SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the registrant |X|
Filed by a party other than the registrant |_|
Check the appropriate box:
|_| Preliminary proxy statement
|X| Definitive proxy statement
|_| Definitive additional materials
|_| Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Community First Banking Company
(Name of Registrant as Specified in Its Charter)
Community First Banking Company
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
|_| $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
|_| $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
|_| 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 transactions 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:
|_| 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:
194726
<PAGE>
COMMUNITY FIRST BANKING COMPANY
110 DIXIE STREET
CARROLLTON, GEORGIA 30117
(770) 834-1071
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD THURSDAY, APRIL 23, 1998
To the Shareholders of Community First Banking Company:
Notice is hereby given that the Annual Meeting of Shareholders of
Community First Banking Company (the "Company") will be held on Thursday, April
23, 1998 at 2:00 p.m. at Community First Bank, 110 Dixie Street, Carrollton,
Georgia 30117, for the following purposes:
(1) To elect three Class I directors to serve a three-year term
expiring at the 2001 Annual Meeting of Shareholders and upon
the election and qualification of their successors;
(2) To ratify the appointment of Porter Keadle Moore LLP as the
Company's independent public accountants for fiscal 1998; and
(3) To transact such other business as may properly come before
the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 20,
1998 as the record date for the determination of shareholders entitled to notice
of and to vote at the meeting.
All shareholders are requested to mark, date, sign and return the
enclosed form of proxy as soon as possible. If you attend the meeting and wish
to vote your shares in person, you may do so at any time before the proxy is
exercised.
By Order of the Board of Directors,
Gary D. Dorminey
President and Chief Executive Officer
March 26, 1998
194726
<PAGE>
COMMUNITY FIRST BANKING COMPANY
110 DIXIE STREET
CARROLLTON, GEORGIA 30117
PROXY STATEMENT
-----------------------------------
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Community First Banking Company (the
"Company") for use at the Annual Meeting of Shareholders (the "Annual Meeting")
to be held on Thursday, April 23, 1998 at 2:00 p.m. at Community First Bank, 110
Dixie Street, Carrollton, Georgia 30117 and at any adjournment(s) thereof. This
Proxy Statement and the form of proxy were first mailed to shareholders on or
about March 26, 1998. If the enclosed form of proxy is properly executed,
returned and not revoked, it will be voted in accordance with the specifications
made by the shareholder. If the form of proxy is signed and returned but
specifications are not made, the proxy will be voted FOR the election of the
Class I directors listed as nominees herein, FOR the ratification of Porter
Keadle Moore LLP as the Company's' independent public accountants for fiscal
1998 and in the discretion of the proxy holders as to any other business that
properly comes before the meeting. Shareholders who sign proxies have the right
to revoke them at any time before they are voted by delivering to the Secretary
of the Company either an instrument revoking the proxy or a duly executed proxy
bearing a later date or by attending the meeting and voting in person.
The close of business on March 20, 1998 has been fixed as the record
date (the "Record Date") for the determination of shareholders entitled to
notice of and to vote at the meeting.
As of the close of business on the Record Date, the Company had
10,000,000 shares of common stock, $.01 par value ("Common Stock"), authorized.
Of such shares, 2,154,094 were issued and entitled to vote on the proposals
presented herein, including 173,777 unallocated shares issued to the Company's
Employee Stock Ownership Plan (the "ESOP") that will be voted by the ESOP
trustees and 71,441 shares held in participant accounts in the Company's 401(k)
Plan that will be voted by the 401(k) Plan trustees. As of the Record Date, the
Company's directors and executive officers collectively beneficially owned an
aggregate of 494,978 shares of Common Stock, which includes 20,500 shares
subject to options that were not exercised as of the Record Date. As a result,
directors and executive officers of the Company will have the authority to vote
474,478 shares of Common Stock, or approximately 22.0% of the shares eligible to
vote, which includes the 245,218 shares held in the ESOP and the 401(k) Plan, as
certain directors and executive officers share voting authority with respect to
those shares as trustees of those plans. Dispositive authority with respect to
the 401(k) Plan shares is retained by the participants in that plan. See "Stock
Owned by Management." Management anticipates that such shares will be voted in
favor of the proposals presented herein. Each share of Common Stock is entitled
to one vote on matters to be presented at the meeting.
A quorum will be present if a majority of the votes entitled to be cast
are present in person or by valid proxy. A plurality of the shares present and
voting at the Annual Meeting, in person or by proxy, will be necessary for the
election of the directors nominated herein. All other matters presented at the
Annual Meeting will be approved if the number of shares voted in favor of the
matter exceeds the number of shares voted against the matter.
A shareholder who is present in person or by proxy at the Annual
Meeting and who abstains from voting on any or all proposals will be included in
the number of shareholders present at the Annual Meeting for the purpose of
determining the presence of a quorum. An abstention with respect to any matter,
however, will not be counted either in favor of or against such matter.
Brokers who hold shares for the accounts of their clients may vote such
shares either as directed by their clients or in their own discretion if
permitted by the exchange or other organization of which they are members.
Proxies that are not voted by brokers on one or more proposals but that are
voted on others are referred to as "broker non-votes" with respect to the
proposal(s) not voted upon. Broker non-votes will be included in determining the
presence of a quorum. A broker non-vote, however, is not treated as being in
favor of or against a particular proposal for which the broker has no
discretionary voting authority. Companies listing their securities on the New
York Stock Exchange are permitted to vote their clients' proxies in their own
discretion as to the election of directors and the ratification of independent
accountants. Accordingly, broker non-votes will not exist with respect to the
matters presented at this Annual Meeting.
If any nominee for election to the Board of Directors named in this
Proxy Statement becomes unavailable for election for any reason, the proxy will
be voted for a substitute nominee selected by the Board of Directors.
STOCK OWNED BY MANAGEMENT
The following table sets forth, as of the Record Date, the number and
percentage ownership of the shares of Common Stock beneficially owned by each
director of the Company, each executive officer named in the Summary
Compensation Table, any person or entity known to be the beneficial owner of
more than five percent of the outstanding Common Stock and all current directors
and executive officers as a group as of the Record Date. Unless otherwise
indicated, each person is the record owner of, and has sole voting and
investment power with respect to, his or her shares. Shares allocated to
participant accounts in the ESOP and 401(k) Plan are voted by the trustees of
those Plans. Accordingly, the shares owned beneficially by Ms. Berry and Dr.
Reeve include 173,777 shares not yet allocated to ESOP participant accounts, as
to which they share voting authority as two of the ESOP trustees, and the shares
owned beneficially by Messrs. Dorminey, Silvey, Bullock and Steed include 71,441
shares held in the 401(k) Plan, as to which they share voting authority as
co-trustees of the 401(k) Plan. <TABLE> <CAPTION>
No. of Percentage
Name Position Shares Ownership(1)
<S> <C> <C> <C>
T. Aubrey Silvey Chairman of the Board 100,570 (2) 4.7 %
Gary D. Dorminey Chief Executive Officer, President and 4.7
Director 98,895 (3)
Anna L. Berry Director 178,681 (4) 8.3
Gary M. Bullock Director 83,220 (5) 3.9
Jerry L. Clayton Director 26,639 (6) 1.2
Thomas E. Reeve, Jr. Director 198,816 (7) 9.2
Michael P. Steed Director 96,480 (8) 4.5
Dean B. Talley Director 25,039 (9) 1.2
Thomas S. Upchurch Director 25,039 (10) 1.2
D. Lane Poston Executive Vice President and Chief
Operating Officer 30,757 (11) 1.4
Anyce C. Fox Senior Vice President 10,384 (12) *
C. Lynn Gable Senior Vice President and CFO 15,984 (13) *
Thomson Horstmann & Bryant, 243,600 (14) 11.3
Inc.
All Directors and Executive
Officers as a Group (12
persons) 494,978 (15) 22.8
</TABLE>
(*) Indicates less than one percent of the outstanding shares of Common Stock.
(1) Calculated based on 2,154,094 shares entitled to vote, which includes
173,777 shares that will be voted by the ESOP trustees and 71,441 shares
that will be voted by the 401(k) Plan Trustees. The number of issued and
outstanding shares used to calculate the percentage of total ownership
includes any shares covered by options issued to the individual or to
members of the group, as applicable, identified in the table.
(2) Includes 904 shares subject to options vesting on or before May 19, 1998
and 71,441 shares held in participant accounts in the 401(k) Plan, as to
which he shares voting authority as a co-trustee.
(3) Includes 1,029 shares held in an IRA, 635 shares allocated to his ESOP
account, 6,034 shares subject to options vesting on or before May 19, 1998
and 71,441 shares held in participant accounts in the 401(k) Plan (which
includes 3,350 shares allocated to his account), as to which he shares
voting authority as a co-trustee.
(4) Includes 904 shares subject to options vesting on or before May 19, 1998
and 173,777 shares not yet allocated to participant accounts in the ESOP,
as to which she shares voting authority as a co-trustee.
(5) Includes an aggregate of 875 shares held in two self-employed pension
plans, 904 shares subject to options vesting on or before May 19, 1998 and
71,441 shares held in participant accounts in the 401(k) Plan, as to which
he shares voting authority as a co-trustee.
(6) Includes 1,600 shares held by a corporation that may be deemed to be
controlled by Mr. Clayton and 904 shares subject to options vesting on or
before May 19, 1998.
(7) Includes 15,000 shares held in an IRA, 9,135 shares held by Dr. Reeve's
spouse, 904 shares subject to options vesting on or before May 19, 1998 and
173,777 shares not yet allocated to participant accounts in the ESOP, as to
which he shares voting authority as a co-trustee.
(8) Includes 7,500 shares held by Mr. Steed's spouse, 6,745 shares held in an
IRA, 2,250 shares held in his spouse's IRA, 904 shares subject to options
vesting on or before May 19, 1998 and 71,441 shares held in participant
accounts in the 401(k) Plan, as to which he shares voting authority as a
co-trustee.
(9) Includes 5,214 shares held in an IRA, 1,000 shares held in a family limited
partnership that may be deemed to be controlled by Mr. Talley and 904
shares subject to options vesting on or before May 19, 1998.
(10) Includes 904 shares subject to options vesting on or before May 19, 1998.
(11) Includes 9,826 shares held by Mr. Poston's spouse, 8,628 shares held in an
IRA, 2,954 shares held in his 401(k) plan account (as to which he has
dispositive, but not voting, authority), 227 shares held in his spouse's
IRA, 588 shares allocated to his ESOP account and 6,034 shares subject to
options vesting on or before May 19, 1998.
(12) Includes 4,472 shares held in Ms. Fox's 401(k) plan account (as to which
she has dispositive, but not voting, authority), 312 shares allocated to
her ESOP account and 600 shares subject to options vesting on or before May
19,1998.
(13) Includes 384 shares allocated to Mr. Gable's ESOP account and 600 shares
subject to options vesting on or before May 19, 1998.
(14) Thomson Horstmann & Bryant, Inc. is a registered investment advisor located
at Park 80 West, Plaza Two, Saddle Brook, New Jersey, 07663. Pursuant to a
Schedule 13G filed with the Commission on March 11, 1998, it has sole
voting power with respect to 156,700 shares, shared voting power with
respect to 3,500 shares and sole dispositive power with respect to 243,600
shares.
(15) Includes 173,777 shares that will be voted by the ESOP trustees, 71,441
shares that will be voted by the 401(k) Plan trustees and 20,500 shares
subject to options vesting on or before May 19, 1998.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's reporting officers and directors and
persons who own more than ten percent of the Company's Common Stock to file
reports of ownership and changes in ownership on Forms 3, 4, and 5 with the
Securities and Exchange Commission (the "Commission") and the Company. Based
solely on its review of forms filed with the Commission and provided to the
Company and written representations from the Company's directors and executive
officers, the Company believes that its executive officers and directors
complied with all filing requirements applicable to them during the fiscal year
ended December 31, 1997. The Company has not received a Form 3 report from its
only known ten percent shareholder describing the date(s) of its acquisition of
ten percent of the Common Stock and is therefore unable to state whether such
shareholder complied with its Exchange Act reporting obligations during 1997.
PROPOSAL ONE
THE NOMINATION AND ELECTION OF DIRECTORS
The Company's Board of Directors consists of nine members divided into
three classes. Class I directors (Messrs. Bullock and Clayton and Dr. Talley)
are serving an initial term expiring at the 1998 Annual Meeting of Shareholders
and are being nominated for re-election for a three-year term commencing at this
Annual Meeting; Class II directors (Dr. Reeve and Messrs. Steed and Upchurch)
are serving an initial term expiring at the 1999 Annual Meeting of Shareholders;
and Class III directors (Ms. Berry and Messrs. Silvey and Dorminey) are serving
an initial term expiring at the 2000 Annual Meeting of Shareholders. Members of
each class serve until the election and qualification of their successors and
are elected for three-year terms upon the expiration of their initial term. All
of the directors listed below have served as directors of the Company since
March 1997.
The following table sets forth the name, age, position(s) with the
Company and its wholly owned subsidiary, Community First Bank (the "Bank"),
business experience for the past five years and current term of service for each
of the members of the Company's Board of Directors. <TABLE> <CAPTION>
Age as of
Name and December 31, Principal Employment for the Past Five Term
Position(s) 1997 Years Expires
----------- ---- ----- -------
<S> <C> <C> <C>
T. Aubrey Silvey 60 Chairman and Chief Executive Officer of 2000
Chairman of the Board Aubrey Silvey Enterprises, an electrical
substation contractor
Gary D. Dorminey 51 Chief Executive Officer, President and 2000
Chief Executive Officer, Director of the Company and the Bank
President and Director
Anna L. Berry 48 Treasurer of Southwire Company, a major 2000
Director manufacturer of wire products
Gary M. Bullock 55 President and Chief Executive Officer of 1998
Vice Chairman of the Board Carroll Electric Membership Corp.
Jerry L. Clayton 55 Owner of Clayton Pharmacy 1998
Director
Thomas E. Reeve 77 Retired Physician 1999
Director
Michael P. Steed 53 President and Owner of Steed Company, a 1999
Director manufacturer of fabric labels
Dean B. Talley 55 Physician 1998
Director
Thomas S. Upchurch 58 President of the Georgia Partnership for 1999
Director Excellence in Education
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
ELECTION OF MESSRS. BULLOCK AND CLAYTON AND DR. TALLEY AS CLASS I DIRECTORS TO
SERVE A THREE-YEAR TERM AS DESCRIBED IN THIS PROXY STATEMENT.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company met 15 times during fiscal 1997.
All directors attended at least 75% of the Board and applicable committee
meetings held during 1997.
The Board of Directors has established a Compensation Committee, which
establishes remuneration levels for officers of the Company, reviews management
organization and development, reviews significant employee benefit programs and
establishes and administers executive compensation programs. The Compensation
Committee consists of Messrs. Bullock, Steed and Upchurch and it met 4 times
during 1997.
The Board of Directors has also established an Audit Committee, which
recommends to the Board of Directors the independent public accountants to be
selected to audit the Company's annual financial statements and approves any
special assignments given to such accountants. The Audit Committee also reviews
the planned scope of the annual audit, any changes in accounting principles and
the effectiveness and efficiency of the Company's internal accounting staff. The
Audit Committee consists of Drs. Reeve and Talley, Mr. Upchurch and Ms.
Berry and it met 4 times during 1997.
The Executive Committee of the Board of Directors has the power and
authority to act on behalf of the Board on important matters between scheduled
director meetings unless specific Board action is required or unless otherwise
restricted by the Company's Articles of Incorporation or Bylaws or by action of
its Board of Directors. The Executive Committee consists of Messrs. Silvey,
Dorminey, Bullock and Steed, and it met 19 times during 1997.
The Board of Directors may from time to time establish certain other
committees to facilitate the management of the Company.
COMPENSATION AND COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is comprised of Messrs. Bullock, Steed and
Upchurch. None of the members of the Compensation Committee has served as a
executive officer of the Company and no executive officer of the Company has
served as a director or member of the Compensation Committee of any other entity
of which Messrs. Bullock, Steed or Upchurch has served as an executive officer.
See "-Director Compensation" below for the terms of stock options, preferred
stock and related bonuses granted to Messrs. Bullock, Steed, Upchurch and the
other non-employee directors of the Company.
DIRECTOR COMPENSATION
Each of the directors of the Company is also a director of the Bank.
Each member of the Board of Directors of the Bank is paid a fee of $575 per
Board meeting attended, $750 per month for Executive Committee members other
than the Chairman ($1,000 per month in the case of the Chairman of the
committee) and $200 per meeting for all other committees. Directors of the
Company do not receive compensation solely for their services as directors of
the Company.
On December 29, 1997, each non-employee director of the Company was
granted options to purchase 9,050 shares of Common Stock at an exercise price of
$39.625, representing the fair market value of the Common Stock on the date of
grant. The options vest at a rate of five percent per quarter commencing on
December 31, 1997 and become fully vested immediately prior to a change in
control of the Company. Directors who were also employees of the Company
received options as described in "Executive Compensation."
On January 8, 1998, each non-employee director of the Company was
awarded 3,620 shares of Series A Convertible Preferred Stock ("Preferred Stock")
under the Company's Management Recognition Plan. The shares automatically
convert into Common Stock on the five-year anniversary of the date of grant or
upon a change of control of the Company, whichever is earlier; receive no
dividends; have no liquidation preference and are not entitled to vote on any
matters prior to their conversion into Common Stock. Directors who were also
employees received shares of Preferred Stock as described in "Certain
Transactions." To reimburse them for tax liability resulting from their receipt
of the Preferred Stock, each non-employee director will receive a $65,930 bonus
in 1998.
In December 1995, the Bank initiated a defined contribution
post-retirement benefit plan to provide retirement benefits to its directors and
to provide death benefits for the designated beneficiary. In connection with the
plan's establishment, the Bank purchased a whole life insurance contract on the
life of each director and entered into a split dollar arrangement with each
director. The increase in cash surrender value of the contract, less the Bank's
cost of funds, determines each director's annual benefit. In the event the
insurance contract fails to produce positive returns, the Bank has no separate
obligation to contribute to the Plan. At December 31, 1997, the cash surrender
value of the insurance contract was approximately $1,071,000.
EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
persons who serve as executive officers of the Company. All references to
positions with the Company also refer to the Bank and its predecessor.
<TABLE>
<CAPTION>
Age as of Principal Employment
Name and Positions(s) December 31, 1997 for the Past Five Years
--------------------- ----------------- -----------------------
<S> <C> <C>
Gary D. Dorminey 51 President and Chief Executive
President and Chief Executive Officer Officer of the Company
D. Lane Poston 48 Executive Vice President and Chief
Executive Vice President and Operating Officer of the Company
Chief Operating Officer
C. Lynn Gable 45 Senior Vice President and
Senior Vice President and Chief Financial Officer of the
Chief Financial Officer Company since February 1997; prior
thereto, President of Gable
Financial Group, Inc.
Anyce C. Fox 51 Senior Vice President of the Company
Senior Vice President since 1990
</TABLE>
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by the Company and
the Bank for services rendered in all capacities during the fiscal years ended
December 31, 1997, 1996 and 1995 to the Company's chief executive officer and
the three other executive officers whose total salary and bonus during such year
exceeded $100,000. See "Certain Transactions" for a description of the terms of
Preferred Stock awards granted to the named executive officers in January 1998.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
-------------------------------------------- Awards
Securities All
Name and Principal Other Annual Underlying Other
Position Year Salary Bonus Compensation(1) Options Compensation(2)
- -------- ---- ------ ----- --------------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Gary D. Dorminey 1997 $165,000 $466,295 (3) $0 60,340 $15,709
President and Chief 1996 139,000 31,650 0 0 4,326
Executive Officer 1995 129,250 42,342 0 0 4,300
D. Lane Poston 1997 $115,000 $468,311 (3) $0 60,340 $13,859
Executive Vice 1996 105,000 24,182 0 0 3,875
President and Chief 1995 99,500 24,875 0 0 2,985
Operating Officer
C. Lynn Gable 1997 $80,135 $176,983 (3) $0 6,000 $7,678
Senior Vice President
and Chief Financial
Officer
Anyce C. Fox 1997 $65,600 $204,461 (3) $0 6,000 $7,093
Senior Vice President 1996 62,940 8,182 0 0 1,802
1995 62,340 14,985 0 0 2,293
</TABLE>
- -----------
(1) Does not include amounts attributable to miscellaneous benefits received by
executive officers, including automobiles owned by the Company or the Bank. The
cost of providing such benefits to any individual executive officer during any
of the years reported did not exceed the lesser of $50,000 or 10% of the total
annual salary and bonus reported for the individual.
(2) Reflects the value of Company matching contributions to the indicated
person's 401(k) plan and ESOP accounts as follows:
Mr. Dorminey 1997 1996 1995
------------ ---- ---- ----
401(k) Plan $3,011 $4,326 $4,300
ESOP $12,698 0 0
Mr. Poston
----------
401(k) Plan $2,099 $3,875 $2,985
ESOP $11,760 0 0
Mr. Gable
---------
401(k) Plan 0 0 0
ESOP $7,678 0 0
Ms. Fox
-------
401(k) Plan $845 $1,802 $2,293
ESOP $6,248 0 0
(3) Includes a bonus in the amount listed below accrued in 1997 but to be paid
in 1998 to reimburse the indicated person for tax liability relating to the
preferred stock awards described in "Certain Transactions Preferred Stock
Awards."
Mr. Dorminey: $439,561
Mr. Poston: $439,561
Mr. Gable: $160,380
Ms. Fox: $191,341
The following table sets forth information regarding each grant of
stock options during fiscal 1997 to each of the executives named in the Summary
Compensation Table. The Company did not award any stock appreciation rights
("SARs") during fiscal 1997.
OPTION GRANTS IN FISCAL 1997
<TABLE>
<CAPTION>
Individual Grants
---------------------------------------------------------
Potential Realizable Value
Number of Percent of at Assumed Annual Rates
Securities Total Options of Appreciation for
Underlying Granted to Exercise Option Term
Options Employees in Price Expiration --------------------------
Name Granted Fiscal Year ($/share) Date 5% ($) 10% ($)
- --------------- ----------- ------------- --------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Mr. Dorminey 60,340(1) 36.7% $39.625 12/29/07 $3,894,642 $6,201,567
Mr. Poston 60,340(1) 36.7% $39.625 12/29/07 $3,894,642 $6,201,567
Mr. Gable 6,000(1) 3.6% $39.625 12/29/07 $387,270 $616,662
Ms. Fox 6,000(1) 3.6% $39.625 12/29/07 $387,270 $616,662
</TABLE>
(1) The indicated options vest at a rate of five percent per quarter commencing
on December 31, 1997 and vest immediately prior to a change of control of
the Company. The Company may withhold shares upon exercise of the options
to satisfy applicable withholding tax obligations.
The following table sets forth information concerning the options held
at December 31, 1997 by the executives named in the Summary Compensation Table.
Neither of such executives exercised any option during fiscal 1997.
FISCAL 1997 YEAR-END OPTION HOLDINGS AND VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at December 31, 1997 Options at December 31, 1997 (1)
---------------------------- --------------------------------------
Shares
Acquired
on Value
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ------------------------ ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Dorminey 0 $ 0 3,017 57,323 $13,199 $250,788
Mr. Poston 0 $ 0 3,017 57,323 $13,199 $250,788
Mr. Gable 0 $ 0 300 5,700 $1,312 $24,938
Ms. Fox 0 $ 0 300 5,700 $1,312 $24,938
</TABLE>
(1) Calculated by subtracting the exercise price ($39.625 per share) from
$44.00 per share, the closing price of the Company's Common Stock as
reported by the Nasdaq Stock Market on December 31, 1997, and multiplying
the difference by the number of shares underlying each option.
RETIREMENT PLAN
The Bank has a defined benefit pension plan ("Retirement Plan" ) for
all employees who have attained the age of 21 years and have completed one year
of service with the Bank. In general, the Retirement Plan provides for annual
benefits payable monthly upon retirement at age 65 in an amount equal to
approximately one percent of the "Average Compensation" of the employee (which
is equal to the average of the compensation paid to him or her during the five
successive calendar years within the final five calendar years of service
affording the highest average, excluding bonuses, overtime pay and other special
compensation) for each year of service, not in excess of 40 years. Under the
Retirement Plan, an employee's benefits are fully vested after five years of
qualifying service. A year of service is any year in which an employee works a
minimum of 1,000 hours. The Retirement Plan provides for an early retirement
option with reduced benefits for participants who are 55.
The following table illustrates annual pension benefits for retirement
at age 65 under various levels of compensation and years of service. The figures
in the table assume that the Retirement Plan continues in its present form and
that the participants elect a straight life annuity form of benefit.
<TABLE>
<CAPTION>
Five Year
Average 10 Years of 15 Years of 20 Years of 25 Years of 30 Years of 35 Years of
Compensation Service Service Service Service Service Service
------------ ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
$ 40,000 $ 4,000 $ 6,000 $ 8,000 $ 10,000 $ 12,000 $ 14,000
50,000 5,000 7,500 10,000 12,500 15,000 17,500
60,000 6,000 9,000 12,000 15,000 18,000 21,000
70,000 7,000 10,500 14,000 17,500 21,000 24,500
80,000 8,000 12,000 16,000 20,000 24,000 28,000
90,000 9,000 13,500 18,000 22,500 27,000 31,500
100,000 10,000 15,000 20,000 25,000 30,000 35,000
110,000 11,000 16,500 22,000 27,500 33,000 38,500
120,000 12,000 18,000 24,000 30,000 36,000 42,000
130,000 13,000 19,500 26,000 32,500 39,000 45,500
140,000 14,000 21,000 28,000 35,000 42,000 49,000
150,000 15,000 22,500 30,000 37,500 45,000 52,500
160,000 16,000 24,000 32,000 40,000 48,000 56,000
</TABLE>
The Bank did not contribute to the Retirement Plan for fiscal 1997. At
December 31, 1997, Mr. Dorminey had 6.67 years of credited service under the
Retirement Plan and total accrued funds in the Retirement Plan of $8,707, Mr.
Poston had 6.58 years of credited service under the Retirement Plan and total
accrued funds in the Retirement Plan of $6,608, Ms. Fox had 6.50 years of
credited service under the Retirement Plan and total accrued funds in the
Retirement Plan of $3,981, and Mr. Gable will not be enrolled in the Retirement
Plan until March 1, 1998.
EMPLOYMENT AGREEMENTS
Pursuant to the terms of the employment agreement executed by Mr.
Dorminey, the Bank and the Company (the Bank and the Company are hereinafter
collectively referred to as the "Employer") on December 29, 1997, Mr. Dorminey
will receive (a) an annual salary of $165,000, which is subject to discretionary
annual increases by the Bank's Board of Directors; (b) an incentive bonus
determined each year by the Compensation Committee of the Bank's Board of
Directors based upon the achievement of certain performance criteria to be
determined annually by the Board of Directors; (c) benefits under such other
programs as are maintained for employees of the Bank or the Company generally;
(d) reimbursement for reasonable business expenses, club dues and
business-related costs of club membership; (e) use of an automobile; and (f)
such other medical, dental and other health care benefits as are extended to
other management personnel. The agreement has an initial term of three years and
will automatically renew on each day after its effective date so that the term
remains a three-year term. Automatic renewal may be terminated by either Mr.
Dorminey or the Employer by giving written notice to the other party of such
termination, in which event the term will end on the third anniversary of the
thirtieth day following the date the written notice is received. If the
agreement is terminated by the Employer for cause (as defined in the agreement)
or by Mr. Dorminey without good reason (as defined in the agreement), Mr.
Dorminey will receive only such salary and bonus amounts as are due and owed to
him on the effective date of the termination. If he is terminated without cause
or upon permanent disability, or if he terminates his employment with good
reason, 60 days' prior written notice of intent to terminate is required and Mr.
Dorminey will receive a termination payment equal to his Average Monthly
Compensation (as defined below) for the remaining term of the agreement. Average
Monthly Compensation means the quotient determined by dividing (a) the greater
of (1) Mr. Dorminey's then current base salary, or (2) the average of his base
salary and incentive bonus for the most recent three consecutive 12-month
periods during which he was employed by the Employer immediately prior to the
effective date of the termination that produced the highest average, by (b)
twelve (12). This payment may be reduced if necessary to comply with certain
provisions of the Internal Revenue Code. In addition, Mr. Dorminey has agreed
not to engage in the community banking business within a 20-mile radius of any
office or facility of the Employer for a period of 36 months following his
termination by the Employer for cause or by Mr. Dorminey for good reason or
following a change in control of the Employer as defined in the agreement, and
not to solicit the Employer's customers or employees within the same geographic
area for the same period of time.
Messrs. Poston and Gable and Ms. Fox also entered into employment
agreements with the Employer that contain essentially identical terms and
conditions, except that the base salaries set forth in such agreements are
$115,000, $90,000 and $65,600, respectively.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
This report discusses the compensation objectives and policies
applicable to the Company's executive officers and the Company's policy
generally with respect to the compensation of all executive officers as a group
for fiscal 1997 and specifically reviews the compensation established for the
Company's Chief Executive Officer during fiscal 1997 as reported in the Summary
Compensation Table. The compensation committee makes recommendations to the
Board for the compensation of the Company's Chief Executive Officer. The Chief
Executive Officer does not participate in the discussion or recommendations of
the compensation committee. The Board must approve all compensation actions
pertaining to the Chief Executive Officer.
COMPENSATION PHILOSOPHY
The Company's executive compensation program has three main objectives:
(1) to align the interests of the executive officers with the interests of the
Company's shareholders (2) to attract and retain highly talented and productive
executives, and (3) to provide incentives to those executive officers for
superior corporate performance measured by the Company's strategic achievements
and overall financial performance. To achieve these objectives, the Company's
executive compensation program consists of base salary, short-term incentive
compensation in the form of a bonus, and long-term incentive compensation in the
form of stock options and shares of Preferred Stock. These compensation elements
are in addition to the general benefit programs that are offered to all of the
Company's employees.
In determining the amount of compensation to be awarded to executive
officers, the Committee studies the compensation packages for executives of a
peer group of the Company's most direct competitors for executive talent,
assesses the competitiveness of the Company's executive compensation program and
reviews the Company's financial performance for the previous fiscal year and its
anticipated financial performance for the current year. The Committee also
gauges the success of the compensation program in achieving its objectives in
the previous year and considers the Company's overall performance objectives.
The Company's executive compensation program includes three basic types
of compensation: base salary, incentive compensation, and long-term incentive
compensation, each of which is described more fully below.
BASE SALARY
In addition to the factors listed in the foregoing section that support
the Company's executive compensation program generally, each of the executive
officer's base salary is based on the individual area of responsibility and
accountability within the Company. As is typical of most companies, the actual
payment of base salary is not conditioned upon the achievement of any
predetermined performance targets.
INCENTIVE COMPENSATION
Bonuses for executive officers are intended to motivate the individual
to work hard to achieve the Company's financial and operational performance
goals or to otherwise motivate the individual to aim for a high level of
achievement on behalf of the Company in the coming year.
Bonuses are determined based on a combination of factors including the
Company's historic and recent financial performance, the individual's
contribution to that performance, the individual's performance on non-financial
goals (such as ethical business conduct, client satisfaction and the general
perception of the Company and the Bank by financial leaders and customers) and
other contributions to the Company's success. Each of these factors is evaluated
subjectively and given relatively equal weight without the application of a
rigorous formula.
LONG-TERM INCENTIVE COMPENSATION
The compensation committee and the Board believe that stock ownership
further aligns the interests of the executive officers with the interests of the
Company's shareholders. The Company's long-term incentive compensation for its
executive officers is based upon the Company's 1997 Stock Option Plan and its
Management Recognition Plan. The Committee believes that placing a portion of
the executives' total compensation in the form of long-term compensation will
retain and incentivize top management. In determining the number and terms of
options and the number of shares of Preferred Stock to grant an executive, the
Committee primarily considers subjectively the same criteria as it considers in
awarding bonuses, as well as the degree to which an incentive for long-term
performance would benefit the Company. The committee believes that these stock
grants and options should include vesting conditions that further encourage the
executive officers to remain with the Company for some time before the full
benefit could be realized.
BENEFITS
The Committee believes the Company must offer a competitive benefits
program to attract and retain key executives. The Company provides the same
medical and other benefits to its executive officers that are generally
available to its other employees.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The compensation of the Company's Chief Executive Officer is prescribed
in his employment agreement, which is described under "Executive Compensation
Employment Agreements." The compensation committee uses data from banks in the
Southeast of similar asset size published in SNL Executive Compensation Review
to determine his base salary. The goal for base salary is to be within five
percent (5%) of the median for the surveyed group. His bonus and long-term
compensation have been and will continue to be determined based on similar
elements and measures of performance as is the compensation for the Company's
other executive officers. The Committee may also employ certain broader criteria
more specific to the responsibilities of the Chief Executive Officer.
SECTION 162(m) OF THE INTERNAL REVENUE CODE
It is the responsibility of the Committee to address the issues raised
by Section 162(m) of the Internal Revenue Code, as amended (the "Code"). The
revisions of this Code section made certain non-performance based compensation
in excess of $1,000,000 to executives of public companies non-deductible to the
companies beginning in 1994. The Committee has reviewed these issues and has
determined that no portion of compensation payable to any executive officer for
fiscal 1997 is non-deductible. The Company's 1997 Stock Option Plan limits to
100,000 the number of options that may be awarded to any individual in a single
year under that plan.
Submitted by: THE COMPENSATION COMMITTEE
Gary M. Bullock
Michael P. Steed
Thomas S. Upchurch
PERFORMANCE GRAPH
The following Performance Graph compares the yearly percentage change
in the cumulative total shareholder return on the Company's Common Stock against
the cumulative total return on the Nasdaq Stock Market (U.S.) index and the
Nasdaq Bank Stocks Index from July 1, 1997, the date the Company's Common Stock
began trading on the Nasdaq Stock Market, to December 31, 1997. The Performance
Graph assumes reinvestment of dividends, where applicable. The base amount for
the Company's Common Stock is $31.875 per share, which was the closing price of
the initial day of trading on July 1, 1997. The initial offering price for the
Company's Stock was $20.00 per share.
[GRAPHIC OMITTED]
CERTAIN TRANSACTIONS
ESOP LOAN
The Company has established an Employee Stock Ownership Plan for
employees age 21 or older who have at least one year of credited service with
the Bank or any affiliate (including years of service with the mutual
predecessor of the Bank). The Bank administers the ESOP and Lisa Lawson, Thomas
E. Reeve, Jr., Steve McCord and Anna L. Berry act as trustees of the related
trust. The ESOP is currently funded by the Company, although the Bank and any
other adopting affiliate may fund the ESOP. Contributions may be made in cash
(which primarily will be invested in Common Stock) or Common Stock. Benefits may
be paid either in shares of Common Stock or in cash.
On June 27, 1997, the ESOP obtained a loan from the Company in the
principal amount of $3,861,700 and used the proceeds to purchase 193,085 shares
of Common Stock issued in the Company's subscription offering for its Common
Stock. The interest rate on the loan is equal to the prime rate, which was 8.50%
at March 26, 1998. Shares purchased by the ESOP with the proceeds of the loan
are held in a loan suspense account and released on a pro rata basis as debt
service payments are made. The Company is required to make cash contributions to
the ESOP sufficient to amortize the principal and interest on the loan, which
has a maturity of five years. In any plan year, additional discretionary
contributions may be made for the benefit of plan participants in either cash or
shares of Common Stock, which may be acquired through the purchase of
outstanding shares in the market or from individual shareholders, upon the
original issuance of additional shares by the Company or upon the sale of
treasury shares by the Company. Such purchases, if made, would be funded through
additional borrowings by the ESOP or additional contributions. The timing,
amount and manner of future contributions to the ESOP will be affected by
various factors, including prevailing regulatory policies, the requirements of
applicable laws and regulations and market conditions.
PREFERRED STOCK AWARDS
On January 8, 1998, directors and executive officers of the Company were
awarded the following numbers of shares of Preferred Stock under the Management
Recognition Plan: Mr. Dorminey: 24,135 shares; Mr. Poston: 24,135 shares; Mr.
Gable: 8,806 shares; Ms. Fox: 10,506 shares; each non-employee director of the
Company: 3,620 shares. The shares convert automatically to Common Stock upon the
earlier of January 8, 2003 or a change of control of the Company. Prior to such
conversion, the shares have no voting or dividend rights and no liquidation
preference. See "Proposal One - The Nomination and Election of Directors -
Director Compensation" and "Executive Compensation - Summary Compensation" for
information regarding the tax reimbursement bonuses accrued on behalf of each of
the recipients of the Preferred Stock.
PROPOSAL TWO
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Unless otherwise directed by the shareholders, proxies will be voted
for ratification of the appointment by the Board of Directors, upon the
recommendation of the Audit Committee, of Porter Keadle Moore LLP ("Porter
Keadle Moore") as the Company's independent accountants for fiscal 1998. If the
appointment of Porter Keadle Moore is not ratified by the shareholders, the
Audit Committee will reconsider its recommendation. Management has been informed
that no member of Porter Keadle Moore has any direct or material indirect
financial interest in the Company or the Bank. A representative of Porter Keadle
Moore will be present at the Annual Meeting to answer appropriate questions and
to make a statement if he or she desires.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF PORTER KEADLE MOORE AS THE COMPANY'S
INDEPENDENT ACCOUNTANTS FOR FISCAL 1998.
EXPENSES AND SOLICITATION OF PROXIES
The expenses of the solicitation of proxies for the Annual Meeting will
be paid by the Company. In addition to solicitation by mail, certain directors,
officers and regular employees of the Company and its subsidiaries may solicit
proxies by telephone, telegram or personal interview, for which they will
receive no compensation in addition to their regular salaries. The Company will
request brokerage houses and custodians, nominees and fiduciaries to forward
soliciting material to the beneficial owners of the shares of Common Stock held
of record by such persons, and, upon request, will reimburse them for their
reasonable out-of-pocket expenses in connection therewith.
OTHER MATTERS
The Board of Directors knows of no other matters which may be brought
before the meeting. If, however, any matter other than the proposals set forth
herein or matters incident thereto should properly come before the meeting,
votes will be cast pursuant to the proxies in accordance with the best judgment
of the proxy holders.
