WILMINGTON, N.C., Aug. 12 /PRNewswire/ -- We are pleased to announce that
RiskMetrics Group -- Institutional Shareholder Services ("ISS") and Glass
Lewis & Co. ("Glass Lewis"), the leading independent proxy voting advisory and
corporate governance firms, recommend that the shareholders of Cape Fear Bank
Corporation (Nasdaq: CAPE) vote the BLUE proxy card in connection with the
election of directors at the upcoming annual meeting and NOT the company's
white proxy card. Specifically, ISS recommended the election of James S.
Mahan III and Mort Neblett. Glass Lewis recommended the election of James S.
Mahan III and David Lucht. ISS and Glass Lewis based their recommendations on
their independent and comprehensive analyses of the company, the current board
and our nominees.
We certainly agree with the recommendations of Messers. Mahan, Neblett
and Lucht, and we are pleased that both ISS and Glass Lewis support us. We
also feel that you should vote "FOR" the other nominees on the BLUE proxy
card. We believe that their experience and expertise, like that of Messrs.
Mahan, Neblett and Lucht, will bring value to the company's boardroom.
Therefore, we urge you to vote for the election of Scott C. Sullivan, Mort
Neblett, Haywood Cochrane, Jr., James S. Mahan III, David Lucht and Robert
Isser by voting the BLUE proxy card today.
ISS and Glass Lewis recognize that the company has underperformed its peers
Consistent with the analysis in our proxy statement, Glass Lewis stated in
its report, "Cape Fear's operating performance lags the industry averages with
respect to a number of metrics including returns, efficiency and
profitability. In addition, the company's stock has underperformed its peers
for an extended period and its shares are currently at a five-year low."
In addition, in comparing the company to the local peer group disclosed on
the company's website, ISS noted that "the company has generally trailed the
peer group median in terms of operational performance since 2004." ISS also
questioned the "deterioration in the company's loan portfolio and the
allowances for loan losses, which currently represent just over one-half of
nonperforming assets."
The current board's actions raise corporate governance concerns for ISS and
Glass Lewis
ISS criticized CEO/Chairman Cameron Coburn's single trigger
change-in-control arrangement as "problematic" and a "poor pay practice." As
we stated in our proxy statement, we believe this is another mechanism to
entrench an unproven and, thus far, ineffective executive officer.
Glass Lewis cautioned shareholders that management nominee, Craig S.
Relan, served as chairman of the audit committee during the last fiscal year.
As you recall, the company reported on April 3, 2008 that it had identified
material weaknesses in its internal controls over financial reporting,
particularly related to its allowance for loan losses. The Glass Lewis report
warned, "We believe such material weaknesses may signal weak internal
accounting expertise, poor internal controls and aggressive financial
reporting practices at the company." Glass Lewis concluded, "In this case, we
believe that the chairman of the audit committee has not satisfactorily
performed his duties in this regard."
Glass Lewis questioned other practices by the company's audit committee
and its chairman. "We note that the audit committee has not appointed an
audit committee financial expert as defined by the SEC. An audit financial
expert is essential in providing the committee with expert advice and guidance
as it relates to the oversight of the company's accounting and financial
reporting. We believe this is a serious omission for which the chair of the
audit committee should be held accountable."
In contrast, if our nominees are elected, we intend to appoint Miltom E.
Petty, who is a certified public accountant with experience in audit and
accounting, as a seventh director and the financial expert on the audit
committee. We initially proposed Mr. Petty as our seventh director nominee,
but we removed him from our slate in response to the company reducing the size
of the board to six directors. We would have preferred to allow you to elect
Mr. Petty, but believe having a financial expert is important enough that he
should be appointed to the board.
ISS and Glass Lewis criticize the board's timing of a potential sale
Concerning a sale of the company, Glass Lewis cautioned, "We believe that
shareholders should be concerned regarding the board's timing of a potential
sale. In December 2007, the board determined to not hold discussions with Mr.
Koury regarding an offer to acquire the company for $12.00 per share.
However, it now believes a strategic transaction could be best for
shareholders at the current depressed values."
ISS shared this sentiment. It stated, "[W]e question why the board did
not consult with its financial advisor prior to rejecting [Mr. Koury's]
December 2007 offer, if only to gauge the attractiveness of such offer in a
softening economy as well as to decide whether the time was right to seek out
interested parties." The analyses of Glass Lewis and ISS give even more
credence to our criticism of the company's lack of focus and direction.
ISS agrees that our nominees have more financial and banking experience than
the current board
According to ISS, "[a] comparative analysis of the dissident and
management slates indicates that the dissident has more relevant financial and
banking experience." ISS highlighted nominee Scott Sullivan who "is a manager
at Cameron Management LLC, an investment firm focused on real estate and other
financial investments, and previously served on Wachovia Bank's local advisory
board." ISS continues by discussing the experience of Messrs. Neblett, Mahan
and Lucht, who, collectively, have a wealth of banking, investment banking and
financial experience. In contrast, ISS noted that, other than CEO/Chairman
Cameron Coburn, the current board consists of a realtor/broker, a restaurant
operator, and others not employed in the banking or financial industry.
The professional proxy advisory firms agree that the company needs a change in
the boardroom
In its report, Glass Lewis stated that it generally does not favor
dissident board nominees "unless one of the following two things has occurred:
(i) there are serious problems at the company and the newly proposed nominee
has a clear and realistic plan to solve those problems; or (ii) the current
board has undertaken an action clearly contrary to the interests of
shareholders (or failed to undertake an action clearly to the benefit of
shareholders)." Consistent with our proxy statement, Glass Lewis found that
the company had serious problems and could benefit from new, independent
directors. Similarly, ISS declared that it makes recommendations solely on
its professional "opinion of what is in the shareholders' best interests."
ISS and Glass Lewis recognize that Live Oak Banking Company, the
Wilmington-based employer of Messrs. Mahan and Lucht, is not a competitor to
the company. Live Oak Banking Company's business is to make specialty loans
-- it does not seek local deposits or otherwise serve as a community bank.
Therefore, we urge you to follow the independent advice of ISS and Glass
Lewis, the leading, independent proxy advisory firms.
Vote the BLUE proxy card for the election of our nominees
We strongly urge you to vote "FOR" Messrs. Mahan, Lucht, Sullivan,
Neblett, Cochrane and Isser on the BLUE proxy card. We are confident that
these gentlemen, as a group, possess the knowledge, experience and leadership
to invigorate the boardroom, to respond to shareholder concerns and to ensure
an effective management team dedicated to maximizing shareholder returns.
We entirely agree with Glass Lewis' assessment that "the participation of
new directors will likely be of value in the board's strategic review process,
...(and) independent directors with substantial industry experience could
assist management in crafting such a turn-around of the bank." Please vote
the BLUE proxy card, and we pledge to work tirelessly for you.
If you have any questions or need assistance in voting your shares, please
contact D.F. King & Co., Inc., which is assisting in our solicitation of
proxies:
D.F. King & Co., Inc.
48 Wall Street, 22nd Floor
New York, NY 10005
Shareholders call toll free (800) 290-6427
Banks and Brokers call collect (212) 269-5550
Important Information
In connection with Cape Fear Bank Corporation's (the "company") 2008
annual meeting of shareholders (the "Annual Meeting"), Maurice J. Koury, The
Maurice and Ann Koury Charitable Trust, The Maurice J. Koury Foundation, Inc.,
Scott C. Sullivan, Miltom E. Petty, Mort Neblett, Haywood Cochrane, Jr., James
S. Mahan III, David Lucht and Robert Isser (the "Group") filed with the SEC
and mailed to shareholders a definitive proxy statement on July 17, 2008. The
Annual Meeting is to be held at 9:30 a.m. on Tuesday, August 19, 2008, at the
University of North Carolina at Wilmington Executive Development Center
located at 1241 Military Cutoff Road, Wilmington, North Carolina.
Shareholders are strongly advised to read the Group's definitive proxy
statement. Shareholders may obtain a free copy of the definitive proxy
statement and any other documents filed by the Group with the SEC at the SEC's
website at www.sec.gov. The definitive proxy statement may also be obtained
for free from D.F. King & Co., Inc. 48 Wall Street, 22nd Floor, New York, NY
10005. Shareholders may call D.F. King & Co. toll free at (800) 290-6427. In
connection with the Annual Meeting, the individuals comprising the Group and
employees of D.F. King & Co. may solicit proxies from shareholders of the
company by mail, advertisement, telephone, electronic means and personal
solicitation. Shareholders may obtain more information regarding the names,
affiliations and interests of the individuals comprising the Group in the
Group's definitive proxy statement. This press release includes quotations
from previously published material from ISS and Glass Lewis. We did not seek
the consent of the author or publication to the use of any such material as
proxy soliciting material nor has any consent been granted. We have not
directly or indirectly paid or proposed to make any payments or give any other
consideration to either ISS or Glass Lewis in connection with the preparation,
publication or republication of any such material.
SOURCE Maurice J. Koury