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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
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:
[X] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
CNB HOLDINGS
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (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 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] 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:
-------------------------------------------------------------------------
Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
<PAGE>
CNB HOLDINGS, INC.
7855 NORTH POINT PARKWAY, SUITE 200
ALPHARETTA, GEORGIA 30022
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
June 21, 2000
---------------
To the Shareholders of CNB Holdings, Inc.:
The Annual Meeting of Shareholders (the "Annual Meeting") of CNB Holdings,
Inc. (the "Company") will be held on Wednesday, June 21, 2000 at 10:00 a.m.,
local time, at the Camerron City Club, 1000 Northfield Court, Roswell, Georgia
for the following purposes:
1. To elect four directors to hold office until the Company's 2003
Annual Meeting of Shareholders;
2. To approve an amendment to the Company's Bylaws to provide that
shareholder approval of a matter (other than the election of
directors) requires that the votes cast in favor of the matter exceed
the votes cast in opposition, unless the Company's Articles of
Incorporation, the Company's Bylaws or applicable law requires a
greater number of affirmative votes. Currently, in order to approve a
matter, the Company's Bylaws require the affirmative vote of two-
thirds (2/3) of the shares represented at a shareholders' meeting and
entitled to vote on the matter, except as otherwise provided by law,
or by the Company's Articles of Incorporation or the Company's Bylaws;
and
3. To transact such other business as may properly come before the
Company's Annual Meeting or any adjournments or postponements thereof.
Only shareholders of record at the close of business on May 5, 2000 will be
entitled to notice of and to vote at the Company's Annual Meeting or any
adjournments or postponements thereof. The stock transfer books will not be
closed.
By Order of the Board of Directors,
H.N. Padget, Jr.
President and Chief Executive Officer
Alpharetta, Georgia
May __, 2000
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN
PERSON, YOU ARE URGED TO COMPLETE, SIGN, DATE AND PROMPTLY MAIL TO THE COMPANY
THE ENCLOSED PROXY CARD IN THE ACCOMPANYING POSTAGE PAID ENVELOPE. YOUR PROXY
MAY BE REVOKED, IF YOU CHOOSE, AT ANY TIME PRIOR TO THE VOTE BEING TAKEN AT THE
COMPANY'S ANNUAL MEETING.
<PAGE>
CNB HOLDINGS, INC.
7855 NORTH POINT PARKWAY, SUITE 200
ALPHARETTA, GEORGIA 30022
ANNUAL MEETING OF SHAREHOLDERS
June 21, 2000
---------------
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of CNB Holdings, Inc. (the "Company") for use
at the Company's Annual Meeting of Shareholders (the "Annual Meeting") to be
held on June 21, 2000 at 10:00 a.m., local time, at the Camerron City Club, 1000
Northfield Court, Roswell, Georgia.
The enclosed proxy card is for use at the Annual Meeting if a shareholder
is unable to attend the Annual Meeting in person or wishes to have his shares
voted by proxy, even if he attends the Annual Meeting. Any proxy given pursuant
to this solicitation may be revoked by any one of the following three actions:
(i) giving written notice to the Secretary of the Company, (ii) delivering a
later dated proxy, or (iii) by voting in person at the Annual Meeting. All
shares represented by valid proxies received pursuant to this solicitation, and
not revoked before their exercise, will be voted in accordance with the
directions given in the proxy. When voting regarding the election of directors
to serve until the Company's 2003 Annual Meeting of Shareholders, shareholders
may vote in favor of all nominees or withhold their votes as to specific
nominees. When voting regarding the amendment of the Company's Bylaws,
shareholders may vote in favor of the proposal, vote against the proposal, or
abstain. Shareholders should specify their choices on the enclosed proxy card.
If no instructions are given, proxies which are signed and returned will be
voted FOR the election of each director nominee named, FOR amending the
Company's Bylaws as proposed, and in accordance with the discretion of the
persons named on the enclosed proxy card with respect to any other matters
properly presented for action at the Annual Meeting.
A quorum for the transaction of business at the Annual Meeting consists of
the holders of a majority of the outstanding shares of Company common stock
entitled to vote at the Annual Meeting being present in person or represented by
proxy.
Each share of Company common stock is entitled to one vote on each matter
to come before the Annual Meeting. The proposal to elect four directors to hold
office until the Company's 2003 Annual Meeting of Shareholders requires the
affirmative vote of a plurality of the votes cast by the holders of Company
common stock present in person or represented by proxy at the Annual Meeting.
Therefore, abstentions and broker non-votes will not be taken into account with
respect to the election of directors. However, the proposal to amend the
Company's Bylaws to change the affirmative vote of shares required to constitute
an act of the shareholders requires the affirmative vote of two-thirds (2/3) of
the issued and outstanding shares of Company common stock. As a result,
abstentions and broker non-votes will have the same effect as negative votes
with respect to the proposal to amend the Bylaws.
The mailing address of the principal executive offices of the Company is
7855 North Point Parkway, Suite 200, Alpharetta, Georgia 30022. This Proxy
Statement and the enclosed proxy card are first being mailed or given to the
Company's shareholders on or about May __, 2000.
Only shareholders of record at the close of business on May 5, 2000 are
entitled to notice of and to vote at the Annual Meeting or any adjournments or
postponements thereof. On May 5, 2000, there were __________ shares of Company
common stock issued and outstanding.
In addition to this solicitation by mail, officers and regular employees of
the Company or its subsidiary, Chattahoochee National Bank (the "Bank"), without
additional compensation, may solicit proxies in favor of the proposals contained
herein if deemed necessary, by personal contact, letter, telephone or other
means of
<PAGE>
communication. It is anticipated that brokers, nominees and other custodians and
fiduciaries will be requested to forward proxy solicitation material to the
beneficial owners of the shares of Company common stock where appropriate, and
the Company will reimburse them for their reasonable expenses incurred in
connection with such transmittals. The costs of proxy solicitation for the
Annual Meeting will be borne by the Company. Your cooperation in promptly
signing and returning the enclosed proxy card will help to avoid additional
expenses.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Board of Directors
The members of the Board of Directors of the Company are elected by the
Company's shareholders. The directorships of the Company are divided into three
classes, with the members of each class serving three year terms. The
shareholders of the Company elect one class annually. The Company's Board of
Directors presently consists of 13 members. Approval of directors requires the
affirmative vote of a plurality of the votes cast by the holders of the shares
of Company common stock voting in person or by proxy at the Annual Meeting.
The Company's Board of Directors has nominated four persons for election as
directors at the Company's Annual Meeting. The terms of the remaining directors
of the Company will continue as indicated below. If for any reason any nominee
should become unable or unwilling to accept nomination or election, the persons
named on the enclosed proxy card will have discretionary authority to vote
proxies for the election of another nominee designated by the Company's Board of
Directors. Management of the Company has no reason to believe that any nominee
will not serve if elected.
David R. Hink, Mary E. Johnson, Robert W. Johnston, and H.N. Padget, Jr.
have been nominated to stand for reelection to the Company's Board of Directors,
as Class II directors, to hold office for a term of three years and until their
successors are elected and qualified.
Recommendation of the Company's Board of Directors
The Company's Board of Directors recommends a vote "For" David R. Hink,
Mary E. Johnson, Robert W. Johnston, and H.N. Padget, Jr.
Nominees For Election To Term Expiring 2003
================================================================================
DAVID R. HINK
Director since 1997
Age 51
Mr. Hink has been the Managing Principal of Strategic Solutions Resources,
LLC, a strategy development and investment banking firm, since December 1996. In
addition, Mr. Hink is Vice Chairman of Enercom, Inc., an Internet software
company in which he also serves as a director. From 1995 to 1996, Mr. Hink
served as President of the MarKit Division of Severn Trent Systems, a software
company. From 1993 to 1995, Mr. Hink was employed with A&C Enercom, Inc., a
subsidiary of Virginia Electric Power Company, where he served as Senior Vice
President and was responsible for its corporate development activities and
information technology group of companies, comprised of Entec Consulting and the
Market Applications Group. Mr. Hink is the Chairman of the Compensation
Committee of the Company and a member of the Loan Committee of the Bank.
================================================================================
-2-
<PAGE>
================================================================================
MARY E. JOHNSON
Director since 1997
Age 47
Ms. Johnson has served as the Controller of T. Stephen Johnson &
Associates, Inc., a financial services consulting firm, and its related entities
since 1987. She also serves as the Corporate Secretary and Treasurer of
Brightlane.com, Inc., an Internet "super-site" offering products and services to
small business owners. Further, Ms. Johnson serves as the Corporate Secretary
of Directo, Inc., a direct deposit payroll services company that acts as an
intermediary between employers and non-banked employees. Ms. Johnson is a
member of the Marketing and Technology Committee of the Bank.
================================================================================
ROBERT W. JOHNSTON
Director since 1997
Age 48
Mr. Johnston is a Vice President of TRC Staffing Services, Inc. in Atlanta,
Georgia, a position he has held since January 2000. Prior to that time, Mr.
Johnston was a consultant to the staffing services industry through his
investment in Koala Enterprises, Inc. since 1978. Mr. Johnston is a member of
the Marketing and Technology Committee of the Bank.
================================================================================
H.N. PADGET, JR.
Director since 1997
Age 44
Mr. Padget is the President and Chief Executive Officer of the Company and
the Bank. He has been a banker in metropolitan Atlanta for over 20 years and
has served in various management positions throughout his career. Mr. Padget
most recently served as Executive Vice President of Milton National Bank,
Alpharetta, Georgia from 1993 through October of 1997. Mr. Padget is the son of
Heber N. Padget, Sr., a director of the Company and the Bank.
================================================================================
INCUMBENT DIRECTORS - TO SERVE UNTIL 2001
================================================================================
MICHAEL L. ALDREDGE
Director since 1997
Age 47
Mr. Aldredge has served as Operations Manager and Secretary of Squire Inn,
Inc., a hotel holding company, since 1990. Mr. Aldredge is also a partner in
KAL Jax Hotel, LTD, where he serves as Managing Partner of the Days Inn
Jacksonville Beach Resort. Mr. Aldredge is a member of the Loan Committee of
the Bank.
================================================================================
-3-
<PAGE>
================================================================================
C. DAN ALFORD
Director since 1997
Age 39
Mr. Alford has served as the Chief Financial Officer of Allied Utility
Network LLC, a consultant to the utility industry, since February 1998.
From 1989 to 1998, Mr. Alford served as the Executive Vice President and Chief
Operating Officer of A&C Enercom, Inc., a subsidiary of Virginia Electric Power
Company from 1996 to 1997, where he also served as General Manager of National
Operations for the Commercial & Industrial Division. Mr. Alford is the Chairman
of the Audit Committee and a member of the Compensation Committee of the
Company, Mr. Alford is also a member of the Audit, Compliance and Community
Reinvestment Act Committee, as well as the Compensation Committee and the
Executive Committee, of the Bank.
================================================================================
WILLIAM H. GROCE, JR.
Director since 1997
Age 64
Mr. Groce is a retired executive from BellSouth Telecommunications. Mr.
Groce held various positions at BellSouth Telecommunications throughout his
career which began in 1958, including Executive Assistant to the President of
BellSouth Telecommunications and Secretary to its Board of Directors from 1988
until his retirement in 1994. Mr. Groce is the Secretary of the Company. Mr.
Groce is also the Chairman of the Asset/Liability Management Committee of the
Bank as well as a member of the Compensation Committee and the Executive
Committee of the Bank.
===============================================================================
W. DARRELL SUMNER
Director since 1997
Age 51
Mr. Sumner is the President and co-founder of Bank Assets, Inc., a firm
that specializes in marketing, designing and implementing compensation and
benefit programs for financial institutions since 1992. Mr. Sumner is a member
of the Compensation Committee of the Company and the Loan Committee and
Asset/Liability Management Committee of the Bank.
================================================================================
INCUMBENT DIRECTORS - TO SERVE UNTIL 2002
================================================================================
PATRICIA RHODES GRIMES
Director since 1997
Age 51
Ms. Grimes has been retired from SunTrust Service Corporation since 1992.
She has extensive banking experience and held various management level positions
with SunTrust Service Corporation and Trusco Data Systems, a division of Trust
Company of Georgia. Most recently, Ms. Grimes served as Senior Vice President
and Manager of the Application Systems Division with SunTrust Service
Corporation, a subsidiary of SunTrust Banks, Inc. Ms. Grimes also held
positions with Trusco Data Systems, including Group Vice President and Assistant
Manager of Systems and Programming, Vice President and Section Manager of
Deposits, Financial and Human Resources Systems, Systems Officer and Project
Leader of the Demand Deposit System, and programmer/analyst for Deposit
Applications. Further, Ms. Grimes has served on the MIS Advisory Board for the
University of Georgia. Ms. Grimes is a member of the Audit and Compensation
Committees of the Company. She is also the Chairman of the Marketing and
Technology Committee of the Bank as well as a member of the Audit, Compliance
and Community Reinvestment Act Committee and the Executive Committee of the
Bank.
================================================================================
-4-
<PAGE>
================================================================================
HEBER N. PADGET, SR.
Director since 1997
Age 68
Mr. Padget has been retired since 1991 from the farming business he started
in 1962. He owns the Padget Cattle Company and Wauka Chick Company, both
farming-related businesses located in Gainesville, Georgia. Mr. Padget is a
member of the Asset/Liability Management Committee of the Bank. Mr. Padget is
the father of H.N. Padget, Jr., the Company's and the Bank's President and Chief
Executive Officer.
================================================================================
JOHN A. POND
Director since 1997
Age 52
Mr. Pond has been the President of Pond & Company, an engineering and
architectural services company, since 1987. Mr. Pond holds a professional
engineer license as well as a professional land surveyor license. Mr. Pond is
the Chairman of the Real Estate Committee of the Bank and a member of the
Marketing and Technology Committee of the Bank.
===============================================================================
REID W. SIMMONS
Director since 1997
Age 52
Mr. Simmons is the President of the Orthodontic Division of InfoCure
Corporation, a national provider of healthcare practice management software
products and services. From 1981 until its purchase by InfoCure Corporation in
1999, Mr. Simmons was the President, founder and co-owner of OMSystems, Inc.
(Orthotrac), a provider of computer hardware and software for orthodontists.
From 1970 until 1981, he held various sales and management positions with NCR
Corporation, including Regional Director and National Director of Large Computer
Systems. Mr. Simmons is a member of the Audit Committee of the Company and the
Marketing and Technology and the Audit, Compliance and Community Reinvestment
Act Committees of the Bank.
================================================================================
W. DAVID SWEATT
Director since 1997
Age 52
Mr. Sweatt is the Chairman of the Company and the Bank. From 1996 through
1998, Mr. Sweatt managed personal investments. From 1993 until it was sold in
1996, Mr. Sweatt was a director and the President and Chief Executive Officer of
Royal Bankshares of Acadiana, Inc., Lafayette, Louisiana, a registered bank
holding company which owned the Bank of Lafayette and Trust Bank of the U.S., a
non-depository trust company. Mr. Sweatt simultaneously served as President and
Chief Executive Officer of both subsidiaries of the holding company. He is the
Chairman of the Loan and the Executive Committees of the Bank.
================================================================================
There are no family relationships between any of the directors or executive
officers of the Company or the Bank, except that H.N. Padget, Jr., is the son of
Heber N. Padget, Sr.
Other Executive Officer
Danny F. Dukes, 39, was named Chief Financial Officer of the Company and
Senior Vice President of the Bank and Controller of the Bank in January, 1999.
From March 1997 until December 1998, Mr. Dukes served as Vice President and
Chief Financial Officer of First Community Bancorp and First Community Bank &
Trust in Cartersville, Georgia. From March 1994 until March 1997, Mr. Dukes
served as Chief Financial Officer of Georgia Federal Credit Union, Atlanta,
Georgia.
-5-
<PAGE>
Meetings of the Board of Directors and Committees
The Board of Directors of the Company held nine meetings during 1999.
The Company's Board of Directors has an Audit Committee, a Compensation
Committee and an Executive Committee. The Audit Committee consists of three
members and held six meetings during 1999. The Audit Committee recommends to the
Company's Board of Directors the independent public auditors to be selected to
audit the Company's annual financial statements and approves any special
assignments of such auditors. The Audit Committee also reviews the scope of the
annual audit, any changes in accounting principles and the effectiveness and
efficiency of the Company's internal accounting staff. The members of the Audit
Committee are C. Dan Alford, Patricia Rhodes Grimes and Reid W. Simmons.
The Company's Compensation Committee, which also functions as the
Compensation Committee for the Bank, consists of five members and held six
meetings during 1999. The Compensation Committee establishes remuneration levels
for officers of the Company and the Bank, reviews management organization and
development, reviews significant employee benefit programs, and establishes and
administers executive compensation programs. The members of the Compensation
Committee are C. Dan Alford, Patricia Rhodes Grimes, William H. Groce, Jr.,
David R. Hink, and W. Darrell Sumner.
The Company's Executive Committee, which also functions as the Executive
Committee for the Bank, consists of four members and held 12 meetings during
1999. The Bank's Executive Committee is authorized, between meetings of the
Bank's Board of Directors, to perform all duties and exercise all authority of
the Board of Directors, except for those duties and authorities specifically
granted to other committees or which are exclusively reserved to the full Board
of Directors. The members of the Executive Committee are C. Dan Alford, Patricia
Rhodes Grimes, William H. Groce, Jr. and W. David Sweatt.
All directors have served on the Company's Board of Directors continuously
since their first election. Each director attended at least 75% of the meetings
of the Board of Directors and the meetings of the committees of which he or she
was a member in 1999.
In addition to the committees of the Company's Board of Directors, the
Board of Directors of the Bank also has established a number of standing
committees.
The Bank's Loan Committee consists of four members and held 42 meetings
during 1999. The Loan Committee reviews any loan request made by a potential
borrower over a certain credit threshold for compliance with the Bank's lending
policies and federal and state rules and regulations governing extensions of
credit to such parties and, based on such compliance, makes a decision whether
to extend credit to the potential borrower. The members of the Loan Committee
are Michael L. Aldredge, David R. Hink, W. Darrell Sumner and W. David Sweatt.
The Bank's Audit, Compliance and Community Reinvestment Act Committee
consists of three members and held six meetings during 1999. The Audit,
Compliance and Community Reinvestment Act Committee provides oversight to the
Bank's internal audit function and compliance with regulatory rules and
regulations. The members of the Audit, Compliance and Community Reinvestment
Act Committee are C. Dan Alford, Patricia Rhodes Grimes and Reid W. Simmons.
The Bank's Asset/Liability Management Committee consists of three members
and held 12 meetings during 1999. The Asset/Liability Management Committee
provides guidance to the Bank in balancing the yields and maturities in its
loans and investments to its deposits. The members of the Asset/Liability
Management Committee are William H. Groce, Jr., Heber N. Padget, Sr. and W.
Darrell Sumner.
The Bank's Marketing and Technology Committee consists of four members and
held eight meetings during 1999. The Marketing and Technology Committee
provides ideas and assistance to the Bank in marketing its services within the
Bank's primary service area as well as oversight of the Bank's information and
operating systems. The members of the Marketing and Technology Committee are
Mary E. Johnson, Robert W. Johnston,
-6-
<PAGE>
John A. Pond and Reid W. Simmons.
The Board of Directors of the Company and the Bank may from time to time
establish other committees to facilitate the management of the Company and the
Bank.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities and Exchange Act of 1934, as amended, and
related regulations of the Securities and Exchange Commission ("SEC"), require
the Company's executive officers and directors, and certain persons who own 10%
or more of Company common stock, to file with the SEC reports of their ownership
of Company common stock. The regulations also require these persons to furnish
the Company with copies of all Section 16(a) forms they file. To the Company's
knowledge, based solely on a review of the copies of such reports furnished to
the Company, the Company believes that during 1999 all filing requirements
applicable to such persons have been complied with, except that a Form 4, Report
of Changes in Beneficial Ownership of Securities, was inadvertently filed late
by directors H.N. Padget, Jr. and W. David Sweatt, and executive officer Danny
F. Dukes.
Certain Transactions
The Bank extends loans from time to time to certain of the Company's and
Bank's directors, their associates and members of the immediate families of the
directors and executive officers of the Company. These loans are made in the
ordinary course of business on substantially the same terms, including interest
rates, collateral and repayment terms, as those prevailing at the time for
comparable transactions with persons not affiliated with the Company or the
Bank, and do not involve more than the normal risk of collectibility or present
other unfavorable features.
EXECUTIVE COMPENSATION
The following table sets forth a summary of the compensation paid to or
accrued on behalf of the Company's Chief Executive Officer during the last three
fiscal years. No other executive officer of the Company or the Bank received
annual salary and bonus in excess of $100,000 during the last fiscal year.
<TABLE>
<CAPTION>
Long Term
Compensation Awards
-------------------
Annual Securities
Compensation/(1)/ Underlying
Fiscal ---------------------------- Options
Name and Principal Position Year Salary ($) Bonus ($) (#)
- -------------------------------------- ------ ---------- --------- -------------------
<S> <C> <C> <C> <C>
H.N. Padget, Jr. 1999 126,302 -- 6,000/(2)/
President and Chief Executive Officer 1998 125,000 10,000 35,000/(3)/
1997 20,833 -- --
</TABLE>
__________________________________
/(1)/ All cash compensation was paid by the Bank.
/(2)/ Consists of grant of non-qualified stock option for 6,000 shares of
Company common stock.
/(3)/ Consists of grants of performance-based incentive stock options for 30,000
shares of Company common stock, and an incentive stock option for 5,000
shares of Company common stock.
Employment Agreement
In November 1997, the Company and the Bank entered into an employment
agreement with H.N. Padget, Jr. regarding Mr. Padget's employment as President
and Chief Executive Officer of the Company and the Bank (the "Employment
Agreement"). Under the terms of the Employment Agreement, Mr. Padget will
receive a salary of $125,000 per year with a 2 1/2% increase per year on the
anniversary date of the opening of the Bank. The Employment Agreement provides
that at the end of each year of operation, Mr. Padget will be entitled to
receive a cash bonus based on a performance matrix established against certain
budgets set by the Company. Additionally, the Employment Agreement provides that
the Company will grant Mr. Padget incentive stock options to purchase
-7-
<PAGE>
shares of Company common stock, subject to achieving certain performance
targets. On August 19, 1998 Mr. Padget received grants of 30,000 performance-
based incentive stock options and 5,000 incentive stock options. Pursuant to the
Employment Agreement, the Company has also provided an automobile to be used by
Mr. Padget. The period of employment commenced as of the date the Bank received
its opening letter from the Office of the Comptroller of the Currency (the
"OCC") and continues for a period of 36 months thereafter except in the event of
Mr. Padget's death. The employment may be terminated (i) at the election of the
Company and the Bank for cause; (ii) at Mr. Padget's election, upon the Bank and
the Company's breach of any material provision of the Employment Agreement; or
(iii) upon Mr. Padget's death or disability. In the event that Mr. Padget's
employment is terminated by the Company without cause, (a) the Company will be
required to meet its obligations under the Employment Agreement for a period of
12 months after the date of termination with respect to Mr. Padget's
compensation and health and dental insurance coverages, and (b) Mr. Padget will
be prohibited from competing with the Bank or soliciting its customers or
employees within the geographic area set forth in the Employment Agreement for a
period of 12 months after the date of termination.
Stock Option Plans
1998 Incentive Stock Option Plan
On May 20, 1998, the Company's Board of Directors and initial shareholders
adopted an Incentive Stock Option Plan (the "Incentive Plan") to promote equity
ownership of the Company by key senior officers, key officers and other key
employees of the Company and the Bank. The Incentive Plan was amended by the
shareholders of the Company at a Special Meeting held on November 25, 1998 to
increase the number of shares reserved thereunder from 60,000 to 115,000. The
Incentive Plan provides for the grant of options at the discretion of the
Company's Compensation Committee. The option exercise price must be at least
100% (110% in the case of a holder of 10% or more of the Company's common stock)
of the fair market value of Company common stock on the date the option is
granted and the options are exercisable by the holder thereof in full at any
time prior to their expiration in accordance with the terms of the Incentive
Plan. Stock options granted pursuant to the Incentive Plan expire on or before
the date which is the tenth anniversary of the date the option is granted, or
until the expiration of 90 days (or such lesser period as the Compensation
Committee may determine) from the date on which the person to whom they were
granted ceases to be employed by the Company or the Bank. As of March 30, 2000,
an aggregate of 83,500 shares of Company common stock had been granted under the
Incentive Plan.
1998 Non Qualified Stock Option Plan
On August 19, 1998, the Company's Board of Directors amended and restated
the Company's 1998 Non Qualified Stock Option Plan (the "Non Qualified Plan").
On November 25, 1998, the Company's shareholders approved the amended and
restated Non Qualified Plan. The purpose of the Non Qualified Plan is to
attract, retain and compensate key personnel and directors of the Company and
the Bank. There are 185,000 shares of Company common stock reserved under the
Non Qualified Plan. The Non Qualified Plan is administered by the Company's
Board of Directors. The option exercise price of options granted under the Non
Qualified Plan is the fair market value of Company common stock on the date the
option is granted and the options are exercisable by the holder thereof in full
at any time prior to their expiration in accordance with the terms of the Non
Qualified Plan. Stock options granted pursuant to the Non Qualified Plan expire
on or before the date which is the tenth anniversary of the date the option is
granted, or such lesser period as the Company's Board of Directors may
determine. As of March 30, 2000, an aggregate of 165,500 shares of Company
common stock had been granted under the Non Qualified Plan.
-8-
<PAGE>
The following table sets forth certain information regarding the grant of
stock options in 1999 to Mr. Padget and the value of options held by him at the
end of such fiscal year.
Option Grants in Last Fiscal Year
Individual Grants
<TABLE>
<CAPTION>
% of Total
Number of Securities Options Granted Exercise or
Underlying Options to Employees in Base Price Expiration
Name Granted (#) Fiscal Year ($/Sh) Date
- ---- -------------------- ---------------- ----------- ----------
<S> <C> <C> <C> <C>
H.N. Padget, Jr. 6,000 26.09 8.25 12/2009
</TABLE>
The following table sets forth certain information regarding the exercise
of stock options in the 1998 by the persons named in the Summary Compensation
Table and the value of options held by such persons at the end of such fiscal
year.
<TABLE>
<CAPTION>
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-end Option Values
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at FY-End (#) at FY-End ($)
Name Exercisable/Unexercisable Exercisable/Unexercisable
----------------------- ------------------------- -------------------------
<S> <C> <C>
H.N. Padget, Jr. 16,666/24,334 0/0
</TABLE>
Director Compensation
The directors of the Company and the Bank do not intend to be separately
compensated in cash for their services as directors until the Company's and the
Bank's net profits exceed their net losses since inception on a cumulative
basis. During the organization of the Company and the Bank, directors of the
Company and the Bank were not compensated for their services. On August 19,
1998, the Company's Board of Directors amended and restated the Company's 1998
Non Qualified Stock Option Plan (the "Non Qualified Plan") to include non-
employee directors and made individual grants to each such director. On
November 25, 1998, the Company's shareholders approved the Non Qualified Plan.
Accordingly, during 1998, each non-employee director received a non qualified
option to purchase a number of shares of Company common stock (ranging in size
from 10,000 shares to 22,500 shares and aggregating 145,000 shares) in
consideration of his or her past service as a director and as a means of
attracting and retaining qualified individuals to serve on the Company's Board
of Directors. During 1999, the Company granted 3,000 non-qualified options to
W. David Sweatt.
-9-
<PAGE>
OUTSTANDING VOTING SECURITIES OF THE COMPANY
AND PRINCIPAL HOLDERS THEREOF
The following table sets forth certain information with respect to the
beneficial ownership, as of April 1, 2000, of shares of Company common stock by
(i) each person known by the Company to be the beneficial owner of more than 5%
of the Company's issued and outstanding common stock, (ii) each of the Company's
directors, (iii) each of the Company's executive officers, and (iv) all
directors and executive officers of the Company as a group. Except as noted
below, the Company believes that each of the persons listed has sole investment
and voting power with respect to the shares included in the table.
<TABLE>
<CAPTION>
Amount and
Nature of Beneficial Percent of
Name of Beneficial Owner Ownershipa/(1)//(2)/ Class
- ------------------------ -------------------- ----------
<S> <C> <C>
Michael L. Aldredge 14,333/(3)/ 1.35
C. Dan Alford 13,333/(4)/ 1.26
Patricia R. Grimes 16,666/(5)/ 1.57
William H. Groce, Jr. 25,000/(6)/ 2.34
David R. Hink 20,000/(7)/ 1.88
Mary E. Johnson 16,666/(8)/ 1.57
Robert W. Johnston 13,333/(9)/ 1.26
Heber N. Padget, Sr. 44,600/(10)/ 4.28
H.N. Padget, Jr. 28,666/(11)/ 2.67
John A. Pond 25,000/(12)/ 2.34
Reid W. Simmons 16,666/(13)/ 1.57
W. Darrell Sumner 13,333/(14)/ 1.26
W. David Sweatt 129,766/(15)/ 11.98
Danny F. Dukes 2,066/(16)/ *
All directors and executive officers as a group (14 persons) 369,428/(16)/ 32.90
</TABLE>
- ---------------
* Represents holdings of less than 1%.
/(1)/ The information contained in this table with respect to Company common
stock ownership reflects "beneficial ownership" as determined in
accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Information with respect to beneficial
ownership is based upon information furnished by each owner.
/(2)/ With respect to certain of the individual executive officers listed in
the table and the aggregate number of shares held by the directors and
executive officers as a group, the number of shares indicated includes
shares of Company common stock that the individual has the right to
acquire on or before May 31, 2000 (60 days from April 1, 2000), through
the exercise of options granted under the Company's 1998 Incentive Stock
Option Plan. Under the SEC's rules, a person is also deemed to be the
beneficial owner of any securities owned by such person's spouse,
children or relatives living in the same household. Accordingly, more
than one person may be deemed to be a beneficial owner of the same
securities.
/(3)/ Includes 1,000 shares held by Mr. Aldredge as custodian for his minor
children. Also includes 3,333 shares issuable upon the exercise of a
stock option that may be exercised within 60 days of April 1, 2000.
/(4)/ Includes 3,333 shares issuable upon the exercise of a stock option that
may be exercised within 60 days of April 1, 2000.
/(5/) Includes 4,166 shares issuable upon the exercise of a stock option that
may be exercised within 60 days of April 1, 2000.
/(6)/ Includes 5,000 shares issuable upon the exercise of a stock option that
may be exercised within 60 days of April 1, 2000.
/(7)/ Includes 5,000 shares issuable upon the exercise of a stock option that
may be exercised within 60 days of April 1, 2000.
/(8)/ Includes 4,166 shares issuable upon the exercise of a stock option that
may be exercised within 60 days of April 1, 2000.
/(9)/ Includes 3,333 shares issuable upon the exercise of a stock option that
may be exercised within 60 days of April 1, 2000.
/(10)/ Includes 900 shares held by Mr. Padget's spouse and an aggregate of
5,000 shares held by Mr. Padget and his spouse as custodians for their
grandchildren. Mr. Padget shares investment and voting power over such
shares with his spouse. Also includes 7,500 shares issuable upon the
exercise of a stock option that may be exercised within 60 days of April
1, 2000.
/(11)/ Includes an aggregate of 5,000 shares held by Mr. Padget's children, as
to which Mr. Padget disclaims beneficial ownership and 16,666 shares
issuable upon exercise of stock options that may be exercised within 60
days of April 1, 2000.
/(12)/ Includes an aggregate of 5,000 shares held by Mr. Pond's children. Also
includes 3,000 shares issuable upon the exercise of a stock option that
may be exercised within 60 days of April 1, 2000.
/(13)/ Includes 12,400 shares held by Simmons Investments, L.P., of which Mr.
Simmons is a general partner. Includes 4,166 shares issuable upon the
exercise of a stock option that may be exercised within 60 days of April
1, 2000.
/(14)/ Includes 3,333 shares issuable upon the exercise of a stock option that
may be exercised within 60 days of April 1, 2000.
/(15)/ Includes 15,000 shares held by Mr. Sweatt's spouse and an aggregate of
10,000 shares held by Mr. Sweatt's spouse as custodian for their minor
children, as to which Mr. Sweatt shares voting and investment power with
his spouse. Also includes 24,166 shares issuable upon exercise of stock
options that may be exercised within 60 days of April 1, 2000.
/(16)/ Includes 666 shares issuable upon the exercise of a stock option that
may be exercised within 60 days of April 1, 2000.
-10-
<PAGE>
PROPOSAL NO. 2
APPROVAL OF AMENDMENT TO BYLAWS
General
Section 2.6 of the Bylaws of the Company (the "Bylaws") currently provides
that shareholder approval of a matter requires the affirmative vote of at least
two-thirds (2/3) of the shares represented at a shareholders' meeting and
entitled to vote on the matter, except as otherwise provided by law, or by the
Company's Articles of Incorporation or the Bylaws. The Board of Directors of the
Company has adopted, subject to shareholder approval, an amendment to Section
2.6 of the Bylaws that would lower the shareholder vote required in order to
approve a matter. Under the proposed amendment, shareholder approval of a matter
(other than the election of directors) would be determined by comparing the
votes cast in favor of the matter with the votes cast against, rather than
comparing the votes cast in favor of the matter to the number of shares
represented at the meeting and entitled to vote. Specifically, shareholder
approval of a matter (other than the election of directors) would require that
the votes cast in favor of the matter exceed the votes cast in opposition,
unless the Company's Articles of Incorporation, the Bylaws or applicable law
requires a greater number of affirmative votes.
Reasons for and Effects of Proposed Amendment
The proposed amendment would bring the Company's shareholder approval
requirements more in line with standard requirements among public companies and
facilitate the approval of non-routine matters. Under the Bylaws currently in
effect, shareholder approval of non-routine matters can be especially difficult
due to the fact that a large number of the Company's shares are held by brokers
as nominees (i.e., in "street name"). When shares are held in street name, the
broker, as nominee, is allowed to vote the shares only on routine corporate
matters, such as electing directors. However, when a non-routine matter arises,
such as approving a stock option plan, a merger or an acquisition, the broker
does not have the authority to vote on the matter unless the customer for whom
the broker is holding the shares provides the broker with voting instructions.
When the customer fails to provide instructions, the broker must return the
proxy to the Company without indicating whether the shares are being voted in
favor or against the matter (i.e., a "broker non-vote"). With respect to non-
routine matters, the Company's practice has been to count broker non-votes as
present and entitled to vote, which means that under Section 2.6 of the Bylaws,
as currently in effect, broker non-votes effectively become a vote against the
matter. Accordingly, in order for a non-routine matter to be approved by
shareholders, extensive and sometimes costly follow-up efforts must be made
after the mailing of the Company's proxy statement in order to ensure that
shareholders properly instruct their brokers to vote in favor of the matter.
While basing shareholder approval of a matter on the number of shares
present and entitled to vote may in some instances protect shareholders'
interests, the Company believes that the benefits of this protection,
particularly when combined with a two-thirds (2/3) approval requirement, are
outweighed by their costs and are sufficiently achieved through other provisions
contained in the Bylaws. Section 2.6 of the Bylaws, as currently in effect, is
a supermajority shareholder approval provision that serves as an anti-takeover
defense for the Company and its shareholders. Therefore, another effect of the
proposed amendment would be to remove an anti-takeover device that may make it
easier for an acquirer to gain control of the Company. In general, the purpose
of anti-takeover defenses is to protect a corporation's interests and those of
its shareholders. However, as discussed below, the Company has other anti-
takeover provisions which the Company's Board of Directors believes adequately
protect the Company in the event an unwanted takeover attempt should arise.
Section 9.2 of the Bylaws explicitly "opts in" to Georgia's business
combination statute. Generally, under this statute, "business combinations"
(e.g., mergers or purchases of 10% or more of the Company's assets or
securities) with an "interested shareholder" (e.g., a person with beneficial
ownership of 10% or more of voting stock) that occur within five years of the
acquirer becoming an interested shareholder are prohibited unless: (i) the Board
of Directors approved the business combination or the transaction that made the
acquirer an interested shareholder; (ii) the interested shareholder attained 90%
of the voting stock in the transaction that made the shareholder an interested
shareholder; or (iii) the interested shareholder attains 90% of the voting stock
of the
-11-
<PAGE>
Company subsequent to becoming an interested shareholder and a majority
of the Company's voting shares approves the acquisition.
In addition, Section 9.1 of the Bylaws explicitly "opts in" to Georgia's
fair price provisions. Generally, under these provisions, in addition to any
other approvals required by law, a business combination with an interested
shareholder must be unanimously approved by the "continuing directors" (e.g.,
any director who is not an affiliate or associate of the interested shareholder
and who was a director prior to the time the shareholder became an interested
shareholder) or recommended by at least two-thirds (2/3) of the continuing
directors and approved by the affirmative vote of a majority of the votes not
beneficially owned by the interested shareholder unless: (i) the consideration
to be received by the Company's shareholders meets certain minimum levels (e.g.,
the highest price paid by the interested shareholder for any shares which it
acquired); (ii) the consideration to be received by shareholders who are not
interested shareholders shall be paid in cash or in the same form as the
interested shareholder previously paid for shares of such class of stock; and
(iii) there has been no reduction in the annual dividend rate from that which
was paid prior to the time the interested shareholder became an interested
shareholder.
Due to the business combination and fair price provisions contained in the
Bylaws, the Company's Board of Directors believes that the Company has adequate
anti-takeover safeguards without a supermajority shareholder approval provision.
Text of Proposed Amendment
The text of Section 2.6 of the Bylaws, as proposed to be amended, is set
forth below. The proposed amendment has been marked by bolding and underlining
the text to be added and striking through the text to be deleted.
2.6 At every meeting of the shareholders, including (but without
limitation of the generality of the foregoing language) meetings of
shareholders for the election of directors, any shareholder having the
right to vote shall be entitled to vote in person or by proxy, but no
proxy shall be voted after 11 months from its date, unless said proxy
provides for a longer period. Each shareholder shall have one vote
for each share of stock having voting power, registered in his name on
the books of the corporation. If a quorum is present, (action on a
===========
matter (other than the election of directors) is approved if the votes
======================================================================
cast favoring the action exceed the votes cast opposing the action,
===================================================================
unless the Articles of Incorporation, these bylaws or applicable law
====================================================================
requires a greater number of affirmative votes [begin strike
==============================================
through] the affirmative vote of two thirds (2/3) of the shares
represented at the meeting and entitled to vote on the subject matter
shall be the act of the shareholders, except as otherwise provided by
law, by the Articles of Incorporation or by these bylaws [end strike
through].
Recommendation of the Company's Board of Directors
The Company's Board of Directors recommends a vote "For" amending Section
2.6 of the Bylaws to reduce the vote required to constitute an act of
shareholders and to change the method of determining whether the requisite
approval has been obtained.
AUDITORS
The firm of Mauldin & Jenkins, LLC audited the financial statements of the
Company for the fiscal year ended December 31, 1999. Representatives of Mauldin
& Jenkins, LLC are expected to be present at the Annual Meeting to respond to
shareholders' questions and will have an opportunity to make any statements they
consider to be appropriate. Although the Board of Directors of the Company has
not yet selected an independent accounting firm for the 2000 fiscal year, it is
expected that Mauldin & Jenkins, LLC will be chosen.
-12-
<PAGE>
ANNUAL REPORT TO SHAREHOLDERS AND REPORTS ON FORM 10-KSB
Additional information concerning the Company, including financial
statements of the Company, is provided in the Company's 1999 Annual Report to
Shareholders that accompanies this Proxy Statement. The Company's Annual Report
on Form 10-KSB for the year ended December 31, 1999, as filed with the SEC, is
available to shareholders who make a written request therefor to Danny F. Dukes,
at the offices of the Company, 7855 North Point Parkway, Suite 200, Alpharetta,
Georgia 30022. Copies of exhibits filed with that report or referenced therein
will be furnished to shareholders of record upon request and payment of the
Company's expenses in furnishing such documents.
SHAREHOLDER PROPOSALS FOR INCLUSION IN NEXT YEAR'S PROXY STATEMENT
Proposals of shareholders intended to be presented at the Company's 2001
Annual Meeting of Shareholders must be received at the Company's principal
executive offices by ______________, in order to be eligible for inclusion in
the Company's proxy statement and form of proxy for that meeting.
OTHER SHAREHOLDER PROPOSALS FOR PRESENTATION
AT NEXT YEAR'S ANNUAL MEETING
For any proposal that is not submitted for inclusion in next year's Proxy
Statement, but is instead sought to be presented directly at the 2001 Annual
Meeting of Shareholders, management will be able to vote proxies in its
discretion if the Company: (i) receives notice of the proposal before the close
of business on __________, 2001, and advises shareholders in the 2001 Proxy
Statement about the nature of the matter and how management intends to vote on
such matter; or (ii) does not receive notice of the proposal prior to the close
of business on ___________, 2001. Notices of intention to present proposals at
the 2001 Annual Meeting of Shareholders should be addressed to William H. Groce,
Secretary, 7855 North Point Parkway, Suite 200, Alpharetta, Georgia 30022.
OTHER MATTERS
The Company's Board of Directors knows of no other matters to be brought
before the Annual Meeting. However, if other matters should come before the
Annual Meeting, it is the intention of the persons named in the enclosed proxy
card to vote the Proxy in accordance with their judgment of what is in the best
interest of the Company.
By Order of The Board of Directors
--------------------------------------
H.N. Padget, Jr.
President and Chief Executive Officer
Alpharetta, Georgia
May __, 2000
-13-
<PAGE>
CNB HOLDINGS, INC.
7855 North Point Parkway, Suite 200
Alpharetta, Georgia 30022
COMMON STOCK PROXY
This Proxy is solicited by the Board of Directors of CNB Holdings, Inc.
For the Annual Meeting of Shareholders, June 21, 2000
The undersigned shareholder of the Company hereby appoints H.N. Padget, Jr.
and Danny F. Dukes, or any of them, as proxies and attorneys-in-fact, with full
power to each of substitution and with discretionary authority, to act for and
in the name of the undersigned to vote, as designated below, all of the shares
of the undersigned at the Annual Meeting of Shareholders of the Company to be
held on June 21, 2000 and at any adjournment or postponement thereof.
1. Election of four directors to hold office until the Company's 2003 Annual
Meeting of Shareholders.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR THE DIRECTOR
NOMINEES NAMED BELOW
[ ] FOR all nominees listed below [ ] WITHOLD AUTHORITY
(except as otherwise indicated below)
David R. Hink, Mary E. Johnson, Robert W. Johnston, and H.N. Padget, Jr.
If you wish to withhold authority to vote for any individual nominee(s), write
the nominee's name(s) on the line below:
- -------------------------------------------------------------------------------
2. The proposal to amend the Company's Bylaws to provide that action on a
matter (other than the election of directors) is approved if the votes cast
favoring the action exceed the votes cast opposing the action, unless the
Company's Articles of Incorporation or Bylaws or applicable law requires a
greater number of affirmative votes.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the proxies are authorized to vote upon such other
matter or matters which may properly come before the Annual Meeting and at any
adjournment or postponement thereof.
WHEN THIS PROXY IS PROPERLY EXECUTED AND RETURNED, AND NOT REVOKED, THE SHARES
IT REPRESENTS WILL BE VOTED IN ACCORDANCE WITH THE CHOICES SPECIFIED ABOVE, AND
IF NO CHOICE IS SPECIFIED, IT WILL BE VOTED FOR EACH OF THE PROPOSALS SET FORTH
ABOVE.
PLEASE MARK, DATE AND SIGN AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
Dated: ____________, 2000 PLEASE SIGN NAME EXACTLY AS LISTED ON THE
MAILING LABEL
-------------------------------------------
Signature
-------------------------------------------
Print name as listed on the mailing label
-------------------------------------------
Signature (if held jointly)
NOTE: If stock is held in the name of two or
more persons, all must sign. When signing as
attorney, trustee, administrator, executor
or guardian, please give your full title as
such. If a corporation, please sign in full
corporate name by President or other
authorized officer.
