Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
CCB FINANCIAL CORPORATION
- ----------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- ------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fees (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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[ ] 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
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or the Form or Schedule and the date of its filing.
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<PAGE>
CCB Financial Corporation
111 Corcoran Street
Post Office Box 931
Durham, North Carolina 27702-0931
------------------------------------
Notice of Annual Meeting of Shareholders
------------------------------------
To Be Held April 27, 1999
NOTICE is hereby given that the Annual Meeting of Shareholders of CCB
Financial Corporation (the "Corporation") will be held as follows:
Place: George Watts Hill Alumni Center,
Stadium Drive at Ridge Road
on the campus of the University of
North Carolina at Chapel Hill,
Chapel Hill, North Carolina
Date: Tuesday, April 27, 1999
Time: 11:00 A.M.
For your convenience, a map with directions to the George Watts Hill
Alumni Center appears on the back outside cover of the accompanying Proxy
Statement.
THE PURPOSES OF THE ANNUAL MEETING ARE:
1. To elect seven members of the Board of Directors for terms of three
years.
2. To consider a proposal to ratify the appointment of KPMG LLP as the
Corporation's independent accountants for the year ending December 31, 1999.
3. To consider and act on any other matters that may properly come before
the Annual Meeting.
The record date for the determination of shareholders entitled to notice
of and to vote at the Annual Meeting has been set as the close of business on
February 26, 1999.
EVEN IF YOU EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE
REQUESTED TO MARK, DATE, AND SIGN THE ENCLOSED APPOINTMENT OF PROXY AND RETURN
IT IN THE ENCLOSED ENVELOPE. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY REVOKE
YOUR APPOINTMENT OF PROXY AND VOTE YOUR SHARES IN PERSON.
Sincerely,
[ERNEST C. ROESSLERS' SIGNATURE APPEARS HERE]
ERNEST C. ROESSLER,
Chairman, President and Chief Executive
Officer
March 18, 1999
<PAGE>
<PAGE>
CCB Financial Corporation
111 Corcoran Street
Post Office Box 931
Durham, North Carolina 27702-0931
--------------
Proxy Statement
--------------
Mailing Date: March 18, 1999
Annual Meeting of Shareholders
To Be Held April 27, 1999
General
This Proxy Statement is being distributed in connection with the
solicitation by the Board of Directors of CCB Financial Corporation (the
"Corporation") of appointments of proxy in the form enclosed herewith for the
1999 Annual Meeting of Shareholders of the Corporation and any adjournments
thereof (the "Annual Meeting"). The Annual Meeting will be held on Tuesday,
April 27, 1999, beginning at 11:00 A.M., at the George Watts Hill Alumni
Center, Stadium Drive at Ridge Road, on the campus of the University of North
Carolina at Chapel Hill, Chapel Hill, North Carolina. For your convenience, a
map with directions to the George Watts Hill Alumni Center appears on the back
outside cover of this Proxy Statement.
As used in this Proxy Statement, the term "the Bank" refers to the
Corporation's wholly-owned North Carolina-chartered commercial bank subsidiary,
Central Carolina Bank and Trust Company, Durham, North Carolina, and the term
"AFB" refers to the Corporation's wholly-owned federal savings bank subsidiary,
American Federal Bank, FSB, Greenville, South Carolina.
Voting of Appointments of Proxies; Revocation
Persons named in the enclosed appointment of proxy as proxies for
shareholders at the Annual Meeting are Leo P. Pylypec, Secretary of the
Corporation and the Bank, W. Harold Parker, Jr., Controller of the Corporation
and the Bank, and Manuel L. Rojas, General Auditor of the Bank. Shares
represented by each appointment of proxy which is properly executed, returned,
and not revoked, will be voted in accordance with the directions contained
therein. If no directions are given, those shares will be voted "FOR" the
election of each of the seven nominees for director named in Proposal 1 and
"FOR" the other proposal described herein. If, at or before the time of the
Annual Meeting, any nominee named in Proposal 1 becomes unavailable for any
reason, the proxies will be authorized to vote for a substitute nominee. On
such other matters as may properly come before the Annual Meeting, the proxies
will be authorized to vote shares represented by appointments of proxy in
accordance with their best judgment.
A shareholder may revoke an appointment of proxy at any time before the
shares represented by it have been voted by filing with Mr. Pylypec at the
address above an instrument revoking it or a properly executed appointment of
proxy bearing a later date, or by attending the Annual Meeting and announcing
his or her intention to vote in person.
Expenses of Solicitation
The Corporation will pay the cost of preparing, assembling, and mailing
this Proxy Statement and other proxy solicitation expenses. In addition to the
use of the mail, appointments of proxy may be solicited in person or by
telephone by officers, directors, or employees of the Corporation and its
subsidiaries without additional compensation. The Corporation has engaged
Corporate Investor Communications, Inc., to assist in the solicitation of
appointments of proxy. The fee for such services will be approximately $4,500,
plus reimbursement of reasonable out-of-pocket expenses. The Corporation also
will reimburse brokerage houses and other nominees for expenses incurred in
forwarding the Corporation's proxy materials to beneficial owners of its voting
securities.
Record Date
The Board of Directors has set February 26, 1999, as the record date (the
"Record Date") for the determination of shareholders entitled to notice of and
to vote at the Annual Meeting. Only shareholders of record on that date will be
entitled to vote at the Annual Meeting.
<PAGE>
Voting Securities
The voting securities of the Corporation are the shares of its $5.00 par
value common stock ("Common Stock"), of which 100,000,000 shares were
authorized and 40,164,190 shares were outstanding as of the Record Date. On
such date there were approximately 9,900 shareholders of record.
Voting Procedures; Votes Required for Approval
The representation in person or by proxy of a majority of the votes
entitled to be cast is necessary to provide a quorum at the Annual Meeting. At
the Annual Meeting, each shareholder will be entitled to cast one vote for each
share of Common Stock held of record on the Record Date for each matter
submitted for voting and, in the election of directors, for each director to be
elected.
In voting for directors under Proposal 1, the seven nominees receiving the
highest numbers of votes will be elected. Votes may be cast in favor of
director nominees or withheld. Withheld votes are not treated as votes cast
and, therefore, will have no effect on the election of directors. In the case
of the other proposal, for such proposal to be approved, the number of votes
cast for approval must exceed the number of votes cast against approval. Under
the rules of the New York Stock Exchange (the "NYSE"), broker-dealers who hold
shares in street name have the authority to vote on certain routine items when
they have not received voting instructions from beneficial owners, in this
case, Proposals 1 and 2. Under North Carolina law, abstentions are not treated
as votes cast and, therefore, will have no effect on the vote for any proposal.
Amount and Nature of Beneficial Ownership of Voting Securities
Set forth below is information regarding the only entity known to
management of the Corporation to beneficially own more than five percent of the
issued and outstanding shares of Common Stock as of December 31, 1998.
<TABLE>
<CAPTION>
Amount and Nature of Percentage
Name and Address Beneficial Ownership of Class(1)
- ----------------------------- ---------------------- ------------
<S> <C> <C>
Central Carolina Bank and 2,233,057(2) 5.53%
Trust Company
111 Corcoran Street
Post Office Box 931
Durham, North Carolina
27702-0931
</TABLE>
- ---------
(1) The calculation of the percentage of class beneficially owned is based on
the 40,345,214 shares of the Corporation's Common Stock issued and
outstanding on December 31, 1998.
(2) Shares beneficially owned by the Bank are held through its trust department
in various fiduciary capacities. In addition to the shares reflected
above, the Bank holds certain other shares in various fiduciary capacities
as to which the Bank disclaims beneficial ownership. The aggregate number
of shares held by the Bank includes 2,175,840 shares over which the Bank
exercises sole voting power, 57,017 shares over which the Bank has shared
voting power, 1,253,654 shares over which the Bank has sole investment
power, and 399,752 shares over which the Bank has shared investment power.
2
<PAGE>
Set forth below is information as of December 31, 1998 regarding the beneficial
ownership of Common Stock by the Corporation's current directors and executive
officers individually, and by all current directors and executive officers of
the Corporation as a group. No current director or executive officer owned more
than one percent of the shares outstanding on December 31, 1998. Current
directors and executive officers as a group owned 2.41% of the shares
outstanding on such date.
<TABLE>
<CAPTION>
Amount and Nature of
Name Beneficial Ownership(1)
- -------------------------------------------- ------------------------
<S> <C>
William L. Abercrombie, Jr. 139,186(2)
J. Harper Beall, III 65,182(3)
James B. Brame, Jr. 16,705(4)
Timothy B. Burnett 10,874(5)
Blake P. Garrett, Jr. 92,243(6)
Edward S. Holmes 23,266(7)
Bonnie McElveen-Hunter 9,564(8)
David B. Jordan 28,618(9)
C. Dan Joyner 43,629(10)
Owen G. Kenan 17,756(11)
Eugene J. McDonald 21,375(12)
Hamilton W. McKay, Jr., M.D. 34,419(13)
George J. Morrow 6,345(14)
Eric B. Munson 12,521(15)
Ernest C. Roessler 114,816(16)
Dr. David E. Shi 16,316(17)
Jimmy K. Stegall 76,326(18)
H. Allen Tate, Jr. 44,326(19)
James L. Williamson 18,421(20)
Dr. Phail Wynn, Jr. 13,550(21)
J. Scott Edwards 96,404(22)
Richard L. Furr 78,257(23)
All current directors and executive 980,099(24)
officers as a group (22 persons)
</TABLE>
- ---------
(1) Except as otherwise noted, each individual exercises sole voting and
investment power with respect to all shares shown as beneficially owned.
(2) Includes 19,020 shares with respect to which Mr. Abercrombie exercises
shared voting and investment power, 81,878 shares which he could purchase
under a presently exercisable option and as to which he is considered to
have sole investment power only and 14,634 shares held under the 401(k)
Plan of AFB as to which he is considered to have sole investment power
only.
(3) Includes 23,284 shares which Mr. Beall could purchase under a presently
exercisable option and as to which he is considered to have sole
investment power only, and 16,320 shares with respect to which he
exercises shared voting and investment power. Does not include 4,020
shares held by Mr. Beall's spouse and children and with respect to which
he disclaims any beneficial ownership.
(4) Includes 8,000 shares which Mr. Brame could purchase under a presently
exercisable option and as to which he is considered to have sole
investment power only.
(5) Includes 6,000 shares which Mr. Burnett could purchase under a presently
exercisable option and as to which he is considered to have sole
investment power only.
(6) Includes 47,614 shares with respect to which Mr. Garrett exercises shared
voting and investment power and 12,565 shares which he could purchase
under a presently exercisable option and as to which he is considered to
have sole investment power only.
(7) Includes 10,000 shares which Mr. Holmes could purchase under a presently
exercisable option and as to which he is considered to have sole
investment power only. Does not include 43,296 shares held by his spouse
and with respect to which he disclaims any beneficial ownership.
3
<PAGE>
(8) Includes 4,000 shares which Ms. McElveen-Hunter could purchase under a
presently exercisable option and as to which she is considered to have
sole investment power only.
(9) Includes 1,522 shares with respect to which Mr. Jordan exercises shared
voting and investment power, 3,462 shares under the 401(k) Plan as to
which he is considered to have sole investment power only, and 8,134
shares which he could purchase under a presently exercisable option and as
to which he is considered to have sole investment power only.
(10) Includes 2,288 shares with respect to which Mr. Joyner exercises shared
voting and investment power and 15,680 shares which he could purchase
under a presently exercisable option and as to which he is considered to
have sole investment power only.
(11) Includes 7,060 shares with respect to which Mr. Kenan exercises shared
voting and investment power and 10,000 shares which he could purchase
under a presently exercisable option and as to which he is considered to
have sole investment power only.
(12) Includes 4,638 shares with respect to which Mr. McDonald exercises shared
voting and investment power and 10,000 shares which he could purchase
under a presently exercisable option and as to which he is considered to
have sole investment power only.
(13) Does not include 1,558 shares held by Dr. McKay's spouse and son and with
respect to which he disclaims any beneficial ownership.
(14) Includes 2,000 shares which Mr. Morrow could purchase under a presently
exercisable option and as to which he is considered to have sole
investment power only.
(15) Includes 10,000 shares which Mr. Munson could purchase under a presently
exercisable option and as to which he is considered to have sole
investment power only.
(16) Includes 7,000 shares with respect to which Mr. Roessler exercises shared
voting and investment power, 42,964 shares which he could purchase under a
presently exercisable option and as to which he is considered to have sole
investment power only, and 19,091 shares held under the 401(k) Plan as to
which he is considered to have sole investment power only.
(17) Includes 11,680 shares which Dr. Shi could purchase under a presently
exercisable option and as to which he is considered to have sole
investment power only.
(18) Includes 10,904 shares with respect to which Mr. Stegall exercises shared
voting and investment power and 10,000 shares which he could purchase
under a presently exercisable option and as to which he is considered to
have sole investment power only.
(19) Includes 10,108 shares with respect to which Mr. Tate exercises shared
voting and investment power and 10,000 shares which he could purchase
under a presently exercisable option and as to which he is considered to
have sole investment power only. Does not include a total of 3,591 shares
held by or for Mr. Tate's spouse and children and with respect to which he
disclaims any beneficial ownership.
(20) Includes 10,000 shares which Mr. Williamson could purchase under a
presently exercisable option and as to which he is considered to have sole
investment power only.
(21) Includes 10,000 shares which Dr. Wynn could purchase under a presently
exercisable option and as to which he is considered to have sole
investment power only.
(22) Includes 24,116 shares under the 401(k) Plan as to which Mr. Edwards is
considered to have sole investment power only and 20,527 shares which he
could purchase under a presently exercisable option and as to which he is
considered to have sole investment power only.
(23) Includes 13,438 shares with respect to which Mr. Furr exercises shared
voting and investment power, 23,272 shares which he could purchase under a
presently exercisable option and as to which he is considered to have sole
investment power only, and 11,236 shares under the 401(k) Plan as to which
he is considered to have sole investment power only.
(24) Includes an aggregate of 427,664 shares with respect to which current
directors and executive officers exercise sole voting and investment
power, 139,912 shares with respect to which they have shared voting and
investment power, 339,984 shares which such persons could purchase under
presently exercisable options and as to which they have sole investment
power only, and 72,539 shares under the 401(k) Plan as to which they have
sole investment power only.
4
<PAGE>
PROPOSAL 1. ELECTION OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" EACH OF THE
SEVEN NOMINEES NAMED BELOW FOR A THREE-YEAR TERM.
<TABLE>
<CAPTION>
Principal Occupation
Name and Age and Other Directorships Director Since(1)
- ----------------------------- -------------------------------------------------------------- ------------------
<S> <C> <C>
Timothy B. Burnett President, Bessemer Improvement Company (industrial and 1994
(58) commercial real estate development); Trustee, Alexander
Hamilton Insurance Trust
Blake P. Garrett, Jr. Partner, Garrett and Garrett Construction (commercial real 1997 (3)
(58) estate developer); Trustee, Real Estate Fund Investment
Trust; Director of AFB
Owen G. Kenan President, Kenan Enterprises, Inc. (commercial real estate 1981
(55) holding company), Kenan Developments, Inc. (commercial
real estate developer); also serves as Director and Vice
Chairman, Kenan Transport Co., Inc. (bulk products hauler),
Vice Chairman, Flagler Systems, Inc. (hotel and property
management), and Chairman, Kenan Global Enterprises,
LLC (international investments)
Bonnie McElveen-Hunter President, Pace Communications, Inc. (publishing) 1996
(48)
George J. Morrow President and Chief Executive Officer, Glaxo Wellcome Inc. 1996
(47) (pharmaceuticals)
Ernest C. Roessler Chairman of the Board, President and Chief Executive Officer 1993
(57) of the Corporation and the Bank; Director of AFB
H. Allen Tate, Jr. President, Allen Tate Company, Inc. (residential real estate 1989
(67) broker); Director, Reliance Relocation Services, Inc.
Remaining Directors Not Subject To Election in 1999
Serving a Two-Year Term
Ending in 2000:
William L. Abercrombie, Jr. Vice Chairman of the Board of the Corporation and the Bank; 1997 (3)
(51) Chairman of the Board, President and Chief Executive
Officer of AFB
</TABLE>
(continued on following page)
5
<PAGE>
<TABLE>
<CAPTION>
Principal Occupation
Name and Age and Other Directorships Director Since(1)
- ----------------------------- ---------------------------------------------------------------- ------------------
<S> <C> <C>
Serving A Three-Year
Term Ending in 2000:
J. Harper Beall, III President, Fairfield Chair Company (furniture manufacturer) 1994
(57)
Edward S. Holmes Partner, Holmes & McLaurin (attorneys at law) 1973
(69)
Eugene J. McDonald President, Duke Management Company (asset management 1985
(66) company affiliated with Duke University); Executive Vice
President, Duke University; Executive Vice Chairman of the
Corporation and Bank; Director, Key Funds, Inc.; and
Director, Flag Group of Mutual Funds
Hamilton W. McKay Jr., M.D. Retired Physician, Carolina Asthma & Allergy Center, P.A. 1990
(69)
James L. Williamson Retired, previously Partner, KPMG LLP (certified public 1995
(66) accountants)
Dr. Phail Wynn, Jr. President, Durham Technical Community College 1992
(51)
Serving A Three-Year
Term Ending in 2001:
James B. Brame, Jr.(2) President, Brame Specialty Co., Inc. (paper products, office 1993
(53) supplies and equipment)
David B. Jordan Vice Chairman of the Board of the Corporation and the Bank; 1995
(62) Former Vice Chairman and Chief Executive Officer of
Security Capital Bancorp (acquired by the Corporation in
1995); Director of AFB
C. Dan Joyner President and Chief Executive Officer of The Prudential/C. 1997(3)
(61) Dan Joyner Co., Inc. (real estate broker); Director of AFB
Eric B. Munson President and Chief Executive Officer, University of North 1985
(56) Carolina Hospitals
Dr. David E. Shi President, Furman University; Director of AFB 1997(3)
(47)
Jimmy K. Stegall President, Service Oil of Monroe, Inc. (petroleum marketer and 1995
(68) real estate development)
</TABLE>
- ---------
(1) Refers to the year in which a person first was elected a director of the
Corporation or, if prior to the Corporation's organization in 1983, the
year in which such person first was elected a director of the Bank.
(2) During 1998, the Bank purchased office supplies and other products from
Brame Specialty Co., Inc., in an aggregate amount of $677,304.
(3) Messrs. Abercrombie, Garrett, and Joyner, and Dr. Shi became members of the
Boards of Directors of the Corporation and the Bank on August 1, 1997, by
action of the then existing Boards of Directors of the Corporation and the
Bank, in connection with the Corporation's acquisition of AFB.
Directors' Compensation
Directors who are officers other than the Executive Vice Chairman do not
receive any additional compensation for their service as directors. During 1998
each director of the Corporation received a retainer of $10,000 and an
additional retainer of $7,500 if a member of the Executive Committee.
Additionally, directors received a fee of $875 for each meeting of the Board of
Directors attended and $750 for attendance at each meeting of a committee of
the Board of Directors. If the director also served as chairman of the
committee, he received an additional fee of $250 for attendance at each
committee meeting. In addition to retainer and attendance fees, Mr. McDonald
received $7,500 monthly in fees for his services as Executive Vice Chairman
beginning in April 1998.
In order to increase stock ownership of directors in the Corporation, in
1998, the directors were given the option of receiving fees in an amount equal
to 120% of the fees to which they were entitled provided they utilized such
amount to purchase shares of the Corporation's Common Stock through the
Corporation's Dividend Reinvestment and Stock Purchase Plan. Alternatively, the
fees may be deferred under a Deferred Compensation Plan that invests solely in
the Common Stock
6
<PAGE>
of the Corporation. Total directors' fees payable for 1998 were $533,150, of
which $102,350 was paid to directors and $430,800 was used to purchase stock or
deferred.
The director retainer fee will be increased in 1999 to $12,500 from
$10,000. All other fees will remain unchanged. Additionally in 1999, directors
will be granted stock options using Black-Scholes methodology, intended to
provide approximately $20,000 per year in annualized compensation.
Board of Directors' Meetings and Committees
The Board of Directors held four regular meetings and one special meeting
during 1998. All incumbent directors, except for Mr. Morrow whose absences were
due to business scheduling conflicts, attended more than 75% of the total
number of meetings of the Board of Directors and its committees on which they
served during 1998.
The Board of Directors has several standing committees, including an Audit
Committee, a Nominating Committee, and a Compensation Committee. The voting
members of these committees are appointed by the Board of Directors annually
from among its members. Additionally, certain officers of the Corporation and
the Bank are appointed to serve as non-voting, advisory members of each
committee.
The current members of the Audit Committee are Mr. Burnett, who serves as
Chairman, and Messrs. Beall, Garrett, Williamson, Dr. McKay and Dr. Wynn.
Officers currently serving as non-voting, advisory members are Messrs. Rojas,
Parker, J. Scott Edwards, Senior Executive Vice President of the Corporation
and the Bank, Sheldon M. Fox, Executive Vice President and Chief Financial
Officer of the Corporation and the Bank, and B. W. Harris, Jr., retired
Controller of the Bank. The primary functions of the Audit Committee are to
provide additional assurance regarding the integrity of financial information
used by the Board of Directors and distributed to the public by the Corporation
and to oversee and monitor the activities of the Corporation's internal and
external audit processes, including the nomination of the Corporation's
independent accountants. The committee met four times during 1998.
The current members of the Nominating Committee are Mr. Holmes, who serves
as Chairman, Messrs. Roessler and Stegall, Dr. McKay, and Dr. Shi. Mr. Pylypec
currently serves as a non-voting, advisory member. The primary function of the
Nominating Committee is to recommend candidates to the Board of Directors for
selection as nominees for election as directors. The committee has met once
since the 1998 Annual Meeting. Any shareholder wishing to make a nomination for
director to be considered at the 2000 Annual Meeting anticipated to be held
during April 2000 must make such nomination in writing to Mr. Pylypec,
Secretary of the Corporation, not less than 60 days nor more than 90 days prior
to such meeting. Such notification must include the name and address of the
shareholder making the nomination, a representation of the number of shares of
the Corporation owned of record by the shareholder and such shareholder's
intention to appear in person or by proxy at the meeting to nominate the person
or persons specified in the notice. As to each person nominated, the
notification must include such person's name and address, employment history
for the past five years, affiliations (if any) with the Corporation and other
corporations, the number of shares of the Corporation that are owned of record
or beneficially by such proposed nominee(s) and information concerning any
transactions in shares of the Corporation or such other corporation within the
prior 60 days. Additionally, information must be given as to whether such
proposed nominee(s) has been convicted in a criminal proceeding within the past
five years and, if so, the details thereof; whether such person(s) has been a
party to any proceeding or subject to any judgment, decree or final order with
respect to violations of federal or state securities laws within the past five
years and the details thereof, if any, and the details of any contract,
arrangement, understanding or relationships with any person with respect to any
securities of the Corporation. Further, the proposed nominee's written consent
to be named as a nominee and to serve as a director if elected must be provided
together with a description of all arrangements or understandings between the
shareholder and each nominee and any other person or persons (naming such
person or persons) pursuant to which the nomination(s) are to be made by the
shareholder. Any nomination(s) not made in accordance with the foregoing
procedure may be disregarded by the chairman of the meeting.
The Compensation Committee administers the Corporation's compensation
program and has responsibility for matters involving the compensation of
executive officers of the Corporation and the Bank. With respect to salaries,
however, the Compensation Committee only establishes salary ranges for
executive officers while the Executive Committee sets actual salaries within
those ranges. All actions of the Compensation Committee are subject to review
by the full Board of Directors. The membership of the Compensation Committee,
which met four times during 1998, is described below.
7
<PAGE>
Compensation Committee Interlocks and Insider Participation
The current members of the Compensation Committee are Mr. Munson, who
serves as Chairman, and Messrs. Brame, Joyner, McDonald and Morrow, with
Messrs. Roessler and John J. Mistretta, Executive Vice President and Director
of Human Resources of the Corporation and the Bank, serving as non-voting,
advisory members.
The current members of the Executive Committee are Mr. Roessler, who
serves as Chairman, and Messrs. Abercrombie, Holmes, Jordan, McDonald, Munson
and Dr. Wynn, with Mr. Edwards and Mr. Furr serving as non-voting, advisory
members.
Compensation Committee Report
General. It is the policy of the Compensation Committee to provide a fully
competitive, performance-based compensation program that will enable the
Corporation to attract, motivate, and retain qualified executive officers.
During 1998, the Corporation's executive compensation program provided for (a)
annual compensation consisting of base salaries combined with cash incentive
bonuses based on the Corporation's financial performance, and (b) long-term
compensation consisting of periodic stock option awards combined with incentive
compensation based on the Corporation's financial performance. The Corporation
also provided certain other compensation plans customary for companies of
comparable size. The annual and long-term compensation programs are intended to
be competitive with median levels of incentive compensation paid by the
Corporation's competitors and were developed based on recommendations made in
1997 by an independent consulting group. Recommendations included changes in
the methodology used to grant stock options. The 1998 grants used the
Black-Scholes methodology which assigns a fair value to an option at the date
of grant.
The Omnibus Reconciliation Act of 1993 amended Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), to limit the
deductibility of annual compensation in excess of $1,000,000 paid by public
corporations to certain executive officers. The Compensation Committee has not
adopted a policy with respect to Section 162(m).
The following is a discussion of each element of the compensation program
for 1998 with respect to the Corporation's executive officers.
Annual Compensation Program. The 1998 base salary for Mr. Roessler was set
on an objective basis by the Executive Committee using specific performance
criteria within a range determined by the Compensation Committee to be
competitive with the base salaries paid to chief executive officers of bank
holding companies of comparable asset size. The Compensation Committee obtained
from Watson-Wyatt Company ("Watson Wyatt"), an independent compensation
consulting firm, an analysis of the base salaries of the chief executive
officers of approximately 40 unnamed bank holding companies. A graphic summary
of this information was prepared to correlate reported base salaries and asset
sizes. The approved midpoint of the salary range was set using a regression
formula to calculate the base salary of a chief executive officer whose bank
has total assets equal in amount to the Corporation's. The 1998 salary set by
the Executive Committee for Mr. Roessler was 100% of the midpoint.
The 1998 salaries of the other executive officers, except Mr. Jordan and
Mr. Abercrombie, were set during February 1998, within ranges approved by the
Compensation Committee, by the Executive Committee based on its evaluation of
the performance and levels of responsibility of each officer and their
contribution to the Corporation's financial performance, measured in terms of
its return on assets and return on equity, for the prior fiscal year. The
salary ranges were set by the Compensation Committee based on its evaluation of
the level of demands and responsibility required by each executive position and
by the levels of compensation paid by financial institutions of comparable size
for similar positions. This comparative analysis was based upon information
obtained from Watson-Wyatt regarding salaries paid to executive officers of
bank holding companies of comparable asset size, expressed in terms of the
ratio of such salaries to the salaries of their respective chief executive
officers. The 1998 salary of Mr. Jordan was separately negotiated in connection
with the Corporation's acquisition of Security Capital Bancorp ("Security
Capital") in 1995 and the 1998 salary of Mr. Abercrombie was separately
negotiated in connection with the Corporation's acquisition of AFB in 1997. See
"Change in Control and Employment Arrangements."
The cash incentive bonuses paid for 1998 to Mr. Roessler and to each of
the other executive officers were determined under the terms of the Management
Performance Incentive Plan (the "Incentive Plan") based on the Corporation's
1998 financial performance, measured in terms of the Corporation's return on
assets, return on equity, earnings per share, and efficiency ratio. The
Incentive Plan uses a "target bonus" approach to determine the size of each
eligible employee's bonus. A participant's base salary and salary grade as of
the first day of the fiscal year is used to determine such participant's target
bonus. During 1998, individual target bonuses, as a percentage of annual base
salary, ranged from a low of 4% to a high of 50%. The overall bonus fund is the
sum of the target bonuses of all participants. Actual bonus amounts for
participants in
8
<PAGE>
the Incentive Plan may be higher or lower than their target bonus amounts and
are based upon a comparison of the Corporation's actual performance to the
designated performance measures. The maximum bonus for any participant
generally may not exceed 200% of his or her target bonus. Additionally, the
Corporation's total net income for the fiscal year must exceed a minimum
threshold amount in order for any bonuses to be paid under the Incentive Plan.
Payment of bonuses under the Incentive Plan are made annually within 75 days of
the end of the fiscal year, subject to approval by the Executive Committee. For
the year ended December 31, 1998, the Corporation exceeded the designated
performance measures and surpassed the applicable minimum net income threshold,
resulting in an overall bonus fund of 130.9% of target bonuses.
Other forms of annual compensation paid to executive officers in 1998
include the Corporation's matching contributions (the "Matching Contributions")
to the account of each executive officer under the 401(k) Plan and the portion
of the Corporation's special discretionary contribution to the 401(k) Plan (the
"Discretionary Contribution") allocated to the account of each executive
officer. The Matching Contributions for Mr. Roessler and the other executive
officers were based on a formula contained in the terms of the 401(k) Plan and
were not related to the Corporation's or the individual officer's performance
for the year. The total amount of the Discretionary Contribution generally was
based upon the Corporation's financial performance for 1998, measured in terms
of earnings per share, net income, return on assets, and return on equity,
although there was no specific formula or other mechanism by which the amount
was determined. The portion of the Discretionary Contribution allocated to the
accounts of Mr. Roessler and the other executive officers was based upon a
formula contained in the terms of the 401(k) Plan.
Long-Term Compensation Program. To enable the Corporation to attract,
retain, and motivate key employees and directors, the Board of Directors
adopted the Long-Term Incentive Plan (the "LTIP"). The LTIP was approved by the
shareholders of the Corporation at their 1994 Annual Meeting and has a ten-year
term. The objective of the LTIP is to provide the Board of Directors with the
means to reward achievement of long-term goals in a manner more flexible than
that provided by the Corporation's previous long-term incentive compensation
arrangements. Under the LTIP, restricted stock, stock options, and performance
units (payable in cash, restricted stock, or unrestricted stock) may
periodically be granted in various combinations to key officers and directors.
The LTIP is administered by the Compensation Committee. Each recipient of an
award under the LTIP must enter into a written agreement with the Corporation
setting forth the restrictions, terms, and conditions of that particular award.
During 1998, Mr. Roessler and each of the other executive officers
received awards under the LTIP in the form of stock options ("Options") and
performance units ("Units"). The Options awarded in 1998 have an exercise price
of $55.9688 per share, and a term of ten years with one-third of the options
vesting on the first, second, and third anniversaries of the date of grant. The
Units awarded in 1998 have a value in range from $0 to $200 each with a target
value of $100 each and will be paid only if the Corporation meets or exceeds a
specified average return on equity, return on assets and total shareholder
return as compared to a peer group of comparably sized banks east of the
Mississippi River over a three-year period ending on December 31, 2000. The
vesting of Units also is subject to the Corporation's achievement of a minimum
level of shareholder return over the three-year performance period. If the
targeted performance goals are met, payment in settlement of earned Units will
be made as soon as practical following the conclusion of the performance period
in cash. The number of Options and Units awarded to Mr. Roessler and to each of
the other executive officers was based in each case upon a specified percentage
of their current base salary.
Executive Compensation
The following table shows for 1998, 1997, and 1996, the cash and certain
other compensation paid to or received or deferred by the Chief Executive
Officer and the four other executive officers of the Corporation (the "Named
Executive Officers").
9
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation
------------------------------------
Other
Name and Annual
Principal Salary Bonus Compensation
Position Year ($)(1) ($)(2) ($)
- --------------------------------------- ------ --------- --------- ----------------
<S> <C> <C> <C> <C>
Ernest C. Roessler
Chairman, President and Chief 1998 536,630 340,890 --
Executive Officer of the Corporation 1997 486,160 312,464 --
and the Bank 1996 417,150 220,523 --
William L. Abercrombie, Jr. (4)
Vice Chairman of the Corporation 1998 328,290 166,454 291,600(5)
and the Bank and Chairman, 1997 285,666 158,880 121,500(5)
President and Chief Executive 1996 262,167 92,605 --
Officer of AFB
David B. Jordan
Vice Chairman of the Corporation 1998 212,282 -- --
and the Bank 1997 251,320 129,222 --
1996 237,415 83,672 --
J. Scott Edwards
Senior Executive Vice President of 1998 298,700 151,798 --
the Corporation and the 1997 268,315 137,961 --
Bank 1996 253,380 89,298 --
Richard L. Furr
Senior Executive Vice President of 1998 310,708 157,900 --
the Corporation and the 1997 273,980 140,874 --
Bank 1996 257,500 90,750 --
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term Compensation
----------------------------------
Awards
-----------------------
Restricted Securities Payouts All
Name and Stock Underlying LTIP Other
Principal Awards Options/SARs Payouts Compensation
Position ($) (#) ($) ($)(3)
- --------------------------------------- ----------- -------------- --------- ----------------
<S> <C> <C> <C> <C>
Ernest C. Roessler
Chairman, President and Chief -- 34,480 150,000 143,438
Executive Officer of the Corporation -- 34,480 138,000 31,406
and the Bank -- 12,140 63,559 26,046
William L. Abercrombie, Jr. (4)
Vice Chairman of the Corporation -- 13,360 -- 26,395
and the Bank and Chairman, -- 12,715 -- 285,275(6)
President and Chief Executive -- 1,335 -- 46,411
Officer of AFB
David B. Jordan
Vice Chairman of the Corporation -- 13,360(7) -- 28,320
and the Bank -- 13,360 -- 27,345
-- 5,520 -- 26,557
J. Scott Edwards
Senior Executive Vice President of -- 14,280 84,000 73,626
the Corporation and the -- 14,280 80,000 15,864
Bank -- 5,900 62,757 15,511
Richard L. Furr
Senior Executive Vice President of -- 14,580 86,000 67,545
the Corporation and the -- 14,580 80,000 16,179
Bank -- 6,000 62,757 15,750
</TABLE>
- ---------
(1) Consists of salary payable to each Named Executive Officer, including
portions of salary deferred at the election of each officer.
(2) Consists entirely of cash bonuses paid to the Named Executive Officers
under the Incentive Plan. See "Compensation Committee Report -- Annual
Compensation Program."
(3) The amount listed for each Named Executive Officer for 1998 includes (i)
the Corporation's matching contributions on behalf of that officer to the
401(k) Plan and (ii) the portion of the Discretionary Contribution to the
401(k) Plan which was allocated to the account of the officer. Those
separate amounts for each Named Executive Officer are, respectively: Mr.
Roessler -- $25,004 and $14,355; Mr. Abercrombie -- $14,306 and $8,214;
Mr. Jordan -- $10,060 and $5,775; Mr. Edwards -- $12,839 and $7,371; Mr.
Furr -- $13,276 and $7,622. The amounts also include for Mr. Roessler --
$104,079, Mr. Edwards -- $53,416 and Mr. Furr -- $46,647 which represents
the present value of the yearly interest forgone on the non-term premium
paid under a split-dollar life insurance arrangement. Also includes
premiums in the amount of $3,875 paid by the Corporation with respect to
whole life insurance for the benefit of Mr. Abercrombie and premiums in
the amount of $12,485 paid by the Corporation with respect to split-dollar
life insurance for the benefit of Mr. Jordan.
(4) On July 31, 1997, the Corporation acquired AFB. Amounts paid to Mr.
Abercrombie prior to such date were paid to him by AFB in his capacity as
Chairman, President and Chief Executive Officer of AFB.
(5) Consists entirely of payments from the Corporation to Mr. Abercrombie in
connection with the Corporation's acquisition of AFB. See "Change in
Control and Employment Arrangements."
(6) Includes a closing bonus in the amount of $275,000 paid to Mr. Abercrombie
by the Corporation in connection with the Corporation's acquisition of
AFB.
(7) Effective January 29, 1999, such options were relinquished and were no
longer outstanding.
10
<PAGE>
The following table sets forth information with regard to grants of
options during the fiscal year ended December 31, 1998. All such grants were
made under the LTIP.
OPTION GRANTS IN 1998
<TABLE>
<CAPTION>
Individual Grants
- ------------------------------------------------------------------------------------------------
Potential Realizable Value
Number at Assumed Annual Rates
of Securities Percent of Total of Stock Price
Underlying Options Granted Appreciation for Option
Options to Employees in Exercise or Term
Granted 1998 Base Price Expiration --------------------------
Name (#) (%) ($/Sh.) Date 5%($) 10%($)
- ----------------------------- --------------- ----------------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Ernest C. Roessler 34,480 9.9% 55.9688 3/17/2008 1,213,644 3,075,611
William L. Abercrombie, Jr. 13,360 3.8% 55.9688 3/17/2008 470,252 1,191,710
David B. Jordan 13,360(1) 3.8% 55.9688 3/17/2008 470,752 1,191,710
J. Scott Edwards 14,280 4.1% 55.9688 3/17/2008 502,634 1,273,774
Richard L. Furr 14,580 4.2% 55.9688 3/17/2008 513,194 1,300,534
</TABLE>
- ---------
(1) Effective January 29, 1999, such options were relinquished and were no
longer outstanding.
The following table sets forth information with regard to option exercises
during the fiscal year ended December 31, 1998.
AGGREGATED OPTION EXERCISES IN 1998
AND OPTION VALUES AT DECEMBER 31, 1998
<TABLE>
<CAPTION>
Number of Securities
Underlying Value of Unexercised
Unexercised Options at In-the-Money Options at
December 31, 1998 (#) December 31, 1998 ($) (1)
Shares Acquired Value ----------------------------- ----------------------------
Name on Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ----------------------------- ----------------- ------------- ------------- --------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Ernest C. Roessler 5,092 168,014 42,964 38,528 1,151,422 164,965
William L. Abercrombie, Jr. 4,000 181,653 81,878 13,360 3,460,055 13,777
David B. Jordan -- -- 8,134 24,106 229,273 295,806
J. Scott Edwards -- -- 20,527 16,247 573,148 77,608
Richard L. Furr -- -- 23,272 16,580 674,808 78,972
</TABLE>
- ---------
(1) Closing price of the Corporation's Common Stock at December 31, 1998 was
$57.00.
The following table sets forth information with regard to Units granted
during 1998. All Units were granted under the LTIP. Each Unit has a designated
value of $100 and will vest only if the Corporation meets or exceeds a
specified average return on equity, return on assets, and total shareholder
return as compared to a peer group of comparably sized banks east of the
Mississippi River over a three-year period beginning January 1, 1998, and
ending December 31, 2000.
LONG-TERM INCENTIVE PLAN -- AWARDS IN 1998
<TABLE>
<CAPTION>
Estimated Future
Performance Payouts Under
or Other Non-Stock Price-Based
Period Plans
Number of Shares Until --------------------
Units or Other Maturation or Target Maximum
Name Rights (#) Payout ($) ($)
- ------------------------------- ------------------ -------------- --------- ----------
<S> <C> <C> <C> <C>
Ernest C. Roessler 1,560 1998-2000 156,000 312,000
William L. Abercrombie, Jr. 720 1998-2000 72,000 144,000
David B. Jordan 550(1) 1998-2000 55,000 110,000
J. Scott Edwards 650 1998-2000 65,000 130,000
Richard L. Furr 680 1998-2000 68,000 136,000
</TABLE>
- ---------
(1) Effective January 29, 1999, such units were relinquished and were no longer
outstanding.
11
<PAGE>
Pension Plan
The Corporation maintains a tax-qualified, defined benefit pension plan
(the "Pension Plan"), in which substantially all full-time employees of the
Corporation and its subsidiaries who have been continuously employed for a
period of twelve months participate. Compensation covered by the Pension Plan
each year is a participant's annual base salary and short term bonus. At his or
her retirement, a participant's annual benefit under the Pension Plan is based
on his or her average covered compensation for any five consecutive plan years
during the last ten years preceding normal retirement age ("Final Average
Compensation"). However, under tax laws in effect at December 31, 1998, the
amount of a participant's annual compensation taken into account for benefit
calculation purposes under the Pension Plan may not exceed $160,000, and
maximum annual benefits payable under the Pension Plan are $130,000. The
Corporation has therefore adopted a supplemental retirement plan (the
"Supplemental Plan") which operates in conjunction with the Pension Plan and
under which a retiree will receive annual benefits in an amount equal to the
difference, if any, between his actual benefit under the Pension Plan and the
amount he would receive under the Pension Plan in the absence of the above
limitations. The following table shows the estimated annual aggregate benefit
payable under the Pension Plan and the Supplemental Plan to participants
following retirement at age 65, which is the "normal retirement age" under the
Pension Plan, based on various specified numbers of years of service with the
Corporation and its subsidiaries and various levels of compensation covered
under the Pension Plan:
<TABLE>
<CAPTION>
Years of Service
Final ---------------------------------------------------------------------------
Average Compensation 10 Years 15 Years 20 Years 25 Years 30 Years 35 Years 40 Years
- ---------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
$100,000............ 12,000 18,000 24,000 30,000 36,000 42,000 48,000
150,000............ 18,000 27,000 36,000 45,000 54,000 63,000 72,000
200,000............ 24,000 36,000 48,000 60,000 72,000 84,000 96,000
250,000............ 30,000 45,000 60,000 75,000 90,000 105,000 120,000
300,000............ 36,000 54,000 72,000 90,000 108,000 126,000 144,000
350,000............ 42,000 63,000 84,000 105,000 126,000 147,000 168,000
400,000............ 48,000 72,000 96,000 120,000 144,000 168,000 192,000
450,000............ 54,000 81,000 108,000 135,000 162,000 189,000 216,000
500,000............ 60,000 90,000 120,000 150,000 180,000 210,000 240,000
550,000............ 66,000 99,000 132,000 165,000 198,000 231,000 264,000
600,000............ 72,000 108,000 144,000 180,000 216,000 252,000 288,000
</TABLE>
- ---------
Benefits shown in the table are computed as straight life annuities
beginning at age 65 and are not subject to a deduction for Social Security
benefits or any other offset amount. As of December 31, 1998, the Final Average
Compensation and years of service of each of the Named Executive Officers would
have been: Mr. Roessler -- $569,338 and 10 years; Mr. Abercrombie -- $415,295
and 25 years; Mr. Jordan -- $278,180 and 39 years; Mr. Edwards -- $324,081 and
30 years; and Mr. Furr -- $329,992 and 27 years.
Change in Control and Employment Arrangements
In 1998 the Corporation and Bank entered into Employment and Amended and
Restated Change in Control Agreements (collectively referred to as "Executive
Employment Agreements"), with Messrs. Roessler ("Roessler Employment
Agreement"), Edwards ("Edwards Employment Agreement"), and Furr ("Furr
Employment Agreement") as senior executive officers of the Corporation and Bank
(individually, Messrs. Roessler, Edwards, and Furr, herein called the
"Executive"). The Roessler Agreement provides that Mr. Roessler will be
employed as the President and Chief Executive Officer of the Corporation and
the Bank. The Board of Directors of the Corporation shall nominate and use its
best efforts to secure the election of Mr. Roessler as a director of the
Corporation during the term of the Roessler Employment Agreement. The Boards of
Directors of the Corporation and Bank shall cause the outstanding shares of the
direct and indirect subsidiaries of the Corporation and Bank to elect Mr.
Roessler as a member of the Boards of Directors of such subsidiaries as will be
useful to Mr. Roessler in the performance of his duties. At all times as Mr.
Roessler serves as a director of the Corporation and Bank, he shall be
appointed to the Executive Committees of those Boards of Directors. The
Roessler Employment Agreement has a five-year term, beginning on its Effective
Date in 1998 (as defined within the Roessler Employment Agreement), and will
automatically, without further action by the Board of Directors of the
Corporation or Bank, be extended for an additional one year period on each
anniversary of its Effective Date, provided that either party may cause the
term of the Roessler Employment Agreement to cease to extend automatically. Mr.
Roessler will receive cash compensation consisting of a base salary of at least
$521,000 per year and will be entitled to participate in all incentive,
savings, retirement and welfare plans, practices, policies and programs
applicable generally to senior executive employees of the Corporation or Bank.
12
<PAGE>
The Edwards Employment Agreement provides that Mr. Edwards will be
employed as the executive officer in charge of the Administrative Group of each
of the Corporation and Bank. In his executive capacities, Mr. Edwards shall
report to the President and Chief Executive Officer of the Corporation and
Bank, as applicable. The Edwards Employment Agreement has a three-year term,
beginning on its Effective Date in 1998 (as defined within the Edwards
Employment Agreement), and will automatically, without further action by the
Board of Directors of the Corporation or Bank, be extended for an additional
one year period on each anniversary of the Effective Date provided that either
party may cause the term of the Edwards Employment Agreement to cease to extend
automatically. Mr. Edwards will receive cash compensation consisting of a base
salary of at least $290,000 per year and will be entitled to participate in all
incentive, savings, retirement and welfare plans, practices, policies and
programs applicable generally to senior executive officers of the Corporation
or Bank.
The Furr Employment Agreement provides that Mr. Furr will be employed as
the executive officer in charge of the Banking Group of each of the Corporation
and Bank. In his executive capacities, Mr. Furr shall report to the President
and Chief Executive Officer of the Corporation and Bank, as applicable. The
Furr Employment Agreement has a three-year term, beginning on its Effective
Date in 1998 (as defined within the Furr Employment Agreement), and will
automatically, without further action by the Board of Directors of the
Corporation or Bank, be extended for an additional one year period on each
anniversary of its Effective Date provided that either party may cause the term
of the Furr Employment Agreement to cease to extend automatically. Mr. Furr
will receive cash compensation consisting of a Base Salary of at least $301,650
per year and will be entitled to participate in all incentive, savings,
retirement and welfare plans, practices, policies and programs applicable
generally to senior executive officers of the Corporation or Bank.
Each Executive Employment Agreement provides, among other benefits to the
Executive, that the Corporation and Bank shall maintain a split-dollar life
insurance agreement ("Split Dollar Agreement") with the Executive, and together
with the Executive, maintain a related life insurance policy to be owned by the
Executive and collaterally assigned to the Corporation and/or the Bank
("Insurance Policy"), providing coverage on the life of the Executive for the
benefit of the Executive's estate, beneficiaries designated by him, and/or
trusts created by him. Each Executive Employment Agreement also provides that
the Compensation Committee of the Board of Directors of the Corporation shall
annually review the Executive's total compensation and in its sole discretion
may adjust the Executive's Base Salary from year to year, but during the term
of the Executive Employment Agreement ("Employment Period") neither the
Compensation Committee nor the Board of Directors of the Corporation or the
Bank may decrease the Executive's Base Salary below the amount stated within
the Executive Employment Agreement, and periodic increases, once granted, shall
not be subject to revocation.
If during the Employment Period the Corporation or Bank terminates an
Executive Employment Agreement other than for Cause or Disability or the
Executive terminates it for Good Reason (each as defined therein), in any of
the foregoing cases within one year after a Change in Control ("Change in
Control Termination"), the Executive shall be entitled to receive, among other
things and in addition to compensatory amounts owed to him for the current
fiscal year, an amount equal to 2.99 times the total of the Executive's Base
Salary and aggregate cash bonus for the last completed fiscal year. Moreover,
under certain circumstances in connection with a Change in Control Termination,
as provided within the Executive Employment Agreements, the Corporation shall
immediately grant a vested and nonforfeitable award under the Long Term
Incentive Plan ("LTIP") of the same type and the same quantitative amount as
awarded to the Executive under the LTIP for the previous fiscal year, and/or an
award under the Executive Management Incentive Program of the same type and in
the same quantitative amount as awarded in the previous fiscal year. All
options previously granted to each Executive that are unvested as of the date
of the Change in Control Termination shall be deemed vested, fully exercisable
and nonforfeitable as of that date, subject to certain exceptions provided
within the Executive Employment Agreements, and Executive benefits under all
nonqualified benefit plans shall be 100% vested. Following a Change in Control
Termination, the Corporation and the Bank shall maintain and continue to pay,
during the term remaining in the Employment Period from and after the date of
the Change in Control Termination, all premiums due under the Split Dollar
Agreement and the Insurance Policy; provided, however, that upon or at any time
prior to the expiration of the Continuing Period, the Executive may exercise
his right under his Executive Employment Agreement to terminate the Split
Dollar Agreement and the Insurance Policy.
During the Executive's Employment Period and the remainder of his
Employment Period after termination of his Executive Employment Agreement, each
Executive has agreed to refrain, with certain exceptions provided, within the
States of South Carolina and North Carolina, directly or indirectly in any
capacity from rendering his services or engaging or having a financial interest
in, any business that shall be competitive with any of those business
activities in which the Corporation or its subsidiaries are engaged as of the
date of termination of his employment. Each Executive has also agreed to
refrain from soliciting the provision of services included in the business
activities of the Corporation or its subsidiaries to certain
13
<PAGE>
customers or potential customers of the Corporation or its subsidiaries. The
obligations of the Corporation and Bank under the Executive Employment
Agreements are subject to certain regulatory intervention as outlined within
the Executive Employment Agreements.
In connection with its acquisition of Security Capital in May 1995 the
Corporation assumed all rights and obligations of Security Capital. These
rights and obligations include an employment agreement (the "Jordan Agreement")
with David B. Jordan providing for Mr. Jordan to serve as Vice Chairman of the
Corporation and the Bank, to be elected to the Board of Directors of both the
Corporation and the Bank and to be recommended for re-election to the Board on
an annual basis until March 15, 2001. On such date, the Jordan Agreement
terminates. The Jordan Agreement requires a base compensation equal to his
total annualized base salary from Security Capital and its subsidiaries in
effect immediately prior to the acquisition as well as participation in all
fringe benefit plans for key employees of the Corporation presently in effect
or that may be made available in the future. However, under the terms of the
Jordan Agreement, Mr. Jordan elected, effective July 1, 1997, to reduce his
duties and responsibilities. As a result thereof, effective July 1, 1998, Mr.
Jordan's salary was reduced, and his participation in certain key employee
incentive plans was terminated. In any event, the Jordan Agreement provides for
the payment of an amount equal to 299% of Mr. Jordan's then applicable base
salary upon certain events occurring after a change of control of the
Corporation defined as: a merger after which shareholders of the Corporation's
voting securities outstanding immediately prior to such event receive or retain
less than 50% of the voting securities of the survivor by merger; any person
acquires more than 20% of the Corporation; 50% of the Bank's securities is
owned by a person or entity other than the Corporation; or the sale of more
than 50% of the assets of either the Corporation or the Bank.
The Corporation acquired AFB in 1997, and in connection with that
acquisition, entered into an employment agreement (the "CCB Abercrombie
Agreement") with Mr. Abercrombie, the Chief Executive Officer of AFB. The CCB
Abercrombie Agreement provides that Mr. Abercrombie will be employed as Vice
Chairman of the Board of Directors of the Corporation and President and Chief
Executive Officer of the Corporation's principal banking subsidiary located in
South Carolina. The Board of Directors shall nominate and use its best efforts
to secure the election of Mr. Abercrombie as a director of the Corporation
during the term of the CCB Abercrombie Agreement and if Mr. Abercrombie is
elected, he shall serve as a member of the Executive Committee of the Board of
Directors. The CCB Abercrombie Agreement has a five-year term, beginning on its
Effective Date (as defined therein), and will automatically, without further
action by the Board of Directors, be extended for an additional one-year period
on each anniversary of the Effective Date, provided that either party may cause
the term of the CCB Abercrombie Agreement to cease to extend automatically. Mr.
Abercrombie will receive cash compensation consisting of a base salary of
$300,000 per year and will be entitled to participate in all incentive,
savings, retirement and welfare plans, practices, policies and programs
applicable generally to senior executive officers of the Corporation on the
same basis as such other senior executive officers, with full credit given to
Mr. Abercrombie's total accumulated years of service at AFB for purposes of
determining vesting and eligibility. The Corporation shall also, if requested
by Mr. Abercrombie, assume and maintain on behalf of Mr. Abercrombie that
certain Supplemental Retirement Benefit Agreement, dated as of December 19,
1994, between Mr. Abercrombie and AFB. In addition to any bonus earned by Mr.
Abercrombie pursuant to the Corporation's regular incentive plans, the
Corporation shall pay to Mr. Abercrombie a monthly bonus for each of the 24
months immediately following the Effective Date in the amount of $24,300.
The CCB Abercrombie Agreement provides that either Mr. Abercrombie or the
Corporation may terminate his employment in consideration of various payments
by the Corporation based upon certain circumstances. In addition, during the
six-month period immediately following the second anniversary of the CCB
Abercrombie Agreement's effect, either Mr. Abercrombie or the Corporation may
terminate Mr. Abercrombie's employment. In such event, Mr. Abercrombie will
continue to receive payments from the Corporation calculated on the basis of
the remaining period of the CCB Abercrombie Agreement ("Employment Period"),
but not to exceed three years. During his Employment Period and the remainder
of his Employment Period after termination of Mr. Abercrombie's employment, Mr.
Abercrombie has agreed to refrain, with certain exceptions provided, within the
States of South Carolina and North Carolina, directly or indirectly, in any
capacity, from rendering his services or engaging or having a financial
interest in, any business that shall be competitive with any of those business
activities in which the Corporation or its subsidiaries are engaged as of the
date of termination of Mr. Abercrombie's employment. Mr. Abercrombie has also
agreed to refrain from soliciting the provision of services included in the
business activities of the Corporation or its subsidiaries to certain customers
or potential customers of the Corporation or its subsidiaries.
Contemporaneously with the execution of the CCB Abercrombie Agreement,
AFB, as a subsidiary of the Corporation, also entered into an employment
agreement with Mr. Abercrombie ("AFB Abercrombie Agreement"). The AFB
Abercrombie Agreement provides that Mr. Abercrombie will continue to serve as
President and Chief Executive Officer of AFB during the term of the AFB
Abercrombie Agreement. The term of the AFB Abercrombie Agreement will run
concurrently with
14
<PAGE>
the term of the CCB Abercrombie Agreement, unless earlier terminated as
provided in the CCB Abercrombie Agreement, or by the Board of Directors of AFB.
Mr. Abercrombie's compensation under the AFB Abercrombie Agreement is provided
by the Corporation in accordance with the terms of the CCB Abercrombie
Agreement.
Finally, under the provisions of the LTIP, if a change in control of the
Corporation occurs (a) all stock options granted thereunder then unexercised
and outstanding will become fully exercisable, (b) all restrictions applicable
to all shares of restricted stock granted thereunder then outstanding will be
deemed lapsed and satisfied, and (c) all performance units granted thereunder
will be deemed to have been fully earned as of the date thereof subject to the
limitation that such stock options, shares of restricted stock, and performance
units have been granted and outstanding for more than six months as of the date
of such change in control. If (a) a participant's employment is terminated by
the Corporation or any of its subsidiary corporations prior to a change in
control without cause at the request of a person who has entered into an
agreement with the Corporation the consummation of which will constitute a
change in control or (b) the participant terminates his or her employment with
the Corporation or any of its subsidiary corporations prior to a change in
control of the Corporation and the circumstance or event which causes such
termination occurs at the request of such person, then a change in control will
be deemed to have occurred immediately prior to such participant's termination
of employment. If the making of any payment or payments under the LTIP would
(a) subject the participant to an excise tax under Section 4999 of the Code, or
any like or successor section thereto or (b) result in the Corporation's loss
of a deduction from federal taxable income for such payments under Section 280G
of the Code, or any like or successor section thereto (either or both, an
"Adverse Tax Consequence"), then, unless otherwise expressly provided in the
underlying award agreement, the payments attributable to the LTIP that are
"parachute payments" within the meaning of Section 280G of the Code will be
reduced, as determined by the Compensation Committee in its sole discretion,
but after consultation with the participant affected, to the extent necessary
to avoid any Adverse Tax Consequence.
15
<PAGE>
Performance Graph
The following line graph illustrates the cumulative total shareholder
return on the Corporation's Common Stock over the five-year period ended
December 31, 1998 and the cumulative total return over the same period of: (a)
three broad equity market indices: (i) the Standard and Poor's 500 Composite
Index; (ii) the Standard and Poor's MidCap 400 Composite Index; and (iii) the
Dow Jones Industrial Index; and (b) a published industry index, the SNL Banks
(Southeast) Index. Beginning with the Corporation's 2000 Proxy Statement, the
Corporation's Performance Graph will utilize the Standard and Poor's MidCap 400
Composite Index in lieu of the Dow Jones Industrial Index since the Corporation
has become a member of the MidCap 400 Composite Index. The graph assumes $100
originally invested on December 31, 1993 and that all subsequent dividends were
reinvested in additional shares.
<TABLE>
<CAPTION>
CCB Financial Corporation
Comparison of Cumulative Total Shareholder Return
Years Ended December 31 (1)
[GRAPH APPEARS HERE]
PERIOD ENDING
INDEX 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
<S> <C> <C> <C> <C> <C> <C>
CCB Financial Corporation 100.0 108.2 178.6 226.1 364.4 393.7
S&P 500 100.0 101.3 139.3 171.2 228.4 293.6
SNL Southeast Bank Index 100.0 100.2 150.3 206.3 312.7 332.9
S&P MidCap 400 100.0 96.4 126.3 150.4 198.8 236.8
Dow Jones Industrials 100.0 105.0 143.8 185.1 231.3 273.3
</TABLE>
(1) Closing price of the Corporation's Common Stock adjusted for the 100% stock
dividend paid October 1, 1998:
December 31, 1993 - $16.63
December 31, 1994 - $17.38
December 31, 1995 - $27.75
December 31, 1996 - $34.13
December 31, 1997 - $53.75
December 31, 1998 - $57.00
16
<PAGE>
Transactions with Management
The Bank, AFB and the Corporation's other financial institution subsidiary
have had, and expect to have in the future, lending transactions in the
ordinary course of business with many of their officers and directors and with
associates of such persons. All loans included in such transactions during 1998
were made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other persons, and did not involve more than the normal risk of collectibility
or present other unfavorable features.
Section 16(a) Beneficial Ownership Reporting Compliance
Directors, executive officers, and certain principal shareholders of the
Corporation are required by federal law to file reports with the Securities and
Exchange Commission regarding the amount of and changes in their beneficial
ownership of Common Stock. To the Corporation's knowledge, all Section 16(a)
filing requirements applicable to the Corporation's officers and directors were
complied with during 1998.
PROPOSAL 2. RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" PROPOSAL 2.
The firm of KPMG LLP, certified public accountants, has been appointed by
the Board of Directors to serve as the Corporation's independent accountants
for 1999, and a proposal to ratify that appointment will be introduced at the
Annual Meeting. KPMG LLP has served as independent accountants for the
Corporation since its organization as the parent holding company of the Bank
during 1983, and previously had served as independent accountants for the Bank
since 1975. If shareholders do not approve this proposal, the Board of
Directors will reconsider the appointment.
Representatives of KPMG LLP are expected to be present at the Annual
Meeting and available to respond to appropriate questions, and will have an
opportunity to make a statement if they so desire.
PROPOSALS OF SHAREHOLDERS
It currently is expected that the 2000 Annual Meeting will be held during
April 2000. Any proposal of a shareholder which is intended to be presented at
the 2000 Annual Meeting must be received by the Corporation at its principal
executive office in Durham, North Carolina, not later than November 16, 1999 in
order to be included in the Corporation's proxy statement and form of
appointment of proxy to be issued in connection with that meeting.
Any other proposal not intended to be included in the proxy statement and
appointment of proxy for the 2000 Annual Meeting, but intended to be presented
at that meeting must be received by the Corporation in writing at its principal
executive office in Durham, North Carolina no later than February 1, 2000.
March 18, 1999
17
<PAGE>
[MAP APPEARS HERE]
* LIMITED COMPLIMENTARY PARKING AVAILABLE
AT THE RAMS HEAD LOT, STADIUM DRIVE AT
RIDGE ROAD. ADDITIONAL PARKING WITH
SHUTTLE SERVICE AVAILABLE AT THE UNC
VISITORS LOT ON HIGHWAY 54 NEAR COUNTRY
CLUB ROAD.
Directions and Parking Information for the
Carolina Club George Watts Hill Alumni Center
FROM I-40
Take Exit 273B (Dean Smith Center) toward Chapel Hill and UNC. You will be on
Highway 54 (also called South Road). Turn left onto Stadium Drive at the Bell
Tower. Pass Kenan Stadium on the right, then pass the George Watts Hill Alumni
Center on the right. Guests may be dropped off at the main entrance on Stadium
Drive. Veer right around the Alumni Center to the Rams Head Parking Lot.
FROM CHAPEL HILL 15-501 BY-PASS
Turn onto Manning Drive toward campus and the Dean Smith Center. At the first
stoplight, take a right onto Ridge Road (there is no sign for Ridge Road).
After passing the athletic field on your right, the Rams Head parking lot will
be on your left.
Additional parking with shuttle service available at the UNC visitors lot
on Highway 54 near Country Club Road.
<PAGE>
CCB
FINANCIAL
CORPORATION
111 Corcoran Street, Post Office Box 931
Durham, North Carolina 27702-0931
- ----------------------------------------
APPOINTMENT
OF
PROXY
THIS APPOINTMENT OF PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The
undersigned hereby appoints Leo P. Plypec, W. Harold Parker, Jr., and Manuel L.
Rojas, and each of them, as attorneys and proxies, each with full power to
appoint his substitute, and hereby authorizes them to represent and to vote as
directed below all the shares of common stock of CCB Financial Corporation (the
"Corporation") held of record by the undersigned on February 26, 1999 at the
Annual Meeting of Shareholders of the Corporation to be held on April 27, 1999
and any adjournments thereof. The undersigned hereby directs that such shares be
voted as follows:
1. ELECTION OF DIRECTORS: [ ]FOR [ ] WITHHOLD [ ] FOR ALL EXCEPT
NOMINEES: THREE-YEAR TERM; Timothy B. Burnett, Blake P. Garrett, Jr., Owen G.
Kenan, Bonnie McElveen-Hunter, George J. Morrow, Ernest C. Roessler, H. Allen
Tate, Jr.
INSTRUCTION: To withhold authority to vote for any individual nominee mark "For
All Except" and write that nominee's name in the space provided below.
<PAGE>
2. RATIFICATION OF THE APPOINTMENT OF KPMG
LLP AS THE CORPORATION'S
INDEPENDENT ACCOUNTANTS FOR 1999: [ ]FOR [ ]AGAINST [ ]ABSTAIN
3. OTHER BUSINESS: On such other matters as may properly come before the Annual
Meeting, the proxies are authorized to vote the shares represented by this
appointment of proxy in accordance with their best judgment.
The shares represented by this appointment of proxy will be voted as directed
above. In the absence of any direction, such shares will be voted by the proxies
"FOR" the election of each of the nominees for director as listed in Proposal 1
by casting an equal number of votes for each such nominee and "FOR" Proposal 2
above. If, at or before the time of the meeting, any nominee listed in Proposal
1 becomes unavailable for any reason, the proxies are authorized to vote for a
substitute nominee.
Please sign exactly as your name(s) appears on this card. If shares are held by
joint tenants, both should sign. If signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
Date________________________,1999
_________________________________
Shareholder sign above
_________________________________
Co-holder (if any) sign above
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
