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 ss.240.14a-11(c) or ss.240.14a-12
CCB FINANCIAL CORPORATION
- ----------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- ------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fees (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11:*
----------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------------
5) Total fee paid:
----------------------------------------------------------------------------
*Set forth the amount on which the filing fee is calculated and state how
it was determined.
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
---------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
---------------------------------------------------------------------------
3) Filing Party:
---------------------------------------------------------------------------
4) Date Filed:
---------------------------------------------------------------------------
CCB FINANCIAL CORPORATION
111 CORCORAN STREET
POST OFFICE BOX 931
DURHAM, NORTH CAROLINA 27702-0931
----------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
----------------------------------------
TO BE HELD APRIL 18, 2000
NOTICE is hereby given that the Annual Meeting of Shareholders of CCB
Financial Corporation (the "Corporation") will be held as follows:
Place: George Watts Hill Alumni Center,
Stadium Drive at Ridge Road
on the campus of the University of
North Carolina at Chapel Hill,
Chapel Hill, North Carolina
Date: Tuesday, April 18, 2000
Time: 11:00 A.M.
For your convenience, a map with directions to the George Watts Hill Alumni
Center appears on the back outside cover of the accompanying Proxy Statement.
THE PURPOSES OF THE ANNUAL MEETING ARE:
1. To elect four members of the Board of Directors for terms of three years
and one member of the Board of Directors for a term of two years.
2. To consider an amendment to the Corporation's Long-Term Incentive Plan.
3. To adopt a new Executive Management Incentive Plan.
4. To consider a proposal to ratify the appointment of KPMG LLP as the
Corporation's independent accountants for the year ending December 31, 2000.
5. To consider and act on any other matters that may properly come before
the Annual Meeting.
The record date for the determination of shareholders entitled to notice of
and to vote at the Annual Meeting has been set as the close of business on March
1, 2000.
EVEN IF YOU EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE
REQUESTED TO MARK, DATE, AND SIGN THE ENCLOSED APPOINTMENT OF PROXY AND RETURN
IT IN THE ENCLOSED ENVELOPE. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY REVOKE
YOUR APPOINTMENT OF PROXY AND VOTE YOUR SHARES IN PERSON.
Sincerely,
/s/ Ernest C. Roessler
ERNEST C. ROESSLER,
Chairman, President and Chief Executive
Officer
March 17, 2000
CCB FINANCIAL CORPORATION
111 CORCORAN STREET
POST OFFICE BOX 931
DURHAM, NORTH CAROLINA 27702-0931
---------------
PROXY STATEMENT
---------------
MAILING DATE: MARCH 17, 2000
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 18, 2000
GENERAL
This Proxy Statement is being distributed in connection with the
solicitation by the Board of Directors of CCB Financial Corporation (the
"Corporation") of appointments of proxy in the form enclosed herewith for the
2000 Annual Meeting of Shareholders of the Corporation and any adjournments
thereof (the "Annual Meeting"). The Annual Meeting will be held on Tuesday,
April 18, 2000, beginning at 11:00 A.M., at the George Watts Hill Alumni Center,
Stadium Drive at Ridge Road, on the campus of the University of North Carolina
at Chapel Hill, Chapel Hill, North Carolina. For your convenience, a map with
directions to the George Watts Hill Alumni Center appears on the back outside
cover of this Proxy Statement.
As used in this Proxy Statement, the term "the Bank" refers to the
Corporation's wholly-owned North Carolina-chartered commercial bank subsidiary,
Central Carolina Bank and Trust Company, Durham, North Carolina, and the term
"AFB" refers to the Corporation's wholly-owned federal savings bank subsidiary,
American Federal Bank, FSB, Greenville, South Carolina.
VOTING OF APPOINTMENTS OF PROXIES; REVOCATION
Persons named in the enclosed appointment of proxy as proxies for
shareholders at the Annual Meeting are Leo P. Pylypec, Secretary of the
Corporation and the Bank, W. Harold Parker, Jr., Controller of the Corporation
and the Bank, and Manuel L. Rojas, General Auditor of the Bank. Shares
represented by each appointment of proxy which is properly executed, returned,
and not revoked, will be voted in accordance with the directions contained
therein. If no directions are given, those shares will be voted "FOR" the
election of each of the five nominees for director named in Proposal 1 and "FOR"
the other proposals described herein. If, at or before the time of the Annual
Meeting, any nominee named in Proposal 1 becomes unavailable for any reason, the
proxies will be authorized to vote for a substitute nominee. On such other
matters as may properly come before the Annual Meeting, the proxies will be
authorized to vote shares represented by appointments of proxy in accordance
with their best judgment.
A shareholder may revoke an appointment of proxy at any time before the
shares represented by it have been voted by filing with Mr. Pylypec at the
address above an instrument revoking it or a properly executed appointment of
proxy bearing a later date, or by attending the Annual Meeting and announcing
his or her intention to vote in person.
EXPENSES OF SOLICITATION
The Corporation will pay the cost of preparing, assembling, and mailing
this Proxy Statement and other proxy solicitation expenses. In addition to the
use of the mail, appointments of proxy may be solicited in person or by
telephone by officers, directors, or employees of the Corporation and its
subsidiaries without additional compensation. The Corporation has engaged
Corporate Investor Communications, Inc., to assist in the solicitation of
appointments of proxy. The fee for such services will be approximately $5,000,
plus reimbursement of reasonable out-of-pocket expenses. The Corporation also
will reimburse brokerage houses and other nominees for expenses incurred in
forwarding the Corporation's proxy materials to beneficial owners of its voting
securities.
RECORD DATE
The Board of Directors has set March 1, 2000, as the record date (the
"Record Date") for the determination of shareholders entitled to notice of and
to vote at the Annual Meeting. Only shareholders of record on that date will be
entitled to vote at the Annual Meeting.
VOTING SECURITIES
The voting securities of the Corporation are the shares of its $5.00 par
value common stock ("Common Stock"), of which 100,000,000 shares were authorized
and 39,445,660 shares were outstanding as of the Record Date. On such date there
were approximately 9,400 shareholders of record.
VOTING PROCEDURES; VOTES REQUIRED FOR APPROVAL
The representation in person or by proxy of a majority of the votes
entitled to be cast is necessary to provide a quorum at the Annual Meeting. At
the Annual Meeting, each shareholder will be entitled to cast one vote for each
share of Common Stock held of record on the Record Date for each matter
submitted for voting and, in the election of directors, for each director to be
elected.
In voting for directors under Proposal 1, the five nominees receiving the
highest numbers of votes will be elected. Votes may be cast in favor of director
nominees or withheld. Withheld votes are not treated as votes cast and,
therefore, will have no effect on the election of directors. In the case of the
other proposals, for such proposals to be approved, the number of votes cast for
approval must exceed the number of votes cast against approval. Under the rules
of the New York Stock Exchange (the "NYSE"), broker-dealers who hold shares in
street name have the authority to vote on certain routine items when they have
not received voting instructions from beneficial owners, in this case, Proposals
1 and 4. Under North Carolina law, abstentions are not treated as votes cast
and, therefore, will have no effect on the vote for any proposal.
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP OF VOTING SECURITIES
Set forth below is information regarding the only entity known to
management of the Corporation to beneficially own more than five percent of the
issued and outstanding shares of Common Stock as of December 31, 1999.
Amount and Nature of Percentage
Name and Address Beneficial Ownership of Class(1)
- ----------------------------- ---------------------- ------------
Central Carolina Bank and 2,281,062 5.76%
Trust Company
111 Corcoran Street
Post Office Box 931
Durham, North Carolina
27702-0931
- ---------
(1) The calculation of the percentage of class beneficially owned is based on
the 39,579,808 shares of the Corporation's Common Stock issued and
outstanding on December 31, 1999.
(2) Shares beneficially owned by the Bank are held through its trust department
in various fiduciary capacities. In addition to the shares reflected above,
the Bank holds certain other shares in various fiduciary capacities as to
which the Bank disclaims beneficial ownership. The aggregate number of
shares held by the Bank includes 2,221,446 shares over which the Bank
exercises sole voting power, 59,616 shares over which the Bank has shared
voting power, 1,329,273 shares over which the Bank has sole investment
power, and 381,907 shares over which the Bank has shared investment power.
2
Set forth below is information as of December 31, 1999 regarding the beneficial
ownership of Common Stock by the Corporation's current directors and executive
officers individually, and by all current directors and executive officers of
the Corporation as a group. No current director or executive officer owned more
than one percent of the shares outstanding on December 31, 1999. Current
directors and executive officers as a group owned 2.74% of the shares
outstanding on such date.
AMOUNT AND NATURE OF
NAME BENEFICIAL OWNERSHIP(1)
- -------------------------------------------- ------------------------
William L. Abercrombie, Jr. 130,307(2)
J. Harper Beall, III 63,864(3)
James B. Brame, Jr. 18,857(4)
Timothy B. Burnett 12,877(5)
Blake P. Garrett, Jr. 94,613(6)
Edward S. Holmes 25,529(7)
David B. Jordan 35,414(8)
C. Dan Joyner 45,527(9)
Owen G. Kenan 22,607(10)
Eugene J. McDonald 25,940(11)
Hamilton W. McKay, Jr., M.D. 28,721(12)
George J. Morrow 8,097(13)
Eric B. Munson 14,314(14)
Ernest C. Roessler 170,185(15)
Dr. David E. Shi 18,041(16)
Jimmy K. Stegall 81,175(17)
H. Allen Tate, Jr. 37,683(18)
James L. Williamson 19,769(19)
Dr. Phail Wynn, Jr. 15,276(20)
J. Scott Edwards 120,435(21)
Sheldon M. Fox 8,052(22)
Richard L. Furr 99,050(23)
All current directors and executive 1,096,333(24)
officers as a group (22 persons)
- ---------
(1) Except as otherwise noted, each individual exercises sole voting and
investment power with respect to all shares shown as beneficially owned.
(2) Includes 11,538 shares with respect to which Mr. Abercrombie exercises
shared voting and investment power, 72,081 shares which he could purchase
under a presently exercisable option and as to which he is considered to
have sole investment power only and 14,956 shares held under the 401(k)
Plan of AFB as to which he is considered to have sole investment power
only.
(3) Includes 15,842 shares which Mr. Beall could purchase under a presently
exercisable option and as to which he is considered to have sole investment
power only, and 21,883 shares with respect to which he exercises shared
voting and investment power. Does not include 4,020 shares held by Mr.
Beall's spouse and children and with respect to which he disclaims any
beneficial ownership.
(4) Includes 9,200 shares which Mr. Brame could purchase under a presently
exercisable option and as to which he is considered to have sole investment
power only.
(5) Includes 7,200 shares which Mr. Burnett could purchase under a presently
exercisable option and as to which he is considered to have sole investment
power only.
(6) Includes 47,614 shares with respect to which Mr. Garrett exercises shared
voting and investment power and 11,095 shares which he could purchase under
a presently exercisable option and as to which he is considered to have
sole investment power only.
(7) Includes 11,200 shares which Mr. Holmes could purchase under a presently
exercisable option and as to which he is considered to have sole investment
power only. Does not include 43,296 shares held by his spouse and with
respect to which he disclaims any beneficial ownership.
3
(8) Includes 522 shares with respect to which Mr. Jordan exercises shared
voting and investment power, 3,764 shares under the 401(k) Plan as to
which he is considered to have sole investment power only, and 15,628
shares which he could purchase under a presently exercisable option and as
to which he is considered to have sole investment power only.
(9) Includes 2,288 shares with respect to which Mr. Joyner exercises shared
voting and investment power and 16,880 shares which he could purchase under
a presently exercisable option and as to which he is considered to have
sole investment power only.
(10) Includes 9,560 shares with respect to which Mr. Kenan exercises shared
voting and investment power and 11,200 shares which he could purchase under
a presently exercisable option and as to which he is considered to have
sole investment power only.
(11) Includes 2,403 shares with respect to which Mr. McDonald exercises shared
voting and investment power and 11,200 shares which he could purchase under
a presently exercisable option and as to which he is considered to have
sole investment power only.
(12) Does not include 1,558 shares held by Dr. McKay's spouse and children and
with respect to which he disclaims any beneficial ownership.
(13) Includes 3,200 shares which Mr. Morrow could purchase under a presently
exercisable option and as to which he is considered to have sole investment
power only.
(14) Includes 11,200 shares which Mr. Munson could purchase under a presently
exercisable option and as to which he is considered to have sole investment
power only.
(15) Includes 7,000 shares with respect to which Mr. Roessler exercises shared
voting and investment power, 84,972 shares which he could purchase under a
presently exercisable option and as to which he is considered to have sole
investment power only, 4,020 shares which his children could purchase under
presently exercisable options assigned to them by Mr. Roessler and as to
which he is considered to have shared investment power only, and 23,528
shares held under the 401(k) Plan as to which he is considered to have sole
investment power only.
(16) Includes 12,880 shares which Dr. Shi could purchase under a presently
exercisable option and as to which he is considered to have sole investment
power only.
(17) Includes 12,904 shares with respect to which Mr. Stegall exercises shared
voting and investment power and 11,200 shares which he could purchase under
a presently exercisable option and as to which he is considered to have
sole investment power only.
(18) Includes 1,050 shares with respect to which Mr. Tate exercises shared
voting and investment power and 11,200 shares which he could purchase under
a presently exercisable option and as to which he is considered to have
sole investment power only. Does not include a total of 6,483 shares held
by or for Mr. Tate's spouse and children and with respect to which he
disclaims any beneficial ownership.
(19) Includes 11,200 shares which Mr. Williamson could purchase under a
presently exercisable option and as to which he is considered to have sole
investment power only.
(20) Includes 11,200 shares which Dr. Wynn could purchase under a presently
exercisable option and as to which he is considered to have sole investment
power only.
(21) Includes 26,037 shares under the 401(k) Plan as to which Mr. Edwards is
considered to have sole investment power only and 41,534 shares which he
could purchase under a presently exercisable option and as to which he is
considered to have sole investment power only.
(22) Includes 132 shares under the 401(k) Plan as to which Mr. Fox is considered
to have sole investment power only, 600 shares with respect to which he
exercises sole voting power only, and 4,000 shares which he could purchase
under a presently exercisable option and as to which he is considered to
have sole investment power only.
(23) Includes 11,334 shares with respect to which Mr. Furr exercises shared
voting and investment power, 42,366 shares which he could purchase under a
presently exercisable option and as to which he is considered to have sole
investment power only, and 12,016 shares under the 401(k) Plan as to which
he is considered to have sole investment power only.
(24) Includes an aggregate of 455,506 shares with respect to which current
directors and executive officers exercise sole voting and investment power,
128,096 shares with respect to which they have shared voting and investment
power, 427,678 shares which such persons could purchase under presently
exercisable options and as to which they have sole investment power only,
4,020 shares with respect to which they have shared investment power, 600
shares with respect to which they have sole voting power only, and 80,433
shares under the 401(k) Plan as to which they have sole investment power
only.
4
PROPOSAL 1. ELECTION OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" EACH OF THE
FOUR NOMINEES NAMED BELOW FOR A THREE-YEAR TERM.
PRINCIPAL OCCUPATION
NAME AND AGE AND OTHER DIRECTORSHIPS DIRECTOR SINCE(1)
- ----------------------------- --------------------------------------------------------------------------------------
J. Harper Beall, III President and Chief Executive Officer, Fairfield Chair 1994
(58) Company (furniture manufacturer)
Eugene J. McDonald President, Duke Management Company (asset management 1985
(67) company affiliated with Duke University); Executive Vice
President, Duke University; Executive Vice Chairman of the
Corporation and Bank; Director, Key Funds, Inc.; and
Director, Flag Group of Mutual Funds
James L. Williamson Retired, previously Partner, KPMG LLP (certified public 1995
(67) accountants)
Dr. Phail Wynn, Jr. President, Durham Technical Community College 1992
(52)
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE NOMINEE
NAMED BELOW FOR A TWO-YEAR TERM.
William L. Abercrombie, Jr. Vice Chairman of the Board of the Corporation and the Bank; 1997 (3)
(52) Chairman of the Board, President and Chief Executive Officer
of AFB
REMAINING DIRECTORS NOT SUBJECT TO ELECTION IN 2000
SERVING A THREE-YEAR TERM
ENDING IN 2001:
James B. Brame, Jr.(2) President, Brame Specialty Co., Inc. (paper products, office 1993
(54) supplies and equipment)
David B. Jordan Vice Chairman of the Board of the Corporation and the Bank; 1995
(63) Former Vice Chairman and Chief Executive Officer of Security
Capital Bancorp (acquired by the Corporation in 1995);
Director of AFB
C. Dan Joyner President and Chief Executive Officer of The Prudential/C. Dan 1997 (3)
(62) Joyner Co., Inc. (real estate broker); Director of AFB
Eric B. Munson President and Chief Executive Officer, University of North 1985
(57) Carolina Hospitals
Dr. David E. Shi President, Furman University; Director of AFB 1997 (3)
(48)
Jimmy K. Stegall President, Stegall Petroleum, Inc. (petroleum marketer and real 1995
(69) estate development)
SERVING A THREE-YEAR
TERM ENDING IN 2002:
Timothy B. Burnett President, Bessemer Improvement Company (industrial and 1994
(59) commercial real estate development); Trustee, Alexander
Hamilton Insurance Trust
Blake P. Garrett, Jr. Partner, Garrett and Garrett Construction (commercial real estate 1997 (3)
(59) developer); Trustee, Real Estate Fund Investment Trust;
Director of AFB
Owen G. Kenan President and Chief Executive Officer, Kenan Enterprises, Inc. 1981
(56) (commercial real estate holding company), Kenan
Developments, Inc. (commercial real estate developer); also
serves as Director and Vice Chairman, Kenan Transport Co.,
Inc. (bulk products hauler), Vice Chairman, Flagler Systems,
Inc. (hotel and property management), and Chairman, Kenan
Global Enterprises, LLC (international investments)
George J. Morrow President and Chief Executive Officer, Glaxo Wellcome Inc. 1996
(48) (pharmaceuticals)
Ernest C. Roessler Chairman of the Board, President and Chief Executive Officer of 1993
(58) the Corporation and the Bank; Director of AFB
H. Allen Tate, Jr. President, Allen Tate Company, Inc. (residential real estate 1989
(68) broker); Director, Reliance Relocation Services, Inc.
5
- ---------
(1) Refers to the year in which a person first was elected a director of the
Corporation or, if prior to the Corporation's organization in 1983, the year
in which such person first was elected a director of the Bank.
(2) During 1999, the Bank purchased office supplies and other products from
Brame Specialty Co., Inc., in an aggregate amount of $1,019,556.
(3) Messrs. Abercrombie, Garrett, and Joyner, and Dr. Shi became members of the
Boards of Directors of the Corporation and the Bank on August 1, 1997, by
action of the then existing Boards of Directors of the Corporation and the
Bank, in connection with the Corporation's acquisition of AFB.
(4) Edward S. Holmes and Hamilton W. McKay, Jr., M.D. are retiring from the
current Board of Directors effective with the 2000 Annual Meeting.
DIRECTORS' COMPENSATION
Directors who are officers other than the Executive Vice Chairman do not
receive any additional compensation for their service as directors. During 1999
each director of the Corporation received a retainer of $12,500 and an
additional retainer of $7,500 if a member of the Executive Committee.
Additionally, directors received a fee of $875 for each meeting of the Board of
Directors attended and $750 for attendance at each meeting of a committee of the
Board of Directors. If the director also served as chairman of the committee, he
received an additional fee of $250 for attendance at each committee meeting. In
addition to retainer and attendance fees, Mr. McDonald received $102,000 in fees
for his services as Executive Vice Chairman in 1999.
In order to increase stock ownership of directors in the Corporation,
beginning in 1998, the directors were given the option of receiving fees in an
amount equal to 120% of the fees to which they were entitled provided they
utilized such amount to purchase shares of the Corporation's Common Stock
through the Corporation's Dividend Reinvestment and Stock Purchase Plan.
Alternatively, the fees may be deferred under a Deferred Compensation Plan that
invests solely in the Common Stock of the Corporation.
Total directors' fees payable for 1999 were $640,975, of which $93,525 was
paid to directors and $547,450 was used to purchase stock or was deferred under
the Deferred Compensation Plan. Additionally in 1999, directors were granted
stock options using Black-Scholes methodology, intended to provide approximately
$20,000 per year in annualized compensation.
Retainer and attendance fees will remain unchanged in 2000. It is
anticipated that directors will be granted additional stock options under
similar terms as in 1999.
BOARD OF DIRECTORS' MEETINGS AND COMMITTEES
The Board of Directors held four regular meetings and one special meeting
during 1999. All incumbent directors attended more than 75% of the total number
of meetings of the Board of Directors and its committees on which they served
during 1999.
The Board of Directors has several standing committees, including an Audit
Committee, a Nominating Committee, a Governance Committee and a Compensation
Committee. The voting members of these committees are appointed by the Board of
Directors annually from among its members. Additionally, certain officers of the
Corporation and the Bank are appointed to serve as non-voting, advisory members
of certain committees.
The current members of the Audit Committee are Mr. Burnett, who serves as
Chairman, and Messrs. Beall, Garrett, Williamson, Dr. McKay and Dr. Wynn. The
primary functions of the Audit Committee are to provide additional assurance
regarding the integrity of financial information used by the Board of Directors
and distributed to the public by the Corporation and to oversee and monitor the
activities of the Corporation's internal and external audit processes, including
the nomination of the Corporation's independent accountants. The committee met
five times during 1999.
The current members of the Nominating Committee are Mr. McDonald, who
serves as Chairman, Messrs. Roessler and Stegall, Dr. McKay, and Dr. Shi. Mr.
Pylypec currently serves as a non-voting, advisory member. The primary function
of the Nominating Committee is to recommend candidates to the Board of Directors
for selection as nominees for election as directors. The committee has met once
since the 1999 Annual Meeting. Any shareholder wishing to make a nomination for
director to be considered at the 2001 Annual Meeting anticipated to be held
during April 2001 must make such nomination in writing to Mr. Pylypec, Secretary
of the Corporation, not less than 60 days nor more than 90 days prior to such
meeting. Such notification must include the name and address of the shareholder
making the nomination, a representation of the number of shares of the
Corporation owned of record by the shareholder and such shareholder's intention
to appear
6
in person or by proxy at the meeting to nominate the person or persons specified
in the notice. As to each person nominated, the notification must include such
person's name and address, employment history for the past five years,
affiliations (if any) with the Corporation and other corporations, the number of
shares of the Corporation that are owned of record or beneficially by such
proposed nominee(s) and information concerning any transactions in shares of the
Corporation or such other corporation within the prior 60 days. Additionally,
information must be given as to whether such proposed nominee(s) has been
convicted in a criminal proceeding within the past five years and, if so, the
details thereof; whether such person(s) has been a party to any proceeding or
subject to any judgment, decree or final order with respect to violations of
federal or state securities laws within the past five years and the details
thereof, if any, and the details of any contract, arrangement, understanding or
relationships with any person with respect to any securities of the Corporation.
Further, the proposed nominee's written consent to be named as a nominee and to
serve as a director if elected must be provided together with a description of
all arrangements or understandings between the shareholder and each nominee and
any other person or persons (naming such person or persons) pursuant to which
the nomination(s) are to be made by the shareholder. Any nomination(s) not made
in accordance with the foregoing procedure may be disregarded by the chairman of
the meeting.
The current members of the Governance Committee are Mr. McDonald, who
serves as Chairman, Messrs. Burnett, Holmes, Morrow, Munson and Dr. Shi. Mr.
Pylypec currently serves as a non-voting, advisory member. The primary
functions of the Governance Committee are an ongoing review of the
Corporation's existing corporate governance policies and procedures and
formulation of recommendations to improve the Corporation's corporate
governance to reflect "best practices" of corporate America. The committee met
seven times in 1999.
The Compensation Committee administers the Corporation's compensation
program and has responsibility for matters involving the compensation of
executive officers of the Corporation and the Bank. With respect to salaries,
however, the Compensation Committee only establishes salary ranges for executive
officers while the Executive Committee sets actual salaries within those ranges.
All actions of the Compensation Committee are subject to review by the full
Board of Directors. The membership of the Compensation Committee, which met four
times during 1999, is described below.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation Committee are Mr. Munson, who
serves as Chairman, and Messrs. Brame, Joyner, McDonald and Morrow, with Messrs.
Roessler and John J. Mistretta, Executive Vice President and Director of Human
Resources of the Corporation and the Bank, serving as non-voting, advisory
members.
The current members of the Executive Committee are Mr. Roessler, who
serves as Chairman, and Messrs. Abercrombie, Holmes, Jordan, McDonald, Munson
and Dr. Wynn, with Messrs. Edwards, Fox and Furr serving as non-voting,
advisory members.
COMPENSATION COMMITTEE REPORT
GENERAL. It is the policy of the Compensation Committee to provide a fully
competitive, performance-based compensation program that will enable the
Corporation to attract, motivate, and retain qualified executive officers.
During 1999, the Corporation's executive compensation program provided for (a)
annual compensation consisting of base salaries combined with cash incentive
bonuses based on the Corporation's financial performance, and (b) long-term
compensation consisting of periodic stock option awards combined with incentive
compensation based on the Corporation's financial performance. The Corporation
also provided certain other compensation plans customary for companies of
comparable size. The annual and long-term compensation programs are intended to
be competitive with median levels of incentive compensation paid by the
Corporation's competitors and were developed based on recommendations made in
1997 by an independent consulting group. Recommendations included changes in the
methodology used to grant stock options. The 1999 grants used the Black-Scholes
methodology which assigns a fair value to an option at the date of grant.
The Omnibus Reconciliation Act of 1993 amended Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), to limit the
deductibility of annual compensation in excess of $1,000,000 paid by public
corporations to certain executive officers. With respect to Section 162(m), the
Compensation Committee has adopted a new Executive Management Incentive Plan in
the form of the attached Appendix A and as described under Proposal 3 for
shareholder vote (the "EMIP").
The following is a discussion of each element of the compensation program
for 1999 with respect to the Corporation's executive officers.
7
ANNUAL COMPENSATION PROGRAM. The 1999 base salary for Mr. Roessler was set
on an objective basis by the Executive Committee using specific performance
criteria within a range determined by the Compensation Committee to be
competitive with the base salaries paid to chief executive officers of bank
holding companies of comparable asset size. The Compensation Committee obtained
from William H. Mercer Co. ("Mercer"), an independent compensation consulting
firm, an analysis of the base salaries of the chief executive officers of
approximately 15 high performing bank holding companies. The bank holding
companies were of similar size and performance level based on key measures such
as earnings per share growth, Return on Assets and Return on Equity. The
information was then used with the strategy to position pay levels at slightly
below the median, consistent with the Corporation's relative size. The 1999
salary set by the Executive Committee for Mr. Roessler was 92% of the median
salary of the chief executive officers of the bank holding companies.
The 1999 salaries of the other executive officers, except Mr. Abercrombie,
were set during February 1999, within ranges approved by the Compensation
Committee, by the Executive Committee based on its evaluation of the performance
and levels of responsibility of each officer and their contribution to the
Corporation's financial performance, measured in terms of its return on assets
and return on equity, for the prior fiscal year. The salary ranges were set by
the Compensation Committee based on its evaluation of the level of demands and
responsibility required by each executive position and by the levels of
compensation paid by financial institutions of comparable size for similar
positions. This comparative analysis was based upon information obtained from
Mercer regarding salaries paid to executive officers of bank holding companies
of comparable asset size, expressed in terms of the ratio of such salaries to
the salaries of their respective chief executive officers. The 1999 salary of
Mr. Abercrombie prior to October 15, 1999 was separately negotiated in
connection with the Corporation's acquisition of AFB in 1997, and his salary for
the remainder of 1999 and for the following years was re-negotiated in the
amendment and restatement of Mr. Abercrombie's employment agreement with the
Corporation effective as of October 15, 1999. See "Change in Control and
Employment Arrangements."
The cash incentive bonuses paid for 1999 to Mr. Roessler and to each of the
other executive officers were determined under the terms of the Management
Performance Incentive Plan (the "Incentive Plan") based on the Corporation's
1999 financial performance, measured in terms of the Corporation's return on
assets, return on equity, earnings per share, and efficiency ratio. The
Incentive Plan uses a "target bonus" approach to determine the size of each
eligible employee's bonus. A participant's base salary and salary grade as of
the first day of the fiscal year is used to determine such participant's target
bonus. During 1999, individual target bonuses, as a percentage of annual base
salary, ranged from a low of 4% to a high of 60%. The overall bonus fund is the
sum of the target bonuses of all participants. Actual bonus amounts for
participants in the Incentive Plan may be higher or lower than their target
bonus amounts and are based upon a comparison of the Corporation's actual
performance to the designated performance measures. The maximum bonus for any
participant generally may not exceed 200% of his or her target bonus.
Additionally, the Corporation's total net income for the fiscal year must exceed
a minimum threshold amount in order for any bonuses to be paid under the
Incentive Plan. Payment of bonuses under the Incentive Plan are made annually
within 75 days of the end of the fiscal year, subject to approval by the
Executive Committee. For the year ended December 31, 1999, the Corporation
exceeded the designated performance measures and surpassed the applicable
minimum net income threshold, resulting in an overall bonus fund of 103.0% of
target bonuses.
Other forms of annual compensation paid to executive officers in 1999
include the Corporation's matching contributions (the "Matching Contributions")
to the account of each executive officer under the 401(k) Plan. The Matching
Contributions for Mr. Roessler and the other executive officers were based on a
formula contained in the terms of the 401(k) Plan and were not related to the
Corporation's or the individual officer's performance for the year.
LONG-TERM COMPENSATION PROGRAM. To enable the Corporation to attract,
retain, and motivate key employees and directors, the Board of Directors adopted
the Long-Term Incentive Plan (the "LTIP"). The LTIP was approved by the
shareholders of the Corporation at their 1994 Annual Meeting and has a ten-year
term. The objective of the LTIP is to provide the Board of Directors with the
means to reward achievement of long-term goals in a manner more flexible than
that provided by the Corporation's previous long-term incentive compensation
arrangements. Under the LTIP, restricted stock, stock options, and performance
units (payable in cash, restricted stock, or unrestricted stock) may
periodically be granted in various combinations to key officers and directors.
The LTIP is administered by the Compensation Committee. Each recipient of an
award under the LTIP must enter into a written agreement with the Corporation
setting forth the restrictions, terms, and conditions of that particular award.
During 1999, Mr. Roessler and each of the other executive officers received
awards under the LTIP in the form of stock options ("Options") and performance
units ("Units"). The Options awarded in 1999 have an exercise price of $55.625
per share, and a term of ten years with one-third of the options vesting on the
first, second, and third anniversaries of the date of grant. The Units awarded
in 1999 have a value in range from $0 to $200 each with a target value of $100
each and will be paid only if the Corporation meets or exceeds a specified
average return on equity, return on assets and total shareholder return as
compared to a peer group of comparably sized banks east of the Mississippi River
over a three-year period ending
8
on December 31, 2001. Vested Units will be settled through payment of cash or
Common Stock made as soon as practical following the conclusion of the
performance period. The number of Options and Units awarded to Mr. Roessler and
to each of the other executive officers was based in each case upon a specified
percentage of their current base salary.
EXECUTIVE COMPENSATION
The following table shows for 1999, 1998, and 1997, the cash and certain
other compensation paid to or received or deferred by the Chief Executive
Officer and the four other highest compensated executive officers of the
Corporation (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
Annual Compensation
------------------------------------
Other
Name and Annual
Principal Salary Bonus Compensation
Position Year ($)(1) ($)(2) ($)
- --------------------------------------- ------ --------- --------- ----------------
Ernest C. Roessler
Chairman, President and Chief 1999 618,000 370,731 --
Executive Officer of the Corporation 1998 536,630 340,890 --
and the Bank 1997 486,160 312,464 --
William L. Abercrombie, Jr. (4)
Vice Chairman of the Corporation 1999 336,810 166,454 170,100(5)
and Chairman, President and 1998 328,290 166,454 291,600(5)
Chief Executive Officer of 1997 285,666 158,880 121,500(5)
AFB
J. Scott Edwards
Senior Executive Vice President of 1999 322,596 161,268 --
the Corporation and the 1998 298,700 151,798 --
Bank 1997 268,315 137,961 --
Richard L. Furr
Senior Executive Vice President of 1999 335,574 167,756 --
the Corporation and the 1998 310,708 157,900 --
Bank 1997 273,980 140,874 --
Sheldon M. Fox (7)
Executive Vice President of the 1999 238,960 114,679 --
Corporation and the 1998 44,422 -- --
Bank 1997 -- -- --
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
-----------------------------------
AWARDS
-------------------------
PAYOUTS
RESTRICTED SECURITIES ------- ALL
NAME AND STOCK UNDERLYING LTIP OTHER
PRINCIPAL AWARDS OPTIONS/SARS PAYOUTS COMPENSATION
POSITION ($) (#) ($) ($)(3)
- --------------------------------------- ----------- -------------- --------- ----------------
Ernest C. Roessler
Chairman, President and Chief -- 34,480 202,000 93,939
Executive Officer of the Corporation -- 34,480 150,000 143,438
and the Bank -- 34,480 138,000 31,406
William L. Abercrombie, Jr. (4)
Vice Chairman of the Corporation -- 13,800 -- 23,672
and Chairman, President and -- 13,360 -- 26,395
Chief Executive Officer of -- 12,715 -- 285,275(6)
AFB
J. Scott Edwards
Senior Executive Vice President of -- 14,280 98,000 49,371
the Corporation and the -- 14,280 84,000 73,626
Bank -- 14,280 80,000 15,864
Richard L. Furr
Senior Executive Vice President of -- 14,580 100,000 46,379
the Corporation and the -- 14,580 86,000 67,545
Bank -- 14,580 80,000 16,179
Sheldon M. Fox (7)
Executive Vice President of the -- 9,800 -- 1,160
Corporation and the 51,750 10,000 -- --
Bank -- -- -- --
- ---------
(1) Consists of salary payable to each Named Executive Officer, including
portions of salary deferred at the election of each officer.
(2) Consists entirely of cash bonuses paid to the Named Executive Officers
under the Incentive Plan. See "Compensation Committee Report -- Annual
Compensation Program."
(3) The amount listed for each Named Executive Officer for 1999 includes the
Corporation's matching contribution on behalf of that officer to the 401(k)
Plan. The separate amounts for each Named Executive Officer are as follows:
Mr. Roessler -- $28,227, Mr. Abercrombie -- $19,797, Mr. Edwards -- $13,950,
Mr. Furr -- $14,511 and Mr. Fox -- $1,160. The amounts also include for Mr.
Roessler -- $65,712, Mr. Edwards -- $35,421 and Mr. Furr -- $31,868 which
represents the present value of the yearly interest forgone on the non-term
premium paid under a split-dollar life insurance arrangement. Also includes
premiums in the amount of $3,875 paid by the Corporation with respect to
whole life insurance for the benefit of Mr. Abercrombie.
(4) On July 31, 1997, the Corporation acquired AFB. Amounts paid to Mr.
Abercrombie prior to such date were paid to him by AFB in his capacity as
Chairman, President and Chief Executive Officer of AFB.
(5) Consists entirely of payments from the Corporation to Mr. Abercrombie in
connection with the Corporation's acquisition of AFB. See "Change of
Control and Employment Arrangements."
(6) Includes a closing bonus in the amount of $275,000 paid to Mr. Abercrombie
by the Corporation in connection with the Corporation's acquisition of AFB.
(7) Mr. Fox was employed by the Corporation on October 26, 1998 and currently
serves as Chief Financial Officer of the Corporation and the Bank. Prior to
being employed by the Corporation, Mr. Fox was a Partner with KPMG LLP.
9
The following table sets forth information with regard to grants of options
during the fiscal year ended December 31, 1999. All such grants were made under
the LTIP.
OPTION GRANTS IN 1999
POTENTIAL REALIZABLE VALUE
NUMBER AT ASSUMED ANNUAL RATES
OF SECURITIES PERCENT OF TOTAL OF STOCK PRICE
UNDERLYING OPTIONS GRANTED APPRECIATION FOR OPTION
OPTIONS TO EMPLOYEES IN EXERCISE OR TERM
GRANTED 1999 BASE PRICE EXPIRATION --------------------------
NAME (#) (%) ($/SH.) DATE 5%($) 10%($)
- ----------------------------- --------------- ----------------- ------------ ----------- ----------- ------------
Ernest C. Roessler 34,480(1) 10.2 55.625 3/22/2009 1,206,188 3,056,718
William L. Abercrombie, Jr. 13,800 4.1 55.625 3/22/2009 482,755 1,223,397
J. Scott Edwards 14,280 4.2 55.625 3/22/2009 499,547 1,265,949
Richard L. Furr 14,580 4.3 55.625 3/22/2009 510,041 1,292,545
Sheldon M. Fox 9,800 2.9 55.625 3/22/2009 342,826 868,789
- ---------
(1) Includes 4,020 options assigned to Mr. Roessler's children.
AGGREGATED OPTION EXERCISES IN 1999
AND OPTION VALUES AT DECEMBER 31, 1999
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1999 (#) DECEMBER 31, 1999 ($) (1)
SHARES ACQUIRED VALUE ------------------------------- ---------------------------
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------- ----------------- ------------- --------------- --------------- ------------- -------------
Ernest C. Roessler 3,994 65,776 88,992(2) 22,986 575,094 --
William L. Abercrombie, Jr. 14,250 685,881 72,081 22,707 1,819,110 --
J. Scott Edwards -- -- 41,534 9,520 333,768 --
Richard L. Furr 2,346 82,697 42,366 9,720 339,916 --
Sheldon M. Fox -- -- 4,000 15,800 -- --
- ---------
(1) Closing price of the Corporation's Common Stock at December 31, 1999 was
$43.56.
(2) Includes 4,020 options assigned to Mr. Roessler's children.
LONG-TERM INCENTIVE PLAN -- AWARDS IN 1999
ESTIMATED FUTURE
PERFORMANCE PAYOUTS UNDER
OR OTHER NON-STOCK PRICE-BASED
PERIOD PLANS
NUMBER OF SHARES UNTIL --------------------
UNITS OR OTHER MATURATION OR TARGET MAXIMUM
NAME RIGHTS (#) PAYOUT ($) ($)
- ------------------------------- ------------------ -------------- --------- ----------
Ernest C. Roessler 2,250 1999-2001 225,000 450,000
William L. Abercrombie, Jr. 980 1999-2001 98,000 196,000
J. Scott Edwards 940 1999-2001 94,000 188,000
Richard L. Furr 980 1999-2001 98,000 196,000
Sheldon M. Fox 700 1999-2001 70,000 140,000
PENSION PLAN
The Corporation maintains a tax-qualified, defined benefit pension plan
(the "Pension Plan"), in which substantially all full-time employees of the
Corporation and its subsidiaries who have been continuously employed for a
period of twelve months participate. Compensation covered by the Pension Plan
each year is a participant's annual base salary and short term bonus. At his or
her retirement, a participant's annual benefit under the Pension Plan is based
on his or her average covered compensation for any five consecutive plan years
during the last ten years preceding normal retirement age ("Final Average
Compensation"). However, under tax laws in effect at December 31, 1999, the
amount of a participant's annual compensation taken into account for benefit
calculation purposes under the Pension Plan may not exceed $170,000, and maximum
10
annual benefits payable under the Pension Plan are $135,000. The Corporation has
therefore adopted a supplemental retirement plan (the "Supplemental Plan") which
operates in conjunction with the Pension Plan and under which a retiree will
receive annual benefits in an amount equal to the difference, if any, between
his actual benefit under the Pension Plan and the amount he would receive under
the Pension Plan in the absence of the above limitations. The following table
shows the estimated annual aggregate benefit payable under the Pension Plan and
the Supplemental Plan to participants following retirement at age 65, which is
the "normal retirement age" under the Pension Plan, based on various specified
numbers of years of service with the Corporation and its subsidiaries and
various levels of compensation covered under the Pension Plan:
YEARS OF SERVICE
FINAL ---------------------------------------------------------------------------
AVERAGE COMPENSATION 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS 40 YEARS
- ---------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
$100,000............ 12,000 18,000 24,000 30,000 36,000 42,000 48,000
150,000............ 18,000 27,000 36,000 45,000 54,000 63,000 72,000
200,000............ 24,000 36,000 48,000 60,000 72,000 84,000 96,000
250,000............ 30,000 45,000 60,000 75,000 90,000 105,000 120,000
300,000............ 36,000 54,000 72,000 90,000 108,000 126,000 144,000
350,000............ 42,000 63,000 84,000 105,000 126,000 147,000 168,000
400,000............ 48,000 72,000 96,000 120,000 144,000 168,000 192,000
450,000............ 54,000 81,000 108,000 135,000 162,000 189,000 216,000
500,000............ 60,000 90,000 120,000 150,000 180,000 210,000 240,000
550,000............ 66,000 99,000 132,000 165,000 198,000 231,000 264,000
600,000............ 72,000 108,000 144,000 180,000 216,000 252,000 288,000
650,000............ 78,000 117,000 156,000 195,000 234,000 273,000 312,000
700,000............ 84,000 126,000 168,000 210,000 252,000 294,000 336,000
750,000............ 90,000 135,000 180,000 225,000 270,000 315,000 360,000
- ---------
Benefits shown in the table are computed as straight life annuities
beginning at age 65 and are not subject to a deduction for Social Security
benefits or any other offset amount. As of December 31, 1999, the Final Average
Compensation and years of service of each of the Named Executive Officers would
have been: Mr. Roessler -- $689,919 and 11 years; Mr. Abercrombie -- $492,189
and 26 years; Mr. Edwards -- $369,312 and 31 years; Mr. Furr -- $378,964 and 28
years and Mr. Fox -- $232,000 and 1 year.
CHANGE IN CONTROL AND EMPLOYMENT ARRANGEMENTS
In 1999 the Corporation and Bank entered into Amended versions of
Employment and Amended and Restated Change in Control Agreements (collectively
referred to as "Executive Employment Agreements"), with Messrs. Roessler
("Roessler Employment Agreement"), Edwards ("Edwards Employment Agreement"),
Furr ("Furr Employment Agreement") and Fox ("Fox Employment Agreement") as
senior executive officers of the Corporation and Bank (individually, Messrs.
Roessler, Edwards, Furr and Fox, herein called the "Executive"). The Executive
Employment Agreements supercede prior versions of such agreements, entered into
in 1998 between the Corporation and Bank and the Executives, respectively. The
Roessler Agreement provides that Mr. Roessler will be employed as the Chairman
of the Board of Directors, President and Chief Executive Officer of the
Corporation and the Bank. The Board of Directors of the Corporation will
nominate and use its best efforts to secure the election of Mr. Roessler as a
director of the Corporation during the term of the Roessler Employment
Agreement. The Boards of Directors of the Corporation and Bank will cause the
outstanding shares of the direct and indirect subsidiaries of the Corporation
and Bank to elect Mr. Roessler as a member of the Boards of Directors of such
subsidiaries as will be useful to Mr. Roessler in the performance of his duties.
At all times as Mr. Roessler serves as a director of the Corporation and Bank,
he will be appointed to the Executive Committees of those Boards of Directors.
The Roessler Employment Agreement has a five-year term, beginning on its
Effective Date in 1998 (as defined within the Roessler Employment Agreement),
and will automatically, without further action by the Board of Directors of the
Corporation or Bank, be extended for an additional one year period on each
anniversary of its Effective Date, provided that either party may cause the term
of the Roessler Employment Agreement to cease to extend automatically. Mr.
Roessler will receive cash compensation consisting of a base salary of at least
$600,000 per year and will be entitled to participate in all incentive, savings,
retirement and welfare plans, practices, policies and programs applicable
generally to senior executive officers of the Corporation or Bank.
The Edwards Employment Agreement provides that Mr. Edwards will be
employed as the Senior Executive Vice President in charge of the Administrative
Group of each of the Corporation and Bank. In his executive capacities, Mr.
Edwards
11
will report to the President and Chief Executive Officer of the Corporation and
Bank, as applicable. The Edwards Employment Agreement has a three-year term,
beginning on its Effective Date in 1998 (as defined within the Edwards
Employment Agreement), and will automatically, without further action by the
Board of Directors of the Corporation or Bank, be extended for an additional one
year period on each anniversary of the Effective Date provided that either party
may cause the term of the Edwards Employment Agreement to cease to extend
automatically. Mr. Edwards will receive cash compensation consisting of a Base
Salary of at least $313,200 per year and will be entitled to participate in all
incentive, savings, retirement and welfare plans, practices, policies and
programs applicable generally to senior executive officers of the Corporation or
Bank.
The Furr Employment Agreement provides that Mr. Furr will be employed as
the Senior Executive Vice President in charge of the Banking Group of each of
the Corporation and Bank. In his executive capacities, Mr. Furr will report to
the President and Chief Executive Officer of the Corporation and Bank, as
applicable. The Furr Employment Agreement has a three-year term, beginning on
its Effective Date in 1998 (as defined within the Furr Employment Agreement),
and will automatically, without further action by the Board of Directors of the
Corporation or Bank, be extended for an additional one year period on each
anniversary of its Effective Date provided that either party may cause the term
of the Furr Employment Agreement to cease to extend automatically. Mr. Furr will
receive cash compensation consisting of a Base Salary of at least $325,800 per
year and will be entitled to participate in all incentive, savings, retirement
and welfare plans, practices, policies and programs applicable generally to
senior executive officers of the Corporation or Bank.
The Fox Employment Agreement provides that Mr. Fox will be employed as an
Executive Vice President and the Chief Financial Officer of each of the
Corporation and Bank. In his executive capacities, Mr. Fox will report to the
President and Chief Executive Officer of the Corporation and Bank, as
applicable. The Fox Employment Agreement has a two-year term, beginning on its
Effective Date in 1998 (as defined within the Fox Employment Agreement), and
unless terminated as of the end of such two-year term, the Fox Employment
Agreement will continue for a renewing three-year term. After the commencement
of the renewing three-year term, the Fox Employment Agreement will
automatically, without further action by the Board of Directors of the
Corporation or Bank, be extended for an additional one year period on each
anniversary of its Effective Date provided that either party may cause the term
of the Fox Employment Agreement to cease to extend automatically. Mr. Fox will
receive cash compensation consisting of a Base Salary of at least $232,000 per
year and will be entitled to participate in all incentive, savings, retirement
and welfare plans, practices, policies and programs applicable generally to
senior executive officers of the Corporation or Bank.
Each Executive Employment Agreement (other than the Fox Employment
Agreement) provides, among other benefits to the Executive, that the Corporation
and Bank will maintain a split-dollar life insurance agreement ("Split Dollar
Agreement") with the Executive, and together with the Executive, maintain a
related life insurance policy to be owned by the Executive and collaterally
assigned to the Corporation and/or the Bank ("Insurance Policy"), providing
coverage on the life of the Executive for the benefit of the Executive's estate,
beneficiaries designated by him, and/or trusts created by him. Each Executive
Employment Agreement also provides that the Compensation Committee of the Board
of Directors of the Corporation will annually review the Executive's total
compensation and in its sole discretion may adjust the Executive's Base Salary
from year to year, but during the term of the Executive Employment Agreement
("Employment Period") neither the Compensation Committee nor the Board of
Directors of the Corporation or the Bank may decrease the Executive's Base
Salary below the amount stated within the Executive Employment Agreement, and
periodic increases, once granted, shall not be subject to revocation.
If during the Employment Period the Corporation or Bank terminates an
Executive Employment Agreement other than for Cause or Disability or the
Executive terminates it for Good Reason (each as defined therein), in any of the
foregoing cases within one year after a Change in Control ("Change in Control
Termination"), the Executive will be entitled to receive, among other things and
in addition to compensatory amounts owed to him for the current fiscal year, an
amount equal to 2.99 times the total of the Executive's Base Salary and target
EMIP Award (as hereinafter described under Proposal 3) for the then current
fiscal year (except that in the case of the Fox Employment Agreement, if such
termination of employment occurs on or prior to October 25, 2000, the applicable
multiplier will be two (2) times rather than 2.99 times). In addition, the
Executive will be entitled to certain additional payments related to the
Corporation's qualified retirement plans and additional benefits related to the
Corporation's welfare benefit plans. Moreover, under certain circumstances in
connection with a Change in Control Termination, as provided within the
Executive Employment Agreements, the Corporation shall immediately grant a
vested and nonforfeitable award under the LTIP of the same type and the same
quantitative amount as awarded to the Executive under the LTIP for the previous
fiscal year, and/or an award under the EMIP of the same type and in the same
quantitative amount as awarded in the previous fiscal year. All Options
previously granted to each Executive
12
that are unvested as of the date of the Change in Control Termination will be
deemed vested, fully exercisable and nonforfeitable as of that date, subject to
certain exceptions provided within the Executive Employment Agreements, and
Executive benefits under all nonqualified benefit plans will be 100% vested.
Following a Change in Control Termination, the Corporation and the Bank shall
maintain and continue to pay, during the term remaining in the Employment Period
from and after the date of the Change in Control Termination, all premiums due
under the Split Dollar Agreement and the Insurance Policy; provided, however,
that upon or at any time prior to the expiration of the Continuing Period, the
Executive may exercise his right under his Executive Employment Agreement to
terminate the Split Dollar Agreement and the Insurance Policy.
In the event that it is determined that any payment to any of the
Executives, whether or not pursuant to his Executive Employment Agreement, would
be deemed an excess parachute payment within the meaning of Section 280G of the
Code and subject to the excise tax imposed by Section 4999 of the Code, the
Executive will be entitled to an additional payment in the amount necessary to
put the Executive in the same financial position he would have been in, had no
excise tax been imposed.
During the Executive's Employment Period and the remainder of his
Employment Period after termination of his Executive Employment Agreement, each
Executive has agreed to refrain, with certain exceptions provided, within the
States of South Carolina and North Carolina, directly or indirectly in any
capacity from rendering his services or engaging or having a financial interest
in, any business that shall be competitive with any of those business activities
in which the Corporation or its subsidiaries are engaged as of the date of
termination of his employment. Each Executive has also agreed to refrain from
soliciting the provision of services included in the business activities of the
Corporation or its subsidiaries to certain customers or potential customers of
the Corporation or its subsidiaries. The obligations of the Corporation and Bank
under the Executive Employment Agreements are subject to certain regulatory
intervention as outlined within the Executive Employment Agreements.
In 1999 the Corporation entered into an Amended and Restated Employment
Agreement with Mr. Abercrombie, the Chief Executive Officer of AFB (the "Amended
CCB Abercrombie Agreement"). The Amended CCB Abercrombie Agreement provides that
Mr. Abercrombie will be employed as Executive Vice President of the Corporation
and, for a certain period of time (see description of Amended Abercrombie AFB
Agreement, below), shall continue to serve as Chief Executive Officer of the
Corporation's principal banking subsidiary located in South Carolina. The
Amended CCB Abercrombie Agreement has a term, beginning on its Effective Date
(as defined therein), and ending on October 15, 2002. Mr. Abercrombie will
receive cash compensation consisting of a Base Salary of $327,000 per calendar
year and an additional fixed bonus of $166,454 per calendar year and will be
entitled to participate in all savings, retirement and welfare plans applicable
generally to senior executive officers of the Corporation on the same basis as
such other senior executive officers, with full credit given to Mr.
Abercrombie's total accumulated years of service at AFB for purposes of
determining vesting and eligibility. The Corporation also assumed and maintains
on behalf of Mr. Abercrombie that certain Supplemental Retirement Benefit
Agreement, dated as of December 19,1994, between Mr. Abercrombie and AFB. The
Amended CCB Abercrombie Agreement provides that either Mr. Abercrombie or the
Corporation may terminate his employment in consideration of various payments by
the Corporation based upon certain circumstances. In the event that it is
determined that any payment by the Corporation to Mr. Abercrombie, whether or
not pursuant to the Amended CCB Abercrombie Agreement, would be subject to the
excise tax imposed by Section 4999 of the Code, payments to Mr. Abercrombie may
be reduced to the level necessary to avoid imposition of the excise tax,
provided that such reduction will only be effected if Mr. Abercrombie's
financial position will be more favorable as a result of the reduction and
avoidance of the excise tax. During his Employment Period and the remainder of
his Employment Period after termination of Mr. Abercrombie's employment, Mr.
Abercrombie has agreed to refrain, with certain exceptions provided, within the
States of South Carolina and North Carolina, directly or indirectly, in any
capacity, from rendering his services or engaging or having a financial interest
in, any business that shall be competitive with any of those business activities
in which the Corporation or its subsidiaries are engaged as of the date of
termination of Mr. Abercrombie's employment. Mr. Abercrombie has also agreed to
refrain from soliciting the provision of services included in the business
activities of the Corporation or its subsidiaries to certain customers or
potential customers of the Corporation or its subsidiaries.
Contemporaneously with the execution of the Amended CCB Abercrombie
Agreement, AFB, as a subsidiary of the Corporation, also entered into an
employment agreement with Mr. Abercrombie (the "Amended AFB Abercrombie
Agreement"). The Amended AFB Abercrombie Agreement provides that Mr. Abercrombie
will continue to serve as President and Chief Executive Officer of AFB until
such time as AFB is merged into Central Carolina Bank and Trust Company. The
term of the Amended AFB Abercrombie Agreement will run concurrently with the
term of the Amended CCB Abercrombie
13
Agreement, unless earlier terminated as provided in the Amended CCB Abercrombie
Agreement, or by the Board of Directors of AFB. Mr. Abercrombie's compensation
under the Amended AFB Abercrombie Agreement is provided by the Corporation in
accordance with the terms of the Amended CCB Abercrombie Agreement.
Finally, under the provisions of the LTIP, if a change in control of the
Corporation occurs (a) all Options granted thereunder then unexercised and
outstanding will become fully exercisable, (b) all restrictions applicable to
all shares of Restricted Stock granted thereunder then outstanding will be
deemed lapsed and satisfied, and (c) all Units granted thereunder will be deemed
to have been fully earned as of the date thereof subject to the limitation that
such Options, shares of Restricted Stock, and Units have been granted and
outstanding for more than six months as of the date of such change in control.
If (a) a participant's employment is terminated by the Corporation or any of its
subsidiary corporations prior to a change in control without cause at the
request of a person who has entered into an agreement with the Corporation the
consummation of which will constitute a change in control or (b) the participant
terminates his or her employment with the Corporation or any of its subsidiary
corporations prior to a change in control of the Corporation and the
circumstance or event which causes such termination occurs at the request of
such person, then a change in control will be deemed to have occurred
immediately prior to such participant's termination of employment. If the making
of any payment or payments under the LTIP would (a) subject the participant to
an excise tax under Section 4999 of the Code, or any like or successor section
thereto or (b) result in the Corporation's loss of a deduction from federal
taxable income for such payments under Section 280G of the Code, or any like or
successor section thereto (either or both, an "Adverse Tax Consequence"), then,
unless otherwise expressly provided in the underlying award agreement, the
payments to participants, other than those participants with Executive
Employment Agreements, attributable to the LTIP that are "parachute payments"
within the meaning of Section 280G of the Code will be reduced, as determined by
the Compensation Committee in its sole discretion, but after consultation with
the participant affected, to the extent necessary to avoid any Adverse Tax
Consequence.
DIRECTOR AND MANAGEMENT OWNERSHIP OF VOTING SECURITIES
The Board of Directors believes that increased ownership of the
Corporation's Common Stock by the Board and management best aligns with
shareholder interests. Accordingly, in 1997 the Compensation Committee
established a Share Ownership Program for executive officers which included
specific ownership levels of Common Stock for each executive officer. In 1999,
the Program was expanded to include members of the Board of Directors and
certain other members of senior management. The Program now specifies target
ownership levels and target annual increases in ownership for each individual
for a five-year period.
14
PERFORMANCE GRAPH
The following line graph illustrates the cumulative total shareholder
return on the Corporation's Common Stock over the five-year period ended
December 31, 1999 and the cumulative total return over the same period of: (a)
two broad equity market indices: (i) the Standard and Poor's 500 Composite
Index; and (ii) the Standard and Poor's MidCap 400 Composite Index; and (b) a
published industry index, the SNL Banks (Southeast) Index. The graph assumes
$100 originally invested on December 31, 1994 and that all subsequent dividends
were reinvested in additional shares.
CCB FINANCIAL CORPORATION
COMPARISON OF CUMULATIVE TOTAL SHAREHOLDER RETURN
YEARS ENDED DECEMBER 31 (1)
[BAR GRAPH APPEARS HERE]
PERIOD ENDING
------------------------------------------------------------------------------
INDEX 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- --------------------------------------------------------------------------------------------------------------
CCB Financial Corporation 100.0 165.0 209.0 336.7 363.8 284.4
S&P 500 100.0 137.6 169.0 225.4 289.8 350.8
SNL Southeast Bank Index 100.0 150.0 205.9 312.1 332.3 261.5
S&P MidCap 400 100.0 131.0 155.9 206.1 245.5 281.6
(1) Closing price of the Corporation's Common Stock adjusted for the 100% stock
dividend paid October 1, 1998:
December 31, 1994 - $17.38
December 31, 1995 - $27.75
December 31, 1996 - $34.13
December 31, 1997 - $53.75
December 31, 1998 - $57.00
December 31, 1999 - $43.56
15
PROPOSAL 2. APPROVAL OF AN AMENDMENT TO THE LONG-TERM INCENTIVE PLAN
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" PROPOSAL 2.
DESCRIPTION OF THE LONG-TERM INCENTIVE PLAN, AS AMENDED
To enable the Corporation to attract, retain, and motivate key employees
and directors, the Board of Directors adopted the LTIP and the Corporation's
shareholders approved the LTIP at the 1994 Annual Meeting. The purpose of the
LTIP is to provide the Board of Directors with the means to reward achievement
of long-term goals through grants of restricted stock, incentive stock options,
non-qualified stock options, and performance units consisting of cash,
restricted stock, or unrestricted stock in various combinations to key employees
and directors of the Corporation or its subsidiaries (the "Participants").
ADMINISTRATION OF THE LTIP
The LTIP will be administered by the Compensation Committee. The
Compensation Committee will be authorized to construe and interpret the LTIP and
to promulgate, amend, and rescind rules and regulations relating to the
implementation, administration, and maintenance of the LTIP. Each Participant
receiving an award under the LTIP will enter into an agreement with the
Corporation that sets forth the restrictions, terms, and conditions of the award
(the "Award Agreement"). The Compensation Committee will make all determinations
necessary or advisable for the LTIP including (a) selecting the LTIP's
Participants, (b) making awards thereunder in such amounts and form as the
Compensation Committee may determine, (c) imposing such restrictions, terms, and
conditions upon such awards as the Compensation Committee may deem appropriate,
and (d) correcting any defect or omission, or reconciling any inconsistency, in
the LTIP or any Award Agreement.
SECURITIES OF THE CORPORATION SUBJECT TO THE LTIP
The Board of Directors will reserve for awards under the LTIP 2,000,000
shares of the authorized and unissued shares of Common Stock. If any awards
expire unexercised or are forfeited, terminated, or settled in cash in lieu of
Common Stock, the shares of Common Stock theretofore subject to such awards will
generally again be available for awards under the LTIP. The maximum number of
shares of Common Stock for any Participant for which awards may be granted under
the LTIP in any year is 100,000 shares.
ELIGIBILITY
Employees eligible to participate in the LTIP consist of key employees who
are officers or managers of the Corporation, the Bank or AFB. As of January 31,
2000, there were 432 such employees. Directors who are not employees of the
Corporation, the Bank or AFB will be eligible to participate in the LTIP only
with respect to awards of Non-qualified Options (as hereinafter defined) and
Restricted Stock (as hereinafter defined). As of January 31, 2000, there were 16
such directors.
STOCK OPTIONS
An option to purchase shares of Common Stock granted under the LTIP will
either (a) qualify under Section 422 of the Code for treatment as an incentive
stock option ("Incentive Option") or (b) not qualify for treatment as an
incentive stock option under Section 422 of the Code ("Non-qualified Option").
In this Proxy Statement, the term "Option" refers to either an Incentive Option
or a Non-Qualified Option. An Option may be granted alone or in addition to any
other award under the LTIP and will be subject to a periodic vesting schedule.
The exercise price of an Option will be determined by the Compensation Committee
at the time of grant subject to the following limitations: (a) the exercise
price of an Incentive Option may not be less than 100% of the fair market value
per share of the Common Stock on the date of the grant and (b) the exercise
price of an Incentive Option granted to an employee who owns ten percent or more
of the combined total voting power of the Corporation may not be less than 110%
of the fair market value per share of the Common Stock on the date of grant. On
January 31, 2000 the last sale price of a share of Common Stock on the New York
Stock Exchange was $43.50. The term of an Option will be such period of time as
is fixed by the Compensation Committee at the time of grant subject to the
following limitations: (a) the term of an Incentive Option may not exceed ten
years after the date of grant and (b) the term of an Incentive Option granted to
an employee who owns ten percent or more of the combined total voting power of
the Corporation may not exceed five years. An Option may be exercised by giving
written notice of exercise to the Corporation specifying the number of shares to
be purchased. Such notice must be accompanied by payment in full of the exercise
price in cash or if permitted by the terms of the governing Award Agreement by
delivery of (a) a fully-secured, recourse promissory note or (b) shares of
Common Stock already owned by the Participant. The Compensation Committee also
may permit Participants to simultaneously exercise an Option, sell the shares of
Common Stock thereby acquired, and use the proceeds from such sale for payment
of the exercise price.
16
If a Participant purchases Common Stock upon the exercise of an Incentive
Option and either (a) holds it for a period of at least two years following the
date of grant and at least one year from the date the option is exercised (the
"Holding Periods") or (b) dies while owning such Common Stock, the Participant
will be subject to federal income tax on the gain realized upon disposition of
such Common Stock at the time of disposition and the amount of gain will be
equal to the amount realized on disposition less the amount paid upon exercise
of the Incentive Option. The Corporation will not be permitted to claim a tax
deduction from federal taxable income at any time in connection an Incentive
Option held for the Holding Periods specified above.
A Participant who receives a Non-qualified Option will not be subject to
federal income tax upon the grant thereof. On the date a Participant exercises a
Non-qualified Option he or she will recognize federal taxable ordinary income
equal to the difference between the exercise price and the fair market value of
the Common Stock purchased. The Corporation will be allowed to deduct from its
federal taxable income an amount equal to the ordinary income recognized by such
Participant upon exercise of the Non-qualified Option.
If a Participant's employment is terminated for any reason other than
disability, retirement, or death before an Option has vested, such Participant's
right to exercise such Option will immediately terminate. If a Participant's
employment is terminated by disability, retirement, or death before an Option
has vested, such Option will vest to the extent determined by the Compensation
Committee.
If a Participant's employment is terminated for any reason other than
disability, retirement, or death, a vested Option will remain exercisable for a
period of up to 30 days following such termination, as determined by the
Compensation Committee. If a Participant's employment is terminated by
retirement or disability, such Participant will have the right to exercise a
vested Incentive Option at any time within the three-month period or one-year
period, respectively, following such termination. In the event the vested Option
is a Non-qualifed Option, the Participant will have the right to exercise the
Option at any time prior to expiration of the Option.
If a Participant dies while entitled to exercise an Option such
Participant's estate, designated beneficiary, or other legal representative will
have the right to exercise such Option at any time within the one-year period
from the date of such Participant's death.
If a non-employee director leaves the Board of Directors for any reason
other than disability, retirement, or death before an Option becomes vested,
such Option will be forfeited. If a non-employee director leaves the Board of
Directors due to disability, retirement, or death before an Option becomes
vested, such Option will vest to the extent determined by the Compensation
Committee.
If a non-employee director leaves the Board of Directors for any reason
other than disability, retirement, or death, a vested Option will remain
exercisable for a period of up to 30 days following such termination, as
determined by the Compensation Committee. If a non-employee director leaves the
Board of Directors due to disability or retirement, such director will have the
right to exercise a vested Option at any time prior to expiration of the Option.
If a non-employee director leaves the Board of Directors due to death, such
non-employee director's estate, designated beneficiary, or other legal
representative, as the case may be, will have the right to exercise a vested
Option at any time within the one-year period following such director's death.
RESTRICTED STOCK
Awards under the LTIP may be in the form of shares of Common Stock subject
to certain restrictions imposed by the Compensation Committee ("Restricted
Stock"). The Compensation Committee may restrict the transferability of
Restricted Stock and require that it be forfeited upon termination of a
Participant's employment or service as a director, as the case may be.
Restricted Stock may be granted alone or in addition to any other award under
the LTIP. The Compensation Committee will determine the number of shares of
Restricted Stock to be granted and may impose different terms and conditions on
any particular grant of Restricted Stock. Shares of Restricted Stock will be
issued in uncertificated form and registered in the name of such Participant and
will be so held until the restrictions thereon have lapsed and all of the terms
and conditions applicable to such award have been satisfied. Awards of
Restricted Stock will only become unrestricted and vest in the Participant in
accordance with the vesting schedule set forth in the underlying Award Agreement
(the "Restriction Period"). In no event will the Restriction Period be less than
one year after the date on which such award is granted. During the Restriction
Period, Restricted Stock may not be transferred or otherwise disposed of by the
Participant. After satisfaction of the restrictions set by the Compensation
Committee, a certificate for the number of shares of Common Stock which are no
longer subject to such restrictions will be delivered to the Participant. The
remaining shares, if any, issued in respect of such
17
Restricted Stock will either be forfeited or will continue to be subject to the
restrictions set by the Compensation Committee, as the case may be. A
Participant will have, with respect to shares of Restricted Stock, all of the
rights of a shareholder of the Corporation, including the right to vote such
shares and to receive any cash dividends declared and paid thereon. Stock
dividends issued with respect to Restricted Stock will be treated as additional
grants of Restricted Stock and will be subject to the same restrictions that
apply to the shares of Restricted Stock with respect to which such stock
dividends are issued.
If a Participant's employment with or service to the Corporation or any of
its subsidiaries is terminated for any reason other than disability, retirement,
or death prior to satisfaction of the restrictions applicable to a grant of
shares of Restricted Stock, such shares will be forfeited unless the
Compensation Committee in its discretion determines otherwise. In the event of
disability, retirement, or death during the Restriction Period, shares of
Restricted Stock will become free of restrictions to the extent determined by
the Compensation Committee.
PERFORMANCE UNITS
Awards under the LTIP may be in the form of performance-based units, with
each unit representing such monetary amount as is designated by the Compensation
Committee subject to such terms and conditions as the Compensation Committee
deems appropriate ("Units"), including a requirement that the Participant
forfeit such Units in the event certain performance criteria are not met within
a designated period of time. Units may be granted alone or in addition to any
other award under the LTIP. The Compensation Committee will determine the number
of Units to be granted to a Participant. The Compensation Committee may impose
different terms and conditions on any particular Units granted to any
Participant. Participants receiving grants of Units will only earn into and be
entitled to payment in respect of such awards if the Corporation and the
Participant achieve certain performance goals (the "Performance Goals") during
and in respect of a designated performance period (the "Performance Period").
The Performance Goals and the Performance Period will be established by the
Compensation Committee. The Compensation Committee will establish Performance
Goals for each Performance Period prior to, or as soon as practicable after, the
commencement of such Performance Period. The Compensation Committee will also
establish a schedule for such Units setting forth the portion of the award which
will be earned or forfeited based on the degree of achievement, or lack thereof,
of the Performance Goals at the end of the relevant Performance Period. In
setting the Performance Goals, the Compensation Committee may use such measures
as total shareholder return, return on equity, return on assets, net earnings
per share growth, comparisons to peer companies, divisional goals, individual or
aggregate Participant performance, or such other measure or measures of
performance as the Compensation Committee may deem appropriate. Such performance
measures will be defined as to their respective components and meaning by the
Compensation Committee. During any Performance Period, the Compensation
Committee will have the authority to adjust the Performance Goals in such manner
as the Compensation Committee deems appropriate with respect to such Performance
Period. In addition to the Performance Goals, the Compensation Committee also
may require a minimum shareholder return threshold be attained before
consideration is given to any results achieved on the Performance Goals.
Should the Corporation and the Participant achieve the applicable
Performance Goals, but the minimum shareholder return threshold falls below the
minimum expectations, then the Unit may be deferred by the Compensation
Committee for up to two years until the threshold is exceeded. If the minimum
shareholder return threshold is not achieved within the additional time frame,
then no Unit will be paid. With respect to each Unit, the Participant will, if
the applicable Performance Goals and minimum shareholder return threshold have
been achieved during the relevant Performance Period, be entitled to receive
payment in an amount equal to the designated value of each Unit times the number
of such Units so earned. Payment in settlement of earned Units will be made as
soon as practical following the conclusion of the respective Performance Period
in cash, shares of unrestricted Common Stock, or shares of Restricted Stock, as
the Compensation Committee will determine and provide in the underlying Award
Agreement.
If a Participant's employment with the Corporation or any of its subsidiary
corporations is terminated for any reason other than disability, retirement, or
death prior to the completion of any Performance Period, such termination will
result in the forfeiture of the Unit. If termination is due to disability,
retirement, or death, the disposition of non-vested awards will be determined by
the Compensation Committee.
18
DEFERRAL OF AWARDS UNDER THE LTIP
The Compensation Committee may permit a Participant to elect to defer
receipt of any payment of cash or any delivery of shares of Common Stock that
would otherwise be due to such Participant by virtue of the exercise, earn out,
or settlement of any award made under the LTIP. If any such election is
permitted, the Compensation Committee will establish rules and procedures for
such deferrals, including the payment of reasonable interest or dividend
equivalents.
CHANGES IN CONTROL OF THE CORPORATION
Under the provisions of the LTIP, if a change in control of the Corporation
occurs (a) all stock options then unexercised and outstanding will become fully
exercisable, (b) all restrictions applicable to all Restricted Stock then
outstanding will be deemed lapsed and satisfied, and (c) all Units will be
deemed to have been fully earned as of the date thereof subject to the
limitation that such Options, shares of Restricted Stock, and Units have been
granted and outstanding for more than six months as of the date of such change
in control.
If (a) a Participant's employment is terminated by the Corporation or any
of its subsidiary corporations prior to a change in control without cause at the
request of a person who has entered into an agreement with the Corporation the
consummation of which will constitute a change in control or (b) the Participant
terminates his or her employment with the Corporation or any of its subsidiary
corporations prior to a change in control of the Corporation and the
circumstance or event which causes such termination occurs at the request of
such person, then a change in control will be deemed to have occurred
immediately prior to such Participant's termination of employment.
If the making of any payment or payments under the LTIP would result in an
Adverse Tax Consequence, then, unless otherwise expressly provided in the
underlying Award Agreement, the payments attributable to the LTIP that are
parachute payments within the meaning of Section 280G of the Code will be
reduced, as determined by the Compensation Committee in its sole discretion, but
after consultation with the Participant affected, to the extent necessary to
avoid any Adverse Tax Consequence.
SUSPENSION, TERMINATION, AND AMENDMENT OF THE LTIP
The Board of Directors may suspend, terminate, or amend the LTIP at any
time and from time to time in such respects as the Board of Directors may deem
advisable subject to the limitation that no such amendment will, without
majority stockholder approval, (a) materially increase the number of shares of
Common Stock which may be issued under the LTIP, (b) materially modify the
requirements as to eligibility for participation in the LTIP, (c) materially
increase the benefits accruing to Participants under the LTIP, or (d) extend the
termination date of the LTIP.
A copy of the LTIP is on file and may be inspected by any shareholder at
the offices of the Corporation, and a copy will be available for inspection by
any shareholder at the Annual Meeting.
DESCRIPTION OF AMENDMENT TO THE LTIP
The amendment would increase the number of shares of Common Stock reserved
for awards under the LTIP from 2,000,000 to 4,000,000.
PROPOSAL 3. ADOPTION OF A NEW EXECUTIVE MANAGEMENT INCENTIVE PLAN
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" PROPOSAL 3.
Internal Revenue Code Section 162(m) ("Section 162(m)") prevents public
companies from deducting for tax purposes amounts of annual compensation above
$1 million, if that compensation is paid to any of its officers whose
compensation is reported in the company's proxy statement ("Covered Employees").
Compensation which is paid pursuant to the terms of a plan or arrangement which
meets the definition of "qualified performance-based compensation" for purposes
of Section 162(m), is not subject to the $1 million limitation. One requirement
necessary to meet the definition is that the "material terms" of the plan or
arrangement be disclosed to and approved by the company's shareholders.
Therefore, in order to fully deduct future payments under the new CCB Financial
Corporation Executive Management Incentive Plan (the "EMIP") the Board of
Directors is requesting the shareholders approve the EMIP.
The following is a summary of the material terms of the EMIP. A copy of the
EMIP is attached as Appendix A to this Proxy Statement, and the following
summary is qualified in its entirety by reference to it.
19
PURPOSE
The purpose of the EMIP is to motivate the participants to perform in a way
that will promote the success, and enhance the value, of the Corporation and its
subsidiaries. Annual incentive awards granted under the EMIP are based upon the
achievement of one-year goals.
ADMINISTRATION
The Compensation Committee (which will satisfy the "outside director"
requirement of Section 162(m)) will administer, construe, and interpret the
EMIP. The construction and interpretation by the Compensation Committee of any
provision of the EMIP will be final and conclusive. The Compensation Committee
must approve, subject to the provisions of the EMIP, the amount, if any, due a
participant. The Compensation Committee may, in its discretion, delegate its
general administrative duties to an officer or employee or committee composed of
officers or employees of the Corporation, but may not delegate its authority to
construe and interpret the EMIP or to approve awards. The Compensation
Committee, subject to approval by the Board of Directors, may, at any time or
from time to time, amend the EMIP in any respect without restriction and without
the consent of any participant. However, any modification of the EMIP which
would increase materially the benefits accruing to participants, modify
materially the requirements as to eligibility for participation, materially
increase the cost of the EMIP to the Corporation, or permit any member of the
Compensation Committee to receive an award, must be approved by the shareholders
of the Corporation.
ELIGIBLE PARTICIPANTS
Participation in the EMIP will be based on recommendation by Corporation
management and subject to approval by the Compensation Committee. Participation
in the EMIP will be limited to officers and other key employees of the
Corporation and its subsidiaries whose judgments, decisions, and actions can
have a discernible impact on the profitability of the Corporation. The
Compensation Committee will establish participation criteria and make decisions
on eligibility based on such criteria.
ANNUAL INCENTIVE AWARDS
The EMIP will include the Corporate Performance Subplan and the Individual
Performance Subplan, as more specifically described below. Awards under both
Subplans will be based entirely upon achievement of one-year goals. Each plan
year runs from January 1 to December 31.
The Corporate Performance Subplan will be based solely on the achievement
of objective corporate performance goals. The awards under this Subplan may be
determined on the basis of one or more of the following measures of corporate
performance, alone or in combination, for the Corporation as a whole or for any
subsidiary, division or business unit: (a) return on equity, (b) return on
assets, (c) stock performance, (d) expense efficiency ratios, (e) earnings per
share, or (f) revenue. Measurement of performance against such goals established
by the Compensation Committee will be objectively determinable, and to the
extent such goals are expressed in standard accounting terms, performance will
be measured in accordance with generally accepted accounting principles. The
Compensation Committee will have the right for any reason to reduce or eliminate
(but not increase) any such award, notwithstanding the achievement of a
specified goal. The maximum annual award under the Corporate Performance Subplan
to any participant will be $2.5 million. At the beginning of each plan year, the
Compensation Committee will establish performance goals under the Corporate
Performance Subplan based on one or more of the above corporate performance
criteria, and establish target awards and any formula for payouts in excess of
target based on the achievement of measurable goals. Target awards under the
Corporate Performance Subplan are to be set by the Compensation Committee as
percentages of base salary, which percentages may differ from participant to
participant and from year to year. Awards under the Corporate Performance
Subplan, made to Covered Employees are intended to satisfy the Section 162(m)
criteria relating to qualified performance-based compensation.
Awards under the Individual Performance Subplan will be based on an
individual's contribution to the business of the Corporation, as determined by
the Compensation Committee. This contribution may be assessed on non-objective
as well as objective measures. The Compensation Committee will establish target
awards under the Individual Performance Subplan and limits on payouts in excess
of targets, if any. Target awards under the Individual Performance Subplan are
set at percentages of base salary to be established by the Compensation
Committee which may differ from participant to participant and from year to
year. Awards under the Individual Performance Subplan are wholly independent of
awards under the Corporate Performance Subplan. Awards under the Individual
Performance Subplan will not be contingent upon the failure to attain the
performance goals under the Corporate Performance Subplan. Awards under the
Individual Performance Subplan may not satisfy Section 162(m).
20
Awards under the EMIP will be approved by the Compensation Committee after
the end of each plan year. No awards will be payable to any employee under any
measure if thresholds established by the Compensation Committee are not reached.
Awards will be paid in cash or stock of the Corporation. Any award under the
EMIP will be vested at the time the Compensation Committee approves the award;
except that, if a participant dies or becomes disabled after the close of the
plan year for which the award was earned and prior to approval of the award, the
award will be vested as of the date of death or disability.
The amount of bonuses to be paid in the future pursuant to the EMIP are
dependent on the Corporation's financial performance and are currently
undeterminable.
REQUIRED VOTE
For purposes of Section 162(m), the affirmative vote of the holders of a
majority of the shares of the Corporation's Common Stock represented and
entitled to vote at the Annual Meeting is required to approve the EMIP. Payments
under the EMIP are contingent upon obtaining such shareholder approval.
PROPOSAL 4. RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" PROPOSAL 4.
The firm of KPMG LLP, certified public accountants, has been appointed by
the Board of Directors to serve as the Corporation's independent accountants for
2000, and a proposal to ratify that appointment will be introduced at the Annual
Meeting. KPMG LLP has served as independent accountants for the Corporation
since its organization as the parent holding company of the Bank during 1983,
and previously had served as independent accountants for the Bank since 1975. If
shareholders do not approve this proposal, the Board of Directors will
reconsider the appointment.
Representatives of KPMG LLP are expected to be present at the Annual
Meeting and available to respond to appropriate questions, and will have an
opportunity to make a statement if they so desire.
TRANSACTIONS WITH MANAGEMENT
The Bank, AFB and the Corporation's other financial institution subsidiary
have had, and expect to have in the future, lending transactions in the ordinary
course of business with many of their officers and directors and with associates
of such persons. All loans included in such transactions during 1999 were made
on substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions with other persons, and
did not involve more than the normal risk of collectibility or present other
unfavorable features.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Directors, executive officers, and certain principal shareholders of the
Corporation are required by federal law to file reports with the Securities and
Exchange Commission regarding the amount of and changes in their beneficial
ownership of Common Stock. To the Corporation's knowledge, all Section 16(a)
filing requirements applicable to the Corporation's officers and directors were
complied with during 1999 with the exception of the following: Mr. Morrow was
delinquent in reporting one purchase transaction. Retiring Directors, Mr. Holmes
and Dr. McKay, were delinquent in reporting one purchase and one sale
transaction, respectively.
PROPOSALS OF SHAREHOLDERS
It currently is expected that the 2001 Annual Meeting will be held during
April 2001. Any proposal of a shareholder which is intended to be presented at
the 2001 Annual Meeting must be received by the Corporation at its principal
executive office in Durham, North Carolina, not later than November 15, 2000 in
order to be included in the Corporation's proxy statement and form of
appointment of proxy to be issued in connection with that meeting.
Any other proposal not intended to be included in the proxy statement and
appointment of proxy for the 2000 Annual Meeting, but intended to be presented
at that meeting must be received by the Corporation in writing at its principal
executive office in Durham, North Carolina no later than February 1, 2001.
March 17, 2000
21
(THIS PAGE INTENTIONALLY LEFT BLANK)
APPENDIX A
CCB FINANCIAL CORPORATION
EXECUTIVE MANAGEMENT INCENTIVE PLAN
ARTICLE 1
PURPOSE
The purpose of this Executive Management Incentive Plan of 2000 ("EMIP") is
to motivate the participants to perform in a way that will promote the success,
and enhance the value, of CCB Financial Corporation and its subsidiaries ("the
Company"). Annual incentive awards granted under the EMIP are based upon the
achievement of one-year goals.
ARTICLE 2
ADMINISTRATION OF THE PLAN
The Compensation Committee of the Board of Directors ("the Committee") will
administer, construe, and interpret the EMIP. No member of the Committee, the
Board of Directors, or any delegate, as the case may be, shall be liable for any
act done in good faith. The construction and interpretation by the Committee of
any provisions of the EMIP shall be final and conclusive. The Committee must
approve, subject to the provisions of the EMIP, the amount, if any, due a
participant. The Committee may, in its discretion, delegate its general
administrative duties to an officer or employee or committee composed of
officers or employees of the Company, but may not delegate its authority to
construe and interpret the EMIP or to approve awards. The Committee, subject to
approval by the Board of Directors, may, at any time or from time to time, amend
the EMIP in any respect without restriction and without the consent of any
participant. However, any modification of the EMIP which would increase
materially the benefits accruing to participants, modify materially the
requirements as to eligibility for participation, materially increase the cost
of the EMIP to the Company, or permit any member of the Committee to receive an
award, must be approved by the stockholders of the Company.
ARTICLE 3
PARTICIPATION IN THE PLAN
Participation in the EMIP shall be based on recommendation by Company
management and subject to approval by the Committee. Participation in the EMIP
will be limited to officers and other key employees of the Company and its
subsidiaries whose judgments, decision, and actions can have a discernible
impact on the profitability of the Company. The Committee will establish
participation criteria and make decisions on eligibility based on such criteria.
ARTICLE 4
ANNUAL INCENTIVE AWARDS
4.1 GENERAL. The EMIP shall include the Corporate Performance Subplan and
the Individual Performance Subplan, as more specifically described below. Awards
under both Subplans will be based entirely upon achievement of one-year goals.
Each plan year runs from January 1 to December 31.
4.2 CORPORATE PERFORMANCE SUBPLAN. The Corporate Performance Subplan will
be based solely on the achievement of objective corporate performance goals. The
awards under this Subplan may be determined on the basis of one of more of the
following measures of corporate performance, alone or in combination, for the
Company as a whole or for any subsidiary, division or business unit: (a) return
on equity, (b) return on assets, (c) stock performance, (d) expense efficiency
ratios, (e) earnings per share, or (f) revenue. Measurement of performance
against such goals established by the Committee shall be objectively
determinable, and to the extent such goals are expressed in standard accounting
terms, performance shall be measured in accordance with generally accepted
accounting principles. The Committee shall have the right for any reason to
deduce or eliminate (but not increase) any such award, notwithstanding the
achievement of a specified goal. The maximum annual award under the Corporate
Performance Subplan to any participant will be $2.5 million. At the beginning of
each plan year, the Committee will establish performance goals under the
Corporate Performance Subplan based on one or more of the above corporate
performance criteria, and establish target awards and any formula for payouts in
excess of target based on the achievement of measurable goals. Target awards
under the Corporate Performance Subplan are to be set by the Committee as
percentages of base salary, which percentage may differ from participant to
participant and from year to year.
A-1
4.3 INDIVIDUAL PERFORMANCE SUBPLAN. Awards under the Individual Performance
Subplan will be based, in whole or in part, on an individual's contribution to
the business of the Company, as determined by the Committee. This contribution
may be assessed on non-objective as well as objective measures. The Committee
will establish target awards under the Individual Performance Subplan and limits
on payouts in excess of targets, if any. Target awards under the Individual
Performance Subplan are set at percentages of base salary to be established by
the Committee which may differ from participant to participant and from year to
year. Awards under the Individual Performance Subplan are wholly independent of
awards under the Corporate Performance Subplan, although the Committee may base
performance targets for the Subplans upon similar criteria. Awards under the
Individual performance Subplan will not be contingent upon the failure to attain
the performance goals under the Corporate Performance Subplan.
4.4 FORM AND PAYMENT OF AWARDS. Awards under the EMIP will be approved by
the Committee after the end of each plan year. No awards will be payable to any
employee under any measure if thresholds established by the Committee are not
reached. Awards will be paid in cash or stock of the Company.
4.5 VESTING. Any award under the EMIP will be vested (considered the
participant's property) at the time the Committee approves the award; except
that, if a participant dies or becomes disabled after the close of the plan year
for which the award was earned and prior to approval of the award, the award
will be vested as of the date of death or disability.
ARTICLE 5
GENERAL PROVISIONS
5.1 NON-ASSIGNABILITY. No grants or awards under the EMIP shall be subject
in any manner to alienation, anticipation, sale, transfer, assignment, pledge or
encumbrance.
5.2 NO RIGHT TO CONTINUED EMPLOYMENT. Participation in the EMIP shall not
give any employee any right to remain in the employ of the Company. The EMIP is
not to be construed as a contract of employment for any period and does not
alter the at-will status of any participant.
5.3 SOURCE OF BENEFITS. Awards under the EMIP will not be prefunded but
will be paid by the Company as and when they become due as provided herein, and
the participant's interest in the award shall be only that of an unsecured
creditor of the Company.
5.4 WITHHOLDING. The Company may deduct or withhold, or require a
participant to remit to the Company, an amount sufficient to satisfy federal,
state and local taxes (including the participant's FICA obligation) required by
law to be withheld with respect to any taxable event arising as a result of the
EMIP.
5.5 GOVERNING LAW. This EMIP, and the rights and obligations of the
parties thereunder, will be construed in accordance with the laws of the State
of North Carolina.
A-2
[GRAPHIC OMITTED]
DIRECTIONS AND PARKING INFORMATION FOR THE
CAROLINA CLUB GEORGE WATTS HILL ALUMNI CENTER
RAMS HEAD LOT
FROM I-40
Take Exit 273B (Highway 54 to Chapel Hill) toward Chapel Hill and UNC. You will
be on Highway 54 (also called Raleigh Road). Raleigh Road becomes South Road on
the UNC campus. Turn left onto Stadium Drive at the Bell Tower. Pass Kenan
Stadium on the right, then pass the George Watts Hill Alumni Center on the
right. Veer right around the Alumni Center to the Rams Head Parking Lot.
FROM CHAPEL HILL 15-501 BY-PASS
Turn onto Manning Drive toward campus and the Dean Smith Center. At the first
stoplight, take a right onto Ridge Road (there is no sign for Ridge Road). After
passing the athletic field on your right, the Rams Head parking lot will be on
your left.
UNC VISITORS LOT
FROM I-40
Take Exit 273B (Highway 54 to Chapel Hill) toward Chapel Hill and UNC. You will
travel on Highway 54 (also called Raleigh Road) to the UNC campus. You will pass
under Highway 15-501. The UNC Visitors Lot is on the right before the next
stoplight.
FROM CHAPEL HILL 15-501 BY-PASS
Take the exit to UNC Chapel Hill campus onto Raleigh Road. The UNC Visitors Lot
is on the right before the next stoplight.
CCB APPOINTMENT THIS APPOINTMENT OF PROXY IS SOLICITED ON BEHALF
FINANCIAL OF OF THE BOARD OF DIRECTORS The undersigned hereby
CORPORATION PROXY appoints Leo P. Pylypec, W. Harold Parker, Jr., and
Manuel L. Rojas, and each of them, as attorneys and
111 Corcoran Street, proxies, each with full power to appoint his
Post Office Box 931 substitute, and hereby authorizes them to represent
Durham, North Carolina and to vote as directed below all the shares of
27702-0931 common stock of CCB Financial Corporation (the
- ------------------------- "Corporation") held of record by the undersigned
on March 1, 2000 at the Annual Meeting of
Shareholders of the Corporation to be held on April
18, 2000 and any adjournments thereof. The
undersigned hereby directs that such shares be
voted as follows:
1. ELECTION OF DIRECTORS: [ ] FOR [ ] WITHHOLD [ ] FOR ALL EXCEPT
NOMINEES: THREE-YEAR TERM: J. Harper Beall, III, Eugene J. McDonald, James L.
Williamson, Dr. Phail Wynn, Jr.
Two-Year Term: William L. Abercrombie, Jr.
INSTRUCTION: To withhold authority to vote for any individual nominee mark "For
All Except" and write that nominee's name in the space provided below.
2. AMENDMENT OF THE CORPORATION'S
LONG-TERM INCENTIVE PLAN. [ ] FOR [ ] AGAINST [ ] ABSTAIN
3. ADOPTION OF A NEW EXECUTIVE
MANAGEMENT INCENTIVE PLAN. [ ] FOR [ ] AGAINST [ ] ABSTAIN
4. RATIFICATION OF THE APPOINTMENT OF KPMG
LLP AS THE CORPORATION'S
INDEPENDENT ACCOUNTANTS FOR 2000. [ ] FOR [ ] AGAINST [ ] ABSTAIN
5. OTHER BUSINESS: On such other matters as may properly come before the Annual
Meeting, the proxies are authorized to vote the shares represented by this
appointment of proxy in accordance with their best judgment.
The shares represented by this appointment of proxy will be voted as directed
above. In the absence of any direction, such shares will be voted by the proxies
"FOR" the election of each of the nominees for director as listed in Proposal 1
by casting an equal number of votes for each such nominee and Proposals 2, 3 and
4 above. If, at or before the time of the meeting, any nominee listed in
Proposal 1 becomes unavailable for any reason, the proxies are authorized to
vote for a substitute nominee.
Please sign exactly as your name(s) appears on this card. If shares are held by
joint tenants, both should sign. If signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
Date: , 2000
------------------
-------------------------------
Shareholder sign above
--------------------------------
Co-holder (if any) sign above
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY