UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
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Four Oaks Fincorp, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Four Oaks Fincorp, Inc.
[_______], 2008
Dear Shareholder:
Accompanying this letter is the Notice of Special Meeting, Proxy Statement
and proxy for Four Oaks Fincorp, Inc.'s Special Meeting. Whether or not you plan
to attend the meeting in person, please submit voting instructions for your
shares promptly using the directions on your proxy card to vote by one of the
following methods: (1) by telephone, by calling the toll-free telephone number
printed on your proxy card; (2) over the Internet, by accessing the website
address printed on your proxy card; or (3) by marking, dating and signing your
proxy card and returning it in the accompanying postage-paid envelope. If you do
attend, you can revoke your proxy and vote in person.
The Special Meeting will begin at [___] p.m. on [______], December [___],
2008, in [_________], located at [_____________], Four Oaks, North Carolina. At
the Special Meeting, our shareholders will vote on an amendment to the Articles
of Incorporation to authorize 50,000 shares of preferred stock, vote on a
proposal to adjourn or postpone the Special Meeting, if appropriate, and
transact any other business properly brought before the meeting.
We hope to see you at the Special Meeting, and please remember to vote your
shares as directed on your proxy card provided as soon as possible.
Sincerely yours,
Ayden R. Lee, Jr.
Chairman, President, and
Chief Executive Officer
FOUR OAKS FINCORP, INC.
6114 US 301 South
Four Oaks, North Carolina 27524
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
[______], 2008
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You are cordially invited to attend the Special Meeting of Shareholders
of Four Oaks Fincorp, Inc., which will be held on [____], December [___], 2008
at [___] p.m., local time, at [__________], located at [__________], Four Oaks,
North Carolina, for the following purposes:
(1) To approve an amendment to the Articles of Incorporation
to authorize 50,000 shares of preferred stock;
(2) To consider and vote on any proposal to adjourn, postpone
or continue the Special Meeting in order to enable our board of
directors to continue to solicit additional proxies in favor of the
proposal to amend our articles of incorporation; and
(3) To transact such other business as may properly come
before the meeting or any adjournments thereof.
Shareholders of record at the close of business on November 19, 2008
are entitled to notice of and to vote at the Special Meeting and any and all
adjournments thereof.
YOUR VOTE IS VERY IMPORTANT. A PROXY CARD IS ENCLOSED FOR THE
CONVENIENCE OF THOSE STOCKHOLDERS WHO DO NOT PLAN TO ATTEND THE SPECIAL MEETING
IN PERSON BUT DESIRE TO HAVE THEIR SHARES VOTED. IF YOU DO NOT PLAN TO ATTEND
THE SPECIAL MEETING, PLEASE COMPLETE AND RETURN THE PROXY CARD AS SOON AS
POSSIBLE IN THE ENVELOPE PROVIDED FOR THAT PURPOSE. IF YOU RETURN YOUR CARD AND
LATER DECIDE TO ATTEND THE SPECIAL MEETING IN PERSON OR FOR ANY OTHER REASON
DESIRE TO REVOKE YOUR PROXY, YOU MAY DO SO AT ANY TIME BEFORE YOUR PROXY IS
VOTED.
By Order of the Board of Directors
Ayden R. Lee, Jr.
Chairman, President, and
Chief Executive Officer
November [____], 2008
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FOUR OAKS FINCORP, INC.
6114 US 301 South
Four Oaks, North Carolina 27524
PROXY STATEMENT
This Proxy Statement, accompanying proxy card and Notice of Special
Meeting of Shareholders are being mailed to shareholders on or about November
[___], 2008 by Four Oaks Fincorp, Inc. in connection with the solicitation of
proxies for use at the Special Meeting of Shareholders to be held in
[_________], located at [________], Four Oaks, North Carolina on [_________],
December [__], 2008 at [___] p.m., local time, and at all adjournments thereof.
The Company will bear the cost of this solicitation, including the preparation,
printing and mailing of the proxy statement, proxy card and any additional
soliciting materials sent by the Company to shareholders. The Company has
engaged The Altman Group, Inc. to assist in the distribution of proxy materials
and the solicitation of proxies by mail, telephone, facsimile, or personal
meetings. The Company estimates the fees of The Altman Group, Inc. to be $8,000
plus expenses. Certain Company officers, directors, and employees may also
assist with solicitation efforts; they will not receive any extra compensation
for these activities.
SPECIAL MEETING
Purposes of the Special Meeting
The principal purposes of the special meeting are to: (i) approve an
amendment to the articles of incorporation to authorize 50,000 shares of
preferred stock; (ii) consider and vote on any proposal to adjourn, postpone or
continue the Special meeting in order to enable our board of directors to
continue to solicit additional proxies in favor of the proposal to amend our
articles of incorporation; and (iii) transact such other business as may
properly come before the special meeting or any adjournments thereof. Our board
of directors knows of no matters other than those stated above to be brought
before the special meeting or any adjournments thereof. Nonetheless, the
proxyholders named on the enclosed proxy card may vote in accordance with the
instructions of the board of directors or, in the absence thereof, in accordance
with their discretion, on any other matter properly presented for action of
which the board of directors is not now aware.
How You Can Vote
You may vote shares by proxy or in person using one of the following
methods:
o Voting by Telephone. You may vote using the directions on your
proxy card by calling the toll-free telephone number printed on
the card. The deadline for voting by telephone is [_________],
[_______], 2008, at [____] a.m. Eastern time. If you vote by
telephone, you need not return your proxy card.
o Voting by Internet. You may vote over the Internet using the
directions on your proxy card by accessing the website address
printed on the card. The deadline for voting over the Internet is
[_________],[_______], 2008, at [____] a.m. Eastern time. If you
vote over the Internet, you need not return your proxy card.
o Voting by Proxy Card. You may vote by completing and returning
your signed proxy card. To vote using your proxy card, please
mark, date and sign the card and return it by mail in the
accompanying postage-paid envelope. You should mail your signed
proxy card sufficiently in advance for it to be received by
[_________], [_______], 2008.
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Proxies
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before it is exercised. Proxies may be revoked by:
o filing a written notice of revocation with our corporate
secretary;
o duly executing a subsequent proxy and filing it with our
corporate secretary before the revoked proxy is exercised;
o timely submitting new voting instructions by telephone or over
the Internet as described above; or
o attending the Special Meeting and voting in person.
If the proxy card is signed and returned, but voting directions are not
made, the proxy will be voted in favor of the proposals set forth in the
accompanying "Notice of Special Meeting of Shareholders."
Record Date
Our board of directors has fixed the close of business on November 19,
2008 as the record date for determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and all adjournments thereof. As
of the close of business on November 19, 2008 we had [____] shares of common
stock outstanding.
Voting Rights
On all matters to come before the Special Meeting, each holder of
common stock will be entitled to one (1) vote for each share held.
How You Can Vote Shares Held by a Broker or Other Nominee
If your shares are held by a broker, bank, custodian or other nominee,
you may have received a voting instruction form with this Proxy Statement
instead of a proxy card. The voting instruction form is provided on behalf of
the broker or other nominee to permit you to give directions to the broker or
nominee on how to vote your shares. Please refer to the voting instruction form
or contact the broker or nominee to determine the voting methods available to
you.
SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information as of November 3,
2008 regarding shares of our common stock beneficially owned by: (i) each
director; (ii) each executive officer named in the Summary Compensation Table in
the proxy statement dated April 7, 2008, relating to the Annual Meeting of the
Company's shareholders held on April 28, 2008; and (iii) all current directors
and executive officers as a group. The business address for each of the persons
listed below is 6114 US 301 South, Four Oaks, North Carolina 27524. Except as
otherwise indicated, the persons listed below have sole voting and investment
power with respect to all shares of our common stock owned by them, except to
the extent that such power may be shared with a spouse. Fractional share amounts
are rounded off to the nearest whole number.
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Name of Amount and Nature of
Beneficial Owner Beneficial Ownership(1) Percent of Class (1)
Ayden R. Lee, Jr.(2) 171,751 2.5%
Paula Canaday Bowman(3) 71,312 1.0%
John W. Bullard (4) 53,032 *
William J. Edwards(5) 39,130 *
Warren L. Grimes(6) 23,748 *
Percy Y. Lee(7) 65,398 *
Dr. R. Max Raynor, Jr.(8) 9,249 *
Clifton L. Painter(9) 54,314 *
Nancy S. Wise(10) 8,674 *
W. Leon Hiatt, III(11) 28,164 *
Jeff. D. Pope(12) 23,023 *
Michael A. Weeks(13) 8,974 *
All Current Directors and Executive
Officers as a Group (12 persons) (14)
556,769 8.08%
*Less than 1%
(1) Based upon 6,889,795 shares of common stock outstanding on November 3,
2008. The securities "beneficially owned" by an individual are
determined in accordance with the definition of "beneficial ownership"
set forth in the regulations of the Securities and Exchange
Commission. Accordingly, they may include securities owned by or for,
among others, the spouse and/or minor children of the individual and
any other relative who resides in the home of such individual, as well
as other securities as to which the individual has or shares voting or
investment power or has the right to acquire within 60 days of
November 3, 2008 under outstanding stock options. Beneficial ownership
may be disclaimed as to certain of the securities.
(2) Includes 16,775 shares subject to stock options which are exercisable
within 60 days of November 3, 2008, and 32,725 shares owned by Mr.
Lee's spouse who has sole voting and investment power with respect to
such shares.
(3) Includes 1,257 shares subject to stock options which are exercisable
within 60 days of November 3, 2008, and 47 shares owned by Ms.
Bowman's spouse who has sole voting and investment power with respect
to such shares.
(4) Includes 20,777 shares subject to stock options which are exercisable
within 60 days of November 3, 2008, and 9,464 shares owned by Mr.
Bullard's spouse who has sole voting and investment power with respect
to such shares.
(5) Includes 1,257 shares subject to stock options which are exercisable
within 60 days of November 3, 2008, 2,684 shares owned by Mr. Edward's
spouse who has sole voting and investment power with respect to such
shares, and 290 shares held in Mr. Edward's name as custodian for his
granddaughter.
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(6) Includes 1,257 shares subject to stock options which are exercisable
within 60 days of November 3, 2008, 10,124 shares owned jointly with
Mr. Grimes' spouse, and 2,051 shares owned by Mr. Grimes' spouse who
has sole voting and investment power with respect to such shares.
(7) Includes 1,257 shares subject to stock options which are exercisable
within 60 days of November 3, 2008, and 44,468 shares owned jointly
with Mr. Lee's spouse.
(8) Includes 742 shares subject to stock options which are exercisable
within 60 days of November 3, 2008.
(9) Includes 8,729 shares subject to stock options which are exercisable
within 60 days of November 3, 2008, 3,514 shares owned by Mr.
Painter's spouse who has sole voting and investment power with respect
to such shares, and 601 shares held in Mr. Painter's name as custodian
for his child.
(10) Includes 4,915 shares subject to stock options which are exercisable
within 60 days of November 3, 2008, 1 share owned jointly with Ms.
Wise's spouse, 52 shares owned by Ms. Wise's spouse who has sole
voting and investment power with respect to such shares, and 111
shares held in Mrs. Wise's name as custodian for her children.
(11) Includes 8,309 shares subject to stock options which are exercisable
within 60 days of November 3, 2008, 208 shares owned by Mr. Hiatt's
spouse who has sole voting and investment power with respect to such
shares, and 2,001 shares owned by minor children who reside in Mr.
Hiatt's home.
(12) Includes 8,309 shares subject to stock options which are exercisable
within 60 days of November 3, 2008.
(13) Includes 742 shares subject to stock options which are exercisable
within 60 days of November 3, 2008, 100 shares held in Mr. Weeks name
as custodian for his grandchildren.
(14) For all current directors and executive officers as a group, includes
a total of 74,326 shares subject to stock options which are
exercisable within 60 days of November 3, 2008.
Proposal No. 1
APPROVAL OF AMENDMENT TO ARTICLES OF INCORPORATION
TO AUTHORIZE PREFERRED STOCK
Our board of directors has unanimously approved and voted to recommend
to our shareholders for their approval an amendment to our company's articles of
incorporation to authorize 50,000 shares of preferred stock, no par value per
share ("Preferred Stock"), which may be issued by our company in the future with
such rights, preferences and designations as determined by our board of
directors without further shareholder action. Currently, our company has
authorized capital of 20,000,000 shares designated as Common Stock. As of
November 3, 2008, there were 6,889,795 shares of common stock outstanding. Our
articles of incorporation currently do not authorize the issuance of preferred
stock. If this proposal is approved, 50,000 shares of Preferred Stock will be
authorized effective upon the filing of the Articles of Amendment with the North
Carolina Secretary of State. The text of the proposed amendment is attached to
this Proxy Statement as Appendix A and is incorporated herein by reference, and
the description set forth herein is qualified in its entirety by reference to
the text of the proposed amendment.
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Vote Requirement
Amendments to our company's articles of incorporation may be adopted
only by the: (i) affirmative vote of the holders of at least eighty percent
(80%) of our capital stock issued and outstanding and entitled to vote thereon;
or (ii) affirmative vote of the holders of at least a majority of our capital
stock issued and outstanding and entitled to vote thereon where the proposed
amendment was approved by an affirmative vote of a majority of disinterested
members of the board of directors.
Since our board of directors has unanimously approved and voted to
recommend to our shareholders for their approval the proposed amendment,
approval of Proposal No. 1 requires the affirmative vote of the holders of at
least a majority of our common stock issued and outstanding and entitled to vote
at the Special Meeting.
Shares voted for Proposal No. 1 and shares represented by returned
proxy cards that do not contain instructions to vote against Proposal No. 1 or
to abstain from voting will be counted as shares cast for Proposal No. 1. Shares
will be counted as cast against Proposal No. 1 if the shares are voted either
against Proposal No. 1 or to abstain from voting. Broker non-votes will not
change the number of votes cast for or against Proposal No. 1, but will be
treated as shares present or represented at the Special Meeting.
Background and Reasons
The proposed amendment grants our board of directors the authority to
issue shares of Preferred Stock in series with such rights (including voting,
dividends and conversion), preferences and designations as it deems necessary or
advisable without any action by our company's shareholders. This is commonly
referred to as "blank check" preferred stock, which is available to and utilized
by many corporations to satisfy their continuing capital requirements. The
Preferred Stock would have such designations, preferences and relative,
participating, optional or other special rights and qualifications, limitations
or restrictions thereof as shall be expressed in the resolution or resolutions
providing for the issue of such stock adopted by our board of directors from
time to time. These rights would include, but not be limited to (i) the
designation of each class or series and the number of shares that will
constitute each such class or series; (ii) the dividend rate for each class or
series; (iii) the price at which, and the terms and conditions on which, the
shares of each class or series may be redeemed, if such shares are redeemable;
(iv) the voting rights, if any, of shares of each class or series; and (v) the
terms and conditions, if any, upon which shares of each class or series may be
converted into shares of other classes or series of shares of our company, or
other securities.
Having the authority to create equity instruments with any number of
provisions will provide our company with the greatest possible flexibility in
connection with possible future actions, such as stock dividends, financings,
mergers, acquisitions or other purposes. For example, the availability of
Preferred Stock will permit our board of directors to negotiate the precise
terms of an equity investment by creating a new series of preferred stock
without incurring the cost and delay of obtaining shareholder approval. All
50,000 shares of Preferred Stock would be available for issuance without further
action by the shareholders of our company, and our company does not intend to
seek shareholder approval prior to the issuance of any Preferred Stock, unless
otherwise required by law or by the rules and policies of the Nasdaq Global
Market. This flexibility will permit us to take advantage of market conditions
as they occur and put our company in a better position to effectively negotiate
with and satisfy the precise financial criteria of any investor in a timely
manner. If this proposal is approved, our company intends to make the
appropriate filings in the State of North Carolina and take any other action
necessary to implement the Articles of Amendment.
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The availability of undesignated preferred stock may have certain
negative effects on the rights of our company's common shareholders. The actual
effect of the issuance of any shares of Preferred Stock upon the rights of
holders of common stock cannot be stated until our board of directors determines
the specific rights of the holders of such Preferred Stock. The proposed
amendment will permit the Board, without future shareholder approval, to issue
preferred stock with dividend, liquidation, conversion, voting or other rights
that are superior to and could adversely affect the voting power or other rights
of the holders of common stock. Specifically, our company will be in a position
to issue securities which would grant to the holders thereof preferences or
priorities over the holders of common stock with respect to, among other things,
liquidation, dividends and voting. This could result in holders of common stock
receiving less in the event of a liquidation, dissolution or other winding up of
our company, reduce the amount of funds, if any, available for dividends on
common stock, and dilute the voting power of the holders of common stock.
Anti-Takeover Effects of Preferred Stock
The authorized but unissued shares of Preferred Stock could also have
anti-takeover effects. Under certain circumstances, any or all of the Preferred
Stock could be used as a method of discouraging, delaying or preventing a change
in control of our company. For example, the Board could designate and issue a
series of preferred stock in an amount that sufficiently increases the number of
outstanding shares to overcome a vote by the holders of common Stock or with
rights and preferences that include special voting rights to veto a change in
control. The Preferred Stock could also be used in connection with the issuance
of a shareholder rights plan, sometimes referred to as a "poison pill." For
example, a class or series of Preferred Stock could be designated that would be
convertible into common stock upon the acquisition by a third party of a
specified percentage of our company's voting stock. Typically, under most
shareholder rights plans, if a third party acquires 15% of a corporation's
voting stock, the shareholders of that corporation (other than the shareholder
who purchased the more than 15% interest in the corporation) have the right to
purchase shares of the common stock of the corporation at a discount to the
market price. This results in dilution to a third party, both economically and
in terms of its percentage ownership of the corporation's shares. Accordingly,
if the Articles of Amendment are adopted, our board of directors without further
action by our company's shareholders would be able to implement a shareholder
rights plan.
Use of the Preferred Stock in the foregoing manner could delay or
frustrate a merger, tender offer or proxy contest, the removal of incumbent
directors, or the assumption of control by shareholders, even if such proposed
actions would be beneficial to our company's shareholders. This could include
discouraging bids for our company even if such bid represents a premium over our
company's then-existing trading price and thereby prevent shareholders from
receiving the maximum value for their shares.
Other Company Provisions with Anti-Takeover Effects
There are other provisions of our articles of incorporation, our
bylaws and our Nonqualified Stock Option Plan (the "Option Plan") that could
have an anti-takeover effect, including: (i) the authority of the board of
directors under the present articles of incorporation to issue up to a maximum
of approximately [_____] shares of common stock presently available; (ii) the
supermajority vote requirements and fair price provisions in connection with
certain "business combinations" in our articles of incorporation that are
described more fully below; (iii) the supermajority vote requirements to amend
our articles of incorporation (see above under "Vote Requirement"); (iv) under
our bylaws, a special meeting of shareholders may only be called by the chief
executive officer, president, secretary, the board of directors or pursuant to
the written request of a shareholder who owns at least twenty-five (25%) of all
shares entitled to vote; and (v) under the Option Plan, upon a merger in which
we are not the surviving corporation, or a liquidation or a sale of
substantially all of our assets, outstanding options will become fully vested
and exercisable and, to the extent not exercised, will terminate upon the
effective date of such a transaction.
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Supermajority Vote Provisions - Business Combinations. Under the
supermajority vote provision in our articles of incorporation, certain plans of
merger or consolidation of us with or into any other corporation, or the sale,
lease or exchange or other disposition of all or substantially all of our assets
to or with any other corporation, person or entity, must be approved by an
affirmative vote of:
(i) the shareholders holding at least a majority of our shares
issued and outstanding and entitled to vote thereon, provided that such plan has
received the prior approval of at least eighty percent (80%) of the full board
of directors before such plan is submitted for approval to the shareholders; or
(ii) the shareholders holding at least eighty percent (80%) of our
shares issued and outstanding and entitled to vote thereon provided that such
plan has not received the prior approval of at least eighty percent (80%) of the
full board of directors, but has received the prior approval of a majority of a
quorum of the board of directors.
Fair Price Provisions. The fair price provision of our articles of
incorporation applies to business combinations, which includes mergers,
consolidations, sales of assets or securities, recapitalizations and similar
transactions involving us that have not received the approval of 80% of the full
board of directors and only to shareholders who vote against such business
combinations and who then elect to sell their shares to us for cash at the
minimum or fair price.
Under the fair price provision, the consideration for such shares
must be paid in cash by us and the price per share must be at least equal to the
greater of:
(i) the highest price per share paid for our common stock during the
four years immediately preceding the vote by any five percent (5%) shareholder
who votes in favor of the business combination;
(ii) the cash value of the highest price per share previously
offered pursuant to a tender offer to shareholders within four years immediately
preceding the vote;
(iii) the aggregate earnings per share of our common stock during
the four fiscal quarters immediately preceding the vote multiplied by the
highest price/earnings ratio of our common stock at any time during the four
fiscal quarters or up to the day the vote occurs;
(iv) the highest price per share, including commissions and fees
paid by a control person in acquiring any of its holdings of our common stock;
or
(v) the fair value per share of our common stock of the minority
shareholders as determined by an investment banking or appraisal firm chosen by
a majority of the members of the board of directors voting against the business
combination, such fair value not taking into consideration that the shares are
held by a minority of the shareholders.
Option Plan. The Option Plan provides for grants of nonqualified
stock options to officers and directors of us and our subsidiaries. Upon a
merger in which we are not the surviving corporation, or a liquidation or a sale
of substantially all of our assets, outstanding options will become fully vested
and exercisable and, to the extent not exercised, will terminate upon the
effective date of such a transaction.
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Anti-Takeover Effect. The supermajority vote and the fair price
provisions of our articles of incorporation and the acceleration of vesting
provisions of the Option Plan may have certain anti-takeover effects, including
that of making us a less attractive target for a "hostile" takeover bid or
rendering more difficult or discouraging a merger proposal or the assumption of
control through the acquisition of a large block of our common stock.
The board of directors believes that the fair price provision may
encourage companies interested in acquiring us to negotiate in advance with the
board of directors since, if eighty percent (80%) of the full board of directors
approves certain business combinations, the minimum price and higher voting
requirements of the fair price provision would be avoided.
The requirement of a supermajority of shareholders to amend our
articles of incorporation and approve certain business transactions may have
anti-takeover effects by allowing a minority of our shareholders to prevent a
transaction favored by the majority of shareholders. Also, in some
circumstances, the board of directors could cause an eighty percent (80%) vote
to be required to approve a transaction, thereby enabling management to retain
control over our affairs and their positions with us.
The primary purpose of the supermajority vote requirements and fair
price provisions, however, is to encourage negotiations with our management by
groups or corporations interested in acquiring control of us and to reduce the
danger of a forced merger or sale of assets.
Contemplated Use of Preferred Stock
Our board of directors is contemplating using the Preferred Stock to
participate in the Capital Purchase Program of the Troubled Asset Relief Program
(the "Program") offered by the Treasury. Our company currently meets all
applicable regulatory capital requirements and remains well-capitalized.
However, based on the advantageous terms of the Program, our board of directors
determined to apply for participation in order to maintain our strong position
within the industry by accessing additional resources for lending and potential
strategic acquisitions.
The Emergency Economic Stabilization Act of 2008 authorized the
Treasury to establish the Program under which certain United States financial
institutions may sell senior preferred stock and issue warrants to purchase an
institution's common stock to the Treasury in exchange for a capital infusion.
Under the Program, eligible institutions can generally apply to issue preferred
stock to the Treasury in aggregate amounts between 1% and 3% of the
institution's risk-weighted assets. On November 5, 2008, our board of directors
authorized and approved our company's participation in the Program. In order to
participate in the Program, our board of directors also authorized our company
to sell up to 20,000 shares of senior preferred stock ("Senior Preferred") to
the Treasury for $1,000 per share, subject to the pre-approval of this proposal
by our company's shareholders.
On November [__], 2008, our company filed its application with the
Treasury to participate in the Program. According to the Treasury's Summary of
Senior Preferred Terms, our company would be required to issue Senior Preferred
with the following characteristics in order to participate in the program:
o Liquidation: the Senior Preferred will have a liquidation preference
of $1,000 per share in most situations.
o Capital Status: the capital our company receives in exchange for the
Senior Preferred will be treated as Tier 1 capital.
o Dividends: our company must pay cumulative dividends on the Senior
Preferred at a rate of 5% per annum for the first five years and 9%
per annum thereafter; dividends will be payable quarterly in arrears.
11
o Redemption: the Senior Preferred may not be redeemed for at least
three years; after three years, the Senior Preferred may be redeemed
at 100% of the issue price, plus accrued and unpaid dividends.
o Transferability: our company must file a shelf registration for the
Senior Preferred and, if necessary, take all action required to cause
the shelf registration statement to be declared effective as soon as
possible; following such shelf registration, the Senior Preferred will
be freely transferable and may be sold to third parties unrelated to
the U.S. government.
o Restrictions on Dividends: while the Senior Preferred is outstanding,
our company may not declare or pay dividends on junior preferred
shares, preferred shares ranking pari passu with the Senior Preferred,
or common shares (other than in the case of pari passu preferred
shares, dividends on a pro rata basis with the Senior Preferred)
unless all dividends owed to the Treasury on account of the Senior
Preferred are fully paid; our company must obtain the consent of the
Treasury to increase common stock dividends per share during the first
three years after the close of the Senior Preferred sale.
o Share Repurchases: our company must, except in certain circumstances,
obtain the Treasury's consent for any share repurchase that our
company desires to conduct during the three years immediately
following the closing of the Senior Preferred sale.
o Voting Rights: the Senior Preferred generally will be non-voting,
except that holders thereof will have the right to vote on (1) any
authorization or issuances of shares ranking senior to the Senior
Preferred, (2) amendments to the rights of the Senior Preferred, and
(3) mergers or similar transactions "which would adversely affect the
rights of the Senior Preferred"; the holders of the Senior Preferred
will have the right to elect two directors of our company if the
dividends on the Senior Preferred are not paid in full for six
dividend periods, whether or not consecutive.
In conjunction with the purchase of Senior Preferred, the Treasury also
would receive warrants from our company to purchase common stock with an
aggregate market price equal to 15% of the Senior Preferred investment, subject
to certain potential reductions. The warrants will have a term of 10 years, and
the initial exercise price on the warrants will be the market price of our
company's common stock on the date of the Senior Preferred investment calculated
on a 20-trading day trailing average, subject to customary anti-dilution
adjustments.
If our company participates in the Program, we must adopt the
Treasury's standards for executive compensation and corporate governance, for
the period during which the Treasury holds any equity issued under the Program.
These standards generally apply to the chief executive officer, chief financial
officer, plus the next three most highly compensated executive officers.
Participating institutions must meet certain standards, including (1) ensuring
that incentive compensation for senior executives does not encourage unnecessary
and excessive risks that threaten the value of our company; (2) requiring a
recovery of any bonus or incentive compensation paid to a senior executive based
on statements of earnings, gains or other criteria that are later proven to be
materially inaccurate; (3) prohibiting our company from making any golden
parachute payment to a senior executive as provided under section 280G(e) of the
Internal Revenue Code; and (4) agreeing not to deduct for tax purposes executive
compensation in excess of $500,000 for each senior executive.
On [_____], 2008, our board of directors authorized our company to
issue warrants to the Treasury to meet the requirements of the Program and to
amend our company's agreements, plans and policies regarding executive
compensation to comply with the limits on executive compensation established by
the Program.
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At this point, however, there is no binding agreement or commitment
with respect to the issuance of Senior Preferred to the Treasury. Our company
and the Treasury must still negotiate the terms and conditions of our company's
participation in the Program, which means that closing of the transaction is not
guaranteed. Although our company has no reason to believe that we will not be
able to participate in the Program, no assurances can be given that we will be
able to participate in the Program, the approximate number of shares of
preferred stock that our company may issue pursuant to the Program or the
approximate amount of consideration we will receive as compensation from
Treasury for any such shares that may be issued by our company under the
Program.
Whether our company ultimately issues Preferred Stock to the Treasury
is irrelevant to our board of directors' rationale for recommending the
proposal. Our board of directors believes that the proposal will provide
flexibility needed to meet corporate objectives and is in our company's best
interest and stockholders' best interest. If this proposal is approved, our
company's officers intend to promptly make appropriate filings in the State of
North Carolina and take any other action necessary to implement the Articles of
Amendment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" AN AMENDMENT TO THE
ARTICLES OF INCORPORATION TO AUTHORIZE PREFERRED STOCK AS DESCRIBED IN THIS
PROPOSAL NO 1.
Proposal No. 2
ADJOURNMENT, POSTPONEMENT OR CONTINUATION
OF THE SPECIAL MEETING
If at the Special Meeting the number of shares of our company's common
stock present or represented in favor of the Articles of Amendment to the
Articles of Incorporation is insufficient to approve Proposal No. 1, our
management may move to adjourn, postpone or continue the Special Meeting in
order to enable our board of directors to continue to solicit additional proxies
in favor of the proposal to amend our articles of incorporation. In that event,
you will be asked to vote only upon the adjournment, postponement or
continuation proposal and not Proposal No. 1.
In this proposal, our company is asking you to authorize the holder of
any proxy solicited by our board of directors to vote in favor of adjourning,
postponing or continuing the Special Meeting and any later adjournments. If our
shareholders approve the adjournment, postponement or continuation proposal, our
company could adjourn, postpone or continue the Special Meeting, and any
adjourned session of the Special Meeting, to use the additional time to solicit
additional proxies in favor of the proposal to amend our articles of
incorporation, including the solicitation of proxies from the shareholders that
have previously voted against such proposal to amend our company's Articles of
Incorporation. Among other things, approval of the adjournment, postponement or
continuation proposal could mean that, even if proxies representing a sufficient
number of votes against the proposal to amend our articles of incorporation have
been received, our company could adjourn, postpone or continue the Special
Meeting without a vote on the proposal to amend our articles of incorporation
and seek to convince the holders of those shares to change their votes to votes
in favor of the approval of the amendment to our articles of incorporation.
Our board of directors believes that if the number of shares of our
common stock present or represented at the Special Meeting and voting in favor
of the proposal to amend our articles of incorporation is insufficient to
approve the amendment, it is in the best interests of the shareholders to enable
the board of directors, for a limited period of time, to continue to seek to
obtain a sufficient number of additional votes to approve the amendment.
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Vote Requirement
The adjournment, postponement or continuation proposal requires that
holders of more of the company's shares vote in favor of the adjournment,
postponement or continuation proposal than vote against the proposal.
Accordingly, abstentions and broker non-votes will have no effect on the outcome
of this proposal. In general, shares voted for Proposal No. 2 and shares
represented by returned proxy cards that do not contain instructions to vote
against Proposal No. 2 or to abstain from voting will be counted as shares cast
for Proposal No. 2. However, no proxy that is specifically marked AGAINST the
proposal to amend our articles of incorporation will be voted in favor of the
adjournment, postponement or continuation proposal, unless it is specifically
marked FOR the discretionary authority to adjourn, postpone or continue the
Special Meeting to a later date. Shares will be counted as cast against Proposal
No. 2 if the shares are voted against Proposal No. 2.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ANY PROPOSAL TO ADJOURN,
POSTPONE OR CONTINUE THE SPECIAL MEETING AS DESCRIBED IN THIS PROPOSAL NO. 2.
SUBMISSION OF SHAREHOLDER PROPOSALS FOR 2009 ANNUAL MEETING
Any proposals that shareholders intend to present for a vote of
shareholders at the 2009 Annual Meeting of Shareholders, and that such
shareholders desire to have included in our proxy statement and form of proxy
relating to that meeting, must be sent to our principal executive office, marked
to the attention of Ayden R. Lee, Jr., and received at such office on or before
December 8, 2008 (120 calendar days prior to the anniversary of the date of the
proxy statement relating to the Company's 2008 Annual Meeting). Proposals
received after December 8, 2008 will not be considered for inclusion in our
proxy materials for our 2009 annual meeting. A determination as to whether we
will oppose inclusion of any proposal in our proxy statement and form of proxy
will be made on a case-by-case basis in accordance with our judgment and the
rules and regulations promulgated by the SEC.
In addition, if a shareholder intends to present a matter for a vote
at the 2009 Annual Meeting, other than by submitting a proposal for inclusion in
our proxy statement for that meeting, the shareholder must give timely notice in
accordance with SEC rules. To be timely, a shareholder's notice must be sent to
our principal executive office, marked to the attention of Ayden R. Lee, Jr.,
and received at such office on or before February 20, 2009 (45 calendar days
prior to the anniversary of the mailing date of the proxy statement relating to
the Company's 2008 Annual Meeting). Such notice should set forth: (i) as to each
matter the shareholder proposes to bring before the meeting, a brief description
of the business desired to be brought before the meeting and the reasons for
conducting such business at the meeting; and (ii) the name and record address of
the shareholder, the class and number of shares of our capital stock that is
beneficially owned by the shareholder, and any material interest of the
shareholder in such business. For notices that are not timely filed, we retain
discretion to vote proxies we receive. For notices that are timely filed, we
retain discretion to vote proxies we receive provided: (a) we include in our
proxy statement advice on the nature of the proposal and how we intend to
exercise our voting discretion; and (b) the proponent fails to (x) provide us
with a written statement, on or before February 20, 2009, that the proponent
intends to deliver a proxy statement and form of proxy to holders of at least
the percentage of our voting shares required under applicable law to carry the
proposal, (y) include the same statement in its proxy materials filed with the
SEC, and (z) immediately after soliciting the percentage of shareholders
required to carry the proposal, provide us with a statement from any solicitor,
or other person with knowledge, that the necessary steps have been taken to
deliver a proxy statement and form of proxy to holders of such percentage of
shares.
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OTHER MATTERS; DISCRETIONARY AUTHORITY
As of the date of this proxy statement, we know of no business that
will be presented for consideration at the Special Meeting other than the items
referred to above. The enclosed proxy confers discretionary authority to vote
with respect to any and all of the following matters that may come before the
Special Meeting: (i) matters for which we did not receive timely notice; (ii)
any proposal omitted from this proxy statement and the form of proxy pursuant to
Rule 14a-8 or Rule 14a-9 under the Securities Exchange Act of 1934, as amended;
and (iii) matters incidental to the conduct of the special meeting. If any such
matters come before the special meeting, the proxy agents named in the
accompanying proxy card will vote in accordance with their judgment.
All shareholders are encouraged to sign, date, and return their
proxy submitted with this proxy statement as soon as possible in the envelope
provided. If a shareholder attends the Special Meeting, then he or she may
revoke his or her proxy and vote in person.
By order of the board of directors
[____], 2008
Ayden R. Lee, Jr.
Chairman, President, and
Chief Executive Officer
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Appendix A
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Articles of Amendment to
Articles of Incorporation of
Four Oaks Fincorp, Inc
Pursuant to Section 55-10-06 of the North Carolina Business Corporation
Act, the undersigned corporation hereby submits these Articles of Amendment for
the purpose of amending its articles of incorporation:
1. The name of the corporation is Four Oaks Fincorp, Inc.
2. The articles of incorporation of the corporation are hereby amended by
deleting Article 3 in its entirety and substituting in lieu thereof
Article 3 as set forth on the attached Exhibit A.
3. The foregoing amendment was approved and adopted on [____], 2008 by the
corporation's board of directors and on [ ], 2008 by the corporation's
shareholders in the manner prescribed by Chapter 55 of the North
Carolina General Statutes and the corporation's articles of
incorporation.
4. These Articles of Amendment will become effective upon filing.
IN WITNESS WHEREOF, I have hereunto set my hand this __ day of ______, 2008.
FOUR OAKS FINCORP, INC.
By:____________________
Ayden R. Lee, Jr.
Chairman, President, and
Chief Executive Officer
16
Exhibit A
4. The capital stock of the corporation shall be designated as follows:
(a) Common stock. The corporation shall have authority to
issue twenty million (20,000,000) shares of common stock with a par value of One
Dollar ($1.00) per share.
(b) Preferred stock.
(1) The corporation shall have authority to
issue 50,000 shares of preferred stock. The shares of preferred stock of the
corporation may be issued from time to time in one or more classes or series,
the shares of each class or series to have such voting powers, full or limited,
or no voting powers, and such designations, preferences, rights, powers,
including voting powers and par value, if any (or qualifications, limitations,
or restrictions thereof) as are stated in the resolution or resolutions
providing for the issue of such class or series adopted by the board of
directors as provided in Paragraph (b)(2) of this Article 3.
(2) Authority is granted to the board of
directors of the corporation, subject to the provisions of this Article 3 and to
the limitations prescribed by the North Carolina Business Corporation Act, to
authorize the issuance of one or more classes, or one or more series within a
class, of preferred stock and with respect to each such class or series to fix
by resolution or resolutions the voting powers, full or limited, if any, of the
shares of such class or series to determine and fix by resolution or resolutions
the designations, preferences, rights, powers, including voting powers and par
value, if any (or qualifications, limitations, or restrictions thereof) of such
shares. This paragraph is intended to afford to the board of directors the
maximum authority permitted under Section 55-6-02 of the North Carolina General
Statutes.
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Appendix B
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REVOCABLE PROXY
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF FOUR OAKS FINCORP, INC.
FOR THE SPECIAL MEETING OF SHAREHOLDERS
The undersigned hereby appoints Ayden R. Lee, Jr. and Dr. R. Max
Raynor, Jr. as proxies , each with the full power of substitution to represent
the undersigned and to vote all of the shares of stock in Four Oaks Fincorp,
Inc. which the under-signed is entitled to vote at the Special Meeting of
Shareholders of said company to be held in [_______], located at [_______], Four
Oaks, North Carolina on [_______],[_______], 2008 at [_______]p.m., and any
adjournments thereof (1) as hereinafter specified upon the proposals listed
below as more particularly described in the company's proxy statement, receipt
of which is hereby acknowledged; and (2) in their discretion upon such other
matters as may properly come before the meeting and any adjournments thereof. In
order to vote for the proposals, place an X in the appropriate box provided on
the reverse side. Our board of directors recommends a vote "FOR" the proposals
listed on the reverse side.
PLEASE COMPLETE, DATE, SIGN, AND MAIL THIS INSTRUCTION CARD PROMPTLY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE OR PROVIDE YOUR INSTRUCTIONS TO VOTE VIA THE
INTERNET OR BY TELEPHONE.
(Continued, and to be marked, dated and signed, on the other side)
FOLD AND DETACH HERE
-------------------------------------------------------
FOUR OAKS FINCORP, INC. - SPECIAL MEETING, [____], 2008
YOUR VOTE IS IMPORTANT!
https://www. proxyvotenow.com/fofn
You can vote in one of three ways:
1. Call toll free 1-866-265-2185 on a Touch-Tone Phone and follow the
instructions on the reverse side. There is NO CHARGE to you for this call.
or
2. Via the Internet at https://www.proxyvotenow.com/fofn and follow the
instructions.
or
3. Mark, sign and date your proxy card and return it promptly in the enclosed
envelope.
PLEASE SEE REVERSE SIDE FOR VOTING INSTRUCTIONS
Revocable Proxy
FOUR OAKS FINCORP, INC.
SPECIAL MEETING OF STOCKHOLDERS
[_________], 2008
1. To amend the Articles of Incorporation to authorize 50,000 shares of
preferred stock.
[ ] FOR the amendment.
[ ] AGAINST the amendment
[ ] Abstain to vote for the amendment.
2. To adjourn, postpone or continue the Special Meeting in order to enable our
board of directors to continue to solicit additional proxies in favor of the
proposal to amend our articles of incorporation
[ ] FOR adjournment, postponement or continuation
[ ] AGAINST adjournment, postponement or continuation
[ ] Abstain adjournment, postponement or continuation
THE BOARD OF DIRECTORS FAVORS A VOTE "FOR" THE ABOVE PROPOSALS AND UNLESS
INSTRUCTIONS TO THE CONTRARY ARE INDICATED IN THE SPACE PROVIDED, THIS PROXY
WILL BE SO VOTED.
NOTE: Please sign your name exactly as it appears on this card. When signing for
a corporation or partnership, or as agent, attorney, trustee, executor,
administrator, or guardian, please indicate the capacity in which you are
signing. In the case of joint tenants, each joint owner must sign.
Please be sure to date and sign this instruction card in the box below.
Date
-------------
-----------------
Stockholder sign above
***IF YOU WISH TO PROVIDE YOUR INSTRUCTIONS TO VOTE BY TELEPHONE OR INTERNET,
PLEASE READ THE INSTRUCTIONS BELOW ***
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE IF YOU ARE VOTING BY MAIL
- --------------------------------------------------------------------------------
PROXY VOTING INSTRUCTIONS
Stockholders of record have three ways to vote:
1. By Mail; or
2. By Telephone (using a Touch-Tone Phone); or
3. By Internet.
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A telephone or Internet vote authorizes the named proxies to vote your shares in
the same manner as if you marked, signed, dated and returned this proxy. Please
note telephone and Internet votes must be cast prior to 3 a.m., [__________],
2008. It is not necessary to return this proxy if you vote by telephone or
Internet.
- --------------------------------------------------------------------------------
Vote by Telephone
Call Toll-Free on a Touch-Tone Phone anytime prior to 3 a.m., [______], 2008:
1-866-265-2185
- --------------------------------------------------------------------------------
Vote by Internet
anytime prior to 3 a.m., [___], 2008, go to
https://www.proxyvotenow.com/fofn
- --------------------------------------------------------------------------------
Please note that the last vote received, whether by telephone, Internet or by
mail, will be the vote counted.
Your vote is important! Control Number
---------
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