[LETTERHEAD OF WAKE FOREST BANCSHARES, INC.]
January 18, 2001
Dear Shareholder:
You are cordially invited to attend the 2001 Annual Meeting of
Shareholders (the "Meeting") of Wake Forest Bancshares, Inc. (the "Company"),
which will be held on February 20, 2001 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 2001 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, 2001,
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 ANNUAL 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,
/s/ Anna O. Sumerlin
--------------------
Anna O. Sumerlin
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 2001 ANNUAL MEETING OF SHAREHOLDERS
DATE: TUESDAY, FEBRUARY 20, 2001
TIME: 2:00 P.M., LOCAL TIME
PLACE: WAKE FOREST POLICE AND JUSTICE CENTER
401 ELM AVENUE, WAKE FOREST, NORTH CAROLINA 27588
At your 2001 annual meeting, we will ask you to:
o Elect four directors to serve for a three-year term expiring
at the 2004 annual meeting;
John D. Lyon Leelan A. Woodlief
Rodney M. Privette William S. Wooten
o Ratify the appointment of Dixon Odom PLLC, as independent
public accountants for the fiscal year ending September 30,
2001; 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 29, 2000, the record date.
By Order of the Board of Directors,
/s/ Carlton E. Chappell
-----------------------
Carlton E. Chappell
Vice President, Secretary and Treasurer
Wake Forest, North Carolina
January 18, 2001
================================================================================
YOU ARE CORDIALLY INVITED TO ATTEND THE 2001 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 2001 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 18, 2001 to all shareholders
entitled to vote. If you owned shares of the Company's common stock at the close
of business on December 29, 2000, the record date, you are entitled to vote at
the annual meeting. On the record date, there were 1,170,002 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 29, 2000. 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: The four nominees for director who receive the
Elect Four Directors most 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: The affirmative vote of a majority of the shares
Ratify the present in person or by proxy at the annual
Appointment of meeting and entitled to vote on this proposal is
Independent Public required to ratify the appointment of Dixon Odom
Accountants 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.
PROPOSAL 3: The affirmative vote of a majority of the shares
Authorize the Board present in person or by proxy at the annual
of Directors to Direct meeting and entitled to vote on this proposal is
the Vote of the required to authorize the board of directors to
Proxies upon Such direct the vote of the proxies upon such other
Other Matters as matters as may properly come before the annual
May Properly Come meeting. So, if you "abstain" from voting, it has
Before the Annual the same effect as if you voted "against" this
Meeting 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.
o PROPOSAL 3: Authorize the Board of Directors to Direct the Vote of the
Proxies upon Such Other Matters as May Properly Come Before the Annual
Meeting. 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.
-2-
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; and
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.
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; and
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, 2000, which has been filed with the Securities and
Exchange Commission ("SEC"), we will send you one (without exhibits) free of
charge. Please write to:
Carlton E. Chappell
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 29, 2000. 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) of the date this
table was prepared. 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.
NAME AND ADDRESS OF AMOUNT AND NATURE OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT
---------------- -------------------- -------
Wake Forest Bancorp, M.H.C. 635,000 54.3%
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 executive officer, and all
directors and executive officers of the Company as a group, as of December 29,
2000. 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)(2) OUTSTANDING
---- ----------- --------------- -----------
Anna O. Sumerlin Director, President and Chief 34,570(3) 2.95%
Executive Officer
Carlton E. Chappell Vice President, Secretary and 21,020(4) 1.80%
Treasurer
Paul K. Brixhoff Director 7,115(5) *
John D. Lyon Director 27,260(6) 2.33%
Harold R. Washington Director 3,915(7) *
R.W. Wilkinson, III Director and Vice-Chairman 7,115(8) *
William S. Wooten Director 1,325(9) *
Howard L. Brown Director, Chairman of the 7,616(10) *
Board
Leelan A. Woodlief Director 5,616(11) *
Rodney M. Privette Director 300 *
All directors and executive officers as a group (11) persons 133,158 11.38%
- ---------------------
* 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) The figures shown for Ms. Sumerlin do not include 14,714 shares held in
trust pursuant to the Employee Stock Ownership Plan of Wake Forest Federal
Savings & Loan Association ("ESOP") that have not been allocated to any
individual's account and as to which Ms. Sumerlin shares voting power with
other ESOP participants and the Association's Compensation Committee
(consisting of Messrs. Woodlief, Brown and Wilkinson (the "ESOP
Committee"). The figure shown for all directors and executive officers as a
group includes such 14,714 shares as to which the members of the ESOP
Committee may be deemed to have sole investment power, except in limited
circumstances, thereby causing each Committee member to be deemed a
beneficial owner of such shares. Each of the members of the ESOP Committee
disclaims beneficial ownership of such shares and, accordingly, such shares
are not attributed to the members of the ESOP Committee individually. See
"Compensation of Directors and Executive Officers - Benefits - Employee
Stock Ownership Plan and Trust."
(3) Includes 9,085 shares as to which Ms. Sumerlin may be deemed to share
voting and investment power; includes options to purchase 10,800 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"); includes 4,452 shares of common stock granted under the Wake Forest
Federal Savings & Loan Association 1997 Recognition and Retention Plan
("RRP"); includes 7,917 shares of common stock allocated to Ms. Sumerlin
under the ESOP as to which she has voting power, but no investment power
except in limited circumstances; and includes 2,316 shares of common stock
held in Ms. Sumerlin's individual retirement account.
(4) Includes options to purchase 10,800 shares of common stock at $12.75 per
share granted under the Option Plan; includes 4,452 shares of common stock
granted under the RRP; and includes 5,267 shares of common stock allocated
to Mr. Chappell under the ESOP as to which he has voting power, but no
investment power except in limited circumstances.
(5) Includes options to purchase 1,851 shares of common stock at $12.75 per
share granted under Option Plan and 764 shares of common stock granted
under the RRP.
(6) Includes 19,695 shares as to which Mr. Lyon may be deemed to share voting
and investment power; and includes options to purchase 1,851 shares of
common stock at $12.75 per share granted under the Option Plan and 764
shares of common stock granted under the RRP.
(7) Includes options to purchase 1,851 shares of common stock at $12.75 per
share granted under the Option Plan and 764 shares of common stock granted
under the RRP.
(8) Includes 900 shares as to which Mr. Wilkinson may be deemed to share voting
and investment power; and includes options to purchase 1,851 shares of
common stock at $12.75 per share granted under the Option Plan and 764
shares of common stock granted under the RRP.
(9) Includes 675 shares as to which Mr. Wooten may be deemed to share voting
and investment power.
(10) Includes options to purchase 1,852 shares of common stock at $12.75 per
share granted under the Option Plan and 764 shares of common stock granted
under the RRP.
(11) Includes options to purchase 1,852 shares of common stock at $12.75 per
share granted under the Option Plan and 764 shares of common stock granted
under the RRP.
-5-
--------------------------------------
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 2004, 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.
DIRECTOR TERM POSITION(S) HELD WITH THE
NOMINEES AGE(1) SINCE (2) EXPIRES COMPANY
- -------- ------ --------- ------- ------------
John D. Lyon.................. 63 1988 2004 Director
Rodney M. Privette............ 45 1997 2004 Director
Leelan A. Woodlief............ 74 1988 2004 Director
William S. Wooten............. 43 1997 2004 Director
CONTINUING DIRECTORS
Paul K. Brixhoff.............. 79 1970 2003 Director
Howard L. Brown............... 73 1986 2002 Director and Chairman of the Board
Anna O. Sumerlin.............. 54 1993 2003 Director, President and Chief
Executive Officer
Harold R. Washington.......... 75 1969 2003 Director
R.W. Wilkinson, III........... 72 1992 2002 Director and Vice-Chairman
- ---------------------
(1) As of September 30, 2000.
(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.
-6-
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.
NOMINEES
JOHN D. LYON has owned an independent state-certified appraisal company
for the past six years and has owned and managed a real estate portfolio for
over 28 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 24 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 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 1999.
WILLIAM S. WOOTEN has operated a successful dental practice in Wake
Forest, North Carolina since 1982. Mr. Wooten is a life-long resident of Wake
Forest, North Carolina. He has been a director of the Association since 1997 and
the Company since 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 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 has served as the Association's President and Chief
Executive Officer since 1995 and the Company's President and Chief Executive
Officer since 1999. Ms. 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 in
1999.
HAROLD R. WASHINGTON has served as a director of the Association since
1969 and the Company since 1999. He is the former owner of an automobile
distributorship and retired in 1980.
-7-
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 in 1999.
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
CARLTON E. CHAPPELL, age 69, has served as the Association's Vice
President, Secretary and Treasurer since 1996 and as the Association's Senior
Vice President from 1988 to 1996. Prior to 1988, Mr. Chappell served as a
director of the Association for 15 years. Mr. Chappell has over 37 years of
business sales experience. He is also the Vice President, Secretary and
Treasurer of the Company, positions he has held since 1999.
ROBERT C. WHITE, age 44, began employment with the Association on
December 1, 1998 as Chief Financial Officer and Vice President. 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 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. He has served as a Vice President of the Company since
1999.
================================================================================
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" ALL OF THE NOMINEES
FOR ELECTION AS DIRECTORS.
================================================================================
-----------------------------------------------------------------
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, 2001, and we are asking shareholders to ratify the appointment.
Representatives of Dixon Odom PLLC, are expected to attend the annual meeting.
CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSURE
On August 21, 2000, the Audit Committee of the full board of directors
of the Company elected to terminate the audit services of the firm of McGladrey
& Pullen, LLP and appoint the firm of Dixon Odom PLLC to serve as the Company's
independent auditors for its fiscal year ending September 30, 2000.
McGladrey & Pullen, LLP had served as the Company's independent
accountants in auditing the Company's fiscal year ended September 30, 1999 and
subsequent interim period from October 1, 1999 to
-8-
August 21, 2000. McGladrey and Pullen, LLP's report on the Company's financial
statements for the year ended September 30, 1999 was an unqualified opinion.
During the Company's fiscal year ended September 30, 1999 and the
subsequent interim period from October 1, 1999 to August 21, 2000, the Company
did not have any disagreements with McGladrey & Pullen, LLP on any matter of
accounting principles or practices, financial statement disclosures, or auditing
scope or procedures, which would have caused McGladrey & Pullen, LLP to make
reference to the subject matter in connection with its report.
During the Company's fiscal year ended September 30, 1999 and the
subsequent interim period from October 1, 1999 to August 21, 2000, the Company
(or anyone acting on its behalf) did not consult with Dixon Odom PLLC regarding
any application of accounting principle to a specified transaction, either
completed or proposed; or any type of audit opinion that might be rendered on
the Company's financial statements. Neither a written report nor oral advice was
provided by Dixon Odom PLLC to the Company that Dixon Odom PLLC concluded was an
important factor considered by the Company in reaching a decision on any
accounting, auditing, or financial reporting issue.
The Company provided McGladrey & Pullen, LLP with a copy of the above
disclosures in response to Item 304(a) of Regulation S-K in conjunction with the
filing of a Form 8-K dated August 21, 2000. The Company requested that McGladrey
& Pullen, LLP provide the Company with a letter addressed to the SEC stating
whether it agreed with the statements made by the Company in response to Item
304(a) of Regulation S-K, and if not, stating the respects in which it does not
agree. On August 25, 2000, McGladrey & Pullen, LLP responded in a letter that
they were in agreement with Company's statements included in its Form 8-K dated
August 21, 2000.
================================================================================
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, 2001.
================================================================================
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 nine 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).
-9-
The Board of Directors of the Company held 12 regular meetings during
the fiscal year ended September 30, 2000. 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
committees:
NOMINATING The Nominating Committee for fiscal year 2000 was
COMMITTEE chaired by Director Sumerlin, with Director Brixhoff
serving as a member. 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. The Company's bylaws
set forth a procedure for shareholders to nominate
directors by notifying the Secretary of the Company
in writing and meeting other requirements set forth
in the bylaws.
COMPENSATION The Compensation Committee is chaired by Director
COMMITTEE Woodlief, with Directors Brown 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 and bonuses. The committee met twice
in 2000. 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 Brown,
COMMITTEE 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 twice during fiscal 2000.
AUDIT The Audit Committee is chaired by Director Lyon, with
COMMITTEE Directors Privette and Brown as members. This
committee reviews any internal audit findings
reported by the Company's internal audit function and
is responsible for reviewing and evaluating the
annual audit reports of the Company's independent
auditors. The board of directors of the Company have
adopted a written charter for the Audit Committee,
which is attached to the proxy statement as Appendix
A. All members of the Audit Committee are independent
directors. The committee met three times in the 2000
fiscal year.
-10-
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' Annual Report on
Form 10-KSB for the year ended September 30, 2000.
AUDIT COMMITTEE OF WAKE FOREST
BANCSHARES, INC.
John D. Lyon (Chairman)
Howard L. Brown
Rodney M. Privette
DIRECTOR'S COMPENSATION
Fee Arrangements. Currently, each non-employee director of the Company
receives a fee of $500 per meeting attended except for the Chairman who receives
$600 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, 2000, was
approximately $39,560. 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 an 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
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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. Lyon's state-certified independent appraisal
company is one of the appraisers designated by the Company to perform
appraisals. A fee of $225 to $300 per appraisal is charged to the borrower. In
the fiscal year 2000, Mr. Lyon's appraisal company received $3,650 in appraisal
fees from borrowers. Mr. Brown performs inspections on construction loans. A fee
of $170 per loan is paid to Mr. Brown, with the cost shared equally by the
Association and the borrower. In the fiscal year 2000, Mr. Brown received
$25,640 in 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, 2000, 1999 and 1998, to the President and Chief
Executive Officer of the Company and the Association. The table also sets forth
the cash compensation paid by the Company to the Secretary/Treasurer of the
Company for 2000 because his compensation exceeded $100,000 for the first time.
No other executive officer of the Company or the Association had salary and
bonus during the fiscal year ended September 30, 2000 aggregating in excess of
$100,000.
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
----------------------
ANNUAL COMPENSATION(1) AWARDS
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OTHER RESTRICTED
ANNUAL STOCK ALL OTHER
SALARY COMPENSATION AWARDS OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITIONS YEAR ($)(1) BONUS($) ($)(2) ($) (#) ($)(3)(4)
---------------------------- ---- ------ -------- ------ --- --- ---------
Anna O. Sumerlin, President and 2000 94,500 78,000 - - - $18,576
Chief Executive Officer 1999 89,500 60,000 - - - $21,145
1998 85,000 50,000 - - - $22,828
Carlton E. Chappell, Vice President
Secretary and Treasurer 2000 65,000 43,000 - - - $12,360
(1) Includes amounts, if any, deferred pursuant to Section 401(k) of the
Code under the Company's 401(k) Plan.
(2) For 2000, 1999 and 1998, 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) 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 Chief Executive Officer and (ii) the
fair market value of 1,548, 1,497 and 1,756 shares allocated to the
Chief Executive Officer under the ESOP during the fiscal years ended
September 30, 2000, 1999 and 1998, respectively, based on a closing
price of $12.00, $14.125, and $13.00 on September 30, 2000, September
30, 1999 and September 30, 1998 respectively. See "- Benefits -
Employee Stock Ownership Plan and Trust."
(4) Includes the fair market value of 1,030 shares allocated to Mr.
Chappell under the ESOP during fiscal year ended September 30, 2000
based on a closing price of $12.00 on September 30, 2000.
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EMPLOYMENT AGREEMENTS
The Company, through the Association, is a party to an employment
agreement with each of Ms. Sumerlin, Mr. Chappell and Mr. White ("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 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 her or his job
performance and the overall performance of the Company. The base salaries for
Ms. Sumerlin, Mr. Chappell and Mr. White as of September 30, 2000 were $94,500,
$65,000 and $82,500, 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 her or 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 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, her or 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.
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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. The
ESOP purchased 41,200 shares of common stock issued in connection with the
reorganization and offering. In order to fund the ESOP's purchase of such common
stock, the ESOP borrowed funds from an unaffiliated lender equal to the balance
of the aggregate purchase price of the common stock. Although contributions to
the ESOP are discretionary, the Company intends to make annual contributions to
the ESOP in an aggregate amount at least equal to the principal and interest
requirement on the debt. This loan is for a term of seven years, bears interest
at the prime rate, and calls for level annual payments of principal plus accrued
interest designed to amortize the loan over its term. Prepayments are also
permitted. The loan due from the ESOP is reflected on the Company's balance
sheet.
Shares purchased by the ESOP were pledged as collateral for the loan,
and are held in a suspense account until released for allocation among
participants in the ESOP as the loan is repaid. The pledged shares are released
annually from the suspense account in an amount proportional to the repayment of
the ESOP loan for each plan year. The released shares are allocated among the
accounts of participants on the basis of the participant's compensation for the
year of allocation. Benefits generally become 100% vested after three years of
service; prior to such time, benefits are 0% vested. Participants also become
immediately vested upon termination of employment due to death, retirement at
age 65, permanent disability or upon the occurrence of a change in control.
Forfeitures will be reallocated among remaining participating employees, in the
same proportion as contributions. Vested benefits may be paid in a single sum or
installment payments and are payable upon death, retirement at age 65,
disability or separation from service.
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, 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.
Any employee of the Company or any affiliate approved by the board of
directors who is selected by the Option Committee is eligible to participate in
the Option Plan as an "eligible individual." Members of the
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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."
The Option Plan provides for the grant of options which qualify for
favorable federal income tax treatment as "incentive stock options" and
"non-qualified stock options" which do not so qualify, which are both subject to
the restrictions of the Internal Revenue Code of 1986, as amended. Unless
otherwise designated by the Option Committee, options granted under the Option
Plan will be non-qualified stock options, will be exercisable at a price per
share equal to the fair market value of a share of common stock on the date of
the option grant and will be exercisable for a period of ten years after the
date of grant (or for a shorter period ending three months after the option
holder's termination of employment for reasons other than death, disability or
retirement or discharge for cause, one year after termination of service due to
death, disability or retirement, or immediately upon termination for cause). In
no event may an option be granted with an exercise price per share that is less
than the fair market value of a share of common stock when the option is
granted. On January 22, 1998 and on each anniversary thereof until all option
shares subject to the grant are exercisable, the option will become exercisable
as to 20% of the option shares as to which the outstanding option has been
granted. An option holder's right to exercise options is suspended during any
period when the option holder is the subject of a pending proceeding to
terminate his or her employment for cause. If an option expires during such
suspension, the Company will, upon the employee's reinstatement, pay damages
equal to the value of the expired options less the exercise price.
Upon the exercise of an option, the exercise price must be paid in
full. Payment may be made in cash or in such other consideration as the Option
Committee deems appropriate, including, but not limited to, common stock already
owned by the option holder or option shares to be acquired by the option holder
upon exercise of the option.
STOCK OPTIONS
The following table provides certain information with respect to the
number of shares of common stock represented by outstanding options held by the
named executive officers as of September 30, 2000. There were no "in-the-money"
options at September 20, 2000 and the named executive officers did not exercise
any options during the fiscal year ended September 30, 2000.
FISCAL YEAR END OPTION/SAR VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS AT FISCAL
AT FISCAL YEAR END (#) YEAR END ($)(1)
------------------------ ----------------
SHARES ACQUIRED VALUE
ON EXERCISE REALIZED
NAME (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ----- ---- ------------------------- -------------------------
Anna O. Sumerlin, - - 8,100/5,400 N/A
President and Chief
Executive Officer
N/A
Carlton E. Chappell - - 8,100/5,400
Vice President, Secretary
and Treasurer
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(1) All options at September 30, 2000 were "out of money" options, i.e., the
exercise price of the options was greater than the closing price of the
Company's common stock on September 20, 2000.
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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 or disability. 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 or disability, 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, nor did they 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 $441,750 or
3.12% of the Association's total equity at September 30, 2000.
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 executive officers, directors and
greater than 10% beneficial owners were complied with, as of September 30, 2000.
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PROPOSAL 3
AUTHORIZATION OF THE BOARD OF DIRECTORS, IN ITS DISCRETION, TO
DIRECT THE VOTE OF THE PROXIES UPON SUCH OTHER MATTERS AS MAY PROPERLY
COME BEFORE THE ANNUAL MEETING, AND ANY ADJOURNMENT OR
POSTPONEMENT THEREOF, INCLUDING, WITHOUT LIMITATION,
A MOTION TO ADJOURN THE ANNUAL MEETING
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GENERAL
The Board of Directors is not aware of any other business that may
properly come before the annual meeting. The Board of Directors seeks the
authorization of the shareholders of the Company, in the event matters properly
come before the meeting, including, but not limited to, the consideration of
whether to adjourn the annual meeting once called to order and to direct the
manner in which those shares represented at the annual meeting by proxies
solicited pursuant to this proxy statement shall be voted. As to all such
matters, the Board intends that it would direct the voting of such shares in the
manner determined by the Board, in its discretion, and in the exercise of its
duties and responsibilities, to be in the best interests of the Company and its
shareholders, taken as a whole.
VOTE REQUIRED
The authorization of the Board of Directors, in its discretion, to vote
upon such other business as may properly come before the annual meeting
("Proposal 3") requires the affirmative vote of the holders of a majority of the
outstanding shares of common stock represented in person or by proxy at the
annual meeting and entitled to vote thereon. Accordingly, shares as to which the
"ABSTAIN" box has been selected on the proxy card will be counted as present and
entitled to vote and will have the effect of a vote against Proposal 3. Shares
underlying broker non-votes will not be counted as having been voted in person
or by proxy and will have no effect on the vote for Proposal 3. The Company
intends to vote for the authorization of the Board of Directors to vote upon
such other business as may properly come before the annual meeting thereby
ensuring a quorum and the likelihood of the approval of Proposal 3.
================================================================================
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
AUTHORIZATION OF THE BOARD OF DIRECTORS, IN ITS DISCRETION, TO DIRECT THE VOTE
OF THE PROXIES UPON SUCH MATTERS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING,
AND ANY ADJOURNMENT OR POSTPONEMENT THEREOF, INCLUDING, WITHOUT LIMITATION, A
MOTION TO ADJOURN THE ANNUAL MEETING.
================================================================================
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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 2002 Annual Meeting of
Shareholders must be received by the Company by September 20, 2001, 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,
/s/ Carlton E. Chappell
-----------------------
Carlton E. Chappell
Vice President, Secretary and Treasurer
Wake Forest, North Carolina
January 18, 2001
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APPENDIX A
WAKE FOREST BANCSHARES, INC.
WAKE FOREST FEDERAL SAVINGS AND LOAN ASSN.
AUDIT COMMITTEE CHARTER
I. APPOINTMENT
There shall be an Audit Committee consisting of not less than three (3) members
of the Board of Directors who are not officers or employees of the Company or
the Association. The members of said Committee shall be appointed by the Board
of Directors each December and shall continue to act until their successors are
appointed, but shall be subject to removal at any time by the majority of the
entire Board. Any such vacancy shall be filled by the Board.
II. POWERS
The Audit Committee shall: (a) assist the Board of Directors in discharging its
statutory and fiduciary responsibilities with regard to audits of the books and
records of the Company and the Association and the monitoring of its accounting
and financial reporting practices; (b) carry on appropriate oversight to
determine that the Company and the Association has adequate administrative and
internal accounting controls and that they are operating in accordance with
prescribed procedures and codes of conduct; and (c) independently review the
Company's financial information that is distributed to shareholders and the
general public.
III. MEETINGS
The Audit Committee shall meet at least annually and at such other times as
determined by the Chairman of the Committee. Two (2) members of the Committee
shall constitute a quorum for the transaction of business.
IV. DUTIES AND RESPONSIBILITIES
A. ANNUALLY
1. Recommend to the Board of Directors the appointment
of the independent accountants; such recommendation
shall reflect consideration of:
a. Independence, professional capability and fees.
b. Accessibility to the full Board.
c. Loyalty to the full Board of Directors, as
the shareholders' representative.
2. Review and approve the auditors' annual plan and
audit scope including a description of key functions
to be audited, a general description of each of the
non- audit provided or to be provided, and an
estimate of audit and non-audit fees and non-audit
fees and costs for the year and actual versus
estimated for the preceding year. Ascertain that
resources are reasonably allocated as to risk and
exposure.
A-1
Determine that the plan calls for review and testing
of internal controls to the extent necessary to
provide an opinion on the financial statements, and
includes procedures to follow-up on prior year's
recommendations and to evaluate management's response
to such recommendations.
3. Determine that management places no restrictions on
the scope of the audits or examinations. Management
representatives shall be excused during these
discussions as appropriate.
4. Review the results of the audits prepared by the
Auditors.
5. Review and approve the financial statements and
Annual Report on Form 10KSB.
6. Review with management and the auditors, their
assessment of the adequacy of internal controls and
the resolution of any identified material weaknesses
and reportable conditions.
7. Ensure that appropriate follow-up takes place on open
audit issues.
B. PERIODICALLY
1. Review any changes in accounting policies or
principles and ascertain the reasons for the changes.
Discussions should include auditor and management
qualitative judgements about the appropriateness of
the changes.
V. REPORTING
The Audit Committee will submit periodic reports of the Committee's work and
findings to the full Board. Said reports will contain recommendations for
appropriate Board action. The Committee will annually present to the Board a
review and recommendation for approval of the annual report and Form 10KSB and
selection of independent accountants.
IV. MANAGEMENT SUPPORT
To assist the Audit Committee in fulfilling its duties, management will provide
the Committee with information and reports as needed and requested.
Approved:
The Audit Committee of Wake Forest Bancshares,
Inc.
A-2
REVOCABLE PROXY
WAKE FOREST BANCSHARES, INC.
302 SOUTH BROOKS STREET
WAKE FOREST, NORTH CAROLINA 27587
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
WAKE FOREST BANCSHARES, INC. FOR THE ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD ON FEBRUARY 20, 2001.
The undersigned shareholder of Wake Forest Bancshares, Inc. hereby
appoints Howard L. Brown and R.W. Wilkinson III, or any of them, with full
powers of substitution, to represent and to vote as proxy, as designated, all
shares of common stock of Wake Forest Bancshares, Inc. held of record by the
undersigned on December 29, 2000 at the 2001 Annual Meeting of Shareholders (the
"Annual Meeting") to be held at 2:00 p.m. on February 20, 2001, or at any
adjournment or postponement thereof, upon the matters described in the
accompanying Notice of the 2001 Annual Meeting of Shareholders and proxy
statement, dated January 18, 2001, and upon such other matters as may properly
come before the Annual Meeting. The undersigned hereby revokes all prior
proxies.
This proxy, when properly executed, will be voted in the manner
directed herein by the undersigned shareholder. IF NO DIRECTION IS GIVEN, THIS
PROXY WILL BE VOTED "FOR" THE ELECTION OF ALL NOMINEES LISTED IN ITEM 1 AND FOR
THE PROPOSALS LISTED IN ITEMS 2 AND 3.
PLEASE MARK, SIGN AND DATE THIS PROXY ON THE REVERSE SIDE
AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
The Board of Directors unanimously recommends a vote "FOR" all of the nominees Please mark your
named in Item 1 and a vote "FOR" each of the proposals in Items 2 and 3. vote as indicated in |X|
this example
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1. Election of four directors for terms FOR 2. Ratification of the appointment of
of three years each. All nominees Dixon Odom PLLC as independent FOR AGAINST ABSTAIN
NOMINEES: John D. Lyon, Rodney (except as WITHHOLD auditors for the fiscal year ending |_| |_| |_|
M. Privette, Leelan A. Woodlief and otherwise for all September 30, 2001.
William S. Wooten. indicated) nominees
|_| |_|
INSTRUCTION: TO WITHHOLD 3. Authorization of the Board of
AUTHORITY to vote for any Directors, in its discretion, to
individual nominee, write that direct the vote of proxies upon
nominee's name in the space such matters as may properly come FOR AGAINST ABSTAIN
provided: before the Annual Meeting, and |_| |_| |_|
any adjournment or postponement
------------------------------------- thereof, including, without
limitation, a motion to adjourn the
Annual Meeting.
The undersigned hereby acknowledges receipt of the Notice of the
2001 Annual Meeting of Shareholders and the proxy statement,
dated January 18, 2001 for the Annual Meeting.
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Signature(s)
Dated: , 2001
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Please sign exactly as your name appears on this proxy. Joint
owners should each sign personally. If signing as attorney,
executor, administrator, trustee or guardian, please include your
full title. Corporate or partnership proxies should be signed by
an authorized officer.