First Charter Corporation
Schedule 14A
(Rule 14A-101)
Information Required In Proxy Statement
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant þ
Filed by a Party other than the
Registrant o
Check the appropriate box:
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o Preliminary
Proxy Statement
o Confidential, For Use of
the Commission Only (as permitted by
Rule 14a-6(e)(2))
þ Definitive Proxy
Statement
o Definitive Additional
Materials
o Soliciting Material Under
Rule 14a-12
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FIRST CHARTER CORPORATION
(Name of Registrant as Specified In
Its Charter)
(Name of Person(s) Filing Proxy
Statement, if other than the Registrant)
PAYMENT OF FILING FEE (Check the appropriate box):
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þ
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No fee required
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Fee computed on table below per Exchange Act
Rules 14a-6(i)(4)
and 0-11.
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1)
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Title of each class of securities to which transaction applies:
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2)
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Aggregate number of securities to which transaction applies:
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3)
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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):
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4)
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Proposed maximum aggregate value of transaction:
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Fee paid previously with preliminary materials:
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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
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1)
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Amount Previously Paid:
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2)
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Form, Schedule or Registration Statement No.:
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April 25, 2007
Dear Fellow Shareholder:
You are cordially invited to attend the Annual Meeting of
Shareholders of First Charter Corporation, which will be held at
the First Charter Center at 10200 David Taylor Drive, Charlotte,
North Carolina on May 23, 2007. The meeting will begin at
10:00 a.m.
The business to be conducted at the Annual Meeting is described
in the accompanying Notice of Annual Meeting of Shareholders and
Proxy Statement, and I invite you to pay careful attention to
both of these documents. In addition, also enclosed is a copy of
our Annual Report on
Form 10-K
for the year ended December 31, 2006 and our Summary 2006
Annual Report to Shareholders.
It is important that your shares be represented and voted at the
Annual Meeting. Whether or not you choose to attend, I urge you
to sign, date, and promptly return the proxy card in the
enclosed postage-paid envelope. You may also vote on the
Internet or by telephone. Instructions for those voting methods
are listed on your proxy card.
For your convenience, our shareholders may listen to the Annual
Meeting on the Internet by visiting our website at
www.FirstCharter.com and following the link provided
under our Investor Relations section. Replays of the
Annual Meeting will be made available for 14 days following
the Annual Meeting.
Thank you for your interest in First Charter. We look
forward to your continued support throughout 2007.
Sincerely,
Robert E. James, Jr.
President and Chief Executive Officer
First Charter
Corporation
10200 David Taylor Drive
Charlotte, North Carolina 28262-2373
NOTICE OF ANNUAL
MEETING OF SHAREHOLDERS
to be held on May 23, 2007
TO THE SHAREHOLDERS:
The Annual Meeting of Shareholders of First Charter Corporation
will be held at the First Charter Center, 10200 David Taylor
Drive, Charlotte, North Carolina on Wednesday, May 23, 2007
at 10:00 a.m., for the following purposes:
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1.
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To elect five directors with terms expiring in 2010 and one
director with a term expiring in 2008;
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2.
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To ratify the action of our Audit Committee in appointing KPMG
LLP as our independent registered public accountants for
2007; and
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3.
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To transact any other business properly brought before the
meeting or any adjournment thereof.
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We have fixed April 10, 2007 as the record date for the
determination of shareholders entitled to notice of and to vote
at the Annual Meeting. Only holders of our common stock of
record at the close of business on that date will be entitled to
notice of and to vote at the meeting and at any adjournment
thereof.
You are cordially invited to attend the Annual Meeting.
Whether or not you plan to attend, please sign, date and
promptly return the accompanying proxy card (or vote by phone or
on the Internet in accordance with the instructions on the proxy
card), so that your shares may be represented and voted at the
Annual Meeting.
By order of the Board of Directors,
Stephen J. Antal
Executive Vice President, General Counsel
and Corporate Secretary
April 25, 2007
TABLE OF CONTENTS
First Charter
Corporation
10200 David Taylor Drive
Charlotte, North Carolina 28262-2373
PROXY
STATEMENT
2007 Annual
Meeting of Shareholders
to be held on May 23, 2007
INFORMATION ABOUT
ANNUAL MEETING AND VOTING
Background
Information
The principal executive offices of First Charter Corporation are
located at 10200 David Taylor Drive, Charlotte, North Carolina
28262-2373
and our telephone number is
(704) 688-4300.
We own all of the outstanding capital stock of First Charter
Bank, a North Carolina state bank (FCB).
References throughout this Proxy Statement to the
Corporation (as well as the words we,
us and our) refer to First Charter
Corporation. References to you or your
refer to our shareholders. The term Common Stock
means the Corporations outstanding common stock.
Purpose of Proxy
Statement
The Board of Directors of First Charter Corporation is
soliciting your proxy for voting at our Annual Meeting of
Shareholders to be held on Wednesday, May 23, 2007 at
10:00 a.m., at the First Charter Center, 10200 David Taylor
Drive, Charlotte, North Carolina (the Annual
Meeting). This Proxy Statement will be mailed to
shareholders on or about April 25, 2007.
Business to be
Transacted
At the Annual Meeting, we will ask you to:
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Elect five directors with terms expiring in 2010 and one
director with a term expiring in 2008;
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Ratify the action of our Audit Committee in appointing KPMG LLP
as our independent registered public accountants for
2007; and
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Consider and vote upon any other business properly brought
before the meeting.
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No other items are scheduled to be voted upon.
Who May
Vote
Shareholders as of the close of business on April 10, 2007
(the Record Date) are entitled to vote at the Annual
Meeting. Each share of Common Stock is entitled to one vote on
each of the matters voted upon at the meeting, except that
shares held by FCB, whether or not held in a fiduciary capacity,
may not be voted by FCB in the election of directors, but will
be counted for purposes of determining a quorum for the
transaction of business at the Annual Meeting.
How to
Vote
You may vote at the Annual Meeting:
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In person;
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By mail via your proxy card;
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By telephone in accordance with the instructions on your proxy
card; or
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On the Internet in accordance with the instructions on your
proxy card.
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Quorum to
Transact Business
A quorum for the transaction of business at the Annual Meeting
consists of the majority of the issued and outstanding shares of
Common Stock entitled to vote on a particular matter, present in
person or represented by proxy. As of the Record Date,
35,104,606 shares of Common Stock were issued and
outstanding. If you attend in person and indicate your presence,
or mail in a properly dated and signed proxy card or vote by
phone or on the Internet in accordance with the instructions on
your proxy card, your shares will be counted toward a quorum.
Voting of
Shares Via Proxy
If you have submitted a properly dated and signed proxy via the
mail (or if you vote by phone or on the Internet in accordance
with the instructions on the proxy card) and a quorum is
established, your shares will be voted as you indicate. However,
if you mail in your proxy card and sign and date your card, but
do not mark it, your shares will be voted in favor of the
election of all of the nominated directors, and in favor of
ratifying KPMG LLP as our independent registered public
accountants for 2007. If you sign and date your proxy card and
withhold voting for any or all of the nominated directors (as
explained on the proxy card) or abstain regarding any of the
other matters to be voted upon, your vote will be recorded as
being withheld or as an abstention, as the case may be, but it
will have no effect on the outcome of the vote. Proxies
submitted by brokers that do not indicate a vote for some or all
of the proposals because they do not have discretionary voting
authority and have not received instructions as to how to vote
on those proposals (so-called broker non-votes) will
be counted for purposes of determining a quorum but will not
affect the outcome of the vote.
Revocation of
Proxy
If you later decide to revoke or change your proxy, you may do
so by: (1) sending a written statement to that effect to
the Secretary of the Corporation; (2) submitting a properly
dated and signed proxy with a later date; or (3) voting in
person at the Annual Meeting.
Vote Necessary
for Action
Directors are elected by a plurality vote of shares present at
the Annual Meeting. Plurality means that the
nominees receiving the largest number of affirmative votes cast
are elected as directors up to the maximum number of directors
who are nominated to be elected at the meeting. At our meeting
the maximum number of directors to be elected is six. In an
uncontested election for directors, the plurality requirement is
not a factor. The ratification of the appointment of KPMG LLP as
our independent registered public accountants for 2007 requires
an affirmative vote of the majority of the shares present and
voting at the meeting.
Duplicate Proxy
Statements and Cards
You may receive more than one proxy statement, proxy card or
Annual Report. This duplication will occur if title to your
shares is registered differently or your shares are in more than
one type of account maintained by Registrar and Transfer
Company, our transfer agent. To have all your shares voted,
please sign, date and promptly return all proxy cards or make
sure that you vote all of your shares by phone or on the
Internet.
Other
Business
We know of no other matters to be presented for shareholder
action at the Annual Meeting. If other matters are properly
presented at the meeting, your signed and dated proxy card, or
your vote by telephone or on the Internet, gives authority to
Stephen J. Antal and Charles A. Caswell to vote your shares in
accordance with their best judgment.
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Expenses of
Solicitation
We will pay the cost of preparing, assembling and mailing this
proxy-soliciting material. In addition to the use of the mail,
proxies may be solicited personally or by telephone, by our
officers and employees without additional compensation. We will
pay all costs of solicitation, including certain expenses of
brokers and nominees who mail proxy material to their customers
or principals.
ELECTION OF
DIRECTORS
Our Articles of Incorporation and Bylaws provide that the Board
of Directors will consist of at least five but not more than
twenty-five members. The exact number of directors is determined
by either the vote of at least 75% of the members of the Board
of Directors or by a vote of the shareholders. The directors are
divided into three classes having staggered three-year terms.
Each class of directors is as nearly equal in number as possible.
The number of directors is currently fixed at seventeen. As
previously announced, Mr. Thomas R. Revels has decided not
to stand for re-election as a director and will retire from
service on the Board of Directors upon the expiration of his
current term at the Annual Meeting. By action of the Board of
Directors, the number of directors will be fixed at sixteen upon
the expiration of Mr. Thomas R. Revels term at the
Annual Meeting. Proxies may not be voted for a number of persons
greater than the number of nominees listed below.
Effective July 26, 2006 and October 25, 2006,
respectively, Ms. Jewell D. Hoover and Mr. John S.
Poelker, were appointed to the Board of Directors to fill
vacancies left by the retirement of Harold D. Alexander at the
2006 Annual Meeting of Shareholders and the resignation of Jerry
A. Felts, effective June 29, 2006. Effective
November 1, 2006, Mr. Richard F. Combs was also
appointed to the Board of Directors in fulfillment of an
obligation established in the Corporations Agreement and
Plan of Merger, dated June 1, 2006, to acquire GBC Bancorp,
Inc. (GBC). Mr. Combs is a former GBC director.
Mr. Combs appointment followed a determination by the
Board of Directors to increase the size of the Board to
seventeen.
As appointed directors Ms. Hoover, and Messrs. Poelker
and Combs must each stand for election at the Annual Meeting.
The Board of Directors has nominated the six persons listed
below to be elected as directors at the Annual Meeting. Each of
the nominees is currently a member of the Board of Directors and
is currently in the class of directors with terms expiring at
the Annual Meeting. Each of the nominees has been nominated for
a term to expire in 2010, except Mr. Richard F. Combs, who
has been nominated for a term to expire in 2008 in order to
better balance each of the three classes of directors.
It is intended that the persons named in the accompanying form
of proxy will vote to elect these six nominees listed below
unless authority to vote is withheld. The nominees will serve
until the 2008 or 2010 Annual Meeting of Shareholders, as
applicable, or until an earlier resignation or retirement or
until a successor shall be elected and shall qualify to serve.
We expect that each of the nominees will be available for
election. However, if a vacancy in the slate of nominees is
caused by death or other unexpected occurrence, it is intended
that shares represented by the accompanying proxy will be voted
for the election of a substitute nominee selected by the persons
named in the proxy. We recommend a vote FOR all of the
nominees for election as directors.
The names, ages and principal occupations (which have continued
for the past five years unless otherwise indicated) and certain
other information for each of the nominees and continuing
directors are set forth below. Each director also serves as a
First Charter Bank Director.
Nominees for
Terms Expiring in 2010
JEWELL D. HOOVER, age 58, has been the President of
Hoover & Associates, LLC, a bank consulting firm since
2003. Prior to that time, she was a Senior Bank Regulator with
the Office of the Comptroller of the Currency, until her
retirement in 2003. Ms. Hoover has been a director of the
Corporation since 2006.
3
WALTER H. JONES, JR., age 65, is a partner in the
law firm of Homesley, Jones, Gaines, Dudley, Childers, McLurkin,
Donaldson & Johnson, PLLC. Mr. Jones is the Chairman of
the Board of FCB and has been a director of the Corporation
since 2000.
SAMUEL C. KING, JR., age 59, is the President of
Kings Office Supply, Inc., an office products retailer.
Mr. King is also the President of The UPS Store,
Lincolnton, North Carolina, a retail packaging and shipping
company. Mr. King has been a director of the Corporation
since 2000.
JERRY E. McGEE, age 64, is President of Wingate
University. Dr. McGee has been a director of the
Corporation since 1995.
JOHN S. POELKER, age 64, has been the President of
The Poelker Consultancy, Inc., a financial services consulting
firm since 2005. Prior to that time, he was the Executive Vice
President and Chief Executive Officer of Old National Bancorp
(Evansville, Indiana) until his retirement in 2005.
Mr. Poelker has been a director of the Corporation since
2006.
Nominee for Term
Expiring in 2008
RICHARD F. COMBS, age 59, has been the President of
Excella International Corp., an advanced oxidation technology
company in the food preparation industry since 2005. Prior to
that time, he was the President of Pureflow Ultraviolet, Inc.,
an industrial water treatment company, and subsidiary of Trojan
Technologies, Inc. Mr. Combs has been a director of the
Corporation since 2006.
Continuing
Directors with Terms Expiring in 2009
MICHAEL R. COLTRANE, age 60, is the President,
Chairman, and Chief Executive Officer of CT Communications,
Inc., a telecommunications company. Mr. Coltrane is the
Vice Chairman of the Board of the Corporation. He served as a
director of the Corporation from 1983 until 1985 and currently
has served as a director of the Corporation since 1988.
Mr. Coltrane also serves as a director of CT
Communications, Inc.
CHARLES A. JAMES, age 60 is the President of Mt.
Pleasant Insurance Agency and the co-owner of Mt. Pleasant
Bonded Warehouse, a general commodity storage company.
Mr. James has been a director of the Corporation since 2000.
ROBERT E. JAMES, JR., age 56, has served as the
President and Chief Executive Officer of the Corporation since
2005, and of FCB since 2004. He served as Executive Vice
President of the Corporation from 1999 to 2005 and Executive
Vice President of FCB from 1999 to 2004. Mr. James has been
a director of the Corporation since 2005.
ELLEN L. MESSINGER, age 48, is the Vice President of
Messinger Inc., a manufacturing company. Ms. Messinger has
been a director of the Corporation since 2003.
HUGH H. MORRISON, age 59, is the President of E. L.
Morrison Holding Company, Inc., a real estate holding company,
owner of M.B. Commercial Real Estate, Inc., a real estate sales,
leasing and property management company and owner of Engineered
Lumber Supply LLC, a wholesale lumber company. Mr. Morrison
has been a director of the Corporation since 1984.
Continuing
Directors with Terms Expiring in 2008
WILLIAM R. BLACK, age 58, is a medical doctor
specializing in oncology. Dr. Black is the Vice Chairman of
the Board of FCB and has been a director of the Corporation
since 1990.
JAMES E. BURT, III, age 69, is a retired banker
and Chairman of the Board of the Corporation. Mr. Burt has
been a director of the Corporation since 2000.
JOHN J. GODBOLD, JR., age 66, is the President of
Godbold Financial Associates, Inc., a bank consulting company.
Mr. Godbold has been a director of the Corporation since
1997.
4
L. D. WARLICK, JR., age 67, is the President of
Warlick Funeral Home. Mr. Warlick has been a director of
the Corporation since 2000.
WILLIAM W. WATERS, age 65, is the retired President
of Waters Construction Company, a homebuilder. Mr. Waters
has been a director of the Corporation since 2000.
Messrs. Charles A. James and Robert E. James, Jr. are
not related. No director has a family relationship as close as
first cousin with any other director, nominee for director or
executive officer of the Corporation.
Director
Compensation
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Director
Compensation for
2006(1)
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Change in
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Pension Value
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Fees Earned
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Non-Equity
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and
Nonqualified
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All
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or
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Stock
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Option
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Incentive Plan
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Deferred
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Other
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Paid in Cash
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Awards
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Awards
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Compensation
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Compensation
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Compensation
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Total
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Name
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($)
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($)(2)(3)(5)
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($)(4)(5)
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($)
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Earnings
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($)(6)
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($)
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(a)
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(b)
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(c)
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(d)
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(e)
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(f)
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(g)
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(h)
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Harold D.
Alexander(7)
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$
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11,000
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$
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23,660
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$
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11,308
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$
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45,968
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William R. Black
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49,750
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6,570
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11,325
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67,645
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James E. Burt III
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43,250
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6,570
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11,325
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0
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(8)
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$
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103,985
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165,130
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Michael R. Coltrane
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51,000
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6,570
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11,325
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68,895
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Richard F. Combs
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5,500
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5,500
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Jerry A.
Felts(9)
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16,750
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16,750
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John J. Godbold, Jr.
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43,750
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6,570
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11,325
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61,645
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Jewell D. Hoover
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20,750
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20,750
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Charles A. James
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46,500
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6,570
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11,308
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64,378
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Walter H. Jones, Jr.
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54,500
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6,570
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11,325
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72,395
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Samuel C. King, Jr.
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50,250
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6,570
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11,308
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68,128
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Jerry E. McGee
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47,000
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6,570
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11,325
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64,895
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Ellen L. Messinger
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49,500
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6,570
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11,318
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67,388
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Hugh H. Morrison
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43,250
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6,570
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11,325
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61,145
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John S. Poelker
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10,000
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10,000
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Thomas R. Revels
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42,000
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6,570
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11,308
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59,878
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Lawrence D. Warlick, Jr.
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45,500
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6,570
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11,308
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63,378
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William W. Waters
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38,500
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6,570
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11,308
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56,378
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(1) |
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Robert E. James, First
Charters President and Chief Executive Officer, is not
included in this table because he is an employee of the
Corporation and thus receives no compensation for his service as
a director. The compensation received by Mr. James as an
employee of the Corporation is shown in the 2006 Summary
Compensation Table below. |
|
(2) |
|
Represents the FAS 123(R)
expense recognized in 2006 for outstanding shares of restricted
stock held by the directors. Restricted shares are expensed
ratably over the vesting period, assuming no forfeitures, using
the grant date fair value, as discussed in footnote 3,
below. |
|
(3) |
|
On March 9, 2006, each of
the non-employee directors received an award of
1,000 shares of restricted stock, each with a
FAS 123(R) grant date fair value of $23,660. Restricted
shares granted to directors during 2006 vest 1/3 annually with
vesting dates of
3/9/07,
3/9/08, and
3/9/09. |
|
(4) |
|
Represents the FAS 123(R)
expense recognized in 2006 for outstanding stock options. In
December 2006, the vesting for all outstanding stock options,
except for awards made in 2006, was accelerated so that all such
stock options were 100% vested. For more information, please
refer to the discussion appearing under the subheading
Other Equity Compensation Actions in the
Compensation Discussion and Analysis section, below.
Such acceleration of stock option vesting did not result in any
incremental fair value, as defined under FAS 123(R). The
assumptions used in the calculation of these amounts are
included in Note 18 Shareholders Equity, Stock
Plans and Stock Awards in the Notes to Consolidated
Financial Statements included within First Charters Annual
Report on
Form 10-K
for the fiscal year ended December 31, 2006. |
5
|
|
|
(5) |
|
The outstanding equity awards
for each director as of December 31, 2006 were as
follows: |
Outstanding
Equity Awards at Fiscal Year-End for 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
Awards
|
|
|
|
Option
Awards
|
|
|
Number of
|
|
|
|
Number of
|
|
|
Shares or
Units
|
|
|
|
Securities
Underlying
|
|
|
Stock that
have
|
|
|
|
Unexercised
Options
|
|
|
not Vested
|
|
Name
|
|
(#)
Exercisable
|
|
|
(#)
|
|
|
|
(a)
|
|
(b)
|
|
|
(c)
|
|
|
Harold D. Alexander, retired
|
|
|
13,600
|
|
|
|
|
|
William R. Black
|
|
|
21,000
|
|
|
|
1,000
|
|
James E. Burt III
|
|
|
12,100
|
|
|
|
1,000
|
|
Michael R. Coltrane
|
|
|
21,000
|
|
|
|
1,000
|
|
Richard F. Combs
|
|
|
|
|
|
|
|
|
Jerry A. Felts, resigned
|
|
|
500
|
|
|
|
|
|
John J. Godbold, Jr.
|
|
|
20,200
|
|
|
|
1,000
|
|
Jewell D. Hoover
|
|
|
|
|
|
|
|
|
Charles A. James
|
|
|
3,580
|
|
|
|
1,000
|
|
Walter H. Jones, Jr.
|
|
|
6,307
|
|
|
|
1,000
|
|
Samuel C. King, Jr.
|
|
|
13,240
|
|
|
|
1,000
|
|
Jerry E. McGee
|
|
|
18,600
|
|
|
|
1,000
|
|
Ellen L. Messinger
|
|
|
20,000
|
|
|
|
1,000
|
|
Hugh H. Morrison
|
|
|
7,307
|
|
|
|
1,000
|
|
John S. Poelker
|
|
|
|
|
|
|
|
|
Thomas R. Revels
|
|
|
8,280
|
|
|
|
1,000
|
|
Lawrence D. Warlick, Jr.
|
|
|
12,520
|
|
|
|
1,000
|
|
William W. Waters
|
|
|
13,600
|
|
|
|
1,000
|
|
|
|
|
|
|
(6) |
|
On June 29, 2000, the
Corporation and Mr. Burt entered into a Separation and
Consulting Agreement terminating Mr. Burts employment
agreement with the Corporation and its successors. Pursuant to
the agreement, Mr. Burt serves as a consultant to the
Corporation on a part-time basis. This agreement is scheduled to
terminate on July 31, 2007. During 2006, Mr. Burt
received $103,985 for his consulting services. |
|
(7) |
|
Effective April 26, 2006,
Harold D. Alexander retired from the Board of Directors pursuant
to the Corporations mandatory retirement policy.
Mr. Alexanders restricted stock award fully vested
upon his retirement pursuant to its terms. Upon his retirement,
Mr. Alexanders outstanding stock options continued to
vest under the original vesting schedule for such options.
However, the vesting for such stock options was accelerated in
December 2006, as discussed in footnote 4 to this
table. |
|
(8) |
|
The Corporation provides
Mr. Burt with monthly payments in the amount of $4,166.67
($50,000 a year) under a supplemental executive retirement plan.
Because these benefits are payable as a ten-year certain annuity
to the participant, the present value of the benefit will
decline each year. From December 31, 2005 to
December 31, 2006, the present value of this benefit
declined by $37,145. Mr. Burt is entitled to continue
receiving these monthly payments until August 2012. |
|
(9) |
|
Mr. Felts resigned from the
Board of Directors effective June 29, 2006. At the time of
his resignation, his unvested options and stock awards
terminated. |
Narrative to
Director Compensation Table
During 2006, each director of the Corporation who was not
employed by the Corporation or its subsidiaries (an
outside director) was paid director fees of
(1) $3,000 per quarter for his or her services as a
director, (2) $1,500 for each meeting of the Board of
Directors of the Corporation attended in person, ($1,000 for
each telephonic attendance), and (3) $1,000 for each
committee meeting attended in person ($750 for each telephonic
attendance). In the event of an unscheduled meeting of the Board
of Directors or committee meeting of short duration (i.e., less
than one hour), a fee of $500 may be paid to each outside
director attending such meeting, in the discretion of the
Chairman of the Board or the committee chairperson. In addition,
the chairperson of the Audit Committee received an annual cash
retainer in the amount of $6,000 and the chairperson of each of
the other committees of the Board of Directors, except the
Executive Committee, received an annual cash retainer in the
amount of $4,000. The compensation for outside directors is
periodically reviewed for adjustment by the Compensation
Committee. During 2006 the Committee retained Semler Brossy
Consulting Group, LLC, a compensation consulting firm, to assist
them with this review; no changes to the compensation described
above were made for 2007.
6
Deferred Compensation for Non-Employee
Directors. Effective May 1, 2001, the
Corporation amended and restated the First Charter Corporation
1994 Deferred Compensation Plan for Non-Employee Directors (the
Deferred Compensation Plan). Under the Deferred
Compensation Plan, eligible directors may elect to defer all or
part of their directors fees for a calendar year, in
exchange for Common Stock. The amount deferred, if any, must be
in multiples of 25 percent of their total directors
fees. Each participant is fully vested in his or her account
balance under the Deferred Compensation Plan. The Deferred
Compensation Plan generally provides for fixed payments or a
lump sum payment, or a combination of both, in shares of Common
Stock after the participant ceases to serve as a director for
any reason.
The Common Stock purchased by the Corporation for the Deferred
Compensation Plan is maintained in the First Charter Corporation
Directors Deferred Compensation Trust, a Rabbi Trust (the
Trust), on behalf of the participants. The assets of
the Trust are subject to the claims of general creditors of the
Corporation. Dividends payable on the shares of Common Stock
held by the Trust will be reinvested in additional shares of
Common Stock and held in the Trust for the benefit of the
participants. Deferrals of director fees pursuant to this plan
amounted to $333,250 for 2006.
Effective May 1, 2001, the Corporation approved and adopted
a non-qualified compensation deferral arrangement called the
First Charter Corporation Directors Option Deferral Plan
(the Director OPT Plan). Under the Director OPT
Plan, eligible directors may elect to defer 100% of their
directors fees and invest these deferrals into mutual fund
investments. Participants are offered the opportunity to direct
an administrative committee to invest in separate investment
funds with distinct investment objectives and risk tolerances.
Deferrals of director fees pursuant to this plan amounted to
$62,250 for 2006.
We also maintain the First Charter Stock Option Plan for
Non-Employee Directors (the Director Option Plan)
and the 2000 Omnibus Stock Option and Award Plan (the
Omnibus Stock Option Plan). The Compensation
Committee from time to time may grant non-qualified options to
purchase Common Stock
and/or
Restricted Stock Awards (RSA) to eligible directors
of the Corporation or a subsidiary in accordance with these
plans. The terms and provisions of any options granted,
including the termination, vesting and accelerated exercise of
the options, upon death, disability, retirement or otherwise, as
well as the terms and provisions of any RSA granted under these
plans, is subject to the discretion of the Compensation
Committee. The exercise price of any option granted must be
equal to the fair market value of the Common Stock on the date
of grant. In March 2006 the Compensation Committee approved an
RSA grant to each of the outside directors of the Corporation in
the amount of 1,000 shares of Common Stock, pursuant to the
Omnibus Stock Option Plan. These RSAs vest in cumulative
installments of one third per year over the next three
years.
Burt Agreements. On June 29, 2000, the
Corporation and James E. Burt, III, a director of the
Corporation, entered into a Separation and Consulting Agreement
terminating Mr. Burts employment with the Corporation
and his prior employment agreements with the Corporation and its
successors (the Consulting Agreement). Pursuant to
the Consulting Agreement, Mr. Burt will serve as a
consultant to the Corporation on a part-time basis until
July 31, 2007, unless the consultancy is terminated
earlier. Mr. Burt advises the Corporation on its business,
customers, products and services, and he remains under the terms
of an ongoing non-competition agreement with the Corporation
both during the term of the Consulting Agreement and for a
two-year period following the termination or end of the
Consulting Agreement. During 2006, Mr. Burt received
$103,985 for his consulting services.
At the time of the merger between the Corporation and Carolina
First Bancshares, Inc., in April 2000 the Corporation assumed a
pre-existing supplemental executive retirement plan that
benefits Mr. Burt. Under this agreement, the Corporation
provides Mr. Burt with monthly payments in the amount of
$4,166.67 ($50,000 a year). Mr. Burt is entitled to
continue receiving these monthly payments until August 2012.
Attendance of
Directors
During 2006, the Board of Directors held 11 meetings. Each
director attended at least 75% of the aggregate number of
meetings of the Board of Directors and all committees of the
Board of Directors on which they served during their applicable
period of service in 2006.
7
Committees of the
Board of Directors
The following is a brief description of the duties of each of
our committees and a list of the current members of each such
committee.
Executive Committee. Subject to limitations
under North Carolina law, the Executive Committee may exercise
all of the authority of the Board of Directors in the management
of the Corporation. The Executive Committee reviews management
reports and makes recommendations to the directors at the
regularly scheduled Board of Directors meetings. The Executive
Committee met three times during 2006. James E. Burt, III,
(Chairman), Michael R. Coltrane (Vice Chairman), William R.
Black, John J. Godbold, Jr., Robert E. James, Jr.,
Walter H. Jones, Jr., Jerry E. McGee, and Hugh H. Morrison
are the current members of the Executive Committee.
ALCO and Finance Committee (the ALCO
Committee). The ALCO Committee became a
committee of the Corporations Board of Directors effective
January 1, 2006, and is responsible for oversight of asset
and liability management, capital and dividend planning,
liquidity, budgeting and forecasting and contingency planning.
The ALCO Committee met six times in 2006. Michael R. Coltrane
(Chairman), William R. Black, James E. Burt, III, Jewell D.
Hoover and Robert E. James, Jr. are the current members of
the ALCO Committee.
Audit Committee. The Audit Committee, among
other things, is responsible for the appointment, compensation,
retention and oversight of the Corporations independent
auditors, and reviews the Corporations financial
statements, audit reports, internal controls and internal audit
procedures. The Audit Committee met thirteen times during 2006.
William R. Black (Chairman), Jewell D. Hoover, Charles A. James,
Samuel C. King, Jr., Ellen L. Messinger and John S. Poelker
are the current members of the Audit Committee. As determined by
the Board of Directors, each of the members of the Audit
Committee is an independent director in accordance with the
independence requirements of the Securities and Exchange
Commission (the SEC), and the NASDAQ Stock Market
Marketplace Rules (the NASDAQ Rules).
Compensation Committee. The Compensation
Committee annually reviews and recommends to the Board of
Directors salary grade ranges and merit increase guidelines for
our employees and the employees of our subsidiaries. In
addition, the committee recommends to the Board of Directors the
annual budget request for all salaries and specifically
recommends to the Board of Directors all executive
officers salaries. Furthermore, it reviews recommendations
from management regarding major benefit plans and recommends to
the Board of Directors annually the formula for matching
contributions and discretionary contributions made by the
Corporation to the First Charter Retirement Savings Plan
(401(k)). The committee also reviews recommendations for the
formula for funding and payments made under the
Corporations Annual Incentive Plan (the Annual
Incentive Plan). The Compensation Committee grants options
and other stock-based awards under and administers the First
Charter Comprehensive Stock Option Plan, Omnibus Stock Option
Plan, the 1999 Employee Stock Purchase Plan (1999
ESPP), the First Charter Corporation Restricted Stock
Award Program and the Director Option Plan. The committee also
annually evaluates and recommends director compensation and
benefits to the full Board of Directors. The Compensation
Committees governing Charter does not contain any specific
provisions regarding the committees ability to delegate
its authority to other persons.
With respect to the Chief Executive Officer, the Compensation
Committee periodically reviews and approves corporate goals and
objectives relevant to CEO compensation, evaluates the
CEOs performance in light of those goals and objectives,
and determines and approves the CEOs compensation. For
members of Executive Management, other than the CEO, the
Committee receives recommendations from the CEO and, in its
discretion, approves the compensation for these individuals. The
Compensation Committee routinely engages an outside compensation
consultant to make recommendations relating to overall
compensation philosophy, the financial peer group to be used for
external comparison purposes for Executive Management (including
the NEOs) and director compensation, comparable base salary
levels for Executive Management, short-term and long-term
incentive compensation plans, appropriate
8
performance parameters for such plans, and related compensation
matters. For 2006, the Compensation Committee engaged Semler
Brossy Consulting Group, LLC to serve in this capacity.
The Compensation Committee met ten times during 2006. Jerry E.
McGee (Chairman), Michael R. Coltrane, Walter H.
Jones, Jr., John S. Poelker, Thomas R. Revels and L.D.
Warlick, Jr., are the current members of the Compensation
Committee. In order to comply with certain restrictions under
Rule 16b-3
of the Securities Exchange Act of 1934, as amended (the
Exchange Act), the Compensation Committee is
composed solely of directors who qualify as non-employee
directors, as that term is defined in
Rule 16b-3.
As determined by the Board of Directors, each of the members of
the Compensation Committee is an independent director in
accordance with the independence requirements of the NASDAQ
Rules.
Governance and Nominating Committee. The
Governance and Nominating Committee evaluates and recommends
nominees for the Board of Directors. In addition, the Governance
and Nominating Committee assesses the effectiveness of the Board
of Directors and its committees and assists in the development
and implementation of the Corporations Corporate
Governance Guidelines. The Governance and Nominating Committee
met eight times during 2006. Walter H. Jones, Jr.
(Chairman), Samuel C. King, Jr., Jerry E. McGee, Ellen L.
Messinger, and L.D. Warlick, Jr. are the current members of
the Governance and Nominating Committee. As determined by the
Board of Directors, each of the members of the Governance and
Nominating Committee is an independent director in accordance
with the independence requirements of the NASDAQ Rules.
Nominations for
Director
The Governance and Nominating Committee identifies and
recommends individuals qualified to become members of the Board
of Directors and recommends to the Board of Directors director
nominees to be presented for shareholder approval at the Annual
Meeting of Shareholders and director candidates to fill
vacancies on the Board of Directors as they arise. The
Governance and Nominating Committee will consider candidates
recommended by shareholders for election to the Board of
Directors. Our Bylaws set forth the procedures for you to follow
in order to nominate persons for election to the Board of
Directors. Generally, you may properly bring a nomination before
the annual meeting of shareholders in a given year if you
provide written notice to the Corporate Secretary at least
90 days, but not more than 120 days, prior to the
anniversary date of the prior years annual meeting of
shareholders. This notice must include certain biographical
information relating to the person nominated. You must also
inform us of the number of shares of Common Stock you
beneficially own. The Governance and Nominating Committee will
consider the nomination for the Board of Directors slate
of nominees for that year. The Bylaws provide a different time
frame for submitting nominations if the annual meeting is held
more than 30 days before or 60 days after the
anniversary date of the prior years annual meeting.
Finally, the Bylaws set forth under what circumstances you may
submit a nomination for director before a special meeting of
shareholders and the time frame within which the nomination must
be submitted. Unless nominations are presented in accordance
with these Bylaw provisions, they will be disregarded and
invalid. You may obtain a copy of the Bylaws, upon written
request, to First Charter Corporation, Post Office
Box 37937, Charlotte, North Carolina,
28237-7937,
Attention: Corporate Secretary, and upon payment of $25.00 to
cover the costs of reproduction and mailing.
The Governance and Nominating Committee reviews the background
and qualifications of each director nominee to determine his or
her experience, competence and character and assesses such
director nominees potential contribution to the Board of
Directors. It is the policy of the Governance and Nominating
Committee to select individuals as director nominees who have
recognized personal and professional integrity, who have
demonstrated exceptional ability and judgment and who will be
most effective, in conjunction with the other nominees to the
Board, in collectively serving the long-term interests of the
Corporation and its shareholders. Director nominees will be
selected by the Governance and Nominating Committee on the basis
of their outstanding achievement in their personal careers,
broad experience, wisdom, ability to make independent analytical
inquiries, understanding of the business environment,
specialized knowledge (such as an understanding of accounting,
financial, marketing or regulatory matters), willingness to
devote adequate time to the duties of the Board of Directors,
and
9
commitment to the Corporations communities and shared
values. Shareholder nominees will be analyzed by the Governance
and Nominating Committee in the same manner as nominees that are
nominated by the Governance and Nominating Committee.
All nominees for election to the Board of Directors have been
recommended by the Governance and Nominating Committee. Except
for Ms. Hoover and Messrs. Poelker and Combs, all such
nominees are current directors standing for re-election.
Ms. Hoover and Messrs. Poelker and Combs, who were
appointed to the Board of Directors in 2006, are required to
stand for election by the shareholders of the Corporation at the
Annual Meeting. Ms. Hoover and Mr. Poelker were
identified and recommended by the Chief Executive Officer and
Chief Financial Officer of the Corporation, respectively. As
previously stated, Mr. Combs was appointed to the Board of
Directors in fulfillment of an obligation established in the
Corporations Agreement and Plan of Merger with GBC.
OWNERSHIP OF
COMMON STOCK
The following table shows, as of February 28, 2007, the
number of shares of Common Stock and the percent of outstanding
Common Stock beneficially owned by (i) each director and
nominee for director of the Corporation, (ii) each
executive officer of the Corporation named in the Summary
Compensation Table contained elsewhere herein and (iii) all
directors and executive officers as a group. Based upon a search
of filings made with the Securities and Exchange Commission, no
shareholder of the Corporation owns 5 percent or more of
our Common Stock.
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
Beneficially
Owned(1)
|
|
Name
|
|
Number
|
|
|
Percent of
Class
|
|
|
|
|
William R. Black
|
|
|
117,904
|
(2)
|
|
|
*
|
|
James E. Burt, III
|
|
|
160,765
|
(3)
|
|
|
*
|
|
Charles A. Caswell
|
|
|
21,025
|
(4)
|
|
|
*
|
|
Michael R. Coltrane
|
|
|
101,449
|
(5)
|
|
|
*
|
|
Richard F. Combs
|
|
|
127,951
|
(6)
|
|
|
*
|
|
J. Scott Ensor
|
|
|
20,523
|
(7)
|
|
|
*
|
|
John J. Godbold, Jr.
|
|
|
181,718
|
(8)
|
|
|
*
|
|
Jewell D. Hoover
|
|
|
2,572
|
(9)
|
|
|
*
|
|
Charles A. James
|
|
|
181,747
|
(10)
|
|
|
*
|
|
Robert E. James, Jr.
|
|
|
162,306
|
(11)
|
|
|
*
|
|
Walter H. Jones, Jr.
|
|
|
64,768
|
(12)
|
|
|
*
|
|
Samuel C. King, Jr.
|
|
|
81,045
|
(13)
|
|
|
*
|
|
Richard A. Manley
|
|
|
9,513
|
|
|
|
*
|
|
Jerry E. McGee
|
|
|
43,520
|
(14)
|
|
|
*
|
|
Ellen L. Messinger
|
|
|
29,679
|
(15)
|
|
|
*
|
|
Hugh H. Morrison
|
|
|
56,612
|
(16)
|
|
|
*
|
|
John S. Poelker
|
|
|
2,000
|
(17)
|
|
|
*
|
|
Thomas R. Revels
|
|
|
15,945
|
(18)
|
|
|
*
|
|
Stephen M. Rownd
|
|
|
25,468
|
(19)
|
|
|
*
|
|
Cecil O. Smith, Jr.
|
|
|
9,446
|
(20)
|
|
|
*
|
|
L. D. Warlick, Jr.
|
|
|
182,206
|
(21)
|
|
|
*
|
|
William W. Waters
|
|
|
78,422
|
(22)
|
|
|
*
|
|
All directors and executive
officers of the Corporation as a group (25 persons)
|
|
|
1,697,276
|
(24)
|
|
|
4.78
|
%
|
|
|
10
|
|
|
(1) |
|
Except as otherwise noted, the
persons named in the table have sole voting and investment power
with respect to the shares listed. |
|
(2) |
|
Includes 21,000 shares that
may be acquired by Dr. Black upon the exercise of stock
options that are currently exercisable. Also includes
(i) 2,342 shares as to which he may be deemed to be
the beneficial owner that are held pursuant to the Deferred
Compensation Plan, as to which he would have sole voting and
investment power upon acquisition and (ii) 2,000 unvested
restricted shares granted under the Corporations
Restricted Stock Award Program as to which he has sole voting
power, but not investment power. |
|
(3) |
|
Includes 10,808 shares
owned by Mr. Burts spouse, as to which she has sole
voting and investment power. Also includes
(i) 12,100 shares that may be acquired by him upon the
exercise of stock options that are currently exercisable,
(ii) 7,507 shares as to which he may be deemed to be
the beneficial owner that are held pursuant to the Deferred
Compensation Plan, as to which he would have sole voting and
investment power upon acquisition and (iii) 2,000 unvested
restricted shares granted under the Corporations
Restricted Stock Award Program as to which he has sole voting
power, but not investment power. |
|
(4) |
|
Includes 11,780 shares that
may be acquired by Mr. Caswell upon the exercise of stock
options that are currently exercisable or become exercisable
within 60 days of February 28, 2007 and 3,000 unvested
restricted shares granted under the Corporations
Restricted Stock Award Program as to which he has sole voting
power, but not investment power. |
|
(5) |
|
Includes 21,000 shares that
may be acquired by Mr. Coltrane upon the exercise of stock
options that are currently exercisable. Also includes
(i) 9,042 shares as to which he may be deemed to be
the beneficial owner that are held pursuant to the Deferred
Compensation Plan, as to which he would have sole voting and
investment power upon acquisition, (ii) 8,925 shares
held in the Anne Collins Coltrane Trust as to which he may be
deemed to be the beneficial owner, as to which he has sole
voting and investment power and (iii) 2,000 unvested
restricted shares granted under the Corporations
Restricted Stock Award Program as to which he has sole voting
power, but not investment power. |
|
(6) |
|
Includes 13,688 shares
owned by Mr. Combs spouse, as to which she has sole
voting and investment power. Also includes
(i) 366 shares as to which he may be deemed to be the
beneficial owner that are held pursuant to the Deferred
Compensation Plan, as to which he would have sole voting and
investment power upon acquisition and (ii) 1,000 unvested
restricted shares granted under the Corporations
Restricted Stock Award Program as to which he has sole voting
power, but not investment power. |
|
(7) |
|
Includes 18,251 shares that
may be acquired by Mr. Ensor upon the exercise of stock
options that are currently exercisable or become exercisable
within 60 days of February 28, 2007 and 2,272 unvested
restricted shares granted under the Corporations
Restricted Stock Award Program as to which he has sole voting
power, but not investment power. |
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(8) |
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Includes 1,789 shares owned
by Mr. Godbolds spouse, as to which she has sole
voting and investing power. Also includes
(i) 20,200 shares that may be acquired by
Mr. Godbold upon the exercise of stock options that are
currently exercisable and (ii) 2,000 unvested restricted
shares granted under the Corporations Restricted Stock
Award Program as to which he has sole voting power, but not
investment power. |
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(9) |
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Includes 1,152 shares as to
which Ms. Hoover may be deemed to be the beneficial owner
that are held pursuant to the Deferred Compensation Plan, as to
which she would have sole voting and investment power upon
acquisition and 1,000 unvested restricted shares granted under
the Corporations Restricted Stock Award Program as to
which she has sole voting power, but not investment
power. |
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(10) |
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Includes 19,200 shares
owned jointly by Mr. Charles A. James and his children, as
to which he has shared voting and investment power. Also
includes (i) 3,580 shares that may be acquired by him
upon the exercise of stock options that are currently
exercisable and (ii) 2,000 unvested restricted shares
granted under the Corporations Restricted Stock Award
Program as to which he has sole voting power, but not investment
power. |
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(11) |
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Includes 140,717 shares
that may be acquired by Mr. Robert E. James, Jr. upon
the exercise of stock options that are currently exercisable or
become exercisable within 60 days of February 28, 2007
and 456 shares owned jointly by Mr. James
children, as to which they have shared voting and investment
power. |
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(12) |
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Includes 529 shares owned
jointly by Mr. Jones and his spouse, as to which he has
shared voting and investment power. Also includes
(i) 33,101 shares owned by his spouse, as to which she
has sole voting and investment power,
(ii) 6,307 shares that may be acquired by him upon the
exercise of stock options that are currently exercisable,
(iii) 15,667 shares as to which he may be deemed to be
the beneficial owner that are held pursuant to the Deferred
Compensation Plan, as to which he would have sole voting and
investment power upon acquisition and (iv) 2,000 unvested
restricted shares granted under the Corporations
Restricted Stock Award Program as to which he has sole voting
power, but not investment power. |
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(13) |
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Includes 6,515 shares owned
jointly by Mr. King and his spouse, as to which they have
shared voting and investment power. Also includes
(i) 4,782 shares owned by his spouse, as to which she
has sole voting and investment power,
(ii) 13,240 shares that may be acquired by him upon
the exercise of stock options that are currently exercisable,
(iii) 925 shares as to which he may be deemed to be
the beneficial owner that are held pursuant to the Deferred
Compensation Plan, as to which he would have sole voting and
investment power upon acquisition and (iv) 2,000 unvested
restricted shares granted under the Corporations
Restricted Stock Award Program as to which he has sole voting
power, but not investment power. |
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(14) |
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Includes 18,600 shares that
may be acquired by Dr. McGee upon the exercise of stock
options that are currently exercisable. Also includes
(i) 8,746 shares as to which he may be deemed to be
the beneficial owner that are held pursuant to the Deferred
Compensation Plan, as to which he would have sole voting and
investment power upon acquisition and (ii) 2,000 unvested
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restricted shares granted under
the Corporations Restricted Stock Award Program as to
which he has sole voting power, but not investment
power. |
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(15) |
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Includes 440 shares owned
by Ms. Messingers spouse, as to which he has sole
voting and investment power. Also includes
(i) 20,000 shares that may be acquired by her upon the
exercise of stock options that are currently exercisable,
(ii) 1,500 shares held by Ms. Messinger as
custodian for her children, as to which they have shared voting
and investment power and (iii) 2,000 unvested restricted
shares granted under the Corporations Restricted Stock
Award Program as to which she has sole voting power, but not
investment power. |
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(16) |
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Includes 1,451 shares owned
by Mr. Morrisons spouse, as to which she has sole
voting and investment power. Also includes
(i) 7,307 shares that may be acquired by him upon the
exercise of stock options that are currently exercisable,
(ii) 12,089 shares as to which he may be deemed to be
the beneficial owner that are held pursuant to the Deferred
Compensation Plan, as to which he would have sole voting and
investment power upon acquisition, (iii) 2,000 unvested
restricted shares granted under the Corporations
Restricted Stock Award Program as to which he has sole voting
power, but not investment power and (iv) 28,000 shares
pledged as collateral. |
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(17) |
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Includes 1,000 unvested
restricted shares granted under the Corporations
Restricted Stock Award Program as to which Mr. Poelker has
sole voting power, but not investment power. |
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(18) |
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Includes 296 shares owned
jointly by Mr. Revels and his former spouse, as to which
they have shared voting and investment power. Also includes
(i) 8,280 shares that may be acquired by
Mr. Revels upon the exercise of stock options that are
currently exercisable, (ii) 5,339 shares as to which
he may be deemed to be the beneficial owner that are held
pursuant to the Deferred Compensation Plan, as to which he would
have sole voting and investment power upon acquisition and
(iii) 2,000 unvested restricted shares granted under the
Corporations Restricted Stock Award Program as to which he
has sole voting power, but not investment power. |
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(19) |
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Includes 22,785 shares that
may be acquired by Mr. Rownd upon the exercise of stock
options that are currently exercisable or become exercisable
within 60 days of February 28, 2007. |
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(20) |
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Includes 8,618 shares that
may be acquired by Mr. Smith upon the exercise of stock
options that are currently exercisable or become exercisable
within 60 days of February 28, 2007. |
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(21) |
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Includes 3,063 shares held
by Mr. Warlicks spouse as custodian for their
children, as to which she has sole voting and investment power.
Also includes (i) 31,270 shares owned by his spouse,
as to which she has sole voting and investment power,
(ii) 12,520 shares that may be acquired by him upon
the exercise of stock options that are currently exercisable,
(iii) 86 shares as to which he may be deemed to be the
beneficial owner that are held pursuant to the Deferred
Compensation Plan, as to which he would have sole voting and
investment power upon acquisition and (iv) 2,000 unvested
restricted shares granted under the Corporations
Restricted Stock Award Program as to which he has sole voting
power, but not investment power |
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(22) |
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Includes 13,600 shares that
may be acquired by Mr. Waters upon the exercise of stock
options that are currently exercisable. Also includes
(i) 1,603 shares as to which he may be deemed to be
the beneficial owner that are held pursuant to the Deferred
Compensation Plan, as to which he would have sole voting and
investment power upon acquisition, and (ii) 2,000 unvested
restricted shares granted under the Corporations
Restricted Stock Award Program as to which he has sole voting
power, but not investment power |
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(23) |
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Includes 13,864 shares that
may be acquired by three other unnamed executive officers upon
the exercise of stock options that are currently exercisable or
become exercisable within 60 days of February 28,
2007. Also includes 3,900 unvested restricted shares granted
under the Corporations Restricted Stock Award Program, as
to which they have sole voting power, but not investment
power. |
CORPORATE
GOVERNANCE MATTERS
Director
Independence
Upon the consideration of the criteria and requirements
regarding director independence set forth in the NASDAQ Rules,
the Board of Directors has determined that each of the following
directors that will serve after the date of the Annual Meeting
are independent directors: Dr. Black,
Mr. Coltrane, Mr. Combs, Ms. Hoover,
Mr. Charles A. James, Mr. Jones, Mr. King,
Dr. McGee, Ms. Messinger, Mr. Morrison,
Mr. Poelker, Mr. Warlick, and Mr. Waters. During
its deliberations, the Board of Directors also considered the
following de minimis relationships with directors deemed
independent under the NASDAQ Rules: (i) Samuel C.
King, Jr. is the President of Kings Office Supply,
Inc., from which the Corporation purchased office products and
furniture during 2006 and (ii) Walter H. Jones, Jr.,
is a Partner in the law firm of Homesley, Jones, Gaines, Dudley,
Childers, McLurkin, Donaldson & Johnson, PLLC, which during
2006 the Corporation engaged from time to time for
representation in various matters involving collections and
foreclosures. Messrs. Alexander and Felts, who each ceased
to be directors during 2006, and Mr. Revels, whose term
expires at the Annual Meeting, were independent during their
service on the Board of Directors.
12
Code of Business
Conduct and Ethics and Corporate Governance Guidelines
The Corporations Board of Directors previously adopted the
First Charter Corporation Code of Business Conduct and
Ethics (the Code), applicable to the directors
and employees (including the Chief Executive Officer and the
Chief Financial Officer) of the Corporation and its
subsidiaries. During 2006, the Board of Directors reaffirmed the
adoption of the Code. In addition, in furtherance of our
long-standing goal of providing effective corporate governance
of our business and affairs for the benefit of shareholders, the
Board of Directors previously adopted the First Charter
Corporation Corporate Governance Guidelines (the
Corporate Governance Guidelines). A copy of each of
the Code and the Corporate Governance Guidelines is available on
our website at www.FirstCharter.com under the Corporate
Governance section.
Committee
Charters
Each of the Audit Committee, the Compensation Committee and the
Governance and Nominating Committee operate under written
charters that have been approved by the Board of Directors.
These charters are available on our website at
www.FirstCharter.com under the Corporate Governance
section.
Audit Committee
Financial Expert
The Board of Directors has determined that one member of the
Audit Committee, John S. Poelker, is an audit committee
financial expert. Mr. Poelker is independent as
that term is defined in the NASDAQ Rules.
Conflicts of
Interest Transactions
Pursuant to the Corporations Amended and Restated
Conflicts of Interest Transactions Policy for Directors and
Executive Officers, an executive officer or director, or
immediate family members of such persons, who has an actual or
possible conflict of interest in a transaction has a duty to
disclose to the Audit Committee that interest and describe all
material facts concerning the matter before entering into the
proposed transaction. The Audit Committee shall review the
proposed transaction and determine whether a conflict of
interest transaction exists and whether such transaction
should be approved by the Audit Committee, subject to the
approval of the disinterested directors of the Corporation. If
the conflict of interest transaction involves a director,
simultaneous with such review, the Audit Committee shall
disclose the proposed transaction to the Governance and
Nominating Committee to facilitate its ongoing monitoring of the
independence of the members of the Board of Directors. The
Governance and Nominating Committee shall inform the Board of
Directors as to its initial assessment of the potential impact
of the conflict of interest transaction upon the subject
directors independence. Thereafter, the disinterested
members of the Board of Directors shall determine by voting
whether the transaction should be approved and validated. On an
annual basis, the Corporations management discloses to the
Audit Committee and the Board of Directors for their review a
summary of all previously approved conflict of interest
transactions and the amounts paid by the Corporation pursuant to
such transactions during each of the two most recently completed
fiscal years. If at any time there is proposed to be a material
change in the amount or type of the continuing transactions
previously approved pursuant to this policy, such change must be
approved in advance in the same manner as a new conflict of
interest transaction.
A conflicts of interest transaction is defined as a
transaction involving the Corporation in which an executive
officer or director has a direct or indirect interest. Under the
policy, executive officers and directors will be deemed to have
a direct interest if they have or a member of their family has a
material financial interest in the transaction. The Corporation
believes that Related Person Transactions (as defined below)
that are required to be disclosed in the Corporations
annual proxy statement will constitute conflicts of
interest transactions and will therefore be subject to the
foregoing approval procedures.
The term Related Person Transaction generally means
a transaction, arrangement or relationship (or any series of the
same) in which the Corporation (including any of its
subsidiaries) was, is or will be a participant
13
and the amount involved exceeds $120,000, and in which any
Related Person had, has or will have a direct or indirect
interest. A Related Person generally means a
director, director nominee or executive officer of the
Corporation; a person who is known to be the beneficial owner of
more than 5% of any class of the Corporations common
stock; and any immediate family member of any of the foregoing
persons, which means any child, stepchild, parent, stepparent,
spouse, sibling,
mother-in-law,
father-in-law,
son-in-law,
daughter-in-law,
brother-in-law,
or
sister-in-law
of the director, executive officer, nominee or more than 5%
beneficial owner, and any person (other than a tenant or
employee) sharing the household of such director, executive
officer, nominee or more than 5% beneficial owner.
Shareholder
Communications
You may communicate directly with any member or committee of the
Board of Directors or the Chair of any committee by writing to
the Board of Directors, or a specific Committee Chair or
director at the following address: First Charter Corporation
Board of Directors, c/o Corporate Secretary, Post Office
Box 37937, Charlotte, North Carolina
28237-7937.
Each such communication should specify the applicable addressee.
The Board of Directors has instructed the Corporate Secretary to
forward these communications to the addressee, and if no
specific addressee is listed, to the Chairman of the Board of
Directors.
Attendance at
2006 Annual Meeting
At the 2006 Annual Meeting of Shareholders, 14 members of our
Board of Directors were in attendance. We believe that the
Annual Meeting is an opportunity for shareholders to communicate
directly with our directors. Pursuant to our Corporate
Governance Guidelines, directors are encouraged to attend the
Annual Meeting of Shareholders.
14
REPORT OF THE
AUDIT COMMITTEE
The Audit Committee of the Board of Directors is currently
composed of six directors and operates under a written charter.
The Audit Committee annually reviews and reassesses the adequacy
of the Audit Committee Charter. During 2006, the Charter was
amended and such amended Charter was adopted by the Board of
Directors and is attached hereto as Appendix A.
Management is responsible for the Corporations internal
controls and the financial reporting process. The independent
auditors are responsible for performing an audit of the
Companys consolidated financial statements in accordance
with the standards of the Public Company Accounting Oversight
Board (United States) and issuing a report thereon. The
Audit Committee, among other things, is responsible for
monitoring and overseeing these processes and is directly
responsible for the appointment, compensation, and oversight of
the Corporations independent auditors.
In this context, the Audit Committee has met and held
discussions with management and the independent auditors.
Management represented to the Audit Committee that the
Corporations consolidated financial statements were
prepared in accordance with accounting principles generally
accepted in the United States of America, and the Audit
Committee has reviewed and discussed the audited consolidated
financial statements with management and the independent
auditors. The Audit Committee has discussed with the independent
auditors the matters required to be discussed by Statement on
Auditing Standards No. 61, as amended (Codification of
Statements on Auditing Standards).
The Corporations independent auditors also provided to the
Audit Committee the written disclosures and the letter required
by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), and the Audit
Committee has discussed with the independent auditors that
firms independence.
Based upon the Audit Committees discussions with
management and the independent auditors and the Audit
Committees review of the representations of management and
the report of the independent auditors to the Audit Committee,
the Audit Committee recommended to the Board of Directors that
the audited consolidated financial statements be included in the
Corporations Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006, filed with the
Securities and Exchange Commission.
Submitted by the Audit Committee of the Board of
Directors:
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William R. Black (Chairman)
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Samuel C. King, Jr.
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Jewell D. Hoover
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Ellen L. Messinger
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Charles A. James
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John S. Poelker
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15
COMPENSATION
DISCUSSION AND ANALYSIS
EXECUTIVE
COMPENSATION PHILOSOPHY
The Corporations executive compensation program has been
designed as an active management tool that directs and rewards
specific results. The primary objective of the executive
compensation program is to reinforce the strategic goals and
objectives that management and the Board of Directors have
developed by directly aligning specific, targeted levels of
performance with specific levels of compensation. The impact of
performance on pay is intended to be clear, direct and easy to
understand.
The executive compensation program is founded upon the idea that
a strong, performance-oriented compensation program, aligned
with the practices of our peers, is a key ingredient in becoming
a leading performer relative to organizations of similar size,
and is, therefore, in the best interests of shareholders. We
also believe that a performance-based compensation program is
vital to attracting and retaining highly talented and motivated
executives to lead the Corporation.
As described elsewhere in this proxy statement, the Compensation
Committee of the Board of Directors is responsible for the
administration of and overall structure of the
Corporations executive compensation program. The
Compensation Committee is composed entirely of independent,
nonmanagement directors.
OVERVIEW OF
COMPENSATION PROGRAM
Beginning in the Fall of 2005, the Corporations executive
compensation program was completely reviewed and updated to
better align the program with our pay for performance
philosophy. From a business perspective, one of
managements primary goals was to enhance total return to
shareholders. To reinforce this overarching business goal, the
Compensation Committee and management sought to tie executive
compensation to quantifiable earnings metrics, such as the
Corporations Operating Earnings Per Share (EPS) and Cash
Return on Equity (ROE).
Based on a review of our competitors business practices
and our understanding of the relationship between pay and
performance within our Peer Group (defined below), the
Compensation Committee made two significant changes to the
structure of the executive compensation program that went into
effect in 2006:
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A new long-term incentive plan (LTIP), tied to Operating EPS
growth, Cash ROE and Net Charge-offs replaced the previous stock
option only plan (see discussion under Elements of
Compensation Long Term Incentive Plan). The
new LTIP plan, which operates under the First Charter 2000
Omnibus Stock Option and Award Plan has targeted the
level of compensation with lower payouts than typical for lower
than peer performance and higher payouts than typical for higher
than peer performance. For example, performance at the
25th percentile
of the Peer Group would result in a payout significantly less
than the
25th pay
percentile, and likewise, 75th percentile performance would
result in a payout greater than 75th pay percentile.
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Share ownership guidelines were implemented to strengthen the
link between the interests of our Directors and executive
officers and those of our shareholders (see discussion under
Share Ownership Guidelines).
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Although the Corporation considers the new LTIP and its
performance-driven incentives to be a focal point of the
redesigned executive compensation program, it is only one
element of a comprehensive executive compensation program
designed to align pay with performance and to aid in the
attraction and retention of
16
highly qualified executives. Each element of the program is
briefly described below along with a summary of its objectives:
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Compensation
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Element
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Description
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Objective
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Base Salary
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Fixed compensation that is usually
increased annually based on performance and an annual review of
peer compensation.
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Provide a base level
of compensation that fairly accounts for the job and scope of
the role being performed, and
Reward the demonstrated proficiency of the
incumbent.
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Annual Incentive Plan (AIP)
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Variable compensation earned based
on performance against pre-established annual goals.
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Reward for achieving
critical annual operating goals (typically, Operating EPS) which
ultimately contributes to long-term total return to shareholders.
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Long-Term Incentive Plan (LTIP)
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The value of the LTIP is comprised
of 30% stock options that vest over time and 70% performance
shares that vest based on achievement of three-year Charge-off,
Cash ROE and Operating EPS, as compared to the Peer Group.
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Motivate performance
consistent with third quartile earnings and return performance
which impacts total return to shareholders.
Align the economic interests of the participants
with the shareholders by rewarding executives for stock price
improvement.
Aid in retention (through vesting schedules).
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Supplemental Executive Retirement
Plan (SERP)
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Non-qualified retirement benefit
that provides additional retirement income beyond what is
provided in the Corporations standard retirement plan
through a pre-set, fixed annuity value. Only the CEO and one
other executive officer are provided SERPs.
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Aid in recruiting of
mid-career executives to the Corporation.
Aid in retention.
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Other Benefits and Perquisites
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Broad-based benefits provided to
all the Corporation employees (e.g., medical and group term life
insurance), a nonqualified deferred compensation arrangement,
and certain perquisites, including club memberships, car
allowance and supplemental welfare benefits.
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Provide a competitive
total package to attract and retain key executives.
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OPERATION OF
COMPENSATION COMMITTEE
The Compensation Committee is responsible for the overall
structure of the Corporations executive compensation
program. The Committee considers, recommends and oversees the
Corporations major benefit plans, including incentive
compensation plans, and equity-based plans in which Directors,
the Corporations top level of executive
management (which consists of the Chief Executive Officer
and seven other executive officers), and other employees of the
Corporation and its subsidiaries may participate. The executive
officers named in the Summary Compensation Table, which consists
of the Chief Executive Officer, the Chief Financial Officer, and
three other members of executive management, are referred to as
NEOs or named executive officers. The
Compensation Committee also approves option grants and
restricted stock or other awards, and imposes such limitations,
restrictions and
17
conditions upon those awards as the Committee deems necessary or
advisable. The Compensation Committee is composed entirely of
independent, nonmanagement directors. Except for the broad-based
compensation and benefit programs available to all employees,
the Compensation Committee approves all compensation-related
decisions for executive management. For more information on the
operations of the Compensation Committee, please refer to
Committees of the Board of Directors.
OUTSIDE
CONSULTANT
In connection with the redesign of the compensation program, the
Compensation Committee engaged the Semler Brossy Consulting
Group, LLC (Semler Brossy) to serve as the Compensation
Committees independent executive compensation advisor.
Semler Brossy works directly for the Compensation Committee,
reporting to the Chairman of the Committee. On issues related to
compensation design or comparison of the Corporations
program to the Peer Group, Semler Brossy typically prepares and
presents a written report to the Committee. Generally, Semler
Brossy will meet with appropriate members of executive
management to assess compensation program design issues and
desired business directives, but Semler Brossy will prepare its
report and findings independently. Semler Brossy is also charged
with providing objective data, consistent with the stated
compensation philosophy, on Peer Group compensation programs and
provides general advice and counsel to the Committee on ongoing
compensation issues that arise. Semler Brossy provides no other
services for the Corporation.
The role and selection of the outside consultant is reviewed
against a set of standards on an annual basis. This review
includes feedback from management. Based on this review, Semler
Brossy was retained for 2007 as the independent executive
compensation advisor to the Compensation Committee.
COMPETITIVE
BENCHMARKING AND POSITIONING
We believe that the compensation practices of our peers provide
important context to the Corporations executive
compensation program. The primary source of peer data for our
executive compensation program is a customized Peer Group
developed to specifically reflect banks with whom the
Corporation competes for talent, banks of similar size and scope
to the Corporation and banks that operate with a similar,
metropolitan focused branch footprint. Additionally, as a
secondary reference point, the Compensation Committee considers
data from financial services compensation surveys.
As part of the compensation review that began in the Fall of
2005, the Compensation Committee developed a set of criteria
that would consistently identify banks most similar to the
Corporation in size and scope of operations (the Peer
Group). Under these criteria, we consider our Peer Group
to consist of financial institutions that:
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Operate with a network of retail branches and commercial lending
activity, with these traditional banking activities representing
the core revenue of the bank;
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Are publicly traded and based in the United States; and
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Have an asset size relative to First Charter as of the end of
the most recent fiscal year that is either (i) within
$1 billion of the Corporations asset size or
(ii) within one-half to two times of the Corporations
asset size, while also operating a core number of branches and
conducting commercial lending activity in metropolitan
statistical areas (MSA) that are comparable to First
Charters MSA.
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The Compensation Committee intends to apply these criteria
annually, based on completed fiscal year results to update the
list of banks that comprise the Peer Group. Based on an
historical analysis, we believe that the majority of the
competitors in the Peer Group will remain in the Peer Group year
over year, with
18
banks leaving and entering the Peer Group primarily because of
acquisition or divestiture activity. For fiscal 2006, the Peer
Group was comprised of the following 28 banks:
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1st Source Corp.
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First Midwest Bancorp Inc.
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Provident Bankshares Corp.
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Alabama National BanCorporation
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Hancock Holding Co.
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Republic Bancorp
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Amcore Financial Inc.
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Independent Bank Corp.
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Sandy Spring Bancorp Inc.
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Bank Atlantic Bancorp Inc.
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Main Street Banks Inc.
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Sterling Bancshares Inc.
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Chemical Financial Corp.
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MB Financial Inc.
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Susquehanna Bancshares Inc.
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Citizens Banking Corp.
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National Penn Bancshares Inc.
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Texas Regional Bancshares Inc.
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Cullen/Frost Bankers Inc.
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NBT Bancorp Inc.
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Umpqua Holdings Corp.
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CVB Financial Corp.
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Park National Corp.
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United Community Banks Inc.
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First Community Bancorp
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Prosperity Bancshares Inc.
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WesBanco Inc.
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First Financial Bancorp
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In general, the Corporation positions each element of
compensation at median of the Peer Group to provide pay
opportunities comparable to the marketplace. When the
compensation design decisions for 2006 were being made, the
Corporations performance was assessed as below the median
of our Peer Group, measured by one year and three year total
shareholder return, earnings per share growth, return on equity
and return on assets. The Compensation Committee determined that
it was in the best interests of the shareholders to target 2006
compensation near the median level of the Peer Group to ensure
the Corporations ability to attract and retain the key
leadership talent that would ultimately be responsible for
improving the Corporations performance. For fiscal 2006,
as evaluated against the measures established for our Long Term
Incentive Plan of Operating EPS and Cash ROE, the
Corporations performance was at or above the median level
of the Peer Group. An independent third party has been engaged
to perform reviews of the Corporations performance against
the Peer Group. This information will be shared with the
Compensation Committee on a semi-annual basis.
The structure of the Corporations executive compensation
program coupled with the positioning of each compensation
element results in a mix of compensation that is heavily
weighted toward variable, at-risk compensation. Approximately
59% of Mr. James 2006 compensation opportunity and an
average of approximately 57% of the other NEOs 2006
compensation opportunity are performance-based, and therefore at
risk based on the Corporations performance. This ensures
that the interests of the NEOs are aligned with those of the
Corporations shareholders.
The Corporation maintains and monitors adherence to desired
positioning of its executive compensation program through a
combination of periodic reviews, as well as at the time of a new
plan introduction or modification and when individual
compensation decisions are made. While the Corporation does not
make compensation decisions solely based on Peer Group
positioning, compensation decisions are evaluated against their
impact on the desired positioning.
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Periodic Review. Approximately every three
years, the Corporation conducts a comprehensive review of all
elements of its compensation program focusing on
questions of mix and total value. The last review was conducted
in the fourth quarter of 2005.
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|
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|
At Time of Plan Introduction. Any time a new
compensation plan is introduced or modified, the Corporation
reviews relevant information from the Peer Group and
compensation surveys.
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|
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|
At Time of Individual Compensation Action (e.g., salary
increase or change in target incentives). Each compensation
action is reviewed within the context of relevant competitive
compensation data. In addition, each compensation action is
reviewed within the context of that individuals total
compensation package.
|
19
ELEMENTS OF
COMPENSATION
Base
Salary
For all members of executive management, base salaries are
reviewed annually as well as at the time of a promotion or other
change in responsibilities. Increases are based on an evaluation
of the previous years performance of the executive, the
relative strategic importance of the position, market conditions
and median pay levels within the Peer Group.
For 2006, Mr. James received an 8.7% salary increase to
$350,000. The new salary improves the positioning of his salary
to above the 25th percentile, but below the median pay
level. This increase was provided to Mr. James after
consideration of the following factors:
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|
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|
|
Competitive Peer Group salary information and salary survey
information;
|
|
|
|
Leadership and strategic direction provided during 2005; and
|
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|
|
Meeting his performance goals as set out in a pre-agreed goal
contract with the Board of Directors.
|
In approving an 8.7% salary increase, the Compensation Committee
noted that the Corporations earnings and return
performance were below desired levels however, the
25th percentile pay positioning combined with the strategic
progress led by Mr. James, supported a larger than typical
increase.
For 2006, base salaries of the NEOs (excluding the CEO) were
reviewed and, on average, increases of 16.3% were provided.
These increases are designed to provide base salaries consistent
with the median pay levels. These increases include two salary
increases related to promotions. During 2006, Mr. Rownd and
Mr. Ensor were promoted to new executive roles. Effective
on the date of the promotion, Mr. Rownd received an
increase of 10.4% and Mr. Ensor received an increase of
24.2%.
2006 Base Salary
Adjustment
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Percentage
|
|
Name
|
|
2005 Base
Salary
|
|
|
2006 Base
Salary(1)
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|
|
Increase
|
|
|
Increase
|
|
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|
|
Robert E. James, Jr.
|
|
|
$322,000
|
|
|
|
$350,000
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|
|
$
|
28,000
|
|
|
|
8.7
|
%
|
Charles A. Caswell
|
|
|
225,000
|
|
|
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245,000
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20,000
|
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|
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8.9
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|
Stephen M. Rownd
|
|
|
215,000
|
|
|
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245,000
|
|
|
|
30,000
|
|
|
|
14.0
|
|
Cecil O. Smith, Jr.
|
|
|
180,000
|
|
|
|
205,000
|
|
|
|
25,000
|
|
|
|
13.9
|
|
J. Scott Ensor
|
|
|
150,000
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|
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205,000
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55,000
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36.7
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|
Richard A. Manley
|
|
|
180,000
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205,000
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25,000
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13.9
|
|
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|
|
|
(1) |
Differences between the 2006 base salary reported in this table
and the salary reported in the Summary Compensation Table for
2006 are attributable to payroll timing and administration.
|
Annual Incentive
Plan (AIP)
The Corporations Annual Incentive Plan (AIP) is a
performance-based annual incentive plan that is based on
achievement of targeted levels of Operating EPS. It is the
belief of management and the Board that successful performance
against Operating EPS is consistent with a well-run financial
services institution. (Accordingly, the LTIP also uses Operating
EPS as a key performance metric and both plans define the term
in the same way.) The Corporation believes that Operating EPS
better reflects the performance of the Corporation than EPS
presented in the Corporations financial statements, which
is calculated according to generally accepted accounting
principles (GAAP EPS), since certain less frequently
occurring items are excluded from the Operating EPS calculation.
Adjustments are made to GAAP EPS to derive Operating EPS
for the following types of items:
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Branch Purchases and Sales;
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Securities Gains and Losses;
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20
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Line of Business Purchase / Sale;
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Direct Merger and Acquisition Expense;
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Material Tax Penalties, Recoveries; and
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Early Extinguishment of Debt and Derivative Securities.
|
Operating EPS is based on fully diluted shares outstanding. For
the NEOs in 2006, the AIP payments were based completely on the
achievement of Operating EPS targets. For 2007, AIP payments
will be based 70% on the achievement of Operating EPS targets
and 30% on the achievement of individual goals established in
advance by the Compensation Committee, as agreed to by
Mr. James on behalf of each member of executive management.
The intent of this change is to balance the team-based incentive
to achieve targeted corporate performance with an individual
accountability performance measure.
The Operating EPS targets set for the AIP are the same Operating
EPS targets set forth in the annual business plan submitted by
executive management to the Board of Directors for their
approval. In determining the reasonableness of these annual
goals, the Board takes into consideration the following factors:
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Long-term strategic plan for the Corporation;
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Actual company results compared to peers and to historical
results;
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Anticipated operational opportunities and challenges; and
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Anticipated external economic events that could impact key
business drivers (e.g., yield curve).
|
In 2006, the Corporations Operating EPS goal was targeted
at $1.59 per share. Our actual Operating EPS for the year
was $1.53, which includes a net impact of the adjustments from
GAAP EPS ($1.49 per share) to Operating EPS of
$0.04 per share.
Commensurate with competitive practices within the Peer Group,
2006 target annual incentives were 50% of base salary for
Mr. James and 40% of base salary for other NEOs. Officers
may earn between 0% 100% of their targeted award
based on their performance against goals. Based on the payout
grid in place for 2006, the Operating EPS of $1.53 resulted in a
payout of 40% of the targeted award. Awards to the NEOs under
the AIP for performance in 2006 are reflected in column
(g) of the 2006 Summary Compensation Table, included under
Compensation of Executive Officers section below.
The Compensation Committee is responsible for reviewing this
result and can, in its discretion, adjust an individual dollar
award. For 2006, the Compensation Committee determined that
there would be no AIP payments for Messrs. James and
Caswell. The Committee felt this action was appropriate in light
of the Corporations late
10-K filing,
the previously disclosed internal control weaknesses and
accounting and integration issues in connection with the GBC
Bancorp, Inc. merger. In the case of Mr. Ensor, since he
was a member of executive management for only three months, his
payout reflects three months as a member of executive management
and nine months under the incentive arrangements in place in his
former position.
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Name
|
|
AIP Payment for
2006
|
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Robert E. James, Jr.
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$
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Charles A. Caswell
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Stephen M. Rownd
|
|
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36,323
|
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Cecil O. Smith, Jr.
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32,646
|
|
J. Scott Ensor
|
|
|
40,824
|
|
Richard A. Manley
|
|
|
25,231
|
|
|
|
After reviewing median compensation levels for similar positions
within the Peer Group, the Compensation Committee determined
that adjustments should be made to target annual incentive
levels for several of the
21
NEOs in 2007. Based on the review, Mr. James target
annual incentive was increased from 50% to 65% of base salary
and Mr. Caswells and Mr. Rownds target
annual incentive was increased from 40% to 50%.
Mr. James target, when combined with his base salary,
results in his aggregate annual target compensation remaining at
a level that is below the median level for chief executive
officers of members of the Peer Group; however, over the coming
years, the Compensation Committee will continue to evaluate
Mr. James compensation and expects to continue to
move his total compensation package closer to the median of
chief executive officer compensation for the Peer Group.
Long-Term
Incentive Plan (LTIP)
Prior to 2006, the Corporation relied on time-based stock
options as its primary long-term incentive vehicle. In
connection with the compensation program review conducted in
2005, a new LTIP tied to Operating EPS growth, Cash ROE and Net
Charge-offs was approved by the Compensation Committee and the
Board of Directors early in 2006.
For 2006, the Compensation Committee approved the following
target levels of long-term awards based on its review of
competitive practices: 100% of base salary for Mr. James
and 70% of base salary for all other NEOs. Consistent with the
renewed emphasis on performance, the new LTIP calls for 70% of
this targeted LTIP value to be delivered through performance
shares and 30% to be delivered through time-based stock options.
We believe this mix is consistent with our pay for performance
philosophy. The number of stock options granted was determined
by dividing the value of the stock option component of the award
by our FAS 123(R) Black-Scholes value as of the date of
grant. The number of performance shares granted was determined
by dividing the value of the performance share component of the
award by the grant-date fair value of $21.91, then adjusting the
award to compensate for the value of the dividends that
participants will not receive on the award during the
performance period. The grant-date fair value of $21.91
represented the closing market price on the date of the grant,
less the discounted present value of such dividends.
With the introduction of the new LTIP, a gap in the long-term
incentive program was created since the performance shares
component does not vest for three years. To offset this gap, the
target value of the performance share component was increased by
40% in 2006 and 33% in 2007.
Equity Award
Timing Policy
All LTIP equity awards relating to fiscal 2006 performance were
granted on March 9, 2006, which was the day of the meeting
at which these awards were approved. In addition, these awards
were granted during an Open Trading Window, defined
under the Corporations Insider Trading Policy as a time
when trading in the Corporations common stock is permitted
following the announcement of the Corporations earnings.
Effective for 2007, the Corporation adopted a policy to grant
equity awards to Directors, members of executive management, and
other officers and employees annually only at such time as when
an Open Trading Window is scheduled to occur. This procedure is
designed to further the Corporations policy that it will
not have any program, plan or practice to time or select the
grant dates of any equity award in coordination with the
Corporations release of material non-public information.
In the event of a new hire or ad hoc grant, the
employee will be notified that his or her grant will be
recommended to the Compensation Committee at their next meeting
and effective the date of the Compensation Committee approval.
Stock
Options
Consistent with competitive practice, stock options are granted
with an exercise price at not less than the fair market value on
date of grant and vest ratably over five years. Options expire
ten years after grant. It is the Compensation Committees
belief that the members of executive management are in the best
position to have a direct positive impact on the
Corporations stock price and, accordingly, stock options
continue to be an element in the incentive compensation package.
For the reasons discussed below under the subheading Other
Equity Actions, stock options have been eliminated for all
other employees receiving equity awards and have been replaced
by restricted stock awards. The Corporation has a policy that it
will not reprice stock options.
22
Performance
Shares
The performance shares will vest based on achievement of three
goals as evaluated over a three-year performance period. It is
the Compensation Committees intention that, when achieved,
these goals taken as a whole are consistent with third quartile
performance within the Peer Group. First, Net Charge-offs must
remain below 1% during the performance period before any vesting
can occur. Second, assuming the Net Charge-off goal has been
met, 70% of the shares can vest based on Operating EPS growth
assessed against the Peer Group and 30% of the shares can vest
based on Cash ROE assessed against pre-established goals.
Finally, the total value of the shares received by the
participant from the LTIP will be a function of the future value
of the stock. The following performance schedules are in place
for the 2006 to 2008 and 2007 to 2009 performance period:
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|
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|
|
|
|
|
|
Operating EPS
Growth Versus Peers
|
|
|
|
(70% of
Performance Share Award)
|
|
|
|
Percentile within
Peer
|
|
|
|
|
|
|
Group
|
|
|
Vesting
|
|
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|
|
Threshold
|
|
|
40th
|
|
|
|
25%
|
|
Target
|
|
|
60th
|
|
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|
100%
|
|
Maximum
|
|
|
80th
|
|
|
|
175%
|
|
|
|
|
|
|
|
|
|
|
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|
|
Cash ROE
|
|
|
|
(30% of
Performance Share Award)
|
|
|
|
Cash
ROE
|
|
|
Vesting
|
|
|
|
|
Threshold
|
|
|
12.5%
|
|
|
|
0%
|
|
Target
|
|
|
15.0%
|
|
|
|
100%
|
|
Maximum
|
|
|
17.5%
|
|
|
|
150%
|
|
|
|
Results between threshold and target and target and maximum will
be interpolated. In addition, participants will not receive
dividends or dividend equivalents on performance shares.
Other Equity
Compensation Actions
In December, 2006 the Compensation Committee approved the
acceleration of vesting of 429,968 stock options of which 36,960
were held by non-employee members of the Board of Directors,
55,675 were held by the Corporations NEOs and 17,988 by
two other members of executive management. The decision to
accelerate the vesting of these stock options was due primarily
to two reasons. The first reason was the effect of
FAS 123(R) which impacts the expense required to be
recognized by the Company. The second reason relates to a change
in compensation philosophy, whereby stock options will serve as
a more limited component of compensation. Beginning in 2006, the
Corporation began to use restricted stock as the primary form of
compensation for employees other than members of executive
management. For 2006, equity compensation for members of
executive management consisted of a combination of performance
share awards and stock option grants; however, the vesting
schedule for the 2006 stock option grants was not accelerated.
Supplemental
Executive Retirement Plan (SERP)
From time to time, the Corporation has provided SERPs to select
executives through contractual agreements that guarantee
additional retirement benefits beyond those made available
through the Corporations qualified retirement plan and
deferred compensation arrangements. The Corporations
existing SERPs have been structured as a pre-set, fixed annuity
value.
Currently, the Corporation provides SERP benefits to two of the
NEOs: Mr. James and Mr. Rownd. Mr. James was
provided a SERP when he was being recruited to First Charter to
replace a benefit that his previous employer provided.
Mr. Rownds SERP was provided primarily as a retention
device and to achieve equity parity with SERPs provided to other
members of executive management at that time. Under
23
the SERPs, upon reaching age 65 and subject to the
satisfaction of the vesting requirements, Mr. James is
entitled to receive a sum of $785,000 and Mr. Rownd is
entitled to receive a sum of $1,205,000. Mr. James and
Mr. Rownd were 70% and 50% vested as of December 31,
2006, respectively, and will continue to vest at a rate of 10%
each year.
Additional details regarding the terms and provisions of the
SERPs are described in the Proxy Statement in the section called
Change in Control and Employment Agreements.
Deferred
Compensation
Executive Management, as well as select members of senior
management, are eligible to participate in the
Corporations Option Plan Trust (OPT Plan)
which is a non-qualified deferred compensation plan. Under this
tax-deferred capital accumulation plan, executives may elect to
defer up to 100% of their base salary and cash annual incentive
and invest these deferrals in mutual funds. Subject to approval
by the Compensation Committee, the plan may provide a
restoration contribution for company matching contributions
otherwise limited under the broad-based qualified 401(k) plan as
a result of Internal Revenue Code restrictions on compensation
that can be recognized under qualified plans. Amounts
contributed by the Corporation to the account of each of the
NEOs under the OPT Plan during 2006 are reflected in the table
entitled Nonqualified Deferred Compensation for 2006
included under Compensation of Executive Officers
section below.
Perquisites and
Other Benefits
The Corporation provides certain perquisites to executive
management where they generally either (i) meet the
business needs of the organization, or (ii) provide a level
of benefits commensurate with the group insurance plans offered
all employees to recognize limitations on wages.
The Corporation provides income protection in the event of
disability or death under group insurance plans for all
employees. These group plans have limitations on income
replacement and, as a result, highly compensated employees are
not provided proportional income protection. Accordingly,
supplemental life and disability coverage are provided by the
Corporation to certain members of executive management. For
2006, Messrs. James and Manley received supplemental term
life coverage and Messrs. James, Rownd and Manley received
disability coverage.
Additionally, the Corporation provides Mr. James a whole
life insurance policy as a continuation of his plan under prior
employment. For 2006, this benefit was grossed up for tax
purposes.
Company-owned vehicles are provided to certain executive
officers to meet the needs of the organization by facilitating
business travel and customer relations. The cost of certain golf
and social club memberships is covered for executive officers,
provided that the club membership provides for a business-use
opportunity such as use of the facilities for functions and
meetings, and client networking and entertainment. For 2006,
these benefits were grossed up for tax purposes. The
Compensation Committee has reviewed the Corporations
policies regarding perquisites and related
gross-up
payments for executive management and has decided to eliminate
gross-up
payments related to such perquisites in the future. The
Committee further expects to adopt new guidelines related to
perquisites going forward.
On very limited occasions, spousal travel in connection with a
business-related event is also a covered expense. This is
limited to events sponsored for the purpose of building customer
or employee relationships where the travel is for an extended
period of time or extends into the personal time of the
executive, or it is expected or customary for the executive to
be accompanied by a spouse.
Other perquisites such as awarded travel, temporary housing, and
moving and relocation costs are provided from time to time,
commensurate with the same benefits afforded other employees.
The Corporations policy has been to gross up for tax
purposes certain relocation expenses.
Members of executive management generally participate in the
Retirement Savings Plan or 401(k) pursuant to which an eligible
employee may elect to defer between 1% and 50% of compensation,
24
and the Corporation contributes quarterly a match of 75 cents
for each dollar contributed up to 6% of eligible pay.
Additionally, the Corporation may contribute annually (i) a
discretionary matching amount based on an EPS target for such
year and (ii) a discretionary contribution allocated to
eligible employees, including executive officers, based on their
eligible compensation. Any and all discretionary contributions
are determined by the Board of Directors on an annual basis.
Employment
Agreements
The Corporation currently maintains employment agreements with
Messrs. James, Rownd and Caswell, primarily as a means of
retention during periods of uncertainty and operational
challenge. As part of the employment contracts the executives
also agree to be bound by non-compete and non-disclosure
provisions. These agreements include provisions for, among other
things:
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Minimum compensation levels, benefits, and perquisites;
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|
|
Non-compete and non-disclosure covenants;
|
|
|
|
Change in control benefits; and
|
|
|
|
A SERP (for Messrs. James and Rownd).
|
Additionally, the Corporation has entered into Change in Control
arrangements with the following NEOs to provide protection to
those executives in the event of their termination related to a
change of control. The arrangements provide for a payout of base
salary and average bonus for 35 months for
Messrs. James, Caswell and Rownd and 24 months for
Messrs. Smith and Ensor if, within a year of the change in
control, their employment is terminated other than For Cause.
The employment agreements eliminate the tax-related ceiling on
post-employment compensation under Section 280G of the
Internal Revenue Code of 1986, as amended, by providing for a
corresponding payment by the Corporation of any taxes imposed by
that section.
Additional details regarding the terms and provisions of the
employment contracts are described in this Proxy Statement in
the section called Employment Agreements, Change in
Control and Potential Payments Upon a Change In Control.
SHARE OWNERSHIP
GUIDELINES
The Board of Directors and the Compensation Committee believe
that Directors and executives should have a reasonable and
tangible equity position in the Corporation which will further
the alignment of interests between these parties and the
shareholders. Therefore, during 2006, the Compensation Committee
and Board, acting upon the recommendation of the Corporate
Governance and Nominating Committee, approved the following
share ownership guidelines for both Directors and members of
executive management:
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|
|
Directors are expected to maintain stock holdings in the
Corporation equal to 2.5 times aggregate annual director fees;
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|
|
The CEO is expected to maintain stock holdings in the
Corporation equal to 2.5 times annual base salary; and
|
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|
Members of executive management, other than the CEO, are
expected to maintain stock holdings in the Corporation equal to
1.5 times annual base salary.
|
These guidelines are considered by the Board to be modest;
however, given the relatively short tenure of the current
members of executive management and the relatively light
historical reliance on equity-based compensation by the
Corporation, the Compensation Committee and the Board believe
them to be appropriate and in the best interests of the
shareholders. Individuals have three years to achieve these
target levels of ownership. Failure to meet these requirements
within this timeframe will be taken into consideration when
granting future equity awards. Common stock held directly or
indirectly (e.g., 401(k) Plan, Deferred Compensation Plan or
family members sharing the same household) and restricted stock
25
subject to time-based vesting count towards the ownership for
purposes of these guidelines. Unvested performance shares and
unexercised stock options do not count for these purposes. The
Compensation Committee expects that it will revisit the share
ownership guideline levels from time to time.
DEDUCTIBILITY OF
COMPENSATION EXPENSES
Section 162(m) of the Internal Revenue Code of 1986
generally limits the tax deductibility by the Corporation for
compensation paid to the CEO and the other most highly
compensated executive officers to $1 million per officer
per year, unless it qualifies as performance-based
compensation. To qualify as performance-based,
compensation payments must satisfy certain conditions, including
limitations on the discretion of the Compensation Committee in
determining the amounts of such compensation. It is the
Corporations current policy that, to the extent possible,
compensation paid to its NEOs be deductible under
Section 162(m) of the Internal Revenue Code. The
Compensation Committee believes that the compensation program
and actions taken during 2006 are consistent with this policy.
EXECUTIVE COMPENSATION
|
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|
|
|
|
|
|
|
|
|
|
Summary
Compensation Table for 2006
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
Change in
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
Value and
|
|
|
|
|
|
|
|
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|
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|
Non-Qualified
|
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|
|
|
|
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|
|
|
|
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|
|
|
|
|
|
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|
Non-Equity
|
|
|
Deferred
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
Incentive Plan
|
|
|
Compensation
|
|
|
All Other
|
|
|
|
|
Name and
|
|
|
|
|
Salary
|
|
|
Bonus
|
|
|
Awards
|
|
|
Awards
|
|
|
Compensation
|
|
|
Earnings
|
|
|
Compensation
|
|
|
Total
|
|
Principal
Position
|
|
Year
|
|
|
($)
|
|
|
($)(1)
|
|
|
($)(2)(3)
|
|
|
($)(4)
|
|
|
($)(5)
|
|
|
($)(6)
|
|
|
($)(7)(8)
|
|
|
($)
|
|
|
|
(a)
|
|
(b)
|
|
|
(c)
|
|
|
(d)
|
|
|
(e)
|
|
|
(f)
|
|
|
(g)
|
|
|
(h)
|
|
|
(i)
|
|
|
(j)
|
|
|
Robert E.
James, Jr.
|
|
|
2006
|
|
|
$
|
348,923
|
|
|
|
|
|
|
$
|
114,662
|
|
|
$
|
97,644
|
|
|
|
|
|
|
|
$21,110
|
|
|
|
$ 69,306
|
|
|
$
|
651,645
|
|
President and Chief Executive
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles A. Caswell
|
|
|
2006
|
|
|
|
244,231
|
|
|
|
|
|
|
|
79,966
|
|
|
|
39,964
|
|
|
|
|
|
|
|
|
|
|
|
135,687
|
|
|
|
499,848
|
|
Executive Vice President, Chief
Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen M. Rownd
|
|
|
2006
|
|
|
|
227,020
|
|
|
|
|
|
|
|
51,123
|
|
|
|
68,226
|
|
|
|
36,323
|
|
|
|
25,545
|
|
|
|
34,610
|
|
|
|
442,847
|
|
Executive Vice President, Chief
Banking Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cecil O.
Smith, Jr.
|
|
|
2006
|
|
|
|
204,039
|
|
|
|
|
|
|
|
46,741
|
|
|
|
29,287
|
|
|
|
32,646
|
|
|
|
|
|
|
|
38,240
|
|
|
|
350,953
|
|
Executive Vice President, Chief
Information Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J. Scott Ensor
|
|
|
2006
|
|
|
|
173,654
|
|
|
|
|
|
|
|
43,941
|
|
|
|
33,978
|
|
|
|
40,824
|
|
|
|
|
|
|
|
12,600
|
|
|
|
304,997
|
|
Executive Vice President, Chief
Risk Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard A. Manley
|
|
|
2006
|
|
|
|
175,654
|
|
|
|
|
|
|
|
35,056
|
|
|
|
1,836
|
|
|
|
25,231
|
|
|
|
|
|
|
|
70,132
|
|
|
|
307,909
|
|
Former Executive Vice President,
Chief Banking Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Performance bonuses for 2006
were paid under the Annual Incentive Plan. In accordance with
SEC requirements, these amounts are reported in the Non-Equity
Incentive Plan Compensation column (column (g)), and as a
result, column (d) entitled Bonus has been left
blank. |
|
(2) |
|
Includes the FAS 123(R)
expense recognized in 2006 for outstanding performance share
awards. For more information on the outstanding performance
shares held by the NEOs, please refer to Outstanding
Equity Awards at Fiscal Year-End for 2006. Performance
shares were granted March 9, 2006, with a grant-date fair
value of $21.91 per share. The grant-date fair value represented
the closing market price of the date of grant, less the
discounted present value of dividends that participants will not
receive on the award over the performance period. The grant-date
fair value is being expensed ratably over the three-year
performance period at the target performance level. No
forfeitures were assumed in determining the expense. |
|
(3) |
|
Includes the FAS 123(R)
expense recognized in 2006 for each of the outstanding shares of
restricted stock held by Messrs. Caswell and Ensor is
$23,730 and $16,919, respectively. None of the other NEOs hold
shares of restricted stock. For more information on the
outstanding shares of restricted stock held by
Messrs. Caswell and Ensor, please refer to
Outstanding Equity Awards at Fiscal Year-End for
2006. Restricted shares are expensed ratably over the
vesting period (five years for Mr. Caswell and three years
for Mr. Ensor) using the grant-date fair value,
representing the closing market price on the date of grant
($23.73 on February 14, 2005 for Mr. Caswell and
$22.34 on July 28, 2004 for Mr. Ensor). |
26
|
|
|
(4) |
|
Represents the FAS 123(R)
expense recognized in 2006 for outstanding stock options. For
more information on the outstanding stock options held by the
NEOs, please refer to Outstanding Equity Awards at Fiscal
Year-End for 2006. The assumptions used in the calculation
of these amounts are included in Note 18
Shareholders Equity, Stock Plans and Stock
Awards in the Notes to Consolidated Financial Statements
included within First Charters Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006. |
|
(5) |
|
This column contains
compensation paid to the NEOs under the Annual Incentive Plan
and, as described in the Compensation Discussion and
Analysis section above, Annual Incentive Plan awards are
paid to the NEOs when specific performance measures are achieved
and the payment is approved by the Compensation
Committee. |
|
(6) |
|
The amounts listed in column
(h) are attributable to the change in actuarial present
value for the SERPs of Messrs. James and Rownd from
December 31, 2005 to December 31, 2006. For a
discussion of the assumptions underlying this valuation, please
refer to the notes to the table below entitled Pension
Benefits for 2006. There were no changes of value
attributable to nonqualified deferred compensation
earnings. |
|
(7) |
|
All other compensation for each
of the NEOs consists of the following component
perquisites: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
B.
James
|
|
|
C.
Caswell
|
|
|
S.
Rownd
|
|
|
C.
Smith
|
|
|
S.
Ensor
|
|
|
R.
Manley
|
|
|
|
|
Auto
|
|
$
|
7,050
|
|
|
$
|
11,166
|
|
|
$
|
8,045
|
|
|
$
|
12,754
|
|
|
$
|
1,708
|
|
|
|
|
|
Auto
gross-up
|
|
|
929
|
|
|
|
4,746
|
|
|
|
191
|
|
|
|
4,386
|
|
|
|
78
|
|
|
|
|
|
Club
|
|
|
9,484
|
|
|
|
53,720
|
|
|
|
7,557
|
|
|
|
5,925
|
|
|
|
|
|
|
|
11,682
|
|
Club
gross-up
|
|
|
3,725
|
|
|
|
22,834
|
|
|
|
2,301
|
|
|
|
1,620
|
|
|
|
|
|
|
|
3,724
|
|
Whole life insurance
|
|
|
13,490
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Life
gross-up
|
|
|
5,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term life insurance
|
|
|
4,077
|
|
|
|
524
|
|
|
|
720
|
|
|
|
1,838
|
|
|
|
346
|
|
|
|
1,885
|
|
Supp disability insurance
|
|
|
3,161
|
|
|
|
|
|
|
|
4,318
|
|
|
|
|
|
|
|
|
|
|
|
2,640
|
|
Relocation
gross-up
|
|
|
|
|
|
|
33,566
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
401(k) contributions
|
|
|
11,220
|
|
|
|
5,286
|
|
|
|
8,891
|
|
|
|
11,220
|
|
|
|
10,055
|
|
|
|
6,453
|
|
Restoration contributions
|
|
|
10,502
|
|
|
|
3,845
|
|
|
|
2,587
|
|
|
|
496
|
|
|
|
14
|
|
|
|
|
|
Other incentives
|
|
|
368
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
399
|
|
|
|
383
|
|
|
|
Total
|
|
$
|
69,306
|
|
|
$
|
135,687
|
|
|
$
|
34,610
|
|
|
$
|
38,240
|
|
|
$
|
12,600
|
|
|
|
26,767
|
|
|
|
|
|
|
(8) |
|
Mr. Manleys total
also includes $43,365 of severance payments made in 2006
pursuant to a Transition Agreement and Release between the
Corporation and Mr. Manley, dated as of September 27,
2006. |
Narrative to
Summary Compensation Table
For a discussion and analysis of the Corporations
compensation program, including a discussion of each element of
compensation provided to the NEOs, please refer to the
Compensation Discussion and Analysis section above.
As discussed in the Compensation Discussion and
Analysis section above, the Corporation has entered into
Employment and Change in Control Agreements with certain members
of executive management. A discussion of these agreements
follows. For additional discussion of the benefits that will be
provided to each of the NEOs in the event of their termination
or a change in control of the Corporation, please refer to
Potential Payments Upon Termination or Change in
Control.
Robert E. James, Jr. Pursuant to an amended and
restated employment agreement between the Corporation and Robert
E. James, Jr. effective December 19, 2001,
Mr. James is employed by the Corporation as President and
Chief Executive Officer for a rolling thirty-six month term
which, unless terminated earlier, automatically extends on the
last day of each successive month thereafter, with the last such
possible thirty-six month term expiring on October 31,
2015. Under the terms of the agreement, Mr. James will
receive an annual base salary of at least $196,000 per
year, plus benefits, and may be entitled to receive annual bonus
compensation from one or more arrangements including but not
limited to the Annual Incentive Plan. In addition,
Mr. James has certain other rights in connection with a
change in control as discussed below.
27
Charles A. Caswell. Pursuant to an employment
agreement between the Corporation and Charles A. Caswell dated
April 13, 2005, and retroactively effective to
March 17, 2005, Mr. Caswell is employed by the
Corporation as Executive Vice President, Chief Financial Officer
and Treasurer for a rolling thirty-six month term which, unless
terminated earlier, automatically extends on the last day of
each successive month thereafter, with the last such possible
thirty-six month term to expire on June 27, 2027. Under the
terms of the agreement, Mr. Caswell, will initially receive
a base salary of $225,000 per year, plus benefits, and may be
entitled to receive annual bonus compensation from one or more
arrangements including but not limited to the Annual Incentive
Plan. In addition, Mr. Caswell has certain other rights in
connection with a change in control as discussed
below.
Stephen M. Rownd. Pursuant to an amended and
restated employment agreement between the Corporation and
Stephen M. Rownd effective December 19, 2001,
Mr. Rownd is employed by the Corporation as Executive Vice
President for a rolling thirty-six month term which, unless
terminated earlier, automatically extends on the last day of
each successive month thereafter, with the last such possible
thirty-six month term expiring on May 31, 2024. Under the
terms of the agreement, Mr. Rownd will receive an annual
base salary of at least $183,600 per year, plus benefits,
and may be entitled to receive annual bonus compensation from
one or more arrangements including but not limited to the Annual
Incentive Plan. In addition, Mr. Rownd has certain other
rights in connection with a change in control as
discussed below.
The employment agreements for Mr. James, Mr. Caswell
and Mr. Rownd also provide that under certain circumstances
upon leaving the employment of the Corporation, the NEO may not,
within the restricted territory and for a period of
two years after termination of employment, engage directly or
indirectly in the banking, financial services or any other
business in which the Corporation and its subsidiaries are
engaged. The term restricted territory means:
(1) the geographic area encompassing a twenty-five
(25) mile radius of Charlotte, North Carolina;
and/or
(2) any Metropolitan Statistical Area (as defined by the
United States Department of Commerce) from which First Charter
generated at least ten percent (10%) of its gross annual revenue
during the last two calendar years before the end of the
executives employment with First Charter. Additionally,
the employment agreements prohibit during the life of the
agreement and for three years afterwards, the solicitation or
inducement of any of the Corporations employees to
terminate their employment with the Corporation and join any
business activity with which the executive is or expects to be
directly or indirectly associated or employed.
Change in Control Provisions. The employment
agreements between the Corporation and Messrs. James,
Caswell and Rownd contain provisions relating to a change in
control of the Corporation. In addition, Messrs. J. Scott
Ensor and Cecil O. Smith, Jr. are parties to change in
control agreements with the Corporation, dated November 6,
2006 and April 13, 2005, respectively. The specific events
that constitute a change in control of the Corporation are
discussed below, under Potential Payments Upon Termination
or Change in Control.
28
Grants of
Plan-Based Awards for 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future
Payouts
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
All Other
|
|
|
|
|
|
Grant
|
|
|
|
|
|
|
Under Non-Equity
Incentive Plan
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
Exercise
|
|
|
Date
|
|
|
|
|
|
|
Awards(1)
|
|
|
Estimated Future
Payouts Under Equity Incentive Plan
Awards(2)
|
|
|
Awards:
|
|
|
Awards:
|
|
|
or
|
|
|
Fair
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
|
Number
|
|
|
Base
|
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of
|
|
|
of
|
|
|
Price
|
|
|
of Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares of
|
|
|
Securities
|
|
|
of
|
|
|
and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock or
|
|
|
Underlying
|
|
|
Option
|
|
|
Option
|
|
|
|
Grant
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Units
|
|
|
Options
|
|
|
Awards
|
|
|
Awards
|
|
Name
|
|
Date
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
(#)
|
|
|
(#)
|
|
|
(#)
|
|
|
(#)
|
|
|
(#)(3)
|
|
|
($/Share)(4)
|
|
|
($)(5)
|
|
|
|
(a)
|
|
(b)
|
|
|
(c)
|
|
|
(d)
|
|
|
(e)
|
|
|
(f)
|
|
|
(g)
|
|
|
(h)
|
|
|
(i)
|
|
|
(j)
|
|
|
(k)
|
|
|
(l)
|
|
|
Robert E.
James, Jr.
|
|
|
3/9/06
|
|
|
$
|
17,446
|
|
|
$
|
174,462
|
|
|
$
|
348,923
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/9/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,748
|
|
|
|
15,700
|
|
|
|
26,298
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
343,987
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/9/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,000
|
|
|
|
$23.66
|
|
|
|
105,120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles A. Caswell
|
|
|
3/9/06
|
|
|
|
9,769
|
|
|
|
97,692
|
|
|
|
195,385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/9/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,348
|
|
|
|
7,700
|
|
|
|
12,898
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
168,707
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/9/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,900
|
|
|
|
23.66
|
|
|
|
51,976
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen M. Rownd
|
|
|
3/9/06
|
|
|
|
9,081
|
|
|
|
90,808
|
|
|
|
181,616
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/9/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,225
|
|
|
|
7,000
|
|
|
|
11,725
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
153,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/9/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,000
|
|
|
|
23.66
|
|
|
|
46,720
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cecil O.
Smith, Jr.
|
|
|
3/9/06
|
|
|
|
8,162
|
|
|
|
81,615
|
|
|
|
163,231
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/9/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,120
|
|
|
|
6,400
|
|
|
|
10,720
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
140,224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/9/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,400
|
|
|
|
23.66
|
|
|
|
43,216
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J. Scott Ensor
|
|
|
3/9/06
|
|
|
|
35,525
|
|
|
|
39,702
|
|
|
|
44,342
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/9/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
648
|
|
|
|
3,700
|
|
|
|
6,198
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
81,067
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/9/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,300
|
|
|
|
23.66
|
|
|
|
25,112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard A. Manley
|
|
|
3/9/06
|
|
|
|
6,308
|
|
|
|
63,077
|
|
|
|
126,154
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/9/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,120
|
|
|
|
6,400
|
|
|
|
10,720
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
140,224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/9/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,400
|
|
|
|
23.66
|
|
|
|
43,216
|
|
|
|
|
|
|
|
(1) |
|
Amounts shown are estimated
threshold, target and maximum payouts for fiscal 2006 to the
NEOs under the Annual Incentive Plan. Actual bonuses received by
these named executive officers for fiscal 2006 are reported in
the Summary Compensation Table under the column entitled
Non-Equity Incentive Plan Compensation. As described
in the Compensation Discussion and Analysis section
above, the Annual Incentive Plan awards are paid to the NEOs
when specific performance measures are achieved and the payment
is approved by the Compensation Committee. |
|
(2) |
|
Amounts shown are estimated
threshold, target and maximum for performance shares that were
granted in 2006, which will result in the issuance of the number
of shares of First Charter common stock indicated three years
from the date of grant if the established performance criteria
are met. The vesting for performance shares is contingent upon
the achievement of Net Charge-off, Operating EPS and Cash ROE
goals over the three year performance period, as described in
the Compensation Discussion and Analysis section
above. |
|
(3) |
|
Stock options vest 20% per
year over the 5 year vesting period. |
|
(4) |
|
The option exercise price is the
closing price of First Charter common stock on the date of
grant. The closing price of First Charters common stock on
March 9, 2006, the date of the grant, was $23.66. |
|
(5) |
|
The value of a performance share
award or option award is based on the fair value as of the grant
date of such award determined pursuant to FAS 123(R). The
grant date fair value for the performance shares is based on the
target award and the SFAS 123(R) value of $21.91. The grant
date fair value for the stock options is based on the
SFAS 123(R) value of $5.84. For a discussion of grant date
fair value calculations, please refer to footnote 2 to the
Summary Compensation Table for 2006. |
29
Outstanding
Equity Awards at Fiscal Year-End for 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option
Awards
|
|
|
Stock
Awards
|
|
|
|
|
|
|
|
|
|
Equity
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
Incentive
|
|
|
Equity
Incentive
|
|
|
|
|
|
|
|
|
|
Plan Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Awards:
|
|
|
Plan Awards:
|
|
|
|
Number of
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
Number of
|
|
|
Market or
Payout
|
|
|
|
Securities
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
Shares or
|
|
|
Market Value
|
|
|
Unearned
|
|
|
Value of
Unearned
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
Units of
|
|
|
of Shares or
|
|
|
Shares,
|
|
|
Shares, Units
or
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Option
|
|
|
|
|
|
Stock
|
|
|
Units of Stock
|
|
|
Units or Other
|
|
|
Other Rights
|
|
|
|
Options
|
|
|
Options
|
|
|
Unearned
|
|
|
Exercise
|
|
|
Option
|
|
|
that have
|
|
|
that have
|
|
|
Rights That
|
|
|
that have
|
|
|
|
(#)
|
|
|
(#)
|
|
|
Options
|
|
|
Price
|
|
|
Expiration
|
|
|
not Vested
|
|
|
not Vested
|
|
|
have not
Vested
|
|
|
not Vested
|
|
Name
|
|
Exercisable(1)
|
|
|
Unexercisable(2)
|
|
|
(#)
|
|
|
($)
|
|
|
Date
|
|
|
(#)(3)
|
|
|
($)(4)
|
|
|
(#)(5)
|
|
|
($)(6)
|
|
|
|
(a)
|
|
(b)
|
|
|
(c)
|
|
|
(d)
|
|
|
(e)
|
|
|
(f)
|
|
|
(g)
|
|
|
(h)
|
|
|
(i)
|
|
|
(j)
|
|
|
Robert E.
James, Jr.
|
|
|
35,000
|
|
|
|
|
|
|
|
|
|
|
$
|
18.38
|
|
|
|
1/29/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,791
|
|
|
|
|
|
|
|
|
|
|
|
14.50
|
|
|
|
1/20/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,296
|
|
|
|
|
|
|
|
|
|
|
|
15.75
|
|
|
|
1/17/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,985
|
|
|
|
|
|
|
|
|
|
|
|
17.37
|
|
|
|
1/16/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,597
|
|
|
|
|
|
|
|
|
|
|
|
18.39
|
|
|
|
1/15/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,448
|
|
|
|
|
|
|
|
|
|
|
|
23.66
|
|
|
|
1/19/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,000
|
|
|
|
|
|
|
|
23.66
|
|
|
|
3/9/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,700
|
|
|
|
$386,220
|
|
Charles A. Caswell
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
23.73
|
|
|
|
2/14/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,900
|
|
|
|
|
|
|
|
23.66
|
|
|
|
3/9/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,000
|
|
|
|
$73,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,700
|
|
|
|
189,420
|
|
Stephen M. Rownd
|
|
|
8,088
|
|
|
|
|
|
|
|
|
|
|
|
18.39
|
|
|
|
1/15/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,097
|
|
|
|
|
|
|
|
|
|
|
|
23.66
|
|
|
|
1/19/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,000
|
|
|
|
|
|
|
|
23.66
|
|
|
|
3/9/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,000
|
|
|
|
172,200
|
|
Cecil O.
Smith, Jr.
|
|
|
7,138
|
|
|
|
|
|
|
|
|
|
|
|
23.60
|
|
|
|
2/28/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,400
|
|
|
|
|
|
|
|
23.66
|
|
|
|
3/9/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,400
|
|
|
|
157,440
|
|
J. Scott Ensor
|
|
|
4,000
|
|
|
|
|
|
|
|
|
|
|
|
16.57
|
|
|
|
10/28/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,072
|
|
|
|
|
|
|
|
|
|
|
|
18.39
|
|
|
|
1/15/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,583
|
|
|
|
|
|
|
|
|
|
|
|
20.90
|
|
|
|
2/25/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,736
|
|
|
|
|
|
|
|
|
|
|
|
23.66
|
|
|
|
1/19/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,300
|
|
|
|
|
|
|
|
23.66
|
|
|
|
3/9/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,272
|
|
|
|
55,891
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,700
|
|
|
|
91,020
|
|
Richard A. Manley
|
|
|
5,365
|
|
|
|
|
|
|
|
|
|
|
|
18.39
|
|
|
|
1/6/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,973
|
|
|
|
|
|
|
|
|
|
|
|
20.90
|
|
|
|
1/6/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
In December 2006, the vesting
for all outstanding stock options, except for awards made in
2006, was accelerated so that all such stock options were 100%
vested. For more information, please refer to the discussion
appearing under the subheading Other Equity Compensation
Actions in the Compensation Discussion and
Analysis section, above. Such acceleration of stock option
vesting did not result in any incremental fair value, as defined
under FAS 123(R). |
|
(2) |
|
Stock options vest 20% per
year over the 5 year vesting period, with 100% vesting
occurring on
3/9/2011. |
|
(3) |
|
Restricted stock units granted
to Mr. Caswell will vest 1,000 shares on each of
12/31/07,
12/31/08 and
12/31/09.
Restricted stock units granted to Mr. Ensor will 100% vest
on July 28, 2007. |
|
(4) |
|
Calculated by multiplying the
unvested shares of restricted stock by the closing market price
of First Charters common stock on December 29, 2006
($24.60). |
|
(5) |
|
Amounts shown are target number
of performance shares granted in 2006. The actual vesting for
performance shares is contingent upon the achievement of Net
Charge-off, Operating EPS and Cash ROE goals over the three year
performance period, as described in the Compensation
Discussion and Analysis section above. |
|
(6) |
|
Calculated by multiplying the
target number of performance shares by the closing market price
of First Charters common stock on December 29, 2006
($24.60). |
30
Option Exercises
and Stock Vested for 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option
Awards
|
|
|
Stock
Awards
|
|
|
|
Number of
Shares
|
|
|
Value Realized
|
|
|
Number of
Shares
|
|
|
Value Realized
|
|
|
|
Acquired on
Exercise
|
|
|
on Exercise
|
|
|
Acquired on
Vesting
|
|
|
on Vesting
|
|
Name
|
|
(#)
|
|
|
($)(1)
|
|
|
(#)
|
|
|
($)(2)
|
|
|
|
(a)
|
|
(b)
|
|
|
(c)
|
|
|
(d)
|
|
|
(e)
|
|
|
Robert E. James, Jr.
|
|
|
3,000
|
|
|
|
$ 28,110
|
|
|
|
|
|
|
$
|
|
|
Charles A. Caswell
|
|
|
|
|
|
|
|
|
|
|
1,000
|
|
|
|
24,600
|
|
Stephen M. Rownd
|
|
|
5,123
|
|
|
|
36,578
|
|
|
|
|
|
|
|
|
|
|
|
|
15,461
|
|
|
|
110,392
|
|
|
|
|
|
|
|
|
|
|
|
|
1,549
|
|
|
|
9,480
|
|
|
|
|
|
|
|
|
|
|
|
|
10,583
|
|
|
|
64,768
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000
|
|
|
|
22,144
|
|
|
|
|
|
|
|
|
|
Cecil O. Smith, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J. Scott Ensor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard A. Manley
|
|
|
5,000
|
|
|
|
9,550
|
|
|
|
|
|
|
|
|
|
|
|
|
763
|
|
|
|
4,982
|
|
|
|
|
|
|
|
|
|
|
|
|
8,204
|
|
|
|
61,940
|
|
|
|
|
|
|
|
|
|
|
|
|
120
|
|
|
|
90
|
|
|
|
|
|
|
|
|
|
|
|
|
1,193
|
|
|
|
895
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The value realized on exercise
represents the difference between the closing market price on
the day of exercise and the exercise price multiplied by the
number of shares acquired on exercise. |
|
(2) |
|
The value realized represents
the number of shares acquired on vesting multiplied by the
closing market price on the day of vesting. In the case of
Mr. Caswell, his shares vested on December 31, 2006.
The closing market price on December 29, 2006 ($24.60), was
used to determine value as the market was closed on
December 30 and 31, 2006. |
Pension Benefits
for 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Present
|
|
|
|
|
|
|
|
|
Years
|
|
|
Value of
|
|
|
Payments
|
|
|
|
|
|
Credited
|
|
|
Accumulated
|
|
|
During
|
|
|
|
|
|
Service
|
|
|
Benefit
|
|
|
Last Fiscal
Year
|
|
Name
|
|
Plan
Name
|
|
(#)(1)
|
|
|
($)(2)
|
|
|
($)
|
|
|
|
(a)
|
|
(b)
|
|
(c)
|
|
|
(d)
|
|
|
(e)
|
|
|
Robert E. James, Jr.
|
|
Supplemental Executive Retirement
Plan
|
|
|
70
|
%
|
|
|
$530,854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles A. Caswell
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen M. Rownd
|
|
Supplement Executive Retirement
Plan
|
|
|
50
|
|
|
|
725,272
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cecil O. Smith, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J. Scott Ensor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard A. Manley
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
As of December 31, 2006,
Messrs. James and Rownd were 70% and 50% vested,
respectively, in their respective SERP benefits. Each SERP
provides a ten-year certain annuity, as described in the
narrative below. |
|
(2) |
|
Please refer to the accompanying
textual narrative for a discussion of the assumptions underlying
the present value calculation for the accumulated
benefits. |
31
Narrative to
Pension Benefits Table
Pursuant to the SERP between Mr. James and the Corporation
dated June 21, 1999, and as amended and restated
December 19, 2001, Mr. James will be entitled to
receive a total of $785,000 (or $6,541.67 a month, for
120 months), if certain conditions are satisfied, when he
reaches the age of 65 on October 17, 2016. This benefit
became 50% vested on January 1, 2005 and vests in
additional 10% increments on January 1 of each year thereafter,
beginning January 1, 2005, until fully vested on
January 1, 2009. As of December 31, 2006,
Mr. James was 70% vested in his SERP benefit. This benefit
will become fully vested if (i) Mr. James dies,
(ii) Mr. James becomes disabled, or (iii) upon a
change in control as described below, and the
unvested benefit is subject to forfeiture if Mr. James is
terminated for cause under his employment agreement.
Pursuant to the SERP between Mr. Rownd and the Corporation
effective December 19, 2001, Mr. Rownd will be
entitled to receive a total of $1,205,000 (or $10,041.67 a
month, for 120 months), if certain conditions are
satisfied, when he reaches the age of 65 on May 23, 2025.
This benefit became 50% vested on January 1, 2006 and vests
in additional 10% increments on January 1 of each year
thereafter, beginning January 1, 2007, until fully vested
on January 1, 2011. As of December 31, 2006,
Mr. Rownd was 50% vested in his SERP benefit. This benefit
will become fully vested if (i) Mr. Rownd dies,
(ii) Mr. Rownd becomes disabled, or (iii) upon a
change in control as described below, and the
unvested benefit is subject to forfeiture if Mr. Rownd is
terminated for cause under his employment agreement.
In quantifying the present value of the current accrued benefit,
the following assumptions were made:
|
|
|
|
|
We have assumed the full benefit will be payable at the date the
participant becomes fully vested
(1/1/2009
and 1/1/2011
for Messrs. James and Rownd, respectively), rather than at
age 65.
|
|
|
|
Since the benefits are fixed in terms of the monthly amount and
the form of payment, the present value will not change due to
any benefit accruals. However, the present value will change
from year to year due to (i) the passage of time to reflect
the time value of money at a discount rate and
(ii) discount rate fluctuations from measurement date to
measurement date.
|
|
|
|
The present value at December 31, 2006 was determined using
a discount rate of 6%, which is consistent with assumptions
applicable to 2006 FASB pension plan disclosure. Since the
benefits are payable as a ten-year certain annuity to the
participant, or to a beneficiary upon the participants
death, no discount for mortality applies.
|
Nonqualified
Deferred Compensation for 2006(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
|
Registrant
|
|
|
Aggregate
|
|
|
|
|
|
Aggregate
|
|
|
|
Contributions
|
|
|
Contributions
|
|
|
Earnings
|
|
|
Aggregate
|
|
|
Balance at
|
|
|
|
in Last Fiscal
|
|
|
in Last Fiscal
|
|
|
in Last Fiscal
|
|
|
Withdrawals
and/or
|
|
|
Last Fiscal
Year
|
|
|
|
Year
|
|
|
Year
|
|
|
Year
|
|
|
Distributions
|
|
|
End
|
|
Name
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
|
(a)
|
|
(b)
|
|
|
(c)
|
|
|
(d)
|
|
|
(e)
|
|
|
(f)
|
|
|
Robert E. James, Jr.
|
|
$
|
|
|
|
$
|
9,894
|
|
|
$
|
1,536
|
|
|
$
|
|
|
|
$
|
27,338
|
|
Charles A. Caswell
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen M. Rownd
|
|
|
|
|
|
|
|
|
|
|
831
|
|
|
|
|
|
|
|
8,041
|
|
Cecil O. Smith, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J. Scott Ensor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard A. Manley
|
|
|
11,000
|
|
|
|
764
|
|
|
|
3,347
|
|
|
|
|
|
|
|
23,576
|
|
|
|
|
|
|
(1) |
|
Reflects deferred compensation
under the OPT Plan, which is described in the narrative
below. |
Narrative to
NonQualified Deferred Compensation Table
The First Charter Option Plan Trust (the OPT Plan)
is a tax-deferred capital accumulation plan. Under the OPT Plan,
eligible participants may defer up to 90 percent of base
salary, up to 100 percent of annual incentive, and excess
deferrals, if any, pursuant to Internal Revenue Code
section 401(a)(17) and 401(k).
32
Participants may invest in mutual funds with distinct investment
objectives and risk tolerances. Eligible employees for the OPT
Plan include executive management as well as key members of
senior management.
The OPT Plan offers six (6) mutual funds in which to invest
deferrals. From day one, participants are 100% vested in
deferrals to the Plan and the earnings on those deferrals.
Amounts deferred under the OPT Plan will be distributed at the
first to occur of the participants (i) termination of
employment with First Charter; (ii) disability;
(iii) death; (iv) retirement; or (v) in the event
of an unanticipated emergency that results in a financial
hardship not within the participants control. Amounts
deferred may also be distributed on a specified date that a
participant selects that is not earlier than two years from the
date of the deferral. Distribution may be made in a lump sum or
in quarterly installments over a five-year period. However, in
the event of termination of employment, disability, death or an
unanticipated emergency, payments will be automatically
distributed in a lump sum.
Potential
Payments Upon Termination or Change in Control
As discussed in Compensation Discussion and Analysis section and
the Narrative to 2006 Summary Compensation Table, the
Corporation has entered into Employment Agreements with
Messrs. James, Caswell and Rownd and into Change in Control
Agreements with Messrs. Ensor and Smith. The potential
payments to the NEOs in the event of their termination are
discussed below. In each case, it is assumed that the date of
termination is December 31, 2006.
Accrued and Vested Benefits. Each of the NEOs has accrued
various benefits under the Corporations compensation
programs and other broad-based employee benefit plans. Many of
these benefits and awards are fully vested and each of the NEOs
would receive all of their vested benefits and awards in the
event that their employment with the Corporation ends for any
reason, including termination by the Corporation for
cause or resignation without good
reason. (Cause is defined generally as willful
misconduct, use of narcotics or alcohol in a manner that affects
the officers duties, conviction of a crime involving moral
turpitude or for any felony, embezzlement or theft, gross
inattention or dereliction of duty or the breach by the officer
of certain other duties and obligations. Good reason
generally means a material reduction in the officers
duties or a change in title resulting in reduction of the
officers duties, a material reduction in salary or bonus,
or the relocation of the officer to an area farther than a
specified distance from their primary employment location.) In
the event of termination for cause or without good reason, each
of the NEOs is entitled only to receive all earned but unpaid
base salary, unreimbursed expenses
and/or
accrued, vested stock options and vested 401(k) or pension
benefits through the effective date of the termination.
The table below summarizes the accrued and vested benefits that
each of the NEOs would be entitled to, assuming they left the
Corporation for any reason on December 31, 2006.
Accrued and
Vested Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James
|
|
|
Caswell
|
|
|
Rownd
|
|
|
Smith
|
|
|
Ensor
|
|
|
|
|
Severance/salary
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Vested SERP
|
|
|
549,500
|
|
|
|
|
|
|
|
602,500
|
|
|
|
|
|
|
|
|
|
Vested OPT balances
|
|
|
23,982
|
|
|
|
1,538
|
|
|
|
10,627
|
|
|
|
199
|
|
|
|
11
|
|
Vested
options(1)
|
|
|
904,044
|
|
|
|
8,700
|
|
|
|
62,538
|
|
|
|
7,138
|
|
|
|
76,056
|
|
|
|
Total
|
|
$
|
1,477,526
|
|
|
$
|
10,238
|
|
|
$
|
675,665
|
|
|
$
|
7,337
|
|
|
$
|
76,067
|
|
|
|
|
|
|
(1) |
|
The value of the vested stock
options is calculated by multiplying the number of options by
the difference between the exercise price over the closing
market price of First Charters common stock on
December 29, 2006 ($24.60). |
Death, Disability or Retirement. Under the
employment agreements with each of Messrs. James, Caswell
and Rownd, if termination of employment occurs at any time due
to the death of executive, then executives estate will be
paid all earned but unpaid base salary and accrued bonus, and an
additional
33
amount representing one years base salary. Each executive
would receive the same payments in the event of their retirement
from First Charter (with the consent of the Corporation) or
their disability, except that any salary payments would be
reduced by any amounts which executive receives from the
Corporations long-term disability plan. For death or
disability, all supplemental benefits (including those provided
under supplemental executive retirement plans) and all equity
awards will be fully vested. For retirement, all equity awards
will be fully vested.
The change in control agreements with each of Messrs. Ensor
and Smith do not provide for any payments in the event of their
death, disability or retirement. However, under the
Corporations LTIP, each of Mr. Ensor and Smith would
be entitled to a pro-rata vesting (representing the pro-rata
service over the three-year performance period) of his
performance share award at the target level of the award.
Additionally, the vesting of the executives outstanding
stock option and restricted stock awards would be accelerated.
The table below summarizes the incremental benefits (beyond the
accrued and vested benefits) that each of the NEOs would be
entitled to, assuming their death, disability or retirement
occurred on December 31, 2006.
Death, Disability
or Retirement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James
|
|
|
Caswell
|
|
|
Rownd
|
|
|
Smith
|
|
|
Ensor
|
|
|
|
|
Salary
|
|
$
|
350,000
|
|
|
$
|
245,000
|
|
|
$
|
245,000
|
|
|
$
|
|
|
|
$
|
|
|
AIP payments
|
|
|
69,785
|
|
|
|
39,077
|
|
|
|
36,323
|
|
|
|
|
|
|
|
|
|
Accelerated portion of
SERP(1)
|
|
|
235,000
|
|
|
|
|
|
|
|
602,500
|
|
|
|
|
|
|
|
|
|
Accelerated
options(2)
|
|
|
16,920
|
|
|
|
8,366
|
|
|
|
7,520
|
|
|
|
6,956
|
|
|
|
4,042
|
|
Accelerated restricted
stock(3)
|
|
|
|
|
|
|
73,800
|
|
|
|
|
|
|
|
|
|
|
|
55,891
|
|
Accelerated/pro-rata performance
shares(3)
|
|
|
386,220
|
|
|
|
189,420
|
|
|
|
172,200
|
|
|
|
52,480
|
|
|
|
30,340
|
|
|
|
Total
|
|
$
|
1,057,925
|
|
|
$
|
555,663
|
|
|
$
|
1,063,543
|
|
|
$
|
59,436
|
|
|
$
|
90,273
|
|
|
|
|
|
|
(1) |
|
Vesting accelerates and benefit
is payable only in the event of death or disability and is not
payable in the event of retirement. |
|
(2) |
|
The value of the accelerated
stock options is calculated by multiplying the number of
accelerated options by the difference between the exercise price
over the closing market price of First Charters common
stock on December 29, 2006 ($24.60). |
|
(3) |
|
The value of the accelerated
performance shares and accelerated shares of restricted stock is
calculated by multiplying the number of accelerated shares by
the closing market price of First Charters common stock on
December 29, 2006 ($24.60). |
Termination Without Cause or Resignation For Good
Reason. Under the employment agreements with each
of Messrs. James, Caswell and Rownd, if termination of
employment occurs at any time due to termination by the
Corporation without cause or due to resignation by the executive
for good reason, then the executive shall be entitled to
(i) all accrued, unpaid base salary and unreimbursed
expenses through the date of such termination; (ii) any
prior year annual incentive bonus earned but not yet paid;
(iii) continued payment of the executives base salary
for the greater of the remainder of the employment term under
the agreement or two (2) years; (iii) an annual bonus
amount (calculated as the average of the three most recent
bonuses) for the greater of the remainder of the employment term
under the agreement or two (2) years;
(iv) continuation of health and welfare benefit coverage
(including coverage for the executives dependents to the
extent such coverage is provided by First Charter for its
employees generally) under such plans and programs to which the
executive was entitled to participate immediately prior to the
date of the end of his employment for the greater of the
remainder of the employment term under the agreement or two
(2) years, provided such continued participation is
possible under the terms and provisions of such plans and
programs; and (v) acceleration of vesting of all
supplemental benefits, including but not limited to all awards,
grants, and options under any supplemental agreement, stock
option plan or grant notwithstanding any other provision in such
plan or grant.
The change in control agreements with each of Messrs. Ensor
and Smith do not provide for any payments in the event of their
termination without cause or resignation for good reason.
However, under the
34
Corporations LTIP, in the event of termination without
cause, each of Mr. Ensor and Smith would be entitled to a
pro-rata vesting (representing the pro-rata service over the
three-year performance period) of his performance share award at
the target level of the award. Additionally, in the event of
termination without cause, the vesting of the executives
outstanding stock option and restricted stock awards would be
accelerated. In the event of resignation for good reason,
Messrs. Ensor and Smith would not receive any additional
benefits.
The tables below summarize the incremental benefits (beyond the
accrued and vested benefits) that each of the NEOs would be
entitled to, assuming their termination without cause or
resignation for good reason occurred on December 31, 2006.
Termination
Without Cause/Resignation For Good Reason
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James
|
|
|
Caswell
|
|
|
Rownd
|
|
|
Smith
|
|
|
Ensor
|
|
|
|
|
Severance/salary
|
|
$
|
700,000
|
|
|
$
|
490,000
|
|
|
$
|
490,000
|
|
|
$
|
|
|
|
$
|
|
|
AIP payment
|
|
|
235,120
|
|
|
|
130,954
|
|
|
|
139,838
|
|
|
|
|
|
|
|
|
|
Accelerated portion of
SERP(1)
|
|
|
235,000
|
|
|
|
|
|
|
|
602,500
|
|
|
|
|
|
|
|
|
|
Accelerated
options(2)
|
|
|
16,920
|
|
|
|
8,366
|
|
|
|
7,520
|
|
|
|
6,956(4
|
)
|
|
|
4,042(4
|
)
|
Accelerated restricted
stock(3)
|
|
|
|
|
|
|
73,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accelerated performance
shares(3)
|
|
|
386,220
|
|
|
|
189,420
|
|
|
|
172,200
|
|
|
|
52,480(4
|
)
|
|
|
30,340(4
|
)
|
Welfare benefits
|
|
|
15,522
|
|
|
|
15,522
|
|
|
|
15,522
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,588,782
|
|
|
$
|
908,062
|
|
|
$
|
1,427,580
|
|
|
$
|
59,436(4
|
)
|
|
$
|
34,382(4
|
)
|
|
|
|
|
|
(1) |
|
Represents acceleration of SERP
balance in addition to the vested portion of the SERP at
December 31, 2006 ($549,500 for Mr. James and $602,500
for Mr. Rownd). |
|
(2) |
|
The value of the accelerated
stock options is calculated by multiplying the number of
accelerated options by the difference between the exercise price
over the closing market price of First Charters common
stock on December 29, 2006 ($24.60). |
|
(3) |
|
The value of the accelerated
performance shares and accelerated shares of restricted stock is
calculated by multiplying the number of accelerated shares by
the closing market price of First Charters common stock on
December 29, 2006 ($24.60). |
|
(4) |
|
For Messrs. Smith and
Ensor, benefits are payable only in the event of termination
without cause and are not payable in connection with resignation
for good reason. |
Termination Following a Change in Control. The
respective employment and change in control agreements of the
NEOs provide for continued payment of base salary and average
bonus amounts, as well as certain continued benefits following
an event which would entitle such officer to payments under his
agreement for a period of 35 months with respect to
Messrs. James, Caswell and Rownd and for a period of
24 months with respect to Messrs. Ensor and Smith. The
employment agreements eliminate the tax-related ceiling on
post-employment compensation under Section 280G of the
Internal Revenue Code of 1986, as amended, by providing for a
corresponding payment by the Corporation of any taxes imposed by
that section. In addition, upon a change in control resulting in
the loss of employment for each of Messrs. James and Rownd,
the benefits provided under their supplemental executive
retirement plans automatically vest 100%, if not fully vested.
For purposes of the agreements, a change in control
generally includes a merger or similar transaction involving the
Corporation in which the Corporations shareholders receive
less than 50% of the voting stock of the surviving corporation,
the sale or transfer of substantially all the Corporations
assets, certain acquisitions of more than 20% of the Common
Stock by any person or group other than a person or group who
owned more than 5% of the Common Stock as of the date of the
agreements unless prior approval of the Board is received,
certain instances in which the composition of the
Corporations Board of Directors changes by more than 50%
during a two year period, or any other transaction that would
constitute a change in control required to be reported by the
Corporation in a proxy statement or the acquisition of control
of the Corporation under applicable federal banking laws.
35
To be entitled to payments upon such a change in control,
(a) the officers employment must be terminated other
than for cause, or (b) the officer must terminate his
employment for good reason, in either case within one year
following the change in control.
The table below summarizes the incremental benefits (beyond the
accrued and vested benefits) that each of the NEOs would be
entitled to, assuming their termination following a change in
control occurred on December 31, 2006.
Termination
Following a Change in Control
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James
|
|
|
Caswell
|
|
|
Rownd
|
|
|
Smith
|
|
|
Ensor
|
|
|
|
|
Severance/salary(1)
|
|
$
|
1,020,833
|
|
|
$
|
714,583
|
|
|
$
|
714,583
|
|
|
$
|
410,000
|
|
|
$
|
410,000
|
|
AIP payment
|
|
|
59,406
|
|
|
|
52,800
|
|
|
|
39,650
|
|
|
|
|
|
|
|
38,694
|
|
Accelerated portion of
SERP(2)
|
|
|
235,500
|
|
|
|
|
|
|
|
602,500
|
|
|
|
|
|
|
|
|
|
Accelerated
options(3)
|
|
|
16,920
|
|
|
|
8,366
|
|
|
|
7,520
|
|
|
|
6,956
|
|
|
|
4,042
|
|
Accelerated restricted
stock(4)
|
|
|
|
|
|
|
73,800
|
|
|
|
|
|
|
|
|
|
|
|
55,891
|
|
Accelerated performance
shares(4)
|
|
|
386,220
|
|
|
|
189,420
|
|
|
|
172,200
|
|
|
|
157,440
|
|
|
|
91,020
|
|
Welfare benefits
|
|
|
30,182
|
|
|
|
30,182
|
|
|
|
30,182
|
|
|
|
10,348
|
|
|
|
10,348
|
|
Excise tax (280G)
gross-up(5)
|
|
|
815,840
|
|
|
|
56,093
|
|
|
|
493,346
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,564,901
|
|
|
$
|
1,125,244
|
|
|
$
|
2,059,981
|
|
|
$
|
584,744
|
|
|
$
|
609,995
|
|
|
|
|
|
|
(1) |
|
Represents amounts payable
following a change in control if the executive is terminated.
Such amounts are payable in 35 equal monthly installments. For
Messrs. James, Caswell and Rownd, if following a change in
control, the executive leaves for good reason then
each will be entitled to severance payments paid monthly for
24 months, as opposed to 35 monthly payments, in the
aggregate amount of $700,000, $490,000 and $490,000,
respectively. |
|
(2) |
|
Represents acceleration of SERP
balance in addition to the vested portion of the SERP at
December 31, 2006 ($549,500 for Mr. James and $602,500
for Mr. Rownd). |
|
(3) |
|
The value of the accelerated
stock options is calculated by multiplying the number of
accelerated options by the difference between the exercise price
over the closing market price of First Charters common
stock on December 29, 2006 ($24.60). |
|
(4) |
|
The value of the accelerated
performance shares and accelerated shares of restricted stock is
calculated by multiplying the number of accelerated shares by
the closing market price of First Charters common stock on
December 29, 2006 ($24.60). |
|
(5) |
|
For Messrs. James, Caswell and
Rownd, if following a change in control, the executive leaves
for good reason then each will be entitled to a
payment from the Corporation consisting of the excise tax
payable in connection with Internal Revenue Code
section 280G and a related gross-up payment in the amount
of $724,637, $0 and $411,770. |
|
|
|
Because the executive is
entitled to receive severance payments following a termination
without cause where there has been no change in control, a
portion of the amount reflected might not be deemed to have been
paid in connection with a change in control under
Internal Revenue Code section 280G and therefore would not
cause the executive to incur an excise tax that would be subject
to a gross-up payment under the applicable employment agreement.
Accordingly, based on the facts and circumstances surrounding
the termination of the executive, the calculated excise tax and
related gross-up could be substantially reduced or
eliminated. |
Manley Transition
Agreement
Pursuant to a Transition Agreement and Release between the
Corporation and Richard A. Manley (Mr. Manley)
dated as of September 27, 2006 (the Transition
Agreement), Mr. Manley commenced his transition from
his role as Executive Vice President and Chief Banking Officer
of the Corporation and FCB on September 27, 2006 (the
Transition Date). Following the Transition Date,
Mr. Manley continued to be employed by the Corporation and
received his then-current regular compensation and benefits
until October 6, 2006 (the Separation Date).
Following the Separation Date, Mr. Manley began to receive
severance pay in the aggregate amount of $205,000, payable in
equal installments for a period of twelve months (the
Payment Period), less appropriate deductions,
including state and federal taxes. In addition, Mr. Manley
was entitled to continued participation in certain broad-based
benefits during the Payment Period or such earlier time as
Mr. Manley
36
becomes eligible under another group plan; reimbursement of
certain club dues, fees and assessments through
December 31, 2006 and payment of a pro-rated bonus as a
participant in the First Charter Annual Incentive Plan for
fiscal year 2006 through September 30, 2006 (such bonus
based upon achievement of the established corporate and
individual goals and objectives and subject to funding criteria
being met, as determined by the Board); and outplacement
services.
In exchange for the severance and other benefits contained in
the Transition Agreement, Mr. Manley has agreed to continue
to honor all return of records, and applicable confidentiality
and conflict of interest obligations previously agreed to or in
accordance with applicable federal and state laws, fully release
the Corporation, its subsidiaries and affiliate companies from
all claims (subject to limited exceptions), and for a period of
one year after the Separation Date, refrain from engaging in
certain specified competitive activities.
The table below summarizes the payments that Mr. Manley
will receive under the Transition Agreement and the accrued and
vested benefits that Mr. Manley is entitled to based upon
his departure from the Corporation on September 27, 2006.
Payments Under
Transition Agreement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested
|
|
|
Performance
|
|
|
Welfare
|
|
|
|
|
Name
|
|
Severance/Salary
|
|
|
AIP
Payment
|
|
|
Options(1)
|
|
|
Shares(2)
|
|
|
Benefits
|
|
|
Total
|
|
|
|
|
Manley
|
|
|
$205,000
|
|
|
|
$25,231
|
|
|
|
$44,317
|
|
|
|
$35,056
|
|
|
|
$1,990
|
|
|
|
$311,594
|
|
|
|
|
|
|
(1) |
|
The value of the vested stock
options is calculated by multiplying the number of options by
the difference between the exercise price over the closing
market price of First Charters common stock on
December 29, 2006 ($24.60). All unvested stock options were
forfeited. |
|
(2) |
|
Represents cash payment in
settlement of outstanding performance shares. |
COMPENSATION
COMMITTEE REPORT
The Compensation Committee is composed entirely of nonmanagement
directors, each of whom has been determined in the Boards
business judgment to be independent based on the standards for
independence adopted by the Board of Directors, which include
the applicable Nasdaq Rules. The Committee is responsible for
executive compensation and the broad-based compensation and
benefit programs, including an annual review of compensation for
the Chief Executive Officer and other executive officers, and an
annual review and approval of management incentive and
equity-based programs.
The Compensation Discussion and Analysis section of this proxy
statement is managements report on the Corporations
compensation program and, among other things, explains the
material elements of the compensation paid to the Chief
Executive Officer and the other NEOs. The Compensation Committee
has reviewed and discussed the Compensation Discussion and
Analysis section of this proxy statement with management. Based
on this review and discussions, the Compensation Committee
recommended to the Board of Directors that the Compensation
Discussion and Analysis be included in this proxy statement and
incorporated by reference into First Charters Annual
Report on
Form 10-K
for the fiscal year ended December 31, 2006.
Submitted by the Compensation Committee of the Board of
Directors, whose current members are:
|
|
|
Jerry E. McGee (Chairman)
|
|
John S. Poelker
|
Michael R. Coltrane
|
|
Thomas R. Revels
|
Walter H. Jones, Jr.
|
|
L.D. Warlick, Jr.
|
37
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Michael R. Coltrane, a member of the Compensation Committee, is
the President, Chairman, and Chief Executive Officer of CT
Communications, Inc. (CTC). CTC provides
telecommunication services to the Corporation. During 2006, the
aggregate amount of fees paid by the Corporation to CTC was
approximately $908,500.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
FCB has had, and expects to have in the future, banking
transactions in the ordinary course of business with directors,
officers and principal shareholders of the Corporation and its
subsidiaries and their associates. All loans and commitments
included in these transactions were made and are expected to be
made in the ordinary course of business and on substantially the
same terms, including interest rate and collateral, as those
prevailing at the time for comparable transactions with other
borrowers and did not and are not expected to involve more than
the normal risk of collectibility or present other unfavorable
features.
The relationship between the Corporation and Mr. Coltrane
is described above under Compensation Committee Interlocks
and Insider Participation.
RATIFICATION OF
APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTANTS
Pursuant to its authority, our Audit Committee has appointed
KPMG LLP, independent registered public accountants, as our
auditors for 2007. KPMG LLP has acted in this capacity since
1983. We have been advised by KPMG LLP that neither the firm nor
any of its members or associates has any direct financial
interest or material indirect financial interest in the
Corporation or our subsidiaries other than as its auditors.
Although the Audit Committee has the sole authority to select
and appoint the independent registered public accountants, we
deem it advisable to obtain your ratification of this
appointment. We understand that a representative from KPMG LLP
will be present at the Annual Meeting, will have the opportunity
to make a statement if he or she desires to do so, and will be
available to respond to appropriate questions.
The Corporation has entered into an engagement letter with KPMG
LLP which sets forth the terms by which KPMG LLP will perform
audit services for the Corporation. The engagement letter is
subject to alternative dispute resolution procedures and
contains a provision that limits punitive damages on the part of
KPMG LLP in the absence of fraud.
The fees billed by KPMG LLP for services rendered to the
Corporation for the fiscal years indicated below were as follows:
|
|
|
|
|
|
|
|
|
|
|
Fees
|
|
2006
|
|
|
2005
|
|
|
|
|
Audit fees
|
|
$
|
822,000
|
|
|
$
|
525,183
|
|
Audit related fees(1)
|
|
|
67,885
|
|
|
|
72,809
|
|
Tax fees(2)
|
|
|
55,505
|
|
|
|
203,210
|
|
All other fees(3)
|
|
|
|
|
|
|
1,500
|
|
|
|
|
|
|
(1) |
|
Consists of aggregate fees
billed for audit of employee benefit plans and fees for
consultations related to audit and accounting matters. |
|
(2) |
|
Consists of aggregate fees
billed for tax compliance of $13,500 and $158,435 in 2006 and
2005, respectively. Also consists of tax advice on return
filings of $42,005 and $44,775 in 2006 and 2005,
respectively. |
|
(3) |
|
Consists of aggregate fees
billed for accounting research materials in 2005. |
38
Policy on Audit
Committee Pre-Approval of the Audit and Permissible Non-Audit
Services by the Independent Registered Public
Accountants
The Audit Committee is responsible for the appointment,
compensation, retention and oversight of the work of the
independent registered public accountants. As part of this
responsibility, the Audit Committee is required to pre-approve
the audit and non-audit services performed by the independent
registered public accountants in order to assure that they do
not impair the accountants independence from the
Corporation. Accordingly, the Audit Committee has adopted
procedures and conditions under which services proposed to be
performed by the independent registered public accountants must
be pre-approved.
Pursuant to this policy, the Audit Committee will consider
annually and approve the terms of the audit engagement. Any
proposed engagement relating to permissible non-audit services
must be presented to the Audit Committee and pre-approved on a
case-by-case
basis. In addition, particular categories of permissible
non-audit services that are recurring may be pre-approved by the
Audit Committee subject to pre-set fee limits. If a category of
services is so approved, the Audit Committee will be regularly
updated regarding the status of those services and the fees
incurred. The Audit Committee reviews requests for the provision
of audit and non-audit services by the Corporations
independent public accountants and determines if they should be
approved. Such requests could be approved either at a meeting of
the Audit Committee or upon approval of the Chair of the Audit
Committee, or another member of the Audit Committee. If a
permissible non-audit service is approved by the Chair or
another member of the Audit Committee, that decision is required
to be presented at the next meeting of the Audit Committee.
Prior to approving any services, the Audit Committee considers
whether the provision of such services is consistent with the
Securities and Exchange Commissions rules on auditor
independence and is compatible with maintaining KPMG LLPs
independence.
We recommend a vote FOR ratification of the appointment
of this firm as independent auditors of the Corporation for
2007. If you do not ratify the appointment of KPMG LLP, our
Audit Committee will consider a change in auditors for the next
fiscal year.
ANNUAL
REPORT
Our Summary 2006 Annual Report and
Form 10-K
for the fiscal year ended December 31, 2006, including
financial statements, accompany this Proxy Statement.
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 of the Exchange Act requires our directors and
executive officers to file reports with the Securities and
Exchange Commission indicating their holdings of and
transactions in our equity securities and to provide copies of
such reports to us. Based solely upon our review of such copies
or written representations related thereto, we believe that all
Section 16 filing requirements of our directors and
executive officers have been complied with on a timely basis for
2006.
SHAREHOLDER
PROPOSALS
We anticipate that our 2008 Annual Meeting of Shareholders will
be held on April 23, 2008. The deadline for submission of
shareholder proposals pursuant to
Rule 14a-8
under the Exchange Act for inclusion in our proxy statement for
the 2008 Annual Meeting of Shareholders would be
December 27, 2007. Additionally, we must receive notice of
any shareholder proposal to be submitted at the 2008 Annual
Meeting of Shareholders (but not required to be included in our
proxy statement) in compliance with Article III,
Section 15 of our Bylaws. This provision requires that a
shareholder give written notice to the Corporate Secretary at
least 90 days, but not more than 120 days, prior to
the anniversary date of the prior years annual meeting of
shareholders. Consequently, any shareholder proposal to be
submitted at the 2008 Annual Meeting of Shareholders (but not
required to be included in our proxy statement) will not be
considered timely pursuant to
Rule 14a-5(e)
under the Exchange Act unless the notice required by our Bylaws
is delivered to the Corporate Secretary not later than the close
of business on February 23, 2008 and not earlier than the
close of business on January 24, 2008 and the persons named
in the proxies solicited by us may exercise discretionary voting
authority with respect to such proposal.
39
HOUSEHOLDING OF
ANNUAL MEETING MATERIALS
We have adopted a procedure approved by the Securities and
Exchange Commission called householding, which
reduces our printing costs and postage fees. Under this
procedure, record holders who share the same address and have
consented to householding will receive only one copy of our
Summary 2006 Annual Report and Proxy Statement unless one or
more of these shareholders has notified us that they wish to
continue receiving individual copies. Shareholders who
participate in householding will continue to receive separate
proxy cards.
If you are a record holder residing at an address to which we
sent only one copy of our Summary 2006 Annual Report and Proxy
Statement and you wish to receive separate documents in the
future, you may discontinue householding by contacting our
transfer agent, Registrar and Transfer Company, 10 Commerce
Drive Cranford, NJ 07016, at its toll free number
(800-368-5948)
or on its website at www.rtco.com. If you are an eligible
record holder receiving multiple copies of our Summary 2006
Annual Report and Proxy Statement, you may request householding
by contacting us in the same manner. If you own your shares
through a bank, broker or other nominee who has not instituted
householding, you may request householding by contacting the
applicable party.
If you are a record holder residing at an address to which we
sent only one copy of our Summary 2006 Annual Report and Proxy
Statement and you wish to receive an additional copy of these
documents for this meeting, you may contact our Investor
Relations Department at Post Office Box 37937, Charlotte,
North Carolina,
28237-7937
or by phone at (704) 688-4817. We will promptly deliver,
upon request, a separate Summary 2006 Annual Report and Proxy
Statement to a shareholder at a shared address to which a single
copy of the documents was delivered.
FORM 10-K
A COPY OF THE CORPORATIONS ANNUAL REPORT ON
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2006, AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, EXCLUDING EXHIBITS, IS
INCLUDED WITH THIS PROXY STATEMENT MAILED TO SHAREHOLDERS, AND
COPIES ARE AVAILABLE WITHOUT CHARGE UPON WRITTEN REQUEST TO
FIRST CHARTER CORPORATION, POST OFFICE BOX 37937, CHARLOTTE,
NORTH CAROLINA
28237-7937,
ATTENTION: CORPORATE SECRETARY. COPIES OF EXHIBITS ARE
AVAILABLE UPON PAYMENT OF $25.00 TO COVER THE COSTS OF
REPRODUCTION.
OTHER
BUSINESS
We know of no other matter to come before the meeting. However,
if any other matter requiring a vote of the shareholders should
arise, it is the intention of the persons named in the enclosed
proxy to vote such proxy in accordance with their best judgement.
By Order of the Board of Directors,
Stephen J. Antal
Executive Vice President, General Counsel
and Corporate Secretary
April 25, 2007
40
Appendix A
First Charter
Corporation
Audit Committee
Charter
As approved for amendment by the First Charter Corporation Board
of Directors on June 28, 2006.
The Audit Committee is appointed by the Board of Directors (the
Board) of First Charter Corporation (the
Corporation) to oversee the accounting and financial
reporting processes of the Corporation and the audits of the
Corporations financial statements. In that regard, the
Audit Committee assists the Board in monitoring (1) the
integrity of the financial statements of the Corporation,
(2) the independent auditors qualifications and
independence, (3) the performance of the Corporations
internal audit function and independent auditors, and
(4) the compliance by the Corporation with legal and
regulatory requirements.
The Audit Committee shall prepare the report required by the
rules of the Securities and Exchange Commission (the
Commission) to be included in the Corporations
annual proxy statement.
The Audit Committee shall consist of no fewer than three
members. Each member of the Audit Committee shall meet the
independence and experience requirements of The NASDAQ Stock
Market, Inc. Marketplace Rules and the Securities Exchange Act
of 1934 (the Exchange Act). All members of the Audit
Committee shall be able to read and understand fundamental
financial statements. No member of the Audit Committee shall
have participated in the preparation of the financial statements
of the Corporation in the past three years. At least one member
of the Audit Committee shall be an audit committee
financial expert as defined by the Commission.
If an audit committee member ceases to be independent for
reasons outside the members reasonable control, his or her
membership on the audit committee may continue until the earlier
of the Corporations next annual shareholders meeting
or one year from the occurrence of the event that caused the
failure to qualify as independent. If the Corporation is not
already relying on this provision, and falls out of compliance
with the requirements regarding audit committee composition due
to a single vacancy on the audit committee, then the Corporation
will have until the earlier of the next annual
shareholders meeting or one year from the occurrence of
the event that caused the failure to comply with this
requirement. The Corporation shall provide notice to NASDAQ
immediately upon learning of the event or circumstance that
caused the non-compliance, if it expects to rely on either of
these provisions for a cure period.
The members of the Audit Committee shall be appointed by the
Board after due consideration and recommendation by the
Governance and Nominating Committee. The Board shall designate
one member of the Audit Committee as its Chair. Members of the
Audit Committee shall serve at the pleasure of the Board or
until successors are appointed. The Chair of the Audit Committee
shall appoint a member of the internal audit staff to act as
Secretary to the Audit Committee and may appoint an Assistant
Secretary.
The Audit Committee shall meet as often as it determines
necessary, but not less frequently than quarterly. The Audit
Committee shall meet periodically in separate executive sessions
with management, the internal auditors and the independent
auditor, and have such other direct and independent interaction
with such persons from time to time as the members of the Audit
Committee deem appropriate. The Audit Committee may request any
officer or employee of the Corporation or the Corporations
outside counsel or
A-1
independent auditor to attend a meeting of the Committee or to
meet with any members of, or consultants to, the Committee.
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IV.
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Committee
Authority and Responsibilities
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The Audit Committee shall have the sole authority to appoint,
determine funding for, and oversee the outside auditors (subject
to shareholder ratification). The Audit Committee shall be
directly responsible for the compensation and oversight of the
work of the independent auditor (including resolution of
disagreements between management and the independent auditor
regarding financial reporting) for the purpose of preparing or
issuing an audit report or related work. The independent auditor
shall report directly to the Audit Committee.
The Audit Committee shall pre-approve all auditing services,
internal control-related services and permitted non-audit
services (including the fees and terms thereof) to be performed
for the Corporation by its independent auditor, subject to the
de minimis exception for non-audit services that are
approved by the Audit Committee before the completion of the
audit. The Audit Committee shall review and discuss with the
independent auditor any documentation supplied by the auditor as
to the nature and scope of any tax services to be approved, as
well as the potential effects of the provision of such services
on the auditors Independence. The Audit Committee may form
and delegate authority to subcommittees consisting of one or
more members when appropriate, including the authority to grant
pre-approvals of audit and permitted non-audit services,
provided that decisions of such subcommittee to grant
pre-approvals shall be presented to the full Audit Committee at
its next scheduled meeting.
The Audit Committee shall have the authority, to the extent it
deems necessary or appropriate, to engage and determine funding
for independent legal, accounting or other advisors. The
Corporation shall provide for appropriate funding, as determined
by the Audit Committee, for payment of compensation to the
independent auditor for the purpose of rendering or issuing an
audit report or performing other audit, review or attest
services for the Corporation and to any advisors employed by the
Audit Committee, as well as funding for the payment of ordinary
administrative expenses of the Audit Committee that are
necessary or appropriate in carrying out its duties.
The Audit Committee shall make regular reports to the Board. The
Audit Committee shall review and reassess the adequacy of this
Charter annually and recommend any proposed changes to the Board
for approval. The Audit Committee, to the extent it deems
necessary or appropriate, shall:
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V.
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Financial
Statement and Disclosure Matters
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Review and discuss with management and the independent auditor
the annual audited financial statements, including disclosures
made in managements discussion and analysis, and recommend
to the Board whether the audited financial statements should be
included in the Corporations
Form 10-K.
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Review and discuss with management and the independent auditor
the Corporations quarterly financial statements before the
filing of its
Form 10-Q,
including the results of the independent auditors review
of the quarterly financial statements.
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3.
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Discuss with management and the independent auditor significant
financial reporting issues and judgments made in connection with
the preparation of the Corporations financial statements,
including any significant changes in the Corporations
selection or application of accounting principles, any major
issues as to the adequacy of the Corporations internal
controls and any special steps adopted in light of material
control deficiencies.
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Review and discuss with management and the independent auditor
any major issues as to the adequacy of the Corporations
internal controls, any special steps adopted in light of
material control deficiencies and the adequacy of disclosures
about changes in internal control over financial reporting,
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5.
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Review and discuss with management (including the chief internal
auditor) and the independent auditor the Corporations
internal controls report and the independent auditors
attestation of the report before the filing of the
Corporations Form
10-K.
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6.
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Review and discuss periodically reports from the independent
auditors on:
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all critical accounting policies and practices to be used;
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all alternative treatments of financial information within
generally accepted accounting principles that have been
discussed with management, ramifications of the use of such
alternative disclosures and treatments, and the treatment
preferred by the independent auditor; and
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c.
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other material written communications between the independent
auditor and management, such as any management letter or
schedule of unadjusted differences.
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7.
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Discuss with management the Corporations earnings press
releases, including the use of pro forma or
adjusted non-GAAP information, as well as financial
information and earnings guidance provided to analysts and
rating agencies. Such discussion may be done generally
(consisting of discussing the types of information to be
disclosed and the types of presentations to be made).
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8.
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Discuss with management and the independent auditor the effect
of regulatory and accounting initiatives as well as off-balance
sheet structures on the Corporations financial statements.
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9.
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Discuss with management the Corporations major financial
risk exposures and the steps management has taken to monitor and
control such exposures, including the Corporations risk
assessment and risk management policies.
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10.
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Discuss with the independent auditor the matters required to be
discussed by Statement on Auditing Standards No. 61
relating to the conduct of the audit, including any difficulties
encountered in the course of the audit work, any restrictions on
the scope of activities or access to requested information, and
any significant disagreements with management.
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11.
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Review disclosures made to the Audit Committee by the
Corporations CEO and CFO during their certification
process for the Form
10-K and
Form 10-Q
about any significant deficiencies in the design or operation of
internal controls or material weaknesses therein and any fraud
involving management or other employees who have a significant
role in the Corporations internal controls.
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12.
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Ensure that a public announcement of the Corporations
receipt of an audit opinion that contains a going concern
qualification is made promptly.
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VI.
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Oversight of the
Corporations Relationship with the Independent
Auditor
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1.
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Review and evaluate the lead partner of the independent auditor
team.
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2.
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Obtain and review a report from the independent auditor at least
annually regarding (a) the independent auditors
internal quality-control procedures, (b) any material
issues raised by the most recent internal quality-control
review, or peer review, of the firm, or by any inquiry or
investigation by governmental or professional authorities within
the preceding five years respecting one or more independent
audits carried out by the firm and (c) any steps taken to
deal with any such issues. Evaluate the qualifications,
performance and independence of the independent auditor,
including considering whether the auditors quality
controls are adequate and the provision of permitted non-audit
services is compatible with maintaining the auditors
independence, and taking into account the opinions of management
and internal auditors. The Audit Committee shall present its
conclusions with respect to the independent auditor to the Board.
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3.
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Obtain from the independent auditor a formal written statement
delineating all relationships between the independent auditor
and the Corporation. It is the responsibility of the Audit
Committee to actively engage in a dialogue with the independent
auditor with respect to any disclosed relationships or services
that may impact the objectivity and independence of the auditor
and for purposes of taking, or
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recommending that the full board take, appropriate action to
oversee the independence of the outside auditor.
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4.
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Ensure the rotation of the lead (or coordinating) audit partner
having primary responsibility for the audit and the audit
partner responsible for reviewing the audit as required by law.
Consider whether, in order to assure continuing auditor
independence, it is appropriate to adopt a Policy of rotating
the independent auditing firm on a regular basis.
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5.
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Adopt a policy for the Corporations hiring of employees or
former employees of the independent auditor.
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6.
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Discuss with the independent auditor material issues on which
the national office of the independent auditor was consulted by
the Corporations audit team.
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7.
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Meet with the independent auditor before the audit to discuss
the planning and staffing of the audit.
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VII.
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Oversight of the
Corporations Internal Audit Function
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1.
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To review and approve the appointment and replacement of the
chief internal auditor (the Chief Auditor).
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2.
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To review the performance of the Chief Auditor on an annual
basis and report the results of such review to the Compensation
Committee of the Board for action in accordance with the
Corporations salary administration program.
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3.
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To review and approve the internal audit plan, subsequent
changes therein, and key audit and business risk considerations,
and review and approve the results of the internal audit plan on
not less than an annual basis.
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4.
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To review the significant reports to management prepared by the
internal auditors together with managements responses and
follow-up to
these reports.
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VIII.
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General
Compliance Oversight Responsibilities
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1.
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Obtain from the independent auditor assurance that
Section 10A (b) (illegal acts) of the Exchange
Act has not been implicated.
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2.
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Obtain reports from management, the Corporations chief
internal auditor and the independent auditor that the
Corporation and its subsidiary entities are in conformity with
applicable legal requirements and the Corporations Code of
Business Conduct and Ethics. Advise the Board with respect to
the Corporations policies and procedures regarding
compliance with applicable laws and regulations and with the
Corporations Code of Business Conduct and Ethics.
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The Committee shall receive reports of violations of, and review
and either approve or disapprove any request for waiver of, such
policy by any director, executive officer or principal
accounting officer.
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3. |
Approve all related party transactions.
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4.
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Establish procedures for the receipt, retention and treatment of
complaints received by the Corporation regarding accounting,
internal accounting controls or auditing matters, and the
confidential, anonymous submission by employees of concerns
regarding questionable accounting or auditing matters.
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5.
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Discuss with management and the independent auditor any
correspondence with regulators or governmental agencies and any
published reports which raise material issues regarding the
Corporations financial statements or accounting policies,
the Corporations compliance policies and any examination
reports or inquiries received from regulators or governmental
agencies and to approve any response thereto.
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A-4
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6.
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Discuss with the Corporations General Counsel legal
matters that may have a material impact on the financial
statements or the Corporations compliance policies.
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7.
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With respect to the information security department,
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a.
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To review and approve the information security plan, subsequent
changes therein, and key credit and business risk
considerations, and review and approve the results of the
information security plan on not less than an annual basis.
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b.
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To review the significant reports to management prepared by the
internal credit reviewers together with managements
responses and
follow-up to
these reports.
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IX.
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Limitation of
Audit Committees Role
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While the Audit Committee has the responsibilities and powers
set forth in this Charter, it is not the duty of the Audit
Committee to plan or conduct audits or to determine that the
Corporations financial statements and disclosures are
complete and accurate and are in accordance with generally
accepted accounting principles and applicable rules and
regulations. These are the responsibilities of management and
the independent auditor.
A-5
PROXY CARD
FIRST CHARTER CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 23, 2007
The undersigned hereby appoints Stephen J. Antal and Charles A. Caswell, and each of them, with full
power of substitution, proxies and agents of the undersigned to vote at the Annual Meeting of
Shareholders of First Charter Corporation (the Corporation) to be held at the First Charter Center, 10200
David Taylor Drive, Charlotte, North Carolina, on May 23, 2007 at 10:00 A.M., and at any adjournment
thereof, all shares of common stock of the Corporation which the undersigned would be entitled to vote
if personally present for the matters appearing on the reverse side of this Proxy Card.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY
IN THE ENCLOSED POSTAGE-PAID ENVELOPE OR
VOTE VIA THE INTERNET OR BY TELEPHONE.
(Continued, and to be marked, dated and signed, on the other side)
ê FOLD AND DETACH HERE ê
FIRST CHARTER CORPORATION ANNUAL MEETING OF SHAREHOLDERS, MAY 23, 2007
YOUR INSTRUCTIONS TO VOTE ARE IMPORTANT!
Proxy Materials are available on-line at:
https://www.proxyvotenow.com/fct
You can provide your instructions to vote in one of three ways:
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Call toll free 1-866-388-1540 on a Touch-Tone Phone and follow the instructions on
the reverse side. There is NO CHARGE to you for this call. |
or
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Via the Internet at https://www.proxyvotenow.com/fct and follow the instructions. |
or
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Mark, sign and date your proxy card and return it promptly in the enclosed envelope. |
PLEASE SEE REVERSE SIDE FOR VOTING INSTRUCTIONS
The Board of Directors
recommends a vote FOR each of the following:
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Please mark as
indicated in this
example |
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Withhold |
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For All |
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For |
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Except |
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ELECTION of the following five nominees listed below
as Directors with terms expiring in 2010. |
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(01) Jewell D. Hoover |
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(02) Walter H. Jones, Jr. |
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(03) Samuel C. King, Jr. |
(04) Jerry E. McGee |
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(05) John S. Poelker |
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ELECTION of the
following nominee listed below as Director with term expiring in 2008.
(06) Richard F. Combs
INSTRUCTION: To vote for all nominees,
mark FOR. To withhold authority to vote for
all nominees, mark Withhold All. To withhold authority to vote for any individual
nominee(s), mark For All Except and write the name of the nominee(s) in the space
provided below.
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For |
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Abstain |
2. |
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TO RATIFY THE APPOINTMENT OF KPMG LLP as the
Corporations independent registered public
accountants for 2007. |
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To transact such other business as
properly may come before the meeting. |
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In
their discretion, the proxies are authorized to vote upon such other business
as properly may come before the meeting.
This
proxy, when properly executed, will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this proxy will
be voted FOR Proposals 1 and 2. The undersigned acknowledges receipt of the
Notice of Annual Meeting of Shareholders and the related Proxy Statement.
Please
sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by an authorized person.
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Mark here for address change and note change |
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Please
be sure to date and sign
this instruction card in the box below. |
Date |
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Sign above |
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* * * IF YOU WISH TO VOTE BY TELEPHONE OR INTERNET, PLEASE READ THE
INSTRUCTIONS BELOW * * * |
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FOLD
AND DETACH HERE IF YOU ARE VOTING BY MAIL
PROXY VOTING INSTRUCTIONS |
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Shareholders of record
have three ways to vote:
1. By Mail; or
2. By Telephone (using
a Touch-Tone Phone); or
3. By Internet.
A telephone or Internet vote
authorizes the named proxies to vote your shares in the same manner as if you marked, signed, dated and
returned this proxy. Please note telephone and Internet votes must be cast prior to 3 a.m., May 23, 2007.
It is not necessary to return this proxy if you vote by telephone or Internet.
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Vote by Telephone |
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Vote by Internet |
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Call Toll-Free on a
Touch-Tone Phone anytime prior to |
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anytime prior to |
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3 a.m., May 23, 2007. |
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3 a.m.,
May 23, 2007, go to |
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1-866-388-1540 |
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https://www.proxyvotenow.com/fct |
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Please note that the
last vote received, whether by telephone, Internet or by mail, will be the vote counted.
ON-LINE PROXY MATERIALS :
Access at https://www.proxyvotenow.com/fct
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PLEASE MARK VOTES
AS IN THIS EXAMPLE |
REVOCABLE PROXY
FIRST CHARTER CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS FOR THE ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD ON MAY 23, 2007
The undersigned hereby appoints Stephen J. Antal and Charles A. Caswell, and each of them,
with full power of substitution, proxies and agents of the undersigned to vote at the Annual
Meeting of Shareholders of First Charter Corporation (the Corporation) to be held at the First
Charter Center, 10200 David Taylor Drive, Charlotte, North Carolina, on May 23, 2007 at 10:00 A.M.,
and at any adjournment thereof, all shares of common stock of the Corporation which the undersigned
would be entitled to vote if personally present for the following matters.
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Please be sure to date and sign
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Date |
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this Proxy in the box below.
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Shareholder sign above Co-holder (if any) sign above
The Board of Directors recommends a vote FOR each of the following:
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For |
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Withhold All |
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For all Except |
1. |
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ELECTION of the following five nominees listed below
as Directors with terms expiring in 2010. |
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(01) Jewell D.
Hoover (03) Samuel C. King, Jr. (05) John S. Poelker |
(02) Walter H. Jones, Jr. (04) Jerry E. McGee |
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ELECTION of the following nominee
listed below as Director with term
expiring in 2008.
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(06) Richard F. Combs |
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INSTRUCTION: To vote for all nominees, mark For. To withhold authority to vote for all
nominees, mark Withhold All. To withhold authority to vote for any individual nominee(s), mark
For All Except and write the name of the nominee(s) in the space provided below.
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For |
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Against |
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Abstain |
2. |
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TO RATIFY THE APPOINTMENT OF KPMG LLP as the Corporations independent registered
public accountants for 2007. |
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To transact such other business as properly may come before the meeting. |
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In their discretion, the proxies are authorized to vote upon such other business as properly
may come before the meeting.
This proxy, when properly executed, will be voted in the manner directed herein by the
undersigned shareholder. If no direction is made, this proxy will be voted FOR Proposals 1 and 2.
The undersigned acknowledges receipt of the Notice of Annual Meeting of Shareholders and the
related Proxy Statement.
5
Detach above card, complete, sign, date and mail in postage paid envelope provided. 5
FIRST CHARTER CORPORATION
Please sign exactly as name appears hereon. When shares are held by joint tenants, both
should sign. When signing as attorney, executor, administrator, trustee or guardian, please give
full title as such. If a corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by an authorized person.
PLEASE ACT PROMPTLY
COMPLETE, SIGN, DATE & MAIL YOUR PROXY CARD TODAY
IF YOUR ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED BELOW AND
RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED.