<PAGE> 1
As filed with the Securities and Exchange Commission on March 9, 1998
Registration No. _________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
Under
The Securities Act of 1933
CLOVER COMMUNITY BANKSHARES, INC.
(Exact name of registrant as specified in its charter)
South Carolina 6711 Applied For
- - ------------------- ------------------- -----------------
(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]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
============================================================================================
Title of Each Amount Amount of
Class of Securities to be Proposed Proposed Registration
to be Registered Registered Maximum Maximum Fee
Offering Price Aggregate
Per Unit Offering Price
============================================================================================
<S> <C> <C> <C> <C>
Stock, $.01 Par Value 1,011,020 (1) $6.47(2) $6,541,299.40(2) $1,929.68
============================================================================================
</TABLE>
(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.
<PAGE> 2
CLOVER COMMUNITY BANKSHARES, INC.
PROSPECTUS
-------------------
CLOVER COMMUNITY BANK
PROXY STATEMENT
FOR A MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 20, 1998
-------------------------------------------------------
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 1,
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 OR ANY STATE COMMISSION NOR HAS THE COMMISSION OR ANY STATE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THE PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------------------------
The date of this Proxy Statement/Prospectus is April 1, 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
================================================================================
<TABLE>
<CAPTION>
Page
----
<S> <C>
SUMMARY.....................................................................1
THE PROPOSED REORGANIZATION.................................................3
RIGHTS OF DISSENTING SHAREHOLDERS...........................................6
FEDERAL INCOME TAX CONSEQUENCES.............................................8
DIVIDENDS AND PUBLIC MARKET.................................................9
BUSINESS OF THE HOLDING COMPANY AND THE BANK...............................10
SUPERVISION AND REGULATION.................................................12
MANAGEMENT; ELECTION OF DIRECTORS..........................................17
PRINCIPAL SHAREHOLDERS OF THE BANK.........................................20
COMPLIANCE WITH THE SECURITIES EXCHANGE ACT OF 1934........................21
RESTRICTIONS ON TRANSFER OF STOCK
RECEIVED BY CERTAIN INDIVIDUALS...................................21
DESCRIPTION OF COMMON STOCK................................................22
FINANCIAL STATEMENTS; REPORT ON FORM F-2...................................22
LEGAL MATTERS..............................................................23
INDEPENDENT PUBLIC ACCOUNTANTS.............................................23
OTHER MATTERS..............................................................23
</TABLE>
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.
<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.
-1-
<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. 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
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
-2-
<PAGE> 7
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 Bank will not be changed as a result of the Reorganization. The
Reorganization will be accounted for as a pooling of interests.
-3-
<PAGE> 8
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 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.
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;
-4-
<PAGE> 9
(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.
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
-5-
<PAGE> 10
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. 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 contain a similar provision. 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.
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."
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
-6-
<PAGE> 11
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. 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. 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.
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
-7-
<PAGE> 12
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 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:
-8-
<PAGE> 13
(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
concerning the tax consequences of the Share Exchange.
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 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.
-9-
<PAGE> 14
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.
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.
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.
-10-
<PAGE> 15
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.
-11-
<PAGE> 16
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
-12-
<PAGE> 17
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.
-13-
<PAGE> 18
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
-14-
<PAGE> 19
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.
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.
-15-
<PAGE> 20
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.
-16-
<PAGE> 21
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, indemnifications 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
policies.
MANAGEMENT; ELECTION OF DIRECTORS
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 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.
-17-
<PAGE> 22
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 1995 $78,000 $10,000 $3,084
Director
</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.
-18-
<PAGE> 23
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.
-19-
<PAGE> 24
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
-20-
<PAGE> 25
which Mr. Turner disclaims beneficial ownership; and 10,000 shares
owned by Mr. Turner's wife, as to which Mr. Turner disclaims beneficial
ownership.
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
-21-
<PAGE> 26
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. 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. All outstanding shares of common stock of the Holding Company will be
fully paid and nonassessable.
FINANCIAL STATEMENTS; REPORT ON FORM F-2
The Bank's annual report 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 F-2 required
to be filed with the Federal Deposit Insurance Corporation under 12 C.F.R. ss.
335.310 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.
-22-
<PAGE> 27
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.
-23-
<PAGE> 28
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> 29
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> 30
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> 31
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> 32
(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
<PAGE> 33
(5) be accompanied by a copy of this chapter.
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.
(b) To the extent the corporation elects to withhold payment under
subsection (a), after taking the proposed
<PAGE> 34
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> 35
(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> 36
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 (filed as part of Registration Statement
signature page.)
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.
- - ------------------------
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> 37
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> 38
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 March 9, 1998.
CLOVER COMMUNITY BANKSHARES, INC.
By: /s/ James C. Harris, Jr.
------------------------
James C. Harris, Jr.
President
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints James C. Harris and Gwen M. Thompson and
each of them his or her true and lawful attorney-in-fact and agent with full
power of substitution and resubstitution, for and in his or her name, place and
stead, in any and all capacities, to sign any and all amendments to this
Registration Statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto such attorney-in-fact and agent, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
such attorney-in-fact and agent, or his or her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates stated.
/s/ James C. Harris, Jr. President, Principal
- - ------------------------- Executive Officer,
James C. Harris, Jr. Principal Financial
Officer and Director
/s/ Ruby M. Bennett Director March 9, 1998.
- - -------------------------
Ruby M. Bennett
/s/ Charles R. Burrell Director March 9, 1998.
- - -------------------------
Charles R. Burrell
/s/ James C. Harris, Jr. Director March 9, 1998.
- - -------------------------
James C. Harris, Jr.
/s/ Herbert Kirsh. Director March 9, 1998.
- - -------------------------
Herbert Kirsh
/s/ H. Marvin McCarter Director March 9, 1998.
- - -------------------------
H. Marvin McCarter
/s/ James H. Owen, Jr. Director March 9, 1998.
- - -------------------------
James H. Owen, Jr.
/s/ Gwen M. Thompson Director March 9, 1998.
- - -------------------------
Gwen M. Thompson
/s/ William C. Turner Director March 9, 1998.
- - -------------------------
William C. Turner
-3-
<PAGE> 39
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 (filed as part of Registration Statement
signature page.)
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>
- - -------------------------
4
<PAGE> 1
EXHIBIT 3(i)
ARTICLES OF INCORPORATION
OF
CLOVER COMMUNITY BANKSHARES, INC.
ARTICLE ONE
NAME
The name of the corporation is Clover Community Bankshares, Inc. (the
"Corporation").
ARTICLE TWO
ADDRESS AND REGISTERED AGENT
The street address of the initial registered office of the Corporation
shall be 124 North Main Street, Clover, South Carolina 29710. The name of the
Corporation's initial registered agent at such address shall be James C.
Harris, Jr.
ARTICLE THREE
CAPITALIZATION
The Corporation shall have the authority, exercisable by its board of
directors (the "Board of Directors"), to issue up to 10,000,000 shares of
voting common stock, par value $.01 per share (the "Common Stock").
ARTICLE FOUR
PREEMPTIVE RIGHTS
The shareholders shall not have any preemptive rights to acquire
additional stock in the Corporation.
ARTICLE FIVE
NO CUMULATIVE VOTING RIGHTS
The Corporation elects not to have cumulative voting, and no shares
issued by this Corporation may be cumulatively voted for directors of the
Corporation (or for any other decision).
2
<PAGE> 2
ARTICLE SIX
LIMITATION ON DIRECTOR LIABILITY
No director of the Corporation shall be personally liable to the
Corporation or its shareholders for monetary damages for breach of the duty of
care or any other duty as a director, except that such liability shall not be
eliminated for:
(i) any breach of the director's duty of loyalty to the
Corporation or its shareholders;
(ii) acts or omissions not in good faith or which involve
gross negligence, intentional misconduct, or a knowing violation of
law;
(iii) liability imposed under Section 33-8-330 (or any
successor provision or redesignation thereof) of the Act; and
(iv) any transaction from which the director derived an
improper personal benefit.
If at any time the Act shall have been amended to authorize the
further elimination or limitation of the liability of a director, then the
liability of each director of the Corporation shall be eliminated or limited to
the fullest extent permitted by the Act, as so amended, without further action
by the shareholders, unless the provisions of the Act, as amended, require
further action by the shareholders.
Any repeal or modification of the foregoing provisions of this Article
Six shall not adversely affect the elimination or limitation of liability or
alleged liability pursuant hereto of any director of the Corporation for or
with respect to any alleged act or omission of the director occurring prior to
such a repeal or modification.
ARTICLE SEVEN
CONTROL SHARE ACQUISITIONS
The provisions of Title 35, Chapter 2, Article 1 of the Code of Laws
of South Carolina shall not apply to control share acquisitions of shares of
the Corporation.
ARTICLE EIGHT
CONSIDERATION OF OTHER CONSTITUENCIES
In discharging the duties of their respective positions and in
determining what is in the best interests of the Corporation, the Board of
Directors, committees of the Board of Directors, and individual directors, in
addition to considering the effects of any actions on the Corporation and its
shareholders, may consider the interests of the employees, customers,
suppliers, creditors, and other constituencies of the Corporation and its
subsidiaries, the communities and geographical
2
<PAGE> 3
areas in which the Corporation and its subsidiaries operate or are located, and
all other factors such directors consider pertinent. This provision solely
grants discretionary authority to the directors and shall not be deemed to
provide to any other constituency any right to be considered.
ARTICLE NINE
NAME AND ADDRESS OF THE SOLE INCORPORATOR
The sole incorporator is Daniel J. Fritze, whose address is 1330 Lady
Street, Third Floor, Keenan Building, Columbia, South Carolina 29201.
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Incorporation as of the date indicated below.
/s/ Daniel J. Fritze
---------------------------------
Daniel J. Fritze
Sole Incorporator
Date: March 4, 1998
3
<PAGE> 4
CERTIFICATION
I, Daniel J. Fritze, an attorney licensed to practice in the State of
South Carolina, certify that the Corporation has complied with the requirements
of Chapter 2, Title 33 of the Code of Laws of South Carolina 1976, relating to
the Articles of Incorporation.
Date: March 4, 1998
/s/ Daniel J. Fritze
------------------------------------------
(Signature)
Nelson Mullins Riley & Scarborough, L.L.P.
1330 Lady Street, Third Floor
Keenan Building
Columbia, South Carolina 29201
4
<PAGE> 1
EXHIBIT 3 (ii)
BYLAWS
OF
CLOVER COMMUNITY BANKSHARES, INC.
<PAGE> 2
CLOVER COMMUNITY BANKSHARES, INC.
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE 1
OFFICES 1
Section 1: Registered Office and Agent............................................1
Section 2: Other Offices..........................................................1
ARTICLE 2
SHAREHOLDERS............................................................................1
Section 1: Place of Meetings......................................................1
Section 2: Annual Meetings........................................................1
Section 3: Special Meetings.......................................................1
Section 4: Notice.................................................................2
Section 5: Quorum.................................................................2
Section 6: Majority Vote; Withdrawal of Quorum....................................3
Section 7: Method of Voting.......................................................3
Section 8: Record Date............................................................3
Section 9: Shareholder Proposals..................................................3
ARTICLE 3
DIRECTORS...............................................................................4
Section 1: Management.............................................................4
Section 2: Number, Classification and Terms of Office of Directors................4
Section 3: Qualifications of Directors............................................5
Section 4: Election of Directors..................................................5
Section 5: Nomination of Directors................................................5
Section 6: Vacancies..............................................................6
Section 7: Removal of Directors...................................................6
Section 8: Place of Meetings......................................................6
Section 9: Regular Meetings.......................................................6
Section 10: Special Meetings.......................................................6
Section 11: Telephone and Similar Meetings.........................................7
Section 12: Quorum; Majority Vote..................................................7
Section 13: Compensation...........................................................7
Section 14: Procedure..............................................................7
Section 17: Action Without Meeting.................................................7
ARTICLE 4
BOARD COMMITTEES........................................................................7
Section 1: Designation............................................................7
Section 2: Meetings...............................................................8
Section 3: Quorum; Majority Vote..................................................8
Section 4: Procedure..............................................................8
Section 5: Action Without Meeting.................................................8
Section 6: Telephone and Similar Meetings.........................................9
</TABLE>
<PAGE> 3
<TABLE>
<S> <S> <C>
ARTICLE 5
OFFICERS9
Section 1: Offices................................................................9
Section 2: Term...................................................................9
Section 3: Vacancies..............................................................9
Section 4: Compensation...........................................................9
Section 5: Removal................................................................9
Section 6: Chairman of the Board.................................................10
Section 7: Chief Executive Officer...............................................10
Section 8: President.............................................................10
Section 9: Vice Presidents.......................................................10
Section 10: Secretary.............................................................10
Section 11: Assistant Secretary...................................................11
Section 12: Treasurer.............................................................11
ARTICLE 6
INDEMNIFICATION........................................................................11
Section 1: Indemnification of Directors..........................................11
Section 2: Advancement of Expenses...............................................12
Section 3: Indemnification of Officers, Employees and Agents.....................12
Section 4: Insurance.............................................................13
Section 5: Nonexclusivity of Rights; Agreements..................................13
Section 6: Continuing Benefits; Successors.......................................13
Section 7: Interpretation; Construction..........................................14
Section 8: Amendment.............................................................14
Section 9: Severability..........................................................14
ARTICLE 7
CERTIFICATES AND SHAREHOLDERS..........................................................14
Section 1: Certificates..........................................................14
Section 2: Issuance of Shares....................................................15
Section 3: Rights of Corporation with Respect to Registered Owners...............15
Section 4: Transfers of Shares...................................................15
Section 5: Registration of Transfer..............................................15
Section 6: Lost, Stolen or Destroyed Certificates................................16
Section 7: Restrictions on Shares................................................16
Section 8: Control Share Acquisitions Statute....................................16
Section 9: Voting of Stock Held..................................................16
ARTICLE 8
GENERAL PROVISIONS.....................................................................17
Section 1: Distributions.........................................................17
Section 2: Books and Records.....................................................17
Section 3: Execution of Documents................................................17
Section 4: Fiscal Year...........................................................17
Section 5: Seal..................................................................17
Section 6: Resignation...........................................................17
Section 7: Computation of Days...................................................17
Section 8: Amendment of Bylaws...................................................17
Section 9: Construction..........................................................18
Section 10: Headings.............................................................18
</TABLE>
<PAGE> 4
BYLAWS
OF
CLOVER COMMUNITY BANKSHARES, INC.
ARTICLE 1: OFFICES
Section 1: Registered Office and Agent. The registered office
of the Corporation shall be at 124 North Main Street, Clover, South Carolina
29710. The registered agent shall be James C. Harris, Jr.
Section 2: Other Offices. The Corporation may also have
offices at such other places within and without the State of South Carolina as
the Board of Directors may from time to time determine or the business of the
Corporation may require.
ARTICLE 2: SHAREHOLDERS
Section 1: Place of Meetings. Meetings of shareholders shall
be held at the time and place, within or without the State of South Carolina,
stated in the notice of the meeting or in a waiver of notice.
Section 2: Annual Meetings. An annual meeting of the
shareholders shall be held each year on the third Monday of April, if not a
legal holiday, but if a legal holiday, then on the next Monday not a legal
holiday, or on such other date and at a time to be set by the Board of
Directors in accordance with all applicable notice requirements. At the
meeting, the shareholders shall elect directors and transact such other
business as may properly be brought before the meeting.
Section 3: Special Meetings.
(a) Special meetings of the shareholders, for any
purpose or purposes, unless otherwise required by the South Carolina Business
Corporation Act of 1988, as amended from time to time (the "Act"), the Articles
of Incorporation of the Corporation (the "Articles"), or these Bylaws, may be
called by the chief executive officer, the president, the chairman of the Board
of Directors or a majority of the Board of Directors.
(b) In addition to a special meeting called in
accordance with subsection 3(a) of this Article 2, the Corporation shall, if
and to the extent that it is required by applicable law, hold a special meeting
of shareholders if the holders of at least ten percent of all the votes
entitled to be cast on any issue proposed to be considered at such special
meeting sign, date and deliver to the secretary of the Corporation one or more
written demands for the meeting.
<PAGE> 5
Such written demands shall be delivered to the secretary by certified mail,
return receipt requested. Such written demands sent to the secretary of the
Corporation shall set forth as to each matter the shareholder or shareholders
propose to be presented at the special meeting (i) a description of the purpose
or purposes for which the meeting is to be held (including the specific
proposal(s) to be presented); (ii) the name and record address of the
shareholder or shareholders proposing such business; (iii) the class and number
of shares of the Corporation that are owned of record by the shareholder or
shareholders as of a date within ten days of the delivery of the demand; (iv)
the class and number of shares of the Corporation that are held beneficially,
but not held of record, by the shareholder or shareholders as of a date within
ten days of the delivery of the demand; and (v) any interest of the shareholder
or shareholders in such business. Any such special shareholders' meeting shall
be held at a location designated by the Board of Directors. The Board of
Directors may set such rules for any such meeting as it may deem appropriate,
including when the meeting will be held (subject to any requirements of the
Act), the agenda for the meeting (which may include any proposals made by the
Board of Directors), who may attend the meeting in addition to shareholders of
record and other such matters.
(c) Business transacted at any special meeting
shall be confined to the specific purpose or purposes stated in the notice of
the meeting.
Section 4: Notice.
(a) Written or printed notice stating the
place, day and hour of the meeting and, in the case of a special meeting, the
specific purpose or purposes for which the meeting is called, shall be
delivered by the Corporation not less than ten nor more than sixty days before
the date of the meeting, either personally or by mail, to each shareholder of
record entitled to vote at such meeting. If mailed, such notice shall be deemed
effective when deposited with postage prepaid in the United States mail,
addressed to the shareholder at the address appearing on the stock transfer
books of the Corporation. Except as may be expressly provided by law, no
failure or irregularity of notice of any regular meeting shall invalidate the
same or any proceeding thereat.
(b) The notice of each special shareholders
meeting shall include a description of the specific purpose or purposes for
which the meeting is called. Except as provided by law, the Articles or these
Bylaws, the notice of an annual shareholders meeting need not include a
description of the purpose or purposes for which the meeting is called.
Section 5: Quorum. The holders of a majority of the shares
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall be requisite and shall constitute a quorum at
meetings of the shareholders for the transaction of business except as
otherwise provided by statute, by the Articles or by these Bylaws. If a quorum
is not present or represented at a meeting of the shareholders, the
shareholders entitled to vote, present in person or represented by proxy, shall
have the power to adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum is present or represented. At
an adjourned meeting at which a quorum is present or represented, any business
- 2 -
<PAGE> 6
may be transacted which might have been transacted at the meeting as originally
notified. Once a share is represented for any purpose at a meeting it is deemed
present for quorum purposes.
Section 6: Majority Vote; Withdrawal of Quorum. Except in
regards to the election of directors, when a quorum is present at a meeting,
the vote of the holders of a majority of the shares having voting power,
present in person or represented by proxy, shall decide any question brought
before the meeting, unless the question is one on which, by express provision
of the statutes, the Articles or these Bylaws, a higher vote is required in
which case the express provision shall govern. Directors shall be elected by a
plurality vote of the shareholders. The shareholders present at a duly
constituted meeting may continue to transact business until adjournment,
despite the withdrawal of enough shareholders to leave less than a quorum.
Section 7: Method of Voting. Each outstanding share of common
stock shall be entitled to one vote on each matter submitted to a vote at a
meeting of shareholders. Each outstanding share of other classes of stock, if
any, shall have such voting rights as may be prescribed by the Board of
Directors. Proxies delivered by facsimile to the Corporation, if otherwise in
order, shall be valid. Votes shall be taken by voice, by hand or in writing, as
directed by the chairman of the meeting. Voting for directors shall be in
accordance with Article 3, Section 3 of these Bylaws.
Section 8: Record Date. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders,
including any special meeting, or shareholders entitled to receive payment of
dividends, or in order to make a determination of shareholders for any other
purpose, the Board of Directors may fix in advance a date as the record date
for any such determination of shareholders, such date in any case to be not
less than ten nor more than seventy days prior to the date on which the
particular action, requiring such determination of shareholders, is to be
taken. Except as otherwise provided by law, if no record date is fixed for the
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders, or of shareholders entitled to receive payment of dividends, the
date on which notice of the meeting is mailed, or the date on which the
resolution of the Board of Directors declaring such dividend is adopted, as the
case may be, shall be the record date.
Section 9: Shareholder Proposals.
(a) To the extent required by applicable law, a
shareholder may bring a proposal before an annual meeting of shareholders as
set forth in this Section 9. To be properly brought before an annual meeting of
shareholders, business must be (i) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors;
(ii) otherwise properly brought before the meeting by or at the direction of
the Board of Directors; or (iii) otherwise properly brought before the meeting
by a shareholder. 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
- 3 -
<PAGE> 7
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). A shareholder's notice to the secretary of the Corporation shall
set forth for each matter the shareholder proposes to bring before the annual
meeting (i) a description of the business desired to be brought before the
annual meeting (including the specific proposal(s) to be presented) and the
reasons for conducting such business at the annual meeting; (ii) the name and
record address of the shareholder proposing such business; (iii) the class and
number of shares of the Corporation that are owned of record, and the class and
number of shares of the Corporation that are held beneficially, but not held of
record, by the shareholder as of the record date for the meeting, if such date
has been made publicly available, or as of a date within ten days of the
effective date of the notice by the shareholder if the record date has not been
made publicly available; and (iv) any interest of the shareholder in such
business. In the event that a shareholder attempts to bring business before an
annual meeting without complying with the provisions of this Section 9, the
chairman of the meeting shall declare to the meeting that the business was not
properly brought before the meeting in accordance with the foregoing
procedures, and such business shall not be transacted. The chairman of any
annual meeting, for good cause shown and with proper regard for the orderly
conduct of business at the meeting, may waive in whole or in part the operation
of this Section 9.
(b) If any shareholder of the Corporation
notifies the Corporation that such shareholder intends to present a proposal
for action at a forthcoming meeting of the Corporation's shareholders and
requests that the Corporation include the proposal in its proxy statement and
such shareholder complies with all the requirements of Rule 14a-8 promulgated
under the Securities Exchange Act of 1934, the Corporation shall consider
inclusion of such proposal in the proxy statement unless it determines that the
proposal is inappropriate for consideration by the shareholders at the meeting.
ARTICLE 3: DIRECTORS
Section 1: Management. The business and affairs of the
Corporation shall be managed by the Board of Directors who may exercise all
such powers of the Corporation and do all such lawful acts and things as are
not by law, the Articles or these Bylaws directed or required to be done or
exercised by the shareholders.
Section 2: Number, Classification and Terms of Office of
Directors. Unless otherwise provided in the Articles of Incorporation, the
number of directors of the Corporation shall be that number as may be fixed
from time to time by resolution of the Board of Directors, but in no event
shall the number be less than seven or greater than 25. The initial number of
directors shall be eight. The number of members of the Board of Directors can
be increased or decreased within the foregoing range at any time by the Board
of Directors. In addition, unless provided otherwise by resolution of the Board
of Directors, if, in any case after proxy materials
- 4 -
<PAGE> 8
for an annual meeting of shareholders have been mailed to shareholders, any
person named therein to be nominated at the direction of the Board of Directors
becomes unable or unwilling to serve, the number of authorized directors shall
be automatically reduced by a number equal to the number of such persons. The
members of the Board of Directors need not be shareholders nor need they be
residents of any particular state.
Section 3: Qualifications of Directors. No individual who is
or becomes a Business Competitor (as defined below) or who is or becomes
affiliated with, employed by or a representative of any individual,
corporation, association, partnership, firm, business enterprise or other
entity or organization which the Board of Directors, after having such matter
formally brought to its attention, determines to be in competition with the
Corporation or any of its subsidiaries (any such individual, corporation,
association, partnership, firm, business enterprise or other entity or
organization being hereinafter referred to as a "Business Competitor") shall be
eligible to serve as a director if the Board of Directors determines that it
would not be in the Corporation's best interests for such individual to serve
as a director of the Corporation. Such affiliation, employment or
representation may include, without limitation, service or status as an owner,
partner, shareholder, trustee, director, officer, consultant, employee, agent,
or counsel, or the existence of any relationship which results in the affected
person having an express or implied obligation to act on behalf of a Business
Competitor; provided, however, that passive ownership of a debt or equity
interest not exceeding 1% of the outstanding debt or equity, as the case may
be, in any Business Competitor shall not constitute such affiliation,
employment or representation. Any financial institution having branches or
affiliates in York County, South Carolina, shall be presumed to be a Business
Competitor unless the Board of Directors determines otherwise.
Section 4: Election of Directors. Directors shall be elected
by a plurality vote.
Section 5: Nomination of Directors.
(a) Nomination of persons to serve as directors
of the Corporation, other than those made by or on behalf of the Board of
Directors of the Corporation, shall be made in writing and shall be delivered
either by personal delivery or by United States mail, postage prepaid, return
receipt requested, to the secretary of the Corporation no later than (i) with
respect to an election to be held at an annual meeting of shareholders, ninety
days in advance of such meeting; and (ii) with respect to an election to be
held at a special meeting of shareholders for the election of directors, the
close of business on the seventh day following the date on which notice of such
meeting is first given to shareholders. Each notice shall set forth: (i) the
name and address of the shareholder who intends to make the nomination and of
the person or persons to be nominated; (ii) a representation that the
shareholder is a holder of record of stock of the Corporation entitled to vote
at such meeting and intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice; (iii) a description of
all arrangements or understandings between the shareholder and each nominee and
any other person or persons (naming such person or persons) pursuant to which
the nomination or nominations are to be made by the shareholder; (iv) such
other information regarding each nominee proposed by such shareholder as would
be required to be included in a proxy statement filed pursuant to the
- 5 -
<PAGE> 9
proxy rules of the Securities and Exchange Commission, had the nominee been
nominated, or intended to be nominated, by the Board of Directors; and (v) the
consent of each nominee to serve as a director of the Corporation if so
elected. The chairman of the meeting may refuse to acknowledge the nomination
of any person not made in compliance with the foregoing procedure. The chairman
of any such meeting, for good cause shown and with proper regard for the
orderly conduct of business at the meeting, may waive in whole or in part the
operation of this Section.
(b) Notwithstanding subsection (a) of this
Section, if the Corporation or any banking subsidiary of the Corporation is
subject to the requirements of Section 914 of the Financial Institutions
Reform, Recovery, and Enforcement Act of 1989, then no person may be nominated
by a shareholder for election as a director at any meeting of shareholders
unless the shareholder furnishes the written notice required by subsection (a)
of this Section to the secretary of the Corporation at least ninety days prior
to the date of the meeting and the nominee has received regulatory approval to
serve as a director prior to the date of the meeting.
Section 6: Vacancies. Except as otherwise provided by law,
in the Articles of Incorporation, or in these Bylaws (a) the office of a
director shall become vacant if he dies, resigns, or is removed from office,
and (b) the Board of Directors may declare vacant the office of a director if
(i) he is interdicted or adjudicated an incompetent, (ii) an action is filed by
or against him, or any entity of which he is employed as his principal business
activity, under the bankruptcy laws of the United States, (iii) in the sole
opinion of the Board of Directors he becomes incapacitated by illness or other
infirmity so that he is unable to perform his duties for a period of six months
or longer, or (iv) he ceases at any time to have the qualifications required by
law, the Articles of Incorporation or these Bylaws. The remaining directors
may, by a majority vote, fill any vacancy on the Board of Directors (including
any vacancy resulting from an increase in the authorized number of directors,
or from the failure of the shareholders to elect the full number of authorized
directors) for an unexpired term; provided that the shareholders shall have the
right at any special meeting called for such purpose prior to action by the
Board of Directors to fill the vacancy.
Section 7: Removal of Directors. Unless provided otherwise
by the Articles of Incorporation, directors may be removed with or without
cause by the affirmative vote of the holders of at least a majority of the
shares entitled to vote at an election of directors, such vote being taken at a
meeting of the shareholders called for that purpose at which a quorum is
present.
Section 8: Place of Meetings. Meetings of the Board of
Directors, regular or special, may be held either within or without the State
of South Carolina.
Section 9: Regular Meetings. Regular meetings of the Board
of Directors may be held without notice at such time and place as shall from
time to time be determined by the Board of Directors.
Section 10: Special Meetings. Special meetings of the Board
of Directors may be called by the chairman, the chief executive officer, or the
president of the Corporation, on not less
- 6 -
<PAGE> 10
than twenty-four hours' notice. Notice of a special meeting may be given by
personal notice, telephone, facsimile, electronic communication, overnight
courier or United States mail to each director. Any such special meeting shall
be held at such time and place as shall be stated in the notice of the meeting.
The notice need not describe the purpose or purposes of the special meeting.
Section 11: Telephone and Similar Meetings. Directors may
participate in and hold a meeting by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Participation in such a meeting shall constitute
presence in person at the meeting, except where a person participates in the
meeting for the express purpose of objecting to the holding of the meeting or
the transacting of any business at the meeting on the ground that the meeting
is not lawfully called or convened, and does not thereafter vote for or assent
to action taken at the meeting.
Section 12: Quorum; Majority Vote. At meetings of the Board
of Directors a majority of the number of directors then in office shall
constitute a quorum for the transaction of business. The act of a majority of
the directors present at a meeting at which a quorum is present shall be the
act of the Board of Directors, except as otherwise specifically provided by
law, the Articles or these Bylaws. If a quorum is not present at a meeting of
the Board of Directors, the directors present may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
is present.
Section 13: Compensation. Each director shall be entitled to
receive such reasonable compensation as may be determined by resolution of the
Board of Directors. By resolution of the Board of Directors, the directors may
be paid their expenses, if any, of attendance at each meeting of the Board of
Directors and may be paid a fixed sum for attendance at each meeting of the
Board of Directors. No such payment shall preclude any director from serving
the Corporation in any other capacity and receiving compensation therefor.
Members of committees may, by resolution of the Board of Directors, be allowed
compensation for attending committee meetings.
Section 14: Procedure. The Board of Directors shall keep
regular minutes of its proceedings. The minutes shall be placed in the minute
book of the Corporation.
Section 17: Action Without Meeting. Any action required or
permitted to be taken at a meeting of the Board of Directors may be taken
without a meeting if the action is assented to by all the members of the Board.
Such consent shall have the same force and effect as a meeting vote and may be
described as such in any document.
ARTICLE 4: BOARD COMMITTEES
Section 1: Designation. The Board of Directors may, by
resolution adopted by a majority of the full Board, designate one or more
committees. Committee members may be
- 7 -
<PAGE> 11
nominated by the Chairman, subject to ratification by the full Board. Each
committee must have two or more members who serve at the pleasure of the Board
of Directors. To the extent specified by the Board of Directors, in the
Articles or in these Bylaws, each committee may exercise the authority of the
Board of Directors. So long as prohibited by law, however, a committee of the
Board may not (a) authorize distributions; (b) approve or propose to
shareholders action required by the Act to be approved by shareholders; (c)
fill vacancies on the Board of Directors or on any of its committees; (d) amend
the Articles; (e) adopt, amend or repeal these Bylaws; (f) approve a plan of
merger not requiring shareholder approval; (g) authorize or approve
reacquisition of shares, except according to a formula or method prescribed by
the Board of Directors; or (h) authorize or approve the issuance or sale or
contract for sale of shares, or determine the designation and relative rights,
preferences and limitations of a class or series of shares, except that the
Board of Directors may authorize a committee (or a senior executive officer of
the Corporation) to do so within limits specifically prescribed by the Board of
Directors. Any director may serve one or more committee. Any committee
appointed under this Section 1 shall perform such duties and assume such
responsibility as may from time to time be placed upon it by the Board of
Directors.
Section 2: Meetings. Time, place and notice of all committee
meetings shall be as called and specified by the chief executive officer, the
committee chairman or any two members of each committee.
Section 3: Quorum; Majority Vote. At meetings of committees,
a majority of the number of members designated by the Board of Directors shall
constitute a quorum for the transaction of business. The act of a majority of
the members present at any meeting at which a quorum is present shall be the
act of such committee, except as otherwise specifically provided by the Act,
the Articles or these Bylaws. If a quorum is not present at a meeting of the
committee, the members present may adjourn the meeting from time to time,
without notice other than an announcement at the meeting, until a quorum is
present.
Section 4: Procedure. Committees shall keep regular minutes
of their proceedings and report the same to the Board of Directors at its next
regular meeting. The minutes of the proceedings of the committee shall be
placed in the minute book of the Corporation.
Section 5: Action Without Meeting. Any action required or
permitted to be taken at a meeting of any committee may be taken without a
meeting if the action is assented to by all the members of the committee. Such
consent shall have the same force and effect as a meeting vote and may be
described as such in any document.
- 8 -
<PAGE> 12
Section 6: Telephone and Similar Meetings. Committee members
may participate in and hold a meeting by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other. Participation in such a meeting shall
constitute presence in person at the meeting, except where a person
participates in the meeting for the express purpose of objecting to the holding
of the meeting or the transacting of any business at the meeting on the ground
that the meeting is not lawfully called or convened, and does not thereafter
vote for or assent to action taken at the meeting.
ARTICLE 5: OFFICERS
OFFICERS
Section 1: Offices. The officers of the Corporation shall
consist of a chief executive officer, president and secretary, each of whom
shall be elected by the Board of Directors. The Board of Directors may also
create and establish the duties of other offices as it deems appropriate. The
Board of Directors shall also elect a chairman of the Board and may elect a
vice chairman of the Board from among its members. The Board of Directors from
time to time may appoint, or may authorize the president to appoint or
authorize specific officers to appoint, the persons who shall hold such other
offices as may be established by the Board of Directors, including one or more
vice presidents (including executive vice presidents, senior vice presidents,
assistant vice presidents), one or more assistant secretaries, and one or more
assistant treasurers. Any two or more offices may be held by the same person.
Section 2: Term. Each officer shall serve at the pleasure of
the Board of Directors (or, if appointed pursuant to this Article, at the
pleasure of the Board of Directors, the president, or the officer authorized to
have appointed the officer) until his or her death, resignation, or removal, or
until his or her replacement is elected or appointed in accordance with this
Article.
Section 3: Vacancies. Any vacancy occurring in any office of
the Corporation may be filled by the Board of Directors. Any vacancy in an
office which was filled by the president or another officer may also be filled
by the president or by any officer authorized to have filled the office vacant.
Section 4: Compensation. The compensation of all officers of
the Corporation shall be fixed by the Board of Directors or by a committee or
officer appointed by the Board of Directors. Officers may serve without
compensation.
Section 5: Removal. All officers (regardless of how elected
or appointed) may be removed, with or without cause, by the Board of Directors.
Any officer appointed by the president or another officer may also be removed,
with or without cause, by the president or by any officer authorized to have
appointed the officer to be removed. Removal will be without prejudice to the
contract rights, if any, of the person removed, but shall be effective
notwithstanding any damage claim that may result from infringement of such
contract rights.
- 9 -
<PAGE> 13
Section 6: Chairman of the Board. The office of the chairman
of the board may be filled by the Board at its pleasure by the election of one
of its members to the office. The chairman shall preside at all meetings of the
Board and meetings of the shareholders and shall perform such other duties as
may be assigned to him by the Board of Directors.
Section 7: Chief Executive Officer. The chief executive
officer shall be responsible for the general and active management of the
business and affairs of the Corporation, and shall see that all orders and
resolutions of the Board are carried into effect. He shall perform such other
duties and have such other authority and powers as the Board of Directors may
from time to time prescribe.
Section 8: President. The president shall be responsible for
the general and active management of the business and affairs of the
Corporation, and shall see that all orders and resolutions of the Board are
carried into effect. He shall perform such other duties and have such other
authority and powers as the Board of Directors may from time to time prescribe.
The president shall preside as chairman of the Board of Directors during the
absence of the Board chairman.
Section 9: Vice Presidents. The vice presidents (executive,
senior, or assistant), as such offices are appointed by the Board of Directors,
in the order of their seniority, unless otherwise determined by the Board of
Directors, shall, in the absence or disability of the president, perform the
duties and have the authority and exercise the powers of the president. They
shall perform such other duties and have such other authority and powers as the
Board of Directors may from time to time prescribe or as the president may from
time to time delegate.
Section 10: Secretary.
(a) The secretary shall attend all meetings of
the Board of Directors and all meetings of the shareholders and record all
votes, actions and the minutes of all proceedings in a book to be kept for that
purpose and shall perform like duties for the executive and other committees
when required.
(b) The secretary shall give, or cause to be
given, notice of all meetings of the shareholders and special meetings of the
Board of Directors.
(c) The secretary shall keep in safe custody the
seal of the Corporation and, when authorized by the Board of Directors or the
executive committee, affix it to any instrument requiring it. When so affixed,
it shall be attested by the secretary's signature or by the signature of the
treasurer or an assistant secretary.
(d) The secretary shall be under the supervision
of the president and shall perform such other duties and have such other
authority and powers as the Board of Directors may from time to time prescribe
or as the president may from time to time delegate.
- 10 -
<PAGE> 14
Section 11: Assistant Secretary. The assistant secretaries,
as such offices are created by the Board of Directors, in the order of their
seniority, unless otherwise determined by the Board of Directors, shall, in the
absence or disability of the secretary, perform the duties and have the
authority and exercise the powers of the secretary. They shall perform such
other duties and have such other powers as the Board of Directors may from time
to time prescribe or as the president may from time to time delegate.
Section 12: Treasurer.
(a) The treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements of the Corporation and shall deposit all moneys and
other valuables in the name and to the credit of the Corporation in appropriate
depositories.
(b) The treasurer shall disburse the funds of
the Corporation ordered by the Board of Directors and prepare financial
statements as they direct.
(c) The treasurer shall perform such other
duties and have such other authority and powers as the Board of Directors may
from time to time prescribe or as the president may from time to time delegate.
(d) The treasurer's books and accounts shall be
opened at any time during business hours to the inspection of any directors of
the Corporation.
ARTICLE 6: INDEMNIFICATION
Section 1: Indemnification of Directors.
(a) The Corporation shall indemnify and hold
harmless, to the fullest extent permitted by applicable law, any person (an
"Indemnified Person") who was or is a party or is threatened to be made a party
to or is otherwise involved in any threatened, pending or completed action,
suit or other proceeding, whether civil, criminal, administrative or
investigative and whether formal or informal, by reason of the fact that he, or
a person for whom he is a legal representative (or other similar
representative), is or was a director of the Corporation or is or was serving
at the Corporation's request as a director, officer, partner, trustee, employee
or agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, against expenses (including attorneys' fees),
judgments, fines, amounts paid in settlement or other similar costs actually
and reasonably incurred in connection with such action, suit or proceeding. For
purposes of this Article 6, all terms used herein that are defined in Section
33-8-500 of the Act or any successor provision or provisions shall have the
meanings so prescribed in such Section.
- 11 -
<PAGE> 15
(b) Without limiting the provisions of Section
1(a) of this Article 6, the Corporation shall indemnify a director who was
wholly successful, on the merits or otherwise, in the defense of any proceeding
to which he was a party because he is or was a director of the Corporation
against reasonable expenses incurred by him in connection with the proceeding.
In addition, the Corporation shall indemnify an individual made a party to a
proceeding because he is or was a director against liability incurred in the
proceeding if: (i) he conducted himself in good faith; (ii) he reasonably
believed: (A) in the case of conduct in his official capacity with the
Corporation, that his conduct was in its best interest; and (B) in all other
cases, that his conduct was at least not opposed to its best interest; and
(iii) in the case of any criminal proceeding, he had no reasonable cause to
believe his conduct was unlawful. The termination of a proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent is not, of itself, determinative that the director did not meet the
standard of conduct described in this subsection (b). The determination of
whether the director met the standard of conduct described in this subsection
(b) shall be made in accordance with Section 33-8-550 of the Act or any
successor provision or provisions.
Section 2: Advancement of Expenses.
(a) With respect to any proceeding to which an
Indemnified Person is a party because he is or was a director of the
Corporation, the Corporation shall, to the fullest extent permitted by
applicable law, pay for or reimburse the Indemnified Person's reasonable
expenses (including, but not limited to, attorneys' fees and disbursements,
court costs, and expert witness fees) incurred by the Indemnified Person in
advance of final disposition of the proceeding.
(b) Without limiting the provisions of Section
2(a) of this Article 6, the Corporation shall, to the fullest extent permitted
by applicable law, pay for or reimburse the reasonable expenses (including, but
not limited to, attorneys' fees and disbursements, court costs and expert
witness fees) incurred by a director who is a party to a proceeding in advance
of final disposition of the proceeding if: (a) the director furnishes the
Corporation a written affirmation of his good faith belief that he has met the
standard of conduct described in Section 1(b) of this Article 6; (b) the
director furnishes the Corporation a written undertaking, executed personally
or on his behalf, to repay the advance if it is ultimately determined that he
did not meet such standard of conduct; and (c) a determination is made that the
facts then known to those making the determination would not preclude
indemnification under this Article 6. The Corporation shall expeditiously pay
the amount of such expenses to the director following the director's delivery
to the Corporation of a written request for an advance pursuant to this Section
2 together with a reasonable accounting of such expenses. The undertaking
required by this Section 2 shall be an unlimited general obligation of the
director but need not be secured and may be accepted without reference to
financial ability to make repayment. Determinations and authorizations of
payments under this Section 2 shall be made in the manner specified in Section
33-8-550 of the Act or any successor provision or provisions.
Section 3: Indemnification of Officers, Employees and Agents.
An officer of the Corporation who is not a director is entitled to the same
indemnification rights which are provided
- 12 -
<PAGE> 16
to directors of the Corporation in Section 1 of this Article 6 and the
Corporation shall advance expenses to officers of the Corporation who are not
directors to the same extent and in the same manner as to directors as provided
in Section 2 of this Article 6. In addition, the Board of Directors shall have
the power to cause the Corporation to indemnify, hold harmless and advance
expenses to any officer, employee or agent of the Corporation who is not a
director to the fullest extent permitted by public policy, by adopting a
resolution to that effect identifying such officers, employees or agents (by
position and name) and specifying the particular rights provided, which may be
different for each of the persons identified. Any officer entitled to
indemnification pursuant to the first sentence of this Section 3 and any
officer, employee or agent granted indemnification by the Board of Directors in
accordance with the second sentence of this Section 3 shall, to the extent
specified herein or by the Board of Directors, be an "Indemnified Party" for
the purposes of the provisions of this Article 6.
Section 4: Insurance. The Corporation may purchase and
maintain insurance on behalf of an individual who is or was a director,
officer, employee or agent of the Corporation, or who, while a director,
officer, employee or agent of the Corporation, is or was serving at the request
of the Corporation as a director, officer, partner, trustee, employee or agent
of another foreign or domestic corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, against liability asserted against
or incurred by him in that capacity or arising from his status as a director,
officer, employee or agent, whether or not the Corporation would have the power
to indemnify him against the same liability under this Article 6.
Section 5: Nonexclusivity of Rights; Agreements. The rights
conferred on any person by this Article 6 shall neither limit nor be exclusive
of any other rights which such person may have or hereafter acquire under any
statute, agreement, provision of the Articles, these Bylaws, vote of
shareholders or otherwise. The provisions of this Article 6 shall be deemed to
constitute an agreement between the Corporation and each person entitled to
indemnification hereunder. In addition to the rights provided in this Article
6, the Corporation shall have the power, upon authorization by the Board of
Directors, to enter into an agreement or agreements providing to any person who
is or was a director, officer, employee or agent of the Corporation certain
indemnification rights. Any such agreement between the Corporation and any
director, officer, employee or agent of the Corporation concerning
indemnification shall be given full force and effect, to the fullest extent
permitted by applicable law, even if it provides rights to such director,
officer, employee or agent more favorable than, or in addition to, those rights
provided under this Article 6.
Section 6: Continuing Benefits; Successors. The
indemnification and advancement of expenses provided by or granted pursuant to
this Article 6 shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and administrators
of such person. For purposes of this Article 6, the term "Corporation" shall
include any corporation, joint venture, trust, partnership or unincorporated
business association that is the successor to all or substantially all of the
business or assets of this Corporation, as a result of merger, consolidation,
sale, liquidation or otherwise, and any such successor shall be liable to the
- 13 -
<PAGE> 17
persons indemnified under this Article 6 on the same terms and conditions and
to the same extent as this Corporation.
Section 7: Interpretation; Construction. This Article 6 is
intended to provide indemnification to the directors and permit indemnification
to the officers of the Corporation to the fullest extent permitted by
applicable law as it may presently exist or may hereafter be amended and shall
be construed in order to accomplish this result. To the extent that a provision
herein prevents a director or officer from receiving indemnification to the
fullest extent intended, such provision shall be of no effect in such
situation. If at any time the Act is amended so as to permit broader
indemnification rights to the directors and officers of this Corporation, then
these Bylaws shall be deemed to automatically incorporate these broader
provisions so that the directors and officers of the Corporation shall continue
to receive the intended indemnification to the fullest extent permitted by
applicable law.
Section 8: Amendment. Any amendment to this Article 6 that
limits or otherwise adversely affects the right of indemnification, advancement
of expenses or other rights of any Indemnified Person hereunder shall, as to
such Indemnified Person, apply only to claims, actions, suits or proceedings
based on actions, events or omissions (collectively, "Post Amendment Events")
occurring after such amendment and after delivery of notice of such amendment
to the Indemnified Person so affected. Any Indemnified Person shall, as to any
claim, action, suit or proceeding based on actions, events or omissions
occurring prior to the date of receipt of such notice, be entitled to the right
of indemnification, advancement of expenses and other rights under this Article
6 to the same extent as if such provisions had continued as part of the Bylaws
of the Corporation without such amendment. This Section 8 cannot be altered,
amended or repealed in a manner effective as to any Indemnified Person (except
as to Post Amendment Events) without the prior written consent of such
Indemnified Person.
Section 9: Severability. Each of the Sections of this Article
6, and each of the clauses set forth herein, shall be deemed separate and
independent, and should any part of any such Section or clause be declared
invalid or unenforceable by any court of competent jurisdiction, such
invalidity or unenforceability shall in no way render invalid or unenforceable
any other part thereof or any separate Section or clause of this Article 6 that
is not declared invalid or unenforceable.
ARTICLE 7: CERTIFICATES AND SHAREHOLDERS
Section 1: Certificates. Certificates in the form determined
by the Board of Directors shall be delivered representing all shares of which
shareholders are entitled. Certificates shall be consecutively numbered and
shall be entered in the books of the Corporation as they are issued. At a
minimum, each share certificate must state on its face: (a) the name of the
Corporation and that it is organized under the laws of South Carolina; (b) the
name of the person to whom the certificate is issued; and (c) the number and
class of shares and the designation of the series, if any, the certificate
represents. Each share certificate (a) must be
- 14 -
<PAGE> 18
signed (either manually or in facsimile) by at least two officers, including
the president, the secretary, or such other officer or officers as the Board of
Directors shall designate; and (b) may bear the corporate seal or its
facsimile. If the person who signed (either manually or in facsimile) a share
certificate no longer holds office when the certificate is issued, the
certificate is nevertheless valid.
Section 2: Issuance of Shares. The Board of Directors may
authorize shares to be issued for consideration consisting of any tangible or
intangible property or benefit to the Corporation, including cash, promissory
notes, services performed, written contracts for services to be performed or
other securities of the Corporation. Before the Corporation issues shares, the
Board of Directors must determine that the consideration received or to be
received for shares to be issued is adequate. That determination by the Board
of Directors is conclusive insofar as the adequacy of consideration for the
issuance of shares relates to whether the shares are validly issued, fully paid
and nonassessable. When the Corporation receives the consideration for which
the Board of Directors authorized the issuance of shares, the shares issued
therefor are fully paid and nonassessable.
Section 3: Rights of Corporation with Respect to Registered
Owners. Prior to due presentation for transfer of registration of its shares,
the Corporation may treat the registered owner of the shares as the person
exclusively entitled to vote the shares, to receive any dividend or other
distribution with respect to the shares, and for all other purposes; and the
Corporation shall not be bound to recognize any equitable or other claim to or
interest in the shares on the part of any other person, whether or not it has
express or other notice of such a claim or interest, except as otherwise
provided by law.
Section 4: Transfers of Shares. Transfers of shares shall be
made upon the books of the Corporation kept by the Corporation or by the
transfer agent designated to transfer the shares, only upon direction of the
person named in the certificate or by an attorney lawfully constituted in
writing. Before a new certificate is issued, the old certificate shall be
surrendered for cancellation or, in the case of a certificate alleged to have
been lost, stolen or destroyed, the provisions of these Bylaws shall have been
complied with.
Section 5: Registration of Transfer. The Corporation shall
register the transfer of a certificate for shares presented to it for transfer
if: (a) the certificate is properly endorsed by the registered owner or by his
duly authorized attorney; (b) the signature of such person has been guaranteed
by a commercial bank or brokerage firm that is a member of the National
Association of Securities Dealers and reasonable assurance is given that such
endorsements are effective; (c) the Corporation has no notice of an adverse
claim or has discharged any duty to inquire into such a claim; (d) any
applicable law relating to the collection of taxes has been complied with; and
(e) the transfer is in compliance with applicable provisions of any transfer
restrictions of which the Corporation shall have notice. The requirements under
this Section 5 may be waived by the Corporation in its sole discretion.
- 15 -
<PAGE> 19
Section 6: Lost, Stolen or Destroyed Certificates. The
Corporation shall issue a new certificate in place of any certificate for
shares previously issued if the registered owner of the certificate: (a) makes
proof in affidavit form that the certificate has been lost, destroyed or
wrongfully taken; (b) requests the issuance of a new certificate before the
Corporation has notice that the certificate has been acquired by a purchaser
for value in good faith and without notice of an adverse claim; (c) gives a
bond in such form, and with such surety or sureties, with fixed or open
penalty, as the Corporation may direct, to indemnify the Corporation (and its
transfer agent and registrar, if any) against any claim that may be made on
account of the alleged loss, destruction or theft of the certificate; and (d)
satisfies any other reasonable requirements imposed by the Corporation. When a
certificate has been lost, apparently destroyed or wrongfully taken, and the
holder of record fails to notify the Corporation within a reasonable time after
he has notice of it, and the Corporation registers a transfer of the shares
represented by the certificate before receiving such notification, the holder
of record is precluded from making any claim against the Corporation for the
transfer or for a new certificate.
Section 7: Restrictions on Shares. The Board of Directors, on
behalf of the Corporation, or the shareholders may impose restrictions on the
transfer of shares (including any security convertible into, or carrying a
right to subscribe for or acquire shares) to the maximum extent permitted by
law. A restriction does not affect shares issued before the restriction was
adopted unless the holders of the shares are parties to the restriction
agreement or voted in favor of the restriction. A restriction on the transfer
of shares is valid and enforceable against the holder or a transferee of the
holder if the restriction is authorized by this Section 7 and its existence is
noted conspicuously on the front or back of the certificate.
Section 8: Control Share Acquisitions Statute. The
Corporation elects not to be subject to or governed by the South Carolina
Control Share Acquisitions Statute contained in Sections 35-2-101 to 35-2-111
of the South Carolina Code, or any successor provision or provisions.
Section 9: Voting of Stock Held. Unless otherwise provided by
resolution of the Board of Directors, the president or any executive vice
president shall from time to time appoint an attorney or attorneys or agent or
agents of this Corporation, in the name and on behalf of this Corporation, to
cast the vote which this Corporation may be entitled to cast as a shareholder
or otherwise in any other corporation, any of whose stock or securities may be
held by this Corporation, at meetings of the holders of the stock or other
securities of such other corporation, or to consent in writing to any action by
any of such other corporation, and shall instruct the person or persons so
appointed as to the manner of casting such votes or giving such consent and may
execute or cause to be executed on behalf of this Corporation and under its
corporate seal or otherwise, such written proxies, consents, waivers or other
instruments as may be necessary or proper; or, in lieu of such appointment, the
president or any executive vice president may attend in person any meetings of
the holders of stock or other securities of any such other corporation and
their vote or exercise any or all power of this Corporation as the holder of
such stock or other securities of such other corporation.
- 16 -
<PAGE> 20
ARTICLE 8: GENERAL PROVISIONS
Section 1: Distributions. The Board of Directors may
authorize, and the Corporation may make, distributions (including dividends on
its outstanding shares) in the manner and upon the terms and conditions
provided by applicable law and the Articles.
Section 2: Books and Records. The Corporation shall keep
correct and complete books and records of account and shall keep minutes of the
proceedings of its shareholders and Board of Directors.
Section 3: Execution of Documents. The Board of Directors or
these Bylaws shall designate the officers, employees and agents of the
Corporation who shall have the power to execute and deliver deeds, contracts,
mortgages, bonds, debentures, checks and other documents for and in the name of
the Corporation, and may authorize such officers, employees and agents to
delegate such power (including authority to redelegate) to other officers,
employees or agents of the Corporation. Unless so designated or expressly
authorized by these Bylaws, no officer, employee or agent shall have any power
or authority to bind the Corporation by any contract or engagement or to pledge
its credit or to render it liable pecuniarily for any purpose or any amount.
Section 4: Fiscal Year. The fiscal year of the Corporation
shall be the same as the calendar year.
Section 5: Seal. The Corporation may provide a seal which
contains the name of the Corporation and the name of the state of
incorporation. The seal may be used by impressing it or reproducing a facsimile
of it or otherwise.
Section 6: Resignation. A director may resign by delivering
written notice to the Board of Directors, the chairman or the Corporation. Such
resignation of a director is effective when the notice is delivered unless the
notice specifies a later effective date. An officer may resign at any time by
delivering notice to the Corporation. Such resignation of an officer is
effective when the notice is delivered unless the notice specifies a later
effective date. If a resignation of an officer is made effective at a later
date and the Corporation accepts the future effective date, the Board of
Directors may fill the pending vacancy before the effective date if the Board
of Directors provides that the successor does not take office until the
effective date.
Section 7: Computation of Days. In computing any period of
days prescribed hereunder the day of the act after which the designated period
of days begins to run is not to be included. The last day of the period so
computed is to be included.
Section 8: Amendment of Bylaws.
- 17 -
<PAGE> 21
(a) Except to the extent required otherwise by
law, these Bylaws, or the Articles of Incorporation, these Bylaws may be
altered, amended or repealed or new Bylaws may be adopted at any meeting of the
Board of Directors at which a quorum is present, by the affirmative vote of a
majority of the directors then in office, provided notice of the proposed
alteration, amendment or repeal is contained in the notice of the meeting.
(b) Except to the extent required otherwise by
law, these Bylaws, or the Articles of Incorporation, these Bylaws may also be
altered, amended or repealed or new Bylaws may be adopted at any meeting of the
shareholders at which a quorum is present or represented by proxy, by the
affirmative vote of the holders of a majority of each class of shares entitled
to vote thereon, provided notice of the proposed alteration, amendment or
repeal is contained in the notice of the meeting.
(c) Upon adoption of any new bylaw by the
shareholders, the shareholders may provide expressly that the Board of
Directors may not adopt, amend or repeal that bylaw or any bylaw on that
subject.
Section 9: Construction. If any portion of these Bylaws
shall be invalid or inoperative, then, so far as is reasonable and possible:
(a) the remainder of these Bylaws shall be considered valid and operative and
(b) effect shall be given to the intent manifested by the portion held invalid
or inoperative.
Section 10: Headings. The headings are for convenience of
reference only and shall not affect in any way the meaning or interpretation of
these Bylaws.
- 18 -
<PAGE> 22
The undersigned, as President of the Corporation, hereby
certifies that the bylaws contained herein are the true and correct bylaws
adopted by the Corporation's board of directors in compliance with any
procedural requirements of the Corporation's Articles of Incorporation and the
laws of the State of South Carolina, and the rules and regulations promulgated
thereunder.
/s/ James C. Harris, Jr.
-------------------------------
James C. Harris, Jr.
President
Date: 3/9/98
--------------------------
- 19 -
<PAGE> 1
EXHIBIT 5.1
LAW OFFICES
NELSON MULLINS RILEY & SCARBOROUGH, L.L.P.
A REGISTERED LIMITED LIABILITY PARTNERSHIP
999 Peachtree Street, N.E.
First Union Plaza
Suite 1400
Atlanta, Georgia 30309
TELEPHONE (404) 817-6000
FACSIMILE (404) 817-6050
March 6, 1998
Clover Community Bankshares, Inc.
124 North Main Street
Clover, South Carolina 29710
Ladies and Gentlemen:
We have acted as counsel to Clover Community Bankshares, Inc. (the
"Corporation") in connection with the filing of a Registration Statement on Form
S-4 (the "Registration Statement"), under the Securities Act of 1933 covering
the offering of 1,011,020 shares (the "Shares") of the Corporation's common
stock, par value $.01 per share. The Shares will be issuable to holders of the
shares of common stock of Clover Community Bank (the "Bank") pursuant to the
terms of the Reorganization Agreement and Plan of Exchange between the
Corporation and the Bank (the "Reorganization Plan"). In connection therewith,
we have examined such corporate records, certificates of public officials and
other documents and records as we have considered necessary or proper for the
purpose of this opinion.
Based on the foregoing, and having regard to legal considerations which
we deem relevant, we are of the opinion that the Shares, when issued and
delivered in accordance with the terms of the Reorganization Plan, will be
legally issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Proxy Statement/Prospectus contained in the Registration
Statement.
Very truly yours,
NELSON MULLINS RILEY & SCARBOROUGH, L.L.P.
By: /s/ Neil E. Grayson
----------------------------------------
Neil E. Grayson
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
The Registrant currently has no subsidiaries. Upon consummation of the
Share Exchange, Clover Community Bank, a state chartered banking association,
will become the Registrant's sole subsidiary.
<PAGE> 1
EXHIBIT 99.1
PROXY
CLOVER COMMUNITY BANK
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS - MONDAY, APRIL 20, 1998
Frank McC. Gadsden or Judy M. Lark, or either of them, with full power
of substitution are hereby appointed as agent(s) of the undersigned to vote as
proxies for the undersigned all of the shares of Common Stock of Clover
Community Bank held of record by the undersigned on March 2, 1998, at the
Annual Meeting of Shareholders to be held on April 20, 1998, and any
adjournment thereof, as follows:
1. Approval of either as the number of directors to be elected at the
Annual Meeting.
FOR ( ) AGAINST ( ) ABSTAIN ( )
2. ELECTION OF FOR all nominees listed WITHHOLD AUTHORITY
DIRECTORS below (except any to vote for all
I have written ( ) nominees listed
below ( )
Ruby M. Bennett, Charles R. Burrell, James C. Harris, Jr., Herbert
Kirsh, H. Marvin McCarter, James H. Owen, Jr., Gwen M. Thompson and
William C. Turner
(INSTRUCTIONS - TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL(S)
WRITE THE NOMINEE'S(S)' NAME(S) ON THE LINE BELOW.
3. To consider and vote upon a Reorganization Agreement and Plan of
Exchange pursuant to which 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 and the Bank will become a
wholly-owned subsidiary of Clover Community Bankshares, Inc. (the
"Company"), as more particularly described in the Proxy
Statement/Prospectus accompanying this Notice. ").
FOR ( ) AGAINST ( ) ABSTAIN ( )
4. And, in the discretion of said agents, upon each other business as
may properly come before the meeting. (Management at present knows
of no other business to be brought before the meeting.)
THE PROXIES WILL BE VOTED AS INSTRUCTED. IF NO CHOICE IS INDICATED WITH RESPECT
TO A MATTER WHERE A CHOICE IS PROVIDED, THIS PROXY WILL BE VOTED FOR SUCH
MATTER.
Please sign below exactly as your name appears on the stock certificate. When
signing as attorney, executor, administrator, trustee, or guardian, please give
full title as such. If a corporation, please sign in full corporate name by the
president or other authorized officer. If a partnership, please sign in
partnership name by authorized person. All joint owners must sign.
Dated__________________, 1998 -------------------------------------
-------------------------------------
PLEASE MARK, SIGN, DATE, AND RETURN THE PROXY CARD PROMPTLY IN THE ENCLOSED
ENVELOPE.
This is a revocable proxy and may be revoked at the pleasure of the shareholder
prior to its exercise. Returning the signed proxy will not prevent you from
voting in person if you attend the meeting. Management, for planning purposes,
would like to know if you will be attending. Please so indicate by checking the
appropriate box.
( ) YES I plan to attend ( ) NO I do not plan to attend
<PAGE> 1
EXHIBIT 99.2
[BANK LETTERHEAD]
__________________, 1998
Dear Shareholder:
Clover Community Bank is off to a fine start in our first eleven years
of operations. I am thankful for the success we have enjoyed so far. However,
there are many changes occurring in the banking industry. To insure that we are
able to avail ourselves of possible opportunities, I, along with the other
directors of the Bank, am recommending to our shareholders that we form a
one-bank holding company. This holding company could be a vehicle to accomplish
goals that would not be attainable under our present bank organizational
structure. Many of these significant advantages are noted in the enclosed Proxy
Statement/Prospectus.
The proposed reorganization would make no change in personnel or in
shareholders. As a matter of fact, the proposed holding company's management
team and shareholders will be basically a mirror image of the Bank's, as the
same individuals will serve as officers and directors of the Bank and the
proposed holding company. The proposed reorganization does require shareholder
approval and we have scheduled this vote at this year's annual meeting.
The meeting will be held at the Bank on Monday, April 20, 1998, at 7:00
p.m., as more fully described in the enclosed Notice of Annual Meeting. The
enclosed Proxy Statement/Prospectus describes the reasons for and the terms and
conditions of the proposed reorganization, as well as certain other information.
You should read it carefully for details of the proposed reorganization and
additional related information. At the meeting, shareholders will vote on a plan
to reorganize the Bank into a one-bank holding company structure. If the
reorganization plan is approved, each outstanding share of common stock of the
Bank will be converted into one share of common stock of the holding company.
YOUR VOTE IS IMPORTANT. Please complete, sign and return the enclosed
proxy form to the Bank as soon as possible in the stamped envelope provided,
even if you plan to attend the meeting. If you attend the meeting and would like
to vote in person, you may revoke your proxy simply by requesting the right to
vote in person. Please do not send in your share certificates with your proxy.
After approval of the reorganization by the bank's shareholders, you will
receive instructions for the surrender and exchange of your shares.
Sincerely,
James C. Harris, Jr.
President
<PAGE> 1
EXHIBIT 99.3
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS OF
CLOVER COMMUNITY BANK
TO BE HELD APRIL 20, 1998
-------------------------------------
NOTICE IS HEREBY GIVEN that the annual meeting (the "Annual Meeting")
of shareholders of CLOVER COMMUNITY BANK (the "Bank") has been called by the
Board of Directors and will be held on April 20, 1998, commencing at 7:00 p.m.
at the Bank's principal office, located at 124 North Main Street, Clover, South
Carolina, 29710, for the following purposes:
(1) To consider and vote upon a Reorganization Agreement and Plan
of Exchange pursuant to which 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 and the Bank will become a wholly-owned subsidiary of
Clover Community Bankshares, Inc. (the "Company"), as more
particularly described in the Proxy Statement/Prospectus
accompanying this Notice. ").
(2) To elect eight members to the Board of Directors.
(3) In the discretion of the proxy holders, such other business as
may lawfully come before the Annual Meeting or any
adjournments or postponements thereof.
Only holders of record of the Bank's common stock as indicated on the
Bank's transfer books at the close of business on March 2, 1998 will be entitled
to notice of and to vote at the Annual Meeting or any adjournment thereof.
Any shareholder will have the right to dissent from the proposed
reorganization and to receive a cash payment for the "fair value" of such
shareholders' shares of bank stock determined according to the applicable
provisions of Chapter 13 of Title 33 of the Code of Laws of South Carolina
regarding the rights of dissenting shareholders, the text of which is included
in the accompanying Proxy Statement/Prospectus as Appendix B. See "RIGHTS OF
DISSENTING SHAREHOLDERS" in the Proxy Statement/Prospectus.
THE BOARD OF DIRECTORS OF THE BANK RECOMMENDS THAT THE HOLDERS OF BANK
COMMON STOCK VOTE TO APPROVE THE REORGANIZATION.
You are requested to complete, date and sign the enclosed form of proxy
which is solicited by the Board of Directors and to mail it promptly in the
enclosed self-addressed envelope. You are, of course, welcome to attend the
Annual Meeting and to vote your shares in person.
By order of the Board of Directors,
-------------------------------------
James C. Harris, Jr., President
Clover, South Carolina
April 1, 1998
PLEASE READ THE ATTACHED PROXY STATEMENT/PROSPECTUS CAREFULLY.
SHAREHOLDERS ARE URGED TO MARK, DATE, SIGN AND MAIL THE ENCLOSED PROXY IN THE
ACCOMPANYING SELF-ADDRESSED, POSTAGE PAID ENVELOPE. IF YOU ATTEND THE ANNUAL
MEETING, YOU MAY VOTE EITHER IN PERSON OR BY PROXY. ANY PROXY GIVEN MAY BE
REVOKED BY YOU IN WRITING OR IN PERSON AT ANY TIME PRIOR TO THE EXERCISE
THEREOF.
