<PAGE>
SCHEDULE 14(a) - INFORMATION
Proxy Statement Pursuant to Section 14(a) of The Securities
Exchange Act of 1934 (Amendment No. ____________)
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] 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 240.14a-11(c) or 240.14(a)-12
C&F FINANCIAL CORPORATION
(Name of Registrant as Specified in its Charter)
(Name of Person Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(I)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
4) 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 No.:
3) Filing Party:
4) Date Filed:
<PAGE>
[LOGO]
C&F Financial Corporation
Eighth and Main Streets
P.O. Box 391
West Point, Virginia 23181
Dear Fellow Shareholders:
You are cordially invited to attend the 2000 Annual Meeting of Shareholders
of C&F Financial Corporation, the holding company for Citizens and Farmers Bank.
The meeting will be held on Tuesday, April 18, 2000, at 3:30 p.m. at the Father
van den Boogaard Center, 3510 King William Avenue, West Point, Virginia. The
accompanying Notice and Proxy Statement describe the matters to be presented at
the meeting. Enclosed is our Annual Report to Shareholders that will be reviewed
at the Annual Meeting.
Please complete, sign, date, and return the enclosed proxy card as soon as
possible. Whether or not you will be able to attend the Annual Meeting, it is
important that your shares be represented and your vote recorded. The proxy may
be revoked at any time before it is voted at the Annual Meeting.
We appreciate your continuing loyalty and support of Citizens and Farmers
Bank and C&F Financial Corporation.
Sincerely,
/s/ Larry G. Dillon
----------------------
Larry G. Dillon
President & Chief Executive Officer
West Point, Virginia
March 20, 2000
<PAGE>
C&F FINANCIAL CORPORATION
Eighth and Main Streets
P.O. Box 391
West Point, Virginia 23181
-----------------------------------------------------------------
NOTICE OF 2000 ANNUAL MEETING OF SHAREHOLDERS
-----------------------------------------------------------------
TO BE HELD APRIL 18, 2000
The 2000 Annual Meeting of Shareholders of C&F Financial Corporation (the
"Company") will be held at the Father van den Boogaard Center, 3510 King William
Avenue, West Point, Virginia, on Tuesday, April 18, 2000, at 3:30 p.m. for the
following purposes:
1. To elect two Class I directors to the Board of Directors of the
Company to serve until the 2003 Annual Meeting of Shareholders, as
described in the Proxy Statement accompanying this notice.
2. To approve the Amendment of the Company's 1994 Incentive Stock Plan,
the material terms of which are described in the Proxy Statement
accompanying this notice.
3. To ratify the Board of Directors' appointment of Yount, Hyde &
Barbour, P.C., as the Company's independent public accountants for
2000.
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Shareholders of record at the close of business on February 18, 2000, are
entitled to notice of and to vote at the Annual Meeting or any adjournment
thereof.
By Order of the Board of Directors
/s/ Gari B. Sullivan
--------------------
Gari B. Sullivan
Secretary
March 20, 2000
IMPORTANT NOTICE
Please complete, sign, date, and return the enclosed proxy card in the
accompanying postage paid envelope so that your shares will be represented at
the meeting. Shareholders attending the meeting may personally vote on all
matters which are considered, in which event the signed proxies are revoked.
<PAGE>
C&F FINANCIAL CORPORATION
Eighth and Main Streets
P.O. Box 391
West Point, Virginia 23181
PROXY STATEMENT
2000 ANNUAL MEETING OF SHAREHOLDERS
April 18, 2000
GENERAL
The following information is furnished in connection with the solicitation
by and on behalf of the Board of Directors of the enclosed proxy to be used at
the 2000 Annual Meeting of the Shareholders (the "Annual Meeting") of C&F
Financial Corporation (the "Company") to be held Tuesday, April 18, 2000, at
3:30 p.m. at the Father van den Boogaard Center, 3510 King William Avenue, West
Point, Virginia. The approximate mailing date of this Proxy Statement and
accompanying proxy is March 20, 2000.
Revocation and Voting of Proxies
Execution of a proxy will not affect a shareholder's right to attend the
Annual Meeting and to vote in person. Any shareholder who has executed and
returned a proxy may revoke it by attending the Annual Meeting and requesting to
vote in person. A shareholder may also revoke his proxy at any time before it is
exercised by filing a written notice with the Company or by submitting a proxy
bearing a later date. Proxies will extend to, and will be voted at, any properly
adjourned session of the Annual Meeting. If a shareholder specifies how the
proxy is to be voted with respect to any proposals for which a choice is
provided, the proxy will be voted in accordance with such specifications. If a
shareholder fails to specify with respect to such proposals, the proxy will be
voted FOR proposals 1, 2, and 3, as set forth in the accompanying notice and
further described herein.
Voting Rights of Shareholders
Only those shareholders of record at the close of business on February 18,
2000, are entitled to notice of and to vote at the Annual Meeting, or any
adjournments thereof. The number of shares of common stock of the Company
outstanding and entitled to vote at the Annual Meeting is 3,646,324. The Company
has no other class of stock outstanding. A majority of the votes entitled to be
cast, represented in person or by proxy, will constitute a quorum for the
transaction of business. Each share of Company common stock entitles the record
holder thereof to one vote upon each matter to be voted upon at the Annual
Meeting.
With regard to the election of directors, votes may be cast in favor or
withheld. If a quorum is present, the nominees receiving a plurality of the
votes cast at the Annual Meeting will be elected directors; therefore, votes
withheld will have no effect. The approval of the Amendment of the Company's
1994 Incentive Stock Plan and the ratification of Yount, Hyde & Barbour, P.C. as
the Company's independent public accountants require the affirmative vote of a
majority of the shares cast on the matter. Thus, although abstentions and broker
non-votes (shares held by customers which may not be voted on certain matters
because the broker has not received specific instructions from the customers)
are counted for purposes of determining the presence or absence of a quorum for
the transaction of business, they are generally not counted for purposes of
determining whether such proposals have been approved and therefore have no
effect.
1
<PAGE>
Solicitations of Proxies
The cost of solicitation of proxies will be borne by the Company.
Solicitations will be made only by the use of the mail, except that officers and
regular employees of the Company and Citizens and Farmers Bank (the "Bank") may
make solicitations of proxies by telephone, telegram, special letter, or by
special call, acting without compensation other than regular compensation. It is
contemplated that brokerage houses and other nominees, custodians, and
fiduciaries will be requested to forward the proxy soliciting material to the
beneficial owners of the stock held of record by such persons, and the Company
will reimburse them for their charges and expenses in this connection.
Principal Holders of Capital Stock
The following table shows the share ownership as of February 18, 2000, of
the shareholders known to the Company to be the beneficial owners of more than
5% of the Company's common stock, par value $1.00 per share, which is the only
voting security outstanding.
<TABLE>
<CAPTION>
Amount and Nature
Name and Address of Beneficial Percent
of Beneficial Owner Ownership(1) of Class
- ------------------- ------------ --------
<S> <C> <C>
SunTrust Banks, Inc. 236,752(2) 6.5%
303 Peachtree Street, Suite 1500
Atlanta, Georgia 30308
</TABLE>
- -------------------------
(1) For purposes of this table, beneficial ownership has been determined in
accordance with the provision of Rule 13d-3 of the Securities Exchange Act
of 1934 under which, in general, a person is deemed to be the beneficial
owner of a security if he or she has or shares the power to vote or direct
the voting of the security or the power to dispose of or direct the
disposition of the security, or if he has the right to acquire beneficial
ownership of the security within sixty days.
(2) Includes 169,072 shares held in a trust of which SunTrust Banks and Mr.
Olsson are co-trustees.
The following table sets forth certain information, as of February 18,
2000, about beneficial ownership of the Common Stock of the Company for each
director, director nominee, certain executive officers and for all directors,
director nominees, and executive officers of the Company as a group.
<TABLE>
<CAPTION>
Number of Shares
Beneficially Owned(1)
Name as of February 18, 2000 Percent of Class
- ----- ----------------------- ----------------
<S> <C> <C>
Larry G. Dillon 47,634(2) (1.3%)
James H. Hudson III 4,191(4) *
Sture G. Olsson 175,898(3)(4) (4.8%)
J. P. Causey Jr. 34,938(4) (1.0%)
William E. O'Connell Jr. 4,250(4) *
Thomas F. Cherry 3,500(2) *
Gari B. Sullivan 9,451(2) *
All Directors and Executive 279,862 (7.6%)
Officers as a group (7 persons)
</TABLE>
- --------------------
* Represents less than 1% of the total outstanding shares of the Company's
common stock.
(1) For purposes of this table, beneficial ownership has been determined in
accordance with the provision of Rule 13d-3 of the Securities Exchange Act
of 1934 under which, in general, a person is deemed to be the beneficial
owner of a
2
<PAGE>
security if he or she has or shares the power to vote or direct the voting
of the security or the power to dispose of or direct the disposition of the
security, or if he has the right to acquire beneficial ownership of the
security within sixty days.
(2) Includes 17,500 shares, 3,300 shares, and 7,167 shares for Mr. Dillon, Mr.
Cherry, and Mr. Sullivan, respectively, as to which they hold presently
exercisable options. A description of such options is set forth below in
greater detail in "Employee Benefit Plans - Incentive Stock Option Plan."
(3) Includes 169,072 shares held in a trust of which SunTrust Banks and Mr.
Olsson are co-trustees.
(4) Includes 2,250 shares represented by presently exercisable options. A
description of the plan under which these options were issued is set forth
below in "Director Compensation."
PROPOSAL ONE
ELECTION OF DIRECTORS
The Company's Board is divided into three classes (I, II, and III) of
directors. The term of office for Class I directors will expire at the Annual
Meeting. Two persons named below, each of whom currently serves as a director of
the Company, will be nominated to serve as Class I directors. If elected, the
Class I nominees will serve until the 2003 Annual Meeting of Shareholders. The
persons named in the proxy will vote for the election of the nominees named
below unless authority is withheld. The Company's Board believes that the
nominees will be available and able to serve as directors, but if any of these
persons should not be available or able to serve, the proxies may exercise
discretionary authority to vote for a substitute proposed by the Company's
Board.
Certain information concerning the nominees for election at the Annual
Meeting as Class I directors is set forth below, as well as certain information
about the other Class II and III directors, who will continue in office until
the 2001 and 2002 Annual Meeting of Shareholders, respectively.
<TABLE>
<CAPTION>
Principal
Served Occupation During
Name (Age) Since(1) Past Five Years
- ---------- ----- ---------------
Class I Directors (Nominees) (Serving Until the 2003 Annual Meeting)
<S> <C> <C>
Larry G. Dillon (47) 1989 Chairman, President and
Chief Executive Officer of the
Company and the Bank
James H. Hudson III (51) 1997 Attorney-at-Law
Hudson & Bondurant, P.C.
Class II Directors (Serving Until the 2001 Annual Meeting)
Sture G. Olsson (79) 1952 Retired; previously Chairman of
the Board, Chesapeake Corporation
Class III Directors (Serving Until the 2002 Annual Meeting)
J. P. Causey Jr. (56) 1984 Senior Vice President, Secretary &
General Counsel of Chesapeake
Corporation
William E. O'Connell Jr. (62) 1994 Chessie Professor of Business,
The College of William and Mary
</TABLE>
(1) Refers to the year in which the director was first elected to the Board of
Directors of the Bank.
3
<PAGE>
The Board of Directors of the Bank consists of the five members of the
Company's Board listed above as well as P. L. Harrell, Joshua H. Lawson, Bryan
E. McKernon, Reginald H. Nelson IV, Paul C. Robinson, and Thomas B. Whitmore Jr.
The Board of Directors is not aware of any family relationship between any
director or person nominated by the Company to become director; nor is the Board
of Directors aware of any involvement in legal proceedings which are material to
any impairment of the ability or integrity of any director or person nominated
to become a director. Unless authority for the nominees is withheld, the shares
represented by the enclosed proxy card, if executed and returned, will be voted
FOR the election of the nominees proposed by the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE DIRECTORS NOMINATED TO SERVE
AS CLASS I DIRECTORS.
Board Committees and Attendance
During 1999, there were eight meetings of the Board of Directors of the
Company and fourteen meetings of the Board of Directors of the Bank. With the
exception of Mr. Olsson, each director attended at least 75% of all meetings of
the boards and committees on which he served. The Board of Directors of the
Company has Capital Plan and Nominating Committees and the Board of Directors of
the Bank has Executive, Compensation, and Audit Committees.
Members of the Capital Plan Committee are Messrs. Causey, Dillon, Hudson,
and O'Connell. The Capital Plan Committee reviews capital related matters and
submits proposals or recommendations to the Board of Directors. The Capital Plan
Committee did not meet during 1999.
Members of the Nominating Committee are Messrs. Causey, Dillon, Hudson, and
O'Connell. The Nominating Committee reviews, on an as-needed basis, the
qualifications of candidates for membership to the Board. The Nominating
Committee did not meet during 1999.
Members of the Executive Committee are Messrs. Causey, Dillon, Hudson,
O'Connell, and Olsson. The Executive Committee reviews various matters and
submits proposals or recommendations to the Board of Directors. The Executive
Committee met once during 1999.
Members of the Compensation Committee are Messrs. Causey, Harrell, Hudson,
and Whitmore. The Compensation Committee recommends the level of compensation of
each officer of the Bank, the granting of stock options and other employee
remuneration plans to the Board of Directors. The Compensation Committee met
four times during 1999.
Members of the Audit Committee are Messrs. Causey, Lawson, and Robinson.
The Audit Committee reviews and approves various audit functions including the
year-end audit performed by the Company's independent public accountants. The
Audit Committee met twice during 1999.
Directors' Compensation
Each of the directors of the Company is also a director of the Bank.
Non-employee members of the Board of Directors of the Bank receive an annual
retainer of $2,500, payable quarterly, with a base meeting fee of $300 per day
for Company or Bank meetings and a fee of $100 for each secondary meeting of the
Company, Bank, or any committees thereof held on the same day as a meeting for
which the base meeting fee is paid.
In addition to cash compensation, non-employee members of the Board of
Directors of the Bank participate in the Non-Employee Directors' Stock
Compensation Plan. Under this plan, directors are granted the option to purchase
the Company's common stock at a price equal to the fair market value of the
stock at the date of grant. Options are exercisable six months after the date of
grant and expire ten years from the date of grant.
4
<PAGE>
On May 1, 1999, all non-employee members of the Board of Directors were granted
1,250 options at a price of $19.00 per share.
Interest of Management in Certain Transactions
As of December 31, 1999, the total maximum extensions of credit (including
used and unused lines of credit) to policy-making officers, directors, and their
associates amounted to $3,222,072, or 8.6%, of total year-end capital. The
maximum aggregate amount of such indebtedness during 1999 was $1,233,888, or
3.5%, of total year-end capital. These loans were made in the ordinary course of
the Bank's business, on the same terms, including interest rates and collateral,
as those prevailing at the same time for comparable transactions with others,
and do not involve more than the normal risks of collectibility or present other
unfavorable features. The Bank expects to have in the future similar banking
transactions with officers, directors, and their associates.
The firm of Thrift Insurance Corporation serves as the local agent for the
Fidelity and Deposit Company of Maryland. Mr. Lawson, a director of the Bank, is
the majority owner of Thrift Insurance Corporation. The Bank maintains its
various insurance policies including its blanket bond coverage, directors and
officers liability coverage, and building and equipment coverage through
Fidelity and Deposit Company of Maryland. All premiums are negotiated directly
with representatives of Fidelity and Deposit Company of Maryland. During 1999,
the Bank paid premiums totaling $60,256 to Thrift Insurance Corporation, as
agent, for the insurance coverage maintained by the Bank.
During 1999, the Company and the Bank and its subsidiaries utilized the
legal services of the law firm of Hudson and Bondurant, P.C., of which James H.
Hudson III is a partner. The amount of fees paid to Hudson and Bondurant, P.C.
did not exceed 5% of the firm's gross revenue.
Executive Compensation
Summary of Cash and Certain Other Compensations. The following table shows
the cash compensation paid to Mr. Dillon, President and Chief Executive Officer
of the Company, Thomas F. Cherry, Senior Vice President and Chief Financial
Officer of the Company, and Gari B. Sullivan, Senior Vice President and
Secretary of the Company, during 1999, 1998, and 1997. During 1999, no other
executive officer of the Company received compensation in excess of $100,000.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
------------------------------------------------------ ------------
All
Name and Other Annual Other
Principal Position Year Salary Bonus(1) Compensation(2) Options(3) Compensation(4)
- ------------------ ---- ------ ----- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Larry G. Dillon 1999 $152,500 $50,000 - 3,500 $22,736
President/Chief 1998 140,000 50,000 - 3,500 22,842
Executive Officer 1997 120,000 40,000 - 3,200 19,118
Thomas F. Cherry 1999 89,000 20,000 - 2,500 10,410
Senior Vice 1998 77,500 15,000 - 2,500 9,010
President/CFO 1997 70,000 10,000 - 1,600 5,681
Gari B. Sullivan 1999 87,500 13,000 - 2,000 29,812
Senior Vice 1998 85,500 12,000 - 1,500 28,619
President/Secretary 1997 82,500 15,000 - 1,100 27,911
</TABLE>
- ------------------
5
<PAGE>
(1) All bonuses were paid under the Management Incentive Bonus Plan, which is
described below in "Employee Benefit Plans."
(2) The amount of compensation in the form of perquisites or other personal
benefits properly categorized in this column according to the disclosure
rules adopted by the Commission did not exceed the lesser of either
$50,000, or 10% of the total annual salary and bonus reported in each of
the three years reported for Mr. Dillon, Mr. Cherry, and Mr. Sullivan, and
therefore, is not required to be reported.
(3) 1999 options were granted at an exercise price of $17.00 per share, 1998
options were granted at an exercise price of $18.625 per share; 1997
options were granted at an exercise price of $12.50 per share.
(4) $8,000, $8,667, and $6,966, were paid to Mr. Dillon, $5,210, $4,501, and
$3,871 were paid to Mr. Cherry, and $4,975, $5,102, and $5,028 were paid to
Mr. Sullivan under the Bank's Profit-Sharing Plan for 1999, 1998, and 1997,
respectively. $6,736, $5,454, and $5,383, were paid to Mr. Dillon and
$19,861, $18,334, and $17,800 were paid to Mr. Sullivan under the Bank's
Split-Dollar Insurance Program for 1999, 1998, and 1997, respectively.
$8,000, $8,721, and $6,769 were paid to Mr. Dillon, $5,200, $4,509, and
$1,810 were paid to Mr. Cherry, and $4,975, $5,183, and $5,083 were paid to
Mr. Sullivan under the Bank's 401(k) Plan for 1999, 1998, and 1997,
respectively. All three plans are described below in "Employee Benefit
Plans."
Stock Options and SAR. The following table shows all grants of options to
Messrs. Dillon, Cherry, and Sullivan in 1999:
<TABLE>
<CAPTION>
Option/SAR Grants in Last Fiscal Year
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term
----------------------------------------------------------------- ---------------
% of Total
Options Granted Exercise or
Options to Employees in Base Price Expiration 5% 10%
Name Granted (#) (1) Fiscal Year ($/Sh) Date ($) ($)
- ---- --------------- ----------- ------ ---- --- ---
<S> <C> <C> <C> <C> <C> <C>
Larry G. Dillon 3,500 6.59% $17.00 12/15/09 37,419.24 94,827.67
Thomas F. Cherry 2,500 4.71% $17.00 12/15/09 26,728.03 67,734.05
Gari B. Sullivan 2,000 3.77% $17.00 12/15/09 21,224.20 54,187.24
- ------------------
</TABLE>
(1) Vesting is as follows: 100% on December 21, 2004.
6
<PAGE>
Option/SAR Exercises and Holdings. The following table shows stock options
exercised by Messrs. Dillon, Cherry, and Sullivan in 1999:
<TABLE>
<CAPTION>
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Options/SAR Values
Value of Unexercised
Number of Unexercised In-the-Money
Options at Options at
Shares December 31, 1999 (#) December 31, 1999($)
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable
- ---- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Larry G. Dillon 2,400 42,600 17,500/ 117,394/
3,400 5,368
Thomas F. Cherry -- -- 3,300/ 15,785/
4,700 2,778
Gari B. Sullivan 3,000 55,625 7,167/ 44,460/
3,733 3,640
</TABLE>
Change in Control Agreements
The Company has entered into "change in control agreements" with Mr. Dillon
and Mr. Cherry. The agreement for Mr. Dillon provides certain payments and
benefits in the event of a termination of his employment by the Company without
"cause," or by Mr. Dillon for "good reason," during the period beginning on the
occurrence of a "change in control" (as defined) of the Company and ending
sixty-one days after the second anniversary of the change in control date. In
such event, Mr. Dillon would be entitled (i) to receive in 12 consecutive
quarterly installments, or in a lump sum, two and one-half times the sum of his
highest aggregate annual base salary during the 24 month period preceding the
change in control date and his highest aggregate annual bonus for the three
fiscal years preceding the change in control date; (ii) for a period of three
years following termination, to receive continuing health insurance, life
insurance, split-dollar insurance, and similar benefits under the Company's
welfare benefit plans and to have the three year period credited as service
towards completion of any service requirement for retiree coverage under the
Company's welfare benefit plans; and (iii) if Mr. Dillon requests within one
year after his termination to have the Company acquire his residence for its
appraised fair market value.
The agreement for Mr. Cherry provides certain payments and benefits in the
event of a termination of his employment by the Company without "cause," or by
Mr. Cherry for "good reason," during the period beginning on the occurrence of a
"change in control" (as defined) of the Company and ending sixty-one days after
the first anniversary of the change in control date. In such event, Mr. Cherry
would be entitled (i) to receive in 4 consecutive quarterly installments, or in
a lump sum, the sum of his highest aggregate annual base salary during the 24
month period preceding the change in control date and his highest aggregate
annual bonus for the three fiscal years preceding the change in control date;
and (ii) for a period of one year following termination, to receive continuing
health insurance, life insurance, and similar benefits under the Company's
welfare benefits plans and to have the one year period credited as service
towards completion of any service requirement for retiree coverage under the
Company's welfare benefit plans.
During the term of the agreements following a change in control, Mr. Dillon
or Mr. Cherry may voluntarily terminate his employment and become entitled to
these payments and benefits under certain circumstances. These circumstances
include, but are not limited to, a material adverse change in his position,
authority, or responsibilities, or a reduction in his rate of annual base
salary, benefits (including incentives, bonuses, stock compensation, and
retirement and welfare plan coverage), or other perquisites as in effect
immediately prior to the change in control date.
7
<PAGE>
Payments and benefits provided under the agreements will be reduced, if and
to the extent necessary, so that Mr. Dillon and Mr. Cherry will not be subject
to a federal excise tax on, and the Company will not be denied an income tax
deduction on account of having made, excess parachute payments.
Employee Benefit Plans
Management Incentive Bonus Plan. The Bank adopted a Management Incentive
Bonus Plan (the "Bonus Plan") effective January 1, 1987. The Bonus Plan is
offered to selected members of management. The bonus is derived from a pool of
funds determined by the Bank's total performance relative to (1) prescribed
growth rates of assets and deposits, (2) return on average assets, and (3)
absolute level of net income. Attainment, in whole or in part, of these goals
dictates the amount set aside in the pool of funds. Evaluation of attainment and
approval of the pool amount is done by the Board of Directors of the Bank.
Payment of the bonus is based on individual performance and paid in cash as a
percentage of the respective individual's base salary. Expense is accrued in the
year of the specified bonus performance.
Other than the Bonus Plan (above), the Incentive Stock Option Plan
(detailed below), and the Split-Dollar Insurance Program (detailed below), there
are no personal benefits provided to principal officers and directors which are
not provided to all other full-time employees.
Profit-Sharing/401(k) Plan. The Bank maintains a Defined Contribution
"Profit-Sharing" Plan sponsored by the Virginia Bankers Association. The plan
was amended effective January 1, 1997, to include a 401(k) savings provision,
which authorizes a maximum voluntary salary deferral of up to 15% of
compensation (with a partial company match), subject to statutory limitations.
The profit-sharing arrangement provides for an annual discretionary contribution
to the account of each eligible employee based in part on the Bank's
profitability for a given year, and on each participant's yearly earnings. All
full-time employees who have attained the age of 18 and have at least three
months of service are eligible to participate. Contributions and earnings may be
invested in various investment vehicles offered through the Virginia Bankers
Association. Contributions and earnings are tax-deferred. An employee is 20%
vested after three years of service, 40% vested after four years, 60% after five
years, 80% after six years, and fully vested after seven years.
Retirement Plan. The Bank has a Non-Contributory Defined Benefit Retirement
Plan (the "Retirement Plan") covering substantially all employees who have
reached the age of 21 and have been fully employed for at least one year. The
Retirement Plan provides participants with retirement benefits related to salary
and years of credited service. Employees become vested after five plan years of
service, and the normal retirement date is the plan anniversary date nearest the
employee's 65th birthday. The Retirement Plan does not cover directors who are
not active officers. The amount expensed for the Retirement Plan during the year
ended December 31, 1999, was $162,324.
The following table shows the estimated annual retirement benefits payable
to employees in the average annual salary and years of service classifications
set forth below assuming retirement at the normal retirement age of 65.
<TABLE>
<CAPTION>
Consecutive Five-Year Years of Credited Service
Average Salary 15 20 25 30 35
- --------------------------- ---------- ---------- ---------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
$ 25,000 $ 4,688 $ 6,250 $ 7,813 $ 8,750 $ 9,688
40,000 8,288 11,050 13,813 15,575 17,338
55,000 12,788 17,050 21,313 24,200 27,088
75,000 18,788 25,050 31,313 35,700 40,088
100,000 26,288 35,050 43,813 50,075 56,338
125,000 33,788 45,050 56,313 64,450 72,588
150,000 41,288 55,050 68,813 78,825 88,838
160,000 44,288 59,050 73,813 84,575 95,338
</TABLE>
8
<PAGE>
Benefits under the Retirement Plan are based on a straight life annuity
assuming full benefit at age 65, no offsets, and covered compensation of $33,000
for a person age 65 in 1999. Compensation is currently limited to $160,000 by
the Internal Revenue Code. The estimated annual benefit payable under the
Retirement Plan upon retirement is $85,177, $49,289, and $23,043 for Messrs.
Dillon, Cherry, and Sullivan, respectively, credited with 40 years of service
for Messrs. Dillon and Cherry and 15 years of service for Mr. Sullivan. Benefits
are estimated on the basis that they will continue to receive, until age 65,
covered salary in the same amount paid in 1999.
Split-Dollar Insurance Plan. In addition to a group life insurance plan
that is available to all full-time employees, the Bank has provided a
Split-Dollar Insurance Program to selected members of management. The insurance
benefit under this program is equal to five times an officer's annual salary in
effect at the time the officer is enrolled in the program. The Bank recovers its
cost from each participant at retirement or from the proceeds of the policy if
the participant dies before reaching retirement age.
Incentive Stock Option Plan. The company adopted the 1994 Incentive Stock
Option Plan (the "Incentive Plan") effective May 1, 1994. The Incentive Plan
makes available up to 200,000 shares of common stock for awards to key employees
of the Company and its subsidiaries in the form of stock options, stock
appreciation rights, and restricted stock (collectively, "Awards"). The purpose
of the Incentive Plan is to promote the success of the Company and its
subsidiaries by providing incentives to key employees that will promote the
identification of their personal interests with the long-term financial success
of the Company and with growth in shareholder value. The Incentive Plan is
designed to provide flexibility to the Company in its ability to motivate,
attract, and retain the services of key employees upon whose judgment, interest,
and special effort the successful conduct of its operation is largely dependent.
Under the terms of the Incentive Plan, the Compensation Committee of the
Board of Directors of the Bank (the "Committee") administers the Incentive Plan.
The Committee has the power to determine the key employees to whom Awards shall
be made.
Each Award under the Incentive Plan will be made pursuant to a written
agreement between the Company and the recipient of the Award (the "Agreement").
In administering the Incentive Plan, the Committee will have the authority to
determine the terms and conditions upon which Awards may be made and exercised,
to determine terms and provisions of each Agreement, to construe and interpret
the Incentive Plan and the Agreements, to establish, amend, or waive rules or
regulations for the Incentive Plan's administration, to accelerate the
exercisability of any Award, the end of any performance period, or termination
of any period of restriction, and to make all other determinations and take all
other actions necessary or advisable for the administration of the Incentive
Plan.
The Board may terminate, amend, or modify the Incentive Plan from time to
time in any respect without shareholder approval, unless the particular
amendment or modification requires shareholder approval under the Internal
Revenue Code of 1986, as amended (the "Code"), the rules and regulations under
Section 16 of the Securities Exchange Act of 1934 or pursuant to any other
applicable laws, rules, or regulations.
The Board of Directors of the Company has approved the Amendment of the
1994 Incentive Stock Plan subject to shareholder approval. See "Approval of the
Amendment of the 1994 Incentive Stock Plan."
Compensation Committee Report on Executive Compensation
The Compensation Committee (the "Committee"), which is composed of non-
employee Directors of the Company and the Bank listed below, recommends to the
Board of Directors of the Bank (the "Board") the annual salary levels and any
bonuses to be paid to the Bank's executive officers. The Committee also makes
recommendations to the Board regarding the issuance of stock options and other
compensation related matters.
Currently, the individuals serving as Chief Executive Officer and executive
officers of the Company also serve in the same capacities, respectively, for the
Bank. These officers are presently compensated for services rendered by them to
the Bank, but not for services rendered by them to the Company.
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The primary objective of the Bank's executive compensation program is to
attract and retain highly skilled and motivated executive officers who will
manage the Bank in a manner to promote its growth and profitability and advance
the interest of the Company's shareholders. As such, the compensation program is
designed to provide levels of compensation which are reflective of both the
individual's and the organization's performance in achieving the organization's
goals and objectives, both financial and non-financial, and in helping to build
value for the Company's shareholders. Based on its evaluation of these factors,
the Committee believes that the executive officers are dedicated to achieving
significant improvements in long-term financial performance and that the
compensation plans the Committee has implemented and administered have
contributed to achieving this management focus.
The principal elements of the Bank's compensation program include base
annual salary, short-term incentive compensation under the Bank's Management
Incentive Bonus Plan, and long-term incentives through the grants of stock
options under the 1994 Incentive Stock Option Plan.
In considering compensation for the Chief Executive Officer and the other
executive officers, the Committee relied on compensation surveys and an
evaluation of the officers' level of responsibility and performance. In 1998,
the Committee used the following compensation surveys to assist in developing
its recommendation on compensation for 1999: the SNL Executive Compensation
Review; the Sheshunoff Bank Executive and Director Compensation Survey; and the
Virginia Bankers Association's Salary Survey of Virginia Banks. The Committee
believes that these are relevant and appropriate indicators of compensation paid
by the Bank's competitors. The Committee received an evaluation by the Chief
Executive Officer of the performance of the executive officers (other than the
Chief Executive Officer) during 1998. The Committee evaluated the performance of
the Chief Executive Officer based on the financial performance of the Company
and the Bank, achievements in implementing the Bank's long-term strategy, and
the personal observations of the Chief Executive Officer's performance by the
members of the Committee. No particular weight was given to any particular
aspects of the performance of the Chief Executive Officer, but his performance
in 1998 was evaluated as outstanding, with the Company and the Bank achieving
record earnings and significant progress being made on the Bank's long-term
strategy.
Based on the salary surveys and the performance evaluations, the Committee
generally set base annual salaries for the Chief Executive Officer and the other
executive officers in the median range of salaries contained in the various
surveys for comparable positions.
The Committee also reviewed each executive officer's performance and
responsibility to assess the payment of short-term incentive compensation. The
Committee uses the compensation surveys and takes into consideration the
performance of the Bank relative to its peer group, taking into consideration
profit growth, asset growth, return on equity, and return on assets. No
particular weight is given to each of these elements. The cash bonuses were
given based upon the role of such officers in the growth and profitability of
the Bank in 1999.
Each year, the Committee also considers the desirability of granting
long-term incentive awards under the Company's 1994 Incentive Stock Option Plan.
The Committee believes that grants of options focus the Bank's senior management
on building profitability and shareholder value. The Committee notes in
particular its view that stock option grants afford a desirable long-term
compensation method because they closely ally the interest of management with
shareholder value. In fixing the grants of stock options with the senior
management group, other than the Chief Executive Officer, the Committee reviewed
with the Chief Executive Officer recommended individual awards, taking into
account the respective scope of accountability and contributions of each member
of the senior management group. The award to the Chief Executive Officer was
fixed separately and was based, among other things, on the review of competitive
compensation data from selected peer companies and information on his total
compensation as well as the Committee's perception of his past and expected
future contributions to the Company's achievement of its long-term goals.
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Compensation Committee
J. P. Causey Jr. - Chairman
P. Loy Harrell
James H. Hudson III
Thomas B. Whitmore Jr.
Compensation Committee Interlocks and Insider Participation
During 1999 and up to the present time, there were transactions between the
Company's banking subsidiary and certain members of the Compensation Committee,
or their associates, all consisting of extensions of credit by the Bank in the
ordinary course of business. Each transaction was made on substantially the same
terms, including interest rates, collateral and repayment terms, as those
prevailing at the time for comparable transactions with the general public. In
the opinion of management, none of the transactions involved more than the
normal risk of collectibility or present other unfavorable features.
None of the members of the Compensation Committee has served as an officer
or employee of the Company or any of its affiliates. No director may serve as a
member of the Committee if he is eligible to participate in the Incentive Plan
or was at any time within one year prior to his appointment to the Committee
eligible to participate in the Incentive Plan.
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Performance Graph
The following graph compares the yearly cumulative total shareholder return
on the Company's common stock with (1) the yearly cumulative total shareholder
return on stocks included in the NASDAQ stock index and (2) the yearly
cumulative total shareholder return on stocks included in the Independent Bank
Index prepared by the Carson Medlin Company. The Independent Bank Index is the
compilation of the total return to shareholders over the past 5 years of a group
of twenty-three independent community banks located in the southeastern states
of Alabama, Florida, Georgia, North Carolina, South Carolina, Tennessee,
Virginia, and West Virginia.
There can be no assurance that the Company's stock performance will
continue into the future with the same or similar trends depicted in the graph
below.
[GRAPH]
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
C&F FINANCIAL CORPORATION 100 103 97 139 205 192
INDEPENDENT BANK INDEX 100 122 155 235 246 222
NASDAQ INDEX 100 141 174 213 300 542
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Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act requires directors, executive
officers, and 10% beneficial owners of the Company's common stock to file
reports concerning their ownership of common stock. The Company believes that
its officers and directors complied with all filing requirements under Section
16(a) of the Securities Exchange Act of 1934 during 1999.
PROPOSAL TWO
APPROVAL OF THE AMENDMENT
OF THE 1994 INCENTIVE STOCK PLAN
The Board of Directors proposes that the Company's shareholders approve an
amendment to the 1994 Incentive Stock Plan (the "Incentive Plan"). The Incentive
Plan was originally approved by the shareholders at the 1994 annual meeting. The
amendment of the Incentive Plan, which the Company's shareholders are being
asked to approve (the "Amendment'), was adopted by the Board of Directors on
February 15, 2000, subject to the approval of the Company's shareholders.
Proposed Amendment
The proposed Amendment amends Section 4.1 of the Incentive Plan to increase
the number of shares of the Company's Common Stock available for Awards under
the Incentive Plan from 200,000 to 500,000.
The Board of Directors believes that amending the Incentive Plan will
provide the Company a tool to incent those employees who are in a position to
contribute materially to the success of the Company and its subsidiaries. The
Board of Directors also believes that the Incentive Plan, as amended, will
benefit the Company by (i) assisting it in recruiting and retaining officers and
key employees with ability and initiative, (ii) providing greater incentives for
officers and key employees, and (iii) associating the interests of officers and
key employees with those of the Company and its shareholders through
opportunities for increased stock ownership.
The following paragraphs summarize the principal features of the Incentive
Plan, as amended. Such summary is subject, in all respects, to the terms of the
Incentive Plan and the Amendment, which are incorporated herein by reference.
The Company will provide promptly, upon request and without charge, a copy of
the full text of the Incentive Plan and the Amendment to any person to whom a
copy of this proxy statement is delivered. Requests should be directed to: Chief
Financial Officer, C&F Financial Corporation, Eighth and Main Streets, West
Point, Virginia 23181.
Summary of the Incentive Plan, as Amended
Administration
Under the terms of the Incentive Plan, the Compensation Committee of the
Board of Directors of the Bank (the "Committee") administers the Incentive Plan.
No director may serve as a member of the Committee if he is eligible to
participate in the Incentive Plan or was at any time within one year prior to
his appointment to the Committee eligible to participate in the Incentive Plan.
The Committee will have the power to determine the key employees to whom Awards
shall be made.
Each Award under the Incentive Plan will be made pursuant to a written
agreement between the company and the recipient of the Award (the "Agreement").
In administering the Incentive Plan, the Committee will have the authority to
determine the terms and conditions upon which Awards may be made and exercised,
to determine terms and provisions of each Agreement, to construe and interpret
the Incentive Plan and the Agreements, to establish, amend, or waive rules or
regulations for the Incentive Plan's administration, to accelerate the
exercisability of any Award, the end of any performance period or termination of
any period of restriction, and to make all other determinations and take all
other actions necessary or advisable for the administration of the Incentive
Plan.
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The members of the Committee and the employee directors will be indemnified
by the Company against the reasonable expenses incurred by them, including
attorney's fees, in the defense of any action, suit, or proceeding, or any
appeal therein to which they may be a party by reasons of any action taken or
failure to act under the Incentive Plan.
Subject to the terms, conditions, and limitations of the Incentive Plan,
the Committee may modify, extend, or renew outstanding Awards, or, if authorized
by the Board of Directors, accept the surrender of outstanding Awards and
authorize new Awards in substitution therefore, including Awards with lower
exercise prices or longer terms than the surrendered Awards. The Board may
terminate, amend, or modify the Incentive Plan from time to time in any respect
without shareholder approval, unless the particular amendment or modification
requires shareholder approval under the Internal Revenue Code of 1986, as
amended (the "Code"), the rules and regulations under Section 16 of the
Securities Exchange Act (the "Exchange Act"), under the rules and regulations of
the exchange or system on which the Common Stock is listed or pursuant to any
other applicable laws, rules, or regulations.
The Incentive Plan will expire on April 30, 2004, unless sooner terminated
by the Board.
Eligibility
All employees of the Company and its subsidiaries who are deemed to be key
employees ("Key Employees") by the Company are eligible for Awards under the
Incentive Plan. Key Employees include officers or other employees of the Company
and its subsidiaries who, in the opinion of the Committee, can contribute
significantly to the growth and profitability of, or perform services of major
importance to, the Company and its subsidiaries. Directors who are not also
officers or employees of the Company or its subsidiaries are not eligible for
Awards under the Incentive Plan.
Awards granted under the Incentive Plan may not be assigned, transferred,
pledged or otherwise encumbered by a participant, other than by will or the laws
of descent and distribution. Awards may be exercised during the recipient's
lifetime only by the recipient or, in the case of disability, by the recipient's
legal representative. Such Awards also are not exercisable until at least six
months after the grant of the Award. Subject to other applicable restrictions,
shares granted as Restricted Stock may not be transferred or sold until at least
six months after the grant of the Award.
The number of employees who may be eligible for Awards under the Incentive
Plan is approximately 50 (including those persons named in the summary
compensation table), and the nature and extent of their participation, the
benefits or amounts to be received by each of them and any consideration to be
received by the Company for granting or awarding such benefits will be
determined by the Committee. Unless specified below in the description of the
particular Awards available under the Incentive Plan or in the Incentive Plan
itself, the prices, expiration dates, consideration to be received by the
Company, and the other terms of each Agreement shall be determined by the
Committee.
Options
The Incentive Plan authorizes the grant of incentive stock options within
the meaning of Section 422 of the Code ("ISOs") and non-qualified stock options
("NQSOs") (collectively, "Options"). The Option terms applicable to such Options
will be determined by the Committee, but no Option will be exercisable in any
event until at least six months after its grant (except in cases of death or
disability) or after ten years from its grant and the exercise price for an
Option may not be less than 100% of the Common Stock's fair market value at the
date the Option is awarded. All Options granted, as ISOs shall comply with all
applicable provisions of the Code and all other applicable rules and regulations
governing ISOs. All other Option terms will be determined by the Committee in
its sole discretion.
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Tandem SARS
The incentive Plan authorizes the grant of stock appreciation rights
granted in tandem with Options ("Tandem SARs").
A Tandem SAR may be exercised with respect to all or part of the shares
subject to the related Option, and entitles the holder, upon exercise, to
receive, without any payment to the Company (other than required withholding
amounts), cash or Common Stock or a combination thereof equivalent in value to
the excess of the fair market value on the exercise date of the shares of Common
Stock represented by the Tandem SAR over the option exercise price of the
related Option.
A Tandem SAR may be exercised only when the current value of the Tandem SAR
exceeds the exercise price of the related Option. A Tandem SAR shall expire no
later than, and is exercisable and transferable subject to the conditions of,
the related Option. In no event may a Tandem SAR be exercised sooner than six
months from the date of grant (except in the case of death or disability).
If a Tandem SAR is exercised, it will reduce correspondingly the number of
shares of Common Stock represented by the related Option, and exercise of the
related Option will similarly reduce the number of shares represented by the
Tandem SAR. The Committee retains sole discretion to approve or disapprove an
optionee's election to receive cash to the extent required by Exchange Act Rule
16b-3 or the terms of the particular Agreement.
Restricted Stock
The Incentive Plan permits the award of shares of restricted stock
("Restricted Stock"). However, no more than one-third of the shares authorized
to be issued under the Incentive Plan may be granted as Restricted Stock.
Restricted Stock may not be disposed of by the recipient until certain
restrictions established by the Committee lapse. Recipients of Restricted Stock
are not required to provide consideration other than the rendering of services.
The recipient shall have, with respect to the Restricted Stock, all the rights
of a stockholder of the Company, including the right to vote the shares, and the
right to receive any cash dividends on the shares. Upon termination of
employment during the period of restriction for reasons other than death,
disability or retirement, all Restricted Stock will be forfeited subject to such
exceptions, if any, as are authorized by the Committee and set forth in the
Agreement. In all events other than death or disability of the recipient, the
applicable period of restriction may not be less than six months.
Shares subject to the Incentive Plan
Up to 500,000 shares of Common Stock may be issued under the Incentive
Plan. Except as set forth below, shares of Common Stock issued in connection
with the exercise of, or as other payment for an Award, will be charged against
the total number of shares issuable under the Incentive Plan. If any Award
granted (for which no material benefits of ownership have been received,
including dividends), with respect to a Tandem SAR, terminates, expires, or
lapses for any reason other than as a result of being exercised (other than by
exercise of a related Option), or if shares issued (for which no material
benefits of ownership have been received, including dividends) pursuant to an
Award are forfeited, Common Stock subject to such Award will be available for
further Awards.
In order to reflect such events as stock dividends, stock splits,
recapitalizations, mergers, consolidations, or reorganizations by the Company,
the Committee will adjust the number of shares subject to each outstanding
Award, the exercise price, and the aggregate number of shares from which grants
or awards may be made.
15
<PAGE>
Change in Control
In order to maintain all the participants' rights in the event of a Change
in Control of the Company (as that term is defined in the Incentive Plan), the
Committee, as constituted before such Change in Control, may take in its sole
discretion any one or more of the following actions either at the time an Award
is made or any time thereafter: (i) provide for the acceleration of any time
periods relating to the exercise or realization of any such Award so that such
Award may be exercised or realized in full on or before a date initially fixed
by the Committee; (ii) provide for the purchase or settlement of any such Award
by the Company, upon the participant's request, for an amount of cash equal to
the amount which could have been obtained upon the exercise of such Award or
realization of such participant's rights had such Award been currently
exercisable or payable; (iii) make such adjustment to any such Award then
outstanding as the Committee deems appropriate to reflect such Change in
Control; or (iv) cause any such Award then outstanding to be assumed, or new
rights substituted therefore, by the acquiring or surviving corporation in such
Change in Control.
Certain Federal Income Tax Consequences
Incentive Stock Options. An optionee will not recognize income on the grant
of an ISO, and an optionee generally will not recognize income on the exercise
of an ISO, except as described in the following paragraph. Under these
circumstances, no deduction will be allowable to the Company in connection with
either the grant of such Options or the issuance of shares upon exercise
thereof.
However, if the exercise of an ISO occurs more than three months after the
optionee ceased to be an employee for reasons other than death or disability (or
more than one year thereafter if the optionee ceased to be an employee by reason
of permanent and total disability), the exercise will not be treated as the
exercise of an ISO, and the optionee will be taxed in the same manner as on the
exercise of a NQSO, as described below. For the Option to qualify as an ISO upon
the optionee's death, the optionee must have been employed at the Company for at
least three months before his or her death.
To the extent the aggregate fair market value (determined at the time the
Options are granted) of shares subject to an ISO that become exercisable for the
first time by any optionee in a calendar year exceeds $100,000, the Options will
not be treated as ISOs, and the optionee will be taxed upon exercise of those
excess Options in the same manner as on the exercise of a NQSO, as described
below.
Gain or loss from the sale or exchange of shares acquired upon exercise of
an ISO generally will be treated as capital gain or loss. If, however, shares
acquired pursuant to the exercise of an ISO are disposed of within two years
after the Option was granted or within one year after the shares were
transferred pursuant to the exercise of the Option, the optionee generally will
recognize ordinary income at the time of the disposition equal to the excess
over the exercise price of the lesser of the amount realized or the fair market
value of the shares at the time of exercise (or, in certain circumstances, at
the time such shares became either transferable or not subject to a substantial
risk of forfeiture). If an optionee recognizes ordinary income as a result of a
disposition as described in this paragraph, the Company will be entitled to a
deduction of the same amount. The exercise of an ISO may result in a tax to the
optionee under the alternative minimum tax because as a general rule the excess
of the fair market value of stock received on the exercise of an ISO over the
exercise price is defined as an item of "tax preference" for purposes of
determining alternative minimum taxable income.
Non-qualified Options and Tandem SARs. A participant will not
recognize income on the grant of a NQSO or a Tandem SAR, but generally will
recognize income upon the exercise of a NQSO or a Tandem SAR. The amount of
income recognized upon the exercise of a NQSO will be measured by the excess, if
any, of the fair market value of the shares at the time of exercise over the
exercise price, provided that the shares are either transferable or not subject
to a substantial risk of forfeiture. The amount of income recognized upon the
exercise of a Tandem SAR will be equal to the amount of cash received and the
fair market value of any shares received at the time of exercise, provided the
shares issued are either transferable or not subject to a substantial risk of
forfeiture, plus the amount of any taxes withheld.
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<PAGE>
If shares received on the exercise of a NQSO or a Tandem SAR are
nontransferable and subject to a substantial risk of forfeiture then, unless the
optionee elects to recognize income at the time of receipt of such shares, the
optionee will not recognize ordinary income until the shares become either
transferable or are not subject to a substantial risk of forfeiture. For these
purposes, shares will be treated as nontransferable and subject to a substantial
risk of forfeiture for as long as the sale of the shares at a profit could
subject the optionee to suit under Section 16(b) of the Exchange Act. In the
circumstances described in this paragraph, the amount of income recognized is
measured with respect to the fair market value of the shares at the time the
income is recognized.
In the case of ordinary income recognized by an optionee as described above
in connection with the exercise of a NQSO or a Tandem SAR, the Company will be
entitled to a deduction in the amount of ordinary income so recognized by the
optionee.
Restricted Stock. A recipient of Restricted Stock is not required to
include the value of such shares in ordinary income until the first time his
rights in the shares are transferable or are not subject to a substantial risk
of forfeiture, whichever occurs earlier, unless he elects to be taxed on receipt
of the shares. With respect to Awards granted under the Incentive Plan that are
settled either in cash or in stock or other property that is either transferable
or not subject to substantial risk of forfeiture, the recipient will recognize
ordinary income at the time of receipt of the cash, stock, or other property. In
the circumstances described in this paragraph, the amount of such income will be
equal to the amount of cash received, or the excess of the fair market value of
the shares or other property received at the time the income is recognized over
the amount (if any) paid for the shares or other property. The Company will be
entitled to a deduction in the amount of the ordinary income recognized by the
recipient for the employer's taxable year which includes the last day of the
recipient's taxable year in which he recognizes such income.
General. The rules governing the tax treatment of Awards that may be
granted under the Incentive Plan are quite technical, so that the above
description of the tax consequences is necessarily general in nature and does
not purport to be complete. Moreover, statutory provisions are, of course,
subject to change, as are their interpretations, and their application may vary
in individual circumstances. Section 162(m) of the Code places certain
limitations on the Company's ability to deduct compensation paid to its
executive officers under certain circumstances, including compensation which may
be payable pursuant to the Incentive Plan.
Accounting Treatment
Under current accounting principles, neither the grant nor the exercise of
a stock option with an exercise price not less than the fair market value of the
Common Stock at the date of grant would require a charge against earnings.
The Tandem SARs will require a charge to earnings of the Company in an
amount equal to the difference between the current market value of the Common
Stock and the exercise price. Depending upon the specific provisions of any
Restricted Stock granted, a charge to earnings representing the value of the
benefit conferred may be required. Under certain circumstances, this charge may
be spread over any period of restriction applicable to such an Award.
Effective Date
If approved by the shareholders, the Incentive Plan will be treated as
amended effective as of April 18, 2000.
Vote Required
The affirmative vote of the holders of a majority of the Common Stock
represented in person or by proxy voting at the Annual Meeting, assuming a
quorum is present, is required to ratify and approve the Plan.
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THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" PROPOSAL 2 TO APPROVE
THE AMENDMENT OF THE 1994 INCENTIVE STOCK PLAN.
PROPOSAL THREE
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, subject to ratification by the shareholders, has
appointed Yount, Hyde & Barbour, P.C. as independent public accountants for the
current fiscal year ending December 31, 2000.
A representative of Yount, Hyde & Barbour, P.C. will be present at the
Annual Meeting and will be given the opportunity to make a statement and respond
to appropriate questions from the shareholders. Unless marked to the contrary,
the shares represented by the enclosed proxy card, if executed and returned,
will be voted FOR the ratification of the appointment of Yount, Hyde & Barbour,
P.C. as the independent public accountants of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE APPOINTMENT
OF YOUNT, HYDE & BARBOUR, P.C. AS INDEPENDENT PUBLIC ACCOUNTANTS.
OTHER BUSINESS
As of the date of this Proxy Statement, management of the Company has no
knowledge of any matters to be presented for consideration at the Annual Meeting
other than those referred to above. If any other matters properly come before
the Annual Meeting, the persons named in the accompanying proxy intend to vote
such proxy, to the extent entitled, in accordance with their best judgment.
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SHAREHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Proposals of shareholders intended to be presented at the 2001 Annual
Meeting must be received by the Company no later than November 8, 2000. Under
applicable law, the Board of Directors need not include an otherwise appropriate
shareholder proposal (including any shareholder nominations for director
candidates) in its proxy statement or form of proxy for that meeting unless the
proposal is received by the Company's Secretary, at the Company's principal
office in West Point, Virginia, on or before the date set forth above.
By Order of the Board of Directors
/s/ Gari B. Sullivan
--------------------
Gari B. Sullivan
Secretary
West Point, Virginia
March 20, 2000
19
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A copy of the Company's Annual Report on Form 10-K Report (including exhibits)
as filed with the Securities and Exchange Commission for the year ended December
31, 1999, will be furnished without charge to shareholders upon written request
directed to the Company's Secretary as set forth on the first page of this Proxy
Statement.
20
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C&F FINANCIAL CORPORATION
This Proxy is solicited on behalf of the Board of Directors
The undersigned hereby appoints Larry G. Dillon and James H. Hudson III,
jointly and severally as proxies, with full power to act alone, and with full
power of substitution to represent the undersigned, and to vote all shares of
the Company standing in the name of the undersigned as of February 18, 2000,
at the annual meeting of shareholders to be held Tuesday, April 18, 2000 -
3:30 p.m. at the Father van den Boogaard Center, 3510 King William Avenue,
West Point, Virginia, or any adjournments thereof, on each of the following
matters. This proxy, when properly executed, will be voted in the manner
directed by the undersigned shareholder. If no direction is made, this proxy
will be voted FOR each proposal and on other matters at the discretion of the
proxy agents.
A [X] Please mark [ ] FOR all nominees [ ] WITHHELD from all
your votes as in (except as marked to nominees
this example. the contrary below.)
1. To elect two Class I directors to serve
until the 2003 Annual Meeting of
Shareholders, or until their successors
are elected and qualified, as instructed
below.
Nominees: Larry G. Dillon
James H. Hudson III
(INSTRUCTIONS: To withhold vote for any nominee(s), write that nominee(s)
name on the space provided below.)
--------------------------------------------------------
(continued on the reverse side)
Please Detach and Mail in the Envelope Provided
<PAGE>
(continued from the reverse side)
2. Proposal to approve the Amendment of the Company's 1994 Incentive Stock
Plan.
[ ] FOR[ ] AGAINST [ ] ABSTAIN
3. Proposal to ratify the appointment of Yount, Hyde & Barbour, P.C. as
independent public accountants of the Company for 2000.
[ ] FOR[ ] AGAINST [ ] ABSTAIN
4.The transaction of any other business as may properly come before the Annual
Meeting presently knows of no other business to be presented at the Annual
Meeting.
Meeting Attendance
I plan to attend the annual meeting on Tuesday, April 18th, 2000 at the
location printed on the back. I will also note the number of attendees
[ ] Will Attend Meeting [ ] Will not Attend Meeting
Number of Attendees _______
Dated: ________________________, 2000
_____________________________________
Signature
_____________________________________
Signature
NOTE: Please sign your name(s) ex-
actly as shown imprinted hereon.
When shares are held by joint ten-
ants, both should sign. When signing
as attorney, executor, administra-
tor, trustee, or guardian, please
give full title as such. If a corpo-
ration, please sign full corporate
name by President or other autho-
rized officer. If a partnership,
please sign in partnership name by
authorized person.
