<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a Party other than the Registrant /X/
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 Section240.14a-11(c) or
Section240.14a-12
CNB, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
CNB, Inc.
201 North Marion Street
Lake City, Florida 32055
March 27, 1998
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
CNB, Inc. ("CNB") to be held on Wednesday, April 15, 1998, commencing at 10:00
A.M. Eastern Standard Time at the Lake City Country Club which is located on
Service Road, off US 90 West by I-75, Lake City, Florida. A formal Notice
setting forth the business to come before the meeting and a Proxy Statement are
attached. The purpose of the meeting is to consider and vote upon the Proposals
explained in the Notice and the Proxy Statement.
It is important that your shares be represented at the Annual Meeting
whether or not you plan to attend the Annual Meeting in person. The Board of
Directors requests that you carefully review these materials before completing,
signing and dating the enclosed proxy and returning it in the postage paid
envelope provided for your use. If you later decide to attend the Annual Meeting
and vote in person, or if you wish to revoke your proxy for any reason prior to
the vote at the Annual Meeting, you may do so and your proxy will have no
further effect.
Also note, the Company has elected to pay the 1998 Florida Intangible Tax
as agent for its stockholders.
Sincerely,
K.C. Trowell
Chairman
<PAGE>
CNB, Inc.
Notice of Annual Meeting of Shareholders
To Be Held On April 15, 1998
To the Holders of Common Stock:
Notice is hereby given that the Annual Meeting of Shareholders of CNB, Inc. (the
"Company" or "CNB") will be held on Wednesday, April 15, 1998 at 10.00 A.M. at
the Lake City Country Club which is located on Service Road, off US 90 West by
I-75, Lake City, Florida to consider and act upon the following matters:
1. Election of six directors of the Company, each for a one year term;
2. Approval of the Company's Performance-Based Incentive Plan; and
3. Such other business as may properly come before the Annual Meeting or
any adjournments thereof.
Only shareholders of record of the Company's Common Stock at the close of
business on March 27, 1998, are entitled to receive notice of, and to vote on,
all business that may come before the Annual Meeting.
Whether or not you plan to attend the meeting, please complete, sign and date
the enclosed proxy and return it promptly to the Company in the postage paid
envelope provided for your use. You may revoke the proxy at any time before it
is exercised by following the instructions set forth on the first page of the
accompanying Proxy Statement.
By Order of the Board of Directors:
Joyce Bruner
Corporate Secretary
Dated: March 27, 1998
<PAGE>
PROXY STATEMENT
Annual Meeting of Shareholders
CNB, INC
P.O. Box 3239
Lake City, Florida 32056
General
This Proxy Statement is being furnished to holders of CNB , Inc. (the
"Company" or "CNB") Common Stock in connection with the solicitation of
proxies by the Board of Directors of CNB for use at the Annual Meeting of
Shareholders. The Annual Meeting of Shareholders will be held on Wednesday,
April 15, 1998, commencing at 10:00 A.M. Eastern Standard Time at the Lake
City Country Club which is located on Service Road, off US 90 West by I-75,
Lake City, Florida.
This Proxy Statement and the attached Notice and Form of Proxy are first
being mailed to holders of CNB Common Stock on or about Friday, March 27,
1998.
The mailing address of the principal office of the Company is CNB, Inc.,
P.O. Box 3239, Lake City, Florida 32056.
Voting of Proxies
Shares represented by proxies properly signed and returned, unless
subsequently revoked, will be voted at the Annual Meeting of Shareholders
in accordance with the instructions thereon. If a proxy is signed and
returned without indicating any voting instructions, the shares represented
by the proxy will be voted FOR approval on the proposals stated in this
Proxy Statement and in the discretion of the holders of the proxies on
other matters that may properly come before the Annual Meeting of
Shareholders.
Any holder of CNB Common Stock who has executed and delivered a proxy may
revoke such proxy at any time before it is voted by attending the Annual
Meeting of Shareholders and voting in person, by giving written notice of
revocation of the proxy or by submitting a signed proxy bearing a later
date. Such notice of revocation or later proxy should be sent to the
attention of Joyce Bruner, Corporate Secretary, CNB, Inc., P.O. Box 3239,
Lake City, Florida 32056. In order for the notice of revocation or later
proxy to revoke the prior proxy, such notice or later proxy must be
received by CNB prior to the vote of shareholders at the Annual Meeting of
Shareholders. Attendance at the Annual Meeting of Shareholders will not in
itself revoke a proxy.
Voting Procedures
The Company's Second Amended and Restated By-laws provide that a majority
of shares entitled to vote and represented in person or by proxy at a
meeting of the shareholders constitutes a quorum. Under the Florida
Business Corporation Act (the "Act"), directors are elected by a plurality
of the votes cast by the shares entitled to vote in the election at a
meeting at which a quorum is present. Other matters are approved if
affirmative votes cast by the holders of the shares represented at a
meeting at which a quorum is present and entitled to vote on the subject
matter exceed votes opposing the action, unless a greater number of
affirmative votes or voting by classes is required by the Act or the
Company's Amended and Restated Articles of Incorporation. Therefore, except
under those limited circumstances, abstentions and broker non-votes have no
effect under Florida law.
Voting Securities and Principal Holders
The Board of Directors of CNB has fixed the close of business on March 27,
1998, as the CNB Record Date for the determination of holders of CNB Common
Stock entitled to receive notice of and to vote at the Annual Meeting of
Shareholders. At the close of business on March 27, 1998, there were issued
and outstanding 2,428,385 shares of CNB Common Stock entitled to vote at
the Annual Meeting of Shareholders held by 540 shareholders of record.
Holders of CNB Common Stock outstanding on March 27, 1998 are entitled to
one vote for each share held of record upon each matter properly submitted
to CNB shareholders at the Annual Meeting of Shareholders.
<PAGE>
PROPOSAL 1: Election of Directors.
The Directors nominated for election at the 1998 Annual Meeting of Shareholders
are Thomas R. Andrews, Audrey S. Bullard, Raymon Land, Sr., Marvin H. Pritchett,
William Streicher and K.C. Trowell. In order to be elected, each nominee must
receive a plurality of the votes cast, which shall be counted as described in
Voting Procedures on page 1. The accompanying proxy, unless otherwise specified,
will be voted FOR the election of the persons named above. If any nominee should
become unavailable, which is not now anticipated, the persons voting the
accompanying proxy may, in their discretion, vote for a substitute.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" THE ELECTION
OF EACH OF THE NOMINEES.
The following table sets forth certain information with respect to the nominees
for director. Members of the Board of Directors will serve until the next annual
meeting of shareholders, and thereafter until their respective successors are
elected and qualified. Except as otherwise indicated, each person has been or
was engaged in his present or last principal occupation, in the same or a
similar position, for more than five years. Executive officers are elected by
the Board of Directors at their first meeting following the annual meeting of
the shareholders.
<TABLE>
<CAPTION>
Name Age Positions Held and Principal Occupations During the Past Five Years
- ---- --- -------------------------------------------------------------------
<S> <C> <C>
Thomas R. Andrews 52 Mr. Andrews was elected to the Board of Directors of
the Company in March 1994 and serves on the
Compensation Committee. Mr. Andrews previously served
as Chairman of the Board of Directors for the former
Bradford Bankshares, Inc. He is the owner of Belco
Enterprises, a commercial real estate company. Mr.
Andrews is a member of the Children's Home Society
Foundation of Florida.
Audrey S. Bullard 55 Ms. Bullard was elected to the Board of Directors of
the Company in 1987 and serves on the Executive,
Compensation, Investment and Marketing Committees.
Ms. Bullard is a long-time resident of Lake City and
is a native of the North Central Florida area. A
practicing certified public accountant, Ms. Bullard
is an officer and part owner of Bullard Development
Co. and A & R of Lake City, as well as several
partnerships and land development firms. Ms. Bullard
has been active in numerous civic and service
organizations, including the Chamber of Commerce, the
Lake Shore Hospital, the Advent Christian Advisory
Board, the Columbia County Public School Foundation,
the Lake City/Columbia County Beautification Board,
the North Florida Advisory Council and the SantaFe
Health Care, Inc. Board.
Raymon Land, Sr. 58 Mr. Land was elected to the Board of Directors of the
Bank in August 1988 and serves on the Marketing
Committee. He has served in the past as President of
the National Watermelon Association. He has been in the
watermelon producing business for 36 years. Mr. Land is
also presently President of Land Truck Brokers, Inc.,
and serves as a Director of Melon Pac, Inc. In
addition, Mr. Land serves on various committees in an
advisory capacity which serve as liaison between the
Department of Agriculture and the produce industry. Mr.
Land is also a member of several horse associations and
is a real estate salesman for Land Brokerage Realty.
Marvin H. Pritchett 64 Mr. Pritchett was elected to the Board of Directors of
the Company in 1988 and serves on the Executive and
Compensation Committees. Mr. Pritchett resides in Lake
Butler, Florida, where he is a self-employed business
owner and investor. Since 1981, he has owned Pritchett
Trucking, Inc., a trucking and hauling firm, of which
he also serves as CEO, and Pritchett, Inc., a timber
firm. He is also in the
2
<PAGE>
business of hauling and selling rock materials through
his companies, Bulldog Truck Lines, Inc., and GP
Materials, Inc., and is owner of the MH Pritchett Farm
in Lake Butler, a cattle operation. Mr. Pritchett is
CEO of Pritchett Investment Group which owns Mack Truck
dealerships in Jacksonville, Tampa and Orlando,
Florida.
William Streicher 62 Mr. Streicher was elected to the Board of Directors of
the Company in 1990 and serves on the Audit,
Compensation and Investment Committees. He owns and
operates several McDonald's restaurant franchises in
the Company's Primary Service Area and also has served
on the board of Ronald McDonald House Charities at
Shands Hospital in Gainesville, Florida for over 10
years. He attended Morningside College in Sioux City,
Iowa. He is past chairman and a past board member of
the Lake City Community College Foundation, a past
member of the Lake City Rotary Club, past Vice
President of McDonald's owner/operator Advertising
Co-Operative and a past representative to the
Advertising Advisory Board of the State of Florida.
K. C. Trowell 59 Mr. Trowell, Chairman, President and Chief Executive
Officer of the Company and the Bank was elected to the
Board of Directors in 1987 and serves as Chairman of
the Executive Committee. Mr. Trowell also serves on the
Investment, Marketing and Compensation Committees.
Although Mr. Trowell serves on the Compensation
Committee, he abstains from voting on decisions which
involve his own compensation. He has served as the
Chairman and Chief Executive Officer of the Company
since its inception in 1987. Mr. Trowell is a Lake
City, Florida, native and has been actively involved in
commercial banking management in North Florida for over
twenty-five years. He has also held management
positions with NationsBank of Lake City (and its
predecessors), American Bank of Jacksonville, and
Barnett Banks, Inc. He is former Chairman of the Board
of Trustees of Florida Bankers Insurance Trust. He is a
past director of Community Bankers of Florida, past
director of the Columbia County Committee of 100, past
director of North Central Florida Areawide Development
Company, and a former board member and chairman of both
Lake City Medical Center and Columbia County Industrial
Development Authority.
</TABLE>
The following persons served as directors of the Company during 1997. They will
not stand for re-election as directors in 1998 and will not serve as such after
the Annual Meeting of Shareholders.
<TABLE>
<CAPTION>
<S> <C> <C>
C. Lavoye Boggus 65 Mr. Boggus was elected to the Board of Directors of the
Company in 1988 and serves on the Executive,
Compensation and Marketing Committees. Mr. Boggus is a
businessman in Live Oak, Florida, and former long-time
director of First Commercial Bank of Live Oak
(currently NationsBank). Mr. Boggus served in the
United States Navy, is a graduate of Bradley
University, and is President of Live Oak Jewelry. In
addition, Mr. Boggus is a former member of the Suwannee
County Chamber of Commerce.
Seymour Chotiner 74 Mr. Chotiner was elected to the Board of Directors of
the Company in 1988 and serves on the Audit, Investment
and Marketing Committees. Mr. Chotiner is a long-time
resident of Live Oak, Florida, and is presently an
inactive licensed real estate broker and a state
certified general appraiser . Mr. Chotiner is a
graduate of St. John's University Law School and is
presently an inactive member of the New
3
<PAGE>
York and an active member of the Florida Bar
Associations. As well as being a self- employed real
estate broker and appraiser, Mr. Chotiner has served as
an appointed member of the Governing Board for Suwannee
River Water Management District, a member of the
Steering Committee for the Suwannee County Museum
Commission.
Roy C. Dicks 84 Mr. Dicks was elected to the Board of Directors of the
Company in 1987 and serves on the Marketing Committee.
Mr. Dicks is a retired businessman who owned and
operated a trucking and harvesting business in south
Florida for forty-three years. Mr. Dicks has formerly
worked as a tree farmer and a rancher, and also owned
and operated Big D Truck Stop in Lake City, Florida,
from 1965 to 1981. In addition, he was a principal
shareholder in Columbia County Speedway, a local
automobile racetrack, from 1974 to 1980.
Helen B. Real 71 Ms. Real was elected to the Board of Directors of the
Company in 1988 and serves on the Audit and Marketing
Committees. Ms. Real resides in Lake City, Florida. She
is retired, but formerly was President and part owner
of Interstate Supply Co., an electrical supply
business.
Paul M. Riherd 70 Mr. Riherd was elected to the Board of Directors of the
Company in October 1996. Mr. Riherd served as President
of the former Farmers and Dealers Bank from 1964
through 1993. He is a charter member of Lake Butler
Rotary Club and has been a director of Independent
Bankers' Bank of Florida. He has also served as a past
director for the North Central Florida Regional
Planning Council and the Suwannee River Economic
Council.
A. Leonard Schlofman 45 Dr. Schlofman was elected to the Board of Directors of
the Company in March 1994 and serves on the Audit
Committee. He served as director of the former Bradford
Bankshares, Inc. Dr. Schlofman is an optometrist and
served in the United States Navy from 1979 until 1981,
when he went into private practice as Leonard
Schlofman, O.D., P.A. He served for 5 years as a prison
optometrist for the Florida Department of Corrections
and is currently under contract with the Department as
a consulting optometrist. In 1996, he was appointed by
the Governor to the Florida State Board of Optometry.
Dr. Schlofman is active in the Kiwanis, the Chamber of
Commerce and the Elk's Club of Starke, Florida and also
serves on the legislative committee for the Florida
Optometric Association. He was a Bradford County School
Board Member from 1982 to 1990.
Jimmie L. Scott 56 Mr. Scott was elected to the Board of Directors of the
Company in March 1994. He served as director of the
former Bradford Bankshares, Inc. He has been employed
by RGC (USA) Mineral Sands, Inc. since 1972 as
Secretary/Controller. Mr. Scott is active in several
civic and service organizations such as the Chamber of
Commerce, the N.A..A.C.P., the Bradford County School
Board and the Bradford Association for Retarded
Citizens.
T. Allison Scott 55 Mr. Scott was elected to the Board of Directors of the
Company in 1988 and serves on the Audit, Investment and
Marketing Committees. Mr. Scott, a businessman and
lifetime resident of Live Oak, Florida, is CEO and
owner of Cheek and Scott Drugs, Inc., and Cheek and
Scott Home Health Care. Mr. Scott, who graduated magna
cum laude from the University of Georgia School of
Pharmacy in 1965,
4
<PAGE>
presently holds a pharmacist license with both the
Florida and Georgia Boards of Pharmacy. Mr. Scott is
also an active timber farmer. Mr Scott has served as
Vice- Chairman and Chairman of the Suwannee Development
Authority.
</TABLE>
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of March 16, 1998, certain information
regarding the beneficial ownership of Company Common Stock by those persons
who beneficially own more than 5% of the outstanding shares of Company
Common Stock and by each director, by the chief executive officer, and by
all executive officers and directors of the Company as a group. Management
knows of no person other than those set forth below who owns more than 5%
of the outstanding shares of Company Common Stock at March 16, 1998.
<TABLE>
<CAPTION>
Name of Beneficial Owner, Amount and Nature of Percent of Shares of
Director, or Executive Officer(1) Beneficial Ownership Common Stock Outstanding (2)
- --------------------------------- --------------------- ----------------------------
<S> <C> <C>
Thomas R. Andrews 102,000 4.10%
C. Lavoye Boggus 42,364 (4) 1.70%
Audrey S. Bullard 1,085,165 (3) 43.65%
Seymour Chotiner 26,604 (7) 1.07%
Roy C. Dicks 67,276 2.71%
Marvin H. Pritchett 395,288 (5) 15.90%
Paul M. Riherd 148,914 (8) 5.99%
Helen B. Real 110,021 4.43%
A. Leonard Schlofman 28,391 (6) 1.14%
Jimmie L. Scott 4,200 0.17%
T. Allison Scott 20,720 (9) 0.83%
William Streicher 69,921 2.81%
K. C. Trowell 1,085,165 (3) 43.65%
Voting Trust 1,085,165 (3) 43.65%
Directors and Executive 1,458,358 (3) 58.66%
Officer as a group (13 persons)
</TABLE>
- ------------------
(1) The address of all persons listed is 201 North Marion Street, P.O. Box
3239, Lake City, Florida 32056.
(2) Based on a total of 2,428,385 shares of Common Stock outstanding, plus
shares of Common Stock which may be acquired by the beneficial owner, or
group of beneficial owners, within 60 days of March 16, 1998, by exercise
of 57,687 options. The percentage total differs from the sums of the
individual percentages due to differing denominators with respect to each
calculation.
(3) This amount includes the number of shares of Company common stock
controlled by the Voting Trust, under the Amended and Restated Voting Trust
Agreement, dated December 31, 1996, of which Ms. Bullard and Mr. Trowell
are the trustees. As trustees, Ms. Bullard and Mr. Trowell are deemed to be
beneficial owners of the full number of shares subject to the Voting Trust.
The Voting Trust includes 102,344 shares owned by Ms. Bullard (4.12% of
Company Common Stock Outstanding), and 96,731 shares owned and 49,707
currently exercisable options held by Mr. Trowell (5.89% of Company Common
Stock). Other parties to the Voting Trust include Roy C. Dicks (67,276
shares), Dale C. Ferguson (102,750 shares), Bobby R. France (29,444
shares), Elizabeth B. Pottle (61,683 shares), Marvin H. Pritchett (395,288
shares), Helen B. Real (110,021 shares) and William Streicher (69,921
shares). In certain circumstances the trustees have the right to exercise
all voting power with respect to the stock deposited in the Voting Trust.
Unless extended, the Voting Trust will continue in effect until the earlier
of (i) December 31, 2001 or (ii) termination of the Voting Trust by the
unanimous written consent of all of the members of the Voting Trust.
5
<PAGE>
(4) Includes 21,000 shares owned by Mr. Boggus' wife of which he shares
voting and investment power.
(5) Includes 48,563 shares owned by New River Developers, 56,851 shares
owned by Pritchett Trucking, Inc., 28,846 shares owned by Mid-Florida
Hauling, Inc., 20,469 shares owned by Bulldog Trucking and 14,574 shares
owned by Mr. Pritchett's wife. Mr. Pritchett shares voting and investment
power of all such shares.
(6) Includes 1,477 shares owned by Dr. Schlofman's wife of which he shares
voting and investment power.
(7) Includes 3,529 shares owned by Mr. Chotiner's wife of which he shares
voting and investment power.
(8) Includes 40,358 shares owned by Mr. Riherd's wife of which he shares
voting and investment power.
(9) Includes 961 shares owned by Mr. Scott's wife of which he shares voting
and investment power.
Section 16 (a) Beneficial Ownership Reporting Compliance
Section 16 (a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's executive officers and directors,
and any persons owning more than 10 percent of a class of the Company's
stock, to file certain reports of ownership and changes in ownership with
the Securities and Exchange Commission ("SEC"). During 1997, the executive
officers and directors of the Company filed with the SEC on a timely basis
all required reports relating to transactions involving equity securities
of the Company beneficially owned by them, except that the Voting Trust,
whose members are Audrey S. Bullard, R. C. Dicks, Marvin H. Pritchett,
Helen B. Real, William Streicher and K.C. Trowell , made one late filing.
Mr. Pritchett, Dr. Schlofman, Mr. Trowell and Mr. Boggus each made one late
filing related to a 1997 stock transfer, a 1998 stock transfer, stock
options granted in 1997 and an amendment of a 1997 stock purchase by Mr.
Boggus' spouse, respectively. Mr. A. Scott made two late filings related to
amendments of 1995 and 1997 stock purchases by his spouse. Mr. Chotiner
made four late filings related to amendments of 1995 and 1997 stock
purchases by his spouse, and a 1997 stock transfer. The Company assumes
responsibility in the preparation and filing of beneficial ownership
reports.
Board of Directors and Standing Committees; Director Compensation
If elected, the 6 nominees will constitute the Board of Directors of the
Company. During 1997, the Board held a total of five regular meetings and
two special meetings.
The Board of Directors maintains an Audit Committee, an Executive Committee
and a Compensation Committee, which are described below. Members of these
committees are elected annually at the Board meeting immediately following
the Annual Meeting of Shareholders. Under the Company's Bylaws, the Board
of Directors is authorized to designate other members of the Board to serve
in the place of absent members of any committee.
The Compensation Committee comprises Mr. Andrews, Ms. Bullard, Mr. Boggus,
Mr. Pritchett, Mr. Streicher and Mr. Trowell. During 1997 this committee
held three meetings. The Compensation Committee is principally responsible
for developing and recommending to the Company's Board of Directors stock
incentive compensation for the Bank. The Committee is also responsible for
(1) establishing and recommending to the Bank's Board of Directors the
compensation of the Chief Executive Officer of the Company and Bank; (2)
establishing and recommending to the Bank's Board of Directors the
compensation of other Senior Management of the Company and Bank; (3)
periodically reviewing all salary administration and employee benefits; and
(4) reviewing management succession plans. Mr. Trowell abstains from
participating in or voting on actions directly related to his employment
and/or compensation arrangements.
6
<PAGE>
The Executive Committee comprises Mr. Boggus, Ms. Bullard, Mr. Pritchett
and Mr. Trowell. During 1997 this committee held three meetings. These
committee members also serve on the Executive Loan Committee of the Bank.
The Executive Committee is principally responsible for: (1) establishing
officers' personal loan authority; (2) establishing loan authority for the
Officers' Loan Committee; and (3) approving loans greater than the
authority of the Officers' Loan Committee. The Executive Committee
additionally recommends to the full Board candidates for the Company and
Bank Boards of Directors.
The Audit Committee comprises Mr. Chotiner, Ms. Real, Dr. Schlofman, Mr. A.
Scott and Mr. Streicher, none of whom is an officer of the Company. During
1997 the Audit Committee held four meetings. The principal responsibilities
of the Audit Committee are to: (1) oversee the internal controls function
with regard to the audit, consumer compliance and loan review plan; (2)
review the Company's credit quality review functions and the methods used
to test loan quality and the adequacy of the Bank's allowance for loan
losses; (3) review any significant audit conclusions; (4) review internal
assessments of the adequacy of internal controls; and (5) review the
compliance of the Company and Bank with laws and regulations.
In 1997 all members of the Board attended at least 75% of the meetings of
the Board and all committees on which they served except Mr. A. Scott and
Mr. J. Scott who each attended 67% of the meetings of the Board.
No fees were paid to directors for their services as directors or committee
members in the year ended December 31, 1997.
Executive Compensation
Summary of Cash and Certain Other Compensation. The following table sets
forth for the fiscal years ended December 31, 1997, 1996 and 1995, the cash
compensation paid or accrued by the Company and the Bank, as well as
certain other compensation paid or accrued for those years, for services in
all capacities to the Chief Executive Officer of the Company and Bank. No
executive officer of the Company or Bank, other than the Chief Executive
Officer, earned compensation in excess of $100,000 for the fiscal years
indicated in the table.
Summary Compensation Table (1)
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
----------------------- ---------------------
(a) (b) (c) (d) (g)(2) (i)
Name and Securities Underlying All Other
Principal Position Year Salary($) Bonus($) Options/SARs(#) Compensation($)
- ------------------- ---- --------- -------- -------------------- ---------------
<S> <C> <C> <C> <C> <C>
K. C. Trowell, 1997 $172,500 $122,647 17,000 $ 7,405 (3)
CEO and President of 1996 $150,000 $106,650 -- $ 6,920
the Company and Bank 1995 $136,980 $ 67,500 -- $ 4,500
</TABLE>
(1) Columns (e), (f) and (h) relating, respectively, to "other annual
compensation," "restricted stock awards," and "LTIP payouts," have been
deleted because no compensation required to be reported in such columns was
awarded to, earned by, or paid to the named executive officer during the
fiscal years ended December 31, 1997, 1996 and 1995. Non-cash perquisites
are not disclosed in this table because the aggregate value of such
perquisites to the named executive officer does not exceed the lesser of
$50,000 or 10% of total annual salary and bonus.
7
<PAGE>
(2) All information in this column relates to options. CNB has not granted
any stock appreciation rights ("SARs").
(3) Matching contribution to 401 (k) of $4,750 and payment of premium for
Group Term Life Insurance of $2,655.
Stock Options. The following table sets forth the options which were granted
during the fiscal year ended December 31, 1997.
Option/SAR Grants in Last Fiscal Year(1)
Individual Grants
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
% of Total Options/SARs Exercise or
Options/SARs Granted to Base Price Expiration
Name Granted(#) Employees in Fiscal Year ($/share) Date
---------- ------------ ------------------------- ------------- ------------
<S> <C> <C> <C>
K. C. Trowell 17,000 100.0% $ 14.00 (2)
</TABLE>
- ---------------
(1) All information in this table relates to options. The Company has not
granted any SARs.
(2) Options become exercisable in the amount of 3,400 options annually
beginning November 1, 1997 and continuing each year until November 1,
2001, with corresponding expiration dates beginning November 1, 2007
and continuing each year until November 1, 2011.
Option Exercises and Holdings. The following table sets forth information
with respect to the executive officer listed in the Summary Compensation
Table concerning the exercise of options during the last fiscal year and
unexercised options held as of the end of the fiscal year.
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option/SAR Values (1)
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Number of Unexercised Value of Unexercised In-
Options/SARs at Fiscal the-Money Options/SARs
Years End at Fiscal Year End(2)
---------------------- -----------------------
(#) ($)
Shares Acquired Value Realized Exercisable/ Exercisable/
Name on Exercise (#) ($) Unexercisable Unexercisable
--------- ---------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
K. C. Trowell -- -- 49,707 / 20,851 $307,093 / $32,428
</TABLE>
- ---------------
(1) All information in this table relates to options. The Company has not
granted any SARs.
(2) There are few transactions involving Company Common Stock, and
therefore, the market value of Company Common Stock as of December 31,
1997, is not readily discernable. On July 15, 1997, the Company
completed a stock offering to existing shareholders, in which common
stock was sold at $14.00 per share. Actual trades in the Company's
common stock closest to December 31, 1997 were at $14.00 per share and
that value is used herein. Based on a market value of $14.00 per
share, all of the exercisable options were in-the-money, at a value of
$307,093. The unexercisable options have exercise prices at or less
than $14.00 per share, and are in-the-money, at a value of $32,428.
8
<PAGE>
Employment Agreements. The Company and Bank entered into an employment
agreement with Mr. Trowell on August 3, 1987, which was amended on July 19,
1990, December 17, 1992, July 20, 1994, November 15, 1995 and March 18,
1998. The employment agreement, as amended, provides that Mr. Trowell's
base salary shall be $250,000 effective January 1, 1998. In addition to his
present base salary, Mr. Trowell would immediately become eligible for cash
bonuses based on the Company's improvement on earnings as a percentage of
average equity. The potential bonus is 5% of base for each 1% or fraction
thereof change in Return on Average Equity ("ROAE") with 7% ROAE as the
qualifying threshold. The equity target range is 7.50% of average assets
and this target is used in periods when excess equity is available. The
minimum asset growth target is 15%. In years when the Company experiences
asset growth less than 15%, Mr. Trowell's total bonus shall be reduced by
2.50% for each one (1) percent of growth less than target rates with the
maximum reduction not to exceed 37.5% of total bonus. Extraordinary charges
to expenses, such as expansion of the number of branches by more than 20%
in any given year, will result in crediting back net operating losses for
the applicable "excess" new branches for a period of two (2) years
following the opening of the "excess" branches. In the case of acquisitions
or mergers, where earnings dilution is expected when the transaction is
renegotiated, total earnings will be adjusted in a proportionate manner.
Beginning in 1999, base salary shall change annually to reflect increases
in the CPI Index for the prior year. In 1997, the Company accrued $122,647
as Mr. Trowell's incentive bonus based on a ROAE of 15.10%, which was paid
to Mr. Trowell in January, 1998. The ROAE for 1996 of 15.10% (excluding the
one-time SAIF assessment) was used to calculate Mr. Trowell's bonus because
the Company had excess equity resulting from the July, 1997 rights
offering. Under the employment agreement, Mr. Trowell also receives use of
an automobile and membership in a local country club, as well as life and
medical disability insurance equal to that provided to other officers of
the Bank. The term of Mr. Trowell's employment agreement is three years.
Unless written notification is provided by either the Bank or Mr. Trowell
by August 1 of each year, the employment agreement will extend an
additional year, thereby in effect requiring a three-year advance notice by
either party who desires to terminate the agreement. Pursuant to the
employment agreement, Mr. Trowell has been granted stock options to
purchase 70,558 shares of Company Common Stock at prices ranging from $6.11
per share to $14.00 per share, which options qualify to be exercised at
varying dates between April 15, 1990, and November 1, 2001. The stock
options may be exercised at any time during the ten-year period following
the date on which the options qualify to be exercised. However, the full
amount of these stock options may be exercised immediately upon the event
of disability, death, termination of employment except for cause, or change
in control of 30% or more of the Company Common Stock to a common interest.
PROPOSAL 2: Approval of the Performance-Based Incentive Plan of CNB, Inc.
At the Annual Meeting, shareholders will be asked to consider and vote on the
Performance-Based Incentive Plan (the "Plan"). The Plan establishes the types of
objectives used to measure and compensate for annual and long-term performance.
The Plan also allows for the reservation for future issuance of a total of
270,000 shares of common stock, of which no more than 70,000 shares may be used
for restricted stock awards. The Plan is designed to motivate officers, senior
management, key employees and directors of the Company to continue their efforts
to improve the success and the growth of the Company and to encourage them to
remain with the Company.
The Plan will provide for performance-based annual cash incentive awards to
officers and senior management of the Company and the Bank. Additionally, the
Plan will provide for the grant of incentive and non-qualified stock options,
stock appreciation rights ("SARs"), performance units and/or restricted stock to
key employees of the Company and the Bank, and non-qualified stock options to
the Company's non-management directors. The inclusion in the Plan of various
types of long-term incentives is not an indication that those incentives will
necessarily be awarded. Rather, various types of
9
<PAGE>
incentives are included so that the Company will have the flexibility to tailor
awards in the future in a fashion that will best motivate the recipients.
The Board of Directors of the Company may amend or terminate the Plan at any
time. However, certain amendments may not be adopted without the approval of the
shareholders, including any amendment that would increase the total number of
shares issuable under the Plan, alter the class of eligible employees or
increase the total award payable to the Chief Executive Officer.
The following is a summary of certain provisions of the Plan, a copy of which is
attached as Appendix A to this proxy statement. The summary set forth below does
not purport to be complete and is qualified in its entirety by reference to
provisions of the Plan.
Annual Incentive Component
The Company adheres to the principle of pay-for-performance. The annual
incentive component of the Plan is an integral part of the Company s
compensation program, tying annual cash incentive awards for officers to the
achievement of specific financial goals. Other senior management is also
eligible to participate in the annual incentive component of the Plan, but with
accountability for various business unit measures such as earnings, return on
equity, overhead ratio, asset quality, product sales and specific individual
objectives, as well as Company financial goals.
The annual incentive component of the Plan is administered by the Compensation
Committee (the "Committee"), which will consist of five outside directors, none
of whom has ever been an employee of the Company or any subsidiary. The
Committee establishes written financial goals for officers at the beginning of
each year. These goals are objective, with threshold, target and maximum
performance levels, and corresponding award payouts. Goals are based on the
Company's business plan approved by the Board of Directors. Before any payout
can occur, the Committee must certify that the established goals were satisfied.
The maximum annual incentive is set at sixty-five percent of salary for each
position, in no event to exceed $200,000.
Long-Term Incentive Component
The long-term incentive component of the Plan provides for the grant of
incentive and non-qualified stock options, SARs, performance units and/or
restricted stock to officers, senior management and key employees of the Company
and the Bank, and non-qualified stock options to the Company s non-management
directors, as specifically described below. If the Plan is approved, a total of
270,000 shares of common stock, of which no more than 70,000 shares may be used
for restricted stock awards, will be reserved for issuance. That number is
subject to possible adjustment for stock dividends, stock splits and other
changes in the Company's capitalization and corporate structure. The maximum
number of shares of common stock or common stock equivalents that may be subject
to an award under the Plan to any eligible participant may not exceed 30,000
shares over any period of three consecutive fiscal years of the Company. The
common stock subject to the Plan may be authorized but unissued shares or shares
purchased or otherwise acquired by the Company for use in the Plan, as
determined from time to time by the Committee.
The long-term incentive component of the Plan is administered by the Committee.
Subject to the provisions of the Plan and the approval of the Board of
Directors, the Committee determines which officers, senior managers or key
employees, if any, will be granted awards, and the type, amount and timing of
the awards. Awards granted by the Committee may consist of incentive stock
options, non-qualified stock options, restricted stock, SARs, which may be
payable in cash or the Company's common stock, performance units or any
combination of the above. Awards of non-qualified stock options to
non-management directors of the Company are not discretionary.
All stock options and SARs will become fully exercisable, all performance units
will be payable, and all restrictions on restricted stock awards will expire
upon the occurrence of the Acceleration Events described in Appendix A.
10
<PAGE>
Stock options, SARs, restricted stock awards and performance units granted under
the Plan are non-transferable except by gift to certain immediate family members
with approval of the Committee, by will, by the laws of descent and
distribution, or by a qualified domestic relations order (a "QDRO"), as defined
by the Code or ERISA, and during the grantee s lifetime may only be exercised by
the grantee or by the guardian or legal representative of such grantee or
pursuant to a QDRO. In addition, stock options and SARs are only exercisable,
restricted stock awards are only earned and performance units are only payable
while the grantee is an employee or director, as applicable, of the Company, or,
for stock options and SARs, within three (3) or twelve (12) months from the date
of termination of employment depending on the reason for termination. Except for
awards to non-management directors of the Company, the exercise period for stock
options and SARs may be extended by the Committee. The extension period may not
exceed sixty (60) months following termination. Restricted stock awards and
performance units are earned on a pro-rata basis if termination occurs due to
death, disability or retirement before certain financial objectives are met, and
immediately if only length of service objectives must still be met by the
participant.
For grants to participants other than the Company's non-management directors,
and subject to the terms of the Plan, the Committee has discretion to accept the
surrender of or modify outstanding awards and grant new awards in substitution
for them, provided that the modification does not adversely alter or impair any
rights or obligations without the participant s consent and does not constitute
repricing as such term is defined in 17 CFR 229.402(i)(1).
The Plan permits participants to elect to pay their taxes due upon the exercise
of options or SARs or upon the vesting of restricted stock awards through the
withholding of a portion of the shares issuable with a fair market value equal
to the taxes due. In connection with any grant or exercise of an award, the Plan
also permits the Committee to provide for a supplemental cash payment to
participants, excluding non-management directors. Any such payment may not be
greater than the lesser of : (a) the difference between the option price and the
fair market value of the underlying shares on the date the option is exercised
(the spread ); or (b) the spread multiplied by the ratio of the maximum federal
income tax rate payable by an employee on the spread to 50 percent (except that,
with respect to restricted stock, SARs or performance units, the spread shall be
the difference between the amount paid for the restricted stock, SAR or
performance unit, as applicable, and the fair market value of the common stock
(or cash) distributed).
Stock Options. Incentive stock options and non-qualified stock options
(collectively Stock Options ) granted under the Plan must be granted at a per
share option price at least equal to the fair market value per share of the
common stock on the date of grant. The option price may be paid in cash, in
shares of common stock or through the surrender of Stock Options or SARs, or,
for non-qualified stock options, other contingent awards determined to be
consistent with Plan purposes and applicable law, as specified by the Committee
at the time of the grant.
The term of any Stock Option may not exceed ten (10) years. The Committee
retains the right to establish vesting schedules for each award. It is
anticipated that Stock Options will become exercisable with 50 percent of the
total number of shares covered by the Stock Option becoming exercisable on the
third anniversary of the date the Stock Option is granted, and an additional 25
percent of the shares becoming exercisable on each of the fourth and fifth
anniversaries of the grant, unless the Committee specifies otherwise at the time
of grant.
Incentive stock options granted under the Plan are entitled to special tax
treatment under Section 422 of the Code. The grant of an incentive stock option
will not result in taxable income to the optionee or an income tax deduction for
the Company either at the time of grant or at the time of exercise. However,
when an optionee exercises an incentive stock option, he or she must generally
include as alternative minimum taxable income in the year of exercise the
difference between the fair market value of the shares on the date of the
exercise and the option price. If the optionee does not dispose of the shares of
common stock received upon exercise of incentive stock options within two (2)
years after the incentive stock option is granted and holds the shares at least
one (1) year after exercise, he or she will realize long-term capital gain or
loss on the sale of such shares, and the Company will not be entitled to an
income tax deduction. Otherwise, the optionee must report in the year of
disposition the difference between the fair market value of the shares on the
date of exercise (or the amount realized, if less) and the option price as
ordinary income. Any gain realized on the disposition in
11
<PAGE>
excess of the amount treated as ordinary income will be treated as a capital
gain. The Company will be allowed a federal income tax deduction equal to the
ordinary income, if any, recognized by the optionee.
Non-qualified stock options granted under the Plan are not entitled to special
tax treatment under Section 422 of the Code. The grant of a non-qualified stock
option will not result in taxable income to the optionee or an income tax
deduction to the Company at the time of grant. An optionee who exercises a
non-qualified stock option will generally recognize ordinary income in the year
of exercise in an amount equal to the difference between the fair market value
of the shares at the time of exercise and the option price. The Company is
permitted an income tax deduction equal to the amount of ordinary income the
optionee is required to recognize as a result of the exercise of a non-qualified
stock option.
Each active non-management director of the Company will receive an initial
option to purchase 1,000 shares of Company stock at the director s first Board
of Directors meeting after election as a director, or, for current directors, on
the date of approval of the Plan. Active non-management directors will also
receive an option to purchase 1,000 shares of Company stock at each subsequent
Annual Meeting of Shareholders.
Restricted Stock Awards. Under the Plan, the Committee may also grant
restricted stock awards to key employees under stock agreements imposing sale,
transfer or encumbrance restrictions for a specified period of time, or such
other restrictions as the Committee may determine, including forfeiture
provisions in the event the participant s employment terminates before a certain
date. Restricted stock awards will be earned by an employee as certain
management objectives established at the time of grant (the Management
Objectives ) are met. The Management Objectives may be the participant s length
of service and/or specified levels of earnings, return on assets, leverage
ratio, earnings-per-share, overhead ratio, loan loss reserve ratio, or return on
equity achieved by the Company or the subsidiary, department or function of the
Company in which the participant is employed, whether in relation to the Company
s business plan or as against an industry peer group. If the participant s
employment terminates prior to the end of the performance period and the
Committee determines that the applicable Management Objectives have been met,
the participant will be deemed to have earned a pro-rata portion of the award
based on the number of months employed compared to the number of months in the
performance period.
The grant of restricted stock awards will not result in taxable income to the
participant or an income tax deduction for the Company until the restricted
stock is transferable or is not subject to a substantial risk of forfeiture.
When the restricted stock becomes transferable or is no longer subject to a
substantial risk of forfeiture, the participant will report as ordinary income
and the Company will be allowed an income tax deduction equal to the fair market
value of the stock at that time.
Except for restrictions upon the sale, transfer or encumbrance of shares, the
recipient of a restricted stock award will have all other rights of a holder of
common stock, including dividend rights and voting rights, except that the
recipient will have no voting rights until Management Objectives, other than
length of service, have been met. Dividends payable on restricted stock awards
subject to Management Objectives other than length of service will be
accumulated but not paid to a participant until such Management Objectives are
met. If a share of restricted stock subject to Management Objectives other than
length of service is forfeited, accumulated dividends on this share of
restricted stock will also be forfeited by the participant and will revert to
the Company.
Stock Appreciation Rights. The Plan will permit the Committee to award SARs
to participants. The exercisability, vesting, duration and other terms and
conditions of SARs shall be determined by the Committee, but in no event may the
term of an SAR exceed ten (10) years. No SAR may be exercised until six (6)
months have elapsed since the date of grant, unless the death or disability of a
participant occurs within such six (6) month period. Upon exercise of an SAR, a
participant shall receive an amount determined by multiplying: (a) the excess of
the fair market value of a share of the Company s common stock on the date
preceding the date of exercise of such SAR over the per share exercise price of
any Stock Option granted in connection with the SAR by (b) the number of shares
of common stock as to which the SAR is being exercised. The Committee has
discretion to determine whether an SAR is payable in common stock, cash or a
combination of both.
12
<PAGE>
Performance Units. The Plan will give the Committee discretion to award
performance units to participants. Each performance unit has a cash value equal
to the fair market value of one (1) share of the Company's common stock. The
Committee has discretion to determine the terms and conditions of a performance
unit award, including the number of performance units granted to a participant
and the Management Objectives as defined above which must be achieved by the
participant before the performance unit is payable. During the performance
period, a participant may have the right to receive amounts equal to dividends
paid on the Company's common stock as determined by the Committee at the time of
the grant. Upon the expiration of the applicable performance period and the
Committee s determination that the Management Objectives have been met, the
Company shall distribute cash to the participant equal to the fair market value
of one (1) share of the Company's common stock on the date of distribution
multiplied by the number of performance units earned. If the participant s
employment terminates prior to the end of the performance period and the
Committee determines that the applicable Management Objectives have been met,
the participant will be deemed to have earned a pro-rata portion of the award
based on the number of months employed compared to the number of months in the
performance period.
The Board of Directors believes that the Plan will give the Company flexibility
to motivate, reward and retain officers, senior management, key employees and
directors who contribute to the Company's annual and long-term success in
building shareholder value. In order for incentive stock options under the Plan
to receive the intended special tax treatment, the Plan must receive the
affirmative vote of a majority of the votes cast on the issue at the Annual
Meeting of Shareholders, provided that a quorum is present. Votes shall be
counted as described in Voting Procedures on page 1. Proxies solicited by the
Board will be voted for approval of the Plan, unless shareholders specify a
contrary choice in their proxies.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR APPROVAL OF THE
COMPANY S PERFORMANCE-BASED INCENTIVE PLAN.
Certain Relationships and Related Transactions
During the last two (2) fiscal years, the Bank loaned funds to certain of
the Company's executive officers and directors in the ordinary course of
business, on substantially the same terms as those prevailing at the time
for comparable transactions with other customers, and which did not involve
more than the normal risk of collectability or present other unfavorable
features.
Independent Certified Public Accountants
On October 24, 1997, the Company terminated its relationship with its
independent certified accountants, Osburn, Henning and Company, and on
October 24, 1997, engaged Arthur Andersen LLP as its independent certified
accountants. Osburn, Henning and Company's reports on the consolidated
financial statements of the Company for fiscal years 1995 and 1996 contains
no adverse opinion or disclaimer of opinion and were not qualified or
modified as to uncertainty, audit scope, or accounting principles. The
decision to change accountants was approved by the Company's Board of
Directors. With respect to the Company's consolidated financial statements
for fiscal years 1995 and 1996 and the subsequent interim periods preceding
the change in accountants, there were no disagreements between the Company
and Osburn, Henning and Company on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure,
which, if not resolved to the satisfaction of Osburn, Henning and Company,
would have caused it to make reference to the subject matter or the
disagreement in connection with its report. Representatives of Arthur
Andersen LLP will not be present at the Annual Meeting of Shareholders.
Shareholder Proposals
Shareholders who wish a proposal to be included in the Company's Proxy
Statement and form of proxy relating to the 1999 Annual Meeting should
deliver a written copy of their proposal to the principal executive offices
of the Company no later than November 20, 1998. Proposals should be
directed to Joyce Bruner,
13
<PAGE>
Corporate Secretary, CNB, Inc., P.O. Box 3239, Lake City, Florida 32056.
Proposals must comply with the SEC proxy rules relating to shareholder
proposals in order to be included in the Company's proxy materials.
Annual Report; Form 10-KSB
A copy of the Company's Annual Report to Shareholders for the fiscal year
ended December 31, 1997, is being provided to each shareholder
simultaneously with delivery of this Proxy Statement. Additional copies of
the Annual Report to Shareholders or copies of the Company's Annual Report
on Form 10-KSB, filed with the Securities and Exchange Commission, may be
obtained by writing to Joyce Bruner, Corporate Secretary, CNB, Inc., P.O.
Box 3239, Lake City, Florida 32056.
Other Matters
As of the date of this Proxy Statement, the Board of Directors of CNB does
not anticipate that other matters will be brought before the Annual Meeting
of Shareholders. If, however, other matters are properly brought before the
Annual Meeting of Shareholders, the persons appointed as proxies will have
the discretion to vote or act thereon according to their best judgment.
Cost of Solicitation
The cost of solicitation of proxies will be borne by the Company, including
expenses in connection with the preparation and mailing of this proxy
statement.
Dated March 27, 1998
Holders of CNB Common Stock are requested to complete, date and sign the
accompanying form of proxy and promptly return it to CNB in the enclosed,
self-addressed postage paid envelope.
14
<PAGE>
APPENDIX A
PERFORMANCE-BASED INCENTIVE PLAN
OF
CNB, INC.
I. GENERAL
1.1 Purpose of the Plan
The 1998 Performance-Based Incentive Plan (the "Plan") of CNB, Inc. (the
"Company") is intended to advance the best interests of the Company and its
subsidiary, CNB National Bank (the "Bank") by providing annual and long-term
incentives to officers, senior management and key employees who have substantial
responsibility for corporate management and growth. Specifically, the annual
incentive component of the Plan provides for performance-based cash incentive
awards to officers and senior management, and the long-term incentive component
of the Plan provides for performance-based incentive awards to key employees
through the grant of options to purchase shares of common stock, $.01 par value,
of the Company (the "Common Stock"), restricted stock, stock appreciation rights
and performance units, thereby increasing the personal stake of participants in
both the annual and long-term success and growth of the Company and encouraging
them to remain in the employ of the Company. In addition, the long-term
incentive component of the Plan provides for performance-based incentive awards
to non-employee members of the Board of Directors ("Directors") of the Company
through the grant of options to purchase Common Stock.
1.2 Administration of the Plan
The Plan shall be administered by the Compensation Committee or other designated
committee (the "Committee") of the Board of Directors of CNB, Inc. which shall
consist solely of two or more directors meeting the definition of outside
directors under Treas. Reg. Section 1.162-27(e)(3).
The Committee shall have full and final authority in its discretion to interpret
conclusively the provisions of the Plan as it may deem advisable, to adopt such
rules and regulations for carrying out the Plan as it may deem advisable; to
decide all questions of fact arising in the application of the Plan; and to make
all other determinations necessary or advisable for the administration of the
Plan.
The Committee shall meet once each fiscal year, and at such additional times as
it may determine or at the request of the chief executive officer of the
Company, to designate the eligible participants, if any, to be granted awards
under the Plan and the type and amount of such awards and the time when such
awards will be granted. No such designation by the Committee shall be effective
as a grant of an award under the Plan until approved by the Board of Directors
of the Company; provided, however, that the Board of Directors may empower the
Committee to grant such awards without approval by the Board of Directors. The
Committee exercises no discretion with respect to awards of stock options to
Directors under the long-term incentive component of the Plan, except as set
forth in Section 7.9 below. All awards granted under the Plan shall be on the
terms and subject to the conditions hereinafter provided.
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<PAGE>
1.3 Eligible Participants
Officers and senior management of the Company and the Bank shall be eligible to
participate in the annual incentive component of the Plan. Key employees,
including officers and senior management of the Company and the Bank, shall be
eligible to participate in the long-term incentive component of the Plan. Any
recipient of an award under this Plan is hereinafter referred to as a
"Participant". Directors who are not employees of the Company are eligible to
participate in the Plan only to the extent and in the manner described in
Section 7.5 below.
1.4 Annual Incentive Component
The Committee establishes written, objective financial goals for the executive
officers named in the Summary Compensation Table of the Company's proxy
statement (the "Named Executive Officers") at the beginning of each year.
Financial goals for the Named Executive Officers may include Company
earnings-per-share ("EPS"), return on equity, overhead ratio, asset quality and
product sales. Goals include threshold, target and maximum performance levels
and corresponding award payouts. Goals are based on the Company's business plan
as approved by the Board of Directors of the Company. Before any payout can
occur, the Committee must certify that performance goals were satisfied.
Officers and senior management are also eligible to participate in the annual
incentive component of the Plan, but with accountability for various business
unit measures such as earnings, return on equity, overhead ratio, asset quality
and product sales and specific individual objectives, as well as Company
financial goals.
The maximum annual incentive is set at sixty-five percent of salary for each
position, in no event to exceed $200,000. Awards under the annual incentive
component are in the form of cash.
1.5 Awards under Long-Term Incentive Component
Awards under the long-term incentive component of the Plan may be in the form of
Incentive Stock Options (as described in Article II), Non-Qualified Stock
Options (as described in Article III), Restricted Stock (as described in Article
IV), Stock Appreciation Rights (as described in Article V), Performance Units
(as described in Article VI) or any combination thereof. Awards to Directors may
only be in the form of Non-Qualified Stock Options (as described in Article
III).
1.6 Limitation on Awards under Long-Term Incentive Component
The aggregate number of shares of Common Stock and restricted stock, including
but not limited to shares reserved for issuance pursuant to the exercise of
options, which may be granted or issued under the terms of the Plan may not
exceed 270,000 shares. Of this aggregate limit, the aggregate number of shares
of restricted stock which may be granted or issued under the terms of the Plan
may not exceed 70,000 shares. The maximum number of shares of Common Stock that
may be subject to grants under the long-term incentive component of the Plan to
a Participant may not exceed 30,000 shares of Common Stock over any period of
three (3) consecutive fiscal years of the Company. Whenever any outstanding
grant or portion thereof expires, is canceled or forfeited or is otherwise
terminated for any reason without having been exercised or vested, or without
payment having been made in respect of the entire grant, the Common Stock
allocable to the expired, forfeited, canceled or otherwise terminated portion of
the grant may again be the subject of further grants hereunder.
Notwithstanding the foregoing, the number of shares of Common Stock available
for grants at any time under the Plan shall be reduced to such lesser amount as
may be required pursuant to the methods of calculation necessary so that the
exemptions provided pursuant to Rule 16b-3 under the Exchange Act will continue
to be available for transactions involving all current and future grants. In
addition, during the period that any grants remain outstanding under the Plan,
the Committee may make good faith adjustments with respect to the number of
shares of Common Stock attributable to such grants for purposes of calculating
the maximum number of shares of Common Stock available for the granting of
future
A-2
<PAGE>
grants under the Plan, provided that following such adjustments the exemptions
provided pursuant to Rule 16b-3 under the Exchange Act will continue to be
available for transactions involving all current and future grants.
1.7 Other Compensation Programs
The adoption of the Plan contemplates the continuation of all existing incentive
compensation plans of the Company which were discontinued and in no way limits
or is limited by the operation, administration or amendment of any such plans.
The existence and terms of the Plan shall not limit the authority of the Board
of Directors in compensating employees of the Company in such other forms and
amounts as it may determine from time to time.
II. INCENTIVE STOCK OPTIONS
2.1 Terms and Conditions
Subject to the following provisions in this Article II, all Incentive Stock
Options shall be in such form and upon such terms and conditions as the
Committee, in its discretion, may from time to time determine and shall be
awarded under the long-term incentive component of the Plan.
2.2 Qualified Stock Options
Incentive Stock Options shall, at the time of grant, be in such form and upon
such terms and conditions as may be required in order that such options will
constitute Incentive Stock Options within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code").
2.3 Option Price
The option price per share shall be at least the Fair Market Value (as defined
in section 8.13 of this Plan) of the Common Stock on the date the Incentive
Stock Option is granted.
2.4 Term of Option
The term of an Incentive Stock Option shall not exceed ten (10) years from the
date of grant.
2.5 Payment
Payment for shares for which an Incentive Stock Option is exercised shall be
made in such manner and at such time or times as shall be provided by the
Committee at the time of grant, in cash, in Common Stock, including restricted
stock, through the surrender of stock options or stock appreciation rights, or
any combination thereof.
2.6 Exercise of Option
Incentive Stock Options shall be exercisable in whole or in part after
completion of such periods of service as the Committee shall specify when
granting the options; provided, however, that in the absence of any Committee
specification to the contrary, and subject to Sections 2.7 and 2.8, (1) fifty
percent (50%) of the shares subject to the Incentive Stock Option shall become
exercisable with respect to such shares on the third anniversary of the date of
grant of the Incentive Stock Option and (2) on each of the next two
anniversaries of the date of the grant, an additional twenty five percent (25%)
of the shares subject to the Incentive Stock Option shall become exercisable
with respect to such shares. In no event, however, and notwithstanding Sections
2.7 and 2.8, shall an Incentive Stock Option be exercised after the expiration
of ten (10) years from the date of grant.
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2.7 Termination of Employment
A Participant's Incentive Stock Options shall expire three months after the
termination of the Participant's employment for any reason other than death,
disability (as determined by the Committee) or retirement (under the applicable
retirement program of the Company or as otherwise determined by the
Committee), and shall be limited to the shares of Common Stock which could
have been purchased by the Participant at the date of termination of
employment.
2.8 Termination of Employment by Reason of Death, Disability or Retirement
Upon the termination of a Participant's employment by reason of death,
disability (as determined by the Committee), or normal retirement (under the
applicable retirement program of the Company or as otherwise determined by the
Committee), Incentive Stock Options held at the termination date by such
Participant shall be exercisable, irrespective of whether the options were fully
exercisable in accordance with Section 2.6 on that date. The Participant's
Incentive Stock Options shall expire unless exercised within one year from the
date of such termination unless otherwise established by the Committee.
In the case of termination of a Participant's employment (1) with at least 20
years of employment or (2) by reason of early retirement within the meaning of
the applicable retirement plan, Incentive Stock Options which may be exercised
shall be limited to the shares which could have been purchased by the
Participant at the date of such early retirement, except that the Committee, in
its discretion, may waive the vesting requirements of Section 2.6. The
Participant's Incentive Stock Options shall expire unless exercised within one
year from the date of such termination.
Notwithstanding the foregoing, the tax treatment available pursuant to Section
422 of the Code upon the exercise of an Incentive Stock Option will not be
available to a Participant who exercises any Incentive Stock Option more than
three months after termination of employment due to retirement, or who, in the
event of waiver of the vesting requirements of Section 2.6, obtains the right to
exercise for the first time Incentive Stock Options having an aggregate fair
market value, determined at the date of issue, exceeding $100,000.
The Committee may, at any time on or before the termination of the exercise
period of the Participant's Incentive Stock Options, extend the exercise period
if the Participant's employment is terminated for a reason specified in this
section. If so extended, the term of the exercise period shall expire on the
date specified by the Committee, which date shall be no later than the date
which is 60 months following the date of the Participant's termination of
employment. If such extension could adversely affect the Participant's federal
income tax treatment of the Incentive Stock Option at the time of extension or
exercise, the extension shall only be made with the consent of the Participant.
In no event may the term of an Incentive Stock Option, including extensions,
exceed the term set forth in Section 2.4.
2.9 Special Rule for 10 Percent Shareholders
If, at the time an Incentive Stock Option is granted, a Participant owns stock
representing more than 10 percent of the total combined voting power of all
classes of stock of the Company, then the terms of the Incentive Stock Option
shall specify that the option price shall at the time of grant be at least 110
percent of the Fair Market Value of the stock subject to the option and such
option shall not be exercisable after the expiration of five (5) years from the
date such option is granted.
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2.10 Notice of Disposition
If a Participant makes a disposition, within the meaning of Section 424(c) of
the Code and regulations promulgated thereunder, of a share or shares of Common
Stock issued to such Participant pursuant to the exercise of an Incentive Stock
Option within the two year period commencing on the day after the date of the
grant or within the one year period commencing on the day after the date of
transfer of such share or shares to the Participant pursuant to such exercise,
the Participant shall, within ten (10) days of such disposition, notify the
Company thereof by delivery of written notice to the Company at its principal
executive office.
2.11 Acceleration Event
Notwithstanding anything herein to the contrary, if an Acceleration Event (as
defined in Section 8.14) has occurred, then all of the shares subject to the
Incentive Stock Option shall immediately become exercisable with respect to such
shares on the date such Acceleration Event occurred.
III. NON-QUALIFIED STOCK OPTIONS
3.1 Terms and Conditions of Options
Subject to the following provisions, all Non-Qualified Stock Options shall be in
such form and upon such terms and conditions as the Committee, in its
discretion, may from time to time determine. Non-Qualified Stock Options shall
be awarded under the long-term incentive component of the Plan.
3.2 Non-Qualified Stock Options
The terms of a Non-Qualified Stock Option shall, at the time of grant, provide
that it will not be treated as an incentive stock option within the meaning of
Section 422 of the Code.
3.3 Option Price
The option price per share shall be at least the Fair Market Value of the Common
Stock on the date the Non-Qualified Stock Option is granted.
3.4 Term of Option
The term of a Non-Qualified Stock Option shall not exceed ten (10) years from
the date of grant.
3.5 Payment
Payment for shares for which a Non-Qualified Stock Option is exercised shall be
made in such manner and at such time or times as shall be provided by the
Committee at the time of grant, in cash, in Common Stock, including restricted
stock, through the surrender of stock options or stock appreciation rights, or
any combination thereof, or other contingent grants which the Committee
determines is consistent with the Plan's purposes and applicable law.
3.6 Exercise of Option
Non-Qualified Stock Options shall be exercisable in whole or in part after
completion of such periods of service as the Committee shall specify when
granting the options; provided, however, that in the absence of any Committee
specification to the contrary, and subject to Sections 3.7 and 3.8, (1) fifty
percent (50%) of the shares subject to the Non-Qualified
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Stock Option shall become exercisable with respect to such shares on the third
anniversary of the date of grant of the Non-Qualified Stock Option and (2) on
each of the next two anniversaries of the date of the grant, an additional
twenty-five percent (25%) of the shares subject to the Non-Qualified Stock
Option shall become exercisable with respect to such shares. In no event,
however, and notwithstanding Sections 3.7 and 3.8, shall a Non-Qualified Stock
Option be exercised after the expiration of ten (10) years from the date of
grant.
3.7 Termination of Employment
A Participant's Non-Qualified Stock Options shall expire three months after the
termination of the Participant's employment for any reason other than death,
disability (as determined by the Committee) or retirement (under the applicable
retirement program of the Company or as otherwise determined by the Committee),
and shall be limited to the shares which could have been purchased by the
Participant at the date of termination of employment.
3.8 Termination of Employment by Reason of Death, Disability or Retirement
Upon the termination of a Participant's employment by reason of death,
disability (as determined by the Committee) or retirement (under the applicable
retirement program of the Company or as otherwise determined by the Committee),
Non-Qualified Stock Options held at the termination date by such Participant
shall be exercisable, irrespective of whether the options were fully exercisable
in accordance with Section 3.6 on that date. The Participant's Non-Qualified
Stock Options shall expire unless exercised within one year from the date of
such termination unless otherwise established by the Committee.
The Committee may, at any time on or before the termination of the exercise
period of the Participant's Non-Qualified Stock Options, extend the exercise
period if the Participant's employment is terminated for a reason specified in
this section. If so extended, the term of the exercise period shall expire on
the date specified by the Committee, which date shall be no later than the date
which is 60 months following the date of the Participant's termination of
employment. In no event may the term of a Non-Qualified Stock Option, including
extensions, exceed the term set forth in Section 3.4.
3.9 Acceleration Event
Notwithstanding anything herein to the contrary, if an Acceleration Event has
occurred, then all of the shares subject to the Non-Qualified Stock Option shall
immediately become earned and the Non-Qualified Stock Option shall become
exercisable with respect to such shares on the date such Acceleration Event
occurred.
IV. RESTRICTED STOCK AWARDS
4.1 Restrictions
Restricted Stock may be granted to a Participant by the Committee under a
Restricted Stock agreement. Such agreement shall specify the number of shares
granted and the conditions and terms of the restrictions. Such restrictions
shall lapse for all or part of the shares granted upon satisfaction of specified
Management Objectives (as defined below) within a specified Performance Period
(as defined below). Restricted Stock, with restrictions noted on the face of the
certificates, shall be issued in the name of the Participant and deposited with
the Company or its designee during the Performance Period. Restricted Stock
shall be awarded under the long-term incentive component of the Plan.
4.2 Management Objectives
Restricted Stock shall be deemed to have been earned by a Participant based upon
achievement of Management Objectives specified by the Committee at the time of
grant. Management Objectives may be the Participant's length of service and/or
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specified levels of earnings, return on assets, overhead ratio,
earnings-per-share, leverage ratio, loan loss ratio, or return on equity
achieved by the Company or any department or function of the Company in which
the Participant is employed, whether in relation to the Company's business plan
or as against an industry peer group. Management Objectives relating to any
particular grant of Restricted Stock need not be the same as those relating to
any other grant, whether made at the same or a different time.
4.3 Performance Period
The Performance Period with respect to Restricted Stock shall be the period of
time within which the Management Objectives relating to that grant are to be
achieved. The Committee shall determine the length of the Performance Period,
which shall commence on the date of grant of Restricted Stock and shall be at
least one year.
4.4 Earning of Restricted Stock
The Committee shall, promptly after the date on which the necessary financial or
other information for a particular Performance Period becomes available,
determine the extent to which the restrictions on Restricted Stock have lapsed
through Participant's achievement of the relevant Management Objectives other
than length of service. Upon determination by the Committee that relevant
Management Objectives other than length of service have been achieved, the
number of shares of Restricted Stock shall be fixed and accumulated dividends
shall be paid as set forth in Section 4.5. Restricted Stock shall not be
considered earned until such time as all restrictions lapse.
4.5 Rights as Shareholder
Except as otherwise provided in this Article IV, the Participant shall have all
rights as a shareholder, including dividend rights and voting rights with
respect to the Restricted Stock. During the Performance Period and subject to
the restrictions set forth in this Article IV, a Participant has the right to
receive the dividends paid on the Common Stock at the same time and in the same
amount as other shareholders of the Company; provided, however, that any
dividends payable on Restricted Stock subject to Management Objectives other
than length of service shall be accumulated and become payable when such
Management Objectives other than length of service have been met in accordance
with Section 4.4. If the Committee determines that the Management Objectives
other than the length of service have not been met within the Performance
Period, dividends on any such unearned Restricted Stock shall revert to the
Company. Restricted Stock subject to Management Objectives other than length of
service shall have no voting rights.
4.6 Termination of Employment
If any Participant's employment has terminated due to the Participant's death,
disability (as determined by the Committee) or retirement (under the applicable
retirement program of the Company or as otherwise determined by the Committee)
prior to the end of a Performance Period, and the Committee has determined that
applicable Management Objectives other than length of service have been
achieved, the extent to which Restricted Stock shall be deemed to have been
earned shall be determined by multiplying the amount of the Restricted Stock
which would have been earned had the Participant's employment not been
terminated by a fraction, the numerator of which is the number of full calendar
months such Participant was employed during the Performance Period and the
denominator of which is the total number of full calendar months in the
Performance Period. All length of service Management Objectives shall
immediately be satisfied upon the Participant's death or disability, or upon
retirement within the meaning of the applicable retirement plan.
4.7 Acceleration Event
Notwithstanding anything herein to the contrary, if an Acceleration Event has
occurred, then all restrictions on the Restricted Stock shall lapse on the date
such Acceleration Event occurred regardless of whether the Management Objectives
with respect to such Restricted Stock have yet been satisfied.
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V. STOCK APPRECIATION RIGHTS
5.1 In General
The Committee may, in its discretion, either alone or in connection with the
grant of an Incentive Stock Option or a Non-Qualified Stock Option (collectively
referred to in this Article V as an "Option"), grant to Participants Stock
Appreciation Rights, the terms and conditions of which shall be set forth in a
Stock Appreciation Rights agreement. If granted in connection with an Option,
Stock Appreciation Rights shall cover the same number of shares of Common Stock
covered by the Option (or such lesser number of shares of Common Stock as the
Committee may determine) and shall, except as provided in this Article V, be
subject to the same terms and conditions as the related Option. Awards of Stock
Appreciation Rights shall be made under the long-term incentive component of the
Plan.
5.2 Time of Award
A Stock Appreciation Right may be granted: (a) at any time if unrelated to an
Option, or (b) if related to an Option, either at the time of grant, or at any
time thereafter during the term of the Option.
5.3 Stock Appreciation Right Related to an Option
(a) Exercise. Subject to Section 5.7, a Stock Appreciation Right
granted in connection with an Option shall be exercisable at such time or times
and only to the extent that the related Option is exercisable, and will not be
transferable except to the extent the related Option may be transferable. A
Stock Appreciation Right granted in connection with an Incentive Stock Option
shall be exercisable only if the Fair Market Value of a share of the Common
Stock on the date of exercise exceeds the purchase price specified in the
related Incentive Stock Option Agreement.
(b) Amount Payable. Upon the exercise of a Stock Appreciation Right
related to an Option, the Participant shall be entitled to receive an amount
determined by multiplying: (i) the excess of the Fair Market Value of a share of
Common Stock on the day immediately preceding the date of exercise of such Stock
Appreciation Right over the per share purchase price under the related Option,
by (ii) the number of shares of Common Stock as to which such Stock Appreciation
Right is being exercised. Notwithstanding the foregoing, the Committee may limit
in any manner the amount payable with respect to any Stock Appreciation Right by
including such a limit in the Stock Appreciation Rights agreement evidencing the
Stock Appreciation Right at the time it is granted.
(c) Treatment of Related Options and Stock Appreciation Rights Upon
Exercise. Upon the exercise of a Stock Appreciation Right granted in connection
with an Option, the Option shall be canceled to the extent of the number of
shares of Common Stock as to which the Stock Appreciation Right is exercised,
and upon the exercise of an Option granted in connection with a Stock
Appreciation Right, the Stock Appreciation Right shall be canceled to the extent
of the number of shares of Common Stock as to which the Option is exercised or
surrendered.
5.4 Stock Appreciation Rights Unrelated to an Option
(a) Terms and Conditions. The Committee may grant to Participants
Stock Appreciation Rights unrelated to Options. Stock Appreciation Rights
unrelated to Options shall contain such terms and conditions as to
exercisability (subject to Section 5.7), vesting and duration as the Committee
shall determine, but in no event shall they have a term of greater than ten (10)
years. Upon the exercise of a Stock Appreciation Right unrelated to an Option,
the Participant shall be entitled to receive an amount determined by
multiplying: (i) the excess of the Fair Market Value of a share of Common Stock
on the day immediately preceding the date of exercise of such Stock Appreciation
Right over the Fair Market Value of a share of Common Stock on the date the
Stock Appreciation Right was granted, by (ii) the number of shares of Common
Stock as to which the Stock Appreciation Right is being exercised.
Notwithstanding the foregoing,
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the Committee may limit in any manner the amount payable with respect to any
Stock Appreciation Right by including such a limit in the Stock Appreciation
Rights agreement evidencing the Stock Appreciation Right at the time it is
granted.
(b) Termination of Employment. Stock Appreciation Rights unrelated to
Options shall expire three months after the termination of the Participant's
employment for any reason other than death, disability (as determined by the
Committee) or retirement (under the applicable retirement program of the Company
or as otherwise determined by the Committee), and shall be limited to the Stock
Appreciation Rights which could have been exercised by the Participant at the
date of termination of employment.
(c) Termination of Employment by Reason of Death, Disability or
Retirement. Upon the termination of a Participant's employment by reason of
death, disability (as determined by the Committee), or normal retirement (under
the applicable retirement program of the Company or as otherwise determined by
the Committee), Stock Appreciation Rights held at the termination date by such
Participant shall be fully exercisable, irrespective of whether some or all of
the Stock Appreciation Rights were fully exercisable in accordance with the
Stock Appreciation Rights agreement on that date. The Participant's Stock
Appreciation Rights shall expire unless exercised within one (1) year from the
date of such termination.
In the case of termination of a Participant's employment by reason of early
retirement within the meaning of the applicable retirement plan, Stock
Appreciation Rights which may be exercised shall be limited to the Stock
Appreciation Rights which could have been exercised by the Participant at the
date of such early retirement, except that the Committee, in its discretion, may
waive the vesting requirements of such Stock Appreciation Rights. The
Participant's Stock Appreciation Rights shall expire unless exercised within one
(1) year from the date of such termination.
The Committee may, at any time on or before the termination of the exercise
period of the Participant's Stock Appreciation Rights, extend the exercise
period if the Participant's employment is terminated for a reason specified in
this section. If so extended, the term of the exercise period shall expire on
the date specified by the Committee, which date shall be no later than the date
which is sixty (60) months following the date of the Participant's termination
of employment. In no event may the term of a Stock Appreciation Right, including
extensions, exceed the term of the Stock Appreciation Right established by the
Committee at the time of the grant.
5.5 Method of Exercise
Stock Appreciation Rights shall be exercised by a Participant only by a written
notice delivered to the Committee (in care of the Secretary of the Company) at
the Company's principal executive office, specifying the number of shares of
Common Stock with respect to which the Stock Appreciation Right is being
exercised. If requested by the Committee, the Participant shall deliver the
Stock Appreciation Rights Agreement evidencing any related Option to the
Secretary of the Company who shall endorse thereon a notation of such exercise
and return such Stock Appreciation Rights agreement to the Participant.
5.6 Form of Payment
Payment of the amount determined under Sections 5.3(b) or 5.4(a) may be made in
the discretion of the Committee solely in whole shares of Common Stock in a
number determined at their Fair Market Value on the day immediately preceding
the date of exercise of the Stock Appreciation Right, or solely in cash, or in a
combination of cash and Common Stock. If the Committee determines to make full
payment in Common Stock and the amount payable results in a fractional share of
Common Stock, payment for the fractional share of Common Stock will be made in
cash. Notwithstanding the foregoing, no payment in the form of cash may be made
upon the exercise of a Stock Appreciation Right to an officer of the Company who
is subject to liability under Section 16(b) of the Exchange Act, unless the
exercise of such Stock Appreciation Right is made either: (a) during the period
beginning on the third business day and ending on the twelfth business day
following the date of release for publication of the Company's quarterly or
annual statements of earnings; or
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(b) pursuant to an irrevocable election to receive cash made at least six months
prior to the exercise of such Stock Appreciation Right.
5.7 Restrictions
No Stock Appreciation Right may be exercised before the date six (6) months
after the date it is granted, except that this restriction shall not apply in
the event of death or disability (as determined by the Committee) of the
Participant occurring before the expiration of the six month period.
5.8 Acceleration Event
Notwithstanding anything contained in this Plan to the contrary, in the event of
an Acceleration Event, subject to Section 5.7, all Stock Appreciation Rights
shall become immediately and fully exercisable.
VI. PERFORMANCE UNITS
6.1 Terms and Conditions of Award
One Performance Unit shall have a cash value equal to the Fair Market Value of
one share of Common Stock. The number of Performance Units to which the
Participant is entitled is based upon achievement of certain Management
Objectives (as defined in Section 6.2) over a Performance Period (as defined in
Section 6.3) as determined by the Committee at the time of grant and as set
forth in a Performance Unit agreement. The Performance Unit agreement shall
specify the number of Performance Units granted and the Management Objectives
and applicable Performance Period. Awards of Performance Units shall be made
under the long-term incentive component of the Plan.
6.2 Management Objectives
Performance Units shall be deemed to have been earned by a Participant based
upon fulfillment of Management Objectives specified by the Committee at the time
of grant. The Management Objectives may be the Participant's length of service
and/or specified levels of earnings, return on assets, leverage ratio, loan loss
reserve ratio, earnings-per-share, overhead ratio or return on equity achieved
by the Company or any department or function of the Company in which the
Participant is employed. Management Objectives relating to any particular grant
of a Performance Unit need not be the same as those relating to any other grant,
whether made at the same or a different time.
6.3 Performance Period
The Performance Period with respect to any Performance Unit shall be the period
of time within which the Management Objectives relating to that grant are to be
achieved (which shall be no less than twelve (12) months). The Committee shall
determine the length of the Performance Period, which shall commence on the date
of grant of the Performance Units.
6.4 Earning of Award
The Committee shall, promptly after the date on which the necessary financial or
other information for a particular Performance Period becomes available,
determine the extent to which the Management Objectives have been achieved prior
to the expiration of the Performance Period and, if such Management Objectives
have been achieved, the restrictions on such Performance Units may, in the
discretion of the Committee, be deemed to have been satisfied prior to the
expiration of the Performance Period. Upon the expiration of the Performance
Period, if the Committee determines that the Management Objectives have not been
met, the Performance Units shall revert to the Company.
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6.5 Rights as Shareholder
During the Performance Period and subject to the restrictions set forth in
Article VI, a Participant may have the right, as determined by the Committee at
the time of the grant, to receive an amount equal to the dividends paid on the
Common Stock at the same time and in the same amount as other shareholders of
the Company (by assuming that, for purposes of such dividend, each Performance
Unit is equivalent to one share of Common Stock).
6.6 Termination of Employment
If any Participant's employment has terminated due to the Participant's death,
disability or retirement within the meaning of the applicable retirement plan
prior to the end of the Performance Period, and the Committee has determined
that applicable Management Objectives have been met, the extent to which
Performance Units shall be deemed to have been achieved shall be determined by
multiplying the amount of the Performance Units which would have been earned had
the Participant's employment not been terminated by a fraction, the numerator of
which is the number of full calendar months such Participant was employed during
the Performance Period and the denominator of which is the total number of full
calendar months in the Performance Period.
6.7 Form of Payment
In accordance with Section 6.4, upon the expiration of the Performance Period
and the determination by the Committee that the Management Objectives
established by the Committee at the time of grant of the Performance Units have
been met, the Company shall distribute cash to the Participant in an amount
equal to the number of Performance Units multiplied by the Fair Market Value of
the Common Stock as of the date of distribution.
6.8 Acceleration Event
Notwithstanding anything herein to the contrary, if an Acceleration Event has
occurred, then all restrictions on the Performance Units shall be deemed to have
been satisfied as of the date of the Acceleration Event, and such Performance
Units shall become fully payable on the date such Acceleration Event occurred.
VII. STOCK OPTION AWARDS TO NON-EMPLOYEE DIRECTORS
7.1 Terms and Conditions of Options
Subject to the following provisions, all stock option awards granted to
Directors of the Company ("Director Awards") under this Article VII shall be in
such form and upon such terms and conditions described herein.
7.2 Non-Qualified Stock Options
The terms of a Director Award shall, at the time of grant, provide that it will
not be treated as an incentive stock option within the meaning of Section 422 of
the Code.
7.3 Option Price
The option price per share shall be at least the Fair Market Value of the Common
Stock on the date the Director Award is granted.
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7.4 Term of Option
The term of a Director Award shall not exceed ten (10) years from the date of
grant.
7.5 Awards to Directors
Each active non-employee Director of the Company shall receive an initial option
to purchase 1,000 shares of Company stock upon the date of the first Board of
Directors meeting after his or her election as a new Director, or at the 1998
Annual Meeting of Shareholders for current Directors. At each subsequent Annual
Meeting of Shareholders, then active Directors will receive an option to
purchase of 1,000 shares of Company stock.
7.6 Payment
Payment for shares upon exercise of a Director Award shall be in such manner and
at such time or times as shall be determined by the Committee at the time of
grant, in cash, in Common Stock, including Restricted Stock, through the
surrender of Stock Options or Stock Appreciation Rights, or any combination
thereof, or by or through other contingent grants which the Committee determines
are consistent with the Plan's purposes and applicable law.
7.7 Exercise of Option
Director Awards shall be exercisable in whole or in part to the extent, and
subject to this section and Section 7.8, as follows: (i) fifty percent (50%) of
the shares subject to the Director Awards shall become exercisable on the third
anniversary of the date of grant of the Director Awards and (ii) an additional
twenty-five percent (25%) of the shares subject to the Director Awards shall
become exercisable on each of the next two anniversaries of the date of grant.
In no event, however, and notwithstanding anything in this section or Section
7.8 to the contrary, shall a Director Award be exercised after the expiration of
ten (10) years from the date of grant.
7.8 Termination of Service as Director
A Participant's Director Award shall expire three months after the termination
of the Director's service as a member of the Board of Directors of the Company
(or as may sooner occur under Section 7.4) for any reason other than death,
disability or retirement (defined as the termination of services as a Director
after at least five (5) years of service as a Director), and shall be limited to
the shares which could have been purchased by the Participant at the date of
termination.
7.9 Termination of Service as Director by Reason of Death, Disability or
Retirement
Upon the termination of a Director's services as a Director by reason of death,
disability, or retirement (as defined in Section 7.8 above), Director Awards
held at the termination date by such Director shall be exercisable by the
Director or his or her estate (in the case of death), irrespective of whether
the options were fully exercisable in accordance with Section 7.7 on that date.
Except as otherwise set forth in this section, the Director's Director Award
shall expire unless exercised within one year from the date of such termination.
The Committee may, at any time on or before the termination of the exercise
period of the Director Award, extend the exercise period if the Director's
services as a Director are terminated for a reason specified in this section. If
so extended, the term of the exercise period shall expire on the date specified
by the Committee, which date shall be no later than the date which is 60 months
following the date of the Director's termination of services. In no event may
the term of a Director Award, including extensions, exceed the term set forth in
Section 7.4.
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7.10 Acceleration Event
Notwithstanding anything herein to the contrary, if an Acceleration Event has
occurred, then all of the shares subject to the Director Award shall immediately
become earned and the Director Award shall become exercisable with respect to
such shares on the date of such Acceleration Event.
VIII. ADDITIONAL PROVISIONS
8.1 General Restrictions
Each grant under the long-term incentive component of the Plan shall be subject
to the requirement that if the Committee shall determine, at any time, that: (a)
the listing, registration or qualification of the shares of Common Stock subject
or related thereto upon any securities exchange or under any state or federal
law; or (b) the consent or approval of any government regulatory body, or (c) an
agreement by the Participant with respect to the disposition of shares of Common
Stock, is necessary or desirable as a condition of, or in connection with, the
granting or the issuance or purchase of shares of Common Stock thereunder, such
grant may not be consummated in whole or in part unless such listing,
registration, qualification, consent, approval or agreement shall have been
effected or obtained free of any conditions not acceptable to the Committee.
8.2 Adjustments for Changes in Capitalization
In the event of a reorganization, recapitalization, stock split, stock dividend,
combination of shares, rights offer, liquidation, dissolution, merger,
consolidation, spin-off or sale of assets, or any other change in or affecting
the corporate structure or capitalization of the Company, the Board of Directors
shall make such adjustments as the Committee may recommend, and as the Board of
Directors in its discretion may deem appropriate, in the number and kind of
shares authorized under the long-term incentive component of the Plan, in the
number, option price or kind of shares covered by the grants and in any
outstanding grants under the Plan in order to prevent substantial dilution or
enlargement thereof.
8.3 Amendments
The Board of Directors may discontinue the Plan at any time, and may amend it
from time to time, but no amendment, without approval by shareholders, may (a)
increase the total number of shares which may be issued under the long-term
incentive component of the Plan, except as provided in Section 8.2 hereof, (b)
change the class of employees of the Company to whom awards may be made, or (c)
cause awards under the Plan to no longer comply with Rule 16b-3 of the Exchange
Act or any other federal or state statutory or regulatory requirements.
8.4 Modification or Substitution
Subject to the terms of the Plan, the Committee may modify outstanding awards or
accept the surrender of outstanding awards and make new awards in substitution
for them under the long-term incentive component of the Plan, provided that the
modification does not adversely alter or impair any rights or obligations of the
Participant without the Participant's consent and does not constitute
"repricing" as such term is defined in 17 CFR 229.402(i)(1).
8.5 Cancellation of Awards
Any grant under the long-term incentive component of the Plan may be canceled at
any time with the consent of the Participant, and a new grant may be provided to
such Participant in lieu thereof, provided the cancellation and reissuance does
not constitute "repricing" as such term is defined in 17 CFR 229.402(i)(1).
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8.6 Shares Subject to the Plan
Shares distributed pursuant to the long-term incentive component of the Plan
shall be made available from authorized but unissued shares or from shares
purchased or otherwise acquired by the Company for use in the Plan, as shall be
determined from time to time by the Committee.
8.7 Rights of a Shareholder
Participants under the Plan, unless otherwise provided by the Plan, shall have
no rights as shareholders by reason thereof unless and until certificates for
shares of Common Stock are issued to them.
8.8 Withholding
(a) The Company shall have the right to deduct from any distribution
of cash or Common Stock to any Participant an amount equal to the federal, state
and local income taxes and other amounts as may be withheld (the "Withholding
Taxes") with respect to any grant under the Plan. If a Participant is to
experience a taxable event in connection with the receipt of cash or shares of
Common Stock pursuant to an Option exercise or payment of a grant (a "Taxable
Event"), the Participant shall pay the Withholding Taxes to the Company prior to
the issuance of such shares of Common Stock. In satisfaction of the obligation
to pay Withholding Taxes to the Company, the Participant may make a written
election (the "Tax Election"), which may be accepted or rejected in the
discretion of the Committee, to have withheld a portion of the cash or shares of
Common Stock then issuable to the Participant having an aggregate Fair Market
Value on the day immediately preceding the date of such issuance equal to the
Withholding Taxes, provided that in respect of a Participant who may be subject
to liability under section 16(b) of the Exchange Act either: (i) in the case of
a Taxable Event involving an Option, grant of Restricted Stock, or Stock
Appreciation Rights (A) the Tax Election is made at least six (6) months prior
to the date of the Taxable Event and (B) the Tax Election is irrevocable with
respect to all Taxable Events of a similar nature occurring prior to the
expiration of six (6) months following a revocation of the Tax Election; or (ii)
in the case of the exercise of an Option (A) the Participant makes the Tax
Election at least six (6) months after the date the Option was granted, (B) the
Option is exercised during the ten (10) day period beginning on the third
business day and ending on the twelfth business day following the release for
publication of the Company's quarterly or annual statement of sales and earnings
(the "Window Period") and (C) the Tax Election is made during the Window Period
in which the related Option is exercised or prior to such Window Period and
subsequent to the immediately preceding Window Period; or (iii) in the case of a
Taxable Event relating to the payment of any award (A) the Participant makes the
Tax Election at least six (6) months after the date the Restricted Stock or
Stock Appreciation Rights were granted and (B) the Tax Election is made (x) in
the case of a Taxable Event occurring within a Window Period, during the Window
Period in which the Taxable Event occurs, or (y) in the case of a Taxable Event
not occurring within a Window Period, during the Window Period immediately
preceding the Taxable Event relating to the Restricted Stock or Stock
Appreciation Rights. Notwithstanding the foregoing, the Committee may, by the
adoption of rules or otherwise, (1) modify the provisions of this section as may
be necessary to ensure that the Tax Elections will be exempt transactions under
section 16(b) of the Exchange Act, and (2) permit Tax Elections to be made at
such other times and subject to such other conditions as the Committee
determines will constitute exempt transactions under section 16(b) of the
Exchange Act.
(b) Except in the case of Non-Qualified Stock Option grants to
non-management Directors, the Committee shall have the authority, at the time of
grant of a Non-Qualified Stock Option, Restricted Stock, Stock Appreciation
Right or Performance Unit under the Plan or at any time thereafter, including
upon any event constituting an Acceleration Event (as hereinafter defined), to
grant tax bonuses to designated Participants to be paid upon their exercise of
Non-Qualified Stock Options or payment in respect of Restricted Stock, Stock
Appreciation Rights or Performance Units granted hereunder. The amount of any
such payments shall be determined by the Committee but shall not be greater than
the lesser of: (a) the difference between the option price (as established
pursuant to Section 3.3, subject to adjustment,
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<PAGE>
if any, pursuant to Section 8.2) and the Fair Market Value, at the time of
exercise of the option, of the shares of Common Stock acquired (the "Spread");
or (b) the Spread times a fraction the numerator of which is the maximum federal
individual income tax rate payable by a Participant optionee on such Spread (at
the date of exercise) and the denominator of which is 50 percent (except that,
with respect to Restricted Stock, Stock Appreciation Rights or Performance
Units, the "Spread," for purposes of applying this section, shall be the
difference between the amount paid for the Restricted Stock, Stock Appreciation
Right or Performance Unit, as applicable, and the Fair Market Value of the
Common Stock (or cash) distributed). The Committee shall have full authority in
its absolute discretion to determine the amount of any such tax bonus (subject
to the limits of this section) and the terms and conditions affecting the
vesting and payment thereof. Such supplemental payment shall be made in cash.
8.9 Nonassignability
Except as expressly provided in the Plan, no grant shall be transferable except:
(i) by gift to the grantee's spouse or natural, adopted or step-children or
grandchildren ("Immediate Family Members") or to a trust for the benefit of one
or more of the grantee's Immediate Family Members or to a family charitable
trust established by the grantee or the grantee's family, but only with the
approval of the Committee; (ii) by will; (iii) by the laws of descent and
distribution; or (iv) by a qualified domestic relations order ("QDRO") as
defined by the Code or Title I of the Employee Retirement Income Security Act of
1974, as amended, or the rules thereunder. Any Stock Option award transferred by
the grantee under Section (i) above may not be subsequently transferred by the
transferee. During the lifetime of the Participant, except as expressly provided
in the Plan, grants under the Plan shall be exercisable only by such Participant
or by the guardian or legal representative of such Participant or pursuant to a
QDRO.
8.10 Nonuniform Determinations
Except as otherwise set forth in the Plan, determinations by the Committee under
the Plan (including, without limitation, determinations of the persons to
receive awards under either the annual or long-term incentive components of the
Plan, the form, amount and timing of such awards, and the terms and provisions
of such awards and the agreements evidencing the same) need not be uniform and
may be made by it selectively among persons who receive, or are eligible to
receive, awards under the Plan, whether or not such persons are similarly
situated.
8.11 No Guarantee of Employment
Awards under the Plan shall not constitute an assurance of continued employment
for any period.
8.12 Effective Date; Duration
The Plan shall become effective as of March 18, 1998, subject to approval by
shareholders at the Company's Annual Meeting of Shareholders. No awards may be
made under the Plan after March 17, 2003, but awards theretofore made may extend
beyond such date.
8.13 Fair Market Value
The phrase Fair Market Value on any date means the average of the high and low
sales prices of the shares of Common Stock on such date on the principal
national securities exchange on which such shares of Common Stock are listed or
admitted to trading. If the shares of Common Stock on such date are not listed
or admitted to trading, the Fair Market Value shall be the value established by
the Board in good faith and, in the case of an Incentive Stock Option, in
accordance with Section 422 of the Code.
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<PAGE>
8.14 Acceleration Event
Notwithstanding anything herein to the contrary, if a Change in Control of the
Company occurs, or if the Committee determines in its sole discretion that an
Acceleration Event has occurred, then all Incentive Stock Options, Non-Qualified
Stock Options, and Stock Appreciation Rights shall become fully exercisable and
all restrictions on the Restricted Stock Award and Performance Units shall
expire as of the date such Change in Control occurred or the Committee
determines that an Acceleration Event has occurred.
For purposes of the Plan, an Acceleration Event includes, but is not limited to,
any Change in Control of the Company, which shall be deemed to have occurred if
the conditions set forth in any one of the following paragraphs shall have been
satisfied:
(i) any person, as defined in Section 3(a)(9) of the Exchange Act, as
such term is modified in Sections 13(d) and 14(d) of the Exchange Act
(other than (A) any employee plan established by the Company, which for
these purposes shall be deemed to be the Company and any corporation,
association, joint venture, proprietorship or partnership which is
connected with the Company either through stock ownership or through common
control, within the meaning of Sections 414(b) and (c) and 1563 of the
Internal Revenue Code of 1986 as amended, (B) the Company or any of its
affiliates (as defined in Rule 12b-2 promulgated under the Exchange Act),
(C) an underwriter temporarily holding securities pursuant to an offering
of such securities, or (D) a corporation owned, directly or indirectly, by
stockholders of the Company in substantially the same proportions as their
ownership of the Company) (a "Person"), is or becomes the beneficial owner
(as defined in Rule 13d-3 promulgated under the Exchange Act), directly or
indirectly, of securities of the Company (not including in the securities
beneficially owned by such Person any securities acquired directly from the
Company) representing 25% or more of the combined voting power of the
Company's then outstanding voting securities;
(ii) during any period of up to two consecutive years (not including
any period prior to the effective date of this Plan) individuals who, at
the beginning of such period, constitute the Board cease for any reason to
constitute at least a majority thereof, provided that any person who
becomes a director subsequent to the beginning of such period and whose
nomination for election is approved by at least two-thirds of the directors
then still in office who either were directors at the beginning of such
period or whose election or nomination for election was previously so
approved (other than a director (A) whose initial assumption of office is
in connection with an actual or threatened election contest relating to the
election of the directors of the Company, as such terms are used in Rule
14a-11 of Regulation 14A under the Exchange Act or (B) who was designated
by a Person who has entered into an agreement with the Company to effect a
transaction described in clause (i), (iii) or (iv) hereof) shall be deemed
a director as of the beginning of such period;
(iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation (other than (A) a
merger or consolidation that would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent,
either by remaining outstanding or by being converted into voting
securities of the surviving entity or any parent thereof, in combination
with the ownership of any trustee or other fiduciary holding securities
under an employee benefit plan of any corporation, at least 51% of the
combined voting power of the voting securities of the Company or such
surviving entity or any parent thereof outstanding immediately after such
merger or consolidation, or (B) a merger or consolidation effected to
implement a recapitalization of the Company (or similar transaction) in
which no Person is or becomes the beneficial owner (as defined in clause
(i) above), directly or indirectly, of securities of the Company (not
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<PAGE>
including in the securities beneficially owned by such Person any
securities acquired directly from the Company representing 25% or more of
the combined voting power of the Company's then outstanding voting
securities); or
(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by
the Company of all or substantially all of the Company's assets, other than
a sale or disposition by the Company of all or substantially all of the
Company's assets to an entity, at least 75% of the combined voting power of
the voting securities of which are owned by persons in substantially the
same proportions as their ownership of the Company immediately prior to
such sale.
8.15 Securities Laws
All references to provisions of the federal securities laws are to such
provisions as in effect on January 1, 1998, without regard to any subsequent
amendments of, changes to or revocation of such provisions.
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<PAGE>
REVOCABLE PROXY
CNB, Inc.
201 North Marion Street
Lake City , Florida 32055
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
KNOW ALL MEN BY THESE PRESENTS that I, the undersigned shareholder of CNB,
Inc. (the "Company"), Lake City, Florida, do hereby nominate, constitute and
appoint Mr. K. C. Trowell, and Ms. Joyce Bruner, or any one or more of them my
true and lawful proxy and attorney(s) with full power of substitution for me and
in my name, place and stead, to represent and vote all of the common stock par
value $.01 per share of the Company, standing in my name on its books on March
27, 1998 at the Annual Meeting of Shareholders to be held on Wednesday, April
15, 1998, at 10:00 a.m. Eastern Standard Time at the Lake City Country Club
which is located on Service Road, off U.S. 90 West by I-75, Lake City, Florida.
PROPOSAL 1. Election of the following Directors:
Thomas R. Andrews [ ] FOR [ ] WITHHELD
Audrey S. Bullard [ ] FOR [ ] WITHHELD
Raymon Land, Sr [ ] FOR [ ] WITHHELD
Marvin H. Pritchett [ ] FOR [ ] WITHHELD
William Streicher [ ] FOR [ ] WITHHELD
K.C. Trowell [ ] FOR [ ] WITHHELD
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" THE ELECTION
OF EACH OF THE NOMINEES.
PROPOSAL 2. Approval of the Performance-Based Incentive Plan of CNB, Inc.
[ ] FOR [ ] WITHHELD [ ] AGAINST
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" APPROVAL OF
THE PERFORMANCE-BASED INCENTIVE PLAN OF CNB, INC.
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the Annual Meeting of Shareholders.
IMPORTANT: PLEASE SIGN AND DATE ON REVERSE
<PAGE>
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, the proxy will
be voted FOR Proposals 1 and 2. Should any other matter requiring a vote of the
shareholders arise, the proxies named above are authorized to vote in accordance
with their best judgment in the interest of the Company. The Board of Directors
is not aware of any matter which is to be presented for action at the meeting
other than as set forth on this proxy. Please sign exactly as your name appears
hereon. When shares are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian, please give full title
as such. If a corporation, please sign the full corporate name by president or
other authorized officer. If a partnership, please sign in partnership name by
authorized person.
The undersigned acknowledges receipt of a Notice of Annual Meeting of
Shareholders and a Proxy Statement for the Annual Meeting prior to the signing
of this proxy.
This proxy may be revoked at any time prior to the time it is voted at
Annual Meeting of the Shareholders.
-------------------------------------
Date
-------------------------------------
Signature
-------------------------------------
Signature (if jointly held)
-------------------------------------
Print Name Here
Dated: March 27, 1998
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
SELF-ADDRESSED ENVELOPE OR OTHERWISE TO CNB, INC. P.O. BOX 3239, LAKE CITY,
FLORIDA 32056.
IF YOU DO NOT SIGN AND RETURN A PROXY OR ATTEND THE MEETING AND VOTE, YOUR
SHARES CANNOT BE VOTED.
