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
Four Oaks Fincorp, Inc.
-----------------------
(Name of Registrant as Specified In Its Charter)
Not Applicable
--------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
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[X] No fee required.
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(1) Title of each class of securities to which transaction applies:
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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[_] 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.
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[LETTERHEAD OF FOUR OAKS FINCORP, INC.]
April 1, 2002
Dear Shareholder:
Accompanying this letter please find the Notice of Annual Meeting,
Proxy Statement, Summary 2001 Annual Report to Shareholders and proxy for Four
Oaks Fincorp, Inc.'s Annual Meeting. It is extremely important for you to
complete, sign, date, and return the enclosed proxy as soon as possible even if
you plan to attend the Annual Meeting in person. If you do attend, you can
revoke your proxy and vote in person.
The Annual Meeting will begin at 8:00 p.m. on Monday, April 22, 2002,
at the main office of Four Oaks Bank & Trust Company, located at 6144 US 301
South, Four Oaks, North Carolina. At the Annual Meeting, the Shareholders will
elect the Board of Directors for the coming year, and transact any other
business properly brought before the meeting.
In compliance with applicable regulations, the Company's financial
statements and other required disclosures are presented in its Annual Report on
Form 10-KSB, a copy of which follows the Proxy Statement, and which reflects the
Company's financial condition as of December 31, 2001.
As mentioned above, we have also included a Summary 2001 Annual Report
to Shareholders which contains additional information about the Company,
including a financial summary, our letter to shareholders and selected financial
data.
As always, we hope to see you at the Annual Meeting, and please
remember to complete, sign, and date the enclosed proxy and return it to Branch
Banking & Trust Company, Corporate Trust Department, in the envelope provided as
soon as possible.
Sincerely yours,
/s/ Ayden R. Lee, Jr.
Ayden R. Lee, Jr.
Chief Executive Officer and President
FOUR OAKS FINCORP, INC.
6114 US 301 South
Four Oaks, North Carolina 27524
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
April 22, 2002
---------------------------------------------------------------------
You are cordially invited to attend the Annual Meeting of Shareholders
of Four Oaks Fincorp, Inc. which will be held on Monday, April 22, 2002 at 8:00
p.m., local time, at the main office of Four Oaks Bank & Trust Company, located
at 6144 US 301 South, Four Oaks, North Carolina, for the following purposes:
(1) To elect the persons listed in the accompanying Proxy
Statement dated April 1, 2002 to the Board of Directors of Four Oaks Fincorp,
Inc.; and
(2) To transact such other business as may properly come
before the meeting or any adjournments thereof.
Shareholders of record at the close of business on March 4, 2002 are
entitled to notice of and to vote at the Annual Meeting and any and all
adjournments thereof.
A copy of the Annual Report on Form 10-KSB, containing financial
statements of Four Oaks Fincorp, Inc., for the year ended December 31, 2001, is
enclosed herewith.
IT IS VERY IMPORTANT THAT YOUR SHARES OF STOCK BE REPRESENTED AT THE
ANNUAL MEETING REGARDLESS OF THE NUMBER OF SHARES YOU MAY HOLD. EVEN THOUGH YOU
MAY PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, PLEASE COMPLETE AND RETURN THE
ENCLOSED PROXY IN THE ENVELOPE PROVIDED. IF YOU ATTEND THE ANNUAL MEETING, YOU
MAY REVOKE YOUR PROXY AND VOTE IN PERSON.
By Order of the Board of Directors
/s/ Ayden R. Lee, Jr.
Ayden R. Lee, Jr.
Chief Executive Officer and
President
April 1, 2002
FOUR OAKS FINCORP, INC.
6114 US 301 South
Four Oaks, North Carolina 27524
PROXY STATEMENT
This Proxy Statement, accompanying proxy card, Notice of Annual Meeting
of Shareholders and the Summary 2001 Annual Report to Shareholders are being
furnished to shareholders on or about April 1, 2002 by the Board of Directors of
Four Oaks Fincorp, Inc. in connection with the solicitation of proxies for use
at the Annual Meeting of Shareholders to be held at our main office, located at
6144 US 301 South, Four Oaks, North Carolina on Monday, April 22, 2002 at 8:00
p.m., local time, and at all adjournments thereof. All expenses incurred in
connection with this solicitation will be paid by us. In addition to
solicitation by mail, certain of our officers, directors, and regular employees,
who will receive no additional compensation for their services, may solicit
proxies by telephone, personal communication, or other means.
ANNUAL MEETING
Purposes of the Annual Meeting
The principal purposes of the annual meeting are: (1) to elect eight
(8) nominees to our board of directors and (2) to transact such other business
as may properly come before the annual meeting or any adjournments thereof. Our
board of directors knows of no matters other than those stated above to be
brought before the annual meeting or any adjournments thereof. Nonetheless, the
proxyholders named on the enclosed proxy card may vote in accordance with the
instructions of the board of directors or in the absence thereof, in accordance
with their discretion, on any other matter properly presented for action of
which the board of directors is not now aware.
Proxies
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before it is exercised. Proxies may be revoked by:
. filing a written notice of revocation with our corporate
secretary;
. duly executing a subsequent proxy and filing it with our
corporate secretary before the revoked proxy is exercised; or
. attending the annual meeting and voting in person.
If the proxy card is signed and returned, but voting directions are not
made, the proxy will be voted in favor of the proposals set forth in the
accompanying "Notice of Annual Meeting of Shareholders."
Record Date
Our board of directors has fixed the close of business on March 4, 2002
as the record date for determination of shareholders entitled to receive notice
of and to vote at the annual meeting and all adjournments thereof. As of the
close of business on March 4, 2002, we had 2,104,150 shares of common stock
outstanding.
Voting Rights
Except as otherwise provided by law, each holder of our common stock,
or their proxies, is entitled to one vote per share upon all matters voted upon
by shareholders. The North Carolina Business Corporation Act provides that with
respect to the election of directors, cumulative voting is not available to our
shareholders.
SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information as of March 4, 2002
regarding shares of our common stock beneficially owned by: (i) each director;
(ii) each director nominee; (iii) each executive officer named in the Summary
Compensation Table in this proxy statement; and (iv) all directors and executive
officers as a group. Except as otherwise indicated, the persons listed below
have sole voting and investment power with respect to all shares of common stock
owned by them, except to the extent that such power may be shared with a spouse.
Fractional share amounts are rounded off to the nearest whole number.
Name of
Beneficial Owner Shares Owned(1) Percent of Class (1)
---------------- --------------- --------------------
M.S. Canaday(2) 55,248 2.6%
Ayden R. Lee, Jr.(3) 62,795 3.0
Paula Canaday Bowman(4) 36,468 1.7
William J. Edwards(5) 7,878 *
Warren L. Grimes(6) 7,945 *
Percy Y. Lee(7) 19,124 *
Dr. R. Max Raynor, Jr.(8) 450 *
Clifton L. Painter(9) 27,428 1.3
William Ashley Turner(10) 121,285 5.8
All Directors and Executive Officers 361,087 17.2%
as a Group (11 persons)(11)
- -----------------
*Less than 1%
(1) Based upon 2,104,150 shares of common stock outstanding on March 4,
2002. The securities "beneficially owned" by an individual are
determined in accordance with the definition of "beneficial ownership"
set forth in the regulations of the Securities and Exchange Commission.
Accordingly, they may include securities owned by or for, among others,
the spouse and/or minor children of the individual and any other
relative who resides in the home of such individual, as well as other
securities as to which the individual has or shares voting or
investment power or has the right to acquire under outstanding stock
options within 60 days of March 4, 2002. Beneficial ownership may be
disclaimed as to certain of the securities.
(2) Includes 1,875 shares subject to stock options which are exercisable
within 60 days.
2
(3) Includes 12,186 shares owned by spouse who has sole voting and
investment power with respect to these shares and 25,000 shares subject
to stock options which are exercisable within 60 days.
(4) Includes 1,875 shares subject to stock options which are exercisable
within 60 days.
(5) Includes 846 shares subject to stock options which are exercisable
within 60 days.
(6) Includes 3,362.060 shares owned jointly with spouse, 763.066 owned by
spouse who has sole voting and investment power with respect to these
shares and 1,875 shares subject to stock options which are exercisable
within 60 days.
(7) Includes 13,063.357 shares owned jointly with spouse and 300 shares
subject to stock options which are exercisable within 60 days.
(8) Includes 300 shares subject to stock options which are exercisable
within 60 days.
(9) Includes 225 shares owned by minor child who resides in the home, 1,309
shares owned by spouse who has sole voting and investment power with
respect to these shares and 13,700 shares subject to stock options
which are exercisable within 60 days.
(10) Includes 120,963.400 shares owned jointly with spouse.
(11) Includes 1,774.582 shares owned by minor children who reside in the
home and 18,750 shares subject to stock options which are exercisable
within 60 days by non-director executive officers.
The following table sets forth certain information as of March 4, 2002
regarding any person who is known to us to be the beneficial owner of more than
five percent (5%) of our common stock.
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership Percent of Class
- ---------------- -------------------- ----------------
William Ashley Turner and Debra C. Turner, Joint 121,285 5.8%
Tenants with right of survivorship
2256 Shotwell Road
Clayton, North Carolina 27520
Josephine L. Sturdivant 108,638 5.2%
5426 Hampton Road
Fayetteville, North Carolina 28311-1322
3
ELECTION OF DIRECTORS
The nominees for the election of directors are named and certain other
information is provided in the following tabulation.
Year Positions and Offices with our Company
first & Business Experience During
Name Age Elected Past Five (5) Years
- ---- --- ------- -------------------
M.S. Canaday 78 1969 Chairman of the board of
directors of Four Oaks Fincorp,
Inc. and Four Oaks Bank & Trust
Company; Owner of Four Oaks Drug
Co.
Ayden R. Lee, Jr. 53 1983 Chief Executive Officer,
President, and Director of Four
Oaks Fincorp, Inc. and Four Oaks
Bank & Trust Company
Dr. R. Max Raynor, Jr. 44 2000 Director of Four Oaks Fincorp,
Inc. and Four Oaks Bank & Trust
Company; Owner of Professional
Eye Care, with locations in
Benson, North Carolina and
Roseboro, North Carolina
Paula Canaday Bowman 53 1989 Director of Four Oaks Fincorp,
Inc. and Four Oaks Bank & Trust
Company
William J. Edwards 58 1990 Director of Four Oaks Fincorp,
Inc. and Four Oaks Bank & Trust
Company; President, Chief
Executive Officer and Chairman
of the Board of Four Oaks IGA
Foodliner, Inc. and Secretary of
Edwards IGA
Percy Y. Lee 61 1992 Director of Four Oaks Fincorp,
Inc. and Four Oaks Bank & Trust
Company; Member of Clayton Area
Advisory Board of the Bank;
President of T.R. Lee Oil Co.;
Senior Partner of Lee Brother's
Rental; Partner in Lee & Dupree,
a rental real estate partnership
Warren L. Grimes 53 1992 Director of Four Oaks Fincorp,
Inc. and Four Oaks Bank & Trust
Company; General Partner in
Reedy Creek Direct Marketing
Association; Solid Waste
Division Manager for Johnston
County; Chairman of the
Company's Compensation
Committee; Chief Financial
Officer and Director of Reedy
Creek Technologies, Inc.
William Ashley Turner 50 2001 Director of Four Oaks Fincorp,
Inc. and Four Oaks Bank & Trust
Company; Owner and President of
Columbus Real Estate, Ashley
Turner Enterprises, Inc., and
Ashley Turner Building Co.,
Inc.; Co-Owner and Vice
President of Woodland
Development Co., Inc.; Owner and
Manager of Ashley Turner
Development Co., LLC; Co-Owner
of Planet Fitness; General
Manager of RAFT, Inc.; Vice
President of Autumn Homes, Inc.,
Build Rite, Inc., Earl Collins
Construction Company, Mason
Construction Co., Southeast
Custom Homes, Inc., Crowder
Construction, Inc. of Clayton,
K.M.A. Construction Co., Inc.,
Robert Massengill Construction
Company, Allen Thornton Homes,
Inc., and W. Chase Homes, Inc.
4
The number constituting our board of directors must be at least five
(5), but not more than twenty-one (21). The number of directors within this
variable range may be fixed or changed from time to time by our shareholders or
our board of directors. Our board of directors has set the number of directors
at eight (8). The members of our board of directors are elected by our
shareholders to serve one (1) year terms.
All directors and executive officers hold office until the next annual
meeting or until their successors are elected and qualified. Our board of
directors has no reason to believe that the persons named above as nominees will
be unable or will decline to serve as a director if elected. However, in the
event of death or disqualification of any nominee or refusal or inability of any
nominee to serve, it is the intention of the proxyholders to vote for the
election of such other person or persons as the proxyholders determine in their
discretion; but in no circumstance will the proxy be voted for more than eight
(8) nominees. Properly executed and returned proxies, unless revoked, will be
voted as directed by the shareholder or, in the absence of such direction, will
be voted in favor of the election of the recommended nominees.
Pursuant to North Carolina law, the eight (8) candidates who receive
the highest number of votes will be elected as directors. Abstentions and broker
non-votes are counted for purposes of determining the presence or absence of a
quorum for the transaction of business, but are not counted in the election of
directors and will not be included in determining which candidates received the
highest number of votes.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL OF THE NOMINEES FOR ELECTION
AS DIRECTORS.
Director Compensation
The Chairman of our board of directors is paid a fee of $1,100 per
month. Other directors, except Mr. Lee who is not paid a director's fee, are
paid fees of $900 per month. During 2001, all of the directors other than Mr.
Lee were paid a bonus of $850. Two (2) of our directors are related to each
other. M.S. Canaday is Paula Canaday Bowman's uncle.
Board of Directors Meetings
During the last fiscal year, our board of directors met fifteen (15)
times. Each incumbent director attended seventy-five percent (75%) or more of
the aggregate of the total number of board of director meetings and the total
number of meetings held by all committees of the board of directors on which he
or she served.
5
Board Committees
Our board of directors has an audit committee and a compensation
committee. The audit committee is composed of Merwin S. Canaday (Chairman),
Warren L. Grimes and William J. Edwards and operates under a written charter (a
copy of which was attached to the Proxy Statement for our 2001 Annual Meeting)
adopted by our board of directors. In addition, Ayden R. Lee, Jr. attends all
meetings of the audit committee as a non-voting member. Messrs. Canaday, Grimes
and Edwards are each an "independent director" as such term is defined by Nasdaq
Marketplace Rules.
The audit committee reviews the results and scope of the annual audit
and other services provided by our independent accountants. The audit committee
also reviews our financial statements and audit letters provided by our
independent accountants. The audit committee recommends to our board of
directors the appointment of independent accountants. The audit committee met
two (2) times during 2001.
The Compensation Committee is composed of Paula Canaday Bowman, Warren
L. Grimes (Chairman), Ayden R. Lee, Jr., R. Max Raynor, Jr. and William Ashley
Turner and is responsible for the approval of compensation arrangements for our
officers and the review of our compensation plans and policies. During 2001, the
compensation committee met four (4) times.
Our board of directors does not have a separate nominating committee,
but performs that function itself.
Audit Committee Report
The audit committee of our board of directors is composed of Merwin S.
Canaday, Warren L. Grimes and William J. Edwards and operates under a written
charter (a copy of which was attached to the Proxy Statement for the 2001 Annual
Meeting of Shareholders) adopted by the board of directors in 2000. The board of
directors, in its business judgment, has determined that all members of the
audit committee are "independent directors" as defined by applicable Nasdaq
Marketplace Rules.
The members of the audit committee are not professionally engaged in
the practice of auditing or accounting nor are they experts in the fields of
accounting or auditing, including in respect of auditor independence. Management
is responsible for our internal controls and the financial reporting process,
including the presentation and integrity of our financial statements. Our
independent accountants are responsible for performing an independent audit of
our consolidated financial statements in accordance with auditing standards
generally accepted in the United States of America and to issue a report
thereon. The audit committee's responsibility is to monitor and oversee these
processes. The audit committee also recommends to our board of directors the
selection of our independent accountants. Members of the audit committee rely
without independent verification on the information provided to them and on
representations of management and our independent accountants.
Accordingly, the audit committee's oversight does not provide an
independent basis to determine that management has maintained appropriate
accounting and financial reporting
6
principles or appropriate internal control and procedures designed to assure
compliance with accounting standards and applicable laws and regulations.
Furthermore, the audit committee's considerations and discussions referred to
below do not assure that the audit of our financial statements has been carried
out in accordance with auditing standards generally accepted in the United
States of America, that our financial statements are presented in accordance
with generally accepted accounting principles or that our auditors are in fact
"independent."
In this context, the audit committee has met and held discussions with
our management, who represented to the audit committee that our consolidated
financial statements were prepared in accordance with accounting principles
generally accepted in the United States of America. The audit committee has
reviewed and discussed the consolidated financial statements with both
management and the independent accountants. The audit committee also discussed
with the independent accountants matters required to be discussed by Statement
on Auditing Standards No. 61 (Communication with Audit Committees). Our
independent accountants also provided to the audit committee the written
disclosures required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), and the audit committee has
considered whether the provision of audit and other non-audit services (set
forth under Audit Firm Fee Summary below) is compatible with maintaining the
accountants independence and has discussed with the independent accountants
their independence.
Based upon the audit committee's discussions with management and the
independent accountants, and the audit committee's review of our consolidated
financial statements, representations of management and the report of the
independent accountants to the audit committee, and subject to the limitations
on the role and responsibility of the audit committee referred to above and the
audit committee charter, the audit committee recommended that our board of
directors include the audited consolidated financial statements in our Annual
Report on Form 10-KSB for the fiscal year ended December 31, 2001, filed with
the Securities and Exchange Commission. The audit committee also recommended
that Dixon Odom PLLC be retained as our independent accountants for the 2002
fiscal year.
Audit Committee
Merwin S. Canaday
Warren L. Grimes
William J. Edwards
7
EXECUTIVE COMPENSATION
The following tables sets forth annual and long-term compensation paid
or accrued by the Company for services rendered for the fiscal years indicated
by the Company's Chief Executive Officer and the next most highly compensated
executive officer whose total salary and bonus exceeded $100,000 individually
during the year ended December 31, 2001 (the "named executive officers").
Summary Compensation Table
Annual Compensation(1) Long-Term Compensation
---------------------- ---------------------------------------
Awards Payouts
------------------- ---------------
Securities All Other
Name & Principal Position Year Salary Bonus Underlying Options Compensation(2)
- ------------------------- ---- ------ ----- ----------------- ---------------
Ayden R. Lee, Jr., Chief 2001 $178,420 $ 3,749 4,000 $7,220
Executive Officer and 2000 201,162 34,542 6,000 8,376
President 1999 152,640 20,860 6,000 7,276
Clifton L. Painter, Senior 2001 $102,730 $ 2,124 2,150 $4,437
Vice President, Chief 2000 114,091 18,455 3,300 4,805
Operating Officer 1999 99,332 8,749 3,300 4,018
_________________
(1) Amounts shown in the table include amounts paid to the named executive
officers in their capacities as executive officers of our subsidiary,
Four Oaks Bank & Trust Company. Four Oaks Bank & Trust Company was
reorganized as our wholly owned subsidiary in July 1997. Amounts shown
also include amounts deferred by the named executive officers under our
Master Corporate Profit Sharing Retirement Plan and Trust.
(2) The amounts shown for Mr. Lee represent our contributions to him under
our Master Corporate Profit Sharing Retirement Plan and Trust in the
amounts of $6,800, $8,046, and $6,940, for each of the years ended
2001, 2000, and 1999, respectively. The remainder of the amounts shown
for Mr. Lee for each year represent insurance premiums paid by us on
term life insurance. The amounts shown for Mr. Painter represent our
contributions to him under our Master Corporate Profit Sharing
Retirement Plan and Trust in the amounts of $4,109, $4,564, and $3,791,
for each of the years ended 2001, 2000, and 1999, respectively. The
remainder of the amounts shown for Mr. Painter for each year represent
insurance premiums paid by us on term life insurance.
Option Grants in Last Fiscal Year
The following table sets forth certain information concerning options
to purchase common stock granted to the named executive officers during the year
ended December 31, 2001.
Number of
Securities % of Total
Underlying Options Granted Exercise
Options to Employees in or Base
Name Granted Fiscal Year Price Exercise Date Expiration Date
---- ------- ----------- ----- ------------- ---------------
Ayden R. Lee, Jr. 4,000 16% $20.00 February 26, 2001 February 26, 2005
Clifton L. Painter 2,150 9% $20.00 February 26, 2001 February 26, 2005
8
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End
Option Values
The following table sets forth certain information concerning options
to purchase common stock held by the named executive officers during the year
ended December 31, 2001, the aggregate value of gains on the date of exercise,
and the value of unexercised options as of December 31, 2001.
Number of Securities Underlying Value of Unexercised
Unexercised Options at December In-the-Money Options at
31, 2001 December 31, 2001(1)
------------------------------------------------------------------
Shares
Acquired on Value Received
Name Exercise (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ----------------------------------------------------------------------------------------------------------------------------
Ayden R. Lee, Jr. -- -- 21,000 4,000 $428,400 $81,600
Clifton L. Painter -- -- 11,550 2,150 235,620 43,860
_________________
(1) Based on the difference between the exercise price and a price per share of
$20.40, which is the last sale price of our common stock as of December 31,
2001.
Employment Agreements
We have an employment agreement with Ayden R. Lee, Jr., Chief Executive
Officer and President. The employment agreement provides for a one-year term and
on each anniversary date thereafter, the agreement is automatically extended for
an additional year, unless either party gives notice of nonrenewal. The current
base salary under the agreement may be increased at the discretion of our board
of directors. Our board of directors has established the 2002 base salary amount
for Mr. Lee at $180,065. In addition to the base salary, Mr. Lee's employment
agreement provides for, among other things, additional benefits applicable to
executive personnel and benefits applicable to all our salaried employees. The
agreement provides for termination by us for "cause" (as defined in the
agreement) at any time.
We also have an employment agreement with Clifton L. Painter, Vice
President and Chief Operating Officer. The employment agreement provides for a
one-year term and on each anniversary date thereafter, the agreement is
automatically extended for an additional year, unless either party gives notice
of nonrenewal. The current base salary under the agreement may be increased at
the discretion of our board of directors. Our board of directors has established
the 2001 base salary amount for Mr. Painter at $100,656. In addition to the base
salary, Mr. Painter's employment agreement provides for, among other things,
additional benefits applicable to executive personnel and benefits applicable to
all our salaried employees. The agreement provides for termination by us for
"cause" (as defined in the agreement) at any time.
Severance Compensation Agreement
We have adopted a severance compensation agreement for Mr. Lee that
will provide him with severance pay benefits in the event of a "change in
control." The purpose of this compensation plan is to recognize the services and
contributions of Mr. Lee as a key employee and
9
the uncertainties relating to continual employment, reduced employee benefits,
management changes, and relocations in the event of a change in control. Under
the severance compensation agreement, in the event a change in control (as
defined in the agreement) occurs and Mr. Lee's employment is "terminated" (as
defined in the agreement) he will be entitled to receive a cash severance
payment equal to two (2) years' salary based upon his then most recent annual
compensation and the amount of his most recent annual bonus at the time of
termination. In addition, Mr. Lee will be entitled to all life insurance,
health, accidental death and dismemberment, and disability plans or programs in
which he is entitled to participate immediately prior to his termination for two
(2) years after the date of his termination or unless and until he obtains other
full-time employment.
Supplemental Executive Retirement Plan
Our subsidiary, Four Oaks Bank & Trust Company, has adopted a
supplemental executive retirement plan ("SERP") for Mr. Lee that, upon his
retirement from the bank, will provide him with supplemental annual payments for
the remainder of his life. The purpose of the SERP is to encourage Mr. Lee to
remain as an employee of the bank and to reward him for contributing materially
to the success of the bank. Under the SERP, the bank will be obligated to pay
Mr. Lee an annual payment upon his retirement in an amount which, when added to
Mr. Lee's 401(k) benefits (based on future estimated amounts) and social
security benefits (based on future estimated amounts), will ensure Mr. Lee a
total annual retirement benefit equal to seventy-five percent (75%) of his
Average Annual Compensation (as defined in the SERP) on the date of his
retirement. Depending upon Mr. Lee's age at retirement, the annual payment as a
percentage of Mr. Lee's fully vested retirement benefit will vary (from
fifty-eight percent (58%) of fully vested retirement benefit at age fifty-five
(55) to one hundred percent (100%) at age sixty-two (62)). The annual payment
which we are obligated to pay Mr. Lee each year after his retirement is subject
to certain limitations, including a maximum limit of fifty thousand dollars
($50,000) per year. In the event of a change of control (as defined in the SERP)
of Four Oaks Fincorp, Inc. and termination of Mr. Lee's employment within
twenty-four (24) months thereafter (for any reason, except termination by the
bank for cause), Mr. Lee will be entitled to receive a lump-sum cash payment
equal to the actuarial equivalence of the greater of (i) the amount he would
have been entitled to had he retired on such date and (ii) the amount of his pro
rata fully vested benefit under the SERP as of such date.
Certain Transactions
Certain of our directors and executive officers are customers of, and
borrowers from, Four Oaks Bank & Trust Company in the ordinary course of
business. From January 1, 2001 to December 31, 2001, loans outstanding to our
directors and executive officers, and their associates as a group, amounted to a
maximum of approximately $1,154,999, or 4.55% of the equity capital of the bank.
All outstanding loans and commitments included in such transactions are made
substantially on the same terms, including rate and collateral, as those
prevailing at the time in comparable transactions with other customers. In the
opinion of management, these loans do not involve more than normal risk of
collectability, or contain other unfavorable features.
10
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires our officers, directors, and persons who own more than ten percent
(10%) of our equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. Officers, directors, and
ten percent (10%) shareholders are required by SEC regulations to furnish us
with copies of all Section 16(a) reports they file. Based solely on a review of
the copies of such reports furnished to us, or representations by such persons
that no Form 5s were required, we believe that during the fiscal year ended
December 31, 2001, all Section 16(a) filing requirements applicable to our
officers, directors, and ten percent (10%) shareholders, were satisfied, except
that Mr. Turner failed to timely file a Form 3 upon his appointment to our Board
of Directors. Such form has since been filed with the Securities and Exchange
Commission.
SELECTION OF INDEPENDENT ACCOUNTANTS
Our board of directors approved the engagement of Dixon Odom PLLC as
our independent public accountants for the year ended December 31, 2000, to
replace PricewaterhouseCoopers LLP. PricewaterhouseCoopers LLP was terminated
effective September 5, 2000.
The reports of PricewaterhouseCoopers LLP on our consolidated financial
statements for the two (2) fiscal years ended December 31, 1999 and 1998 did not
contain any adverse opinion or disclaimer of opinion, nor were they qualified or
modified as to uncertainty, audit scope or accounting principles.
In connection with the audits of our financial statements for each of
the two (2) fiscal years ended December 31, 1999 and 1998 and in the subsequent
interim period through September 5, 2000, there were no disagreements with
PricewaterhouseCoopers LLP on any matters of accounting principles or practices,
financial statement disclosure, or auditing scope and procedures which, if not
resolved to the satisfaction of PricewaterhouseCoopers LLP would have caused
PricewaterhouseCoopers LLP to make reference to the matter in their report on
the financial statements for such years.
At our request, PricewaterhouseCoopers LLP furnished us with a letter
to the Securities and Exchange Commission, dated September 12, 2000, a copy of
which was filed as an exhibit to our Current Report on Form 8-K, dated September
12, 2000, pursuant to which PricewaterhouseCoopersLLP agreed with the above
statements.
During the two (2) fiscal years and the subsequent interim period
preceding September 5, 2000, we did not consult Dixon Odom PLLC regarding any of
the matters or events set forth in Regulation S-K Item 304(a)(2)(i) and (ii).
PricewaterhouseCoopers LLP served as our independent accountants from
January 1, 2000 through September 5, 2000. Since September 5, 2000, Dixon Odom
PLLC has served as our independent accountants. PricewaterhouseCoopers LLP's
services to us for 2000 included consultation on various accounting, tax and
other matters. Dixon Odom PLLC's services to us
11
for 2000 and 2001 included the audit of our annual consolidated financial
statements, reviews of certain of our income tax returns and consultation on
various accounting, tax and other matters. A representative of Dixon Odom PLLC
is expected to be present at the Annual Meeting. This representative will have
an opportunity to make a statement if desired and will be available to respond
to shareholder questions. A representative of PricewaterhouseCoopers LLP is not
expected to be present at the Annual Meeting. There were no non-audit services
provided by either PricewaterhouseCoopers LLP or Dixon Odom PLLC during 2000 or
2001.
Audit Firm Fee Summary
During the fiscal year ended December 31, 2001, we retained our
independent accountant, Dixon Odom PLLC, to provide services in the following
categories and amounts:
Audit Fees $39,850
Financial Information Systems Design
And Implementation Fees $ 0
All Other Fees $ 3,635
ADDITIONAL INFORMATION
A copy of our Annual Report on Form 10-KSB for the fiscal year ended
December 31, 2001, including the financial statements and schedules thereto, as
filed with the SEC will be furnished on written request, without charge to any
of our shareholders. Such requests should be addressed to Wanda J. Blow, Four
Oaks Fincorp, Inc., P.O. Box 309, Four Oaks, North Carolina 27524 ((919)
963-2177).
SUBMISSION OF SHAREHOLDER PROPOSALS FOR 2003 ANNUAL MEETING
Any proposals that shareholders intend to present for a vote of
shareholders at the 2003 Annual Meeting of Shareholders, and that such
shareholders desire to have included in our proxy statement and form of proxy
relating to that meeting, must be sent to our principal executive office, marked
to the attention of Ayden R. Lee, Jr., and received at such office on or before
December 2, 2002 (120 calendar days prior to the anniversary of the date of this
proxy statement). Proposals received after December 2, 2002 will not be
considered for inclusion in our proxy materials for our 2003 annual meeting. A
determination as to whether we will oppose inclusion of any proposal in our
proxy statement and form of proxy will be made on a case-by-case basis in
accordance with our judgment and the rules and regulations promulgated by the
SEC.
In addition, if a shareholder intends to present a matter for a vote at
the 2003 annual meeting, other than by submitting a proposal for inclusion in
our proxy statement for that meeting, the shareholder must give timely notice in
accordance with SEC rules. To be timely, a shareholder's notice must be sent to
our principal executive office, marked to the attention of Ayden R. Lee, Jr.,
and received at such office on or before February 15, 2003 (45 calendar days
prior to the anniversary of the mailing date of this proxy statement). Such
notice should set forth (a) as to each matter the shareholder proposes to bring
before the meeting, a brief description of the
12
business desired to be brought before the meeting and the reasons for conducting
such business at the meeting, and (b) the name and record address of the
shareholder, the class and number of shares of our capital stock that are
beneficially owned by the shareholder, and any material interest of the
shareholder in such business. For notices that are not timely filed, we retain
discretion to vote proxies we receive. For notices that are timely filed, we
retain discretion to vote proxies we receive provided: (i) we include in our
proxy statement advice on the nature of the proposal and how we intend to
exercise our voting discretion; and (ii) the proponent fails to (x) provide us
with a written statement, on or before February 15, 2003, that the proponent
intends to deliver a proxy statement and form of proxy to holders of at least
the percentage of our voting shares required under applicable law to carry the
proposal, (y) include the same statement in its proxy materials filed with the
SEC and (z) immediately after soliciting the percentage of shareholders required
to carry the proposal, provide us with a statement from any solicitor, or other
person with knowledge, that the necessary steps have been taken to deliver a
proxy statement and form of proxy to holders of such percentage of shares.
OTHER MATTERS; DISCRETIONARY AUTHORITY
As of the date of this proxy statement, we know of no business that
will be presented for consideration at the annual meeting other than the items
referred to above. The enclosed proxy confers discretionary authority to vote
with respect to any and all of the following matters that may come before the
annual meeting: (i) matters for which we did not receive timely notice; (ii)
approval of the minutes of a prior meeting of shareholders, if such approval
does not amount to ratification of the action taken at the meeting; (iii) the
election of any person to any office for which a bona fide nominee is named in
this proxy statement and such nominee is unable to serve or for good cause will
not serve; (iv) any proposal omitted from this proxy statement and the form of
proxy pursuant to Rule 14a-8 or Rule 14a-9 under the Securities Exchange Act of
1934, as amended; and (v) matters incidental to the conduct of the annual
meeting. If any such matters come before the annual meeting, the proxy agents
named in the accompanying proxy card will vote in accordance with their
judgment.
All shareholders are encouraged to sign, date, and return their proxy
submitted with this proxy statement as soon as possible in the envelope
provided. If a shareholder attends the annual meeting, then he or she may revoke
his or her proxy and vote in person.
By Order of the Board of Directors
April 1, 2002
Ayden R. Lee, Jr.
Chief Executive Officer and President
13
Appendix A
PROXY THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOUR OAKS FINCORP, INC.
FOR THE 2002 ANNUAL MEETING OF SHAREHOLDERS.
The undersigned hereby appoints Ayden R. Lee, Jr. and M. S. Canaday as proxies,
each with the full power of substitution to represent the undersigned and to
vote all of the shares of stock in Four Oaks Fincorp, Inc. which the undersigned
is entitled to vote at the Annual Meeting of Shareholders of said Company to be
held at the main office of Four Oaks Bank & Trust Company located at 6144 US 301
South, Four Oaks, North Carolina on Monday, April 22, 2002 at 8:00 p.m., and any
adjournments thereof (1) as hereinafter specified upon the proposal listed below
as more particularly described in the Company's proxy statement, receipt of
which is hereby acknowledged; and (2) in their discretion upon such other
matters as may properly come before the meeting and any adjournments thereof. In
order to vote for the proposal, place an X in the appropriate box provided
below. The Board recommends a vote "FOR" the proposal listed below.
1. To elect the following nominees as directors for a one year term: M. S.
Canaday; Ayden R. Lee, Jr.; William J. Edwards; Paula Canaday Bowman; Dr. R. Max
Raynor, Jr.; Percy Y. Lee; Warren L. Grimes; William Ashley Turner
[_] FOR all nominees (except as marked to the contrary below.)
[_] WITHHOLD AUTHORITY to vote for all nominees.
(INSTRUCTION: To withhold authority to vote for any individual nominee(s) write
that nominee(s) name on the line provided below.)
- --------------------------------------------------------------------------------
PLEASE MARK, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE
(continued from other side)
By signing the proxy, a shareholder will also be authorizing the proxyholder to
vote in his discretion regarding any procedural motions which may come before
the Annual Meeting. For example, this authority could be used to adjourn the
meeting if the Company believes it is desirable to do so. Adjournment or other
procedural matters could be used to obtain more time before a vote is taken in
order to solicit additional proxies or to provide additional information to
shareholders. The Company has no current plans to adjourn the meeting, but would
attempt to do so if the Company believes that adjournment would promote
shareholder interests.
THE BOARD OF DIRECTORS FAVORS A VOTE "FOR" THE ABOVE PROPOSAL AND UNLESS
INSTRUCTIONS TO THE CONTRARY ARE INDICATED IN THE SPACE PROVIDED, THIS PROXY
WILL BE SO VOTED.
SHARES
Please date and sign this Proxy and return promptly.
Dated: _______________________________________, 2002
____________________________________________________
Signature
____________________________________________________
Signature
NOTE: Please sign your name exactly as it appears on this
card. When signing for a corporation or partnership, or as
agent, attorney, trustee, executor, administrator, or
guardian, please indicate the capacity in which you are
signing. In the case of joint tenants, each joint owner must
sign.