SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act
of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
WAKE FOREST BANCSHARES, INC.
(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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(6)
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(4) Date filed:
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WAKE FOREST BANCSHARES, INC.
January 16, 2004
Dear Shareholder:
You are cordially invited to attend the 2004 Annual Meeting of
Shareholders (the "Meeting") of Wake Forest Bancshares, Inc. (the "Company"),
which will be held on February 17, 2004 at 2:00 p.m., local time, at the Wake
Forest Police and Justice Center, 401 Elm Avenue, Wake Forest, North Carolina.
The attached Notice of the 2004 Annual Meeting of Shareholders and
proxy statement describe the formal business to be transacted at the Meeting.
Directors and officers of the Company, as well as a representative of Dixon Odom
PLLC, the accounting firm appointed by the Board of Directors to be the
Company's independent auditors for the fiscal year ending September 30, 2004,
will be present at the Meeting to respond to questions.
The Board of Directors of the Company has determined that an
affirmative vote on each matter to be considered at the Meeting is in the best
interests of the Company and its shareholders and unanimously recommends a vote
"FOR" each of these matters.
Please complete, sign and return the enclosed proxy card promptly
whether or not you plan to attend the Meeting. YOUR VOTE IS IMPORTANT REGARDLESS
OF THE NUMBER OF SHARES YOU OWN. VOTING BY PROXY WILL NOT PREVENT YOU FROM
VOTING IN PERSON AT THE MEETING, BUT WILL ASSURE THAT YOUR VOTE IS COUNTED IF
YOU ARE UNABLE TO ATTEND. IF YOU ARE A SHAREHOLDER WHOSE SHARES ARE NOT
REGISTERED IN YOUR OWN NAME, YOU WILL NEED ADDITIONAL DOCUMENTATION FROM YOUR
RECORD HOLDER TO ATTEND AND TO VOTE PERSONALLY AT THE MEETING. EXAMPLES OF SUCH
DOCUMENTATION INCLUDE A BROKER'S STATEMENT, LETTER OR OTHER DOCUMENT CONFIRMING
YOUR OWNERSHIP OF SHARES OF THE COMPANY.
On behalf of the Board of Directors and the employees of Wake Forest
Bancshares, Inc., we thank you for your interest.
Sincerely yours,
Robert C. White
President and Chief Executive Officer
WAKE FOREST BANCSHARES, INC.
302 S. BROOKS STREET, P.O. BOX 1167
WAKE FOREST, NORTH CAROLINA 27588-1167
(919) 556-5146
NOTICE OF THE 2004 ANNUAL MEETING OF SHAREHOLDERS
DATE: TUESDAY, FEBRUARY 17, 2004
TIME: 2:00 P.M., LOCAL TIME
PLACE: WAKE FOREST POLICE AND JUSTICE CENTER
401 ELM AVENUE, WAKE FOREST, NORTH CAROLINA 27587
At your 2004 annual meeting, we will ask you to:
o Elect four directors, each of which would serve for a three-year term
expiring at the 2007 annual meeting.
o John D. Lyon
o Rodney M. Privette
o Leelan A. Woodlief
o William S. Wooten
o Ratify the appointment of Dixon Odom PLLC, as independent public
accountants for the fiscal year ending September 30, 2004; and
o Transact any other business as may properly come before the annual
meeting.
You may vote at the annual meeting and at any adjournment or
postponement thereof if you were a shareholder of Wake Forest Bancshares, Inc.
at the close of business on December 31, 2003, the record date.
By Order of the Board of Directors,
Billy B. Faulkner
Corporate Secretary
Wake Forest, North Carolina
January 16, 2004
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YOU ARE CORDIALLY INVITED TO ATTEND THE 2004 ANNUAL MEETING. IT IS IMPORTANT
THAT YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER OF SHARES YOU OWN. THE
BOARD OF DIRECTORS URGES YOU TO SIGN, DATE AND MARK THE ENCLOSED PROXY CARD
PROMPTLY AND RETURN IT IN THE ENCLOSED ENVELOPE. RETURNING THE PROXY CARD WILL
NOT PREVENT YOU FROM VOTING IN PERSON IF YOU ATTEND THE ANNUAL MEETING.
================================================================================
GENERAL INFORMATION
GENERAL
We have sent to the shareholders of Wake Forest Bancshares, Inc. (the
"Company") this proxy statement and enclosed proxy card because the Board of
Directors of the Company is soliciting your proxy to vote at the 2004 annual
meeting. You do not need to attend the annual meeting to vote your shares. You
may simply complete, sign and return the enclosed proxy card, and your votes
will be cast for you at the annual meeting.
We began mailing this proxy statement, the Notice of Annual Meeting and
the enclosed proxy card on or about January 16, 2004 to all shareholders
entitled to vote. If you owned shares of the Company's common stock at the close
of business on December 31, 2003, the record date, you are entitled to vote at
the annual meeting. On the record date, there were 1,145,296 shares of common
stock issued and outstanding.
QUORUM REQUIREMENT
A quorum of shareholders is necessary to hold a valid meeting. The
presence, in person or by proxy, of holders of at least a majority of the total
number of votes eligible to be cast in election of directors generally by the
holders of the outstanding shares entitled to vote at the annual meeting is
necessary to constitute a quorum.
VOTING RIGHTS
You are entitled to one vote at the annual meeting for each share of
the Company's common stock that you owned of record at the close of business on
December 31,2003. The number of shares you own (and may vote) is listed at the
top of the back of the proxy card.
You may vote your shares at the annual meeting in person or by proxy.
To vote in person, you must attend the annual meeting, and obtain and submit a
ballot, which we will provide to you at the annual meeting. To vote by proxy,
you must complete, sign and return the enclosed proxy card. If you properly
complete your proxy card and send it to us in time to vote, your "proxy" (one of
the individuals named on your proxy card) will vote your shares as you have
directed. IF YOU SIGN THE PROXY CARD BUT DO NOT SPECIFY HOW YOU WANT TO VOTE
YOUR SHARES, YOUR PROXY WILL VOTE YOUR SHARES FOR THE ELECTION OF THE NOMINEES
FOR DIRECTOR AND FOR THE RATIFICATION OF THE APPOINTMENT OF THE COMPANY'S
INDEPENDENT PUBLIC ACCOUNTANTS.
If any other matter is presented, your proxy will vote the shares
represented by all properly executed proxies on such matters as a majority of
the Board of Directors determines. As of the date of this proxy statement, we
know of no other matters that may be presented at the annual meeting, other than
those listed in this proxy statement.
1
VOTE REQUIRED
PROPOSAL 1: Elect The four nominees for director who receive the most
Four Directors votes will be elected. So, if you do not vote for
a nominee, or you indicate "withhold authority"
for any nominee on your proxy card, your vote will
not count "for" or "against" the nominee. You may
not vote your shares cumulatively for the
election of directors.
PROPOSAL 2: Ratify The affirmative vote of a majority of the shares
the Appointment of present in person or by proxy at the annual meeting
Independent Public and entitled to vote on this proposal is required to
Accountants ratify the appointment of Dixon Odom PLLC as the
Company's independent certified public accountants.
So, if you "abstain" from voting, it has the same
effect as if you voted "against" this proposal.
EFFECT OF BROKER NON-VOTES
If your broker holds shares that you own in "street name," the broker
may vote your shares on Proposals 1 and 2 listed above even if the broker does
not receive instructions from you. If your broker does not vote on a proposal,
this will constitute a "broker non-vote." Here is the effect of a "broker
non-vote."
o PROPOSAL 1: Elect Four Directors. A broker non-vote would have no
effect on the outcome of this proposal because only a plurality of
votes cast is required to elect a director.
o PROPOSAL 2: Ratify the Appointment of Independent Public Accountants. A
broker non-vote would have no effect on the outcome of this proposal.
CONFIDENTIAL VOTING POLICY
The Company maintains a policy of keeping stockholder votes
confidential. We only let our Inspectors of Election and our tabulating agent
examine the voting materials. We will not disclose your vote to management
unless it is necessary to meet legal requirements. We will, however, forward any
written comments that you may have to management.
REVOKING YOUR PROXY
You may revoke your proxy at any time before it is exercised by:
o Filing with the Company a letter revoking the proxy;
o Submitting another signed proxy with a later date; or
o Attending the annual meeting and voting in person, if you file a
written revocation with the Secretary of the annual meeting prior to
the voting of the proxy.
IF YOUR SHARES ARE NOT REGISTERED IN YOUR OWN NAME, YOU WILL NEED
APPROPRIATE DOCUMENTATION FROM YOUR STOCKHOLDER OF RECORD TO VOTE PERSONALLY AT
THE ANNUAL MEETING. Examples of such documentation include a valid proxy from
the registered holder of your shares confirming your ownership of shares of the
Company.
2
SOLICITATION OF PROXIES
The Company will pay the costs of soliciting proxies from its
shareholders. Directors, officers or employees of the Company and Wake Forest
Federal Savings & Loan Association (the "Association") may solicit proxies by:
o mail;
o telephone; or
o other forms of communication.
We will reimburse banks, brokers, nominees and other fiduciaries for
the expenses they incur in forwarding the proxy materials to you.
OBTAINING AN ANNUAL REPORT ON FORM 10-KSB
If you would like a copy of our Annual Report on Form 10-KSB for the
year ended September 30, 2003, which has been filed with the Securities and
Exchange Commission ("SEC"), we will send you one (without exhibits) free of
charge. Please write to:
Billy B. Faulkner
Corporate Secretary
Wake Forest Bancshares, Inc.
302 S. Brooks Street
Wake Forest, North Carolina 27587
3
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL SHAREHOLDERS OF THE COMPANY
The following table contains common stock ownership information for
persons known to the Company to "beneficially own" 5% or more of the Company's
common stock as of December 30, 2003. In general, beneficial ownership includes
those shares that a person has the power to vote, sell, or otherwise dispose.
Beneficial ownership also includes that number of shares which an individual has
the right to acquire within 60 days (such as stock options) after December 30,
2003. Two or more persons may be considered the beneficial owner of the same
shares. We obtained the information provided in the following table from filings
with the SEC and with the Company. In this proxy statement, "voting power" is
the power to vote or direct the voting of shares, and "investment power"
includes the power to dispose or direct the disposition of shares.
AMOUNT AND
NATURE OF
NAME AND ADDRESS OF BENEFICIAL PERCENT OF
TITLE OF CLASS BENEFICIAL OWNER OWNERSHIP CLASS
--------------------- --------------------------------------- ---------------- -------------
Common Stock, par Wake Forest Bancorp, M.H.C. 635,000 55.4%
value $.01 per share 302 S. Brooks Street, P.O. Box 1167
Wake Forest, North Carolina 27588-1167
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows the number of shares of the Company's common
stock beneficially owned by each director and each executive officer of the
Company and the Association, whose annual salary and bonus for 2003 was at least
$100,000 (the "named executive officers"), and all directors and executive
officers of the Company as a group, as of December 31, 2003. Except as otherwise
indicated, each person and each group shown in the table has sole voting and
investment power with respect to the shares of common stock listed next to their
name.
4
AMOUNT AND NATURE PERCENT OF
POSITION WITH OF BENEFICIAL COMMON STOCK
NAME THE COMPANY OWNERSHIP(1) OUTSTANDING
-------------------------- ----------------------------------- ------------------ ---------------
Paul K. Brixhoff Director 7,767(2) *
Howard L. Brown Director, Chairman of the Board 8,269(3) *
John D. Lyon Director 28,548(4) 2.49%
Rodney M. Privette Director 1,262 *
Anna O. Sumerlin Director 21,381(5) 1.85%
Harold R. Washington Director 4,487(6) *
Robert C. White Director, President and Chief 6,325(7) *
Executive Officer
R.W. Wilkinson, III Director and Vice-Chairman 7,767(8) *
Leelan A. Woodlief Director 6,269(9) *
William S. Wooten Director 1,515(10) *
All directors and executive officers as a group (11 persons) 96,954 8.27%
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* Less than one percent
(1) See "Principal Shareholders of the Company" for a definition of "beneficial
ownership." All persons in the table have sole voting and investment power,
except as otherwise indicated.
(2) Includes options to purchase 2,314 shares of common stock at $12.75 per
share granted under Option Plan.
(3) Includes options to purchase 2,315 shares of common stock at $12.75 per
share granted under the Option Plan.
(4) Includes 19,695 shares as to which Mr. Lyon may be deemed to share voting
and investment power; and includes options to purchase 2,314 shares of
common stock at $12.75 per share granted under the Option Plan.
(5) Includes options to purchase 13,500 shares of common stock at $12.75 per
share option plan granted under the Wake Forest Federal Savings & Loan
Association 1997 Stock Option Plan (the "Option Plan"); and includes 2,316
shares of common stock held in Mrs. Sumerlin's individual retirement
account.
(6) Includes options to purchase 2,314 shares of common stock at $12.75 per
share granted under the Option Plan.
(7) Includes 4,225 shares of common stock allocated to Mr. White under the ESOP
as to which he has voting power, but no investment power except in limited
circumstances.
(8) Includes 900 shares as to which Mr. Wilkinson may be deemed to share voting
and investment power; and includes options to purchase 2,314 shares of
common stock at $12.75 per share granted under the Option Plan.
(9) Includes options to purchase 2,315 shares of common stock at $12.75 per
share granted under the Option Plan.
(10) Includes 675 shares as to which Mr. Wooten may be deemed to share voting
and investment power.
5
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PROPOSAL 1
ELECTION OF DIRECTORS
--------------------------------
GENERAL
The Board has nominated four persons for election as directors at the
annual meeting. All four nominees are currently serving on the Company's Board
of Directors. If you elect the nominees, they will hold office until the annual
meeting in 2007, or until their successors have been elected.
We know of no reason why any nominee may be unable to serve as a
director. If any nominee is unable to serve, your proxy may vote for another
nominee proposed by the Board. If for any reason these nominees prove unable or
unwilling to stand for election, the Board will nominate alternates or reduce
the size of the Board of Directors to eliminate the vacancy. The Board has no
reason to believe that its nominees would prove unable to serve if elected.
DIRECTORS TERM POSITION(S) HELD WITH THE
NOMINEES AGE(1) SINCE (2) EXPIRES COMPANY
-------------------------------- ------ --------- ------- ------------------------------------
John D. Lyon 66 1988 2004 Director
Rodney M. Privette 48 1997 2004 Director
Leelan A. Woodlief 77 1988 2004 Director
William S. Wooten 46 1997 2004 Director
CONTINUING DIRECTORS
-------------------------------
Howard L. Brown 76 1986 2005 Director and Chairman of the Board
Robert C. White 47 2002 2005 President, Chief Executive Officer &
Chief Financial Officer
R.W. Wilkinson, III 75 1992 2005 Director and Vice-Chairman
Paul K. Brixhoff 82 1970 2006 Director
Anna O. Sumerlin 57 1993 2006 Director
Harold R. Washington 78 1969 2006 Director
------------------
(1) As of September 30, 2003.
(2) Includes service on the Board of Directors of the Association.
The principal occupation and business experience of each nominee for
election as director and each continuing director are set forth below. Unless
otherwise indicated, each of the following persons has held his or her present
position for the last five years.
BIOGRAPHICAL INFORMATION
The following information relates to the directors and executive
officers of the Company and the Association. Unless otherwise indicated, each
director and executive officer has held his or her current occupation for the
last five years.
6
NOMINEES
JOHN D. LYON has owned an independent state-certified appraisal company
for the past ten years although he currently does not perform appraisal
services. He also has owned and managed a real estate portfolio for over 30
years. Mr. Lyon also has close to 33 years of retail management experience. He
has served as a director of the Association since 1988 and the Company since its
inception in 1999.
RODNEY M. PRIVETTE is President and a general agent of Privette
Insurance Company in Rolesville, North Carolina. Mr. Privette specializes in
life insurance, retirement planning, property and casualty insurance and has
over 25 years experience in his field. Mr. Privette has served on the Rolesville
Fire Department since 1975 and as Fire Chief since 1992. Since 1997, he has
served as a director of the Association and the Company since its inception in
1999.
LEELAN A. WOODLIEF is in retail management and is semi-retired from
Woodlief Supply Company, a farming supply store. He has over 50 years experience
in the agriculture and insurance businesses. Mr. Woodlief has served as a
director of the Association since 1988 and the Company since its inception in
1999.
WILLIAM S. WOOTEN has operated a successful dental practice in Wake
Forest, North Carolina since 1982. He has been a director of the Association
since 1997 and the Company since its inception in 1999.
CONTINUING DIRECTORS
PAUL K. BRIXHOFF worked in the automotive parts supply business for
over 29 years. He retired in 1982. He has served as a director of the
Association since 1970 and the Company since its inception in 1999.
HOWARD L. BROWN has served as Chairman of the Board of Directors of the
Association since 1996 and the Company since 1999. He has been a director of the
Association since 1986 and the Company since its inception in 1999. He served as
Vice Chairman of the Board of Directors of the Association from 1992 to 1996.
Mr. Brown is the former owner of an oil distribution company and has been
retired since 1988.
ANNA O. SUMERLIN previously served as the Association's President and
Chief Executive Officer from 1995 to March of 2002 and the Company's President
and Chief Executive Officer from its inception in 1999 to March of 2002. Mrs.
Sumerlin also served as the Managing Officer, Executive Vice President,
Corporate Secretary and Treasurer from 1988 to 1995 and as the Assistant Manager
and Assistant Secretary-Treasurer beginning in 1979. She was elected to the
Board of Directors of the Association in 1993 and the Company since its
inception in 1999.
HAROLD R. WASHINGTON has served as a director of the Association since
1969 and the Company since its inception in 1999. He is the former owner of an
automobile distributorship and retired in 1980.
ROBERT C. WHITE has served as President and Chief Executive Officer of
the Company and the Association since April of 2002 and was appointed to the
Board of Directors of the Company in September of 2002. Mr. White has served as
Chief Financial Officer of the Association since December 1998 and of the
Company since its inception in 1999. Prior to that, Mr. White had served as Vice
President of the Company since 1999 and the Association since December 1998.
Prior to that, Mr. White served as Chief Financial Officer and Senior Vice
President of United Federal Savings Bank in Rocky Mount, North Carolina from
April 1997 to September 1998. In September of 1998, United Federal was
7
acquired in a merger transaction. Prior to his appointment with United Federal,
Mr. White was a partner in the CPA firm of McGladrey & Pullen, LLP in Raleigh,
North Carolina. He was with the CPA firm for nineteen years and was in charge of
the local office's financial institutions practice.
R.W. WILKINSON, III has served as a director of the Association since
1992 and the Company since 1999. From 1979 to 1988, Mr. Wilkinson served as
Managing Officer, Executive Vice President and Corporate Secretary-Treasurer of
the Association. From 1963 to 1979, Mr. Wilkinson served as Assistant Manager of
the Association. Mr. Wilkinson was elected Vice-Chairman of the Board of
Directors of the Association in 1997 and the Company since its inception in
1999.
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
BILLY B. FAULKNER, age 55, has served as Secretary and Treasurer of the
Company and the Association since March 2002. He has served as a Vice President
of the Company and the Association since his employment with the Association on
October 1, 2000. Mr. Faulkner's primary responsibility is as the Association's
Chief Lending Officer. Prior to joining the Association, Mr. Faulkner was a
Senior Vice President, Credit Administration, with Triangle Bank from 1998 to
2000. Prior to that, Mr. Faulkner was a Vice President with United Federal
Savings Bank from 1982 to 1997, responsible for various lending activities.
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THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" ALL OF THE NOMINEES
FOR ELECTION AS DIRECTORS.
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8
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PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
-------------------------------------
GENERAL
The Board of Directors has appointed the firm of Dixon Odom PLLC, to
act as independent public accountants for the Company for the fiscal year ending
September 30, 2004, and we are asking shareholders to ratify the appointment.
Representatives of Dixon Odom PLLC, are expected to attend the annual meeting.
The representatives will have the opportunity to make a statement if they desire
to do so. It is expected that the representatives will be available to respond
to appropriate questions.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit fees. The aggregate fees paid to Dixon Odom PLLC for professional
services rendered for the audit of our annual financial statements for the
fiscal years ended September 30, 2003 and September 30, 2002, and for the
reviews of the financial statements included in our quarterly reports on Form
10-QSB for those fiscal years, were $29,779 and $26,323, respectively.
Financial Information System Design and Implementation Fees. We did not
engage Dixon Odom PLLC for any professional services related to financial
information system design and implementation during the fiscal years ended
September 30, 2003 and September 30, 2002.
Tax Fees. The aggregate fees paid to Dixon Odom PLLC for professional
services rendered for tax compliance, tax advice and tax planning for the fiscal
years ended September 30, 2003 and September 30, 2002 were $3,000 and $3,000
respectively.
Audit-Related Fees. We did not pay any fees to Dixon Odom PLLC for
assurance and related services that are reasonably related to the performance of
the reviews of our financial statements not included under "Audit Fees" for the
fiscal years ended September 30, 2003 and September 30, 2002.
All Other Fees. We did not pay any fees to Dixon Odom PLLC for services
rendered to us, other than the services described above under "Audit Fees" and
"Tax Fees," for the fiscal years ended September 30, 2003 and September 30,
2002.
================================================================================
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE RATIFICATION OF
THE APPOINTMENT OF DIXON ODOM PLLC, AS INDEPENDENT AUDITORS FOR THE COMPANY FOR
THE FISCAL YEAR ENDED SEPTEMBER 30, 2004.
================================================================================
9
INFORMATION ABOUT BOARD OF DIRECTORS AND MANAGEMENT
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS OF THE COMPANY
The Company's Board of Directors currently consists of ten members. The
Company's federal stock charter and bylaws provide that the Board of Directors
shall be divided into three classes, as nearly equal in number as possible. The
terms of four directors expire at the annual meeting.
The Board of Directors oversees the Company's business and monitors the
performance of the Company's management. In accordance with our corporate
governance procedures, the Board of Directors does not involve itself in the
day-to-day operations of the Company. The Company's executive officers and
management oversee the day-to-day operations of the Company. Our directors
fulfill their duties and responsibilities by attending regular meetings of the
Board which are held on a monthly basis. Our directors also discuss business and
other matters with the Chairman and the President, other key executives, and our
principal external advisers (legal counsel, auditors, financial advisors and
other consultants).
The Board of Directors of the Company held 12 regular meetings during
the fiscal year ended September 30, 2003. Each incumbent director attended at
least 75% of the meetings of the Board of Directors plus committee meetings on
which that particular director served during this period.
COMMITTEES OF THE BOARD
The Board of Directors of the Company have established the following
standing committees:
NOMINATING/ The Nominating/Corporate Governance Committee is
CORPORATE currently chaired by Director Wilkinson, with
GOVERNANCE Director Washington serving as a member. The
COMMITTEE committee for fiscal year 2003 wasserving as a
chaired by Director Lyon, with Director Woodlief
member, and met once in fiscal year 2003.
The Nominating/Corporate Governance Committee
formulates our corporate governance guidelines and
determines the qualification and independence of
directors and committee members. The committee is
responsible for nominating persons for election to
the board of directors and also reviews if any
shareholder nominations comply with the notice
procedures set forth in the Company's bylaws and
summarized below. The Committee will consider
nominees recommended by shareholders. The board of
directors of the Company have not adopted a written
charter for the Nominating/Corporate Governance
Committee. Directors Wilkinson and Washington are
independent as defined under the Nasdaq Stock Market
listing standards.
The Company's bylaws set forth a procedure for
shareholders to nominate directors by delivering
written notification to the Secretary of the Company
at the Company's principal executive offices at
least five days prior to the date of the annual
meeting. The notice must set forth shall set forth
(a) as to each person whom the shareholder proposes
to nominate for election or reelection as a
director, (i) the name, age, business address and
residence address of such person, (ii) the principal
occupation or employment of such person, and (iii)
such person's written consent to serve as a
director, if elected; and (b) as to the shareholder
giving the notice (i) the name and address of such
shareholder and (ii) the class and number of shares
of the Company which are owned of record by such
shareholder. Upon delivery, such nominations shall
be posted in a conspicuous place in each office of
the Company. Ballots bearing the names of all the
persons nominated by the Nominating/Corporate
Governance Committee and by shareholders shall be
provided for use at the annual meeting. However, if
the Nominating/Corporate Governance Committee shall
fail or refuse to
10
act at least 20 days prior to the annual meeting,
nominations for directors may be made at the annual
meeting by any shareholder entitled to vote and
shall be voted upon.
The Nominating/Corporate Governance Committee
believes (i) that a nominee for the Company's board
of directors must possess the following minimum
qualifications: reside, be employed, or maintain
real estate holdings in Wake Forest or the immediate
surrounding communities and hold more than 100
shares of the Company's stock. The Committee also
believes that individuals who possess strong
analytical skills, business experience, and the
ability to assist the Company in generating new
business opportunities would have qualities
considered advantageous.
Each of John D. Lyon, Rodney M. Privette, Leelan A.
Woodlief and William S. Wooten was recommended for
election by the non-management directors, Directors
Wilkinson and Washington, serving on the
Nominating/Corporate Governance Committee. As of
December 31, 2003, the Nominating/Corporate
Governance Committee had not received any nominee
recommendations from any security holders for the
2004 elections.
COMPENSATION The Compensation Committee is chaired by Director
COMMITTEE Woodlief, with Directors Brown, Sumerlin and
Wilkinson as members. This committee establishes the
compensation of the Chief Executive Officer,
approves the compensation of other officers and
determines compensation and benefits to be paid to
employees of the Company and the Association. It
also sets directors' fees. The committee met 2
times in 2003. The Compensation Committee also acts
as the ESOP Committee, and meets to review the
Company's ESOP. The Compensation Committee is
currently acting as the "Option Plan Committee" and
the "RRP Committee" in administering the Option Plan
and RRP, respectively.
EXECUTIVE The Executive Committee is chaired by Director
COMMITTEE Brown, with Directors Sumerlin, Wilkinson and
Woodlief as members. This committee meets as
requested by management, and pursuant to the bylaws
of the Company, may act on behalf of the Board
except for such matters as declaration of dividends,
changes to the Company's charter or bylaws, or other
material issues as defined in the bylaws. All
actions of this committee are reviewed by the entire
Board of Directors at its next regular meeting. The
Executive Committee met 21 times during fiscal 2003.
AUDIT The Audit Committee is a separately-designated,
COMMITTEE standing committee established in accordance with
section 3(a)(58)(A) of the Securities Exchange Act
of 1934, as amended. The Audit Committee is chaired
by Director Lyon, with Directors Privette and
Sumerlin as members. The Audit Committee oversees
and monitors our financial reporting process and
internal control system, reviews and evaluates the
audit performed by our outside auditors and reports
any substantive issues found during the audit to the
Board. The Audit Committee is directly responsible
for the appointment, compensation and oversight of
the work of our independent auditors. The committee
will also review and approve all transactions with
affiliated parties. The board of directors of the
Company have adopted a written charter for the Audit
Committee. With the exception of Director Sumerlin,
all members of the Audit Committee are independent
directors as defined under the Nasdaq Stock Market
listing standards. Because Director Sumerlin worked
for the Company, as President, within the last three
years, she is not "independent" as defined by the
Nasdaq Stock Market listing standards. The committee
met four times in the 2003 fiscal year.
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AUDIT COMMITTEE REPORT
WAKE FOREST BANCSHARES, INC. AUDIT COMMITTEE REPORT
The following Audit Committee Report is provided in accordance with the
rules and regulations of the SEC. Pursuant to such rules and regulations, this
report shall not be deemed "soliciting materials," filed with the SEC, subject
to Regulation 14A or 14C of the SEC or subject to the liabilities of section 18
of the Securities Exchange Act of 1934, as amended.
The Audit Committee has reviewed and discussed the audited financial
statements with management. The committee has also reviewed and discussed with
Dixon Odom PLLC ("Dixon Odom"), their independent auditors, the matters required
to be discussed by SAS 61, as may be modified or supplemented.
The Audit Committee also has received the written disclosures and the
letter from the independent accountants required by Independence Standards Board
Standard No. 1 (Independence Standards Board Standard No.1, Independence
Discussions with Audit Committee), as may be modified or supplemented, and has
discussed with Dixon Odom its independence.
Based on the foregoing discussions, the Audit Committee recommended to
the Board of Directors of Wake Forest Bancshares, Inc. that the audited
financial statements be included in Wake Forest Bancshares, Inc.'s Annual Report
on Form 10-KSB for the year ended September 30, 2003.
AUDIT COMMITTEE OF WAKE FOREST BANCSHARES, INC.
John D. Lyon, Chairman
Rodney M. Privette
Anna O. Sumerlin
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DIRECTOR'S COMPENSATION
Fee Arrangements. Currently, each non-employee director of the Company
receives a fee of $700 per meeting attended except for the Chairman who receives
$1,000 per meeting attended. Directors are not compensated for attending
committee meetings. In addition, each non-employee director who has attended a
minimum of 75% of the aggregate number of the Board and committee meetings of
which he or she is a member called during the respective calendar year, will
receive an annual retainer fee of $3,700, payable in December. The aggregate
amount of fees paid to such directors by the Company for the year ended
September 30, 2003, was approximately $101,400. Directors are also covered by
the Option Plan and RRP. See "- Benefits - Stock Option Plan," and "-
Recognition and Retention Plan."
Directors' Retirement Plan. The Company has adopted a nonqualified
Retirement Plan for Board Members of the Company (the "Directors' Retirement
Plan"), which provides benefits to each eligible director commencing on his or
her termination of Board service at or after age 65. Each director who serves or
has agreed to serve as a director automatically becomes a participant in the
Directors' Retirement Plan. An eligible director retiring at or after age 65
will be paid an annual retirement benefit equal to the lesser of the amount of
the aggregate compensation for services as a director (excluding stock
compensation) paid to him or her for the 12-month period immediately prior to
his or her termination of board service or $5,000, multiplied by a fraction, the
numerator of which is the number of his or her years of service as a director
(including service as a director or trustee of the Company or any predecessor)
and the denominator of which is 10. An individual who terminates board service
after having served as a director for 10 years may elect to begin collecting
benefits under the Directors' Retirement Plan at or after attainment of age 50,
but the annual retirement benefits payable to him or her will be reduced
pursuant to the Directors' Retirement Plan's early retirement reduction formula
to reflect the commencement of benefit payments prior to age 65. Benefits are
paid for a fixed period of 10 years. Upon a change in control, participants will
receive an immediate lump sum distribution of their benefit.
Other Arrangements. Mr. Brown performs inspections on collateral
associated with construction loans that are originated by the Association. In
fiscal year 2003, Mr. Brown received $20,400 for such inspection fees.
EXECUTIVE COMPENSATION
Cash Compensation. The following table sets forth the cash compensation
paid by the Company for services rendered in all capacities during the fiscal
years ended September 30, 2003, 2002, and 2001, to Mr. White. No other executive
officer earned salary plus bonus in excess of $100,000 during the fiscal year
ended September 30, 2003.
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SUMMARY COMPENSATION TABLE
--------------------------
LONG TERM COMPENSATION
---------------------------------------
ANNUAL COMPENSATION AWARDS
------------------------------------------- ----------------------
OTHER RESTRICTED
ANNUAL STOCK ALL OTHER
SALARY COMPENSATION AWARDS OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITIONS YEAR ($)(1) BONUS($) ($)(2) ($)(3) (#) ($)(4)
---------------------------- ---- ------ -------- -------------- ------ --- -------------
Robert C. White, President and Chief 2003 98,000 26,000 - - - 16,103
Executive Officer 2002 94,100 25,000 - 1,700 - 19,936
2001 88,625 15,000 - - - 14,824
------------------
(1) Includes amounts, if any, deferred pursuant to Section 401(k) of the Code
under the Company's 401(k) Plan.
(2) For fiscal 2003, 2002, and 2001, there were no: (a) perquisites with an
aggregate value for any named individual in excess of the lesser of $50,000
or 10% of the total of the individual's salary and bonus for the year; (b)
payments of above-market preferential earnings on deferred compensation;
(c) payments of earnings with respect to long-term incentive plans prior to
settlement or maturation; (d) tax payment reimbursements; or (e)
preferential discounts on stock.
(3) The value of the restricted stock award reflected in the table above
reflects the value of the award as of the date granted. This award is fully
vested and dividends these shares are distributed to Mr. White. The
aggregate fair market value of this award was $2,000 on September 30, 2003
based on a closing price of $20.00 per share.
(4) Includes (i) the dollar value of premiums, if any, paid by the Company with
respect to term life insurance (other than group term insurance coverage
under a plan available to substantially all salaried employees) for the
benefit of the Mr. White and (ii) the fair market value of 432 shares
allocated to Mr. White under the ESOP during the 2003 fiscal year based on
a closing price of $20.00 on September 30, 2003 and (iii) $7,463 in
employer matching contributions associated with the Association's 401(k)
plan.
EMPLOYMENT AGREEMENTS
The Company, through the Association, is a party to an employment
agreement with both Mr. White and Mr. Faulkner ("Senior Executives"). These
employment agreements establish the respective duties and compensation of the
Senior Executives and are intended to ensure that the Company will be able to
maintain a stable and competent management base. The continued success of the
Company depends to a significant degree on the skills and competence of the
Senior Executives.
The employment agreements provide for three-year terms. They provide
that, commencing on the first anniversary date of the employment agreements and
continuing each anniversary date thereafter, the Board of Directors may, with
the Senior Executive's concurrence, extend the employment agreements for an
additional year, so that the remaining terms shall be three years, after
conducting a performance evaluation of the Senior Executive. The employment
agreements provide that the Senior Executive's base salary will be reviewed
annually by the Compensation Committee of the Board. The employment agreements
provide that each of the Senior Executive's base salary may be increased on the
basis of his job performance and the overall performance of the Company. The
base salaries for Mr. White and Mr. Faulkner as of September 30, 2003 were
$98,000 and $70,000, respectively. Each Senior Executive may receive a bonus
based upon achievement of prescribed performance criteria. In addition to base
salary, the employment agreements provide for, among other things, entitlement
to participation in stock, retirement and welfare benefit plans and eligibility
for fringe benefits applicable to executive personnel such as fees for club and
organization memberships deemed appropriate by the Company and the Senior
Executive. The employment agreements provide for termination by the Company at
any time for cause as defined in the employment agreements. In the event the
Company chooses to terminate the Senior Executive's employment for reasons other
than for cause, or in the event of the Senior Executive's resignation from the
Company upon: (i) failure to re-appoint, elect or re-elect the Senior Executive
to his current offices; (ii) a material change in the Senior Executive's
functions, duties or responsibilities; (iii) a relocation of the Senior
Executive's principal place of employment outside Wake County without the
14
Senior Executive's consent; (iv) liquidation or dissolution of the Company; (v)
a change of control of the Company; or (vi) a breach of the employment agreement
by the Company, the Senior Executive or, in the event of death, his beneficiary,
is entitled to a lump sum cash payment in an amount equal to three times the
Senior Executive's highest rate of annual salary, including bonuses and stock
awards included as W-2 wages achieved during the employment period, and the
additional contributions or benefits under any employee benefit plans of the
Company or the Association that the Senior Executive would have earned assuming
such executive was fully vested in the plans. The Company would also continue
the Senior Executive's life, health and disability insurance coverage for three
years.
The employment agreements restrict the dollar amount of compensation
and benefits payable to a Senior Executive in the event of termination following
a "change in control" to three times the Senior Executive's average annual
compensation for the previous five calendar years. In general, for purposes of
the employment agreements and the plans maintained by the Company, a "change in
control" will generally be deemed to occur when a person or group of persons
acting in concert acquires beneficial ownership of 25% or more of any class of
equity security, such as common stock of the Company, or in the event of a
tender offer, exchange offer, merger or other form of business combination, sale
of assets or contested election of directors which results in a change in
control of the majority of the Board of Directors of the Company. The Senior
Executives are entitled to reimbursement of certain costs incurred in
negotiating, interpreting or enforcing the employment agreements. Each
employment agreement also provides for the Company to indemnify the Senior
Executive to the fullest extent allowable under federal law.
Cash and benefits paid to a Senior Executive under the employment
agreements together with payments under other benefit plans following a "change
in control" of the Company may constitute an "excess parachute" payment under
Section 280G of the Internal Revenue Code of 1986, as amended, resulting in the
imposition of a 20% excise tax on the recipient and the denial of the deduction
for such excess amounts to the Company. Compensation payable to the Senior
Executive shall be reduced if such reduction would avoid the assessment of the
excise tax.
BENEFITS
Employee Stock Ownership Plan and Trust. This plan is a tax-qualified
plan that covers substantially all salaried employees of the Association. All
contributions by the Association to the ESOP are discretionary. Shares are
allocated among the accounts of participants in the ESOP on the basis of the
participant's compensation for the year of allocation.
The ESOP committee, which is currently comprised of members of the
Compensation Committee, may instruct the trustee regarding investment of funds
contributed to the ESOP. The ESOP trustee, subject to its fiduciary duty, must
vote all allocated shares held in the ESOP in accordance with the instructions
of the participating employees. Under the ESOP, any unallocated shares will be
voted in a manner calculated to most accurately reflect the instructions it has
received from participants regarding the allocated stock as long as such vote is
in accordance with the provisions of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"). The ESOP may purchase additional shares of common
stock in the future.
Stock Option Plan. The Company has an Option Plan in effect, which was
approved by shareholders at the 1997 annual meeting of shareholders. The Company
reserved 54,000 shares of common stock for issuance upon the exercise of options
granted under the Option Plan. The members of the Board's Compensation Committee
who are disinterested directors ("Option Committee") administer the Option Plan.
The Option Plan is not subject to ERISA and is not a tax-qualified plan.
15
Recognition and Retention Plan. The RRP was adopted by the Company and
approved by its shareholders at the 1997 annual meeting of shareholders. The
Company has established a trust ("RRP Trust") to purchase up to 22,248 shares of
the Company's common stock which may be used for awards granted under the RRP.
Any employee of the Company or any affiliate approved by the board of
directors who is selected by the RRP Committee is eligible to participate in the
RRP as an "eligible individual." Members of the board of directors of the
Company or any affiliate approved by the board of directors who are not
employees or officers of the Company or such affiliate are eligible to
participate as an "eligible director."
Stock subject to awards is held in trust pursuant to the RRP until
vested. An individual to whom an award is granted is credited with cash
dividends with respect to stock subject to awards granted to him or her whether
or not vested. Awards generally vest at a rate of 20% over a five year period.
However, any shares covered by the award will become 100% vested as of the date
of the recipient's death, disability, retirement or on a change of control of
the Association. If an individual covered by an award ceases to be an employee,
a director, an advisory director or director emeritus for reasons other than
death, disability retirement or after a change of control of the Association,
the individual forfeits all rights to his or her unvested shares remaining in
the RRP Trust. Individuals may designate a beneficiary to receive distributions
on account of death. The RRP Committee will exercise voting rights with respect
to shares in the RRP Trust in a manner that reflects the votes or responses of
all other shareholders and will respond to any tender offer, exchange offer or
other offer made to shareholders.
TRANSACTIONS WITH CERTAIN RELATED PERSONS
The Association has made loans or extended credit to executive officers
and directors and also to certain persons related to executive officers and
directors. All such loans were made by the Association in the ordinary course of
business, on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with the
general public, such loans did not involve more than the normal risk of
collectibility or present other unfavorable features. The outstanding principal
balance of such loans to directors, executive officers and their associates
totaled $73,900 or 0.09% of the Association's total equity at September 30,
2003.
The Company intends that all transactions in the future between the
Company and its executive officers, directors, holders of 10% or more of the
shares of any class of its common stock and affiliates thereof, will contain
terms no less favorable to the Company than could have been obtained by it in
arm's-length negotiations with unaffiliated persons and will be approved by a
majority of independent outside directors of the Company not having any interest
in the transaction.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's executive
officers and directors, and persons who own more than 10% of common stock to
file with the SEC reports of ownership and changes of ownership.
Officers, directors and greater than 10% shareholders are required by
the regulations to furnish the Company with copies of all Section 16(a) forms
they file. The Company knows of no other person other than Wake Forest Bancorp,
M.H.C. that owns 10% or more of the Company's common stock.
Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons, the Company believes
that all filing requirements applicable to its
16
executive officers, directors and greater than 10% beneficial owners were
complied with, as of September 30, 2003.
CODE OF ETHICS
We have adopted the Wake Forest Federal Ethics Policy (the "Ethics
Policy"), which applies to all employees, officers and directors of the Company,
the MHC and the Association. The Ethics Policy meets the requirement of a "code
of ethics" as defined by item 406 of Regulation S-B, and applies to our Chief
Executive Officer (who is our principal executive and accounting officer). The
Ethics Code was filed with the SEC as an Exhibit to our report on Form 10-KSB
for the fiscal year ended September 30, 2003.
ADDITIONAL INFORMATION
INFORMATION ABOUT SHAREHOLDER PROPOSALS
Any shareholder proposal intended for inclusion in the Company's proxy
statement and proxy card relating to the Company's 2005 Annual Meeting of
Shareholders must be received by the Company by September 18, 2004, pursuant to
the proxy soliciting regulations of the SEC. Nothing in this paragraph shall be
deemed to require the Company to include in its proxy statement and proxy card
for such meeting any shareholder proposal which does not meet the requirements
of the SEC in effect at the time. Any such proposal will be subject to 17 C.F.R.
ss. 240.14a-8 of the Rules and Regulations promulgated by the SEC under the
Exchange Act.
In addition, under the Company's bylaws, if you wish to nominate a
director or bring other business before an annual meeting:
o You must be a shareholder of record and have given timely notice in
writing to the Secretary of the Company; and
o Your notice must contain specific information required in our bylaws.
By Order of the Board of Directors,
Billy B. Faulkner
Corporate Secretary
Wake Forest, North Carolina
January 16, 2004
17