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 Under Rule 14a-12
[ ] Confidential, For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
First Union Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy, 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)(1) 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:
<PAGE>
[FIRST UNION LOGO APPEARS HERE]
March 7, 2000
Dear Stockholder:
On behalf of the Board of Directors, I am pleased to invite you to
the Annual Meeting of Stockholders in Charlotte, North Carolina, on
Tuesday, April 18, 2000, at 9:30 a.m.
The notice of meeting and proxy statement on the following pages
contain information about the meeting. We will also review operating
results for the past year and present other information concerning
First Union. The meeting should be interesting and informative and we
hope you will be able to attend.
This year we are pleased to offer our record holders of common stock
(those who hold stock certificates registered in their own names and
not in the name of a broker or other nominee) the option of voting by
telephone or through the Internet.
In order to ensure your shares are voted at the meeting, please
either return the enclosed proxy card at your earliest convenience or
vote through the telephone or Internet voting procedures described on
your proxy card. Every stockholder's vote is important, whether you
own a few shares or many.
Sincerely yours,
/s/ Edward E. Crutchfield
------------------------------------
Edward E. Crutchfield
Chairman and Chief Executive Officer
First Union Corporation, One First Union Center,
Charlotte, North Carolina 28288-0013
<PAGE>
First Union Corporation
One First Union Center, Charlotte, North Carolina 28288-0013
NOTICE OF ANNUAL MEETING
TO BE HELD ON APRIL 18, 2000
March 7, 2000
The Annual Meeting of Stockholders will be held in the Auditorium, 12th
floor, Two First Union Center, Charlotte, North Carolina, on Tuesday,
April 18, 2000, at 9:30 a.m., to consider the following:
1. A First Union proposal to elect the eight nominees named in the
attached proxy statement as directors, seven nominees to serve
as Class II directors with terms expiring at the 2003 Annual
Meeting of Stockholders, and one nominee to serve as a Class III
director with a term expiring at the 2001 Annual Meeting of
Stockholders, in each case until their successors are duly
elected and qualify.
2. A First Union proposal to approve the performance goals under the
Management Incentive Plan.
3. A First Union proposal to approve the performance goals under the
Management Long-term Cash Incentive Plan.
4. A First Union proposal to ratify the appointment of KPMG LLP as
auditors for the year 2000.
5. If properly presented, a stockholder proposal, which management
opposes, regarding the nomination of directors.
6. Such other business as may properly come before the meeting or any
adjournments thereof.
Only holders of record of First Union common stock on February 22,
2000, are entitled to notice of and to vote at the meeting.
By Order of the Board of Directors,
/s/ Mark C. Treanor
-------------------------
Mark C. Treanor
Secretary
WHETHER OR NOT YOU PLAN TO ATTEND, PLEASE EITHER RETURN THE ENCLOSED
PROXY CARD OR VOTE THROUGH THE TELEPHONE OR INTERNET VOTING PROCEDURES
DESCRIBED ON YOUR PROXY CARD, TO ENSURE YOUR SHARES ARE VOTED AT THE
MEETING. YOUR VOTE IS IMPORTANT, WHETHER YOU OWN A FEW SHARES OR MANY.
<PAGE>
First Union Corporation
One First Union Center, Charlotte, North Carolina 28288-0013
-----------------
PROXY STATEMENT
-----------------
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors in
connection with the Annual Meeting of Stockholders to be held in the
Auditorium, 12th Floor, Two First Union Center, Charlotte, North Carolina, on
Tuesday, April 18, 2000, at 9:30 a.m. The proxy is for use at the meeting if
you do not attend or if you wish to vote your shares by proxy even if you do
attend. If you are a registered stockholder (that is, you hold stock
certificates registered in your own name) you may also vote by telephone or
through the Internet, by following the instructions described on your proxy
card. If your shares are held in "street name" please check your voting
instruction form or contact your broker or other nominee to determine if you
can vote by telephone or through the Internet. You may revoke your proxy at any
time before it is exercised by (i) giving a written notice of revocation to the
Corporate Secretary of First Union, (ii) submitting a proxy having a later
date, or (iii) appearing at the meeting and requesting to vote in person. All
shares represented by valid proxies and not revoked before they are exercised
will be voted as specified. If no specification is made, proxies will be voted
"FOR" the election of all nominees for director presented under Proposal 1;
"FOR" the approval of the performance goals under the Management Incentive Plan
presented under Proposal 2; "FOR" the approval of the performance goals under
the Management Long-Term Cash Incentive Plan presented under Proposal 3; "FOR"
the ratification of KPMG LLP as auditors for the year 2000 presented under
Proposal 4; and "AGAINST" the stockholder proposal presented under Proposal 5.
This proxy statement and the enclosed proxy and 1999 Annual Report to
Stockholders are being first mailed to our stockholders on or about March 13,
2000. The Annual Report does not constitute "soliciting material" and is not to
be deemed "filed" with the SEC.
If you have any shares in our Dividend Reinvestment and Stock Purchase
Plan, the enclosed proxy represents the number of shares you have in the Plan
on the record date for the meeting, as well as the number of shares directly
registered in your name on the record date.
First Union will bear the cost of preparing this proxy statement and of
soliciting proxies in the enclosed form. Proxies may be solicited by our
employees, either personally, by letter or by telephone. Our employees will not
be specifically compensated for these services. In addition, we have retained
Georgeson Shareholder Communications, Inc. as proxy solicitors to assist in the
solicitation and tabulation of proxies. Their base fee is $21,000, plus
expenses and an additional fee per proxy tabulated.
VOTING SECURITIES AND PRINCIPAL HOLDERS
As of February 22, 2000, the record date for the meeting, there were
982,766,896 shares of First Union common stock outstanding. You have one vote
for each share registered in your name on the record date with respect to each
matter voted on at the meeting. We are not aware of any stockholder who was the
beneficial owner of more than 5% of the outstanding shares of common stock on
the record date, except for Capital Research and Management Company, 333 South
Hope Street, Los Angeles, CA 90071, an investment adviser, which based on a
Schedule 13G filed with the SEC, was the holder of 52,887,380 shares of common
stock as of December 31, 1999, or 5.4% of the outstanding shares of common
stock on the record date. Capital Research indicated that it holds such shares
for accounts under the discretionary management of Capital Research and not for
its own account. Capital Research also indicated that it does not have sole or
shared voting power with respect to the shares and has sole dispositive power
over them.
1
<PAGE>
The presence in person or by proxy of a majority of the shares of common
stock outstanding on the record date will constitute a quorum for purposes of
conducting business at the meeting. For purposes of determining the votes cast
on any matter at the meeting, only "FOR" and "AGAINST" votes are included.
Abstentions and broker non-votes (I.E., shares held by brokers that they can't
vote on certain matters because they haven't received voting instructions from
their customers with respect to such matters) are only counted for the purpose
of determining whether a quorum is present. With the exception of the election
of directors, which requires a plurality of the votes cast, the affirmative
vote of a majority of the votes cast at the meeting on each proposal is
required to approve each proposal.
PROPOSAL 1. A FIRST UNION PROPOSAL TO ELECT DIRECTORS
GENERAL INFORMATION AND NOMINEES
The Board of Directors is divided into three classes. At each annual
meeting of stockholders, the stockholders elect the members of one of the three
classes to three-year terms. The number of directors is determined by the
directors but cannot be less than nine or more than 30. For purposes of the
election of directors at the meeting the number of directors has been fixed at
23, with eight directors in Class I, seven directors in Class II, and eight
directors in Class III.
The terms of the directors serving in Class II will expire at the meeting
and, except as otherwise indicated below, the terms of the directors serving in
Classes I and III will expire at the 2002 and 2001 Annual Meetings of
Stockholders, respectively.
A. Dano Davis, Roddey Dowd, Sr., William H. Goodwin, Jr., Radford D.
Lovett, Mackey J. McDonald, Lanty L. Smith and G. Kennedy Thompson are being
nominated to serve as directors in Class II with terms expiring at the 2003
Annual Meeting of Stockholders. Each of such nominees is currently serving as a
Class II director, except for Lanty Smith who is currently serving as a Class
III director. In addition, B. F. Dolan, who is currently serving as a Class II
director, is being nominated to serve as a Class III director with a term
expiring at the 2001 Annual Meeting of Stockholders.
Directors who reach retirement age (I.E., age 70) during their term in
office are to retire from the Board at the annual meeting of stockholders next
following their 70th birthday, subject to the Board authorizing the retirement
to be deferred when deemed appropriate.
Directors are elected by a plurality of votes cast. Shares cannot be voted
for a greater number of persons than the number of nominees named herein.
Should any nominee be unavailable for election by reason of death or other
unexpected occurrence, the enclosed proxy, to the extent permitted by
applicable law, may be voted with discretionary authority in connection with
the nomination by the Board and the election of any substitute nominee. In
addition, the Board may reduce the number of directors to be elected at the
meeting.
PROXIES, UNLESS INDICATED TO THE CONTRARY, WILL BE VOTED "FOR" THE
ELECTION OF THE EIGHT NOMINEES NAMED BELOW AS DIRECTORS OF FIRST UNION IN THE
CLASSES AND FOR THE TERMS INDICATED.
Listed below are the names of the seven nominees to serve as Class II
directors, the nominee to serve as a Class III director and the 15 incumbent
directors who will be continuing in office following the meeting, together
with: their ages; their principal occupations during the past five years; any
other directorships they hold with publicly-held companies; the year during
which they were first elected a director; and the number of shares of First
Union common stock they beneficially owned as of January 31, 2000. As of such
date, no director beneficially owned more than 1% of the outstanding shares of
common stock.
2
<PAGE>
<TABLE>
<CAPTION>
Name, Age, Principal Occupation Director Shares
and Certain Other Directorships Since Owned (1)
------------------------------------------------------------ ---------- ----------
<S> <C> <C> <C>
CLASS II NOMINEES FOR ELECTION TO TERMS EXPIRING IN 2003
[PHOTO APPEARS HERE]
A. DANO DAVIS (54). Chairman, Winn-Dixie Stores, Inc., 1997 2,851,714
Jacksonville, Florida, a food retailer, since November
1999. Prior to November 1999, also Principal Executive
Officer. Director, Winn-Dixie Stores, Inc. (1)
[PHOTO APPEARS HERE]
RODDEY DOWD, SR. (67). Chairman of the Executive 1988 20,269
Committee, Charlotte Pipe and Foundry Company,
Charlotte, North Carolina, a manufacturer of pipe and
fittings, since September 1998. Formerly, Chairman,
Charlotte Pipe and Foundry Company. Director, Ruddick
Corporation.
[PHOTO APPEARS HERE]
WILLIAM H. GOODWIN, JR. (59). Chairman, CCA 1993 956,500
Industries, Inc., Richmond, Virginia, a diversified holding
company. (1)
[PHOTO APPEARS HERE]
RADFORD D. LOVETT (66). Chairman, Commodores 1985 363,092
Point Terminal Corporation, Jacksonville, Florida, an
operator of a marine terminal and a real estate
management company. Director, Florida Rock Industries,
Inc., FRP Properties, Inc. and Winn-Dixie Stores, Inc.
[PHOTO APPEARS HERE]
MACKEY J. MCDONALD (53). Chairman (since October 1997 4,000
1998), President and Chief Executive Officer, VF
Corporation, Greensboro, North Carolina, an apparel
manufacturer. Director, Hershey Foods Corporation and
VF Corporation.
[PHOTO APPEARS HERE]
LANTY L. SMITH (57). Chairman, Soles Brower Smith & 1987 8,000
Co., Greensboro, North Carolina, an investment banking
firm, since December 1998. Also, Chairman, Precision
Fabrics Group, Inc., Greensboro, North Carolina, a
manufacturer of engineered, specification textile
products, since November 1997. Prior to November
1997, Chairman and Chief Executive Officer, Precision
Fabrics Group, Inc.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Name, Age, Principal Occupation Director Shares
and Certain Other Directorships Since Owned (1)
----------------------------------------------------------- ---------- ------------
[PHOTO APPEARS HERE]
<S> <C> <C> <C>
G. KENNEDY THOMPSON (49). President, First Union Corporation, 1999* 310,044
since December 1999. Formerly, Vice Chairman, First Union Corporation,
October 1998 to December 1999, Executive Vice President, November 1996
to October 1998, and President, First Union-Florida, prior to November
1996. Director, Florida Rock Industries, Inc. (1)(2)
CLASS III NOMINEE FOR ELECTION TO TERM EXPIRING IN 2001
[PHOTO APPEARS HERE]
B. F. DOLAN (72). Investor. Director, FPL Group, Inc. and Polaris 1977 110,895
Industries, Inc.
INCUMBENT CLASS I DIRECTORS - TERMS EXPIRING IN 2002
[PHOTO APPEARS HERE]
ERSKINE B. BOWLES (54). General Partner, Forstmann Little & Co., 1999 9,500
New York, New York, and Managing Director, Carousel Capital Company,
LLC, Charlotte, North Carolina, merchant banking-private equity
companies, since January 1999. Formerly, Chief of Staff, The White
House, November 1996 to November 1998, Managing Director, Carousel
Capital Company, LLC, December 1995 to November 1996, and Deputy Chief
of Staff, The White House, prior to December 1995. Director, McLeodUSA
Incorporated and VF Corporation. (2)
[PHOTO APPEARS HERE]
ROBERT J. BROWN (65). Chairman, President and Chief Executive 1993 1,432
Officer, B&C Associates, Inc., High Point, North Carolina, a public
relations and marketing research firm. Director, Duke Energy
Corporation, AutoNation, Inc. and Sonoco Products Company. (1)
[PHOTO APPEARS HERE]
EDWARD E. CRUTCHFIELD (58). Chairman and Chief Executive Officer, 1997 1,257,896
First Union Corporation. Director, Bernhardt Industries, Inc., Liberty
Corporation and VF Corporation. (1)(2)
----------
*Elected a director by the Board of Directors in July 1999.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Name, Age, Principal Occupation Director Shares
and Certain Other Directorships Since Owned (1)
---------------------------------------------------------- ---------- ----------
[PHOTO APPEARS HERE]
<S> <C> <C> <C>
JAMES E. S. HYNES (59). Chairman, Hynes, Inc., 1999 20,408
Charlotte, North Carolina, a sales and marketing services
firm. Director, Ruddick Corporation.
[PHOTO APPEARS HERE]
HERBERT LOTMAN (66). Chairman and Chief Executive 1998 154,487
Officer, Keystone Foods Holding Company, Inc., Bala
Cynwyd, Pennsylvania, a global food processor and
logistics company. (1)
[PHOTO APPEARS HERE]
PATRICIA A. MCFATE (67). Senior Scientist, Strategies 1998 8,626
Group, Science Applications International Corporation,
Santa Fe, New Mexico, a systems engineering company.
[PHOTO APPEARS HERE]
JOSEPH NEUBAUER (58). Chairman and Chief Executive 1996 11,664
Officer, ARAMARK Corporation, Philadelphia,
Pennsylvania, a service management company. Director,
Bell Atlantic Corporation, CIGNA Corporation and
Federated Department Stores, Inc.
[PHOTO APPEARS HERE]
RUTH G. SHAW (52). Executive Vice President and Chief 1990 2,700
Administrative Officer, Duke Energy Corporation,
Charlotte, North Carolina, an energy company, since
June 1997. Formerly, Senior Vice President, Corporate
Resources, and Chief Administrative Officer, Duke
Energy Corporation. Director, Avado Brands, Inc. and
Texas Eastern Products Pipeline Company. (1)
INCUMBENT CLASS III DIRECTORS -- TERMS EXPIRING IN 2001
[PHOTO APPEARS HERE]
EDWARD E. BARR (63). Chairman, Sun Chemical 1996 137,068
Corporation, Fort Lee, New Jersey, a graphic arts
materials manufacturer, since January 1998. Formerly,
Chairman, President and Chief Executive Officer, Sun
Chemical Corporation. Director, United Water Resources
Inc.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Name, Age, Principal Occupation Director Shares
and Certain Other Directorships Since Owned (1)
----------------------------------------------------------- ---------- ----------
[PHOTO APPEARS HERE]
<S> <C> <C> <C>
G. ALEX BERNHARDT, SR. (56). Chairman and Chief 1992 3,979
Executive Officer, Bernhardt Furniture Company, Lenoir,
North Carolina, a residential and executive office
furnishings manufacturer, since August 1996. Formerly,
President and Chief Executive Officer, Bernhardt
Furniture Company. Director, Duke Energy
Corporation. (1)
[PHOTO APPEARS HERE]
W. WALDO BRADLEY (66). Chairman, Bradley Plywood 1986 89,554
Corporation, Savannah, Georgia, a wholesale distributor
of building materials. (1)
[PHOTO APPEARS HERE]
NORWOOD H. DAVIS, JR. (60). Chairman of the Board, 1998 130,121
Trigon Healthcare, Inc., Richmond, Virginia, a healthcare
company, since April 1999. Prior to April 1999, also Chief
Executive Officer. Director, Hilb, Rogal and Hamilton
Company and Trigon Healthcare, Inc. (1)
[PHOTO APPEARS HERE]
FRANK M. HENRY (66). Chairman, Frank Martz Coach 1996 622,208
Company, Wilkes-Barre, Pennsylvania, bus
transportation. Director, Commonwealth Telephone
Enterprises, Inc. (1)(2)
[PHOTO APPEARS HERE]
ERNEST E. JONES (55). President and Chief Executive 1998 2,698
Officer, Philadelphia Workforce Development
Corporation, Philadelphia, Pennsylvania, a workforce
development company, since October 1998. Formerly,
President and Executive Director of Greater Philadelphia
Urban Affairs Coalition.
[PHOTO APPEARS HERE]
JAMES M. SEABROOK (66). Chairman and Chief 1998 9,790
Executive Officer, Seabrook Brothers & Sons, Inc., frozen
foods processor and marketer, Seabrook, New
Jersey. (1)
</TABLE>
6
<PAGE>
- ----------
(1) The foregoing directors and nominees have sole voting and investment power
over the shares of common stock beneficially owned by them on January 31,
2000, except for the following shares over which the directors indicated,
and such directors and the seven senior executive officers of First Union
(in addition to Crutchfield and Thompson: B.J. Walker, Vice Chairman;
Donald A. McMullen, Jr., Vice Chairman; Benjamin P. Jenkins, III, Vice
Chairman; Robert T. Atwood, Executive Vice President and Chief Financial
Officer; and Mark C. Treanor, Executive Vice President, Secretary and
General Counsel) as a group, share voting and/or investment power:
Bernhardt -- 1,177 shares; Bradley -- 4,322 shares; Brown -- 200 shares;
Crutchfield -- 27,709 shares; A. Dano Davis -- 2,471,514 shares; Norwood
H. Davis, Jr. -- 127,953 shares; Goodwin -- 950,500 shares; Henry --
14,568 shares; Lotman -- 45,360 shares; Seabrook -- 566 shares; Shaw --
1,700 shares; Thompson -- 11,616 shares; and members of the group
(including the foregoing) -- 3,742,645 shares.
The foregoing directors, nominees and senior executive officers beneficially
owned a total of 8,137,432 shares, or less than one percent of the
outstanding shares of common stock as of January 31, 2000. Included in such
shares are the following shares held under certain of our employee benefit
plans, including options exercisable on January 31, 2000, or within 60 days
thereafter, by the directors indicated, and by the directors and senior
executive officers as a group: Crutchfield -- 726,321 shares; Thompson --
147,798 shares; and members of the group (including the foregoing) --
1,405,915 shares. Non-employee directors are not eligible to participate in
any of our stock option or other employee benefit plans.
The following directors and nominees disclaim beneficial ownership of
certain shares of common stock held by certain of their related interests,
as a result of which these shares are not included in the number of shares
indicated above: Bradley -- 61,128 shares; Crutchfield -- 34,114 shares; and
Lotman -- 106,704 shares.
(2) See (i) "Employment Contracts" under "Executive Compensation", and (ii)
"Other Matters Relating to Executive Officers and Directors".
COMMITTEES OF THE BOARD AND ATTENDANCE
EXECUTIVE COMMITTEE. The Executive Committee held seven meetings in 1999.
The Committee is authorized, between meetings of the Board, to perform all
duties and exercise all authority of the Board, except for those duties and
authorities delegated to other committees of the Board or which are exclusively
reserved to the Board by our Bylaws or by statute. In addition, the Chair of
the Executive Committee, a non-employee director, also serves as the lead
independent director of the Board. The responsibilities of the lead independent
director include, among other things, assisting the Chairman of the Board with
certain Board-related matters, and acting, as necessary, as the principal
liaison between the independent directors and the Chairman of the Board. The
following directors are the current members of the Committee: Dolan (Chairman),
Crutchfield, R. Stuart Dickson (a retiring director), Arthur M. Goldberg (a
retiring director), Goodwin, Lovett, McDonald, Neubauer and Smith.
AUDIT COMMITTEE. The Audit Committee held seven meetings in 1999. The
principal responsibilities of the Committee are to ensure that the Board
receives objective information regarding policies, procedures and activities
with respect to auditing, accounting, internal accounting controls, financial
reporting, regulatory matters and such other activities as may be directed by
the Board.
7
<PAGE>
The following directors are the current members of the Committee: Neubauer
(Chairman), Norwood H. Davis, Jr. (Vice Chairman), Barr, Jones, McFate and
Smith.
CREDIT/MARKET RISK COMMITTEE. The Credit/Market Risk Committee held six
meetings in 1999. The Committee is authorized, among other things, to review
the deposit base, allowance for loan losses, and funds management, market risk
and lending policies, and to monitor the liquidity, investment portfolio,
trading activities, non-performing assets and owned real estate. The following
directors are the current members of the Committee: McDonald (Chairman), A.
Dano Davis (Vice Chairman), Bernhardt, Bradley, Dolan and Goodwin.
FINANCIAL SERVICES COMMITTEE. The Financial Services Committee held six
meetings in 1999. The Committee is authorized, among other things, to review
the commercial, consumer and mortgage banking, capital management and capital
markets activities of First Union. The following directors are the current
members of the Committee: Dowd (Chairman), Shaw (Vice Chairman), Bowles,
Goldberg, Lovett and Seabrook.
HUMAN RESOURCES COMMITTEE. The Human Resources Committee (the "HR
Committee") held six meetings in 1999. The HR Committee is authorized, among
other things, to review and make recommendations to the Board regarding
employee compensation, to administer various employee benefit plans, to act as
the executive compensation committee and to monitor conditions of employment
and personnel policies. The following directors are the current members of the
HR Committee: Dickson (Chairman), Brown, Henry, Hynes, Lotman and Randolph N.
Reynolds (a retiring director).
NOMINATING COMMITTEE. The Nominating Committee held two meetings in 1999.
The Committee is authorized, among other things, to recommend the number of
directors to be elected to the Board, to recommend any changes in Board
membership, to recommend director prospects and to study the compensation for
directors and recommend changes when appropriate. The following directors are
the current members of the Committee: Dolan (Chairman), Bernhardt (Vice
Chairman), Crutchfield, Dickson, Goodwin, Lovett and McDonald. Our Bylaws
include provisions setting forth specific conditions under which persons may be
nominated as directors at an annual meeting of stockholders. A copy of such
provisions is available upon request to: First Union Corporation, One First
Union Center, Charlotte, North Carolina 28288-0013, Attention: Corporate
Secretary.
ATTENDANCE. The Board held nine meetings in 1999. In 1999, all of the
directors attended at least 75% of the meetings of the Board and the relevant
committees, except for Arthur M. Goldberg (a retiring director) and Randolph N.
Reynolds (a retiring director), who were not able to do so due to illness,
business or other conflicts.
EXECUTIVE COMPENSATION
The following information relates to compensation paid or payable to (i)
the Chief Executive Officer (the "CEO"), (ii) the four other most highly
compensated executive officers who were serving as such at December 31, 1999,
and (iii) two former executive officers who were not serving as such on such
date and who otherwise would have been among the four highest paid (the CEO and
such six other executive officers, the "Named Officers"). See "Employment
Contracts".
8
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth for the Named Officers: (i) their name and
principal position on December 31, 1999 (column (a)); (ii) years covered
(column (b)); (iii) annual compensation (columns (c), (d) and (e)), including
(A) base salary (column (c)), (B) bonus (column (d)), and (C) other annual
compensation not properly categorized as salary or bonus (column (e)); (iv)
long-term compensation (columns (f), (g) and (h)), including (A) the dollar
value of any award of restricted stock (calculated by multiplying the closing
sale price of the common stock on the date of grant by the number of shares
awarded) (column (f)), (B) the sum of the number of stock options granted
(column (g)) and (C) the dollar value of all payments pursuant to long-term
incentive plans ("LTIPs") (column (h)); and (v) all other compensation for the
covered year that we believe could not be properly reported in any other column
of the table (column (i)).
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
-------------------------------------------------
Other Annual
Salary Bonus Compensation
Name and Position Year ($) (1) ($) (1) ($) (2)
- -------------------------- ---------- --------------- ------------------ --------------
<S> <C> <C> <C> <C>
(a) (b) (c) (d) (e)
Edward E. Crutchfield 1999 1,180,000 -- 115,631
Chairman and Chief 1998 1,140,000 2,280,000 107,186
Executive Officer 1997 1,025,000 2,050,000 104,120
G. Kennedy Thompson 1999 500,000 -- 16,183
President 1998 400,000 1,908,563(6) 143,285
1997 345,000 2,443,163(6) 244,792
Donald A. McMullen, Jr. 1999 490,000 -- 18,495
Vice Chairman 1998 445,000 880,000 33,964
1997 405,000 700,000 11,886
Robert T. Atwood 1999 475,000 -- 19,198
Executive Vice 1998 470,000 840,000 17,697
President and 1997 420,000 750,000 11,522
Chief Financial Officer
Austin A. Adams 1999 460,000 -- 17,227
Executive Vice 1998 405,000 600,000 11,886
President 1997 345,000 450,000 42,473
John R. Georgius (7) 1999 800,000 -- 55,556
Former President 1998 750,000 1,500,000 129,036
and Chief Operating 1997 725,000 1,450,000 23,854
Officer
Jack M. Antonini (8) 1999 475,000 -- 12,309
Former Executive 1998 420,000 600,000 13,407
Vice President 1997 420,000 400,000 30,408
<CAPTION>
Long-Term Compensation
-----------------------------------------------
Awards Payouts
------------------------------- ---------------
Securities
Restricted Underlying LTIP All Other
Stock Awards Options/SARs Payouts Compensation
Name and Position ($) (3) (4) (#) (4) ($) (1) ($) (5)
- -------------------------- ---------------- -------------- --------------- -------------
<S> <C> <C> <C> <C>
(a) (f) (g) (h) (i)
Edward E. Crutchfield 2,359,950 257,843 1,130,784 310,944
Chairman and Chief 2,049,939 400,844 1,015,812 320,378
Executive Officer 15,059,070 -- 1,012,818 229,955
G. Kennedy Thompson 824,063 35,800 -- 106,020
President 689,960 34,138 -- 101,611
593,924 37,200 269,866 45,106
Donald A. McMullen, Jr. 979,975 42,962 441,403 76,069
Vice Chairman 809,986 39,206 320,217 29,197
561,820 42,000 320,217 11,507
Robert T. Atwood 840,544 36,500 396,766 156,984
Executive Vice 809,986 39,206 360,024 140,104
President and 609,976 48,000 358,964 76,719
Chief Financial Officer
Austin A. Adams 840,544 36,500 347,171 170,736
Executive Vice 689,960 34,138 320,217 127,178
President 561,820 42,000 317,346 77,569
John R. Georgius (7) 1,600,000 96,676 743,937 423,268
Former President 8,507,398 844 718,501 433,112
and Chief Operating 1,083,510 100,000 701,562 151,178
Officer
Jack M. Antonini (8) 840,544 36,500 250,000 34,554
Former Executive 839,992 56,479 168,000 31,727
Vice President -- -- -- 254,911
</TABLE>
- ----------
(1) Amounts include dollars deferred by the Named Officers under our Deferred
Compensation Plans. At the election of the participants in such plans,
account balances are paid in a lump sum or in ten annual installments upon
termination of employment due to death, disability or retirement, except in
the event of a "change in control" of First Union where the successor or
acquiring corporation does not elect to continue such Plans, in which case
such balances are to be paid in a lump sum. A nonqualified retirement trust
has been established to fund certain nonqualified benefit plans, including
the Deferred Compensation Plans and Supplemental Retirement Plan. Prior to a
"change in control" of First Union, benefits are paid from the trust only
upon our direction. Upon the occurrence of a "change in control", we are
required to contribute an amount to the trust sufficient to pay the benefits
required to be paid under such plans as of the date on which the "change in
control" occurs.
(2) Represents reimbursement for (i) payment of taxes, and (ii) personal
benefits, if such benefits exceed the lesser of $50,000 or 10% of the total
of the amounts in columns (c) and (d). The only personal benefits for a
Named Officer which exceeded 25% of such personal benefits in 1999, were
membership fees and dues for Mr. Crutchfield, which totaled $45,362.
(3) The aggregate number of shares of restricted stock held as of December 31,
1999, and the value thereof as of such date, were as follows: Crutchfield:
324,243 shares ($10,679,754); Thompson: 40,124 shares ($1,321,584);
McMullen: 46,266 shares ($1,523,886); Atwood: 43,408 shares ($1,429,751);
Adams: 40,424 shares ($1,331,466); and Antonini: 31,909 shares ($1,051,003).
Georgius retired in 1999, as a result of which all of his restricted shares
became fully vested. Restricted stock awards granted in 1999 vest at a rate
of 20% per year over five years or upon termination due to death,
disability, retirement at age 65, or a
9
<PAGE>
"change in control" of First Union. See also footnote (6) below. Dividends
on shares of restricted stock are paid at the same time dividends on the
other outstanding shares of common stock are paid.
(4) Each of the Named Officers, other than Messrs. Crutchfield, Georgius and
Antonini, have also been granted stock awards, effective in January 2000,
which will be reflected in next year's proxy statement. Ninety percent of
each award consisted of ten-year stock options, which will not become
exercisable until January 2001, and will only have value if the price of
First Union common stock rises above $31.5625, the exercise price of the
options. Ten percent of each award consisted of shares of restricted stock,
which will vest 20% per year over a five-year period. The number of shares
involved in the foregoing awards to each of such Named Officers ranged from
100,000 shares to 221,000 shares. These officers are not expected to receive
any further stock incentive awards in 2000. See also "HR Committee Report on
Executive Compensation".
(5) Amounts shown for 1999 consist of the following:
<TABLE>
<CAPTION>
Crutchfield Thompson McMullen Atwood Adams Georgius Antonini
------------- ---------- ---------- -------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Savings Plan matching
contributions ...................... $ 61,200 30,000 29,400 28,500 27,600 44,000 28,500
Value of life insurance
premiums ........................... 239,536 21,820 45,678 61,184 31,509 174,869 3,168
Value of disability
insurance .......................... -- 1,130 -- 4,269 2,266 1,634 2,886
Above market interest on deferred
compensation ....................... 10,208 53,070 991 62,488 109,361 202,765 --
</TABLE>
The value of life insurance premiums includes the value of premiums advanced
by us under split-dollar life insurance agreements. We may terminate
certain of such agreements and receive our interest in the related life
insurance policies under certain conditions, provided we may not terminate
such agreements if certain of such conditions occur after a "change in
control" of First Union.
(6) Thompson participated in an annual incentive bonus plan for the Capital
Markets Group in 1998 and 1997 that required 25% of his annual incentive
bonus be paid in shares of restricted stock (the "Bonus Shares"). We
matched 50% of the Bonus Shares with additional shares of restricted
stock. The shares of restricted stock awarded under the plan vest at the
end of a three-year period. The bonus amounts set forth in the Summary
Compensation Table represent the total bonus, including the portions
attributable to such matched shares of restricted stock. These shares of
restricted stock are not included in footnote (3) above.
(7) In addition to the payments indicated, pursuant to an Employment Agreement
entered into in September 1995, Mr. Georgius was paid $6,218,750 upon his
retirement in December 1999. In addition, Mr. Georgius was given an
automobile valued at $68,282, including tax gross-up.
(8) In addition to the payments indicated, Mr. Antonini was paid $1,668,987 in
2000 in connection with the termination of his employment.
OPTION/SAR GRANTS TABLE
The following table sets forth with respect to grants of stock options
made during 1999 to each of the Named Officers: (i) the name of such officer
(column (a)); (ii) the number of options granted (column (b)); (iii) the
percent the grant represents of the total options granted to all employees
during 1999 (column (c)); (iv) the per share exercise price of the options
granted (column (d)); (v) the expiration date of the options (column e)); and
(vi) the Black-Scholes value of the options at grant date (column (f)).
10
<PAGE>
OPTION/SAR GRANTS IN 1999
<TABLE>
<CAPTION>
Individual Grants
---------------------------------------------------------------------------
Number of Securities % of Total
Underlying Options/SARs Options/SARs Granted Exercise or Black - Scholes
Granted (1) to Employees Base Price Expiration Grant Date Value (3)
Name (#) in 1999 ($/Sh) Date ($)
- --------------------- ------------------------- ---------------------- ------------- ------------ ---------------------
<S> <C> <C> <C> <C> <C> <C>
(a) (b) (c) (d) (e) (f)
Crutchfield ......... 257,043(1) 54.9375 4/20/09 3,677,187
800(2) 46.7500 9/30/04 7,992
---------
Total: 257,843 0.55
Thompson ............ 35,000(1) 54.9375 4/20/09 500,701
800(2) 46.7500 9/30/04 7,992
---------
Total: 35,800 0.08
McMullen ............ 42,162(1) 54.9375 4/20/09 603,158
800(2) 46.7500 9/30/04 7,992
---------
Total: 42,962 0.09
Atwood .............. 35,700(1) 54.9375 4/20/09 510,714
800(2) 46.7500 9/30/04 7,992
---------
Total: 36,500 0.08
Adams ............... 35,700(1) 54.9375 4/20/09 510,714
800(2) 46.7500 9/30/04 7,992
---------
Total: 36,500 0.08
Georgius ............ 95,876(1) 54.9375 4/20/09 1,371,576
800(2) 46.7500 9/30/04 7,992
---------
Total: 96,676 0.20
Antonini ............ 35,700(1) 54.9375 4/20/09 510,714
800(2) 46.7500 9/30/04 7,992
---------
Total: 36,500 0.08
</TABLE>
- ----------
(1) These options are nonqualified stock options, except for options granted to
each of McMullen and Antonini to purchase 1,802 shares, which are
incentive stock options ("ISOs") under section 422 of the Internal Revenue
Code of 1986, as amended. The options are exercisable after one year from
the date of grant, subject to the limitations under section 422, at an
option exercise price equal to the market price of the common stock at the
date of grant. See footnote (3) below.
(2) These options were granted under the 1999 Employee Stock Plan and are
nonqualified stock options. The option exercise price is equal to the
market price of the common stock on the date of grant. The options are
exercisable 20% per year, subject to our attaining certain performance
goals with respect to the options exercisable in 2001, 2002 and 2003. See
footnote (3) below.
(3) The values shown for the options referred to in footnote (1) reflect
standard application of the Black-Scholes pricing model using (i) 60-month
volatility (24.3005%) and daily stock prices for the five years prior to
grant date, (ii) an option term of ten years, (iii) an interest rate that
corresponds to the U.S. Treasury rate with a ten-year maturity (5.26%),
and (iv) dividends at the annualized rate in place on the date of grant
($1.88). The values shown for the options referred to in footnote (2)
reflect standard application of the Black-Scholes pricing model using (i)
60-month volatility (25.51%) and daily stock prices for the five years
prior to grant date, (ii) an option term of five years, (iii) an interest
rate that corresponds to the U.S. Treasury rate with a five-year maturity
(5.84%), and (iv) dividends at the annualized rate in place on the date of
grant ($1.88). The values do not take into account risk factors such as
non-transferability and limits on exercisability. The Black-Scholes
options pricing model is a commonly utilized model for valuing options.
The model assumes that the possibilities of future stock returns
(dividends plus share price appreciation) resemble a normal "bell-shaped"
curve. In assessing the values indicated in the above table, it should be
kept in mind that no matter what theoretical value is placed on a stock
option on the date of grant, the ultimate value of the option is dependent
on the market value of the common stock at a future date, which will
depend to a large degree on the efforts of the Named Officers to bring
future success to First Union for the benefit of all stockholders.
AGGREGATED OPTION/SAR EXERCISES AND YEAR-END OPTION/SAR VALUE TABLE
The following table sets forth with respect to each exercise of stock
options (or tandem stock appreciation rights ("SARs")) and freestanding SARs
during 1999 by each of the Named Officers and the year-end value of unexercised
options and SARs on an aggregated basis: (i) the name of
11
<PAGE>
such officer (column (a)); (ii) the number of shares received upon exercise, or
if no shares were received, the number of securities with respect to which the
options or SARs were exercised (column (b)); (iii) the aggregate dollar value
realized upon exercise (column (c)); (iv) the total number of unexercised
options and SARs held at December 31, 1999, separately identifying the
exercisable and unexercisable options and SARs (column (d)); and (v) the
aggregate dollar value of in-the-money, unexercised options and SARs held at
December 31, 1999, separately identifying the exercisable and unexercisable
options and SARs (column (e)).
AGGREGATED OPTION/SAR EXERCISES IN 1999 AND
DECEMBER 31, 1999 OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options/SARs In-the-Money Options/SARs
at 12/13/99 (#)(1) at 12/31/99 ($)
------------------------ --------------------------
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable
- ------------- ----------------- -------------- ------------------------ --------------------------
<S> <C> <C> <C> <C>
(a) (b) (c) (d) (e)
Crutchfield 2,787 77,158 726,321/267,599 2,074,598/127,000
Thompson 0 0 147,798/38,340 620,935/26,664
McMullen 0 0 132,828/42,962 306,250/0
Atwood 0 0 199,982/42,324 920,336/61,137
Adams 0 0 165,120/40,718 684,285/44,278
Georgius(2) 0 0 324,204/0 662,458/0
Antonini 0 0 57,323/36,500 0/0
</TABLE>
- ----------
(1) Upon a "change in control" of First Union, all outstanding options will
become exercisable.
(2) In accordance with the terms of the applicable stock option plan, all of
Georgius' unexercisable options became exercisable upon his retirement in
1999.
LONG-TERM INCENTIVE PLAN AWARDS TABLE
The following table sets forth, with respect to each award made to a Named
Officer in 1999 under any LTIP: (i) the name of such officer (column (a)); (ii)
the number of shares, units or other rights awarded under any LTIP (column
(b)); (iii) the performance or other time period until payout or maturation of
the award (column (c)); and (iv) for LTIPs not based on stock price, the dollar
value of the estimated payout or range of estimated payouts under the award
(threshold, target and maximum amount), whether such award is denominated in
stock or cash (columns (d) through (f)).
LONG-TERM INCENTIVE PLANS -- AWARDS IN 1999 (1)
<TABLE>
<CAPTION>
Estimated Future Payments under
Non-Stock Price-Based Plans
--------------------------------------------
Performance or Other
Number of Shares, Period Until Maturation Threshold Target Maximum
Name Units or Other Rights (#) or Payout ($ or #) ($ or #)(2) ($ or #)(3)
- ------------- --------------------------- ------------------------ ----------- ------------- --------------
<S> <C> <C> <C> <C> <C>
(a) (b) (c) (d) (e) (f)
Crutchfield 3 years 0 1,130,784 1,180,000
Thompson 3 years 0 -- 500,000
McMullen 3 years 0 441,403 490,000
Atwood 3 years 0 396,766 475,000
Adams 3 years 0 347,171 460,000
Georgius 3 years -- -- --
Antonini 3 years -- -- --
</TABLE>
- ----------
(1) See the Summary Compensation Table. Under the Management Long-Term Cash
Incentive Plan, if we achieve not less than a 10% average return on equity
("ROE") (calculated as indicated below under "HR Committee Report on
Executive Compensation") for the three-year period ending each December
31, based on our "adjusted net income" (as defined in such Plan), a
contribution to a management incentive pool will be made, based on (i) our
average ROE ranking for the applicable period compared to the average ROE
of the 25 largest bank holding companies in the U.S. for such period
(ranging from a ranking of one to 13), and (ii) a percentage of base
salaries of the participants in such Plan for the last year of the period
(gradually
12
<PAGE>
decreasing from 50% of such salaries if our ranking is one, to 27% if our
ranking is 13). Participants receive awards under such Plan, subject to the
discretion of the HR Committee, at the end of each three-year period on the
basis of individual performance as determined by the HR Committee. The
maximum potential award is 100% of base salary.
(2) Targets are not determinable. Awards indicated represent awards granted in
1999 for the 1996-1998 three-year period. Future awards may be higher or
lower than such awards.
(3) Represents 1999 annual salaries, the maximum awards that can be granted in
2000 for the 1997-1999 three-year period.
PENSION PLAN TABLE
The following table sets forth the estimated annual benefits payable upon
retirement under our Pension Plan (including amounts attributable to our
Supplemental Retirement Plan) in the specified compensation and years of
service classifications indicated below.
The compensation covered by the Pension Plan includes basic compensation,
overtime and certain incentive compensation. The portions of compensation which
are considered covered compensation under the Pension Plan for the Named
Officers are the salary amounts indicated in the Summary Compensation Table
less deferred amounts. As of January 1, 2000, the credited full years of
service under the Pension Plan were as follows: Crutchfield -- 34 years;
Thompson -- 24 years; McMullen -- 5 years; Atwood -- 9 years; and Adams -- 26
years. Georgius and Antonini were not serving as executive officers on such
date. The portions of compensation which are considered covered compensation
under the Supplemental Retirement Plan for the Named Officers who are
participants in such Plan are the annual salary, bonus and LTIP amounts
indicated in the Summary Compensation Table. The Pension Plan is referred to in
the table as "PP" and the Supplemental Retirement Plan as "SRP".
<TABLE>
<CAPTION>
Estimated annual retirement benefit, assuming a married
participant, a straight life annuity and the years
of service indicated (1)
-------------------------------------------------------------------------------------------------------------
15 years 20 years 25 years 30 years 35 years
Average annual --------------------- --------------------- --------------------- --------------------- ---------------------
compensation PP SRP PP SRP PP SRP PP SRP PP SRP
- -------------------- -------- ------------ -------- ------------ -------- ------------ -------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$1,250,000 ......... 35,095 354,647 46,793 479,123 58,491 603,598 70,189 728,074 74,189 724,534
2,250,000 ......... 35,095 678,236 46,793 910,575 58,491 1,142,915 70,189 1,375,254 74,189 1,371,714
3,250,000 ......... 35,095 1,001,826 46,793 1,342,028 58,491 1,682,231 70,189 2,022,433 74,189 2,018,893
4,250,000 ......... 35,095 1,325,416 46,793 1,773,481 58,491 2,221,547 70,189 2,669,612 74,189 2,666,072
5,250,000 ......... 35,095 1,649,005 46,793 2,204,934 58,491 2,760,563 70,189 3,316,792 74,189 3,313,252
</TABLE>
- ----------
(1) For the year ending December 31, 2000, the annual retirement benefit
payable under the Pension Plan is limited by federal law to $135,000 and
the maximum covered compensation is limited to $170,000. For officers
covered under the Supplemental Retirement Plan (currently, a total of 15
in number), any excess annual retirement benefit (based on 30 or less
years of service) which could not be paid under the Pension Plan because
of such limitations would be payable under the Supplemental Retirement
Plan. The foregoing is reflected in the table. Following a "change in
control" of First Union, benefits earned under the Supplemental Retirement
Plan would be payable in a lump sum actuarial equivalent, upon a
participant's retirement or upon any modification to such Plan which would
cause the actual or projected benefits payable under such Plan to be
reduced.
COMPENSATION OF DIRECTORS
Directors receive a quarterly retainer of $11,250, plus $1,500 for each
committee meeting attended and $2,000 for each meeting of the Board attended.
In addition, the Chairman of each committee receives a quarterly fee of $2,500.
Travel and accommodation expenses are reimbursed by First Union. Directors who
are employees of First Union do not receive any directors' fees. Directors'
fees totaling $1,809,870 were either paid to the directors in 1999 or deferred
under the terms of our Deferred Compensation Plan for Non-Employee Directors.
Under the Deferred Compensation Plan for Non-Employee Directors, directors
who are not employees of First Union may defer payment of all or any part of
their directors' fees. Deferred amounts
13
<PAGE>
are payable after the end of the calendar year in which the director ceases to
be a director, in annual installments over a ten-year period, unless otherwise
determined by the HR Committee. In 1999, 19 directors deferred $1,324,621 of
their 1999 directors' fees. Deferred fees may either earn interest or be valued
based on the fair market value of First Union common stock, at the option of
the director.
Directors who elect to have their deferred fees valued based on the market
value of First Union common stock, in effect are investing in so-called
"phantom" stock. This means that the value of their deferred account is based
on the market value of First Union common stock and will rise and fall just as
if the account was actually invested in the stock. As of December 31, 1999, a
total of 20 directors had an aggregate of $9,998,090 in their phantom stock
deferred accounts, which equates to an aggregate of 303,547 shares of First
Union common stock based on the fair market value of First Union common stock
on that date.
All non-employee directors who serve five years or more are eligible to
participate in our Retirement Plan for Non-Employee Directors. Under such Plan,
after the end of the calendar year in which the director retires, the director
is entitled to receive an annual retirement benefit equal to 80% of the amount
of the annual director retainer in effect at that time.
The foregoing does not include payments being made to five former
directors for serving as special advisory consultants to the Board. Such former
directors (i) retired as of the Annual Meeting of Stockholders in April 1998,
(ii) are to be paid an annual retainer fee of $60,000 for the three-year period
from April 1998 to April 2001, and (iii) are eligible to participate in the
same benefit programs the current directors are eligible to participate in. The
foregoing also does not include payments being made to (i) Terrence A. Larsen,
who retired as a director at the Annual Meeting of Stockholders in 1999, and
who retired as an employee on June 30, 1998, or (ii) Malcolm S. McDonald, who
also retired as a director at the Annual Meeting of Stockholders in 1999, and
who retired as an employee on July 31, 1998.
The payments to Larsen are being made pursuant to an Employment Agreement
entered into in connection with the acquisition of CoreStates Financial Corp in
April 1998. Pursuant to such agreement, he is to be paid $2,500,000 per year
until April 2003, and $1,000,000 per year thereafter, subject to offset by
certain retirement benefits. The agreement also provided for him to receive
100,000 shares of restricted First Union common stock in 1998 and 1999, an
option to purchase 200,000 shares of First Union common stock in 1998 (which
was granted at an exercise price of $60.4375 per share), an option to purchase
200,000 shares of First Union common stock in 1999 (which was granted at an
exercise price of $55.00 per share) and a split dollar life insurance policy
which will pay $15,000,000 to his beneficiary upon his death, in addition to
any outstanding loans under the policy. The restrictions on the shares of
restricted stock granted in 1998 and 1999 have lapsed. Pursuant to such
agreement, Larsen is also entitled to certain welfare benefits.
The payments to McDonald are being made pursuant to an Employment
Agreement entered into in connection with the acquisition of Signet Banking
Corporation in November 1997. Pursuant to such agreement, he is to be paid
$1,400,000 per year until November 2002, and $840,000 per year thereafter,
subject to offset by certain retirement benefits. Under the agreement, in 1997
he also received 40,000 shares of restricted First Union common stock and an
option to purchase 100,000 shares of common stock (which was granted at an
exercise price of $48.75 per share). The restrictions on the shares of
restricted stock have lapsed. Pursuant to such agreement, McDonald is also
entitled to certain welfare benefits.
14
<PAGE>
EMPLOYMENT CONTRACTS.
First Union has entered into employment agreements with several of its
executive officers, including the following employment contracts entered into
with the Named Officers.
CRUTCHFIELD. In August 1985, we entered into a five-year Employment
Agreement with Edward E. Crutchfield as Chairman and Chief Executive Officer,
subject to (i) extension so that the unexpired portion would be not less than
five years, (ii) the right of either party to terminate the agreement at any
time, and (iii) the right of Crutchfield to terminate the agreement if the
Board changes the offices held by him or his power and authority or duties or
responsibilities. The agreement provides for an annual salary of not less than
$330,000 and an annual bonus based on his performance and other factors. If we
terminate the agreement other than for "cause" or if he terminates the
agreement as provided in (iii) above, he will be paid an amount equal to the
sum of (a) the result of multiplying (i) his then current annual salary by (ii)
the number of years (including any fraction thereof) then remaining in the term
of employment, and (b) the result of multiplying (i) his annual average
short-term Management Incentive Plan bonus during the three calendar years
preceding the termination date by (ii) the number of years (including any
fraction thereof) then remaining in the term of employment. If he terminates
his employment other than as provided in (iii) above, he will be paid 66 2/3%
of his then current annual salary for a period of two years, subject to
termination of such payments if he were to violate a two-year non-compete
provision. The agreement also provides for a gross-up payment equal to the
amount of excise taxes (plus the applicable federal and state income, FICA and
excise taxes due on such gross-up payment) payable by him if his employment is
terminated in conjunction with a "change in control" of First Union and such
taxes become payable as a result of payments to him under the agreement or
otherwise, being deemed to be "excess parachute payments" for federal tax
purposes.
THOMPSON. In November 1999, we entered into a five-year Employment
Agreement with G. Kennedy Thompson, the President of First Union. The five-year
employment period is automatically extended on an annual basis unless either
party determines otherwise prior to the annual extension date. The agreement
provides that if we terminate his employment for reasons other than "cause",
death, disability or retirement or he terminates his employment for "good
reason" then he will be entitled to (i) a pro rata annual bonus for the period
prior to his termination date, based on the highest bonus paid to him during
either the three-year period prior to his termination or the three-year period
prior to the date of the agreement, (ii) an amount equal to five times his
annual base salary and the highest bonus determined under (i) above, (iii) an
amount equal to the actuarial equivalent of the benefit payable under our
Supplemental Retirement Plan, and (iv) medical and life insurance benefits for
him and his family for five years after his termination date (or for life if
the termination date occurs after a "change in control" of First Union). The
agreement also provides for a gross-up payment equal to the amount of excise
taxes (plus the applicable federal and state income, FICA and excise taxes due
on such gross-up payment) payable by him if his employment is terminated in
conjunction with a "change in control" of First Union and such taxes become
payable as a result of payments to him under the agreement or otherwise, being
deemed to be "excess parachute payments" for federal tax purposes.
OTHER EMPLOYMENT AGREEMENTS. We have also entered into employment
agreements with Messrs. McMullen, Atwood and Adams and certain other officers
which are similar to the employment agreement with Mr. Thompson, except such
agreements are for three-year terms instead of a five-year term and the amount
pursuant to (ii) in the preceding paragraph is three times their annual base
salary and highest bonus.
15
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the HR Committee are Messrs. Brown, Dickson (a
retiring director), Henry, Hynes, Lotman and Reynolds (a retiring director),
none of whom is, or has been, an officer or employee of First Union.
Edward E. Crutchfield serves on the Board of Bernhardt Furniture Company,
and as one of the outside directors on its Compensation Advisory Committee. G.
Alex Bernhardt, Sr., a director of First Union, serves as Chairman and Chief
Executive Officer of Bernhardt Furniture Company. See also "Other Matters
Relating to Executive Officers and Directors -- Certain Relationships".
HR COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The HR Committee had six regularly scheduled meetings during 1999, at
which time it reviewed, evaluated and approved executive compensation and
benefit recommendations without the presence of the CEO. Our executive
compensation programs consist of elements that vary based on corporate
performance (variable pay) and elements that do not (fixed pay). The variable
component opportunity is substantial. Variable pay elements include a
short-term incentive plan, stock compensation plans and a long-term cash
incentive plan, which are further discussed below. For 1999, these variable
performance based elements represented from 46% to 86% of total compensation
for executives covered under such plans. All plans are developed based on
competitive information and administered to balance the interests of the
executives with our performance and the interests of our stockholders.
In its deliberations on executive pay, the HR Committee maintains the
following standards:
o Programs are designed to attract, motivate, reward and retain high
performing and dedicated management employees.
o In total, the compensation programs balance competitive need, corporate,
individual and business unit performance, and affordability.
o Programs provide competitive financial security for executives and
dependents in the event of death, disability or retirement.
The HR Committee believes that the most meaningful performance and pay
equity comparisons are made against companies of similar size and with similar
business interests. In keeping with this belief, in 1999 the HR Committee began
using the 20 largest bank holding companies in the U. S. as the comparator
group when making compensation decisions. Previously, the HR Committee used the
25 largest bank holding companies. The decision to change the comparator group
was made as a result of the HR Committee's belief that this group of larger
bank holding companies is more similar to First Union in size, business
interests, and opportunities. We ranked sixth in size among the group on
December 31,1999, based on assets.
The companies chosen for compensation comparisons in the most recent
competitive study (I.E., the 20 largest bank holding companies) are not the
same companies that comprise the published industry index in the performance
graph set forth below (I.E., the KBW 50 (as defined below)), although the 20
largest bank holding companies are included in the KBW 50. The HR Committee
believes that the most direct competitors for executive talent are not
necessarily all of the companies that would be included in a published industry
index for comparing total stockholder value.
The HR Committee believes that ROE is the most appropriate measure for
evaluating our results. In order to provide a consistent basis for comparison,
the computation of ROE is based on the
16
<PAGE>
average quarter-end stockholders' equity, excluding unrealized gains or losses
on investment securities, as determined in accordance with the Statement of
Financial Accounting Standards No. 115 ("SFAS 115"), "Accounting for Certain
Investments in Debt and Equity Securities". Our Management Incentive Plan and
Management Long-Term Cash Incentive Plan both rely on such ROE performance as
the primary determinant of incentive payouts. The ROE calculations in 1998 and
1999 exclude one-time restructuring and merger-related charges. Additionally,
the HR Committee may, at its discretion, consider other performance indicators,
such as stock price and market capitalization, when making decisions relative
to these plans.
First Union's and the HR Committee's general intent is to provide
executive compensation consisting of base salaries, which when combined with
awards made under the short-term Management Incentive Plan, the Management
Long-Term Cash Incentive Plan and grants made under our stock compensation
plans, result in total compensation levels which approximate the relative
rankings of asset size and ROE performance within the peer group. This result
is achieved through the use of proxy data on total compensation for the five
most highly compensated executives and financial performance data for the peer
companies. For other executive officers, the HR Committee uses judgment based
on this data. Each compensation decision is based on what is competitive for
that compensation element relative to the peer group, as well as the impact of
such decision on total compensation.
Because pay and performance levels at peer companies are not known at the
time compensation decisions are made, the HR Committee does not know if the
target compensation levels have been met until such peer information is made
public. Therefore, the HR Committee looks at the historical relationship
between pay and performance over time (typically a three-year period) as well
as comparisons for a single year. For 1998, our ROE peer group rank was 3rd,
our asset size ranked 6th, and the total for all compensation for the Named
Officers ranked 5th. It is the HR Committee's intent to address any variance
between performance rank and compensation rank with future compensation
decisions.
The HR Committee's review of executive compensation relative to the
$1,000,000 limit on tax deductible compensation under the Omnibus Budget
Reconciliation Act of 1993 and the regulations promulgated thereunder was made
in the context of ensuring the ability to balance sound compensation decisions
with appropriate fiscal responsibility. The HR Committee's intention has been
to modify our executive compensation plans to minimize the possibility of lost
deductions. However, it is also the HR Committee's intent to balance the
effectiveness of such plans against the materiality of any possible lost
deductions.
To continue to meet these objectives, the HR Committee may from time to
time change or adjust one or more of our executive compensation plans or
recommend the same to the Board, as it deems appropriate. Additionally, from
time to time we employ an independent firm of employee benefit consultants to
advise us and the HR Committee as to various matters relating to executive
compensation.
BASE SALARY
Our base salary program targets base salaries for executive officers at
market. As indicated above, our "market" is the 20 largest bank holding
companies in the U. S., as measured by total assets. The HR Committee believes
that base salary should be reflective of the executive's scope
17
<PAGE>
of responsibility, and further, that asset size is the best indicator of scope
of responsibility. Accordingly, base salaries for executives are targeted to
have the same relative rank among the peer group as asset size. For 1998, our
asset size ranked 6th among the peer group and the total base salaries for the
Named Officers ranked 4th among the peer group. Any variances are addressed in
determining the total compensation for such Named Officers. Base salary
increases in 1999 were made as a result of the review of base salary market
data.
SHORT-TERM MANAGEMENT INCENTIVE PLAN
Our short-term Management Incentive Plan covering executive officers is
funded based on ROE. For 1999, the threshold ROE was 15%. Individual awards may
range from 0% to 200% of base salary. Determination of individual awards is
based primarily on our ROE, but includes a subjective assessment of individual
performance, where permitted. Measures of individual performance include
meeting business unit objectives, promoting corporate values and providing
leadership to employees.
Our ROE for 1999 was 21.35%, exceeding the threshold ROE by 42%. However,
there were no cash payments made under the plan for 1999. This decision was
considered in connection with stock awards, some of which were effective in
December 1999 and some of which were effective in January 2000.
LONG-TERM INCENTIVE PROGRAM
The long-term incentive program is composed of the following:
o Our stock compensation plans, which are made up of two elements: stock
options and restricted stock awards. The HR Committee believes that
issuing stock options and restricted stock to executives benefits our
stockholders by encouraging and enabling executives to own First Union
stock, thus aligning executive pay with stockholder interests.
o Our Management Long-Term Cash Incentive Plan, which pays cash awards
based on ROE performance. Our ROE rank for the period against the peer
group determines the available pool from which awards may be made. Our
ROE for the period, and individual performance, are considered in
determining actual payouts from the plan.
Award sizes for the stock plans, and payouts from the long-term cash plan,
are set so that total compensation approximates the relative rankings of asset
size and ROE performance within the peer group. Our 1998 ROE of 22.85% resulted
in a three-year average ROE rank of 5th among the peer group, generating a pool
of 46% of the aggregate base salaries of all participants in the long-term cash
plan. This amount was distributed by the HR Committee in its discretion.
The 1999 mix of the long-term incentive program awards was set
subjectively. In determining the mix, the HR Committee balanced awards for past
performance with incentives for future performance and took into account such
factors as overall risk of the pay package, award size in prior years and
cash/stock mix. Current holdings of stock were not considered.
In addition to the stock options and restricted stock awards granted in
1999, the HR Committee also approved stock options and restricted stock awards,
which were effective in January 2000, and will be reported in next year's proxy
statement. See "Summary Compensation Table" above.
18
<PAGE>
1999 COMPENSATION FOR THE CEO
Edward E. Crutchfield is eligible to participate in the same executive
compensation plans available to the other executive officers as described
above. In 1999, Mr. Crutchfield voluntarily advised the Board that he would not
accept, if granted, either a short-term management incentive payment for the
1999 performance period (normally granted in December 1999), or a long-term
incentive payment for the three-year period ended in December 1999 (normally
granted in April 2000), although First Union's 1999 ROE ranking of 7th among
the 20 largest bank holding companies in the nation and 1997-1999 three-year
average ROE ranking of 5th among such bank holding companies met the plans'
criteria for such awards. His payout under the Long-Term Cash Incentive Plan
reflected in the compensation table was awarded in April 1999, and was based
primarily on the 1996-1998 three-year average ROE, as discussed above. The
stock option grant and restricted stock awards made to him in April 1999, were
based on the analysis discussed above. These awards were determined by the HR
Committee such that Mr. Crutchfield's total compensation would approximate the
expected relative rankings of asset size and ROE performance within the peer
group. In the aggregate, the variable performance based portion was 86% of his
compensation. The 1985 employment agreement with him described above had no
impact on compensation decisions made with respect to him during 1999.
In 1999, Mr. Crutchfield voluntarily advised the Board that he would not
accept, if granted, a salary increase for 2000. With respect to the HR
Committee's use of the historical relationship between pay and performance
described above, our total assets and ROE performance for 1998 ranked 6th and
3rd, respectively, among the peer group, and Mr. Crutchfield's base salary and
total compensation both ranked 2nd. The 1999 salary change for Mr. Crutchfield
reflected in the compensation table was approved in December 1998. He received
no salary increase in 1999 for 2000.
R. STUART DICKSON, CHAIRMAN
ROBERT J. BROWN
FRANK M. HENRY
JAMES E.S. HYNES
HERBERT LOTMAN
RANDOLPH N. REYNOLDS
19
<PAGE>
PERFORMANCE GRAPH
The following graph compares (i) the yearly change in the cumulative total
stockholder return on First Union common stock with (ii) the cumulative return
of the Standard & Poor's 500 Stock Index ("S&P 500") and the Keefe, Bruyette &
Woods, Inc. 50 Index ("KBW 50"). The graph assumes that the value of an
investment in the common stock and in each index was $100 on December 31, 1994,
and that all dividends were reinvested.
The S&P 500 and the KBW 50 are market-capitalization-weighted indices,
meaning that companies with a higher market value count for more in both
indices. The KBW 50 is comprised of 50 bank holding companies, including all
money-center and major regional bank holding companies.
[LINE GRAPH APPEARS HERE WITH THE FOLLOWING PLOT POINTS:]
<TABLE>
<CAPTION>
December, 31
----------------------------------------------------------------------------
1994 1995 1996 1997 1998 1999
------ ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
First Union ......... $100 139.94 192.52 273.68 333.92 189.37
S&P 500 ............. 100 137.45 168.93 225.21 289.43 350.26
KBW 50 .............. 100 160.18 228.58 331.21 358.63 348.18
</TABLE>
The information set forth above under the subheadings "HR Committee Report
on Executive Compensation" and "Performance Graph" (i) shall not be deemed to
be "soliciting material" or to be "filed" with the SEC or subject to Regulation
14A or the liabilities of Section 18 of the 1934 Act, and (ii) notwithstanding
anything to the contrary that may be contained in any filing by First Union
under such Act or the 1933 Act, shall not be deemed to be incorporated by
reference in any such filing.
OTHER MATTERS RELATING TO EXECUTIVE OFFICERS AND DIRECTORS
GENERAL
The directors (including organizations with which they are affiliated and
members of their immediate families) and senior executive officers are
customers of our bank. In the opinion of management, the outstanding
indebtedness and commitments in connection with the lending relationships of
such directors and officers were made in the ordinary course of business and on
substantially the same terms, including interest rates, collateral and
repayment terms, as those prevailing at the time for comparable transactions
with other customers and do not involve more than normal risk of
20
<PAGE>
collectibility or present other unfavorable features. During 1999, the
aggregate monthly outstanding principal balances of loans made by our bank to
such directors and officers, including certain of their related interests,
ranged from a high of approximately $3.6 billion to a low of approximately $2.9
billion. In addition to such lending relationships, the directors and
organizations they are affiliated with provide certain services or otherwise do
business with First Union and its affiliated entities, and we in turn provide
certain services or otherwise do business with the directors and such
organizations, in each case in the ordinary course of business. Certain of such
relationships are discussed below.
CERTAIN RELATIONSHIPS
Erskine B. Bowles is a general partner of Forstmann Little & Co. and a
Managing Director of Carousel Capital Company, LLC. Carousel Company is the
general partner of Carousel Capital Partners, LP. First Union has a 15% limited
partnership interest in Carousel Partners, which is represented by a $25
million commitment. As of December 31, 1999, we had invested $16.9 million in
Carousel Partners, leaving a remaining commitment of $8.1 million. As part of
our investment in Carousel Partners, we pay Carousel Company a semi-annual
management fee, which totaled $383,132 in 1999. First Union is a lender to, and
may invest in, certain of the companies that Carousel Partners and Forstmann
Little have investments in and may engage in other transactions with such
companies. In 1990, we entered into a sale/leaseback transaction with a real
estate finance company that involved various First Union bank branches in North
Carolina, Florida and Georgia. The lease agreement expires in 2010. Bowles is a
passive investor (7.15% limited partnership interest) in Investment Partners
Leasing Corporation, which has an option to lease all or part of such branches,
at a fixed rate, upon expiration of the lease. First Union entered into an
agreement with Investment Partners whereby we have the option to sublease such
branches from Investment Partners, at market rates, at the expiration of the
lease, if they exercise their option.
Frank M. Henry is a partner in Frank M. Henry Associates, from which we
lease a branch office in Wilkes-Barre, Pennsylvania. The initial term expires
on April 30, 2003, and has four five-year renewal options. The rent paid in
1999 totaled $75,140.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the 1934 Act requires the directors and executive
officers covered by such Section to file certain reports relating to their
ownership of First Union common stock and any changes in such ownership with
the SEC and the New York Stock Exchange. To our knowledge, based solely on a
review of the copies of such reports or other written representations, during
or prior to the year ended December 31, 1999, all Section 16(a) filing
requirements applicable to such directors and executive officers were complied
with, except as set forth in prior proxy statements and except for late filings
by: G. Alex Bernhardt, Sr., a director, relating to the purchase of 1,000
shares; Robert J. Brown, a director, relating to the sale of 318 shares; Jamie
Buckland, a former Section 16(a) reporting officer, relating to 132 shares
withheld for taxes in connection with the vesting of a stock option; Charles L.
Coltman, a former Section 16(a) reporting officer, relating to the sale of
20,000 shares; Benjamin P. Jenkins, III, a Section 16(a) reporting officer,
relating to a gift of 9,100 shares and three sale transactions involving an
aggregate of 9,211 shares; Sue P. Perrotty, a Section 16(a) reporting officer,
relating to the purchase of 2,000 shares by her spouse; and Randolph N.
Reynolds, a retiring director, relating to the purchase of 1,000 shares by a
trust for which he serves as one of the trustees.
21
<PAGE>
PROPOSAL 2. A FIRST UNION PROPOSAL TO APPROVE THE PERFORMANCE GOALS UNDER THE
MANAGEMENT INCENTIVE PLAN
PROPOSAL 3. A FIRST UNION PROPOSAL TO APPROVE THE PERFORMANCE GOALS UNDER THE
MANAGEMENT LONG-TERM CASH INCENTIVE PLAN
GENERAL
Proposals 2 and 3 relate to approval of the material terms of the
performance goals under two existing benefit plans, the Management Incentive
Plan (the "Short-Term Plan") and the Management Long-Term Cash Incentive Plan
(the "Long-Term Plan" and together with the Short-Term Plan, the "Plans"). The
Proposals are being presented to the stockholders as a result of the Omnibus
Budget Reconciliation Act of 1993 and the regulations promulgated thereunder by
the Internal Revenue Service ("OBRA"), in order to preserve the federal income
tax deduction with respect to certain executive compensation payable under the
Plans.
Under OBRA, the allowable federal income tax deduction by a publicly-held
corporation for compensation paid or accrued with respect to the chief
executive officer and the four other most highly compensated executive officers
of such corporation serving as such at the end of such corporation's fiscal
year is limited to no more than $1,000,000 per year (the "OBRA Limitation");
provided however, this limitation does not apply to "qualified
performance-based compensation" which requires, among other conditions, that
stockholders approve the material terms of the performance goals pursuant to
which the compensation is to be measured.
Pursuant to the foregoing, certain amendments to the Plans were approved
by the stockholders at the 1995 Annual Meeting of Stockholders. OBRA also
provides, however, that if a plan permits the compensation committee to change
the targets under one or more of the performance goals in determining the
amount of compensation payable under the plan, (such as the Plans) the
stockholders must re-approve the material terms of the performance goals no
later than the first stockholders meeting that occurs in the fifth year
following the year in which the stockholders previously approved the
performance goals. Accordingly, Proposals 2 and 3 are being submitted to the
stockholders at the meeting.
Notwithstanding the adoption of these Proposals, we reserve the right to
pay compensation that may not qualify as performance-based under OBRA.
SHORT-TERM PLAN
The Short-Term Plan was approved by the Board of Directors in 1978 and has
been amended by the Board of Directors on several occasions since then.
The Short-Term Plan is intended to provide significant and sustaining
motivation to key management personnel. Participants in the Short-Term Plan are
limited to key members of senior management who are selected by the HR
Committee. In 1999, there were 222 participants in the Short-Term Plan.
Pursuant to the Short-Term Plan, if our ROE (based on net income as
adjusted for certain items) is not less than 15% for a given fiscal year, a
contribution to an incentive pool is made. The amount of the contribution is
equal to a percentage of net income, based on the ROE, ranging from 1% of net
income for an ROE of 15%, to a maximum of 2.5% of net income for an ROE of 20%
or greater.
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<PAGE>
Under the Short-Term Plan, as currently in effect, participants receive
awards from the incentive pool, including amounts in the pool carried over from
prior years because they were not awarded in such years, on the basis of
individual performance as determined by the HR Committee; provided, however,
that the maximum award for an individual may not exceed 200% of the
individual's base salary.
Awards are payable in the first quarter of the year following the year in
which the awards are earned, except for awards payable to Expected OBRA
Officers (as defined below). Such awards are payable on or after January 31 of
such following year; provided, however, such awards may be paid prior to
January 31 if they are discounted at a rate intended to reflect the time value
of money.
The Short-Term Plan provides that: (i) the HR Committee shall determine
the executive officers whose compensation the HR Committee determines may be
subject to the OBRA Limitation (the "Expected OBRA Officers") and an ROE
performance goal (based on Adjusted Net Income (as defined below)) that will
need to be attained for each year in order to permit any awards to be made to
the Expected OBRA Officers for such year; (ii) the amount of any award for
Expected OBRA Officers will be designated as 200% of the Expected OBRA
Officer's base salary as of December 31 of the year for which the award is
made, subject to reduction by the HR Committee, in its discretion, but in no
event may such award exceed $3,000,000; and (iii) for purposes of determining
the ROE performance goal, common equity shall exclude any adjustment for
unrealized gains or losses on debt and equity securities.
The term "Adjusted Net Income" means net income applicable to common
stockholders, adjusted to remove the effect of the following:
(i) items to be disclosed under generally accepted accounting
principles, or that would be disclosed absent a materiality
concept, in the income statement as extraordinary gains or losses
or as changes in accounting principles;
(ii) net income or loss attributable to companies acquired in
acquisition transactions which are being treated as poolings to the
extent the income or loss is attributable to periods prior to the
consummation date of the transaction; and
(iii) restructuring charges to be recognized in the income statement as a
result of current and/or pending acquisition transactions.
No awards were made under the Short-Term Plan for the year ended December
31, 1999. The Expected OBRA Officers (including certain of the Named Officers
indicated above) and an ROE performance goal of 15% have been determined for
2000.
LONG-TERM PLAN
The Long-Term Plan was approved by the Board of Directors in December 1991
and has been amended by the Board of Directors on several occasions since then.
Through recognition of both long-term performance relative to our peers
and individual performance, the Long-Term Plan is intended to provide
significant and sustaining motivation to key management personnel. Participants
in the Long-Term Plan are limited to key members of senior management who are
selected by the HR Committee. For awards granted in April 1999 for the
1996-1998 three-year period, there were 231 participants in the Long-Term Plan.
23
<PAGE>
Pursuant to the Long-Term Plan, if the average ROE (based on net income as
adjusted for certain items) is not less than 10% for the three-year period
ending each December 31, a contribution to an incentive pool is made.
The contribution to the pool is based on the rank of our average ROE for
the applicable period compared to the average ROE of a peer group of the 25
largest bank holding companies in the nation ranging from 50% of the base
salaries of all participants in the Long-Term Plan for the last year of the
applicable period if such rank is one, to 27% of such base salaries if such
rank is 13.
Under the Long-Term Plan, as currently in effect, participants receive
awards from the incentive pool, including amounts in the pool carried over from
prior years because they were not awarded in such years, on the basis of
individual performance as determined by the HR Committee; provided, however,
that the maximum award for an individual may not exceed 100% of the
individual's base salary.
Awards are payable at any time during the year following the end of the
applicable period for which the awards are earned, except for awards payable to
Expected OBRA Officers. Such awards are payable on April 30th of such following
year; provided, however, such awards may be prior to such April 30th if they
are discounted at a rate intended to reflect the time value of money.
The Long-Term Plan also provides that: (i) the HR Committee shall
determine the Expected OBRA Officers and an average ROE performance goal (based
on Adjusted Net Income) that will need to be attained for each three-year
period in order to permit any awards to be made to the Expected OBRA Officers
for such period; (ii) the maximum award for an Expected OBRA Officer may not
exceed $1,500,000; and (iii) for purposes of determining the ROE performance
goal, common equity shall exclude any adjustment for unrealized gains or losses
on debt and equity securities.
The Expected OBRA Officers (including certain of the Named Officers
indicated above) and an average ROE performance goal of 15% have been
determined for the 2000-2002 three-year period.
The following table sets forth the awards granted under the Long-Term Plan
in April 1999 to the individuals and groups indicated for the 1996-1998
three-year period. Non-employee directors are not eligible to participate in
the Long-Term Plan.
<TABLE>
<CAPTION>
1999 AWARDS FOR 1996-1998
--------------------------
<S> <C>
Crutchfield .................................... $ 1,130,784
Thompson ....................................... --
McMullen ....................................... 441,403
Atwood ......................................... 396,766
Adams .......................................... 347,171
Georgius ....................................... 743,937
Antonini ....................................... 250,000
Executive Officer Group (7 in number) .......... 2,464,911
Non-Executive Officer Employee Group ........... 19,712,096
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL OF
THESE PROPOSALS. PROXIES, UNLESS INDICATED TO THE CONTRARY, WILL BE VOTED "FOR"
APPROVAL OF THE PROPOSALS.
24
<PAGE>
PROPOSAL 4. A FIRST UNION PROPOSAL TO RATIFY THE APPOINTMENT OF AUDITORS
The accounting firm of KPMG LLP has been appointed as our auditors for the
year 2000 and in accordance with established policy, such appointment is being
submitted to the stockholders for ratification. In the event the appointment is
not ratified by a majority of votes cast, in person or by proxy, it is
anticipated that no change in auditors would be made for the current year
because of the difficulty and expense of making any change so long after the
beginning of the current year, but such vote would be considered in connection
with the appointment of auditors for 2001.
KPMG LLP were our auditors for the year ended December 31, 1999, and a
representative of such firm is expected to attend the meeting, respond to
appropriate questions and if such representative desires, which is not now
anticipated, make a statement.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THIS PROPOSAL. PROXIES,
UNLESS INDICATED TO THE CONTRARY, WILL BE VOTED "FOR" THIS PROPOSAL.
PROPOSAL 5. A STOCKHOLDER PROPOSAL REGARDING THE NOMINATION OF DIRECTORS
Mr. Richard A. Dee, of 115 East 89th Street, New York, New York 10128, an
owner of 566 shares of First Union common stock, has advised First Union that
he intends to present the following proposal and supporting statement at the
meeting. In accordance with applicable proxy regulations, the proposal and
supporting statement, which are presented as received by First Union and for
which First Union and the Board accept no responsibility, are set forth below.
"STOCKHOLDERS OF PUBLICLY-OWNED CORPORATIONS DO NOT 'ELECT' DIRECTORS.
Directors are 'selected' by incumbent directors and managements -- stockholders
merely 'RATIFY' or approve director selections much as they ratify selections
of auditors.
"The term 'Election of Directors' is misused in corporate proxy materials
to refer to the process by which directors are empowered. The term is
inappropriate -- and it is misleading. WITH NO CHOICE OF CANDIDATES, THERE IS
NO ELECTION.
"Incumbent directors are anxious to protect their absolute power over
corporate activities. The root of that power is control of Corporate Governance
- -- which is assured by control of board composition. Unfortunately, the
'Elective process rights' of stockholders are being ignored.
"Approval of this Corporate Governance proposal will provide First Union
stockholders with a CHOICE of director candidates -- an opportunity to vote for
those whose qualifications and views they favor. And approval will provide
stockholders with 'duly elected' representatives.
"In a democracy, those who govern are duly elected by those whom they
represent -- and they are accountable to those who elect them. Continuing in
public office requires satisfying constituents, not just nominators. Corporate
directors, many of whom divide their time between many masters, take office
unopposed -- and answer only to fellow directors.
"IT IS HEREBY REQUESTED THAT THE BOARD OF DIRECTORS ADOPT PROMPTLY A
RESOLUTION REQUIRING THE NOMINATING COMMITTEE TO NOMINATE TWO CANDIDATES FOR
EACH DIRECTORSHIP TO BE FILLED BY VOTING OF STOCKHOLDERS AT ANNUAL MEETINGS. IN
ADDITION TO CUSTOMARY PERSONAL BACKGROUND INFORMATION, PROXY STATEMENTS SHALL
INCLUDE A STATEMENT BY EACH CANDIDATE AS TO WHY HE OR SHE BELIEVES THEY SHOULD
BE ELECTED.
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<PAGE>
"As long as incumbents are permitted to select and to propose only the
number of so-called "candidates" as there are directorships to be filled -- and
as long as it is impossible, realistically, for stockholders to utilize
successfully what is supposed to be their right to nominate and elect directors
- -- there will be no practical means for stockholders to bring about director
turnover until this or a similar proposal is adopted. Turnover reduces the
possibility of inbreeding and provides sources of new ideas, viewpoints,
approaches.
"The 'pool' from which corporate directors are selected must be expanded
from the current preponderance of chairmen and CEO's to include younger
executives, including many more women, whose backgrounds qualify them well to
represent the stockholders of particular companies.
"Although director nominees would continue to be selected by incumbents,
approval of this proposal will enable First Union stockholders to replace any
or all directors if they become dissatisfied with them -- or with the results
of corporate policies and/or performance. Not a happy prospect even for those
able to nominate their possible successors!
"The benefits that will accrue to First Union stockholders from Directors
that have been democratically-elected, and who are willing to have their
respective qualifications reviewed and weighed carefully by stockholders, far
outweigh any arguments raised by those who are accustomed to being "selected"
- -- and who are determined to maintain their absolute power over the Corporate
Governance process.
"PLEASE VOTE FOR THIS PROPOSAL."
POSITION OF FIRST UNION'S BOARD
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "AGAINST" THE PROPOSAL SET
FORTH ABOVE FOR THE FOLLOWING REASONS:
The Board strongly believes that its present nominating process is the
most effective way of ensuring that highly qualified and dedicated individuals
serve on the Board. Each year the Nominating Committee performs the critical
function of examining the composition of the Board and whether to recommend any
changes in its membership. In performing these duties, the Nominating Committee
reviews the qualifications of existing Board members and other possible
candidates, including any candidates proposed by the stockholders in accordance
with First Union's Bylaws, and recommends one nominee for each open
directorship position. Each nominee selected is an individual that the Board,
in its best judgment, believes possesses the necessary skills, integrity, and
dedication to best serve the stockholders of First Union. The Board believes
that this process ensures that only the individuals with the range of skills
and experience most appropriate for First Union serve on the Board. Approval of
the proposal, however, would place the Board in the unusual and difficult
position of having to recommend both the individual who it believes is the best
qualified to serve as a director and a competing, second candidate who may be
viewed less favorably by the Board. Accordingly, the proposal, if effectuated,
may result in a fragmented Board that includes less qualified individuals. The
risk of such a harmful result to First Union and its stockholders is not
justified -- especially since First Union's Bylaws already provide a procedure
in which alternative candidates may be proposed directly by the stockholders
themselves.
In addition, the proposal, if effectuated, would likely deter many
individuals with superior qualifications from seeking or accepting nomination
to the Board. The Board believes that it is not practical to expect highly
qualified candidates, many of whom are likely to be approached by other
companies seeking their talents, to set aside their time or other directorship
positions to compete
26
<PAGE>
in an uncomfortable political campaign in which they would not be assured of
having the recommendation and full support of the entire Board. As a result,
First Union and its stockholders may be denied the services of talented
individuals, many of whom may end up serving as directors for other financial
services companies to the detriment of First Union and its stockholders.
For the reasons set forth above, the Board believes that maintaining the
present director selection process is in the best interests of the stockholders
and First Union.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "AGAINST" THIS PROPOSAL.
PROXIES, UNLESS INDICATED TO THE CONTRARY, WILL BE VOTED "AGAINST" THE
PROPOSAL.
STOCKHOLDER PROPOSALS
Management is not aware of any other matters to be voted on at the
meeting. If any other matters are voted on, the enclosed proxy will be deemed
to confer discretionary authority to the individuals named as proxies to vote
the shares represented by such proxy, as to any such matters.
Proposals of stockholders intended to be included in our proxy statement
and voted on at the 2001 Annual Meeting of Stockholders must be received at our
offices at One First Union Center, Charlotte, North Carolina 28288-0013,
Attention: Corporate Secretary, on or before November 14, 2000. The submission
of such proposals by stockholders and the consideration of such proposals by us
for inclusion in next year's proxy statement and form of proxy are subject to
the applicable rules and regulations of the SEC.
Pursuant to our Bylaws, in order for any business not included in the
proxy statement for the 2001 Annual Meeting of Stockholders to be brought
before the meeting by a stockholder of record entitled to vote at the meeting,
the stockholder must have given timely notice of such business in writing to
the Corporate Secretary of First Union. According to our Bylaws, the meeting is
scheduled to be held on April 17, 2001, and to be timely, the notice must not
be received any earlier than January 17, 2001, nor any later than February 16,
2001. If the meeting is not held on such date, the notice must be received no
later than the tenth day after public disclosure of the date of the meeting.
The notice must set forth (i) a brief description of the business desired to be
brought before the meeting and the reasons for so doing, (ii) the name and
address of the stockholder and the number of shares of First Union common stock
owned by the stockholder, and (iii) any material interest of the stockholder in
such business, other than having an interest as a stockholder. A copy of our
Bylaws is available upon request to: First Union Corporation, One First Union
Center, Charlotte, North Carolina 28288-0013, Attention: Corporate Secretary.
March 7, 2000
A COPY OF OUR 1999 ANNUAL REPORT ON FORM 10-K WILL BE PROVIDED WITHOUT
CHARGE (EXCEPT FOR EXHIBITS) UPON WRITTEN REQUEST TO FIRST UNION CORPORATION,
CORPORATE RELATIONS, ONE FIRST UNION CENTER, CHARLOTTE, NC 28288-0206.
27
<PAGE>
[FIRST UNION LOGO APPEARS HERE]
<PAGE>
TO VOTE BY MAIL, PLEASE DETACH PROXY CARD HERE
- --------------------------------------------------------------------------------
[FIRST UNION LOGO APPEARS HERE]
PROXY
FIRST UNION CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned holder of shares of common stock of First Union Corporation (the
"Corporation") hereby constitutes and appoints Norwood H. Davis, Jr., James M.
Seabrook and Ruth G. Shaw, or any of them, the lawful attorneys and proxies of
the undersigned, each with full power of substitution, for and on behalf of the
undersigned, to vote as specified on the reverse side, all of the shares of the
Corporation's common stock held of record by the undersigned on February 22,
2000, at the Annual Meeting of Stockholders of the Corporation to be held on
April 18, 2000, at 9:30 a.m., in the Auditorium, 12th Floor, Two First Union
Center, Charlotte, North Carolina, and at any adjournments or postponements
thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS SPECIFIED ON THE REVERSE
SIDE. IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED "FOR" PROPOSALS 1
THROUGH 4 AND "AGAINST" PROPOSAL 5. IF ANY OTHER MATTERS ARE VOTED ON AT THE
MEETING, THIS PROXY WILL BE VOTED BY THE PROXYHOLDERS ON SUCH MATTERS IN THEIR
SOLE DISCRETION.
SEE REVERSE SIDE
<PAGE>
[FIRST UNION LOGO APPEARS HERE]
INSTRUCTIONS FOR VOTING YOUR PROXY
Stockholders of record have three ways to vote their proxies:
o BY TELEPHONE (using a touch-tone telephone)
o THROUGH THE INTERNET (using a browser)
o BY MAIL (traditional method)
Your telephone or Internet vote authorizes the named proxies to vote your shares
in the same manner as if you had returned your proxy card. We encourage you to
use these cost effective and convenient ways of voting, 24 hours a day, 7 days a
week.
TELEPHONE VOTING Available only until 5:00 p.m. Eastern time, on April 17,
2000
o This method of voting is available for residents of the U.S. and Canada
o On a touch-tone telephone, call TOLL FREE 1-877-816-0833, 24 hours
a day, 7 days a week
o You will be asked to enter ONLY the CONTROL NUMBER shown below
o Have your proxy card ready, then follow the prerecorded instructions
o Your vote will be confirmed and cast as you directed
INTERNET VOTING Available only until 5:00 p.m. Eastern time, on April 17, 2000
o Visit the Internet voting Website at http://cybervote.georgeson.com
o Enter the COMPANY NUMBER AND CONTROL NUMBER shown below and follow the
instructions on your screen
o You will incur only your usual Internet charges
VOTING BY MAIL
o Simply mark, sign and date your proxy card and return it in the
postage-paid envelope
o IF YOU ARE VOTING BY TELEPHONE OR THE INTERNET, PLEASE DO NOT MAIL YOUR
PROXY CARD
COMPANY NUMBER CONTROL NUMBER
TO VOTE BY MAIL, PLEASE DETACH PROXY CARD HERE
- --------------------------------------------------------------------------------
[X] PLEASE MARK VOTES AS IN
THIS EXAMPLE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1
THROUGH 4 AND "AGAINST" PROPOSAL 5.
<TABLE>
<CAPTION>
<S><C>
(1) A First Union proposal to elect directors: Class II: A. Dano Davis, Roddey Dowd,
Sr., William H. Goodwin, Jr., Radford D. Lovett, Mackey J. McDonald, Lanty L. FOR all nominees listed WITHHOLD
Smith and G. Kennedy Thompson. Class III: B.F. Dolan. (except as indicated to authority to vote
INSTRUCTIONS: To withhold authority to vote for any individual nominee(s), write the contrary) for all nominees
the name(s) of such nominee(s) in the space provided below. [ ] [ ]
--------------------------------------------------------------------------------
(2) A First Union proposal to approve the performance goals under the Management For Against Abstain
Incentive Plan. [ ] [ ] [ ]
(3) A First Union proposal to approve the performance goals under the Management For Against Abstain
Long-Term Cash Incentive Plan. [ ] [ ] [ ]
(4) A First Union proposal to ratify the appointment of KPMG LLP as auditors for For Against Abstain
the year 2000. [ ] [ ] [ ]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" PROPOSAL 5.
For Against Abstain
(5) A stockholder proposal regarding the nomination of directors. [ ] [ ] [ ]
DATE:_______________________________, 2000
__________________________________________
__________________________________________
SIGNATURE(S)
NOTE:Signature(s) should agree with
name(s) on proxy form. Executors,
administrators, trustees and other
fiduciaries, and persons signing on behalf
of corporations or partnerships, should so
indicate when signing.
</TABLE>
