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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[_] Soliciting Material Pursuant to ss. 240.14a-12
Four Oaks Fincorp, Inc.
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(Name of Registrant as Specified In Its Charter)
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Four Oaks Fincorp, Inc.
December 3, 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 7:00 p.m. on Monday, December 22,
2008, in the cafeteria of Four Oaks Elementary School, located at 180 Hatcher
Street, 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,
/s/ Ayden R. Lee, Jr.
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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
December 22, 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 Monday, December 22, 2008 at
7:00 p.m., local time, in the cafeteria of Four Oaks Elementary School, located
at 180 Hatcher Street, 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
/s/ Ayden R. Lee, Jr.
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Ayden R. Lee, Jr.
Chairman, President, and Chief Executive
Officer
December 3, 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 December 3,
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 the cafeteria of
Four Oaks Elementary School, located at 180 Hatcher Street, Four Oaks, North
Carolina on Monday, December 22, 2008 at 7:00 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 Monday,
December 22, 2008, at 3:00 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
Monday, December 22, 2008, at 3:00 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
Friday, December 19, 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 6,889,795 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.
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.
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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.
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.
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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 11,498,877 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.
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:
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(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.
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.
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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 (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. This would permit our Company to apply for
an investment by the Treasury between approximately $7 million and $20 million.
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. The estimated proceeds of the proposed sale of 20,000 shares of
Preferred Stock are $20,000,000. Our company expects to use the proceeds to make
loans and strategic acquisitions pursuant to the terms of the Program.
On November 14, 2008, our company filed its application with the Treasury
to participate in the Program. As of the date of this Proxy Statement, our
application is pending and we have not been advised as to the Treasury's
decision thereon. Should the Treasury deny our application, we do not anticipate
that it will have a material adverse effect on our liquidity, capital resources
or results of operations.
Because our common stock is traded on the Over-The-Counter-Bulletin
Board, which is not a national securities exchange, the Treasury is not treating
our company as a "public company" under the Program. On November 17, 2008, the
Treasury announced terms and conditions for certain non-public financial
institutions eligible for the Program, including our company, which is the basis
for the description of the Program in this proxy statement. Since some of the
terms and conditions relating to the warrant issuances and registration of
warrant shares are different than the original term sheet announced by the
Treasury, our board of directors supplemented its approval of our company's
participation in the program with additional consents on November 19, 2008.
11
Pro Forma Impact of the Capital Purchase Program
The following unaudited pro forma financial information of Four Oaks Fincorp,
Inc. as of and for the fiscal year ended December 31, 2007 and the nine months
ended September 30, 2008 show the effects of a minimum of $7 million and a
maximum of $20 million of Senior Preferred issued to the Treasury pursuant to
the Program for non-public financial institutions. We have presented this
financial information under two different scenarios:
o The minimum investment, which assumes the issuance under the Program of
7,000 shares of Senior Preferred at $1,000 per share and the issuance
of a warrant to purchase Senior Preferred with an aggregate liquidation
preference equal to 5% of the Preferred investment, or 350 additional
shares at an exercise price of $0.01 per share, and
o The maximum investment, which assumes the issuance under the Program of
20,000 shares of Senior Preferred at $1,000 per share and the issuance
of a warrant to purchase Senior Preferred with an aggregate liquidation
preference equal to 5% of the Preferred investment, or 1,000 additional
shares at an exercise price of $0.01 per share.
The Senior Preferred will pay cumulative dividends at a rate of 5% per annum for
the first five years and 9% per annum thereafter. The cash proceeds from the
Preferred investment are included in non-interest bearing cash in the following
pro forma financial data. The effective dividend on Senior Preferred in the
following pro forma financial information includes amortization of the discount
on Senior Preferred, amortized over a five-year period using the effective yield
method (approximately 7%), and dividends on both the Senior Preferred at 5% and
the warrants converted to Senior Preferred at 9%.
There is the possibility that participation in the Program will impact future
net income available to our common shareholders due to future dividends and
accretion charges related to the Preferred Stock. The pro forma financial data
presented below may change materially under either the minimum investment or
maximum investment scenario based on the actual proceeds received under the
Program if our application is approved by Treasury, the timing and utilization
of the proceeds, as well as certain other factors including the discount rate
used to determine the fair value of the Senior Preferred. Accordingly, we can
provide no assurance that the minimum or maximum investment pro forma scenarios
included in the consolidated financial data will ever be achieved. We have
included the following unaudited pro forma consolidated financial data solely
for the purpose of providing shareholders with information that may be useful
for purposes of considering and evaluating the proposals to amend our Articles
of Incorporation.
This financial date should be read in conjunction with our audited financial
statements and the related notes as filed as part of our Annual Report on Form
10-K for the year ended December 31, 2007, and our unaudited consolidated
financial statements and the related notes filed as part of our Quarterly Report
on Form 10Q for the quarter ended September 30, 2008.
12
As of September 30, 2008
----------------------------------------------
Actual As Adjusted As Adjusted
Balance Sheet data: (Unaudited) (Minimum) (2) (Maximum) (2)
-------------- -------------- --------------
ASSETS (Amounts in thousands)
Cash and due from banks (1) $ 13,026 $ 20,026 $ 33,026
Securities and other interest earning assets 165,253 165,253 165,253
Loans, net 652,742 652,742 652,742
Other assets 52,454 52,454 52,454
------------- ------------- -------------
Total assets $ 883,475 $ 890,475 $ 903,475
============= ============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits 683,560 683,560 683,560
Borrowings 114,450 114,450 114,450
Subordinated debentures 12,372 12,372 12,372
Other liabilities 7,717 7,717 7,717
------------- ------------- -------------
Total liabilities 818,099 818,099 818,099
------------- ------------- -------------
Shareholders' equity:
Senior preferred stock (1) - 7,000 20,000
Warrant preferred stock (1) - 350 1,000
Discount on senior preferred stock (3) - (394) (1,126)
Premium on warrant preferred stock (3) - 44 126
Common stock 6,890 6,890 6,890
Additional paid-in capital 30,813 30,813 30,813
Retained earnings 28,698 28,698 28,698
Accumulated other comprehensive loss (1,025) (1,025) (1,025)
------------- ------------- -------------
Total shareholders' equity 65,376 72,376 85,376
------------- ------------- -------------
Total liabilities and shareholders' equity $ 883,475 $ 890,475 $ 903,475
============= ============= =============
Capital Ratios:
Tier 1 leverage ratio 8.37% 9.04% 10.37%
===== ===== ======
Tier 1 risk-based captial ratio 10.34% 11.24% 12.85%
====== ====== ======
Total risk-based capital ratio 11.58% 12.46% 14.05%
====== ====== ======
1. The proforma financial information reflects the issuance of a minimum of
$7,000,000 and a maximum of $20,000,000 of Four Oaks Fincorp, Inc.
Preferred Stock, with the proceeds included in non-interest bearing cash.
The proforma balance of preferred stock also includes a minimum of
350,000 and a maximum of 1,000,000 of additional Preferred Stock,
resulting from the exercise of warrants, yielding negligible cash
proceeds.
2. The balance sheet data gives effect to the issuance of the Preferred
Stock as of the balance sheet date.
3. Because our common stock is traded on the Over-The-Counter-Bulletin
Board, which is not a national securities exchange, the Treasury is not
treating our company as a "public company" under the Program but as a
non-public financial institution. Under the Program for non-public
financial institutions, we will be required to issue to Treasury a
warrant to acquire additional Senior Preferred (the "Warrant Preferred")
equal to 5% of the amount of Preferred Stock already issued. The warrant
is exercisable at $.01 per share, which would generate virtually no
proceeds to our company. The Program terms also provide that the warrant
will be exercised immediately upon issuance of the Senior Preferred. The
Warrant Preferred carry a dividend rate of 9% from the date of issuance,
which differs from the dividend requirement on the preferred stock of 5%
for the first five years and then 9% thereafter. Using the assumption of
the issuance of $20 million of Senior Preferred to our company, a warrant
for an additional $1million Warrant Preferred would be issued and
exercised immediately, with essentially no additional proceeds to our
company upon exercise. As a result, our company would record total
Preferred Stock at its redemption value of $20 million, additional
Preferred Stock issuable upon exercise of a warrant of $1 million (the
"Warrant Preferred"), a discount of $1.1 million on the Warrant Preferred
and a premium of $126,000 related to the Warrant Preferred Stock. This
issuance results in an initial net increase in equity of $20 million
representing the cash proceeds from issuance of the Preferred Stock. The
amortization of the discount resulting from the issuance of Preferred
Stock would be over five years and would be recorded as an increase in
dividends and corresponding decrease in net income available to common
shareholders. The accretion of the discount resulting from the issuance
of Warrant Preferred would be over five years and would be recorded as an
decrease in dividends and corresponding increase in net income available
to common shareholders.
13
As of December 31, 2007
----------------------------------------------
As Adjusted As Adjusted
Balance Sheet data: Actual (1) (Minimum) (3) (Maximum) (3)
-------------- -------------- --------------
ASSETS
Cash and due from banks (2) $ 14,394 $ 21,394 $ 34,394
Securities and other interest earning assets 118,182 118,182 118,182
Loans, net 538,617 538,617 538,617
Other assets 37,110 37,110 37,110
------------- ------------- -------------
Total assets $ 708,303 $ 715,303 $ 728,303
============= ============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits 537,763 537,763 537,763
Borrowings 97,000 97,000 97,000
Subordinated debentures 12,372 12,372 12,372
Other liabilities 6,538 6,538 6,538
------------- ------------- -------------
Total liabilities 653,673 653,673 653,673
------------- ------------- -------------
Shareholders' equity:
Senior preferred stock (2) - 7,000 20,000
Warrant preferred stock (2) - 350 1,000
Discount on senior preferred stock (4) - (394) (1,126)
Premium on warrant preferred stock (4) - 44 126
Common stock 6,165 6,165 6,165
Additional paid-in capital 21,545 21,545 21,545
Retained earnings 26,477 26,477 26,477
Accumulated other comprehensive income 443 443 443
------------- ------------- -------------
Total shareholders' equity 54,630 61,630 74,630
------------- ------------- -------------
Total liabilities and shareholders' equity $ 708,303 $ 715,303 $ 728,303
============= ============= =============
Capital Ratios:
Tier 1 leverage ratio 10.16% 11.11% 12.82%
====== ====== ======
Tier 1 risk-based captial ratio 11.70% 12.77% 14.70%
====== ====== ======
Total risk-based capital ratio 12.87% 13.93% 15.83%
====== ====== ======
1. Derived from audited consolidated financial statements.
2. The proforma financial information reflects the issuance of a minimum of
$7,000,000 and a maximum of $20,000,000 of Four Oaks Fincorp, Inc.
Preferred Stock, with the proceeds included in non-interest bearing cash.
The proforma balance of preferred stock also includes a minimum of
350,000 and a maximum of 1,000,000 of additional Preferred Stock,
resulting from the exercise of warrants, yielding negligible cash
proceeds.
3. The balance sheet data gives effect to the issuance of the Preferred
Stock as of the balance sheet date.
4. Because our common stock is traded on the Over-The-Counter-Bulletin
Board, which is not a national securities exchange, the Treasury is not
treating our company as a "public company" under the Program but as a
non-public financial institution. Under the Program for non-public
financial institutions, we will be required to issue to Treasury a
warrant to the Warrant Preferred equal to 5% of the amount of Preferred
Stock already issued. The warrant is exercisable at $.01 per share, which
would generate virtually no proceeds to our company. The Program terms
also provide that the warrant will be exercised immediately upon issuance
of the Senior Preferred. The Warrant Preferred carry a dividend rate of
9% from the date of issuance, which differs from the dividend requirement
on the preferred stock of 5% for the first five years and then 9%
thereafter. Using the assumption of the issuance of $20 million of Senior
Preferred to our company, a warrant for an additional $1million Warrant
Preferred would be issued and exercised immediately, with essentially no
additional proceeds to our company upon exercise. As a result, our
company would record total Preferred Stock at its redemption value of $20
million, Warrant Preferred of $1 million, a discount of $1.1 million on
the Warrant Preferred and a premium of $126,000 related to the Warrant
Preferred. This issuance results in an initial net increase in equity of
$20 million representing the cash proceeds from issuance of the Preferred
Stock. The amortization of the discount resulting from the issuance of
Preferred Stock would be over five years and would be recorded as an
increase in dividends and corresponding decrease in net income available
to common shareholders. The accretion of the discount resulting from the
issuance of Warrant Preferred would be over five years and would be
recorded as an decrease in dividends and corresponding increase in net
income available to common shareholders.
14
For the Nine Months Ended September 30, 2008
------------------------------------------------------
Actual As Adjusted As Adjusted
(Unaudited) (Minimum) (1) (Maximum) (1)
---------------- ---------------- ----------------
Income Statement data: (Amounts in thousands, except per share data)
Total interest and dividend income (2) $ 36,768 $ 36,768 $ 36,768
Total interest expense 17,559 17,559 17,559
--------------- --------------- ---------------
Net interest income 19,209 19,209 19,209
Provision for loan losses 1,589 1,589 1,589
--------------- --------------- ---------------
Net interest income after provision for loan losses 17,620 17,620 17,620
Total non-interest income 4,190 4,190 4,190
Total non-interest expenses 16,146 16,146 16,146
--------------- --------------- ---------------
Income before income taxes 5,664 5,664 5,664
Provision for income taxes 1,778 1,778 1,778
--------------- --------------- ---------------
Net income $ 3,886 $ 3,886 $ 3,886
=============== =============== ===============
Dividend on preferred stock $ (263) $ (750)
Amortization of discount on preferred stock (52) (149)
--------------- ---------------
Effective dividend on preferred stock (4) (314) (899)
--------------- ---------------
Dividend on warrant preferred (24) (68)
Accrection of premium on warrant preferred 6 17
--------------- ---------------
Effective dividend on warrant preferred (4) (18) (51)
--------------- ---------------
Net income available to common shareholders $ 3,553 $ 2,936
=============== ===============
Basic net income per common share $ 0.60 $ 0.55 $ 0.46
=============== =============== ===============
Diluted net income per common share $ 0.60 $ 0.55 $ 0.46
=============== =============== ===============
Weighted average basic shares outstanding 6,440,021 6,440,021 6,440,021
=============== =============== ===============
Weighted average diluted shares outstanding 6,445,456 6,445,456 6,445,456
=============== =============== ===============
Return on average equity - annualized 7.92% 6.55% 4.59%
===== ===== =====
(1) The income statement data gives effect to the equity proceeds at the
beginning of the period, and assumes the cash proceeds were held in a
non-interest bearing cash account throughout the period.
(2) The funds received from the preferred stock issue are assumed to be
included in non-interest bearing cash. Subsequent redeployment of the
funds is anticipated, but the timing of such redeployment is uncertain.
(3) The issuance costs expected to be incurred are immaterial; therefore, no
effect was given in the pro forma.
(4) The effective dividend on Preferred Stock includes amortization of the
discount, amortized over a five-year period using the effective yield
method (approximately 6%) and dividends on Preferred Stock at 5%. The
effective dividend on Warrant Preferred stock includes accretion of the
premium, amortized over a five-year period using the effective yield
method (approximately 6%) and dividends on Warrant Preferred at 9%.
15
For the Year Ended December 31, 2007
------------------------------------------------------
As Adjusted As Adjusted
Actual (1) (Minimum) (2) (Maximum) (2)
---------------- ---------------- ----------------
(Amounts in thousands, except per share data)
Total interest and dividend income (3) $ 47,513 $ 47,513 $ 47,513
Total interest expense 23,699 23,699 23,699
--------------- --------------- ---------------
Net interest income 23,814 23,814 23,814
Provision for loan losses 1,362 1,362 1,362
--------------- --------------- ---------------
Net interest income after provision for loan losses 22,452 22,452 22,452
Total non-interest income 4,070 4,070 4,070
Total non-interest expenses 17,683 17,683 17,683
--------------- --------------- ---------------
Income before income taxes 8,838 8,838 8,838
Provision for income taxes 3,187 3,187 3,187
--------------- --------------- ---------------
Net income $ 5,651 $ 5,651 $ 5,651
=============== =============== ===============
Dividend on preferred stock $ (350) $ (1,000)
Amortization of discount on preferred stock (69) (198)
--------------- ---------------
Effective dividend on preferred stock (5) (419) (1,198)
--------------- ---------------
Dividend on warrant preferred (32) (90)
Accrection of premium on warrant preferred 8 22
--------------- ---------------
Effective dividend on warrant preferred (5) (24) (68)
--------------- ---------------
Net income available to common shareholders $ 5,208 $ 4,385
=============== ===============
Basic net income per common share $ 0.92 $ 0.84 $ 0.71
=============== =============== ===============
Diluted net income per common share $ 0.91 $ 0.84 $ 0.71
=============== =============== ===============
Average basic shares outstanding 6,170,140 6,170,140 6,170,140
=============== =============== ===============
Average diluted shares outstanding 6,192,559 6,192,559 6,192,559
=============== =============== ===============
Return on average equity - annualized 10.34% 8.45% 5.88%
====== ===== =====
(1) Derived from audited consolidated financial statements.
(2) The income statement data gives effect to the equity proceeds at the
beginning of the period, and assumes the cash proceeds were held in a
non-interest bearing cash account throughout the period.
(3) The funds received from the preferred stock issue are assumed to be
included in non-interest bearing cash. Subsequent redeployment of the
funds is anticipated, but the timing of such redeployment is uncertain.
(4) The issuance costs expected to be incurred are immaterial; therefore, no
effect was given in the pro forma.
(5) The effective dividend on Preferred Stock includes amortization of the
discount, amortized over a five-year period using the effective yield
method (approximately 6%) and dividends on Preferred Stock at 5%. The
effective dividend on Warrant Preferred stock includes accretion of the
premium, amortized over a five-year period using the effective yield
method (approximately 6%) and dividends on Warrant Preferred at 9%.
16
Principal Terms of the Capital Purchase Program
Our company's participation in the Program would be pursuant to the
Treasury's Summary of Preferred Terms for non-public financial institutions,
which the Treasury has deemed to include companies such as our company that have
their stock traded on the Over-the-Counter Bulletin Board. Our company would be
required to issue Senior Preferred with the characteristics set forth below 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.
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: if required by the Treasury, 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; after the third anniversary and prior to the tenth
anniversary of the Senior Preferred sale, our company must obtain the
consent of the Treasury for any increase in aggregate common dividends
per share greater than 3% per annum, provided that no increase in common
dividends may be made as a result of any dividend paid in common shares,
any stock split or similar transaction; from and after the tenth
anniversary of the Senior Preferred sale, our company is prohibited from
paying common dividends until all equity securities held by the Treasury
are redeemed in whole or the Treasury has transferred all of such equity
securities to third parties.
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 ten years immediately following the closing
of the Senior Preferred sale; from and after the tenth anniversary of the
Senior Preferred sale, our company is prohibited from repurchasing any
equity securities or trust preferred securities until all equity
securities held by the Treasury are redeemed in whole or the Treasury has
transferred all of such equity securities to third parties.
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.
o Related Party Transactions: for as long as the Treasury holds any equity
securities of our company, our company and its subsidiaries will not
enter into transactions with related persons (within the meaning of Item
404 under the SEC's Regulation S-K) unless (i) such transactions are on
terms no less favorable to our company and its subsidiaries than could be
obtained from an unaffiliated third party, and (ii) have been approved by
the audit committee or comparable body of independent directors of our
company; our company is already subject to these requirements.
17
In conjunction with the purchase of Senior Preferred, the Treasury also
would receive warrants from our company to purchase preferred stock ("Warrant
Preferred") having an aggregate liquidation preference equal to 5% of the Senior
Preferred investment. The warrants will have a term of 10 years, and the initial
exercise price on the warrants will be $0.01 per share or such greater amount as
the charter may require as the par value per share of Warrant Preferred. The
Warrant Preferred will have the same rights, preferences, privileges, voting
rights and other terms as the Senior Preferred, except that (1) the Warrant
Preferred will pay dividends at a rate of 9% per annum and (2) the Warrant
Preferred may not be redeemed until all the Senior Preferred has been redeemed.
The Program also may require our company to file a shelf registration for the
Senior Preferred, the warrants and the Warrant Preferred underlying the warrants
so that the Treasury could resell the securities in the future. On November 19,
2008, our board of directors authorized our company to issue warrants to the
Treasury to meet the requirements of the Program.
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 November 5,
2008, our board of directors authorized our company to amend our company's
agreements, plans and policies regarding executive compensation to comply with
the limits on executive compensation established by the Program.
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.
18
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.
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.
19
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.
INCORPORATION OF FINANCIAL INFORMATION
The Securities and Exchange Commission's ("SEC") rules permit our company
to incorporate by reference information into this proxy statement, which means
that our company can disclose important information to shareholders by referring
shareholders to another document without stating that information in this
document. Any information incorporated by reference into this proxy statement is
considered to be part of this proxy statement from the date we file that
document. Any reports filed by our company with the SEC after the date of this
proxy statement will automatically update and, where applicable, supersede any
information contained in this proxy statement or incorporated by reference into
this proxy statement.
Our company incorporates by reference the following items of Part II of
our Annual Report on Form 10-K for the fiscal year ended December 31, 2007:
o Item 6. Selected Financial Data;
o Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations;
20
o Item 7A. Quantitative and Qualitative Disclosures About Market Risk; and
o Item 8. Financial Statements and Supplementary Data.
The Company also incorporates by reference the following items of Part I of
the Company's Quarterly Report on Form 10-Q filed with the SEC for the periods
ended March 31, 2008, June 30, 2008 and September 30, 2008:
o Item 1. Unaudited Consolidated Financial Statements;
o Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations; and
o Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The Company will deliver promptly upon written or oral request a copy of
any or all documents referred to above that have been or may be incorporated by
reference into this proxy statement, excluding all exhibits to those documents
unless they are specifically incorporated by reference into those documents.
Requests for copies should be directed to Wanda J. Blow, Four Oaks Fincorp,
Inc., P.O. Box 309, Four Oaks, North Carolina 27524 (telephone number
919-963-2177).
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
December 3, 2008
Ayden R. Lee, Jr.
Chairman, President, and Chief Executive
Officer
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Appendix A
----------
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 November 5, 2008 by
the corporation's board of directors and on December ___, 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
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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
----------
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 the cafeteria of Four Oaks Elementary
School, located at 180 Hatcher Street, Four Oaks, North Carolina on Monday,
December 22, 2008 at 7:00 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, December 22, 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
December 22, 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.
25
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., Monday, December
22, 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., Monday, December
22, 2008:
1-866-265-2185
- --------------------------------------------------------------------------------
Vote by Internet
anytime prior to 3 a.m., Monday, December 22, 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 _______
26