payment required by Section
33-13-250 from a dissenter as to any shares of which he (or the
beneficial owner on whose behalf he is asserting dissenters' rights)
was not the beneficial owner on the date set forth in the dissenters'
notice as the date of the first announcement to news media or to
shareholders of the terms of the proposed corporate action, unless the
beneficial ownership of the shares devolved upon him by operation of
law from a person who was the beneficial owner on the date of the first
announcement.
<PAGE> 39
(b) To the extent the corporation elects to withhold payment under
subsection (a), after taking the proposed corporate action, it shall
estimate the fair value of the shares, plus accrued interest, and shall
pay this amount to each dissenter who agrees to accept it in full
satisfaction of his demand. The corporation shall send with its offer a
statement of its estimate of the fair value of the shares, an
explanation of how the fair value and interest were calculated, and a
statement of the dissenter's right to demand additional payment under
Section 33-13-280.
SECTION 33-13-280. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due and demand
payment of his estimate (less any payment under Section 33-13-250) or
reject the corporation's offer under Section 33-13-270 and demand
payment of the fair value of his shares and interest due, if the:
(1) dissenter believes that the amount paid under Section
33-13-250 or offered under Section 33-13-270 is less than the
fair value of his shares or that the interest due is
calculated incorrectly;
(2) corporation fails to make payment under Section 33-13-250 or
to offer payment under Section 33-13-270 within sixty days
after the date set for demanding payment; or
(3) corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer
restrictions imposed on uncertificated shares within sixty
days after the date set for demanding payment.
(b) A dissenter waives his right to demand additional payment under this
subsection unless he notifies the corporation of his demand in writing
under subsection (a) within thirty days after the corporation made or
offered payment for his shares.
SECTION 33-13-300. COURT ACTION.
(a) If a demand for additional payment under Section 33-13-280 remains
unsettled, the corporation shall commence a proceeding within sixty
days after receiving the demand for additional payment and petition the
court to determine the fair value of the shares and accrued interest.
If the corporation does not commence the proceeding within the
sixty-day period, it shall pay each dissenter whose demand remains
unsettled the amount demanded.
(b) The corporation shall commence the proceeding in the circuit court of
the county where corporation's principal office (or, if none in this
State, its registered office) is located. If the corporation is a
foreign corporation without a registered office in this State, it shall
commence the proceeding in the county in this State where the principal
office (or, if none in this State, the registered office) of the
domestic corporation merged with or whose shares were acquired by the
foreign corporation was located.
(c) The corporation shall make all dissenters (whether or not residents of
this State) whose demands remain unsettled parties to the proceeding as
in an action against their shares and all parties must be served with a
copy of the petition. Nonresidents may be served by registered or
certified mail or by publication, as provided by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) is plenary and exclusive. The court may appoint
persons as appraisers to receive evidence and recommend decisions on
the question of fair value. The appraisers have the powers described in
the order appointing them or in any amendment to it. The dissenters are
entitled to the same discovery rights as parties in other civil
proceedings.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds the fair value of his
shares, plus interest, exceeds the amount paid by the corporation.
SECTION 33-13-310. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under Section 33-13-300
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The
court shall assess the costs against the corporation, except that the
court may assess costs against all or some of the dissenters, in
amounts the court finds equitable, to the extent the court finds the
dissenters acted arbitrarily, vexatiously, or not in good faith in
demanding payment under Section 33-13-280.
(b) The court also may assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
<PAGE> 40
(1) against the corporation and in favor of any or all dissenters
if the court finds the corporation did not comply
substantially with the requirements of Sections 33-13-200
through 33-13-280; or
(2) against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom
the fees and expenses are assessed acted arbitrarily,
vexatiously or not in good faith with respect to the rights
provided by this chapter.
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that
the fees for those services should not be assessed against the
corporation, the court may award to these counsel reasonable fees to be
paid out of the amounts awarded the dissenters who were benefited.
(d) In a proceeding commenced by the dissenters to enforce the liability
under Section 33-13-300(a) of a corporation that has failed to commence
an appraisal proceeding within the sixty-day period, the court shall
assess the costs of the proceeding and the fees and expenses of
dissenters' counsel against the corporation and in favor of the
dissenters.
<PAGE> 41
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
As permitted by the South Carolina Business Corporation Act, Article
Six of the Registrant's Bylaws, filed as Exhibit 3(ii) hereto and incorporated
by reference herein, provides for indemnification of directors and officers in
certain instances.
Item 21. Exhibits and Financial Statements Schedules.
(a) The following exhibits are filed herewith, or, as noted, have
previously been filed:
2.1 Reorganization Agreement and Plan of Exchange between
Clover Community Bankshares, Inc. and Clover
Community Bank (filed as Appendix A to the Proxy
Statement/Prospectus)
3(i) Articles of Incorporation of Clover Community
Bankshares, Inc.*
3(ii) Bylaws of Clover Community Bankshares, Inc.*
5.1 Opinion of Nelson Mullins Riley & Scarborough, L.L.P.
as to the legality of the securities being
registered*
21.1 Subsidiaries of the registrant*
23.1 The consent of Nelson Mullins Riley & Scarborough,
L.L.P. appears in its opinion filed as Exhibit 5.*
24.1 Power of Attorney of certain officers and directors
of Clover Community Bankshares, Inc. with respect to
the execution of amendments to this Registration
Statement *
99.1 Form of Proxy*
99.2 Form of letter to Bank shareholders regarding the
Annual Meeting*
99.3 Form of notice of Bank shareholders*
(b) Not applicable.
(c) Not applicable.
- --------------------------------------------------------------------------------
* Previously filed.
Item 22. Undertakings.
(a) (1) The undersigned registrant hereby undertakes as follows:
that prior to any public reoffering of the securities registered hereunder
through use of a prospectus which is a part of this registration statement by
any person or party who is deemed to be an underwriter within the meaning of
Rule 145(c), the issuer undertakes that such reoffering prospectus will contain
the information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(2) The registrant undertakes that every prospectus: (i) that
is filed pursuant to paragraph (1) immediately preceding, or (ii) that purports
to meet the requirements of Section 10(a)(3) of the Securities Act and is used
in connection with an offering of securities subject to Rule 415 of the
Securities Act will be filed as a
-1-
<PAGE> 42
part of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(b) Not applicable.
(c) Not applicable.
-2-
<PAGE> 43
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Clover, State of South Carolina, on April 8, 1998.
CLOVER COMMUNITY BANKSHARES, INC.
By: /s/ James C. Harris, Jr.
--------------------------
James C. Harris, Jr.
President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates stated.
<TABLE>
<S> <C> <C>
/s/ James C. Harris, Jr. President, Principal April 8, 1998
- ------------------------------- Executive Officer,
James C. Harris, Jr. Principal Financial
Officer and Director
* Director April 8, 1998.
- -------------------------------
Ruby M. Bennett
* Director April 8, 1998.
- -------------------------------
Charles R. Burrell
/s/ James C. Harris, Jr. Director April 8, 1998.
- -------------------------------
James C. Harris, Jr.
* Director April 8, 1998.
- -------------------------------
Herbert Kirsh
* Director April 8, 1998.
- -------------------------------
H. Marvin McCarter
* Director April 8, 1998.
- -------------------------------
James H. Owen, Jr.
* Director April 8, 1998.
- -------------------------------
Gwen M. Thompson
* Director April 8, 1998.
- -------------------------------
William C. Turner
</TABLE>
*By: /s/ James C. Harris, Jr.
---------------------------
James C. Harris, Jr.
As attorney in fact
-3-
<PAGE> 44
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------------- ----------------------------------------------------------
<S> <C>
2.1 Reorganization Agreement and Plan of Exchange
between Clover Community Bankshares, Inc. and Clover
Community (filed as Appendix A to the Proxy
Statement/Prospectus)
3(i) Articles of Incorporation of Clover Community
Bankshares, Inc.*
3(ii) Bylaws of Clover Community Bankshares, Inc.*
5.1 Opinion of Nelson Mullins Riley & Scarborough,
L.L.P. as to the legality of the securities being
registered*
21.1 Subsidiaries of the registrant*
23.1 The consent of Nelson Mullins Riley & Scarborough,
L.L.P. appears in its opinion filed as Exhibit 5.1*
24.1 Power of Attorney of certain officers and directors
of Clover Community Bankshares, Inc. with respect to
the execution of amendments to this Registration
Statement*
99.1 Form of Proxy*
99.2 Form of letter to Bank shareholders regarding Annual
Meeting*
99.3 Form of notice to Bank shareholders*
</TABLE>
- -------------------------
* Previously filed
