<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] 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 Rule 14a-11(c) or Rule 14a-12
</TABLE>
COMMUNITY FINANCIAL GROUP, 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:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 16, 2000
Notice is hereby given that the Annual Meeting of Shareholders of Community
Financial Group, Inc. ("the Company") will be held on May 16, 2000 at 9:00 a.m.
(Local Time), at the Nashville City Club, 20th Floor, SunTrust Bank Building,
201 4th Avenue North, Nashville, Tennessee 37219. The meeting will be held for
the following reasons:
1. To elect three Class II Directors to serve until the 2003 annual
meeting of shareholders or until their successors are elected and
qualified; and
2. To transact such other business as may properly be brought before the
Annual Meeting, or any adjournment thereof.
The Board of Directors has fixed the close of business on March 23, 2000, as the
record date for determining those shareholders who will be entitled to notice of
and to vote at the meeting and any adjournments thereof.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN, AND
RETURN THE ENCLOSED PROXY. YOUR PROXY MAY BE REVOKED AT ANY TIME PRIOR TO THE
TIME IT IS VOTED AS PROVIDED IN THE PROXY STATEMENT.
Your attention is directed to the Proxy Statement accompanying this notice for a
more complete statement regarding matters to be acted upon at the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Joan B. Marshall
-------------------------------------
Joan B. Marshall, Corporate Secretary
Nashville, Tennessee
April 10, 2000
<PAGE> 3
COMMUNITY FINANCIAL GROUP, INC.
L&C Tower, 2nd Floor
401 Church Street
Nashville, Tennessee 37219
PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation of proxies
by the Board of Directors of Community Financial Group, Inc. ("the Company") for
use at the Annual Meeting of Shareholders of the Company, to be held at the
Nashville City Club, 20th Floor, SunTrust Bank Building, 201 4th Avenue North,
Nashville, Tennessee 37219. at 9:00 a.m. (Local Time), on May 16, 2000, and at
all adjournments thereof. The presence in person or by proxy of holders of a
majority of the outstanding shares of the common stock entitled to vote at the
Annual Meeting constitutes a quorum for the purpose of transacting business at
the meeting.
This Proxy Statement and the Annual Report of the Company for the fiscal year
ended December 31, 1999 were first mailed to shareholders on or about April 10,
2000, to shareholders of record as of March 23, 2000.
PURPOSE OF MEETING
At the Annual Meeting, the shareholders will be asked:
1. To elect three Class II Directors to serve until the 2003 annual
meeting of shareholders or until their successors are elected and
qualified; and
2. To transact such other business as may properly be brought before the
Annual Meeting, or any adjournment thereof.
GENERAL PROXY STATEMENT INFORMATION
Outstanding Securities and Voting Rights
There were issued and outstanding 3,831,191 shares of the Company's common stock
on March 23, 2000, which has been fixed as the record date for purposes of
determining shareholders entitled to notice of, and to vote at, the Annual
Meeting. Only holders of the Company's common stock will be entitled to vote,
and may vote, in person or by proxy, one vote for each share of common stock
held of record on the books of the Company as of the record date, on any matter
submitted to a vote of the shareholders. There is no provision for cumulative
voting. If a properly executed proxy is returned and the shareholder has
abstained from voting on any matter, the shares represented by the proxy will be
considered present at the meeting for purposes of determining a quorum, but will
not be considered to have been voted in favor of such matters. Any broker
non-votes will be considered present at the meeting for purposes of determining
a quorum, but will not be considered to be represented at the meeting for
calculating the vote on such matters.
<PAGE> 4
REVOCABILITY OF PROXIES
A proxy for use at the Annual Meeting is enclosed. Any shareholder who executes
and delivers such proxy has the right to revoke it at any time before it is
exercised by filing with the Corporate Secretary a written statement revoking
the proxy, or a duly executed proxy bearing a later date. In addition, the
powers of the proxy holders will be revoked if the person executing the proxy is
present at the meeting and elects to vote in person.
Subject to such revocation, all shares represented by a properly executed proxy
received in time for the Annual Meeting will be voted by the proxy holders, in
accordance with the instructions on the proxy. In the absence of contrary
instructions, the shares represented by proxy will be voted FOR the election of
directors described herein under the "Election of Directors;" and at their
discretion on any other items as may be properly brought before the meeting.
SOLICITATION OF PROXIES
This solicitation of proxies is being made by the Board of Directors of the
Company. The expense of preparing, printing and mailing these proxy materials
will be borne by the Company. It is contemplated that proxies will be solicited
principally through the use of mail, but officers, directors and employees of
the Company may solicit proxies personally or by telephone, without receiving
special compensation. Although there is no formal agreement to do so, the
Company may reimburse banks, brokerage houses, depositories and custodians,
nominees and fiduciaries for mailing proxy materials to their principals.
STOCK OWNERSHIP
Security Ownership of Certain Beneficial Owners
The following table sets forth information as to the beneficial ownership of
each person known to the Company to own more than 5% of the outstanding common
stock as of January 31, 2000. For purposes of calculating the percent of Common
Stock beneficially owned, all shares that are subject to options that are
exercisable within 60 days are deemed to be presently outstanding.
<TABLE>
<CAPTION>
Name and Address of Amount/Nature of
Beneficial Owner Beneficial Owner % of Class
---------------- ---------------- ----------
<S> <C> <C>
Leon Moore 411,235* 10.20%
2229 Nashville Pike Individual, Trust
Gallatin, TN 37066 and Corporate Ownership
</TABLE>
*Includes 381,027 shares held directly by Mr. Moore; 8,617 shares held by the
Leon Moore Family Trust of which Mr. Moore serves as co-trustee; 18,091 shares
owned by a corporation of which Mr. Moore is a shareholder, director, and chief
executive officer; and 3,500 shares that he has the right to purchase upon the
exercise of stock options.
Security Ownership of Directors and Executive Officers
The following table sets forth the names of all current directors, those
executive officers included in the Summary Compensation Table, and directors and
executive officers as a group, their principal occupations, the number of shares
and percentage of the Company's outstanding Common Stock beneficially owned as
of January 31, 2000. Except as indicated in the notes to the following table,
the persons indicated possess sole voting and investment power with respect to
all shares set forth opposite their names.
2
<PAGE> 5
<TABLE>
<CAPTION>
Name of Amount/Nature of Percent of
Beneficial Owner Beneficial Owner(1) Class(1) Principal Occupation
---------------- ------------------- ---------- --------------------
<S> <C> <C> <C>
J. B. Baker 40,871(2) 1.01% President & CEO
Volunteer Express, Inc.
Anne J. Cheatham 20,571(3) .51% Senior Vice President
Community Financial Group, Inc.
Julian C. Cornett 45,329(3) 1.12% Executive Vice President
Community Financial Group, Inc.
Jo D. Federspiel 14,110(2) .35% President
Deason International, Inc.
Richard H. Fulton 45,505(4) 1.13% Chairman
Fulton & Associates
Mack S. Linebaugh, Jr. 75,623(3) 1.88% Chairman, President & CEO
Community Financial Group, Inc.
Leon Moore 411,235(5) 10.20% President & CEO
ShoLodge, Inc.
Perry W. Moskovitz 41,632(2) 1.03% Senior Vice President
Aon Risk Services, Inc.
C. Norris Nielsen 33,981(2) .84% Partner
MacNiel Advisors
David M. Resha 8,373(2) .21% Chief Operating Officer
Finova Mezzanine Capital, Inc.
G. Edgar Thornton 47,655(2) 1.18% President
Thornton & Harwell Agency, Inc.
All Directors and Executive 804,540 19.95%
Officers as a Group (13 persons)
</TABLE>
(1) Under the rules of the Securities and Exchange commission, a person is
deemed to be a "beneficial owner" of a security if that person has or
shares "voting power," which includes the power to vote or direct the
voting of such security, or "investment power," which includes the power to
dispose or direct the disposition of such security. A person is also deemed
to be a beneficial owner of any securities of which that person has the
right to acquire beneficial ownership within 60 days. Under these rules,
more than one person may be deemed to be a beneficial owner of the same
securities and a person may be deemed to be a beneficial owner of
securities as to which he has no beneficial interest. For purposes of
calculating the percent of Common Stock beneficially owned,all shares that
are subject to options that are exercisable within 60 days are deemed to be
presently outstanding.
(2) Includes 3,500 shares of Common Stock purchasable upon the exercise of
stock options.
(3) Includes the following shares subject to exercisable stock options:
Ms. Cheatham, 6,100 shares; Mr. Cornett, 32,400 shares; Mr. Linebaugh,
58,000 shares; all other executive officers, 7,600 shares. Also includes
interests in shares held in Associates Stock Purchase Plan and the
Retirement Savings Plan (401k).
(4) Includes 2,326 shares held by Mr. Fulton's wife directly with respect to
which Mr. Fulton disclaims beneficial ownership and 3,500 shares that he
has the right to purchase upon the exercise of stock options.
3
<PAGE> 6
(5) Includes 18,091 shares owned by ShoLodge, Inc. of which Mr. Moore is an
executive officer, director, and shareholder; 8,617 shares held in the Leon
Moore Family Trust of which Mr. Moore serves as co-trustee; and 3,500
shares that he has the right to purchase upon the exercise of stock
options.
PROPOSAL 1
ELECTION OF DIRECTORS
In accordance with the Charter Amendment approved by Shareholders at the 1998
Annual Meeting, the Board of Directors is divided into three classes of
Directors serving staggered three-year terms. The term of Class II directors
expires at this annual meeting. The terms of Class I and Class III directors
expire as stated below. The Board of Directors proposes the election of three
Class II directors. All of the nominees are presently directors of the Company.
Each Class II director elected at the meeting will hold office until the 2003
annual meeting of shareholders or until their respective successors are duly
elected and qualified.
At the meeting each share of common stock shall have one (1) vote which may be
cast by the owner of record or by his authorized representative. The candidates
receiving the largest number of votes shall be elected.
In the election of directors, a shareholder may withhold authority for the proxy
holder(s) to vote for all or any one of the nominees identified herein by so
indicating on the enclosed proxy. Unless authority to vote for the nominees is
so withheld, the proxy holders will vote the proxies received by them for the
election of nominees identified herein. If any nominee identified herein should
be unable or declines to serve, which is not now anticipated, the Board of
Directors shall have the discretionary authority to name a substitute who shall
be designated to fill the vacancy.
NOMINEES FOR DIRECTORS
Class II - Term Expiring at the 2003 Annual Meeting
Jo D. Federspiel
Ms. Federspiel, 65, is President of Deason International, Inc., a company which
links U.S. companies with business expansion opportunities in the international
market. Ms. Federspiel was elected a director of the Company in May, 1996 having
served as a director of The Bank of Nashville since September 21, 1993.
Richard H. Fulton
Mr. Fulton, 73, is Chairman of Fulton & Associates, a consulting firm which
enables the private and public sectors to form partnerships providing public
service more efficiently and economically. Mr. Fulton was elected a director of
the Company in May, 1996 having served as a director of The Bank of Nashville
since July 18, 1989. He served as Chairman of the Board of The Bank of Nashville
from 1989 through 1992 and Chairman Emeritus from 1992 through 1994.
Perry W. Moskovitz
Mr. Moskovitz, 65, is Senior Vice President of Aon Risk Services, Inc., an
international insurance brokerage and risk management firm. Prior to this
affiliation in 1998, Mr. Moskovitz served as Senior Vice President of Sedgwick,
Inc. He also serves as President of Perry W. Moskovitz Company, Incorporated, an
investment and development company. Mr. Moskovitz was elected a director of the
Company in May, 1996 having served as a director of The Bank of Nashville since
July 18, 1989.
4
<PAGE> 7
MEMBERS OF BOARD OF DIRECTORS CONTINUING IN OFFICE
Class I - Term Expiring at the 2002 Annual Meeting
L. Leon Moore
Mr. Moore, 59, is President, Chief Executive Officer and a Director of ShoLodge,
Inc., a corporation engaged in the ownership, management and franchising of
lodging facilities. Mr. Moore was elected a director of the Company in May, 1996
having served as a director of The Bank of Nashville since July 18, 1989.
C. Norris Nielsen
Mr. Nielsen, 61, is a Partner of MacNiel Advisors which serves as the general
partner of the Iroquois Fund and the Saint Andrews Fund, two privately held
equity investment partnerships. Mr. Nielsen was elected a director of the
Company in May, 1996 having served as a director of The Bank of Nashville since
June 27, 1995.
G. Edgar Thornton
Mr. Thornton, 75, is President of Thornton & Harwell Agency, Inc., a general
insurance agency specializing in property/casualty insurance and contract bonds.
Mr. Thornton also serves as President of Smyrna Air Center. Mr. Thornton was
elected a director of the Company in May, 1996 having served as a director of
The Bank of Nashville since May 21, 1991.
Class III - Term Expiring at the 2001 Annual Meeting
J. B. Baker
Mr. Baker, 52, is President and Chief Executive Officer of Volunteer Express,
Inc. and co-owner of Five Star Express, Inc. Mr. Baker was elected a director of
the Company in May, 1996 having served as a director of The Bank of Nashville
since July 12, 1994.
Mack S. Linebaugh, Jr.
Mr. Linebaugh, 61, is Chairman, President and Chief Executive Officer of
Community Financial Group, Inc. and The Bank of Nashville. Mr. Linebaugh was
elected a director of the Company in May, 1996 having served as a director
of The Bank of Nashville since September 8, 1992.
David M. Resha
Mr. Resha, 53, is Chief Operating Officer of Finova Mezzanine Capital, Inc.
(formerly Sirrom Capital Corporation), a specialty finance company which offers
financing and management services to small, growing companies. Mr. Resha was
elected a director effective February 10, 1998.
BOARD ATTENDANCE AND COMPENSATION
All members of the Company's Board of Directors are also members of the Board of
Directors of the Bank. The Company's By-Laws provide for an Audit Committee and
other committees as the Board of Directors may appoint from time to time. At the
present time, Community Financial Group, Inc. has no committees other than an
Audit Committee. During 1999, The Bank of Nashville, a wholly owned subsidiary
of the Company, had four (4) standing committees: the
5
<PAGE> 8
Compensation Committee, the Finance Committee, the Marketing Committee and the
Trust Committee. In 1999, the Company's Board of Directors met 11 times with 10
of those meetings being joint meetings with the Bank's Board of Directors.
Additionally the Bank's Board of Directors met 7 times. All incumbent Directors
attended at least 75% of the aggregate number of the meetings held by the
Company's Board of Directors and by the Bank's Board of Directors and Committees
during the period for which she/he served as a Director.
In 1999, the Directors of the Company were not compensated by the Company, but
as Directors of the Bank, they were each paid an annual retainer of $3,000 as
compensation for services on the Board. In addition, pursuant to the provisions
of the Company's 1997 Nonstatutory Stock Option Plan, each outside director of
the Company received 5,000 options to purchase the Company's stock. Directors
were also paid for attendance at each meeting of the Board and Committees on
which they serve. A meeting fee of $600 was paid for each Board of Directors'
and Finance Committee meeting attended. A meeting fee of $400 was paid for
attendance at all other committee meetings. The Chairman of each Committee
received an additional $100 for each meeting chaired during the year. Members of
the Company's Board who were also employees of the Company or the Bank did not
receive any meeting or committee fees. In 1999, all fees due the Directors were
paid in the form of shares of Common Stock of the Company. The number of shares
was determined based upon the market value of the Common Stock and the
Director's attendance at Board and Committee meetings.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors and greater than 10% shareholders ("Reporting
Persons") to file initial reports of ownership and reports of changes in
ownership with the Securities and Exchange Commission. Executive officers and
directors are required by SEC regulations to furnish the Company with copies of
all Section 16(a) forms they file. Based solely on a review of such forms
furnished to the Company and written representations from such Reporting Persons
with respect to the period from January 1, 1999 through December 31, 1999, all
filing requirements applicable to Reporting Persons have been met.
COMMITTEES OF THE BOARD OF DIRECTORS
The By-Laws of the Company provide for an Audit Committee consisting of at least
three (3) members of the Board of Directors appointed by the Board, none of whom
are active officers of the Company. The Committee is to meet once each year, or
more often if required by the Chairman of the Board or the President and shall
examine, or cause to be examined, such books, assets, and securities of the
Company as it deems necessary or proper, or as it may be directed to examine. A
record shall be kept of all such examinations, which shall be certified by the
Committee serving, and presented to the Board of Directors at its next meeting.
The Audit Committee shall state whether the Company is in a sound and solvent
condition, whether adequate internal audit controls and procedures are being
maintained, and shall recommend to the Board such changes as shall be deemed
advisable. The Audit Committee, upon its own recommendation and with the
approval of the Board of Directors, may employ a qualified firm of Certified
Public Accountants to make the examination and audit of the Company. If such a
procedure is followed, the one annual examination and the audit by such firm of
accountants and the presentation of its report to the Board of Directors, shall
be deemed sufficient to comply with the requirements of the Audit Committee. The
current members of the Company's Audit Committee are: Messrs. Moskovitz
(Chairman), Moore, Nielsen, Resha, and Ms. Federspiel. The Audit Committee of
the Company met once in 1999.
6
<PAGE> 9
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTION OF THE AFOREMENTIONED
NOMINEES AS DIRECTORS OF THE COMPANY. IT IS INTENDED THAT SHARES REPRESENTED BY
PROXIES WILL, UNLESS CONTRARY INSTRUCTIONS ARE GIVEN, BE VOTED IN FAVOR OF THEIR
ELECTION.
EXECUTIVE OFFICERS
The following information regarding each person who currently serves as an
executive officer of the Company is listed below: name, age, current position
with the Company, and principal occupations during the past five years. The
executive officers serve at the discretion of the Board of Directors in their
various capacities. Each of the executive officers also serves as an executive
officer of The Bank of Nashville.
Officer Age
------- ---
Mack S. Linebaugh, Jr. 61
Chairman of the Board, President, Chief Executive Officer, and a Director of the
Company and the Bank. Mr. Linebaugh joined the Bank on September 2, 1992.
Julian C. Cornett 55
Executive Vice President of the Company and the Bank. Mr. Cornett joined the
Bank on October 13, 1992 and is responsible for all aspects of Credit
Administration.
Anne J. Cheatham 58
Senior Vice President of the Company and the Bank. Ms. Cheatham joined the Bank
on January 3, 1989 and is responsible for Bank Administration.
Joan B. Marshall 51
Senior Vice President and Corporate Secretary of the Company and the Bank. Ms.
Marshall joined the Bank on January 17, 1989 and is responsible for maintaining
the official records of the Company and shareholder relations.
T. Wayne Hood 38
Senior Vice President and General Counsel of the Company and the Bank. Mr. Hood
joined the Bank on March 29, 1993 and currently also serves as Compliance
Officer.
7
<PAGE> 10
COMPENSATION OF MANAGEMENT AND OTHER INFORMATION
Summary Compensation Table
The following table sets forth, as to the Chief Executive Officer and the most
highly compensated Executive Officers (other than the CEO) of the Company and
its subsidiary, The Bank of Nashville, whose total compensation exceeded
$100,000, certain information regarding cash compensation received from the
Company or the Bank for services performed in all capacities during the last
three fiscal years. The officers were not compensated by the Company. All
compensation was paid by the Bank.
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards Payouts
------------------------------------ ------------------------------
(2)
Other Restricted Securities (3)
Annual Stock Underlying All Other
Name and (1) Compen- Awards Options LTIP Compen-
Principal Position Year Salary Bonus sation ($) (#) Payouts sation
------------------ ---- ----------------------------- ------------------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mack S. Linebaugh, Jr. 1999 $200,000 $10,217 $20,000 -0- -0- -0- $27,490
Chairman, CEO 1998 $200,000 $ 5,895 $10,000 -0- -0- -0- $28,285
President/Director 1997 $189,000 $ 9,450 $ 7,500 -0- -0- -0- $11,479
Julian C. Cornett 1999 $152,000 $ 7,639 $12,500 -0- -0- -0- $13,931
Executive Vice 1998 $152,000 $ 4,491 $ 5,000 -0- -0- -0- $13,809
President 1997 $144,700 $ 7,235 $ 5,000 -0- -0- -0- $ 7,830
Anne J. Cheatham 1999 $102,000 $ 5,184 $ 7,500 -0- -0- -0- $12,401
Senior Vice President 1998 $ 98,000 $ 3,075 $ 4,500 -0- -0- -0- $12,318
1997 $ 98,000 $ 4,900 $ 4,500 -0- -0- -0- $ 7,466
</TABLE>
(1) The amounts shown in this column reflect payment under an Incentive
Performance Plan in which all employees of the Bank participate.
(2) Represents performance awards granted by the Compensation Committee of the
Board of Directors.
(3) Represents the Bank's annual accrued contribution to the Retirement Savings
Plan (the 401(k) Plan) and includes payment by the Bank of permanent life
insurance premium during 1999.
OPTION GRANTS DURING YEAR ENDED DECEMBER 31, 1999
The following table sets forth certain information relative to the grant of
stock options made during 1999 to each of the named executive officers as of the
end of the last fiscal year.
<TABLE>
<CAPTION>
Potential Realizable
Number of % of Total Value at Assumed
Securities Options Stock Price Appreciation
Underlying Granted Exercise for Option Term(1)
Options to Price Expiration ------------------
Name Granted Employees Per Share Date 5% 10%
---- ------- --------- --------- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Mack S. Linebaugh, Jr. 10,000 14.85% $ 12.880 4/13/09 $81,002 $205,274
Julian C. Cornett 8,500 11.97% $ 12.880 4/13/09 $68,851 $174,483
Anne J. Cheatham 7,500 10.56% $ 12.880 4/13/09 $60,751 $153,956
</TABLE>
(1) The dollar gains under these columns result from calculations assuming 5%
and 10% growth rates over a 10 year period as set by the Securities and
Exchange Commission and are not intended to forecast future price
appreciation of the Company's Common Stock. The gains reflect a future
value based upon growth at these prescribed rates. These values have also
not been discounted to present value. It is important to note that options
have value to the listed executive and to all option recipients
8
<PAGE> 11
only to the extent the stock price exceeds the exercise price shown on the
table during the effective option period.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
The following table sets forth certain information with respect to options
exercised during 1999 and the value of unexercised options held by the named
executive officers of the Company at December 31, 1999.
<TABLE>
<CAPTION>
Number of Securities (1)
Underlying Unexercised Value of Unexercised
Options In the Money Options
# of Shares $ December 31, 1999(#) December 31, 1999($)
Acquired On Value -------------------- --------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Options
-------
Mack S. Linebaugh, Jr. -0- -0- 56,000 16,000 $272,550 $ 32,250
Julian C. Cornett -0- -0- 30,700 12,800 $138,875 $ 4,875
Anne J. Cheatham -0- -0- 4,600 9,400 $ 1,688 $ 1,125
</TABLE>
(1) Determined by calculating the difference in exercise price and market value
of common stock at fiscal year end 1999.
LONG TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
The Company made no awards during 1999 under any "Long Term Incentive Plans" as
defined in securities regulation definitions.
EMPLOYMENT AGREEMENTS
The Company and the Bank entered into Employment Agreements with Mack S.
Linebaugh, Julian C. Cornett, and Anne J. Cheatham each dated as of September
14, 1999. The Agreements are for terms of one year and automatically renew
annually for succeeding one year terms unless either party gives notice of
nonrenewal. Except as noted below, each Agreement contains substantially the
same terms and provisions. Each Agreement may be terminated by the Company or
the Bank with or without cause (as defined in the Agreements) and pursuant to
the Agreement, the Executive may elect to terminate employment at any time
within (90) days after a "change in control" has occurred.
Mr. Linebaugh's Agreement provides for annual compensation of $200,000 and other
employee benefits described herein. The Agreement also provides that in the
event of a "change in control" involving the Company or the Bank, Mr. Linebaugh
may elect to receive severance pay in an amount equal to 2.99 times the sum of
his annual base compensation plus the annual value of his participation in all
benefit plans in effect at that time. Mr. Cornett's Agreement provides for
annual compensation of $152,000 and other employee benefits described herein.
The Agreement also provides that in the event of a "change in control" involving
the Company or the Bank, Mr. Cornett may elect to receive severance pay in an
amount equal to 2.00 times the sum of his annual base compensation plus the
annual value of his participation in all benefit plans in effect at that time.
Ms. Cheatham's Agreement provides for annual compensation of $102,000 and other
employee benefits described herein. The Agreement also provides that in the
event of a "change in control" involving the Company or the Bank, Ms. Cheatham
may elect to receive severance pay in an amount equal to 1.00 times the sum of
her annual base compensation plus the annual value of her participation in all
benefit plans in effect at that time.
9
<PAGE> 12
REPORT OF COMPENSATION COMMITTEE
Since the Board of Directors of the Company and its subsidiary bank, The Bank of
Nashville, are composed of the same individuals, and all compensation is paid by
The Bank of Nashville, the Compensation Committee of the Board of Directors of
The Bank of Nashville has served as the only Compensation Committee.
Accordingly, the report of the Compensation Committee of the Board of Directors
of The Bank of Nashville is presented herein. During 1999, the Compensation
Committee met three times. The purpose of the Committee is to review the
Company's executive compensation policies and programs and submit
recommendations to the Board of Directors for executive and director
compensation. The Compensation Committee also administers the Company's 1997
Nonstatutory Stock Option Plan. The members of the Committee are: J. B. Baker,
Chairman, Ed Thornton, Jo Federspiel, Leon Moore and Perry Moskovitz.
Compensation awarded to executive officers is designed to assure that the
Company continues to attract, motivate, and retain executives of superior
abilities. The Company's general goal for compensating its executive officers is
to provide competitive compensation in the median range of that received by
executive officers with similar duties and responsibilities at financial
institutions in the Company's market area and in other financial institutions of
similar size throughout the state of Tennessee. The Company's executive
compensation has focused on the use of cash bonuses and stock options to reward
executives and key officials. Base salaries for executives, as a group, have not
been increased significantly during the past three years.
Bonuses for executive officers are set annually by the Committee based on
recommendations by the Chief Executive Officer and the Committee's subjective
perception of each individual executive's previous and anticipated contribution
to the company's success. The Committee does not follow an objective bonus
program and no specific earnings or other criteria are set in advance by the
Committee for the purpose of determining bonuses. The Company also rewards the
bank's employees, including Executive Officers, through its annual Performance
Based Incentive Program. Awards under the program are based on the Company
achieving a pre-established target above budgeted net income. Under the program,
each employee received an award of 5.24% of their 1999 base pay.
The Company uses stock options as a long-term incentive for its executives and
other key officers. Stock options are used because they relate amounts earned by
executives to the financial performance of the Company. The Committee believes
that stock ownership and stock options held by executives encourage long term
performance, enhance shareholder value and beneficially align management's
interests with the interests of the Company's shareholders. The actual
individual stock option awards, however, are not subject to specific measurement
criteria. They are based on the Chief Executive Officer's recommendations and
the Committee's subjective assessment of each executive's performance. Options
are generally granted at the fair market value of the Company's common stock
immediately preceding the grant date and generally expire 10 years after the
grant date. Approximately 33% of the total full-time employees were granted
stock options in 1999.
Chief Executive Officer's 1999 Compensation. Mr. Linebaugh's base compensation
remained at $200,000 during 1999. Mr. Linebaugh was paid a bonus of $20,000 and
granted 10,000 stock options for his performance in fiscal 1999. In determining
Mr. Linebaugh's compensation, the Committee relied on the same subjective
criteria as used in determining compensation for other executive officers.
Compensation Committee
J. B. Baker, Chairman
10
<PAGE> 13
FIVE-YEAR STOCK PERFORMANCE GRAPH
The line graph below reflects the cumulative five-year shareholder return on the
Company's Common Stock compared to such return of the NASDAQ Stock Index and The
Carson Medlin Company's Independent Bank Index (IBI). The graph assumes that the
value of an investment in the common stock and in each index was $100 on
December 31, 1994 and that all dividends were reinvested.
COMMUNITY FINANCIAL GROUP, INC.
Five Year Total Return Index
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
COMMUNITY FINANCIAL GROUP, INC. 100 159 169 229 196 205
INDEPENDENT BANK INDEX 100 122 155 235 246 222
NASDAQ INDEX 100 141 174 213 300 542
</TABLE>
11
<PAGE> 14
TRANSACTIONS WITH DIRECTORS AND EXECUTIVE OFFICERS
Some of the Company's executive officers and directors and certain of their
associates (immediate family members including spouses, parents, children,
siblings, mothers- and fathers-in-law, sons- and daughters-in-law, and brothers-
and sisters-in-law) are customers of the Company's subsidiary bank. As customers
of such bank, they have had transactions in the ordinary course of business with
the bank, including borrowings. As of December 31, 1999, there was an aggregate
of approximately $5,489,739 (11.60% of the Company's equity and 2.73% of net
loans) in loans outstanding to such persons. This aggregate comprised loans to
executive officers, directors and nominees in the amount of $4,952,256 and loans
to related parties, immediate family members, corporations or other
organizations that are associates of such persons in the amount of approximately
$537,483. All such loans were made in the ordinary course of business on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons and did
not involve more than a normal risk of collectability or present other
unfavorable features at the time such loans were made.
EMPLOYEE BENEFIT PLANS
The Company's subsidiary, The Bank of Nashville, sponsors major medical and
dental insurance plans, long and short-term disability plans, an accidental
death and dismemberment plan, a workmen's compensation plan, a term-life
insurance plan, and an employee supplemental parking program. The major medical
and dental plans are administered under provisions of a premium conversion
program as set forth in Section 125 of the Internal Revenue Code of 1986, as
amended. The Company and the Bank also sponsor a Retirement Savings Plan
[401(k)] and an Associates' Stock Purchase Plan.
RETIREMENT SAVINGS PLAN
The Bank of Nashville's Retirement Savings Plan (the "401(k) Plan") was adopted
in 1990 and amended in 1993 to reward employees (associates) for their long and
loyal service to the Bank by providing them with retirement benefits. The 401(k)
Plan was adopted effective April 30, 1996 by the Company, and participation in
the 401(k) Plan is now available to all associates, including officers of the
Company and the Bank beginning the first day of the month coinciding with or
following the date of employment. As of December 31, 1999, 76 associates were
eligible and 65 were participating. All eligible associates may contribute
between 1% and 15% of their annual compensation; however, a participant's total
contribution for a calendar year may not exceed a dollar limit which is
determined by the Internal Revenue Service. For 2000, the limit is $10,500. All
associates' deferrals are fully vested. Each associate is entitled to direct the
investment of his or her contribution into designated fund(s), one of which
invests solely in the Company's common stock.
The Board of Directors of the Bank and the Company establish the levels of
contribution each will make to the 401(k) Plan on behalf of their respective
employees. During 1999, all 401(k) Plan participants were Bank employees and the
Bank matched $1.00 for each $1.00 on the first 2% of the employee deferrals and
$.50 for each $1.00 on deferrals for the next 4% with no matching on employee
deferrals in excess of 6%. All of the Company's or Bank's contributions are made
in the form of the Company's common stock and are held in a separate investment
fund. Both the associate's and the Bank's (or Company's) contributions to the
plan are tax deferred until distributed. Associates vest 100% in Bank (or
Company) contributions after three years of service as defined in the 401(k)
Plan.
12
<PAGE> 15
STOCK PURCHASE PLAN
The Community Financial Group, Inc. Associates' Stock Purchase Plan (ASPP) was
amended and restated effective May 1, 1996 to replace the ASPP previously
maintained by The Bank of Nashville. The purpose of the ASPP is to encourage
employees of the Company and its subsidiaries to identify with the success of
the Company through stock ownership. Participation is non-discretionary and
immediate for all full-time associates of the Company or permanent part-time
associates of the Company who work at least twenty (20) hours per week and five
(5) months each calendar. As of December 31, 1999, there were 81 eligible and
participating associates in the ASPP. The Board approved the sale of a maximum
of 100,000 shares of the common stock of the Company through the ASPP. The ASPP
allows common stock to be sold at a discount. Until September 30, 1996, the
discount was 15%. Thereafter, the ASPP provides that the discount will be 16%,
or such other percentage as may be established from time to time by the Board.
However, the ASPP provides that the stock will not be sold for less than Par
Value ($6.00 per share) and further provides for the decrease of the discount,
if necessary to comply with this provision. All associates contribute to the
ASPP a minimum of $5.00 to a maximum of 10% of their basic compensation per
payroll period. All associates' accounts are 100% vested at all times. The
Company pays all administrative costs associated with the ASPP.
1997 NONSTATUTORY STOCK OPTION PLAN
In 1997, the Board of Directors adopted the 1997 Nonstatutory Stock Option Plan
which reserved 150,000 shares of the Company's Common Stock for use under the
Plan plus 10% of any additional shares of stock issued after the effective date
of the Plan. The Plan is administered by the Compensation Committee of the Board
of Directors. Stock issued pursuant to the Plan may be either authorized but
unissued shares or shares held in the treasury of the Corporation. The persons
eligible to receive options under the Plan are employees, directors, and
officers of the Company and/or its subsidiaries. Options are granted at an
option price of no less than the Fair Market Value of the stock on the date
immediately preceding the grant date. Each grant of an option shall be evidenced
by a stock option agreement specifying the number of shares, the exercise price,
and a vesting schedule. During 1999, 106,900 options were granted under the
Plan.
INDEPENDENT PUBLIC ACCOUNTANTS
KPMG LLP, which has served as independent certified public accountants to the
Company since its formation, has been selected by the Board to serve in that
capacity in 2000. A representative of KPMG will be present at the Meeting in
order to respond to questions and to make any other statements such
representative deems appropriate.
OTHER MATTERS
The Board of Directors, at the time of the preparation of this Proxy Statement,
knows of no business to come before the meeting other than that referred to
herein. If any other business should come before the meeting, the persons named
in the enclosed Proxy will have discretionary authority to vote all proxies in
accordance with the recommendations of the Board of Directors.
13
<PAGE> 16
PROPOSALS OF SHAREHOLDERS
Shareholders intending to submit proposals for presentations at the 2001 Annual
Meeting of Shareholders of the Company and inclusion of such in the Proxy
Statement and form of proxy for such meeting should forward proposals to Joan B.
Marshall, Corporate Secretary, Community Financial Group, Inc., L & C Tower, 2nd
Floor, 401 Church Street, Nashville, TN 37219. The proposals must be in writing
and must be received by the Company prior to November 15, 2000. Proposals should
be sent to the Company via Certified Mail - Return Receipt Requested.
BY ORDER OF THE BOARD OF DIRECTORS
Community Financial Group, Inc.
/s/ Joan B. Marshall
------------------------------------
April 10, 2000 Joan B. Marshall, Corporate Secretary
14
<PAGE> 17
REVOCABLE PROXY
COMMUNITY FINANCIAL GROUP, INC.
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Richard H. Fulton and G. Edgar Thornton the
true and lawful attorneys in fact for the undersigned, with full power of
substitution to vote as Proxies for the undersigned at the Annual Meeting of
Shareholders of Community Financial Group, Inc. to be held on May 16, 2000, and
at any and all adjournments thereof, the number of shares which the undersigned
will be entitled to vote if then personally present, for the following purposes:
With- For All
For hold Except
#1. ELECTION OF DIRECTORS [ ] [ ] [ ]
Election of Class II Directors: JO D. FEDERSPIEL
RICHARD H. FULTON
PERRY W. MOSKOVITZ
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK
"FOR ALL EXCEPT" AND WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.
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#2. Authority to transact such other For Against Abstain
business as may properly come before [ ] [ ] [ ]
the meeting or any adjournment
thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE LISTED PROPOSALS.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED,
THIS PROXY WILL BE VOTED FOR THE PROPOSALS STATED. IF ANY OTHER BUSINESS IS
PRESENTED AT THE MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS PROXY
IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO
OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
Please be sure to sign and date -----------------------
this Proxy in the box below. Date
----------------------------------------------------------------
- ----Shareholder sign above -----Co-holder (if any) sign above----
- DETACH ABOVE CARD, SIGN, DATE AND MAIL IN POSTAGE PAID ENVELOPE PROVIDED -
COMMUNITY FINANCIAL GROUP, INC.
- --------------------------------------------------------------------------------
Note: Please date Proxy and sign exactly as your name appears on this
Proxy card. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such. If signer is a corporation, please
sign full corporate name by authorized officer.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
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