SOUTHERN NATIONAL CORP /NC/, DEF 14A, 1994-03-17

SOUTHERN NATIONAL CORP /NC/
DEF 14A, 1994-03-17
NATIONAL COMMERCIAL BANKS

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934

(Amendment No. )

(xx) Filed by the Registrant
( ) Filed by a Party other than the Registrant

Check the appropriate box:

( ) Preliminary Proxy Statement
(xx) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to (section mark)240.14a-11(c) or
(section mark)240.14a-12

Southern National Corporation
(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement)

PAYMENT OF FILING FEE (Check the appropriate box):

(xx) $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2).
( ) $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
( ) 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:

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.

( ) 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: $0

2) Form, Schedule or Registration Statement No.: Def 14-A

3) Filing Party: Washburn Graphics, Inc.

4) Date Filed: 3-17-94

( ) Filing Fee of $ was previously paid on , 199 ,
the date the Preliminary Proxy Statement was filed.

<PAGE>
SOUTHERN NATIONAL CORPORATION
Post Office Box 1489
Lumberton, North Carolina 28359
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
April 19, 1994
TO THE SHAREHOLDERS OF
SOUTHERN NATIONAL CORPORATION:
Notice is hereby given that the Annual Meeting of Shareholders of Southern
National Corporation (the Corporation) will be held on Tuesday, April 19, 1994
(at 11:00 A.M. local time), at PINE CREST COUNTRY CLUB, MAXTON HIGHWAY,
LUMBERTON, NORTH CAROLINA, for the following purposes:
(1) To elect eight Directors with terms expiring in 1997 and two
Directors with terms expiring in 1996.
(2) To approve the Corporation's Omnibus Stock Incentive Plan.
(3) To approve the Corporation's Long-Term Incentive Plan.
(4) To approve the Corporation's Short-Term Incentive Plan.
(5) To approve an amendment to the Corporation's Incentive Stock
Option Plan and Non-Qualified Stock Option Plan.
(6) To transact such other business as may properly come before the
meeting.
Pursuant to the provisions of the North Carolina Business Corporation Act,
February 17, 1994 has been fixed as the record date for the determination of
holders of Common Stock entitled to notice of and to vote at the Annual Meeting
of Shareholders or any adjournment thereof. Accordingly, only shareholders of
record at the close of business on the record date will be entitled to notice of
and to vote at said meeting or any adjournment thereof. It is important that
your shares of the Corporation's Common Stock be represented at this meeting in
order that the presence of a quorum may be assured.
A copy of the Annual Report, containing the financial statements of the
Corporation for the year ended December 31, 1993, is enclosed herewith.
By Order of the Board of Directors
(Sicnature of David L. Craven)
DAVID L. CRAVEN, SECRETARY
March 16, 1994
Even if you plan to attend the meeting in person, please date and execute
the enclosed proxy and mail it promptly. If you attend the meeting, you may
revoke your proxy and vote your shares in person. A postage-paid,
return-addressed envelope is enclosed.

<PAGE>
SOUTHERN NATIONAL CORPORATION
500 North Chestnut Street
Lumberton, North Carolina 28359
PROXY STATEMENT
The enclosed proxy, for use only at the Annual Meeting of Shareholders to
be held April 19, 1994, at 11:00 A.M. local time, and any adjournment thereof,
is solicited on behalf of the Board of Directors of Southern National
Corporation (the Corporation). The approximate date this proxy material is first
being sent to shareholders is March 16, 1994. Such solicitation is being made by
mail and may be made in person or by fax or telephone by officers or employees
of the Corporation. All expenses incurred in such solicitation will be paid by
the Corporation or its subsidiaries. Banks, brokerage houses and other
institutions, nominees and fiduciaries will be requested to forward the
soliciting material to beneficial owners and to obtain authorization for the
execution of proxies. The Corporation will, upon request, reimburse such parties
for their reasonable expenses in forwarding proxy material to beneficial owners.
The accompanying proxy is for use at the meeting if a shareholder either
will be unable to attend in person or will attend but wishes to vote by proxy.
The proxy may be revoked by the shareholder at any time before it is exercised
by filing with the Secretary of the Corporation an instrument revoking it,
filing a duly executed proxy bearing a later date or by attending the meeting
and electing to vote in person. All shares of the Corporation's Common Stock
represented by valid proxies received pursuant to this solicitation, and not
revoked before they are exercised, will be voted in the manner specified
therein. If no specification is made, the proxies will be voted in favor of: (1)
electing 10 nominees named in this Proxy Statement to the Board of Directors;
(2) approving the Corporation's Omnibus Stock Incentive Plan; (3) approving the
Corporation's Long-Term Incentive Plan; (4) approving the Corporation's
Short-Term Incentive Plan and (5) approving an amendment to the Corporation's
Incentive Stock Option Plan and Non-Qualified Stock Option Plan.
VOTING SECURITIES OUTSTANDING
Pursuant to the provisions of the North Carolina Business Corporation Act,
February 17, 1994 has been fixed as the record date for the determination of
holders of Common Stock entitled to notice of and to vote at the Annual Meeting
of Shareholders. Each share of the Corporation's Common Stock issued and
outstanding on February 17, 1994 is entitled to one vote on all proposals at the
meeting, except that shares held by Southern National Bank of North Carolina
(SNB North Carolina) or Southern National Bank of South Carolina (SNB South
Carolina), in a fiduciary capacity, may only be voted in accordance with the
instruments creating the fiduciary capacity. Holders of shares of Common Stock
vote together as a voting group on all such proposals. As of the close of
business on February 17, 1994, there were 42,353,374 shares of Common Stock of
the Corporation outstanding and entitled to vote.
SECURITY OWNERSHIP
The following is the only shareholder known to the Corporation to be the
beneficial owner as of February 17, 1994, of more than 5% of the Corporation's
Common Stock:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1) CLASS
<S> <C> <C>
Southern National Bank of 2,667,044 6.30%
North Carolina
P.O. Box 1489
500 North Chestnut Street
Lumberton, North Carolina 28359
</TABLE>

<PAGE>
(1) The amount shown represents shares held in a fiduciary capacity for various
accounts, including: (i) 2,537,212 shares (or 5.99% of the shares
outstanding) held for the account of the Southern National Employee Stock
Ownership Plan (the ESOP), as to which SNB North Carolina has sole
investment power, votes shares which have been allocated to individual
accounts in accordance with the instructions of the participants and does
not vote shares as to which no instructions are received; (ii) 90,698 shares
held for the account of the Southern National ESOP Excess Plan, as to which
SNB North Carolina has sole voting power, but not investment power; and
(iii) 39,134 shares held for customers of SNB North Carolina and SNB South
Carolina as to which it has sole voting and sole investment power. Of that
total, 36,801 shares are held by SNB North Carolina and 2,333 shares are
held by SNB South Carolina. In connection with SNB North Carolina's
beneficial ownership as disclosed above, all voting rights, investment
discretion and other fiduciary duties of the bank are set forth in the plan
documents in connection with the various accounts listed herein.
The table below sets forth the beneficial ownership of Common Stock and
Depositary Shares (each Depositary Share representing a one-quarter interest in
a share of the Corporation's 6 3/4% Cumulative Convertible Preferred Stock,
Series A (6 3/4% Preferred Stock )) by all Directors and nominees, the Chief
Executive Officer and the four next most highly compensated executive officers
and all Directors and executive officers of the Corporation as a group as of
February 22, 1994. Unless otherwise indicated, all persons listed below have
sole voting and investment power over all shares beneficially owned. No person
or group owns more than 1% of the 6 3/4% Preferred Stock.
<TABLE>
<CAPTION>
SHARES OF DEPOSITARY
COMMON STOCK SHARES
BENEFICIALLY PERCENT OF BENEFICIALLY
NAME OF BENEFICIAL OWNER OR NUMBER OF PERSONS IN GROUP OWNED (1)(2) COMMON STOCK OWNED (3)
<S> <C> <C> <C>
L. Glenn Orr, Jr................................................. 132,665 * --
Gary E. Carlton.................................................. 32,503 * --
William F. Black................................................. 64,091 * --
Luther C. Boliek................................................. 121,028 * --
H. Ray Davis..................................................... 111,674 * --
Ronald E. Deal................................................... 22,104 * --
William N. Geiger................................................ 17,910 * --
Paul S. Goldsmith................................................ 46,305 * --
Lloyd Vincent Hackley............................................ 3,446 * --
James A. Hardison................................................ 2,553 * --
Donald C. Hiscott................................................ 11,999 * --
Richard Janeway, M.D............................................. 25,616 * 400
Joseph A. McAleer................................................ 200 * --
Albert O. McCauley............................................... 2,071 * --
Dickson McLean, Jr............................................... 20,157 * 400
Charles E. Nichols............................................... 69,641 * --
C. Edward Pleasants.............................................. 60,514 * --
Nido R. Qubein................................................... 51,017 * --
Ted R. Reynolds.................................................. 11,245 * --
T. H. Yancey..................................................... 110,000 * 600
Robert H. Yeargin................................................ 35,791 * --
A. Bruce Williams................................................ 26,725 * --
A. Tab Williams.................................................. 329,282 * 11,000
Edward M. Williams............................................... 18,326 * --
John R. Spruill.................................................. 26,689 * --
Michael W. Sperry................................................ 21,130 * --
James F. Byrne................................................... 30,840 * 1,062
Directors and executive officers as a
group (33 persons)............................................. 1,464,955 3.46% 14,462
</TABLE>

<PAGE>
* Less than 1%.
(1) As reported to the Corporation by the Directors and nominees (including
shares held by spouses, minor children, family companies, partnerships and
trusts). The table includes options which become exercisable within 60 days
after February 22, 1994 and shares allocated to individual accounts by the
ESOP, voting of which is directed by those named persons and group members
who participate in the ESOP and as to which such persons have no investment
power.
(2) Unless otherwise indicated, the persons named in the table have sole voting
and investment power over the shares included in the table. Does not include
shares of Common Stock that could be acquired by conversion of the 6 3/4%
Preferred Stock.
(3) Each Depositary Share is convertible into 1.4767 shares of Common Stock.
PROPOSAL 1: ELECTION OF DIRECTORS
The Board of Directors currently consists of 22 persons. The Board of
Directors has authorized increasing the size of the Board following the Annual
Meeting of Shareholders to 24 persons. The Board is divided into three classes,
each class to be as nearly equal in number as possible. There are 10 nominees
for election as Directors, two of whom will serve for a term expiring in 1996
and eight of whom will serve for a term expiring in 1997. Edward M. Williams is
retiring from the Board as of January 1, 1995, but will continue to serve as a
Consultant thereafter.
It is intended that the persons named in the accompanying form of proxy
will vote to elect the 10 nominees listed below as Directors, unless authority
so to vote is withheld. Each nominee is currently a member of the Board of
Directors, except for Luther C. Boliek, H. Ray Davis, Paul S. Goldsmith and
Robert H. Yeargin, who are former directors of The First Savings Bank, FSB which
merged with and into Southern National Bank of South Carolina in January 1994.
Although management expects that each of the nominees will be available for
election, in the event a vacancy in the slate of nominees is occasioned by
unexpected occurrence, it is intended that shares of the Corporation's Common
Stock represented by proxies will be voted for the election of a substitute
nominee selected by the persons named in the accompanying form of proxy. The
election of each nominee requires the affirmative vote of a plurality of the
shares of Common Stock cast in the election of Directors. Votes that are
withheld and shares held in street name that are not voted in the election of
Directors will not be included in determining the number of votes cast.
The names of the nominees for election and the other continuing members of
the Board of Directors, their principal occupations and certain other
information with respect to such persons are as follows.
3

<PAGE>
NOMINEES FOR ELECTION AS DIRECTORS
FOR THREE-YEAR TERMS EXPIRING IN 1997
<TABLE>
<CAPTION>
DIRECTOR
PRINCIPAL OCCUPATION OF CORPORATION
DURING THE PAST OR PREDECESSOR
NAME AGE FIVE YEARS; OTHER DIRECTORSHIPS BANK SINCE (1)
<S> <C> <C> <C>
William N. Geiger, Jr. 59 Chairman of Development Properties, Incorporated; Chairman 1987
of GMK Associates (Real estate development) until 1988
James A. Hardison, Jr. 64 Executive Vice President of Southern National Bank of North 1984
Carolina; former President of Pee Dee Oil Co.; former
President and Chairman of First National Bank of Anson
County
Charles E. Nichols (2) 66 Of Counsel, Nichols, Caffrey, Hill, Evans & Murrelle, 1984
Attorneys-at-Law
Ted R. Reynolds (2) 61 Senior Partner of Reynolds & Pendergrass, P.A., 1989
Attorneys-at-Law
Joseph A. McAleer 44 Chief Executive Officer and Director, Krispy Kreme Doughnut 1993
Corporation since 1992; prior thereto President and Chief
Operating Officer and Director, Krispy Kreme Doughnut
Corporation
Luther C. Boliek 56 Vice Chairman, Southern National Corporation since January 1981
1994; prior thereto President and Chief Executive Officer
and Director, The First Savings Bank, FSB since 1992; prior
thereto President, Chief Operating Officer and Director,
The First Savings Bank, FSB
H. Ray Davis 66 Retired; former Chairman of the Board, The First Savings 1968
Bank, FSB
Paul S. Goldsmith 60 President, William Goldsmith Company, Inc. (Insurance) 1970
</TABLE>

NOMINEES FOR ELECTION AS DIRECTORS
FOR TWO-YEAR TERMS EXPIRING IN 1996
<TABLE>
<CAPTION>
DIRECTOR
PRINCIPAL OCCUPATION OF CORPORATION
DURING THE PAST OR PREDECESSOR
NAME AGE FIVE YEARS; OTHER DIRECTORSHIPS BANK SINCE (1)
<S> <C> <C> <C>
T. H. Yancey 68 Secretary and Treasurer, Yancey Motors, Inc. 1991
Robert H. Yeargin 67 Chairman and CEO, Yeargin Properties, Inc. (Construction) 1968
</TABLE>

<PAGE>
CONTINUING DIRECTORS
<TABLE>
<CAPTION>
DIRECTOR
PRINCIPAL OCCUPATION OF CORPORATION
DURING THE PAST OR PREDECESSOR
NAME AGE FIVE YEARS; OTHER DIRECTORSHIPS BANK SINCE (1)
<S> <C> <C> <C>
TERMS EXPIRING IN 1996
William F. Black 63 Retired; former Executive Vice President of Southern 1984
National Bank of North Carolina; former President and
Treasurer of Community Bank of Carolina
Dickson McLean, Jr. (2)(4) 66 President of McLean, Stacy, Henry, McLean, Slaughter & 1956
Ramsaur, P.A., Attorneys-at-Law
C. Edward Pleasants (3) 53 President, Chief Executive Officer and Director, Pleasants 1993
Hardware Company
Nido R. Qubein (4) 45 Chief Executive Officer of Creative Services, Inc. 1990
(International management consulting)
A. Bruce Williams 66 Retired; former President, Chief Administrative and 1977
Operating Officer of Southern National Bank of North
Carolina; former Executive Vice President of the
Corporation; former Vice President of Southern National
Bank of South Carolina
A. Tab Williams, Jr. 66 Chairman and Chief Executive Officer of A. T. Williams Oil 1982
Company
Edward M. Williams (4) 70 President of W.S.W. Company and Sanford Notions, Inc. 1965
(Textiles)
TERMS EXPIRING IN 1995
L. Glenn Orr, Jr. 53 Chairman, Chief Executive Officer, and President of the 1982
Corporation; Chairman and Chief Executive Officer of
Southern National Bank of North Carolina; Chairman of
Southern National Bank of South Carolina
Gary E. Carlton 53 President and Chief Operating Officer of Southern National 1986
Bank of North Carolina; Executive Vice President of the
Corporation; Vice Chairman of Southern National Bank of
South Carolina
Ronald E. Deal (4) 50 Chairman of Wesley Hall; Investor; President of Highland 1986
House Furniture Company until 1988
Lloyd Vincent Hackley (3) 53 Chancellor; Professor of Political Science, Fayetteville 1992
State University; Vice President for Student and Special
Programs, University of North Carolina
Donald C. Hiscott (3) 61 President and Chief Executive Officer of SGH Healthcare 1987
Corporation
Richard Janeway, M.D. (4) 61 Executive Vice President for Health Affairs and Executive 1989
Dean; Professor of Neurology and Research Associate in
Radiology, Bowman Gray School of Medicine, Wake Forest
University
Albert O. McCauley (3) 53 Secretary and Treasurer, Quick Stop Food Marts, Inc. 1993
</TABLE>

(1) On January 1, 1969, the Board of Directors of SNB North Carolina became the
Board of Directors of the Corporation pursuant to a Plan of Reorganization
in which the Corporation acquired SNB North Carolina.
(2) Member of a law firm which performed legal work for the Corporation or its
subsidiaries during 1993. Fees in the amount of $56,093.00 were paid to the
firm of Mclean, Stacy, Henry, McLean, Slaughter & Ramsaur, P.A., fees in the
amount of $182,009.94 were paid to the firm of Reynolds & Pendergrass, P.A.
and fees in the amount of $49,212.38 were paid to the firm of Nichols,
Caffrey, Hill, Evans & Murrelle for legal services during 1993. Fees for
legal services were also paid by the Corporation or its subsidiaries to the
law firm of Young, Clement, Rivers & Tisdale in the sum of $22,764.07 during
1993. J. Rutledge Young, Jr., a senior partner in that firm, is a Director
of SNB South Carolina.
(3) Member of the Audit Committee.
(4) Member of the Compensation Committee and the Nominating Committee.
5

<PAGE>
The Board of Directors has an Audit Committee, a Nominating Committee and a
Compensation Committee. The members of the Compensation Committee also serve as
members of the Nominating Committee.
The Audit Committee recommends engaging and discharging the independent
auditors; directs and supervises special investigations; reviews with the
independent auditors the plan and result of the auditing engagement; reviews the
scope and result of the Corporation's procedures for internal auditing and loan
review; approves each professional service above certain limits provided by the
independent auditors; considers the range of audit and non-audit fees; and
reviews the adequacy of the Corporation's system of internal accounting
controls.
The Nominating Committee recommends to the Board of Directors nominees for
election as Directors and considers the performance of incumbent Directors in
determining whether or not to nominate them for re-election. The Nominating
Committee will consider written nominations of candidates for election to the
Board of Directors submitted by shareholders to the Secretary of the Corporation
that are accompanied by biographical material, qualifications and consent of
nominees. Nominations of such candidates must be received not later than 60 days
prior to one year after the date of the immediately preceding Annual Meeting of
Shareholders, along with such information as is disclosed in the proxy materials
concerning all nominees for Director and the shareholder's name, address and
number of shares owned, in order to be considered for the slate of nominees for
election as Directors at the next annual meeting.
The Compensation Committee recommends to the Board of Directors
remuneration arrangements for senior management and Directors and adoption and
administration of compensation plans in which Officers and Directors are
eligible to participate.
All members attended at least 75% of the Board of Directors meetings and
assigned committee meetings during 1993. The Board of Directors held ten
meetings during the year (seven regular meetings and three special meetings);
its Nominating Committee held one meeting; its Audit Committee held six
meetings; and its Compensation Committee held seven meetings. Directors receive
an annual retainer fee of $7,500, Board meeting fees of $600 per regular meeting
attended and $1,000 per special meeting attended and a committee meeting fee of
$600 per meeting attended. Employee Directors do not receive Director fees. The
Chairman of the Audit Committee, in lieu of the above Audit Committee fee,
received $6,000 for 1993 as compensation for his continuous responsibility and
consultation. All non-employee Directors elected prior to June 30, 1991 (Black,
Deal, Geiger, Hiscott, Janeway, McLean, Nichols, Reynolds, A. T. Williams, Jr.,
E. M. Williams and T. H. Yancey), have executed Consulting Agreements with the
Corporation to provide consulting services for a period of ten years following
their retirement. Directors beginning such service during 1994, 1995, 1996, or
1997, shall receive $13,200 per year. Directors beginning such service after
1997 shall receive a sum equal to the annual retainer paid to the Corporation's
directors in effect at the time they begin such service. The Consultants have
agreed not to serve as directors of, or advisers to businesses which compete
with the Corporation during the time they serve as consultants to the
Corporation.
6

<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
The following table presents information relating to total compensation
during the fiscal year ended December 31, 1993 of the Chief Executive Officer
and the four next most highly compensated executive officers (the Named
Executives):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
AWARDS PAYOUTS
ANNUAL COMPENSATION SECURITIES LTIP
NAME AND OTHER ANNUAL OPTIONS/SARS PAYOUTS ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS (1) COMPENSATION (2) (NO. OF SHARES) (3) ($)(4)(5) COMPENSATION (6)
<S> <C> <C> <C> <C> <C> <C> <C>
L. Glenn Orr, Jr. 1993 $444,184 $217,700 -- 22,459 $ 216,500 $ 74,822
Chairman & Chief 1992 427,100 224,200 -- 25,498 -- 67,953
Executive Officer (7) 1991 408,400 98,500 -- 29,134 --
Gary E. Carlton 1993 211,900 74,200 -- 8,571 73,000 38,199
Executive Vice 1992 203,700 76,400 -- 9,728 -- 69,942
President (7) 1991 186,800 45,600 -- 11,116 --
John R. Spruill 1993 186,576 65,300 -- 18,867 65,000 47,460
Executive Vice 1992 179,400 67,300 -- 8,568 -- 19,813
President & Chief 1991 167,500 41,900 -- 9,790 --
Financial Officer
Michael W. Sperry 1993 181,100 63,400 -- 18,314 62,100 14,100
Executive Vice 1992 174,100 65,300 -- 8,315 -- 56,838
President 1991 160,000 38,200 -- 9,501 --
James F. Byrne 1993 173,700 60,800 -- 9,026 60,300 22,142
Executive Vice 1992 167,000 62,600 -- 7,976 -- 21,948
President 1991 153,375 38,300 -- 9,042 --
</TABLE>

(1) Includes payment under the Short-Term Incentive Plan made in 1994 for
service in 1993. Twenty-eight officers, including the five executives listed
above, received payouts in 1994 under the Short-Term Incentive Plan
totalling $1,249,875 for service in 1993. No non-executive Director
participates in or receives payouts under the Short-Term Incentive Plan in
1994. The Executive Group, consisting of eleven executives, including the
five executives listed above, received payouts in 1994 under the Short-Term
Incentive Plan totalling $710,400 for service in 1993. Benefits or amounts
for service in 1994 cannot be determined at this time. Under the
Corporation's Capital Appreciation Plan, Byrne deferred 100% of his bonus
which was payable in 1994 for performance in 1993.
(2) None of the named individuals received perquisites or other personal
benefits in excess of the lesser of $50,000 or 10% of the total of his
salary and bonus for 1993. Amounts of Other Annual Compensation are not
required for 1991 and will be phased in over the next fiscal year.
(3) Options referred to in this table were granted on December 19, 1991,
December 17, 1992 and December 16, 1993. The option agreement for each of
these options contains an exercise schedule under which 25% of the option
granted becomes exercisable each year such that at the end of the 4th year
following date of grant, the option becomes fully exercisable. Options
granted in 1991 and 1992 are non-qualified stock options. Options granted in
1993 are incentive stock options granted in a single grant to each named
executive officer. No restricted stock awards were made to the Named
Executives in 1993, 1992, or 1991.
(4) Under the Corporation's Capital Appreciation Plan, Byrne deferred 100% of
his LTIP award payable in 1994 under the Long-Term Cash Incentive Plan for
the performance period 1991-1993.
(5) Seven members of the Executive Group consisting of eleven executives,
including the five executives listed above, received payouts in 1993 under
the 1991-1993 Long-Term Cash Incentive Plan totalling $572,900. No
non-executive Director or non-executive officer employee received payouts
under the 1991-1993 Long-Term Cash Incentive Plan.
(6) Components of 1993 All Other Compensation consist of the following:
Corporate contributions made in 1993 under the Corporation's 401(k) ESOP and
amounts accrued but not contributed under the Corporation's ESOP Excess Plan
which allows payment of benefits otherwise entitled under the 401(k) ESOP
except for limitations imposed by the Internal Revenue Code, in the amount
of $8,994 Orr; $8,994 Carlton; $8,994 Spruill; $8,994 Sperry; and $8,994
Byrne. Amounts accrued under and interest earned on
7

<PAGE>
deferred compensation in 1993 in excess of 120% of the long-term applicable
federal rate in the amounts of $37,334 Orr; $0 Carlton; $0 Spruill; $2,327
Sperry; and $9,856 Byrne. Includes actuarial equivalent of benefit to
employee from payment of annual premiums by the Corporation in 1993 under a
split dollar life insurance program in the amounts of $27,030 Orr; $13,265
Carlton; $3,961 Spruill; $2,779 Sperry; and $3,292 Byrne. Includes term life
insurance premiums paid by the Corporation in 1993 in the amount of $1,464
Orr. Includes relocation expenses paid by the Corporation in 1993 in the
amounts of $7,636 to Carlton and $34,505 to Spruill. Amounts of All Other
Compensation are not required for 1991 and will be phased in over the next
fiscal year.
(7) Effective June 30, 1991, separate payment to employee Directors for service
as a Director was terminated and base salaries for Orr and Carlton were
increased in 1991 to offset this loss of income.
The following table shows all grants of options to each of the Named
Executives in 1993.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
<S> <C> <C> <C> <C> <C> <C>
<CAPTION>
% OF TOTAL
OPTIONS
GRANTED TO
OPTION EMPLOYEES
GRANTS IN FISCAL EXERCISE EXPIRATION
NAME (SHARES) (1) YEAR 1993 PRICE DATE 5% 10%
<S> <C> <C> <C> <C> <C> <C>
L. Glenn Orr, Jr...................... 22,459 9.93% $19.77 12-15-2003 $279,729 $705,983
Gary E. Carlton....................... 8,571 3.30 19.77 12-15-2003 106,753 269,423
John R. Spruill....................... 18,867 7.35 19.77 12-15-2003 234,990 593,071
Michael W. Sperry..................... 18,314 7.13 19.77 12-15-2003 228,103 575,688
James F. Byrne........................ 7,026 2.73 19.77 12-15-2003 87,510 220,857
</TABLE>

(1) Each option is an incentive stock option. Each option agreement vests or
becomes exercisable with respect to 25% of the shares subject to the option
one year from date of grant (12/16/93) and an additional 25% becomes
exercisable each additional year thereafter. No options have been granted
which include stock appreciation rights (SARs).
The following table provides information concerning stock options exercised
by each of the Named Executives in 1993, and the value of options held by each
at December 31, 1993.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
SHARES NUMBER OF UNEXERCISED IN-THE-MONEY
ACQUIRED ON VALUE OPTIONS AT FY-END (SHARES) OPTIONS AT FY-END (1)
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
L. Glenn Orr, Jr.............. -- -- 49,157 65,555 $ 382,481 $ 227,314
Gary E. Carlton............... -- -- 19,049 25,111 148,938 87,731
John R. Spruill............... -- -- 17,143 33,557 134,923 78,211
Michael W. Sperry............. -- -- 16,619 32,564 130,761 75,843
James F. Byrne................ -- -- 15,799 20,624 124,157 72,489
</TABLE>

(1) The closing price on December 31, 1993 for Corporation Common Stock was
$19.75 and is used in calculating the value of unexercised options.
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The following table describes target performance awards planned in 1993 to
be made to the Named Executives in 1996 under the Long-Term Cash Incentive Plan.
Actual payment is dependent upon performance achieved in 1993 to 1995.
LONG-TERM INCENTIVE PLAN AWARDS TABLE
1993-95 LONG-TERM CASH INCENTIVE PLAN
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS UNDER
NON-STOCK PRICE BASED PLANS (1)
1993-95 THRESHOLD TARGET MAXIMUM
NAME AVERAGE SALARY AWARD (2) AWARD (2) AWARD (2)
<S> <C> <C> <C> <C>
L. Glenn Orr, Jr............................................. $462,188 $40,441 $ 161,766 $ 242,649
Gary E. Carlton.............................................. 220,489 13,781 55,122 82,683
John R. Spruill.............................................. 194,138 12,134 48,535 72,802
Michael W. Sperry............................................ 188,441 11,778 47,110 70,665
James F. Byrne............................................... 180,740 11,296 45,185 67,778
</TABLE>

(1) The Corporation has a Long-Term Cash Incentive Plan that provides for
payments of cash awards to certain key employees of the Corporation and its
subsidiaries who contribute to the success of the Corporation based upon the
achievement over a three-year period of performance goals identified in the
plan. Performance under the Long-Term Cash Incentive Plan is based upon
growth in earnings per share as compared to an earnings per share target and
return on average equity as compared to identified industry standards.
Payment under the 1993-1995 Long-Term Cash Incentive Plan will be made in
1996 and will be reported in the Summary Compensation Table.
(2) The cash awards payable are based on a percentage of the employees' average
salaries over the three-year performance period. Accordingly, the awards
identified will change to the extent the actual average compensation differs
from the projected average compensation.
RETIREMENT PLANS
The Corporation has a defined benefit retirement plan, the Southern
National Retirement Plan (the Retirement Plan), for its employees. All employees
of the Corporation and its subsidiaries are eligible to participate under the
Retirement Plan after completing one year of service. Contributions to the
Retirement Plan are computed on an actuarial basis. An employee's normal annual
retirement benefit under the Retirement Plan at age 65 is an amount equal to
1.1% of the first $6,600 of the participant's average compensation, plus 1.5% of
the participant's average compensation in excess of $6,600, times the number of
years of service completed with the Corporation and its subsidiaries. A
participant's average compensation is his average annual compensation including
salary, wages, overtime, bonuses and incentive compensation, for the five
consecutive years that produce the highest average.
The following table shows the estimated annual benefits payable under the
Retirement Plan upon retirement at age 65 to persons in specified average
compensation and years of service classifications. The amounts shown are based
on a 10 year certain and life annuity and are not subject to offsets based upon
social security amounts or other amounts. As of December 31, 1993, for purposes
of computing benefits under the Retirement Plan, age and years of service of the
Named Executives are as follows: age 53 and 21 years for Mr. Orr; age 53 and 15
years for Mr. Carlton; age 51 and five years for Mr. Spruill; age 49 and four
years for Mr. Sperry; and age 62 and 31 years for Mr. Byrne.
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ESTIMATED ANNUAL RETIREMENT BENEFITS
BASED ON YEARS OF CREDITED SERVICE(1)(2)
<TABLE>
<CAPTION>
AVERAGE COMPENSATION
FOR 5 CONSECUTIVE YEARS
OF HIGHEST COMPENSATION 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS 40 YEARS
<S> <C> <C> <C> <C> <C> <C> <C>
$100,000......................... $ 14,736 $ 22,104 $ 29,472 $ 36,840 $ 44,208 $ 51,576 $ 58,944
150,000......................... 22,236 33,354 44,472 55,590 66,708 77,826 88,944
200,000......................... 29,736 44,604 59,472 74,340 89,208 104,076 118,944
250,000......................... 37,236 55,854 74,472 93,090 111,708 130,326 148,944
300,000......................... 44,736 67,104 89,472 111,840 134,208 156,576 178,944
350,000......................... 52,236 78,354 104,472 130,590 156,708 182,826 208,944
400,000......................... 59,736 89,604 119,472 149,340 179,208 209,076 238,944
450,000......................... 67,236 100,854 134,472 168,090 201,708 235,326 268,944
500,000......................... 74,736 112,104 149,472 186,840 224,208 261,576 298,944
550,000......................... 82,236 123,354 164,472 205,590 246,708 287,826 328,944
600,000......................... 89,736 134,604 179,472 224,340 269,208 314,076 358,944
650,000......................... 97,236 145,854 194,472 243,090 291,708 340,326 388,944
700,000......................... 104,736 157,104 209,472 261,840 314,208 366,576 418,944
750,000......................... 112,236 168,354 224,472 280,590 336,708 392,826 448,944
800,000......................... 119,736 179,604 239,472 299,340 359,208 419,076 478,944
</TABLE>

(1) The amounts shown exceed statutory benefit limits and compensation caps
under the Retirement Plan in some instances. To the extent an amount cannot
be earned under the Retirement Plan, it will be earned under the
Corporation's Supplemental Executive Retirement Plan.
(2) If employment date is on or after January 1, 1979, basic benefit is lifetime
annuity. If employment date is prior to January 1, 1979, basic benefit is
120 months certain and thereafter for participant's lifetime.
EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL AGREEMENTS
Mr. Orr has a contract providing for employment with the Corporation and
SNB North Carolina until age 65 with a minimum base salary of $347,000 per year,
subject to adjustments with respect to average changes in salaries of the
highest paid Officers of the Corporation. In the event that SNB North Carolina
or the Corporation is acquired such that SNB North Carolina or the Corporation
is not the surviving entity, Mr. Orr may, at his option, terminate the contract
and receive a severance payment totalling three (3) times his then current
annual salary.
Mr. Carlton has a contract providing for employment with the Corporation
and SNB North Carolina until age 65 with a minimum base salary of $220,000 per
year, subject to adjustments as approved annually by the Board of Directors. The
contract contains a covenant not to compete in the business of banking, lending
or financial services for a period of five years if he terminates his
employment.
Mr. Spruill, Executive Vice President and Chief Financial Officer of the
Corporation, has a contract for employment with the Corporation, SNB North
Carolina and SNB South Carolina. The contract has a continuing term of five
years (extended daily, but not beyond May, 2007), with a minimum base salary of
$140,000 per year subject to adjustments as approved annually by the Board of
Directors. Either party may by written notice fix the term of five years. Mr.
Spruill's contract also contains a covenant not to compete in the business of
banking, lending or financial services for two years if he terminates his
employment prior to the end of his initial term or any subsequent five-year term
of employment.
Mr. Sperry, Executive Vice President and Chief Credit Officer of the
Corporation, has a change in control agreement with the Corporation. Under the
contract, if a change in control (as defined under the contract) of the
Corporation occurs, a three-year term of employment commences after the date of
the change in control with Mr. Sperry's base salary as then in effect continuing
with normal salary increases. If Mr. Sperry is terminated without just cause or
voluntarily terminates after a demotion within three years after a change in
control, Mr. Sperry shall receive a severance payment equal to three times the
sum of his base salary and average bonuses and incentive amounts paid or payable
to Mr. Sperry during the thirty-six (36) month period prior to his termination
of employment and Mr. Sperry shall receive any vested benefits under the
Corporation's qualified and non-qualified employee benefit plans, stock option
plans, deferred compensation arrangements, and
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life insurance based plans. If a payment under the contract would result in a
parachute payment under the Internal Revenue Code, then the payment amount will
be reduced to a level one dollar ($1) under the level that constitutes a
parachute payment. The payment is not reduced by amounts earned by Mr. Sperry
from other employment following termination by the Corporation.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee's report on executive compensation of the Board
of Directors of the Corporation is set forth below. This Committee report
documents the components of the Corporation's executive officer compensation
programs and describes the basis on which 1993 compensation determinations were
made by the Committee with respect to the executive officers of the Corporation,
including the executive officers that are named in the compensation tables (the
Named Executives). The report also includes the factors and criteria for
compensation of the Chairman and Chief Executive Officer of the Corporation
which are separately set forth below. See Discussion of Compensation for the
Chairman and Chief Executive Officer below.
COMPENSATION PHILOSOPHY AND OVERALL OBJECTIVES OF EXECUTIVE COMPENSATION
PROGRAMS. Components of the Corporation's present compensation program were
designed in 1990. An outside consultant was engaged and prepared an executive
compensation program design. The consultant compared the financial performance
of the Corporation to that of an industry peer group of southeastern banks for
the period 1987 to 1989. The study indicated that for this period, the
Corporation's average return on equity approximated the peer group's median,
return on average assets was somewhat below its peer group at .86%, and its
earnings per share growth was in the top quarter of its peers. Total
compensation of executives in 1990 for the Chief Executive Officer and other
executive officers was at or below the 25th percentile of the peer group. The
study indicated the need to implement an option program to be competitive with
the peer group and link cash incentives to performance measures based on
earnings per share, return on assets and return on equity. Of the peer group,
100% had a long term incentive plan, 80% had a non-qualified stock option plan,
and 93% had an incentive stock option plan. The study recommended stock
incentives to motivate executives to align themselves with shareholders. As set
forth below, these recommendations have been adopted by the Corporation and form
the basis of its compensation philosophy.
It is the philosophy of the Corporation to ensure that executive
compensation be directly linked to continuous improvements in corporate
performance which lead to increases in shareholder value. The following
objectives have been adopted by the Committee as guidelines for compensation
decisions.
(bullet)Provide a competitive total compensation package that enables the
Corporation to attract and retain key executives.
(bullet)Integrate bonus programs with the Corporation's annual and long-term
business objectives and strategy, and focus executive behavior on the
fulfillment of those objectives.
(bullet)Provide variable compensation opportunities through bonus programs that
align executive remuneration with corporate performance that will serve
the interests of the Corporation's shareholders.
COMPENSATION PROGRAM COMPONENTS. Each year the Committee reviews the
Corporation's compensation program to ensure that pay levels and incentive
opportunities are competitive and reflect the performance of the Corporation.
The particular elements of the compensation program for executive officers are
further explained below.
BASE SALARY -- Base pay levels are largely determined through comparisons
with corporations of similar size and complexity as the Corporation. As noted
above, base salaries were carefully evaluated in 1990 through use of a peer
group study. Actual salaries are based on individual performance contributions
within a competitive salary range for each position that is established through
job evaluation and market comparisons. Base pay levels for the executive
officers are competitive within a range that the Committee considers to be
reasonable and necessary. A top five executive compensation review by a
consulting firm was commissioned by the Compensation Committee which compared
1992 compensation of the Named Executives to an industry peer group of 14
southeastern banks. The study was commissioned by the Committee in 1992 to
respond to the Securities and Exchange Commission's new requirements concerning
executive compensation and was designed not only
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<PAGE>
to assist the Committee in setting 1993 compensation but also to support the
Committee's review of compensation decisions made for 1992. Peer group data were
obtained from 1992 proxy statements and increased by 5.8% to update the peer
group data. The peer group utilized is the same peer group of bank holding
companies utilized on the Performance Graph which is set forth herein. The study
indicated that while compensation of Named Executives is consistent with the
median salaries paid by the peer group, the Corporation's return on average
assets over a three year period has improved against its peers and its growth in
earnings per share and net income growth is solidly positioned in the top 25% of
its peer group. According to the study, the Corporation's financial performance
for the 1990-1992 period was clearly above average and for fiscal 1992, the
Corporation was one of the best performing companies in the peer group. The
Compensation Committee determined that, based upon the Corporation's
performance, the Corporation's compensation strategy should provide for base
salaries and target annual incentives that approximate the median for the peer
group. A four percent (4%) increase in base salary was recommended by the
Compensation Committee in fiscal 1993 for the Named Executives to ensure that
base salaries plus bonuses for the Named Executives approximated the median base
salary plus bonuses for the peer group. The Board of Directors acted in
accordance with this recommendation. These increases represent modest merit
increases in base salary for each of the Named Executives. An early 1994 review
of 1993 compensation levels indicates that 1993 base salary and annual bonus
(under the Short-Term Incentive Plan described below) paid to the Chief
Executive Officer and the other Named Executives approximates the 1992 peer
group median base salary and annual bonus for like executives.
SHORT-TERM INCENTIVE PLAN -- The Corporation's officers are eligible to
participate in an annual incentive compensation plan with awards based primarily
on the attainment of certain earnings per share and return on assets goals. Each
of these components is given equal weight in the formula to calculate awards.
The objective of this plan is to deliver competitive levels of compensation for
the attainment of financial objectives that the Committee believes are primary
determinants of share price over time. In particular, the plan aims to focus
corporate behavior on consistent and steady earnings growth. Targeted awards for
executive officers of the Corporation are consistent with targeted awards of
peer group companies of similar size and complexity to the Corporation which are
reflected on the Performance Graph. Actual awards are subject to decrease or
increase on the basis of the Corporation's performance. Historically, the
earnings per share Target goal is set at the Corporation's budgeted earnings.
For fiscal year 1993 earnings were budgeted at $1.95 per share, a 12.7% increase
over the 1992 earnings per share originally reported of $1.73 per share.
Originally reported actual earnings for 1993 were $2.03 per share or 17.3% over
originally reported earnings per share for 1992. If budgeted earnings are
achieved, a full payout of bonuses is made. The payout ratio decreases to 25% of
full payment based on an incremental decrease in the earnings per share and
return on assets from the Target goal set for earnings per share and return on
assets down to a minimum or threshold level. Conversely, the payout ratio
increases based on an incremental increase in the earnings per share and return
on assets above the Target goal set for earnings per share and return on assets
up to a Superior level. The Corporation achieved the Plan's financial
performance objectives for the last three years and awards have been made to the
Named Executives during that three-year period as disclosed in the Bonus column
of the Summary Compensation Table.
LONG-TERM CASH INCENTIVE PLAN -- The Board of Directors has adopted a
Long-Term Cash Incentive Plan which provides for payments of cash awards to
certain key employees of the Corporation and its subsidiaries who contribute to
the success of the Corporation based upon the achievement of established
performance goals identified in the plan. Performance under the Long-Term Cash
Incentive Plan is based upon growth in earnings per share as compared to an
earnings per share target and return on average equity as compared to the peer
group. Each of these components is given equal weight in the formula to
calculate awards. The first payment under the Long-Term Cash Incentive Plan was
made in 1994 as a result of the Corporation achieving the Superior goal of $5.11
cumulative earnings per share and achieving results between the Target goal of
14.80% return on common equity and the Superior goal of 16% return on common
equity during the performance period 1991-1993. This payment is disclosed in the
Long-Term Compensation LTIP Payouts column of the Summary Compensation Table.
The next payment under the Long-Term Cash Incentive Plan (based on the
performance period 1992-1994) will be made in 1995 if target performance goals
are achieved. Performance through the first two year period of this plan is at
the Superior goal performance level established under the plan. Planned awards
under the 1993-95 Long-Term Cash Incentive Plan are described in the Long-Term
Incentive Plan Awards Table above. Performance through the first year of this
plan is at the Superior goal
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performance level established under the plan. Awards actually made under the
1992-1994 Long-Term Cash Incentive Plan will be dependent upon performance
achieved in 1994, the final performance year of the plan.
CAPITAL ACCUMULATION PLAN FOR ELIGIBLE KEY EMPLOYEES -- The Board of
Directors has adopted the Capital Accumulation Plan for Eligible Key Employees
of Southern National Corporation, which allows eligible participants to defer a
stipulated percentage of any incentive compensation to be earned in the
following calendar year. Each year interest will be credited to any amounts
deferred during the following calendar year and to any prior accumulations. The
interest credited to a participant's account will vary annually, and will
generally track market interest rates. The limit for annual deferrals is 100% of
a participant's combined awards under the Short-Term Incentive Plan and the
Long-Term Incentive Plan, or any prior long-term incentive plan then in effect.
The amount deferred must be in 25% increments of a participant's incentive
compensation. Benefits under the Capital Accumulation Plan for Eligible Key
Employees will be paid upon a participant's early or normal retirement, death,
disability, hardship or separation from service. Participants may elect to
receive their benefit payments in a lump sum, or in 180 equal monthly payments.
STOCK OPTION PROGRAM -- The Committee strongly believes that by providing
those persons who have substantial responsibility for the management and growth
of the Corporation with an opportunity to increase their ownership of
Corporation stock, the best interests of shareholders and executives will be
closely aligned. Stock options link the executive's rewards directly to
shareholder return. The Committee has awarded options both in recognition of
past corporate performance (as to Mr. Spruill and Mr. Sperry) and as an
incentive for future performance, the intent of option grant being to motivate
those receiving grants to increase the value of corporation stock in the future.
Options may be granted to key management employees or contributors who have a
significant effect on the long term strategic success of the Corporation.
Executives are eligible to receive stock options from time to time, giving them
the right to purchase shares of Common Stock of the Corporation at a specified
price in the future. The number of stock options granted to executive officers
is based on competitive practices, including practices of the peer group
described in the Performance Graph. While the Committee reviewed the amount and
value of options currently held by executives, the Committee has not established
a target ownership level for equity holdings by executives and prior grants and
the number of outstanding options is not presently factored into the grant
formula. Target ownership levels for equity holdings by executives may be
studied by the Committee in 1994 and considered in conjunction with future
grants of stock options. Options were granted in 1993 based upon a formula. For
Mr. Spruill and Mr. Sperry, options were granted equal to the product of two (2)
times base salary divided by the option price of $19.77 as a one-time award in
recognition of improved credit quality and improvements in operating efficiency.
For the other Named Executives and executive officer group, options were granted
equal to the product of 80% of salary divided by the option price of $19.77; the
Corporation's Secretary received options equal to the product of 50% of salary
divided by the option price of $19.77. Additional information on options is set
forth in the Option Grants Table and the Fiscal Year End Option Value Table
above.
DISCUSSION OF 1993 COMPENSATION FOR THE CHAIRMAN AND CHIEF EXECUTIVE
OFFICER. In considering the compensation for the Chairman and Chief Executive
Officer for fiscal year 1993, the Committee reviewed his existing compensation
arrangements and both corporate and individual performance. The employment
agreement between the Corporation and Mr. Orr was structured to provide him with
a fully competitive base salary and annual incentive opportunity. The Committee
has made the following determinations regarding the compensation of Mr. Orr.
(bullet)Base salary for Mr. Orr in 1993 increased from the base salary that was
paid in 1992 by 4% to ensure that his base salary approximated the median
base salary for the peer group.
(bullet)A Long-Term Incentive Plan payout of $216,500 was made in 1994 based on
financial performance of the Corporation during the performance period
1991-1993 as a result of the Corporation achieving the Superior goal of
$5.11 cumulative earnings per share, and achieving results between the
Target goal of 14.80% return on common equity and the Superior goal of 16%
return on common equity during the performance period 1991-1993.
(bullet)An incentive award (bonus) was paid in 1994 for fiscal 1993 performance
under the Short Term Incentive Plan in the amount of $217,700 based on the
Corporation's achieving earnings per share of $2.03, on a fully-diluted
basis (which fell between the Target goal and the Superior goal, resulting
in a payout
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of 130% of target), and a return on assets of 1.35% which exceeded the
Superior goal set under the plan.
(bullet)The study conducted by a consulting firm at the request of the Committee
in 1992 indicates Mr. Orr's combined base salary and bonus for 1993
approximates peer company medians of combined base salary and bonus paid
to Chief Executive Officers of its peer group in 1992. This combined
amount is consistent with the Committee's targeted range of compensation
for Mr. Orr and is based upon the Corporation's performance in that 33% of
Mr. Orr's combined salary and bonus amount paid for service in 1993 was
based upon the Corporation exceeding the Target goal under the Short-Term
Incentive Plan of earnings per share of $2.03 on a fully-diluted basis in
1993. The Committee determined that Mr. Orr's base salary should be
maintained at a competitive level relative to its peer group. The peer
group utilized in this study is the same peer group utilized in the
Performance Graph set forth herein.
(bullet)Stock options for shares of Corporation stock were awarded under the
Corporation's stock option program to Mr. Orr. The Committee's award was
based on a formula. The options granted equalled the product of 100% of
Mr. Orr's base salary divided by the option price of $19.77 per share.
This level of grant is competitive with the grants to CEO's in the peer
group. (See the Option Grants in Last Fiscal Year Table above.)
SUMMARY. The Corporation's executive compensation programs are based on
financial performance. For fiscal 1993, the Committee's decisions took into
consideration the fact that the Corporation's financial performance, as measured
by earnings per share, was 17% above the earnings per share originally reported
for fiscal year 1992. The Committee also notes that the closing price of the
Corporation's Common Stock has increased from $13.875 on December 31, 1991 to
$19.75 on December 31, 1993, a 42.3% increase.
After its review of all existing programs, the Committee continues to
believe that the total compensation program for executives of the Corporation is
competitive with the compensation programs provided by other corporations with
which the Corporation competes. This position was confirmed in a study conducted
by outside consultants which noted the Corporation's 1992 levels of incentive
compensation support the Corporation's pay-for-performance philosophy under
which incentive pay is based on obtaining budgeted increases in earnings over
earnings achieved in the prior year. The Committee also referred to a study
conducted by another consulting firm, which determined that the budget process
was reasonable and prudent. The Committee noted that the goals established under
the Short-Term Incentive Plan are reasonable and dictate significant increases
in 1994 performance over 1993 performance. The same reasoning was applied by the
Committee in 1992 in setting the goals under the Short-Term Incentive Plan bonus
earned in 1993 and paid in 1994, which is reflected in the Summary Compensation
Table. The Committee believes that any amounts paid under the Short-Term
Incentive Plan will be appropriately related to corporate and individual
performance, yielding awards that are directly linked to the annual financial
and operational results of the Corporation. The Committee also believes that the
stock option program provides opportunities to participants that are consistent
with the returns that are generated on the behalf of the Corporation's
shareholders.
Currently, all compensation paid by the Corporation to its executives is
deductible. Approval of the Long-Term Incentive Plan and Short-Term Incentive
Plan by shareholders (see Proposals 3 and 4) will ensure deductibility of
compensation paid under such plans as performance based compensation under
Section 162(m) of the Internal Revenue Code of 1986, as amended.
COMPENSATION COMMITTEE
Richard Janeway, M.D. -- Chairman
Nido R. Qubein -- Vice-Chairman
Dickson McLean, Jr.
Ronald E. Deal
E. M. Williams
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Nido R. Qubein, a Director of the Corporation and a member of the
Compensation Committee, is owner of Creative Services, Inc., an international
management consulting firm. SNB North Carolina has entered into
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a consulting services contract with Creative Services, Inc. under which Creative
Services, Inc. is advising management of the Corporation by providing
organizational development expertise, including the conceptualization and
creation of integrated corporate employee training materials and programs.
Creative Services, Inc. was paid $183,110 under this contract in 1993.
Management believes this contract is on terms as favorable as could have been
obtained from others.
Dickson McLean, Jr., a Director of the Corporation and a member of the
Compensation Committee, is President of McLean, Stacy, Henry, McLean, Slaughter
& Ramsaur, P.A., Attorneys-at-Law. The firm is under retainer to provide legal
services to the Corporation and its subsidiaries. The firm was paid the sum of
$56,093 in 1993. Management believes these services were provided on terms as
favorable as could have been obtained from others.
Mr. McLean and Mr. Qubein abstain from voting on matters relating to stock
options and the Long-Term Cash Incentive Plan and Short-Term Incentive Plan.
TRANSACTIONS WITH OFFICERS AND DIRECTORS
Directors and officers of the Corporation and their associates are
customers of and have had transactions with the Corporation's subsidiaries in
the ordinary course of business. All outstanding loans and commitments included
in such transactions were in the ordinary course of business, made on
substantially the same terms, including rates and collateral, as those
prevailing at the time for comparable transactions with other customers and did
not involve more than normal risk of collectibility or present other unfavorable
features. All outstanding loans to such officers and Directors and their
associates are current as to principal and interest. As of December 31, 1993,
loans in excess of $60,000 to Directors, executive officers and their interests
totaled approximately $24 million, or approximately 4.8% of the Corporation's
consolidated shareholders' equity at such date.
Elizabeth T. Williams, wife of A. Tab Williams, Jr., a Director of the
Corporation and formerly a Director of Forsyth Bank & Trust Co., leased to
Forsyth Bank & Trust Co. the land and building used by it as a branch location
at Corporation Parkway and Peters Creek Parkway in Winston-Salem, North
Carolina, effective November 1, 1979, for a base period of 25 years with renewal
options. The initial monthly rent under the lease is $3,680 with increases based
on the Consumer Price Index at the end of the seventh year and each five years
thereafter. SNB North Carolina assumed this lease upon its merger with Forsyth
Bank & Trust Co. The current rent is $4,737 per month. Management believes that
the lease terms are as favorable as could have been obtained from other sources.
Ted R. Reynolds, a Director of the Corporation, is a 90% owner of Raleigh
Place Associates, a North Carolina General Partnership that entered into a 15
year lease with SNB North Carolina, whereby the bank leases office space for one
of its Raleigh bank branches located at 316 West Edenton Street, Raleigh, North
Carolina. The lease has renewal options. For fiscal year 1993, 12 lease payments
of $4,798 each month were paid to Raleigh Place Associates for a total of
$57,576. In addition to lease payments, SNB North Carolina is obligated to share
certain lease pass-through expenses of the building for operating expenses. In
1993, the bank paid approximately $19,000 to Raleigh Place Associates, which sum
represented its share of operating expenses for calendar year 1993. Management
believes this lease contract is on terms that are as favorable as could have
been obtained from other sources.
See Compensation Committee Interlocks and Insider Participation above.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires that the
Corporation's directors and executive officers, and persons who own more than
10% of a registered class of the Corporation's equity securities, file with the
Securities and Exchange commission initial reports of ownership and reports of
change in ownership of Common Stock and other equity securities of the
Corporation. Officers, directors and greater than 10% shareholders are required
by SEC regulation to furnish the Corporation with copies of all Section 16(a)
forms that they file.
To the Corporation's knowledge, based solely on review of the copies of
such reports furnished to the Company, and written representations that no other
reports were required, during the fiscal year ended
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December 31, 1993, all Section 16(a) filing requirements applicable to its
officers, directors and greater than 10% beneficial owners were met.
PERFORMANCE GRAPH
Set forth below is a graph comparing the total returns (assuming
reinvestment of dividends) of Corporation Common Stock, the S&P 500 Index, and
an industry peer group index of 14 southeastern banks. The graph assumes $100
invested on December 31, 1988 in Corporation Common Stock and each of the
indices.
The bank holding companies in the peer group index are BB&T Financial
Corporation, CCB Financial Corporation, South Trust Corporation, AmSouth
Bancorporation, Central Fidelity Banks, Inc., First Alabama Bancshares, Inc.,
First Virginia Banks, Inc., Compass Bancshares, Inc. (formerly Central
Bancshares of the South, Inc.), Mercantile Bancshares Corporation, Bank South
Corp., Synovus Financial Corp., Centura Banks, Inc., Baltimore Bancorp., Inc.
and United Carolina Bancshares Corporation.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL SHAREHOLDER RETURN
AMONG SNC, S&P 500 INDEX AND PEER GROUP
(Performance Graph appears here--see appendix)
[CAPTION]
<TABLE>
1988 1989 1990 1991 1992 1993
<S> <C> <C> <C> <C> <C> <C>
Southern National $100 $108 $ 83 $120 $175 $182
Peer Group Index 100 118 100 163 221 233
S&P 500 100 132 127 166 179 197
</TABLE>

<PAGE>
PROPOSAL 2: APPROVAL OF THE OMNIBUS STOCK INCENTIVE PLAN
The Board of Directors proposes that the shareholders approve the Southern
National Corporation Omnibus Stock Incentive Plan (the Stock Plan), adopted by
the Board of Directors on February 17, 1994, subject to the approval of the
Corporation's shareholders. The approval of the Stock Plan requires the
affirmative vote of the holders of a majority of the shares of Common Stock
present or represented by properly executed and delivered proxies at the
meeting. Abstentions and shares held in street name voted as to any matter at
the meeting will be included in determining the number of votes present or
represented at the meeting.
For several years the Corporation has provided stock-based compensation
opportunities to executives and key employees under the Corporation's
Nonqualified Stock Option Plan (the Nonqualified Plan) and Incentive Stock
Option Plan (the ISO Plan). The Board of Directors believes that the
Nonqualified Plan and the ISO Plan have served their purpose of promoting a
greater identity of interests between participants and shareholders and that
similar opportunities should be continued under the Stock Plan. However, the
number of shares available for issuance under the existing plans will likely be
depleted within the next year. If the shareholders approve the Stock Plan,
additional awards may, but are not required to, be made under the Nonqualified
Plan and the ISO Plan, until there are no remaining authorized shares under
these plans.
The Stock Plan is intended to provide the Compensation Committee of the
Board of Directors maximum flexibility to meet the evolving needs of the
Corporation in providing stock-based compensation to its key executives over the
next ten years, in order to align more closely the interests of corporate
management with those of shareholders. The Stock Plan may be used to grant stock
options and stock appreciation rights, and to award restricted stock and
performance shares. The Stock Plan may also be used to grant stock options in
conjunction with future mergers. The Stock Plan therefore eliminates the need
and expense of registering additional shares of Common Stock each time the
Corporation engages in a merger transaction, for example the approximately
571,049 shares that have been registered as a result of the Corporation's recent
mergers.
The following paragraphs summarize the principal features of the Stock
Plan. This summary is subject, in all respects, to the terms of the Stock Plan.
The Corporation will provide promptly, upon request and without charge, a copy
of the full text of the Stock Plan to each person to whom a copy of this proxy
statement is delivered. Requests should be directed to: Mr. Robert K. Borbet,
Vice President, Compensation and Benefits Administrator, Southern National Bank
of North Carolina, 500 North Chestnut Street, Lumberton, North Carolina 28358,
(910) 671-2224.
SUMMARY OF THE STOCK PLAN
The Board of Directors believes that the Stock Plan will benefit the
Corporation by (i) assisting it in recruiting and retaining employees with
ability and initiative, (ii) providing greater incentive for employees of the
Corporation or its related entities and (iii) associating the interests of
employees with those of the Corporation, its related entities, and its
shareholders through opportunities for increased stock ownership. A maximum of
4,000,000 shares of Common Stock may be issued under the Stock Plan, subject to
a 3% replenishment percentage. However, in no event shall the number of shares
authorized for issuance under the Stock Plan exceed 10% of authorized and
outstanding Common Stock as of the time of any replenishment adjustment.
The Compensation Committee of the Board of Directors will administer the
Stock Plan. The Compensation Committee may delegate its authority to administer
the Stock Plan to one or more officers of the Corporation. The Compensation
Committee, however, may not delegate its authority with respect to individuals
who are subject to Section 16 of the Securities Exchange Act of 1934 ( Section
16). As used in this summary, the term Administrator means the Compensation
Committee and any delegate, as appropriate.
Each employee of the Corporation or a related entity is eligible to
participate in the Stock Plan. Certain non-employees are eligible to participate
in the Stock Plan in conjunction with merger and acquisition transactions. The
Administrator will select the individuals who will participate in the Stock Plan
(Participants) but no person may participate in the Stock Plan while he is a
member of the Compensation Committee. The Administrator may, from time to time,
grant stock options, stock appreciation rights (SARs), stock awards, or
17

<PAGE>
performance shares to Participants. Although the Stock Plan allows several
different kinds of awards, the Compensation Committee intends to continue its
past practice of providing stock-based compensation opportunities in the form of
stock options on substantially the same basis as under the Nonqualified Plan and
the ISO Plan.
Options granted under the Stock Plan may be incentive stock options ( ISOs)
or nonqualified stock options. A stock option entitles the Participant to
purchase shares of Common Stock from the Corporation at the option price. The
option price will be fixed by the Administrator at the time the option is
granted, but the price cannot be less than 100% of the shares' fair market value
on the date of grant in the case of ISOs, and not less than 85% of the shares'
fair market value on the date of grant in the case of nonqualified stock
options. The Corporation's existing Nonqualified Plan also permits the option
price of nonqualified stock options to be not less than 85% of the shares' fair
market value on the date of grant. However, in the past no nonqualified stock
options have been granted for less than 100% of the shares' fair market value on
the date of grant, and although available as an option, the Corporation does not
anticipate that this practice will change in the future. The option price may be
paid in cash, with shares of Common Stock, or with a combination of cash and
Common Stock.
SARs entitle the Participant to receive the lesser of (i) the excess of the
fair market value of a share of Common Stock on the date of exercise over the
initial value of the SAR or (ii) the initial value. The initial value of the SAR
is determined by the Administrator at the time of the grant but cannot be less
than the fair market value of a share of Common Stock on the date of grant. The
amount payable upon the exercise of an SAR may be paid in cash, Common Stock, or
a combination of the two.
SARs may be granted in relation to option grants (Corresponding SARs) or
independently of option grants. The difference between these two types of SARs
is that to exercise a Corresponding SAR, the Participant must surrender
unexercised that portion of the stock option to which the Corresponding SAR
relates.
Participants may be awarded shares of Common Stock pursuant to a restricted
stock award. The Administrator, in its discretion, may prescribe that a
Participant's rights in a restricted stock award shall be nontransferable or
forfeitable, or both, unless certain conditions are satisfied. These conditions
may include, for example, a requirement that the Participant continue employment
with the Corporation or a related entity for a specified period or that the
Corporation, a related entity, or the Participant achieve stated objectives. It
is anticipated that the vesting period of a restricted stock award will be no
less than three years, or no less than one year in the case of performance-based
restricted stock awards.
The Stock Plan also provides for the award of performance shares. A
performance share award entitles the Participant to receive a payment equal to
the fair market value of a targeted number of shares of Common Stock if certain
performance standards are met. The Administrator will prescribe the requirements
that must be satisfied before a performance share award is earned. The
performance share requirements may include, for example, a requirement that the
Participant continue employment with the Corporation or a related entity for a
specified period or that Corporation, a related entity, or the Participant
achieve stated objectives. A performance share award will be earned based on the
performance share value during each of the five valuation periods (calendar
years) following the date of the award. To the extent that performance shares
are earned, the obligation may be settled in cash, in Common Stock or by a
combination of the two.
All awards made under the Stock Plan will be evidenced by written
agreements between the Corporation and the Participant. A maximum of 30,000
shares may be granted to a Participant in any calendar year. The share
limitation and the terms of outstanding awards shall be adjusted, as the
Compensation Committee deems appropriate, in the event of a stock dividend,
stock split, combination, reclassification, recapitalization, or other similar
events.
No option, SAR or stock award may be granted and no performance shares may
be awarded under the Stock Plan after February 16, 2004. The Board of Directors
may terminate the Stock Plan sooner without further action by shareholders. The
Board of Directors also may amend the Stock Plan except that no amendment that
increases the number of shares of Common Stock that may be issued under the
Stock Plan or changes the class of individuals who may be selected to
participate in the Stock Plan will become effective until it is approved by
shareholders.
18

<PAGE>
Neither the number of individuals who will be selected to participate in
the Stock Plan nor the type or size of awards that will be approved by the
Administrator can be determined. The Corporation is also unable to determine the
number of individuals who would have participated in the Stock Plan or the type
or size of awards that would have been made under the Stock Plan had it been in
effect in 1993.
FEDERAL INCOME TAX CONSEQUENCES
The Corporation has been advised by counsel regarding the federal income
tax consequences of the Stock Plan. No income is recognized by a Participant at
the time an option is granted. If the option is an ISO, no income will be
recognized upon the Participant's exercise of the option. Income is recognized
by a Participant when he disposes of shares acquired under an ISO. The exercise
of a nonqualified stock option generally is a taxable event that requires the
Participant to recognize, as ordinary income, the difference between the shares'
fair market value and the option price.
No income is recognized upon the grant of an SAR. The exercise of an SAR
generally is a taxable event. The Participant generally must recognize income
equal to any cash that is paid and the fair market value of Common Stock that is
received in settlement of an SAR.
The Participant will recognize income on account of a stock award on the
first day that the shares are either transferable or not subject to a
substantial risk of forfeiture. The amount of income recognized by the
Participant is equal to the fair market value of the Common Stock received on
that date.
The Participant will recognize income on account of the settlement of a
performance share award. The Participant will recognize income equal to any cash
that is paid and the fair market value of Common Stock (on the date that the
shares are first transferable or not subject to a substantial risk of
forfeiture) that is received in settlement of the award.
The employer (either the Corporation or a related entity) will be entitled
to claim a federal income tax deduction on account of the exercise of a
nonqualified option or SAR, the vesting of a stock award, and the settlement of
a performance share award. The amount of the deduction is equal to the ordinary
income recognized by the Participant. The employer will not be entitled to a
federal income tax deduction on account of the grant or the exercise of an ISO.
The employer may claim a federal income tax deduction on account of certain
dispositions of Common Stock acquired upon the exercise of an ISO.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE OMNIBUS STOCK
INCENTIVE PLAN.
PROPOSAL 3: APPROVAL OF THE LONG-TERM INCENTIVE PLAN
The Board of Directors proposes that the shareholders approve the Southern
National Corporation Long-Term Incentive Plan (the Long-Term Plan), previously
adopted by the Board of Directors on December 20, 1990. The Board of Directors
amended the Long-Term Plan on February 17, 1994 in order for it to qualify as
performance-based compensation under applicable Internal Revenue Service laws
and regulations, subject to the approval of the Corporation's shareholders. The
approval of the Long-Term Plan and its amendments requires the affirmative vote
of the holders of a majority of the shares of Common Stock present or
represented by properly executed and delivered proxies at the meeting.
Abstentions and shares held in street name voted as to any matter at the meeting
will be included in determining the number of votes present or represented at
the meeting.
The Corporation has previously maintained long-term cash incentive plans
for specified three year periods, for example the 1993-95 Long-Term Cash
Incentive Plan, which were not required to be submitted for shareholder
approval. Those plans will remain in effect in accordance with their terms until
they terminate. It is proposed that all future long-term incentive awards be
made under the Long-Term Plan. The Long-Term Plan is now being submitted for
shareholder approval in order that it qualify as performance-based compensation
under applicable Internal Revenue Service laws and regulations.
The Board of Directors believes that the Long-Term Plan will benefit the
Corporation by (i) assisting it in recruiting and retaining officers and key
employees with ability and initiative, (ii) providing greater incentive
19

<PAGE>
for officers and key employees, and (iii) associating the interests of officers
and key employees with those of the Corporation and its shareholders through
opportunities for increased stock ownership.
The following paragraphs summarize the more significant features of the
Long-Term Plan. This summary is subject, in all respects, to the terms of the
Long-Term Plan. The Corporation will provide promptly, upon request and without
charge, a copy of the full text of the Long-Term Plan to each person to whom a
copy of this proxy statement is delivered. Requests should be directed to: Mr.
Robert K. Borbet, Vice President, Compensation and Benefits Administrator,
Southern National Bank of North Carolina, 500 North Chestnut Street, Lumberton,
North Carolina 28358, (910) 671-2224.
The Compensation Committee of the Board of Directors will administer the
Long-Term Plan. The Compensation Committee will select the employees who will
participate in the Long-Term Plan (Participants). Key employees of the
Corporation or a related entity are eligible to participate in the Long-Term
Plan.
The Long-Term Plan provides cash awards to key employees who contribute to
the success of the Corporation based on the achievement of goals established for
a given three-fiscal-year performance period. Awards under the Long-Term Plan
will be based on overall corporate performance. Corporate performance under the
Long-Term Plan will be based upon growth in earnings per share as compared to an
earnings per share target, and return on average equity performance as compared
to identified industry standards.
Each payout of an incentive award will be from the general funds of the
Corporation. No special or separate fund will be established or other
segregation of assets made to assure payout of any incentive award. The Board of
Directors will have the power to amend the Long-Term Plan, or to suspend or
terminate the Long-Term Plan in whole or in part.
Neither the number of individuals who will be selected to participate in
the Long-Term Plan nor the size of the incentive payments to be made under the
Long-Term Plan can be determined. However, the payments made under the 1991-93
Long-Term Cash Incentive Plan in 1993 are described in Summary Compensation
Table under the LTIP Payouts column.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE LONG-TERM
INCENTIVE PLAN.
PROPOSAL 4: APPROVAL OF THE SHORT-TERM INCENTIVE PLAN
The Board of Directors proposes that the shareholders approve the Southern
National Corporation Short-Term Incentive Plan (the Short-Term Plan), previously
adopted by the Board of Directors on December 20, 1990. The Board of Directors
amended the Short-Term Plan on February 17, 1994 in order for it to qualify as
performance-based compensation under applicable Internal Revenue Service laws
and regulations, subject to the approval of the Corporation's shareholders. The
approval of the Short-Term Plan and its amendments requires the affirmative vote
of the holders of a majority of the shares of Common Stock present or
represented by properly executed and delivered proxies at the meeting.
Abstentions and shares held in street name voted as to any matter at the meeting
will be included in determining the number of votes present or represented at
the meeting.
The Corporation has previously maintained annual short-term cash incentive
plans, for example the 1993 Short-Term Incentive Plan, which were not required
to be submitted for shareholder approval. It is proposed that all future
short-term incentive awards be made under the Short-Term Plan. The Short-Term
Plan is now being submitted for shareholder approval in order that it qualify as
performance-based compensation under applicable Internal Revenue Service laws
and regulations.
The Board of Directors believes that the Short-Term Plan will benefit the
Corporation by (i) assisting it in recruiting and retaining officers and key
employees with ability and initiative, (ii) providing greater incentive for
officers and key employees, and (iii) associating the interests of officers and
key employees with those of the Corporation and its shareholders through
opportunities for increased stock ownership.
The following paragraphs summarize the more significant features of the
Short-Term Plan. This summary is subject, in all respects, to the terms of the
Short-Term Plan. The Corporation will provide promptly, upon request and without
charge, a copy of the full text of the Short-Term Plan to each person to whom a
copy of
20

<PAGE>
this proxy statement is delivered. Requests should be directed to: Mr. Robert K.
Borbet, Vice President, Compensation and Benefits Administrator, Southern
National Bank of North Carolina, 500 North Chestnut Street, Lumberton, North
Carolina 28358, (910) 671-2224.
The Compensation Committee of the Board of Directors will administer the
Short-Term Plan. The Compensation Committee will select the employees who will
participate in the Short-Term Plan (Participants). Key executives of the
Corporation or a related entity are eligible to participate in the Short-Term
Plan.
The Short-Term Plan provides cash awards to key employees who contribute to
the success of the Corporation based on the achievement of short-term goals
established for a given fiscal year. Awards are based on corporate performance
determined primarily on the attainment of certain earnings per share and return
on assets goals. The size of incentive payments under the Short-Term Plan will
be determined by establishing target incentive awards expressed as a percentage
of base salary. Such percentages may not exceed 35% of base salary and will be
established annually by the Compensation Committee. The maximum incentive award
for a participant will be equal to 150% of the participant's targeted incentive
awards. Actual awards are subject to decrease or increase on the basis of the
Corporation's performance. The target earnings per share will be based on the
Corporation's budgeted earnings. If budgeted earnings are achieved, a full
payout of bonuses is made. The payout ratio decreases to 25% of full payment
based on an incremental decrease in the targeted earnings per share and return
on assets down to a minimum or threshold level. Conversely, the payout ratio
increases based on an incremental increase in the target earnings per share and
return on assets up to a superior level.
Each payout of an incentive award will be from the general funds of the
Corporation. No special or separate fund will be established or other
segregation of assets made to assure payout of any incentive award. The Board of
Directors will have the power to amend the Short-Term Plan, or to suspend or
terminate the Short-Term Plan in whole or in part.
Neither the number of individuals who will be selected to participate in
the Short-Term Plan nor the size of the incentive payments to be made under the
Short-Term Plan can be determined. However, payments made under the 1993
Short-Term Incentive Plan during 1993 are described in the Summary Compensation
Table.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE SHORT-TERM
INCENTIVE PLAN.
PROPOSAL 5: APPROVAL OF AMENDMENTS TO THE
NONQUALIFIED STOCK OPTION AND INCENTIVE STOCK OPTION PLANS
The Board of Directors proposes that the shareholders approve amendments to
the Southern National Corporation Nonqualified Stock Option Plan (the
Nonqualified Plan) and the Southern National Corporation Incentive Stock Option
Plan (the ISO Plan) (collectively, the Option Plans) adopted by the Board of
Directors on February 17, 1994, subject to the approval of the Corporation's
shareholders. The approval of amendments to the ISO Plan and Nonqualified Plan
requires the affirmative vote of the holders of a majority of the shares of
Common Stock present or represented by properly executed and delivered proxies
at the meeting. Abstentions and shares held in street name voted as to any
matter at the meeting will be included in determining the number of votes
present or represented at the meeting.
The proposed amendments will give the Compensation Committee the authority
to accelerate the four year vesting schedule of nonqualified stock options and
incentive stock options under appropriate circumstances, in the event of death,
disability or retirement.
The following paragraphs summarize the principal features of the Option
Plans. This summary is subject, in all respects, to the terms of the Option
Plans and the proposed amendments. The Corporation will provide promptly, upon
request and without charge, a copy of the full text of the Option Plans and the
proposed amendments to each person to whom a copy of this proxy statement is
delivered. Requests should be directed to: Mr. Robert K. Borbet, Vice President,
Compensation and Benefits Administrator, Southern National Bank of North
Carolina, 500 North Chestnut Street, Lumberton, North Carolina 28358, (910)
671-2224.
21

<PAGE>
The Option Plans are administered by the Compensation Committee of the
Board of Directors. The Compensation Committee selects those key employees of
the Corporation or its subsidiaries that will be eligible to receive options,
and also selects the type of option to be granted, the price of each option, and
the specific terms to be included in the option agreement.
Options granted under the Option Plans have a term of ten years from the
date of grant, subject to earlier termination in the event of death, disability
or retirement. In addition, all options granted under the Option Plans are
subject to a four year vesting schedule, whereby 25% of the number of shares in
each option are exercisable on the first anniversary of the date of grant, and
each year thereafter.
The prices at which the shares of the Corporation's common stock may be
purchased are determined by the Compensation Committee. However, an incentive
stock option may not be granted at an option price of less than 100% of its fair
market value on the date of grant, and nonqualified stock options may not be
granted at an option price of less than 85% of its fair market value on the date
of grant.
The purpose of the Option Plans is to provide long term incentives to
certain key employees of the Corporation or its subsidiaries, to remain in its
employment and to use their best efforts on behalf of their employers. The Board
of Directors retains the power to amend, suspend or terminate either of the
Option Plans; however, the Board of Directors may not, without shareholder
approval implement such changes, which may (i) increase the total amount of the
share reserve for the options; (ii) change the option price except as allowable
under the Option Plans; (iii) affect outstanding option rights already granted;
(iv) extend the option term or decrease the option term; and (v) extend the
termination date of the plans.
The ISO Plan is intended to qualify for certain advantageous tax treatment
under section 422 of the Internal Revenue Code of 1986, as amended (the Code).
The Nonqualified Plan is not intended to qualify under Code section 422. Refer
above to Proposal 2: Approval of the Omnibus Stock Incentive Plan under the
caption Federal Income Tax Consequences for a discussion of the federal income
tax consequences of the grant and exercise of nonqualified or incentive stock
options.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSAL TO
AMEND THE NONQUALIFIED STOCK OPTION PLAN AND INCENTIVE STOCK OPTION PLAN.
ANNUAL REPORT
The Corporation's 1993 Annual Report to Shareholders, including financial
statements, accompanies this Proxy Statement.
PROPOSALS FOR 1995 ANNUAL MEETING
Under regulations of the Securities and Exchange Commission, any
shareholder desiring to make a proposal to be acted upon at the 1995 annual
meeting of shareholders must present such proposal to the Corporation at its
principal office in Lumberton, North Carolina, by November 17, 1994, for the
proposal to be considered for inclusion in the Corporation's proxy statement.
In addition to any other applicable requirements, for business to be
properly brought before the annual meeting by a shareholder even if the proposal
is not to be included in the Corporation's proxy statement, the Corporation's
bylaws provide that the shareholder must give timely notice in writing to the
Secretary of the Company at least 60 days prior to the date one year from the
date of the immediately preceding annual meeting. As to each matter, the notice
must contain (i) a brief description of the business desired to be brought
before the annual meeting, (ii) the name, record address of, and class and
number of shares beneficially owned by, the shareholder proposing such business
and (iii) any material interest of the shareholder in such business.
22

<PAGE>
OTHER BUSINESS
The Board of Directors knows of no other matter to come before the Annual
Meeting of Shareholders. However, if any other matter requiring a vote of the
shareholders should arise, it is the intention of the persons named in the
accompanying proxy to vote such proxy in accordance with their best judgment.
By Order of the Board of Directors
(Signature of David L. Craven)
DAVID L. CRAVEN
SECRETARY
Dated: March 16, 1994
23

<PAGE>
SOUTHERN NATIONAL CORPORATION
PROXY
THIS PROXY IS SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING
OF SHAREHOLDERS TO BE HELD APRIL 19, 1994
KNOW ALL MEN BY THESE PRESENTS, That the undersigned shareholder of
Southern National Corporation (the Corporation), a North Carolina corporation,
hereby constitutes and appoints H. Franklin Biggs, K. Dwight Willoughby, Felton
Sealey and Laura P. Richardson, and each of them, attorneys and proxies, with
full power of substitution, for and on behalf of the undersigned to act and
vote, as indicated below, according to the number of shares of the Corporation's
common stock held of record by the undersigned on February 17, 1994, and as
fully as the undersigned would be entitled to act and vote if personally
present, at the Annual Meeting of Shareholders to be held at Pine Crest Country
Club, Maxton Highway, Lumberton, North Carolina on April 19, 1994 at 11:00 a.m.
and at any adjournment or adjournments thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF PROPERLY EXECUTED AND NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED IN FAVOR OF PROPOSALS 1, 2 3, 4 AND 5.
1. PROPOSAL TO ELECT AS DIRECTORS THE 10 NOMINEES LISTED BELOW:
<TABLE>
<S> <C> <C>
[] FOR electing all 10 nominees listed below [] AGAINST electing all 10 nominees [] ABSTAIN
(except as marked to the contrary below) listed below
</TABLE>
(Instruction: To withhold authority to vote for any individual Nominee, strike a
line through the Nominee's name in the list below.)
William N. Geiger, Jr., James A. Hardison, Jr., Charles E. Nichols, Ted R.
Reynolds, Joseph A. McAleer, Luther C. Boliek, H. Ray Davis, Paul S. Goldsmith,
T. H. Yancey and Robert H. Yeargin.
2. PROPOSAL TO APPROVE THE CORPORATION'S OMNIBUS STOCK INCENTIVE PLAN.
[] FOR [] AGAINST [] ABSTAIN
3. PROPOSAL TO APPROVE THE CORPORATION'S LONG-TERM INCENTIVE PLAN
[] FOR [] AGAINST [] ABSTAIN
4. PROPOSAL TO APPROVE THE CORPORATION'S SHORT-TERM INCENTIVE PLAN.
[] FOR [] AGAINST [] ABSTAIN

<PAGE>
5. PROPOSAL TO APPROVE AN AMENDMENT TO THE CORPORATION'S INCENTIVE STOCK
OPTION PLAN AND NON-QUALIFIED STOCK OPTION PLAN.
[] FOR [] AGAINST [] ABSTAIN
6. In their discretion, the proxies are authorized to act and vote upon any
other business which may properly be brought before the meeting or any
adjournment thereof.
The undersigned hereby ratifies and confirms all that said attorneys and
proxies or any of them lawfully do or cause to be done by virtue hereof. A
majority of said attorneys and proxies who shall be present and acting as such
at the Annual Meeting of Shareholders or any adjournment thereof, or if only one
such attorney and proxy be present and acting, then that one, shall have and may
exercise all the powers hereby conferred.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
of Shareholders, dated March 16, 1994, the Proxy Statement and Annual Report
furnished therewith.
(SEAL)
(SEAL)
NOTE: Please sign exactly as name
appears on stock certificate. When
shares are held by joint tenants,
both should sign. Executors,
administrators, trustees and other
fiduciaries, and persons signing on
behalf of corporations or
partnerships, should so indicate
when signing.
Dated this day of ,
1994.
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY PROMPTLY. THANK YOU.

***************************************************************************
APPENDIX

On the Notice of Annual Meeting of Shareholders page the signature of
David L. Craven appears where noted.

On Page 16 the Performance Graph appears where indicated. The plot
points are listed in the table below that point.

On Page 23 the signature of David L. Craven appears where noted.