UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
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
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Check
the appropriate box:
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Preliminary
Proxy Statement
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Confidential,
for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material Pursuant to §240.14a-12
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First
Bancorp
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(Name
of Registrant as Specified In Its
Charter)
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(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
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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)(1) 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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N/A |
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(2)
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Aggregate
number of securities to which transaction applies:
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N/A |
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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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N/A |
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(4)
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Proposed
maximum aggregate value of transaction:
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N/A |
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(5)
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Total
fee paid:
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N/A |
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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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N/A |
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(2)
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Form,
Schedule or Registration Statement No.:
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(3)
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Filing
Party:
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(4)
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Date
Filed:
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341
North Main Street
Troy,
North Carolina 27371-0508
Telephone
(910) 576-6171
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO
BE HELD WEDNESDAY, MAY 2, 2007
To
Our Shareholders:
The
annual meeting of shareholders of First Bancorp (the “Company”) will be held at
the James H. Garner Conference Center, 211 Burnette Street, Troy, North Carolina
(see map on outside back cover) on Wednesday, May 2 at 3:00 p.m. local time,
for
the purpose of considering and acting on the following matters:
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1.
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A
proposal to elect fifteen (15) nominees to the Board of Directors
to serve
until the 2008 annual meeting of shareholders, or until their successors
are elected and qualified.
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A
proposal to ratify the appointment of Elliott Davis, PLLC as the
independent auditors of the Company for
2007.
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3.
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A
proposal to adopt a new equity-based incentive plan, entitled the
“First
Bancorp 2007 Equity Plan.”
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4.
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Such
other business as may properly come before the meeting, or any adjournment
thereof.
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Only
shareholders of record as of the close of business on March 13, 2007 are
entitled to notice of and to vote at the annual meeting and any adjournment
thereof.
Whether
or not you expect to be present at the annual meeting, please complete, date
and
sign the enclosed form of proxy and return it promptly in the enclosed envelope.
If you attend the meeting, your proxy will be returned to you upon request.
You
may also vote by telephone or on the Internet, as described in the proxy
statement and on the proxy card.
Please
note that the attached form of proxy includes a request from the Company to
indicate whether or not you plan to attend the annual meeting. For planning
purposes, management of the Company would appreciate you filling in the
appropriate box indicating whether or not you plan to attend the annual meeting.
If you initially indicate that you are not planning to attend and later want
to,
or do not indicate one way or the other, you are still welcome and invited
to
attend the meeting.
The
proxy
statement accompanying this notice sets forth further information concerning
the
proposals to be considered at the annual meeting. You are urged to study this
information carefully.
Included
in this package, in compliance with applicable regulations, is the Company’s
2006 Annual Report on Form 10-K, which includes the Company’s financial
statements and other required disclosures. Also included in the package is
a
2006 Summary Annual Report, which includes a financial overview, the president’s
letter, and other general information about the Company.
By
Order
of the Board of Directors
Anna
G.
Hollers
Secretary
March
28,
2007
First
Bancorp
341
North Main Street
Troy,
North Carolina 27371-0508
Telephone
(910) 576-6171
PROXY
STATEMENT
INTRODUCTION
This
proxy statement is furnished to the shareholders of First Bancorp (hereinafter
sometimes referred to as the “Company”) by the Board of Directors in connection
with its solicitation of proxies for use at the annual meeting of shareholders
of the Company to be held on Wednesday, May 2, 2007 at 3:00 p.m. local time,
at
the James H. Garner Conference Center, 211 Burnette Street, Troy, North Carolina
(see map on outside back cover), and at any adjournment thereof. Action will
be
taken at the annual meeting on the items described in this proxy statement
and
on any other business that properly comes before the meeting.
This
proxy statement and accompanying form of proxy are first being mailed to
shareholders on or about March 28, 2007.
The
accompanying proxy is for use at the 2007 Annual Meeting if a shareholder either
will be unable to attend in person or will attend but wishes to vote by proxy.
Most shareholders have a choice of voting by completing the enclosed proxy
card
and mailing it in the postage-paid envelope provided, voting over the Internet
or using a toll-free number. Shareholders should refer to the proxy card or
the
information forwarded by the shareholder’s bank, broker or other holder of
record to see which voting options are available. Shareholders who vote over
the
Internet may incur costs, such as telephone and Internet access charges, for
which the shareholder is responsible. The Internet and telephone voting
facilities for eligible shareholders of record will close at 3:00 a.m. Eastern
Daylight Time on May 2, 2007. Specific instructions to be followed by any
shareholder interested in voting via the Internet or telephone are shown on
the
enclosed proxy card. The Internet and telephone voting procedures are designed
to authenticate the shareholder’s identity and to allow shareholders to vote
their shares and confirm that their instructions have been properly recorded.
In
the event that the proxy card does not reference Internet or telephone voting
information because the recipient is not the registered owner of the shares,
the
proxy card must be completed and returned in the self-addressed, postage-paid
envelope provided.
Any
shareholder giving a proxy may revoke it at any time before a vote is taken
by
(i) duly executing a proxy bearing a later date; (ii) executing a notice of
revocation in a written instrument filed with the secretary of the Company;
or
(iii) appearing at the meeting and notifying the secretary of the intention
to
vote in person. Unless a contrary choice is specified, all shares represented
by
valid proxies received pursuant to this solicitation, and not revoked before
they are exercised, will be voted as set forth in this proxy statement. In
addition, the proxy confers discretionary authority upon the persons named
therein, or their substitutes, with respect to any other business that may
properly come before the meeting.
The
presence, in person or by proxy, of the holders of a majority of the outstanding
shares of the Company’s common stock entitled to vote is necessary to constitute
a quorum at the annual meeting. If a quorum is not present or represented at
the
annual meeting, the shareholders present and entitled to vote have the power
to
adjourn the meeting from time to time, without notice other than announcement
at
the meeting, until a quorum is present or represented. At any such adjourned
meeting at which a quorum is present or represented, any business may be
transacted that might have been transacted at the meeting as originally
notified. Abstentions from the vote on a particular proposal and broker
non-votes will be counted as present for purposes of determining if a quorum
is
present, but will not be counted as votes on the proposal in
question.
The
Company will bear the entire cost of preparing this proxy statement and of
soliciting proxies. Proxies may be solicited by employees of the Company, either
personally, by special letter, or by telephone. Employees will not receive
additional compensation for the solicitation of proxies. The Company also will
request brokers and others to send solicitation material to beneficial owners
of
stock and will reimburse their costs for this purpose.
Page
1
Only
shareholders of record as of the close of business on March 13, 2007 will be
entitled to vote at the annual meeting or any adjournment thereof. The number
of
outstanding shares entitled to vote at the shareholders meeting is 14,365,217.
Shareholders are entitled to one vote for each share of the Company’s common
stock.
PRINCIPAL
HOLDERS OF VOTING SECURITIES
The
Company knows of no person or group who beneficially owns more than five percent
of the outstanding common stock of the Company.
PROPOSAL
1 - ELECTION OF DIRECTORS
Section
3.02 of the Company’s bylaws provides that the number of directors on the Board
of Directors of the Company will be not less than three nor more than 18, as
may
be fixed by resolution duly adopted by the Board of Directors at or prior to
the
annual meeting at which such directors are to be elected. Effective as of the
2007 Annual Meeting of Shareholders to be held May 2, 2007, the size of the
board has been fixed by the Board of Directors at 15 members.
In
the
absence of any specifications to the contrary, proxies will be voted for the
election of all 15 of the nominees listed in the table below by casting an
equal
number of votes for each such nominee. If, at or before the time of the meeting,
any of the nominees listed below becomes unavailable for any reason, the
proxyholders have the discretion to vote for a substitute nominee or nominees.
The board currently knows of no reason why any nominee listed below is likely
to
become unavailable. The 15 nominees receiving a plurality of votes cast shall
be
elected. This means that the 15 nominees with the most votes will be elected.
Only votes “FOR” a nominee will affect the outcome.
The
Company’s articles of incorporation provide that, if cumulative voting applies,
each shareholder is “entitled to multiply the number of votes he is entitled to
cast by the number of directors for whom he is entitled to vote and cast the
product for a single candidate or distribute the product among two or more
candidates.” Cumulative voting procedures will not be followed at the annual
meeting unless a shareholder calls for cumulative voting as provided in the
Company’s articles of incorporation, by announcing at the meeting before the
voting for directors starts, his or her intention to vote cumulatively. If
cumulative voting is properly invoked by a shareholder, the chair shall declare
that all shares entitled to vote have the right to vote cumulatively and shall
thereupon grant a recess of not less than two days, nor more than seven days,
as
the chair shall determine, or of such other period of time as is unanimously
agreed upon. If cumulative voting applies, the proxyholders may, in their
discretion, vote the shares to which such proxies relate on a basis other than
equally for each of the nominees named below and for less than all such
nominees, but the proxyholders will cast such votes in a manner that would
tend
to elect the greatest number of such nominees (or any substitutes therefor
in
the case of unavailability) as the number of votes cast by them would
permit.
NOMINATIONS
FOR DIRECTOR
Nominees
for election to the Board of Directors are selected by the incumbent board
prior
to each annual meeting, based upon the recommendation of the Nominating and
Corporate Governance Committee of the Board of Directors, and the nominees
listed below were selected in that manner. Nominations from shareholders must
be
made in accordance with the Company’s bylaws, which generally require such
nominations to be made in writing and not less than 60 nor more than 90 days
prior to the meeting at which directors are to be elected and to include certain
information about the proposed nominee, in addition to other requirements.
A
copy of
the bylaw provision setting forth the complete procedure for shareholder
nominations of directors may be obtained upon written request to First Bancorp,
Post Office Box 508, 341 North Main Street, Troy, North Carolina 27371-0508,
Attention: Anna G. Hollers, Secretary.
The
Company’s bylaws state that no individual may be elected to, or may serve, on
the Board of Directors any time after his or her 72nd birthday, except that
if a
director is elected to the Board of Directors prior to his or her 72nd birthday
and reaches the age of 72 while serving as a director, such director’s term
shall continue until the next annual meeting of shareholders, at which time
the
director shall retire. The bylaws allow the Board of Directors to make
exceptions to this limitation in connection with mergers or acquisitions. The
bylaws also state that the
Page
2
foregoing
provisions do not apply to any individual during the time such individual is
serving as chief executive officer of the Company.
DIRECTORS,
NOMINEES AND EXECUTIVE OFFICERS
The
following table sets forth certain information as of December 31, 2006, with
respect to the 15 nominees for election to the Board of Directors, two current
directors who are not standing for re-election, the executive officers of the
Company, and the former chief executive officer of the Company (all of these
persons may be contacted at Post Office Box 508, 341 North Main Street, Troy,
North Carolina 27371). The 15 nominees are current directors. Each nominee
was
nominated for election to the Board of Directors by the Nominating and Corporate
Governance Committee as described in the section below entitled “Corporate
Governance Policies and Practices - Director Nomination Process.” Each nominee
has indicated a willingness to serve if elected. The Board of Directors
recommends a vote “FOR” the election of these nominees.
Page
3
TABLE
OF
DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
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Current
Director (D),
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Director
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Common
Stock
Beneficially
Owned (1)
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||||||
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Name
(Age)
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Nominee
(N), or
Position
with Company
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of
Company
Since
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Number
of
Shares
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Percent
of
Class
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||||
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Directors
and Nominees
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Jerry
L. Ocheltree (47)
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President
& CEO (D) (N)
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2006
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15,129
(2)
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0.11%
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||||
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Jack
D. Briggs (67)
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(D)
(N)
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1983
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113,751
(3)
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0.79%
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R.
Walton Brown (54)
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Executive
Vice President (D) (N)
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2003
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41,756
(4)
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0.29%
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||||
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H.
David Bruton, M.D. (72)
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(D)
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2000
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109,375
(5)
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0.76%
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||||
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David
L. Burns (68)
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(D)
(N)
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1988
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77,848
(6)
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0.54%
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||||
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John
F. Burns (59)
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Executive
Vice President (D) (N)
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2000
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80,097
(7)
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0.56%
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||||
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Mary
Clara Capel (48)
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(D)
(N)
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2005
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7,231
(8)
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0.05%
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||||
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James
G. Hudson, Jr. (67)
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Executive
Vice President (D) (N)
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2001
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74,496
(9)
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0.52%
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||||
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George
R. Perkins, Jr. (67)
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(D)
(N)
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1996
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502,775
(10)
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3.50%
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||||
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Thomas
F. Phillips (61)
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(D)
(N)
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2000
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84,904
(11)
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0.59%
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||||
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Edward
T. Taws (72)
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(D)
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1986
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33,377
(12)
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0.23%
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||||
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Frederick
L. Taylor II (37)
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(D)
(N)
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2005
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17,192
(13)
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0.12%
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||||
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Virginia
C. Thomasson (55)
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(D)
(N)
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2000
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26,565
(14)
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0.18%
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||||
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Goldie
H. Wallace (60)
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(D)
(N)
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1997
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251,614
(15)
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1.75%
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||||
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A.
Jordan Washburn (70)
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(D)
(N)
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1995
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48,180
(16)
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0.34%
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||||
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Dennis
A. Wicker (54)
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(D)
(N)
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2001
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19,440
(17)
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0.14%
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||||
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John
C. Willis (64)
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(D)
(N)
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1983
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488,873
(18)
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3.40%
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Non-Director
Executive Officers & Former Chief Executive
Officer
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||||||||
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James
H. Garner (77)
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Former
President & Chief Executive Officer
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n/a
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52,911
(19)
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0.37%
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Anna
G. Hollers (56)
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Executive
Vice President,
Chief
Operating Officer
and
Secretary
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n/a
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96,865
(20)
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0.67%
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Teresa
C. Nixon (49)
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Executive
Vice President,
Chief
Lending Officer &
Compliance
Officer of First Bank
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n/a
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61,584
(21)
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0.43%
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David
G. Grigg (56)
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President
of Montgomery
Data
Services, Inc.
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n/a
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55,636
(22)
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0.39%
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Eric
P. Credle (38)
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Senior
Vice President &
Chief
Financial Officer
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n/a
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29,327
(23)
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0.20%
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Timothy
S. Maples (46)
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Senior
Vice President and
Investment
Officer
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n/a
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24,483
(24)
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0.17%
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Lee
C. McLaurin (44)
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Senior
Vice President & Controller
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n/a
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17,534
(25)
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0.12%
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William
A. Roberts (66)
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Senior
Vice President &
Head
of Operations
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n/a
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5,807
(26)
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0.04%
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Directors/Nominees,
Non-Director Executive Officers and Former Chief Executive Officer
as a
Group (25 persons)
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2,336,749
(27)
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16.27%
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Page
4
________________________________
Notes
to
Table of Directors, Nominees and Executive Officers:
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(1)
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Unless
otherwise indicated, each individual has sole voting and investment
power
with respect to all shares beneficially owned by such individual.
The
above table includes executive officers’ reported shares in the 401(k)
defined contribution plan, which are voted by the plan trustee and
not by
the shareholder for whom such shares are listed. Also included are
shares
subject to options (exercisable as of December 31, 2006 or within
60 days
after December 31, 2006) granted under the Company’s stock option
plan.
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(2)
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Mr.
Ocheltree’s number of shares includes 4,613 shares held in the Company’s
401(k) defined contribution plan and exercisable options to purchase
5,250
shares.
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(3)
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Mr.
Briggs’ number of shares includes 1,375 shares held as custodian for his
daughter, 273 shares held as a custodian for his granddaughter, 63,129
shares held jointly with his spouse, 1,458 shares held by his spouse
and
exercisable options to purchase 12,250 shares.
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(4)
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Mr.
Brown’s number of shares includes 1,448 shares held in the Company’s
401(k) defined contribution plan and exercisable options to purchase
15,000 shares.
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(5)
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Dr.
Bruton’s number of shares includes 6,732 shares held by his spouse, 3,374
shares held as custodian in a trust for a minor, and exercisable
options
to purchase 11,250 shares.
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(6)
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Mr.
D. Burns’ number of shares includes 35,448 shares held by Mr. Burns’
business interests and exercisable options to purchase 15,750
shares.
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(7)
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Mr.
J. Burns’ number of shares includes 3,655 shares held in the Company’s
401(k) defined contribution plan and exercisable options to purchase
8,500
shares.
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(8)
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Ms.
Capel’s number of shares includes exercisable options to purchase 4,500
shares.
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(9)
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Mr.
Hudson’s number of shares includes 2,592 shares held by his spouse and
2,501 shares held in the Company’s 401(k) defined contribution
plan.
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(10)
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Mr.
Perkins’ number of shares includes exercisable options to purchase 22,500
shares.
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(11)
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Mr.
Phillips’ number of shares includes 1,965 shares held by his spouse, 186
shares jointly owned with a relative, and exercisable options to
purchase
13,500 shares.
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(12)
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Mr.
Taws’ number of shares includes 8,677 shares held by his spouse and
exercisable options to purchase 21,900 shares.
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(13)
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Mr.
Taylor’s number of shares includes exercisable options to purchase 4,500
shares.
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(14)
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Ms.
Thomasson’s number of shares includes exercisable options to purchase
16,515 shares.
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(15)
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Ms.
Wallace’s number of shares includes exercisable options to purchase 20,250
shares.
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(16)
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Mr.
Washburn’s number of shares includes exercisable options to purchase
11,250 shares.
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(17)
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Mr.
Wicker’s number of shares includes exercisable options to purchase 13,500
shares.
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(18)
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Mr.
Willis’ number of shares includes 271,591 shares held by his spouse and
exercisable options to purchase 22,500 shares.
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(19)
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Mr.
Garner’s number of shares includes 1,280 shares held in the Company’s
401(k) defined contribution plan, 9,198 shares held jointly with
his
spouse and exercisable options to purchase 2,654 shares.
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(20)
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Ms.
Hollers’ number of shares includes 17,983 shares held in the Company’s
401(k) defined contribution
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Page
5
plan,
3,075 shares held by her spouse and exercisable options to purchase 13,001
shares.
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(21)
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Ms.
Nixon’s number of shares includes 13,841 shares held in the Company’s
401(k) defined contribution plan, 1,852 shares held by Ms. Nixon’s
business interests, 37 shares held in trust for a minor, and exercisable
options to purchase 26,251 shares.
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(22)
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Mr.
Grigg’s number of shares includes 282 shares held jointly with his
daughters, 141 shares held jointly with his son, 10,976 shares held
in the
Company’s 401(k) defined contribution plan and exercisable options to
purchase 14,370 shares.
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(23)
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Mr.
Credle’s number of shares includes 3,039 shares held in the Company’s
401(k) defined contribution plan and exercisable options to purchase
23,850 shares.
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(24)
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Mr.
Maples’ number of shares includes 884 shares held in the Company’s 401(k)
defined contribution plan.
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(25)
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Mr.
McLaurin’s number of shares includes 1,534 shares held in the Company’s
401(k) defined contribution plan and exercisable options to purchase
10,800 shares.
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(26)
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Mr.
Roberts’ number of shares includes 1,342 shares held in the Company’s
401(k) defined contribution plan.
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(27)
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The
number of shares held by directors, nominees, non-director executive
officers and the former chief executive officer as a group includes
461,600 shares held indirectly as described above, and also includes
596,321 shares of the Company’s stock that have been pledged as collateral
by these persons for loans received from the Company and other financial
institutions.
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________________________
Directors
and Nominees
Jerry
L.
Ocheltree was named as the President and Chief Executive Officer of the Company
as of January 1, 2007. He was named as the President of First Bank, the
Company’s banking subsidiary, in September 2005, a position he still holds. Mr.
Ocheltree joined First Bank in 1998, serving as a Senior Vice President -
Regional Executive until his election as President. Mr. Ocheltree has been
a
director of the Company since 2006 and First Bank since 2005.
Jack
D.
Briggs is a funeral director and retail furniture merchant and is president
and
owner of J. Briggs, Inc., Davidson Funeral Home, Inc., Carter Funeral Home,
Inc., and Mountain View of Denton, Inc. and secretary of Piedmont Funeral Home.
Mr. Briggs has been in the funeral director business since 1970. Mr. Briggs
has
been a director of the Company since 1983 and a director of First Bank since
1976.
R.
Walton
Brown was the chairman of the Board of Directors, President, and Chief Executive
Officer of Carolina Community Bancshares, Inc., a bank holding company
headquartered in Latta, South Carolina, from its inception in 1995 until its
acquisition by the Company in January 2003. He served as the president of
Carolina Community Bank, the bank subsidiary of Carolina Community Bancshares,
and its predecessors from 1979 until January 2003, and now serves as Executive
Vice President of First Bank. Mr. Brown has been a director of the Company
and a
director of First Bank since 2003.
H.
David
Bruton, M.D. is a retired physician and served as the Secretary of North
Carolina’s Department of Health and Human Services from 1997 until 2001. Until
December 31, 1996, he was a practicing physician with Sandhills Pediatric,
Inc.
He served as a director of First Savings Bancorp, Inc. from 1979 until First
Savings’ 2000 merger with the Company and has served as a director of the
Company and First Bank since that time.
David
L.
Burns is the chairman of the Board of Directors. Since 1983, Mr. Burns has
served as president of Z. V. Pate, Inc., a Laurel Hill-based holding company
for
agricultural, timber, restaurants and retail sales. Mr. Burns has been a
director of the Company since 1988 and a director of First Bank since
1992.
John
F.
Burns served as a director and President and Chief Executive Officer of First
Savings Bancorp, Inc. at the time of the First Bancorp-First Savings merger
and
had been employed by First Savings since 1972. Since the
Page
6
merger,
he has served as a director of the Company and First Bank. He has been employed
as an Executive Vice President of the Company and First Bank since
2000.
Mary
Clara Capel is a member of senior management as the director of administration
at Capel, Incorporated, a rug manufacturer, importer and exporter located in
Troy, North Carolina, where she has been employed since 1981, including six
years in her current position. Ms. Capel has been a director of the Company
and
First Bank since 2005.
James
G.
Hudson, Jr. served as a director and President and Chief Executive Officer
of
Century Bancorp, Inc., a bank holding company headquartered in Thomasville,
North Carolina, at the time of the May 2001 Century Bancorp acquisition by
the
Company and had been employed with Century since 1972. Since that time, he
has
served as a director of the Company and First Bank. He has been employed as
an
Executive Vice President of First Bank since 2001.
George
R.
Perkins, Jr. is President and Chief Executive Officer of Frontier Spinning
Mills, Inc., a yarn manufacturer located in Sanford, North Carolina, and has
served in such capacity since 1996. Mr. Perkins has been a director of the
Company and First Bank since 1996.
Thomas
F.
Phillips is an automobile dealer and owner of Phillips Ford, located in
Carthage, North Carolina. He served as a director of First Savings Bancorp,
Inc.
from 1985 until First Savings’ 2000 merger with the Company and has served as a
director of the Company and First Bank since that time.
Edward
T.
Taws, Jr. is Chairman of Fletcher Industries/Fletcher International, a
manufacturer of textile machinery located in Southern Pines, North Carolina.
Mr.
Taws has been a director of the Company since 1986 and a director of First
Bank
since 1992.
Frederick
L. Taylor II is President of Troy Lumber Company, located in Troy, North
Carolina where he has been employed since 1992. Mr. Taylor has been a director
of the Company and First Bank since 2005.
Virginia
C. Thomasson is a Certified Public Accountant with the firm Holden, Thomasson,
& Longfellow, P.C., located in Southern Pines, North Carolina, where she has
been a partner since 1988. She served as a director of First Savings Bancorp,
Inc. from 1997 until First Savings’ 2000 merger with the Company and has served
as a director of the Company and First Bank since that time.
Goldie
H.
Wallace is a private investor in the Company and other business interests.
Ms.
Wallace has been a director of the Company and First Bank since
1997.
A.
Jordan
Washburn was a sales representative for Morrisette Paper Company located in
High
Point, North Carolina until his retirement in 2001. Mr. Washburn has been a
director of the Company since 1995 and a director of First Bank since
1994.
Dennis
A.
Wicker is a partner with the law firm Helms Mulliss & Wicker, LLP in
Raleigh, North Carolina. Mr. Wicker served as Lieutenant Governor of North
Carolina from 1993 to 2000. Mr. Wicker is a member of the board of directors
of
Coca-Cola Bottling Company Consolidated and Air T, Inc. Mr. Wicker has been
a
director of the Company and First Bank since 2001.
John
C.
Willis is a private investor in restaurant and real estate interests. Mr. Willis
has been a director of the Company since 1983 and a director of First Bank
since
1980.
Executive
Officers
In
addition to Mr. Brown, Mr. J. Burns, and Mr. Ocheltree, the executive officers
of the Company are as follows:
Anna
G.
Hollers is Chief Operating Officer, Executive Vice President, and Secretary
of
the Company and First Bank. Ms. Hollers has served as Secretary of the Company
and First Bank since 1983, as Executive Vice President of the Company and First
Bank since 1994, and was named Chief Operating Officer in 2005. She has been
employed by the Company since 1983 and by First Bank since 1972.
Page
7
Teresa
C.
Nixon is Chief Lending Officer, Executive Vice President, Loan Administrator,
and the Compliance Officer of First Bank. She has served in these same or
similar capacities since joining First Bank in 1989.
David
G.
Grigg has served as President of Montgomery Data Services, Inc. since its
formation in 1984. He was employed by First Bank from 1972 until
1984.
Eric
P.
Credle is Senior Vice President and has served as the Chief Financial Officer
of
the Company and First Bank since joining the Company in 1997.
Timothy
S. Maples is Senior Vice President and Assistant Secretary of the Company and
First Bank and Investment Officer of First Bank. He has served in his capacity
as Senior Vice President of the Company and First Bank and Investment Officer
of
First Bank since joining the Company in 2000. He has served as Assistant
Secretary of the Company and First Bank since 2005.
Lee
C.
McLaurin is Senior Vice President and has served as the Controller of the
Company and First Bank since joining the Company in 1987.
William
A. Roberts is Senior Vice President and Head of the Operations Division of
First
Bank. He has served in this position since 2006. From 2000 through 2005, he
served as First Bank’s Community Reinvestment Act Officer. He has been employed
by First Bank since 2000.
BOARD
COMMITTEES, ATTENDANCE AND COMPENSATION
The
Board
of Directors has established four standing committees: the Executive Committee,
the Audit Committee, the Compensation Committee, and the Nominating and
Corporate Governance Committee. In addition, the Board of Directors may
establish other committees from time to time for specific purposes.
Executive
Committee
The
Executive Committee is authorized, between meetings of the Board of Directors,
to perform all duties and exercise all authority of the Board of Directors,
except those duties and authorities exclusively reserved to the Board of
Directors by the Company’s bylaws or by statute. The current members of the
Committee are Mr. Briggs, Mr. Brown, Mr. D. Burns-Chairman, Mr. J. Burns, Mr.
Ocheltree, Mr. Perkins, Mr. Phillips, Mr. Taws, Mr. Taylor, Mr. Washburn, Mr.
Wicker and Mr. Willis. Mr. William E. Samuels and Mr. James H. Garner both
retired from the Board of Directors and Executive Committee in 2006. The
Executive Committee held 12 meetings during 2006.
Audit
Committee
The
Audit
Committee is responsible for the appointment, compensation and oversight of
the
Company’s independent auditors, and must approve in advance all audit fees and
the terms of all non-audit services provided by the independent auditors. The
Audit Committee also reviews and presents to the Board of Directors information
regarding the effectiveness of the Company’s policies and procedures with
respect to auditing, accounting, and internal controls. The Audit Committee
also
reviews the Company’s financial reporting process on behalf of the Board of
Directors. The current members of the Audit Committee are Mr. Briggs, Dr.
Bruton, Mr. D. Burns-Chairman, Ms. Capel, Mr. Phillips, Mr. Taylor, Ms.
Thomasson, Ms. Wallace and Mr. Willis, each of whom is independent, as defined
by the National Association of Securities Dealers (“NASDAQ”) and the Securities
Exchange Act. Mr. Wicker resigned from the Audit Committee in December 2006
because he no longer met the Securities Exchange Act independence standards
applicable to audit committee members. This was a result of the law firm in
which Mr. Wicker is a partner being approved by the Company to perform legal
work on its behalf. The Board of Directors determined that Mr. Wicker continued
to meet the NASDAQ definition of “independence,” which permitted him to continue
as an independent director for all purposes other than service on the Audit
Committee. The Audit Committee held 9 meetings during 2006.
The
Board
of Directors has determined that Ms. Thomasson is an “audit committee financial
expert” within the meaning of SEC rules and regulations. The Audit Committee
reviews and ratifies its charter on an annual basis. The Audit Committee
charter
is attached as Appendix A to this proxy statement.
Page
8
Compensation
Committee
The
Compensation Committee operates under a charter that has been approved by the
Board of Directors. The Compensation Committee reviews and ratifies its charter
on an annual basis, and the charter is available on the Company’s website at
www.firstbancorp.com under the tab “Investor Relations.” Generally, the
Committee is responsible for reviewing the compensation policies and benefit
plans of the Company and for making recommendations regarding the compensation
of its executive officers. The Committee also administers the Company’s stock
option plan. The Committee has the authority to delegate any of its
responsibilities to subcommittees. The current members of the Committee are
Mr.
Briggs, Mr. D. Burns-Chairman, Mr. Phillips, Ms. Thomasson, Mr. Wicker, and
Mr.
Willis, each of whom is independent under the rules and regulations of NASDAQ.
Mr. Washburn resigned from the Compensation Committee in July 2006 because
he no
longer met the independence standards of NASDAQ. This was a result of First
Bank
purchasing land from a partnership in which Mr. Washburn’s son has an ownership
interest. Mr. Willis was appointed to the Compensation Committee to replace
Mr.
Washburn. The Compensation Committee held eight meetings during
2006.
Nominating
and Corporate Governance Committee
The
Nominating and Corporate Governance Committee is responsible for i) identifying
qualified individuals to become Board members, ii) determining the composition
of the Board and its committees, and iii) developing and implementing the
Company’s corporate governance guidelines. The Committee will consider
shareholder nominees for board membership. Any shareholder wishing to nominate
a
candidate for director must follow the procedures described in the section
“Nominations For Director” above. The section below entitled “Corporate
Governance Policies and Practices - Director Nomination Process” describes the
process utilized by the Nominating and Corporate Governance Committee for
identifying and evaluating candidates to be nominated as directors. The
Nominating and Corporate Governance Committee reviews and ratifies its charter
on an annual basis, and the charter is available on the Company’s website at
www.firstbancorp.com under the tab “Investor Relations.” The current members of
the Committee are Mr. D. Burns-Chairman, Mr. Phillips, Ms. Thomasson, Mr.
Wicker, and Mr. Willis, each of whom is independent as defined by NASDAQ rules.
Mr. Washburn resigned from the Nominating and Corporate Governance Committee
in
July 2006 because he no longer met the independence standards of NASDAQ. This
was a result of First Bank purchasing land from a partnership in which Mr.
Washburn’s son has an ownership interest. Mr. Willis was appointed to the
Nominating and Corporate Governance Committee to replace Mr. Washburn. The
Nominating and Corporate Governance Committee held two meetings during
2006.
Attendance
The
Board
of Directors held 13 meetings during 2006. In 2006, all of the directors and
nominees for re-election attended at least 75% of the aggregate of the meetings
of the Board of Directors and the committees described above on which they
served during the period they were directors and members of such
committees.
CORPORATE
GOVERNANCE POLICIES AND PRACTICES
The
Company has developed, and operates under, corporate governance principles
and
practices that are designed to maximize long-term shareholder value, align
the
interests of the board and management with those of the Company’s shareholders,
and promote the highest ethical conduct among the Company’s directors and
employees. Highlights of the Company’s corporate governance policies, practices
and procedures are described below.
Director
Independence
The
Board
of Directors believes that a substantial majority of the board should consist
of
directors who are independent under rules set forth by NASDAQ. The Board of
Directors makes an annual determination regarding the independence of each
of
the Company’s directors. The board last made these determinations for each
member of the board in February 2007, based on the review of director
questionnaires designed to elicit information regarding independence. The Board
of Directors has determined that 11 of its 17 current directors are independent
as contemplated by NASDAQ. The six individuals who are not independent are
Mr.
Brown, Mr. J. Burns, Mr. Hudson, Mr. Ocheltree, Mr. Perkins, and Mr. Washburn.
Each of the directors who is not independent, except Mr. Perkins and Mr.
Washburn, is a current employee of the Company. Mr. Perkins is not considered
independent under NASDAQ criteria because of a transaction between a business
interest of his and the Company that occurred in
Page
9
2004.
Mr. Washburn is not considered independent under NASDAQ criteria as a result
of
a transaction between the Company and his son that occurred in
2006.
Annual
Director Re-Election
Since
the
Company’s inception, its bylaws have required that directors must stand for
re-election to the Board of Directors at each annual shareholders’ meeting. The
Board of Directors believes that this policy makes it easier for shareholders
to
hold directors more directly accountable for corporate performance compared
to
the staggered-board structure in use at many public companies, which permits
directors to hold their positions for several years.
Separation
of the Offices of Chairman and Chief Executive Officer
The
Board
of Directors believes that one of its main purposes is to protect shareholders’
interests by providing independent oversight of management, including the Chief
Executive Officer. Although not required by the Company’s bylaws, the Board of
Directors has historically believed, and continues to believe, that this
objective is facilitated by having an independent director serve as Chairman,
thereby separating the offices of Chairman of the Board of Directors and Chief
Executive Officer. The Chairman of the Board is responsible for approving
meeting schedules and agendas, as well as acting as a liaison between the Chief
Executive Officer and the independent directors.
Executive
Sessions
The
Board
of Directors has adopted a resolution requiring that the independent directors
of the Company meet at least twice a year in executive session with no
non-independent directors or employees of the Company present. At these
meetings, the independent directors discuss strategic or other key issues
regarding the Company. Two of these executive sessions were held in
2006.
Director
Nomination Process
The
Nominating and Corporate Governance Committee is responsible for identifying
individuals qualified to become board members and recommending to the board
the
individuals for nomination as members of the board. The goal of the Nominating
and Corporate Governance Committee is to create a board that will demonstrate
objectivity and the highest degree of integrity on an individual and collective
basis. In evaluating current members and new candidates, the Nominating and
Corporate Governance Committee considers the needs of the board and the Company
in light of the current mix of director skills and attributes. In addition
to
requiring that each director possess the highest integrity and character, the
Nominating and Corporate Governance Committee’s evaluation of director
candidates includes an assessment of issues and factors regarding an
individual’s familiarity with the Company’s geographic market area, independence
as defined by the various regulatory authorities, business experience,
accounting and financial expertise, diversity, and awareness of the Company’s
responsibilities to its customers, employees, regulatory bodies, and the
communities in which it operates. The Nominating and Corporate Governance
Committee also takes into consideration the Board’s established policies
relating to the Board’s retirement policy and the ability of directors to devote
adequate time to board and committee matters. When the Nominating and Corporate
Governance Committee is considering current board members for nomination for
re-election, the Committee also considers prior board contributions and
performance, as well as meeting attendance records.
The
Nominating and Corporate Governance Committee may seek the input of the other
members of the Board and management in identifying and attracting director
candidates that are consistent with the criteria outlined above. In addition,
the Committee may use the services of consultants or a search firm, although
it
has not done so in the past. The Nominating and Corporate Governance Committee
will consider recommendations by Company shareholders of qualified director
candidates for possible nomination to the board. Shareholders may recommend
qualified director candidates by writing to the Company’s Corporate Secretary at
341 North Main Street, Troy, North Carolina 27371. Submissions should include
information regarding a candidate’s background, qualifications, experience, and
willingness to serve as a director. Based on a preliminary assessment of a
candidate’s qualifications, the Nominating and Corporate Governance Committee
may conduct interviews with the candidate and request additional information
from the candidate. The Committee uses the same process for evaluating all
nominees, including those recommended by shareholders.
Page
10
In
addition, the Company’s bylaws contain specific conditions under which persons
may be nominated directly by shareholders as directors at an annual meeting
of
shareholders. The provisions include the condition that shareholders comply
with
the advance notice time-frame requirements described under the section entitled
“Nominations for Director” above.
Stock
Ownership Requirements
The
Company’s Board of Directors has adopted a common stock ownership policy for
members of the board. This policy requires that any candidate for the Board
of
Directors must either own, or commit to acquire, common stock of the Company
with a monetary value of at least $50,000. The Board believes that this stock
ownership policy substantially enhances shareholder value by materially aligning
the Board’s interest with those of the shareholders.
Mandatory
Retirement
The
Company’s bylaws state that no individual may be elected to, or may serve, on
the Board of Directors any time after his or her 72nd birthday, except that
if a
director is elected to the Board of Directors prior to his or her 72nd birthday
and reaches the age of 72 while serving as a director, such director’s term
shall continue until the next annual meeting of shareholders, at which time
the
director shall retire. The bylaws allow for the Board to make exceptions to
this
limitation in connection with mergers or acquisitions. The bylaws also state
that the foregoing provisions do not apply to any individual during the time
such individual is serving as chief executive officer of the Company.
Communications
with Directors
The
Board
of Directors believes that it is important that a direct and open line of
communication exist between the Board of Directors and its shareholders and
other interested parties. Any shareholder or other interested party who desires
to contact one or more of the Company’s directors may send a letter to the
following address:
First
Bancorp Board of Directors
PO
Box
417
Troy,
North Carolina 27371
In
addition, any shareholder or other interested party who has any concerns or
complaints relating to accounting, internal controls or auditing matters, may
contact the Audit Committee by writing to the following address:
First
Bancorp Audit Committee
PO
Box
417
Troy,
North Carolina 27371
All
such
communications will be forwarded to the appropriate party as soon as practicable
without being screened.
Annual
Meeting Policy
Directors
are expected to attend the Company’s annual meeting of shareholders. Except for
Ms. Wallace, all current members of the Board attended the Company’s 2006 annual
meeting of shareholders.
Cumulative
Voting
The
Company’s bylaws provide for the availability of “cumulative voting” in the
election of directors. Under cumulative voting, each shareholder calculates
the
number of votes available to such shareholder by multiplying the number of
votes
to which his or her shares are normally entitled by the number of directors
for
whom the shareholder is entitled to vote. The shareholder can then cast the
product of the multiplication for a single candidate or can distribute it in
any
manner among any number of candidates. For example, if 15 directors are to
be
elected, a shareholder who owns 1,000 shares with one vote per share will have
15,000 votes. This shareholder can cast all of these votes for one candidate,
or
1,000 for 15 candidates, or 5,000 for each of three candidates, or any other
mathematically possible combination.
Page
11
The
purpose of cumulative voting is to preserve the right of minority shareholders,
or a group of shareholders acting together, to obtain representation on the
Board of Directors that is roughly proportional to their ownership interest
in
the corporation. The Company’s Board of Directors believes that the minority
representation guaranteed by cumulative voting is an appropriate feature of
corporate democracy and is not likely to cause harmful factionalism on the
board.
Cumulative
voting procedures will not be followed at the annual meeting unless a
shareholder calls for cumulative voting as provided in the Company’s articles of
incorporation, by announcing at the meeting before the voting for directors
starts, his or her intention to vote cumulatively. See the third paragraph
under
Proposal 1 above for additional information regarding cumulative
voting.
Code
of Conduct
The
Board
of Directors has adopted a Code of Conduct that applies to the Company’s
directors and employees, including the Chief Executive Officer, Chief Financial
Officer and Principal Accounting Officer. The Code includes guidelines relating
to ethical handling of actual or potential conflicts of interest, compliance
with laws, accurate financial reporting, and procedures for promoting compliance
with, and reporting violations of, the Code. The Code of Conduct is available,
without charge, upon written request to the following address: First Bancorp,
Attention: Anna Hollers - Corporate Secretary, PO Box 508, Troy, North Carolina
27371, or by sending an e-mail to Ms. Hollers at
ahollers@firstbancorp.com.
COMPENSATION
OF DIRECTORS
The
Board
of Directors establishes compensation for board members based primarily on
consultation with an outside consultant, who assists the Board of Directors
in
evaluating whether they are receiving fair compensation for the services they
perform. This is based primarily on a comparison to other financial service
companies of a similar size. This type of analysis was performed in January
2006
in setting the director fee schedule for 2006. Based on this evaluation, the
Company set its monthly retainer at $600, and the fee for each board meeting
attended at $250. Normally, meetings are held monthly. Such directors who served
on the Executive Committee, Nominating and Corporate Governance Committee,
Audit
Committee, or Compensation Committee also receive $250 for each committee
meeting attended. In January 2007, a similar analysis to that described above
was performed, and based on such analysis, the director fee schedule for 2007
did not change from 2006.
In
2006,
directors of the Company were also compensated $250 for each meeting attended
for their service as directors on the boards of the Company’s subsidiaries. All
directors of the Company are also directors of First Bank, the Company’s
principal subsidiary. Various combinations of 10 to 12 directors of the Company
currently serve on the boards of Montgomery Data Services and First Bancorp
Financial Services, subsidiaries of the Company, and First Bank Insurance
Services, a subsidiary of First Bank. The boards of First Bank and Montgomery
Data Services normally meet on a monthly basis, whereas the First Bank Insurance
Services board normally meets on a quarterly basis, and the board of First
Bancorp Financial Services currently meets on an annual basis.
Non-employee
directors of the Company also participate in the Company’s stock option plan. In
June 2006, each non-employee director of the Company received an option to
acquire 2,250 shares of the Company’s common stock over a 10 year term at an
exercise price equal to the fair market value of such stock on the date of
grant. It is the intent of the Board of Directors that similar grants be made
in
June of each year to non-employee directors.
In
addition to the compensation described above, the Company provides one of its
directors, Mr. Washburn, with approximately 100 square feet of office space,
which Mr. Washburn uses primarily in connection with his work with various
charitable organizations.
Page
12
In
addition to the compensation they receive for service as directors, there are
four board members who are also employees of the Company. The directors are
Mr.
Brown, Mr. J. Burns, Mr. Hudson and Mr. Ocheltree. Compensation for Mr.
Ocheltree is disclosed in the following section entitled “Compensation
Discussion and Analysis.” Mr. Brown, Mr. Burns and Mr. Hudson each have
employment agreements with the Company that are consistent with those described
in the section below entitled “Compensation Discussion and Analysis,” except
that Mr. Hudson’s contract was amended in 2005 to reduce the number of hours he
is required to work each week from 40 hours to 20. Additionally, Mr. Hudson’s
amended contract does not have automatic renewal provisions and expires in
May
2008.
Page
13
The
following table sets forth compensation we paid to our directors in
2006:
|
Name
(a)
|
Fees
Earned or
Paid
in Cash ($)
(b)
|
Option
Awards
($)
(d)
|
All
Other
Compensation
($)
(g)
|
Total
($)
(h)
|
|
Jack
D. Briggs
|
22,250
|
15,278
|
—
|
37,528
|
|
R.
Walton Brown (2)
|
22,300
|
—
|
210,952
|
233,252
|
|
H.
David Bruton
|
19,550
|
15,278
|
—
|
34,828
|
|
David
L. Burns
|
27,240
|
15,278
|
—
|
42,518
|
|
John
F. Burns (2)
|
18,240
|
—
|
251,624
|
269,864
|
|
Mary
Clara Capel
|
15,950
|
15,278
|
—
|
31,228
|
|
James
H. Garner (3)
|
23,270
|
—
|
—
|
23,270
|
|
James
G. Hudson, Jr. (2)
|
15,360
|
—
|
95,595
|
110,955
|
|
Jerry
L. Ocheltree (3)
|
18,900
|
—
|
—
|
18,900
|
|
George
R. Perkins, Jr.
|
16,630
|
15,278
|
—
|
31,908
|
|
Thomas
F. Phillips
|
26,700
|
15,278
|
—
|
41,978
|
|
Edward
T. Taws, Jr.
|
18,610
|
15,278
|
—
|
33,888
|
|
Frederick
L. Taylor II
|
13,700
|
15,278
|
—
|
28,978
|
|
Virginia
C. Thomasson
|
20,450
|
15,278
|
—
|
35,728
|
|
Goldie
H. Wallace
|
13,950
|
15,278
|
—
|
29,228
|
|
A.
Jordan Washburn
|
18,860
|
15,278
|
—
|
34,138
|
|
Dennis
A. Wicker
|
16,450
|
15,278
|
—
|
31,728
|
|
John
C. Willis
|
23,700
|
15,278
|
—
|
38,978
|
|
(1)
The following table shows the number of stock options that each
director
held as of December 31, 2006:
|
|
Aggregate
Outstanding Equity Awards
|
|
|
Name
|
Options
Outstanding
(#)
|
|
Jack
D. Briggs
|
12,250
|
|
R.
Walton Brown
|
15,000
|
|
H.
David Bruton
|
11,250
|
|
David
L. Burns
|
15,750
|
|
John
F. Burns
|
8,500
|
|
Mary
Clara Capel
|
4,500
|
|
James
H. Garner
|
2,654
|
|
James
G. Hudson, Jr.
|
-
|
|
Jerry
L. Ocheltree
|
5,250
|
|
George
R. Perkins, Jr.
|
22,500
|
|
Thomas
F. Phillips
|
13,500
|
|
Edward
T. Taws, Jr.
|
21,900
|
|
Frederick
L. Taylor II
|
4,500
|
|
Virginia
C. Thomasson
|
16,515
|
|
Goldie
H. Wallace
|
20,250
|
|
A.
Jordan Washburn
|
11,250
|
|
Dennis
A. Wicker
|
13,500
|
|
John
C. Willis
|
22,500
|
|
(2)
"All Other Compensation" includes the sum of the director's salary,
bonus,
401(k) match, and club dues as an employee.
|
|||||
|
(3)
We report Mr. Garner's and Mr. Ocheltree's compensation as employees
in
the summary compensation table
below.
|
Page
14
EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
In
this
section, we discuss our compensation program as it pertains to our principal
executive officer, our principal financial officer, and our three other most
highly compensated executive officers in 2006. We refer to these five persons
throughout as the “named executive officers.” Our discussion focuses on
compensation and practices relating to 2006, our most recently completed fiscal
year.
Structure
and Role of the Compensation Committee
The
Compensation Committee of our board of directors consists entirely of
independent directors. It operates under a written charter that the board has
adopted.
The
committee is primarily responsible for the following:
|
·
|
Reviewing
the performance of our chief executive officer, or CEO
|
|
·
|
Recommending
the compensation of our CEO to the board
|
|
·
|
Reviewing
and approving the CEO’s recommendations about the compensation of our
other executive officers
|
|
·
|
Recommending
to the board the performance targets for our annual incentive bonus
plan
|
|
·
|
Periodically
reviewing our equity-based and other incentive plans and recommending
any
revisions to the board of directors
|
|
·
|
Recommending
to the board any discretionary 401(k)
contributions
|
|
·
|
Approving
any stock option grants
|
The
committee does not give the CEO any explicit parameters in recommending base
salary adjustments for the other named executive officers. Instead, the
committee expects the CEO to use reasonable judgment, based on his years of
experience in the banking industry and his subjective observations of the
current business environment and the officers’ performance.
Compensation
Philosophy and Objectives
The
objectives of our executive compensation programs are:
|
·
|
Fairly
compensating executives for their
efforts
|
|
·
|
Attracting
and retaining quality executive
leadership
|
|
·
|
Rewarding
the achievement of annual corporate performance
targets
|
|
·
|
Aligning
officers’ long-term interests with those of our
shareholders
|
The
committee’s general philosophy is that we should compensate our executive
officers at approximately the same average level as corresponding officers
at
similarly situated peer financial service companies.
Because
the committee bases its compensation decisions on the objectives and philosophy
described above, it does not take into account an individual’s net worth or the
wealth the individual has accumulated from prior compensation.
Competitive
Positioning
Periodically,
the committee engages outside compensation consultants to evaluate whether
our
compensation practices are consistent with meeting our objectives. In these
engagements, the outside consultant typically compares our compensation
practices and compensation levels to those of a peer group of similarly situated
financial service companies. The consultant then provides the committee with
analysis and recommendations.
The
committee engaged Benmark, a nationally recognized compensation expert, to
provide analysis and
Page
15
recommendations
regarding compensation in 2006 for our named executive officers. In January
2006, Benmark presented the committee with its findings, which it based on
a
study of 2004 proxy data (the most recent data available).
The
Benmark analysis compared the annual direct compensation (salary and bonus)
of
our named executive officers to a representative sample of similarly situated
financial service companies located in the Southeast with total assets between
$1 and $5 billion. This peer group consisted of the following
companies:
|
· First
Charter Corporation
|
· United
Community Banks
|
|
· Southern
Community Financial Corporation
|
· Main
Street Banks
|
|
· First
Community Bancshares
|
· GB&T
Bancshares
|
|
· Union
Bankshares Corporation
|
· Capital
City Bank Group
|
|
· Virginia
Financial Group
|
· Seacoast
Banking Corp of Florida
|
|
· FNB
Corporation
|
· Alabama
National Bancorporation
|
|
· Virginia
Commerce Bancorp
|
· Greene
County Bancshares
|
|
· SCBT
Financial Corporation
|
Composition
of Direct Compensation
We
provide a mix of pay elements to compensate our named executive officers. Of
this mix, the largest two elements are generally the two elements of annual
direct compensation, base salary and annual incentive bonus (direct
compensation, as we define it, excludes stock option grants).
For
2006,
the committee designed our Management Incentive Plan to provide our named
executive officers, except the CEO (see below), with the opportunity to earn
an
annual cash bonus of 35%-50% of their base salary if we achieved targeted levels
of earnings performance. The committee and the board believe that a meaningful,
but not overwhelming, amount of each named executive officer’s annual direct
compensation should be tied to achieving corporate performance targets. The
committee believes this structure reflects a proper balance of direct
compensation that provides our officers with a baseline level of financial
stability (in the form of base salary), while also providing an appropriate
incentive for achieving annual targets that drive our corporate
performance.
Immediately
after we initially adopted our Management Incentive Plan in the early 1990s,
the
board exempted our CEO from the plan. Instead, his bonus was set as a flat
percentage of our consolidated net income, which was consistent with how his
bonus had been calculated in prior years. The board set this alternate formula
for our CEO in order to directly correlate his bonus to all incremental
increases in consolidated net income. From 1997 through 2006, this percentage
was set at 1%. Based on its review of peer company statistics, the board
determined that the 1% amount generally resulted in a reasonable proportion
of
bonus to base salary.
Executive
Compensation Program Overview
The
five
primary components of our executive compensation program are:
|
·
|
Base
salary
|
|
·
|
Annual
cash incentives
|
|
·
|
Equity
grants
|
|
·
|
Benefits
|
|
·
|
Post-termination
compensation
|
The
following section briefly describes each of these components.
1. Base
Salary
We
pay
each officer a base salary because it provides a basic level of compensation
and
is necessary for recruitment and retention. The committee intends that our
named
executive officers’ base salaries will provide them with a competitive baseline
level of compensation based on their individual experience, performance and
scope of responsibility. An important aspect of base salary is the ability
of
the committee, the board and the CEO (in the
Page
16
case
of
other officers’ salaries) to use annual base salary adjustments to reflect an
individual’s performance or changed responsibilities.
Base
salary levels are also important because we generally tie the amount of
incentive compensation and retirement benefits to an officer’s base salary. For
example, awards under our annual bonus plan, the Management Incentive Plan,
are
denominated as a percentage of base salary.
For
our
named executive officers, the committee targets base salaries to be at or near
the market averages, based on our most recent peer group market data. In
addition, each of the named executive officers has an employment agreement
that
entitles him or her to an annual increase in base salary that is at least as
much as any percentage increase in the U.S. consumer price index in the prior
12
months. For 2006, this resulted in salary increases between approximately 3%
and
9% for the named executive officers other than Mr. Ocheltree. The CEO
recommended, and the committee approved, a substantial increase in Mr.
Ocheltree’s base salary to reflect his new responsibilities as president of the
bank.
2. Annual
Cash Incentive
2006
Incentive Bonus
We
have
an annual incentive bonus plan under which we pay cash bonuses each January
based on corporate performance in the preceding fiscal year. We pay bonuses
under this plan in order to promote the attainment of specific corporate goals
that the committee and the board think are particularly important. The plan
has
two thresholds that the board established when it adopted the plan in 1993:
|
·
|
return
on average equity of at least 10%,
and
|
|
·
|
actual
earnings per share as a percent of the targeted goal of at least
90%.
|
This
means that if we do not achieve a return on average equity of at least 10%,
or
if we do not achieve at least 90% of our targeted earnings per share, no one
receives a bonus under the plan. The board selected these two threshold goals
in
order to require certain minimum levels of acceptable profitability before
bonuses are paid.
If
we
meet these two thresholds, the plan pays bonuses according to a scale based
on
the actual level of earnings per share achieved in relation to the targeted
goal
(see below). The board set this scale and selected earnings per share as the
payment measure at the inception of the plan. Earnings per share was set as
the
payment measure because the board believed that there is a close correlation
between earnings per share and shareholder value (as reflected in our stock
price).
These
are
the same performance measures that we have used under the plan since its
inception in 1993. Throughout this time, the board has set the earnings per
share goal based primarily on the earnings per share goal in our annual budget.
The board approves our budget at the beginning of each fiscal year, based on
recommendations of and discussions with management. Then, recognizing that
it
sets the budget at an aggressive level, the board typically has set the target
earnings per share goal for the plan 1-2% below the budgeted earnings per share.
For 2006, this resulted in a target of $1.54 basic earnings per share under
the
plan.
Each
named executive officer who participates in this plan has a target bonus payment
that is expressed as a percentage of his/her salary. The board set the target
bonus percentage for each officer for 2006 at a level that is generally at
or
near the average bonus paid to peer company officers with similar
responsibilities. The following table indicates the target bonus percentage
in
2006 for the named executive officers who participated in the plan (as described
below, Mr. Garner did not participate in 2006):
|
Named
Executive Officer
|
Target
Bonus Percentage
|
|
Jerry
L. Ocheltree
|
50%
|
|
Anna
G. Hollers
|
35%
|
|
Teresa
C. Nixon
|
35%
|
|
Eric
P. Credle
|
35%
|
Page
17
As
noted
above, the board also established a scale of the bonus each participant would
receive, as a percentage of his/her target bonus percentage, based on earnings
per share between a threshold level (below which we would pay no bonuses) and
a
maximum level (above which bonuses would not increase). The threshold earnings
per share goal was 90% of the target, and the maximum was 125% of the target.
Earnings per share between any of the stated goals would yield a proportionate
award. The following table shows the scale.
|
Percentage
of
Earnings
Per Share Goal
|
Percentage
of
Target
Bonus
|
|
Threshold
90
|
30
|
|
95
|
60
|
|
Target
100
|
100
|
|
105
|
110
|
|
110
|
120
|
|
115
|
130
|
|
120
|
140
|
|
Maximum
125
|
150
|
Accordingly,
the bonus range for 2006 for each of the four named executive officers who
participated in this plan for 2006, expressed as a percentage of base salary,
was to be as follows:
|
Named
Executive Officer
|
Target
Bonus Percentage
|
|
Jerry
L. Ocheltree
|
0%-75.0%
|
|
Anna
G. Hollers
|
0%-52.5%
|
|
Teresa
C. Nixon
|
0%-52.5%
|
|
Eric
P. Credle
|
0%-52.5%
|
In
the
second half of 2006, the board approved changes in the bonus formula for 2006
under the plan. First, the board reduced the threshold level of earnings per
shares from 90% to 80%. Second, it adjusted the scale for determining bonus
awards, increasing the payout at the threshold level changing from 30% to 50%
of
the target bonus. The board made these changes because our earnings per share
was projected to be approximately 88% of the targeted level, principally due
to
an unusual loss, and the board did not believe that it would be equitable for
our named executive officers not to receive bonuses under the circumstances.
In
making this decision, the board consulted with Clark Consulting, nationally
recognized compensation consultants that we had recently engaged to assist
the
committee in evaluating our executive compensation program for 2007. Our
benefits consultant from Clark Consulting indicated that the changes were
consistent with his experience in the benefits industry, and the board of
directors believed they were reasonable.
The
bonus
scale for 2006, as revised, was as follows:
|
Percentage
of
Earnings
Per Share Goal
|
Percentage
of Target Bonus, 2006
|
|
Threshold
80
|
50
|
|
90
|
75
|
|
Target
100
|
100
|
|
105
|
110
|
|
110
|
120
|
|
115
|
130
|
|
120
|
140
|
|
Max.
125
|
150
|
Our
earnings per share for 2006 was 88% of target, and accordingly, each named
executive officer who participated in the plan received a bonus of 70% of
his/her target bonus percentage. In addition, after the end of the year but
before we paid these bonuses, our new CEO recommended to the compensation
committee that the target bonus percentage for three of the named executive
officers be increased from 35% to 40%. Clark Consulting had recently recommended
these increases, and Mr. Ocheltree believed they should be effective
immediately. The committee agreed and approved payment of the higher bonuses
to
Ms. Hollers, Ms. Nixon and Mr. Credle.
Page
18
In
2006,
as in prior years, our CEO did not participate in this bonus plan. Instead,
the
board set the CEO’s bonus at 1% of our consolidated net income. The board chose
this alternate formula for our CEO in order to correlate his bonus directly
to
all incremental increases in net income. Based on the most recent peer company
market data, the board concluded that the 1% payment level would result in
a
reasonable bonus for the CEO.
The
following table presents the amount of the cash bonus that each named executive
officer received for 2006, expressed as a percentage of the officer’s base
salary.
|
Named
Executive Officer
|
2006
Bonus Received as a
Percent
of Base Salary
|
|
James
H. Garner
|
64%
|
|
Jerry
L. Ocheltree
|
35%
|
|
Anna
G. Hollers
|
28%
|
|
Teresa
C. Nixon
|
28%
|
|
Eric
P. Credle
|
28%
|
Changes
to the Plan for 2007
As
noted
above, in late 2006, we engaged Clark Consulting to assist the committee in
evaluating our executive compensation program. Based on their advice, in January
2007 the committee recommended, and the board approved, a new cash-based annual
incentive plan. This plan will be in effect for 2007 for specified employees,
including all of our named executive officers who remain employed with us
(including our CEO).
The
primary difference between the new plan and the previous plan is that the new
plan allows for the possibility of using multiple performance measures to
determine the amount of each participant’s annual bonus. By contrast, the old
plan based bonuses entirely on earnings per share performance once we met the
threshold goals. Under the new plan, the board will assign a weight to each
performance measure, with the sum of the weights equal to 100%. The weight
is
the percentage of each participant’s total bonus that will be based on that
particular performance measure. The board will also set threshold, target and
maximum performance levels for each measure. If we do not achieve the threshold
performance level, participants will earn no bonus for that measure. They will
earn 50% of their target bonus for the measure if we meet the threshold level,
100% if we meet the target level and 200% if we achieve the maximum level.
Bonuses will be directly proportional for performance between any of these
set
points. Thus, under the new plan an officer’s bonus amount could range from 0%
to 200% of the officer’s total target bonus award.
The
board
determined that the 2007 performance goals for the named executive officers
would be earnings per share, return on average equity, core deposit growth,
and
assets per employee.
The
board
also set the following target bonuses for the named executive officers. These
are total target awards, i.e., the sum of the target awards for each of the
four
performance measures, and they are expressed as percentages of base salary.
|
Named
Executive Officer
|
Target
Bonus Percentage
|
|
Jerry
L. Ocheltree
|
50%
|
|
Anna
G. Hollers
|
40%
|
|
Teresa
C. Nixon
|
40%
|
|
Eric
P. Credle
|
40%
|
The
total
target award for our CEO for 2007 is the same, as a percentage of salary, as
his
target award for 2006, when he was the president of our bank subsidiary. As
we
noted above, the board has increased the target awards for the other three
officers by 5% of their salaries.
Page
19
3. Equity
Grants
Current
Stock Option Plan
In
1994
and then again in 2004, we adopted, and our shareholders approved, a stock
option plan. We believe that stock options are an important tool for aligning
our employees’ long-term interests with those of our shareholders. They also
serve to reward outstanding performance. Under our current plan, the committee
has the discretion to grant options each year to executive officers and other
key employees. Although we currently have no formal system for determining
the
number of options we grant each, either in the aggregate or to any individual,
the committee generally considers our current financial performance, the
individual’s level of responsibility and the number of stock options we have
previously granted the individual. The committee has not intended for options
to
be an ongoing component of annual compensation, but instead has typically
granted them to attract new employees, to recognize changes in responsibilities,
and to periodically reward exemplary performance. The committee did not believe
that any of these conditions existed in 2006 and thus did not grant any
options.
2007
Equity Compensation Plan
The
board
is now proposing that our shareholders approve a new equity plan (see Proposal
3
below). Clark Consulting has recommended this plan to us. If
our
shareholders approve the new plan, it will allow us to structure incentive
awards using various types of equity-based compensation, including performance
units, restricted stock, stock options, and stock appreciation rights. Our
current plan provides only for option grants, which no longer have an advantage
from an accounting perspective over other types of equity-based compensation.
We
have not yet adopted a formal plan for determining when and to whom to make
grants under the new plan.
4. Benefits
We
provide a competitive benefits program for our named executive officers. We
provide these benefits in order to retain and attract an appropriate caliber
of
talent and recognize that other companies with which we compete for talent
provide similar benefits to their executive officers.
The
following table lists our current benefit programs and shows, for each, the
employees eligible for each benefit:
|
Benefit
Plan
|
Named
Executive
Officers
|
Certain
Managers
and
Individual
Contributors
|
All
Full-Time
Employees
|
|||
|
Supplemental
Executive Retirement
Plan
|
X
|
X
|
||||
|
Perquisites
|
X
|
X
|
||||
|
401(k)
Plan
|
X
|
X
|
X
|
|||
|
Defined
Benefit Pension Plan
|
X
|
X
|
X
|
|||
|
Health
Insurance
|
X
|
X
|
X
|
|||
|
Medicare
Supplement
|
Mr.
Garner only
|
|||||
|
Life
Insurance
|
X
|
X
|
X
|
|||
|
Additional
Death Benefit
|
Mr.
Garner only
|
|||||
|
Disability
Insurance
|
X
|
X
|
X
|
|||
|
Long-Term
Care Insurance
|
Mr.
Garner only
|
Death
Benefit
We
provide basic life insurance coverage for all full-time employees in the amount
of two times the employee’s average salary, up to a maximum of $300,000.
Additionally, in 2005, the committee agreed to pay $100,000 upon the death
of
Mr. Garner, our CEO until his retirement on December 31, 2006, to his spouse
or
estate. The committee made this commitment to Mr. Garner because the company
had
recently terminated a split-dollar life insurance plan in which Mr. Garner
(and
others) had participated. We terminated this plan, which was designed to pay
$100,000 upon the death of each participant, in response to provisions of the
2002 Sarbanes-Oxley Act. The committee believed that Mr. Garner, because of
his
advanced age, would not be able to recoup the value of this
Page
20
terminated
benefit in the future in the event that we established a replacement benefit
of
some type.
Supplemental
Insurance Benefits
In
addition to the death benefit, the board granted Mr. Garner two other benefits
in 2004 and 2005 in recognition of his long tenure with us and our performance
during his service as CEO. First, in 2004, the committee designated Mr. Garner
as the first participant in our long-term care insurance plan (he remains the
only participant). This plan provides for the payment of insurance premiums
for
a long-term care insurance policy for each participant. Under this plan, we
purchased a long-term care insurance policy for Mr. Garner’s benefit. The policy
calls for 10 annual payments of $22,880 per year. Mr. Garner was to be 100%
vested in the benefit upon the completion of three years of service, which
meant
he would have been fully vested in August 2007. However, in December 2006,
the
board of directors voted to accelerate his vesting to 100% upon his announced
retirement on December 31, 2006.
In
2005,
the board approved an agreement under which we will pay for supplemental
Medicare insurance for Mr. Garner and his spouse for the rest of their lives.
Supplemental
Executive Retirement Plan
We
sponsor a supplemental executive retirement plan, or SERP, for the benefit
of
certain members of our senior management, including each of the named executive
officers. The purpose of the SERP is to provide additional monthly pension
benefits to ensure that each participant will receive lifetime pension benefits
beyond the amounts that we can pay under our qualified pension plan. The SERP
generally provides participants with an annual benefit at retirement equal
to 3%
of final average compensation multiplied by years of service, up to a maximum
of
60% of final average compensation (65% for Mr. Garner). The amount of a
participant’s SERP benefit is reduced by (1) the amount payable under our
qualified pension plan, and (2) 50% of the participant’s primary social security
benefit.
We
set
the benefits payable under the SERP in 1993 at the inception of the plan, in
consultation with an employee benefits consultant who assisted us with plan
design. At that time, the employee benefits consultant provided peer information
and gave his expert opinion that the benefits payable under this plan were
reasonable and would further our objectives of attracting and retaining senior
management executives. The committee believes these reasons are still
valid.
5. Post-Termination
Compensation
Accelerated
Vesting
Our
current stock option plan and the SERP have change in control provisions that
automatically vest all participants in the benefits of each plan in the event
of
a change in the control of our company. We believe that other companies with
which we compete for executive talent provide a similar acceleration benefit,
and that these provisions therefore assist us in attracting and retaining
talent.
Employment
Agreements
We
have
three-year, automatically renewing employment agreements with each of the named
executive officers. Each of these agreements provides for the payment of certain
severance benefits to the officer upon termination of employment in certain
circumstances, including following a change in the control of our company.
For
more information about these benefits, see “Executive Compensation - Potential
Payments Upon Termination.” Each
agreement also contains non-competition and confidentiality covenants that
protect our company if the officer leaves.
The
objectives of the agreements are as follows:
|
·
|
The
multi-year term helps us attract and retain talented executive
officers.
|
|
·
|
The
non-competition covenant protects us by preventing an officer from
leaving
our company and immediately joining a competitor, which would likely
result in the officer taking business away from
us.
|
|
·
|
The
confidentiality covenant protects us by preventing an officer from
disclosing trade secrets or confidential information regarding our
company
or our customers for two years after the officer
leaves.
|
Page
21
|
·
|
The
change-in-control severance payment provision benefits us by minimizing
the uncertainty and distraction caused by the current climate of
bank
acquisitions, and by allowing our executive officers to focus on
performance by providing transition assistance in the event of a
change in
control.
|
The
committee and the board believe the amount of the severance benefits potentially
payable to each named executive officer under these agreements is reasonable
and
consistent with industry standards.
Perquisites
We
provide only very limited perquisites. During 2006, the only perquisites
provided to any of the named executive officers were as follows:
|
·
|
We
paid country club dues amounting to $3,903 on behalf of Mr.
Ocheltree.
|
|
·
|
We
paid $7,125 in moving expenses for Mr. Ocheltree because we changed
his
primary location when the board promoted him to executive
management.
|
Other
Guidelines and Procedures Affecting Executive Compensation
Stock
Option Grants
When
we
approve a stock option grant, we set a date in the future as the measurement
date for the exercise price of the stock option. We do not “back-date” stock
option grants. We do not have a policy or practice of making stock option grants
during periods in which there is material non-public information about our
company.
It
has
been and continues to be our intent that all incentive payments be deductible
unless maintaining deductibility would undermine our ability to meet our primary
compensation objectives or is otherwise not in our best interest. At this time,
essentially all compensation we have paid to the named executive officers is
deductible under the federal tax code, except for income realized from exercise
of incentive stock options by some executive officers.
Share
Ownership Guidelines for Named Executive Officers
We
do not
require our named executive officers to own any minimum amount of our common
stock. We may consider a minimum stock ownership policy in the future, but
the
committee does not currently believe that such a policy is
necessary.
REPORT
OF THE COMPENSATION COMMITTEE
The
Compensation Committee of First Bancorp has reviewed and discussed with
management the Compensation Discussion and Analysis required by Item 402(b)
of
Regulation S-K. Based on its review and discussion, the committee recommended
to
the board that the Compensation Discussion and Analysis be included in this
proxy statement and in First Bancorp’s annual report on Form 10-K for filing
with the Securities and Exchange Commission.
Submitted
by the Compensation Committee of First Bancorp’s board of
directors.
|
David
L. Burns - Chairman
|
Virginia
C. Thomasson
|
|
Jack
D. Briggs
|
Dennis
A. Wicker
|
|
Thomas
F. Phillips
|
John
C. Willis
|
Page
22
Summary
Compensation Table
The
following table shows the compensation we paid for 2006 to the named executive
officers.
|
SUMMARY
COMPENSATION
TABLE
|
|||||||
|
Name
and Principal
Position
|
Year
|
Salary
($)
|
Bonus
($)
(2)
|
Non-Equity
Incentive
Plan Compensation
($)
(2)
|
Pension
Value
and
Nonqualified
Deferred
Compensation
Earnings
($)
(3)
|
All
Other
Compens-
ation
($)
(4)
|
Total
($)
|
|
(a)
|
(b)
|
(c)
|
(d)
|
(g)
|
(h)
|
(i)
|
(j)
|
|
James
H. Garner
|
2006
|
300,000
|
—
|
193,205
|
105,800
|
156,949
|
755,954
|
|
President
& Chief
|
|||||||
|
Executive
Officer (1)
|
|||||||
|
Jerry
L. Ocheltree
|
2006
|
260,000
|
91,000
|
—
|
25,900
|
42,650
|
419,550
|
|
President
of First Bank
(1)
|
|||||||
|
Anna
G. Hollers
|
2006
|
243,000
|
68,000
|
—
|
127,200
|
27,422
|
465,622
|
|
Executive
Vice President,
|
|||||||
|
Chief
Operating
Officer,
|
|||||||
|
Secretary
|
|||||||
|
Teresa
C. Nixon
|
2006
|
224,976
|
63,000
|
—
|
57,400
|
14,442
|
359,818
|
|
Executive
Vice President,
|
|||||||
|
Chief
Lending Officer,
|
|||||||
|
and
Compliance
Officer
|
|||||||
|
Eric
P. Credle
|
2006
|
190,000
|
53,200
|
—
|
11,000
|
12,684
|
266,884
|
|
Senior
Vice President and
|
|||||||
|
Chief
Financial Officer
|
|||||||
___________________
Notes:
|
(1)
|
Mr.
Garner served as our president and CEO until December 31, 2006.
Effective
January 1, 2007, Mr. Ocheltree became our president and
CEO.
|
|
(2)
|
In
2006, we did not meet the original threshold earnings per share
goal
necessary to pay bonuses under our annual incentive bonus plan.
However,
the compensation committee adjusted the formula in late 2006, and
we met
the revised threshold goal. See “Compensation Discussion and Analysis -
Executive Compensation Program Overview - Annual Cash Incentive.” Because
of the discretionary nature of the adjustment, we reflect the bonuses
we
paid to our named executive officers under this plan in column
(d), the
“Bonus” column, rather than as “Non-Equity Incentive Plan Compensation” in
column (g). Our CEO did not participate in the plan in
2006.
|
|
(3)
|
The
amounts in this column reflect the change in the total actuarial
net
present value of the officers’ accrued benefits under our pension plan and
SERP.
|
Page
23
|
(4)
|
The
following table shows the components of “All Other
Compensation.”
|
|
All
Other Compensation
|
|||||||
|
Name
|
401(k)
Matching
Contributions
($)
|
Director/
Committee
Fees
($)
|
Long-Term
Care
Insurance
Premiums
($)
|
Club
Dues
($)
|
Moving
Expenses
($)
|
Payment
for
Unused
Sick
Days
Upon
Retirement
($)
|
Total
($)
|
|
James
H. Garner
|
12,722
|
23,270
|
22,880
|
—
|
—
|
98,077
|
156,949
|
|
Jerry
L. Ocheltree
|
12,722
|
18,900
|
—
|
3,903
|
7,125
|
—
|
42,650
|
|
Anna
G. Hollers
|
12,722
|
14,700
|
—
|
—
|
—
|
—
|
27,422
|
|
Teresa
C. Nixon
|
12,722
|
1,720
|
—
|
—
|
—
|
—
|
14,442
|
|
Eric
P. Credle
|
12,684
|
—
|
—
|
—
|
—
|
—
|
12,684
|
We
have
entered into employment agreements with 25 of our officers, including each
of
the named executive officers. Each agreement has a two- or three-year term
that
automatically extends for an additional year on each anniversary date of the
agreement unless we or the officer gives written notice that the extension
will
not occur. The term for each named executive officer is three
years.
Each
employment agreement guarantees the officer a minimum base salary and a salary
increase each year that is at least as much as any percentage increase in the
U.S. consumer price index during the prior 12 months. Each agreement also
guarantees that the officer will be eligible to participate in our SERP and
stock option plan.
We
may
terminate any officer’s employment agreement “for cause” if we find that the
officer:
|
·
|
demonstrated
gross negligence or willful misconduct in performing his/her
duties;
|
|
·
|
committed
an act of dishonesty or moral turpitude;
or
|
|
·
|
has
been convicted of a felony or other serious
crime.
|
Each
agreement provides for post-termination benefits that we must pay in certain
circumstances. See “Potential Payments Upon Termination” for more information
about these potential benefits, and about the non-competition and
confidentiality covenants contained in the agreements.
Page
24
Grants
of Plan-Based Awards
The
following table provides information about the bonus awards we made to the
named
executive officers in early 2006. We paid these awards out in early 2007 based
on our corporate performance in 2006 (and on an adjustment to the original
award
formula). We did not make any other performance-based awards to the named
executive officers in 2006.
|
Estimated
Possible Payouts Under
Non-Equity
Incentive Plan Awards
|
|||
|
Name
(a)
|
Threshold
($)
(c)
|
Target
($)
(d)
|
Maximum
($)
(e)
|
|
James
H. Garner
|
—
|
222,960
|
—
|
|
Jerry
L. Ocheltree
|
39,000
|
130,000
|
195,000
|
|
Anna
G. Hollers
|
25,515
|
85,050
|
127,575
|
|
Teresa
C. Nixon
|
23,622
|
78,742
|
118,112
|
|
Eric
P. Credle
|
19,950
|
66,500
|
99,750
|
The
amounts shown in this table for Mr. Ocheltree, Ms. Hollers, Ms. Nixon and Mr.
Credle relate to possible payouts for 2006 under our annual incentive bonus
plan, which is called the Management Incentive Plan. Under this plan, we pay
cash bonuses each January based on corporate performance in the preceding fiscal
year.
The
plan
has two thresholds that the board established when it adopted the plan in
1993:
|
·
|
return
on average equity of at least 10%, and
|
|
·
|
actual
earnings per share as a percent of the targeted goal of at least
90%.
|
This
means that if we do not achieve a return on average equity of at least 10%,
or
if we do not achieve at least 90% of our targeted earnings per share, no one
receives a bonus under the plan.
If
the
two threshold goals just described are met, the plan pays bonuses according
to a
scale based on the actual level of earnings per share achieved in relation
to
the targeted goal (see below). For 2006, the target was basic earnings per
share
of $1.54.
Page
25
Each
named executive officer who participates in this plan has a target bonus payment
that is expressed as a percentage of his/her salary. The following table
indicates the target bonus percentage in 2006 for the named executive officers
who participated in the plan (as described below, Mr. Garner did not participate
in 2006):
|
Named
Executive Officer
|
Target
Bonus Percentage
|
|
Jerry
L. Ocheltree
|
50%
|
|
Anna
G. Hollers
|
35%
|
|
Teresa
C. Nixon
|
35%
|
|
Eric
P. Credle
|
35%
|
As
noted
above, the board also established a scale of the bonus each participant would
receive, as a percentage of his/her target bonus percentage, based on earnings
per share between a threshold level (below which we would pay no bonuses) and
a
maximum level (above which bonuses would not increase). The threshold earnings
per share goal was 90% of the target, and the maximum was 125% of the target.
Earnings per share between any of the stated goals would yield a proportionate
award. The following table shows the scale.
|
Percentage
of
Earnings
Per Share Goal
|
Percentage
of
Target
Bonus
|
|
Threshold
90
|
30
|
|
95
|
60
|
|
Target
100
|
100
|
|
105
|
110
|
|
110
|
120
|
|
115
|
130
|
|
120
|
140
|
|
Maximum
125
|
150
|
Accordingly,
assuming that at least the minimum thresholds were met, the bonus range for
2006
for each of the four named executive officers who participated in this plan
for
2006, expressed as a percentage of base salary, was to be as
follows:
|
Named
Executive Officer
|
Bonus
Range Once Thresholds Met
|
|
Jerry
L. Ocheltree
|
15%-75.0%
|
|
Anna
G. Hollers
|
10.5%-52.5%
|
|
Teresa
C. Nixon
|
10.5%-52.5%
|
|
Eric
P. Credle
|
10.5%-52.5%
|
In
the
“Grants of Plan-Based Awards” table above, the amount shown in the “Threshold”
column is the product of the officer’s 2006 base salary multiplied by the lower
number in this range. The amount shown in the “Maximum” column is the product of
the officer’s base salary multiplied by the higher number in the range.
We
did
not meet the original earnings per share threshold for 2006. However, we paid
bonuses under the plan, including to these four named executive officers, under
a revised formula that the board set. See “Compensation Discussion and Analysis
- Executive Compensation Program Overview - Annual Cash Incentive.”
In
2006,
as in prior years, our CEO did not participate in this bonus plan. Instead,
the
board set the CEO’s bonus at 1% of our 2006 consolidated net income. The target
bonus shown for him in the “Grants of Plan-Based Awards” table was 1% of our
budgeted consolidated net income for the year.
Page
26
Outstanding
Equity Awards at Fiscal Year End
The
following table provides information about the equity awards our named executive
officers held as of the end of 2006. To date, we have not granted any form
of
equity award other than stock options.
|
|
|
Option
Awards
|
||
|
Name
|
Grant
Date
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
|
(a)
|
(b)
|
(c)
|
(f)
|
(g)
|
|
James
H. Garner
|
4/30/1999
|
2,654
|
11.56
|
4/30/2009
|
|
Jerry
L. Ocheltree
|
7/25/2001
|
2,250
|
15.33
|
7/25/2011
|
|
4/1/2004
|
3,000
|
21.70
|
4/1/2014
|
|
|
5,250
|
||||
|
Anna
G. Hollers
|
7/25/2001
|
4,000
|
15.33
|
7/25/2011
|
|
4/1/2004
|
9,001
|
21.70
|
4/1/2014
|
|
|
13,001
|
||||
|
Teresa
C. Nixon
|
4/30/1999
|
11,250
|
11.56
|
4/30/2009
|
|
7/25/2001
|
6,000
|
15.33
|
7/25/2011
|
|
|
4/1/2004
|
9,001
|
21.70
|
4/1/2014
|
|
|
26,251
|
||||
|
Eric
P. Credle
|
10/22/1997
|
5,850
|
12.33
|
10/22/2007
|
|
7/25/2001
|
15,000
|
15.33
|
7/25/2011
|
|
|
4/1/2004
|
3,001
|
21.70
|
4/1/2014
|
|
|
23,851
|
||||
Page
27
Option
Exercises and Stock Vested
This
table provides information about stock option exercises by the named executive
officers in 2006.
|
|
Option
Awards
|
|
|
Name
|
Number
of
Shares
Acquired
on
Exercise
(#)
|
Value
Realized On
Exercise
($)
|
|
(a)
|
(b)
|
(c)
|
|
James
H. Garner
|
—
|
—
|
|
Jerry
L. Ocheltree
|
—
|
—
|
|
Anna
G. Hollers
|
8,150
|
107,375
|
|
Teresa
C. Nixon
|
4,250
|
33,290
|
|
Eric
P. Credle
|
—
|
—
|
Page
28
Pension
Benefits
The
following table shows information about the named executive officers’ accrued
benefits under our tax-qualified pension plan and our supplemental executive
retirement plan, or SERP.
|
Name
|
Plan
Name
|
Number
of
Years
Credited
Service
(#)
|
Present
Value of
Accumulated
Benefit
($) (1)
|
|
(a)
|
(b)
|
(c)
|
(d)
|
|
James
H. Garner
|
Qualified
Plan
|
38
|
678,600
|
|
SERP
Plan
|
20
|
1,246,900
|
|
|
Jerry
L. Ocheltree
|
Qualified
Plan
|
9
|
64,000
|
|
SERP
Plan
|
9
|
29,000
|
|
|
Anna
G. Hollers
|
Qualified
Plan
|
34
|
575,500
|
|
SERP
Plan
|
20
|
246,100
|
|
|
Teresa
C. Nixon
|
Qualified
Plan
|
18
|
194,400
|
|
SERP
Plan
|
18
|
142,600
|
|
|
Eric
P. Credle
|
Qualified
Plan
|
9
|
40,800
|
|
SERP
Plan
|
9
|
4,700
|
|
|
(1)
|
The
present value of each officer’s accumulated benefit under each plan was
calculated using the following assumptions: The officer retires at
age 65.
At that time, the officer takes a lump sum based on his or her accrued
benefit as of December 31, 2006. The lump sum is calculated using
the 1983
Group Annuity Mortality Table for Males and Females and is discounted
to
December 31, 2006 using a rate of return of 5.75% per
year.
|
Pension
Plan
Our
tax-qualified pension plan provides each participant with an annual benefit,
paid monthly in cash. At normal retirement age of 65, this benefit is equal
to
the sum of:
| (1) |
0.75%
of the participant’s final average compensation multiplied by his/her
years of service (up to 40), and
|
|
(2)
|
0.65%
of the participant’s final average compensation in excess of “covered
compensation” (the average of the social security taxable wage base during
the 35-year period that ends with the year the participant reaches
social
security retirement age), multiplied by years of service (up to
35).
|
“Final
average compensation” means the average of the participant’s highest consecutive
five years of compensation during his or her last 10 years of employment. For
purposes of this plan, “compensation” generally means base salary plus bonuses.
However, the federal tax code limits the amount of compensation we can take
into
account for purposes of the pension plan. The limit was $220,000 for
2006.
Each
participant becomes fully vested in his plan benefits after five years of
service. Early retirement, with reduced monthly benefits, is available to any
participant who leaves the company at or after age 55 with 15 years of service.
The plan also provides a death benefit to a vested participant’s surviving
spouse.
Page
29
As
required by federal pension laws, benefits under the pension plan are funded
by
assets held in a tax-exempt trust.
SERP
Our
SERP
is for the benefit of our senior management, including the named executive
officers. The purpose of the SERP is to provide additional monthly pension
benefits to ensure that each participant will receive lifetime pension benefits
beyond the amounts that we can pay under our qualified pension plan. The SERP
generally provides participants with an annual benefit at normal retirement
age
of 65, payable monthly in cash, equal to 3% of final average compensation
multiplied by years of service, up to a maximum of 60% of final average
compensation (65% for Mr. Garner). For purposes of the SERP, “final average
compensation” has the same meaning as under our pension plan. The amount of a
participant’s SERP benefit is reduced by (1) the amount payable under our
qualified pension plan, and (2) 50% of the participant’s primary social security
benefit.
Each
participant becomes fully vested at retirement, death, disability or a change
in
control. Early retirement, with reduced monthly benefits, is available to any
participant who leaves the company at or after age 55 with 15 years of service.
The plan also provides a death benefit to a vested participant’s surviving
spouse.
Because
the SERP is a non-qualified plan, its benefits are unsecured, and a
participant’s claim for benefits under the plan is no greater than the claim of
a general creditor.
As
a
general rule, we do not grant extra years of credited service under either
the
pension plan or the SERP. On one occasion, we credited two officers of an
acquired company with three extra years of service under the SERP. None of
the
named executive officers has received any extra years of credited service under
either plan.
Potential
Payments Upon Termination
This
section contains information about arrangements that provide for compensation
to
our named executive officers in connection with their termination.
Employment
Agreements
As
noted
above, we are party to employment agreements with 25 of our officers, including
each of the named executive officers (other than Mr. Garner, whose agreement
terminated when he retired). Under each of these agreements, we have agreed
to
pay the officer’s base salary for the remainder of the agreement term if we
terminate the officer other than for cause. The agreement term for each of
the
named executive officers is three years.
We
have
also agreed to continue paying each officer his base salary for the remainder
of
the term if the officer’s employment ends due to a long-term disability.
However, according to the agreement, we can deduct from this salary continuation
any amount that he or she receives from our company-wide long-term disability
plan. Also, the officer must look for a job somewhere else or else we can stop
paying him. If the officer finds another job, we can deduct any amounts that
he
earns in the new job from our payments.
Each
employment agreement also provides for severance to the officer if we or the
officer terminates his/her employment within 12 months after a change in control
(other than for cause or normal retirement). The amount of the severance
payment, which we would be required to pay in cash within 10 days, is the lesser
of:
|
·
|
a
specified multiple, ranging from 1 to 2.9 (it is 2.9 for the named
executive officers), of the officer’s base salary as of the date of the
change in control, and
|
|
·
|
2.99
multiplied by the officer’s “base amount” under Section 280G(b)(3) of the
federal tax code.
|
In
general, the number calculated according to the first bullet will be the smaller
number.
The
agreements define “control” as the power, either directly or indirectly, to
direct our management or policies or to vote 40% or more of any class of our
securities. In general, any change in control of our company triggers the change
in control provisions of the employment agreements. However, the agreements
expressly exclude as a
Page
30
“change
in control” any merger, consolidation or reorganization following which the
owners of our capital stock who were previously entitled to vote in the election
of our directors own 61% or more of the resulting entity’s voting stock.
The
agreements also state that any of the following events will be considered to
be
a “change in control”:
|
·
|
any
person, entity or group becoming the beneficial owner, directly or
indirectly, of 33% or more of any class of our voting
stock;
|
|
·
|
during
any period of two consecutive years, individuals who at the beginning
of
the period made up our board (we refer to these individual as the
“incumbent board”), or persons whose election was approved by at least ¾
of the incumbent board, fail to make up at least a majority of the
board;
or
|
|
·
|
the
sale of all or substantially all of our assets.
|
The
following table shows the cash severance amounts we would have owed our named
executive officers under their employment agreements if they had terminated
employment on December 31, 2006 under various circumstances.
|
Name
|
Nature
of Payment
|
Involuntary
Termination for Cause or Voluntary Termination by Employee
($)
|
Involuntary
Termination Without Cause ($) (1)
|
Termination
due to Long-Term Disability ($) (2)
|
Change
In Control ($) (3)
|
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
|
Jerry
L. Ocheltree
|
Severance
- Cash
|
—
|
541,667
|
304,167
|
594,475
|
|
Value
of Options That Would Vest
|
—
|
—
|
—
|
—
|
|
|
Total
|
—
|
541,667
|
304,167
|
594,475
|
|
|
Anna
G. Hollers
|
Severance
- Cash
|
—
|
637,875
|
338,625
|
704,700
|
|
Value
of Options That Would Vest
|
—
|
—
|
—
|
—
|
|
|
Total
|
—
|
637,875
|
338,625
|
704,700
|
|
|
Teresa
C. Nixon
|
Severance
- Cash
|
—
|
590,562
|
291,312
|
652,430
|
|
Value
of Options That Would Vest
|
—
|
—
|
—
|
—
|
|
|
Total
|
—
|
590,562
|
291,312
|
652,430
|
|
|
Eric
P. Credle
|
Severance
- Cash
|
—
|
498,750
|
199,500
|
551,000
|
|
Value
of Options That Would Vest
|
—
|
—
|
—
|
—
|
|
|
Total
|
—
|
498,750
|
199,500
|
551,000
|
|
|
(1)
|
These
amounts are equal to 1/12 of each officer’s base salary as of December 31,
2006 multiplied by the number of months remaining in his/her employment
agreement term.
|
|
(2)
|
This
column shows the amounts due under the terms of the officers’ employment
agreements minus the amounts payable under the terms of our long-term
disability plan (in which all full-time employees
participate).
|
|
(3)
|
Except
for Mr. Ocheltree, these amounts are equal to 2.9 multiplied by
each
officer’s annual base salary as of December 31, 2006. Mr. Ocheltree’s
amount is 2.99 multiplied by his “base amount” under Section 280G(b)(3) of
the federal tax code because it results in a lesser
amount.
|
Page
31
The
employment agreements also contain non-competition and confidentiality covenants
by the officers. The non-competition covenants prohibit each officer
from:
|
·
|
engaging,
directly or indirectly, in any competing activity or business within
a
restricted territory for a certain period of time after leaving our
company, which we call the restricted
period;
|
|
·
|
soliciting
or recruiting any of our employees during the restricted period;
and
|
|
·
|
making
sales contacts with or soliciting any of our customers for any products
or
services that we offer, in either case within the restricted territory
during the restricted period.
|
The
restricted period is one year if we terminate the officer for cause or he
terminates voluntarily. If we terminate him other than for cause, the restricted
period is the remainder of the agreement term. The restricted territory for
each
officer is a 50-mile radius around his primary residence and/or work location.
The
confidentiality covenants contained in each agreement prohibit the officer
from
disclosing any confidential business secrets or other confidential data both
during the term of the employment agreement and for a period of two years after
termination.
Additional
Vesting Under Long-Term Care Insurance Plan for Retiring CEO
Mr.
Garner, our long-time CEO, retired effective December 31, 2006. In recognition
of his long and successful tenure with us, the board of directors decided to
accelerate his vesting under our long-term care insurance plan upon his
retirement. As a result, Mr. Garner became vested in an additional $44,000
of
premium payments. We will make these payments over the next seven years.
Page
32
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The
2006
members of the Committee were Mr. Briggs, Mr. D. Burns-Chairman, Mr. Phillips,
Ms. Thomasson, Mr. Washburn (until July 2006), Mr. Wicker, and Mr. Willis
(beginning in July 2006). None of these members has ever been an officer or
employee of the Company. In addition, except for Mr. Washburn and Mr. Wicker,
no
member of the Compensation Committee had any relationships with the Company
requiring disclosure under “Certain Transactions” below. There are no
Compensation Committee interlocks, as described in SEC rules and
regulations.
CERTAIN
TRANSACTIONS
In
addition to the rules and regulations of the Securities and Exchange Commission,
the Company and First Bank are subject to Federal Reserve Board Regulation
O,
which governs extensions of credit by First Bank to any executive officer,
director or principal shareholder of the Company or First Bank. The Company
has
established processes for reviewing and approving extensions of credit and
other
related party transactions. Related party transactions are approved by the
Board
of Directors, and the related person does not participate in the deliberations
or cast a vote. The Audit Committee also reviews all related party transactions
and determines whether to ratify or approve such transactions.
Certain
of the directors, nominees, principal shareholders and officers (and their
affiliates) of the Company have deposit accounts and other transactions with
First Bank, including loans in the ordinary course of business. All loans or
other extensions of credit made by First Bank to directors, nominees, principal
shareholders and officers of the Company and to affiliates of such persons
were
made in the ordinary course of business on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with independent third parties and did not involve
more
than the normal risk of collectibility or present other unfavorable features.
At
December 31, 2006, the aggregate principal amount of loans to directors,
nominees, principal shareholders and officers of the Company and to affiliates
of such persons was approximately $10,296,000.
In
July
2006, the Company purchased land located in Kannapolis, North Carolina from
a
partnership in which the son of Jordan Washburn, Jess H. Washburn, has a 16.7%
ownership interest. Jordan Washburn is a member of the Company’s Board of
Directors. The purchase price of the land was $475,000. The purchase price
was
negotiated by Jess Washburn and Richard Clayton, a senior officer of the
Company, subject to board approval. The Board of Directors determined that
$475,000 was a fair price for the property based on its knowledge of the land
and discussions with executive management of the Company, who also had a working
knowledge of land values in the area. The Audit Committee also approved this
transaction.
During
2006, the Company approved the law firm of Helms, Mulliss & Wicker to
provide legal services to the Company, primarily in connection with the
preparation and review of documents associated with new loan closings in several
of the Company’s markets. Dennis Wicker, a member of the Company’s Board
of Directors, is a partner in this law firm and a member of its Management
Committee. The Company did not pay Helms, Mulliss & Wicker any fees
during 2006, but expects to pay fees to the firm in 2007. Mr. Wicker will
not personally provide any of the services to the Company, and none of the
fees paid to the law firm will directly affect Mr. Wicker's compensation from
the firm.
On
June
6, 2006, the Company agreed to purchase the residence of Jerry L. Ocheltree,
a
director and executive officer of the Company, for $379,000 and to pay
approximately $7,125 in moving expenses associated with his move to a residence
closer to the Company’s headquarters. Mr. Ocheltree’s primary workplace changed
from High Point, North Carolina to Troy, North Carolina in connection with
his
appointment as President of First Bank. The purchase price of Mr. Ocheltree’s
residence was based on an average of three appraisals, and the amount paid
for
moving expenses was the lowest of three bids obtained. The Board of Directors
approved this transaction, and the Audit Committee ratified it.
Page
33
SECTION
16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under
the
securities laws of the United States, the Company’s directors, its executive
officers, and any persons holding more than 10% of the Company’s common stock
are required to report their ownership of the Company’s common stock and any
changes in that ownership to the Securities and Exchange Commission and the
National Association of Securities Dealers Automated Quotation System. Specific
due dates for these reports have been established, and the Company is required
to report in this proxy statement any failure to file by these dates during
2006. Based upon a review of such reports and representations from the Company’s
directors and executive officers, the Company believes that all such reports
were filed on a timely basis in 2006.
The
nominees who receive the highest number of votes cast, up to the number of
directors to be elected, shall be elected as directors. The Board of Directors
recommends that shareholders vote “FOR” the proposal to elect the 15 nominees as
directors. Unless indicated to the contrary, proxies will be voted “FOR” the 15
nominees listed above.
Page
34
PROPOSAL
2 - RATIFICATION OF INDEPENDENT AUDITORS
Your
directors and management recommend that the shareholders ratify the appointment
of Elliott Davis, PLLC to serve as the independent auditors for the Company
for
the year ending December 31, 2007. Elliott Davis, PLLC has audited the Company’s
consolidated financial statements since 2005. If the appointment of Elliott
Davis, PLLC is not ratified by the shareholders, the Board of Directors will
reconsider the appointment of auditors for the current fiscal year.
Representatives
of Elliott Davis, PLLC are expected to be present at the annual meeting. The
representatives will be available to respond to appropriate questions and will
be given an opportunity to make any statement they consider
appropriate.
AUDIT
COMMITTEE REPORT
Management
has the primary responsibility for the financial statements and the reporting
process. The Company’s independent auditor, which for the fiscal year 2006 was
Elliott Davis, PLLC (“Elliott Davis”) is responsible for expressing an opinion
on the conformity of the Company’s audited financial statements to accounting
principles generally accepted in the United States of America and for attesting
to the Company’s control over financial reporting. The Company’s Audit Committee
pre-approves all audit services and permitted non-audit services (including
the
fees and terms thereof) to be performed by the independent auditors. The
Committee may 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 Committee
at
its next scheduled meeting.
On
July
26, 2005, the Company’s Audit Committee dismissed KPMG LLP (“KPMG”) as the
Company’s independent registered public accounting firm as reported on a Form
8-K filed with the SEC on August 1, 2005. The decision to dismiss KPMG was
considered and approved by the Audit Committee. On July 26, 2005, the Company’s
Audit Committee appointed Elliott Davis as the Company’s independent registered
public accounting firm for the 2005 fiscal year. The decision to replace KPMG
with Elliott Davis was not the result of a disagreement with KPMG about the
Company’s financial statements.
KPMG’s
reports on the Company’s consolidated financial statements for the fiscal years
ended December 31, 2004 and 2003 did not contain an adverse opinion or
disclaimer of opinion, and were not qualified or modified as to uncertainty,
audit scope or accounting principles or practices, financial statement
disclosure, or auditing scope or procedures which disagreements, if not resolved
to KPMG’s satisfaction, would have caused KPMG to make reference to the subject
matter of the disagreement in connection with the audits of the fiscal years
ended December 31, 2004 and 2003, and the subsequent interim periods through
June 30, 2005. During the fiscal years ended December 31, 2004 and 2003 and
subsequent interim periods through June 30, 2005, the Company believes that
there were no “reportable events,” as that term is described in Item 304
(a)(1)(v) of Regulation S-K.
The
Company did not consult with Elliott Davis during the fiscal years ended
December 31, 2004 and 2003 or during any subsequent interim period from December
31, 2004 through and including August 1, 2005, on either the application of
accounting principles to a specified transaction, either completed or proposed,
or the type of audit opinion that might be rendered on the Company’s
consolidated financial statements.
Page
35
The
Audit
Committee has reviewed and discussed with management and Elliott Davis the
audited financial statements as of and for the year ended December 31, 2006.
The
Audit Committee has discussed with Elliott Davis the matters required to be
discussed by Statement on Auditing Standards No. 61 (Communication with Audit
Committees). In addition, the Audit Committee has received from Elliott Davis
the written disclosures and letter required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees) and discussed
with them their independence from the Company and its management. The Audit
Committee also has considered whether Elliott Davis’ provision of any
information technology services or other non-audit services to the Company
is
compatible with the concept of auditor independence. In this analysis, the
Audit
Committee reviewed the services and related fees provided by Elliott Davis
in
the following categories and amounts:
|
2006
|
2005
|
|||||||
|
Audit
Fees
|
$
|
295,800
|
259,300
|
|||||
|
Audit-Related
Fees
|
14,200
|
13,500
|
||||||
|
Tax
Fees
|
─
|
─
|
||||||
|
All
Other Fees
|
─
|
─
|
||||||
|
Total
Fees
|
$
|
310,000
|
272,800
|
|||||
For
2005
and 2006, audit fees included fees for the integrated audit of the consolidated
financial statements and internal control over financial reporting
(Sarbanes-Oxley Section 404), quarterly reviews of the interim consolidated
financial statements and an additional internal control attestation.
Audit-related fees consisted of audits of the financial statements of two
employee benefit plans sponsored by the Company. Elliott Davis did not perform
any services related to tax compliance or tax consulting for the years ended
December 31, 2005 or 2006. All services performed by Elliott Davis in 2006
were
pre-approved by the Audit Committee.
Based
on
the reviews and discussions referred to above, the Audit Committee recommended
to the Board of Directors that the audited consolidated financial statements
be
included in the Company's Annual Report on Form 10-K for the year ended December
31, 2006 for filing with the Securities and Exchange Commission.
The
Board
of Directors has determined that Ms. Thomasson is an “audit committee financial
expert” within the meaning of SEC rules and regulations.
The
Board
of Directors has adopted a written charter for the Audit Committee, which is
reviewed and reassessed for adequacy on an annual basis. The Audit Committee
charter is included as Exhibit A to this Proxy Statement.
RESPECTFULLY
SUBMITTED BY THE AUDIT COMMITTEE
OF
THE
BOARD OF DIRECTORS:
|
Jack
D. Briggs
|
Fred
L. Taylor II
|
|
H.
David Bruton
|
Virginia
C. Thomasson
|
|
David
L. Burns, Chairman
|
Goldie
H. Wallace
|
|
Mary
Clara Capel
|
John
C. Willis
|
|
Thomas
F. Phillips
|
The
affirmative vote of the holders of a majority of shares of common stock
represented and voting at the meeting (either in person or by proxy) is required
for approval of this proposal. The board of directors recommends that
shareholders vote “FOR” this proposal. Unless indicated to the contrary, proxies
will be voted “FOR” this proposal.
Page
36
PROPOSAL
3 - APPROVAL OF A NEW EQUITY-BASED INCENTIVE PLAN,
ENTITLED
THE “FIRST BANCORP 2007 EQUITY PLAN”
The
Board
of Directors (the “Board”) is submitting to the shareholders, for their
approval, an equity-based incentive plan entitled the “First Bancorp 2007 Equity
Plan” (“2007 Equity Plan”) that is intended to replace the Company’s existing
stock option plan, which is entitled the “First Bancorp 2004 Stock Option Plan”
(“2004 Option Plan”). The Board believes that the 2004 Option Plan and its
predecessor plan have been an important means of attracting, retaining and
motivating key employees and directors. However, the 2004 Option Plan only
provides for the grant of stock options. Based on recommendations from a
compensation consulting firm, the Board of Directors believes it would be
advantageous to have other forms of equity-based awards available for grant.
In
addition to stock options, the other types of potential awards that would be
possible if the 2007 Equity Plan is approved are stock appreciation rights,
restricted stock, restricted performance stock, unrestricted Company stock,
and
performance units. We believe that these alternative awards have advantages
over
stock options in certain circumstances. For example, a stock option may lose
its
“management retention” objective if its exercise price becomes significantly
greater than the current market price of the stock because the option would
have
little perceived value. However, a restricted stock award, for instance, would
retain value for as long as the Company’s stock price was above
zero.
As
discussed above, the intent of proposing this new plan is only to provide
additional alternatives for equity-based compensation. Accordingly, we have
structured the 2007 Equity Plan to carry forward certain of the characteristics
of the 2004 Option Plan. These provisions are as follows: i) the 2004 Option
Plan has 1,180,250 remaining options available for grant, and correspondingly
the 2007 Equity Plan being proposed has 1,180,250 awards available for grant,
and ii) the 2004 Option Plan has a remaining term of seven years, and the 2007
Equity Plan has a seven year stated term. If it is approved by the shareholders,
the 2007 Equity Plan will prohibit the grant of any additional awards under
the
2004 Option Plan.
The
2007
Equity Plan was approved by the Compensation Committee (“Committee”) and adopted
by the Company’s Board on January 30, 2007 and will become effective on the date
it is approved by the shareholders. Because it is anticipated that the Company’s
directors and officers will receive awards under the 2007 Equity Plan, directors
and officers are deemed to have an interest in approval of the plan. The
following is a summary of the material terms of the 2007 Equity Plan. This
summary is qualified in its entirety by the complete terms of the 2007 Equity
Plan, which is attached hereto as Appendix B.
General
The
purpose of the 2007 Equity Plan is to provide us with a means of providing
employees and directors of the Company and its subsidiaries the benefits of
ownership of First Bancorp common stock (“Common Stock”). The 2007 Equity Plan
is designed to help us attract and retain personnel of superior ability, to
reward employees and directors for past services and to motivate these
individuals through added incentives to further contribute to our future growth
and success.
Under
the
2007 Equity Plan, stock options, stock appreciation rights, shares of restricted
stock, restricted performance stock, unrestricted Company stock or performance
units, or a combination of any such awards (collectively, “Awards”), may be
granted from time to time to employees or directors of the Company or its
subsidiaries, all generally in the discretion of the Committee or the Board.
Each Award under the 2007 Equity Plan will be evidenced by a separate written
agreement that sets forth the terms and conditions of the Award.
We
intend
that stock options or other grants of Awards under the 2007 Equity Plan to
persons subject to Section 16 of the Exchange Act will satisfy the requirements
of Rule 16b-3 under the Exchange Act (“Rule 16b-3”).
We
have
reserved 1,180,250 shares of Common Stock for issuance under the 2007 Equity
Plan, subject to adjustment to protect against dilution in the event of certain
changes in capitalization of the Company.
Page
37
Administration
The
2007
Equity Plan will be administered by the Committee. As required by its charter,
the Committee consists solely of independent directors as defined by NASDAQ.
Under the 2007 Equity Plan, except for grants of awards to Company directors,
which the Board of Directors must grant, the Board or the Committee will have
complete authority to determine the persons to whom Awards will be granted
from
time to time, as well as the terms and conditions of such Awards. The Board
or
the Committee also will have discretion to interpret the 2007 Equity Plan and
the Awards granted under the 2007 Equity Plan and to make other determinations
necessary or advisable for the administration of the 2007 Equity
Plan.
Awards
That May Be Granted
Under
the
2007 Equity Plan, the Committee may grant or award eligible participants stock
options, stock appreciation rights, shares of restricted stock, restricted
performance stock, unrestricted Company stock or performance units. These grants
and awards are referred to herein as the “Awards.” All Awards must be granted or
awarded on or before May 2, 2014.
Options.
Options
generally permit the holder thereof the ability to purchase a stated number
of
shares of the Company’s common stock at the exercise price set on the date of
the grant. The exercise price of any option may not be less than 100% of the
fair market value of the Company’s common stock as quoted by NASDAQ on the
date of grant. Options granted under the 2007 Equity Plan may be either
incentive stock options (“ISO”) for eligible employees or nonqualified stock
options (“NSO”) for eligible employees and directors. The Committee shall
determine the expiration date of each Option granted; provided, however, that
the term of any ISO shall not exceed ten (10) years after the date the ISO
is
awarded. In the Committee’s discretion, it may also specify the period or
periods of time within which each option will first become exercisable and/or
assign performance goals that must be attained in order for the participant
to
have a fully exercisable option.
Stock
Appreciation Rights.
A stock
appreciation right will generally entitle the holder thereof to a payment equal
to the amount the fair market value of Common Stock exceeds the exercise price
of the stock appreciation right, multiplied by the number of stock appreciation
rights surrendered. The Committee in its discretion will determine whether
payment in connection with a stock appreciation right will be in the form of
cash or Common Stock or a combination thereof. To the extent not previously
exercised, all SARs shall automatically be exercised on the last trading day
prior to their expiration, so long as the fair market value of a share of Common
Stock exceeds the exercise price, unless prior to such day the holder instructs
the Chief Financial Officer or Secretary of the Company, or the Committee in
writing.
Restricted
Stock.
Restricted stock generally consists of shares of Common Stock that at the time
of award are subject to restrictions or limitations as to the participant’s
ability to sell, transfer, pledge or assign such shares. Shares of restricted
stock may vest (separately or in combination), and all or a portion of the
applicable restrictions may lapse, from time to time over one or more restricted
periods, based on such factors as continued employment, the passage of time,
the
attainment of performance goals or other measures as the Committee determines.
Unrestricted
Stock Awards. The
Committee may make awards of unrestricted company stock to employees on such
terms and conditions as the Committee may prescribe.
Performance
Units. The
Committee may award performance units to eligible employees under the 2007
Equity Plan. If the applicable performance goals set by the Committee are
satisfied, participants will be entitled to receive payment of the performance
units in an amount equal to the designated value of each performance unit
awarded, times the number of such performance units so earned. Payment in
settlement of earned performance units shall be made in cash, in shares of
unrestricted Common Stock or any combination thereof. Payment shall be made
in a
lump sum or in installments and shall be subject to such other terms and
conditions as shall be determined by the Committee.
Page
38
Termination
of Participant
The
following is a listing of several circumstances that may incur involving the
termination of a participant from employment and the ramifications of each
on
Awards.
If
an
employee terminates his employment voluntarily for reasons other than death,
disability or retirement, all unvested Awards will expire. The employee will
have three months following termination to exercise any exercisable stock
options or SARs.
If
an
employee terminates his employment due to death or disability, all unvested
awards will become fully vested and exercisable. In this circumstance, the
employee or their beneficiary will generally have one year to exercise any
unexercised vested awards.
If
an
employee is terminated for cause, all options and SARs, whether vested or not,
shall expire. Any unvested restricted stock awards will also be
forfeited.
If
an
employee retires, all unvested Awards will expire. The employee will generally
have one year to exercise any unexercised vested awards.
In
general, performance units will terminate if the employee’s employment
terminates at any time during the performance period.
Change
in Control
A
change
in control shall be deemed to have occurred on:
(i)
the
date on which any “person” or “group” (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act), other than the Company or
any entity owned, directly or indirectly, by the stockholders of the Company
in
substantially the same proportions as their ownership of Common Stock, becomes
the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act) of shares representing more than 40% of the combined voting power of the
then-outstanding securities entitled to vote generally in the election of
directors of the Company; or
(ii)
the
date on which (i) the Company merges with any other entity, (ii) the
Company enters into a statutory share exchange with another entity, or
(iii) the Company conveys, transfers or leases all or substantially all of
its assets to any person; provided,
however,
that in
the case of subclauses (i) and (ii), a Change of Control shall not be
deemed to have occurred if the shareholders of the Company immediately before
such transaction own, directly or indirectly immediately following such
transaction, more than 60% of the combined voting power of the outstanding
securities of the corporation resulting from such transaction in substantially
the same proportions as their ownership of securities immediately before such
transaction.
Generally,
a change in control will have the following impact on Awards:
|
(i)
|
If
the Company is not the surviving corporation and the acquiror does
not
assume the Award or substitute equivalent equity awards in the acquiror,
the Award will become immediately and fully exercisable. Any
performance-based goals will be deemed to have been met at the targeted
level of performance;
|
|
(ii)
|
If
the Company is the surviving corporation, or the acquiror assumes
the
Awards or substitutes equivalent awards, then the Awards or such
substitutes will remain outstanding and governed by their respective
terms;
|
|
(iii)
|
If
the participant terminates without cause within 24 months following
a
change in control and has Awards that are not yet fully exercisable
because the Company was the surviving corporation or the acquiror
assumed
the Awards, those Awards will become immediately and fully exercisable.
Any performance based goals will be deemed to have been met at the
targeted level of performance.
|
Page
39
|
(iv)
|
If
the participant is terminated for cause within 24 months following
a
change in control and has Awards that are not yet fully exercisable
because the Company was the surviving corporation or the acquiror
assumed
the Awards, all options and SARs, whether vested or not, shall expire.
Any
unvested restricted stock awards and performance units will also
be
forfeited.
|
Adjustments
In
case
of any reorganization, recapitalization, reclassification, stock split, stock
dividend, distribution, combination of shares, merger, consolidation, rights
offering, or any other changes in the corporate structure or shares of the
Company, appropriate adjustments shall be made by the Committee or the Board,
as
the case may be, (or if the Company is not the surviving corporation in any
such
transaction, the board of directors of the surviving corporation) in the
aggregate number and kind of shares subject to the Plan, and the number and
kind
of shares and the option price per share subject to outstanding options or
which
may be issued under outstanding Restricted Stock Awards or pursuant to
unrestricted Company Stock Awards in order to preserve the value of the Awards.
Appropriate adjustments shall also be made by the Committee or the Board, as
the
case may be, in the terms of any Awards under the Plan to reflect such changes
and to modify any other terms of outstanding Awards on an equitable
basis.
Limitations
There
is
no maximum number of persons eligible to receive Awards under the 2007 Equity
Plan. Any shares of Common Stock subject to restricted stock, restricted
performance stock, unrestricted stock, and performance units shall not exceed
50% of the total shares available under the 2007 Equity Plan, and the maximum
number of shares of Common Stock that may be issued subject to Incentive Stock
Options is 1,100,000. The maximum number of shares of Common Stock subject
to
restricted Stock, unrestricted Company stock and performance units, to the
extent they are denominated in shares, may not exceed 50,000 shares of Company
stock to any single employee in any one fiscal year, subject to adjustments
described above, or alternatively to the extent that performance units are
denominated in cash, the maximum amount of performance units awarded to any
single employee in any one fiscal year may not exceed $1,000,0000. The maximum
number of shares of common stock for which options or stock appreciation rights
may be granted to any single participant in any one fiscal year shall not exceed
75,000, subject to adjustments described above.
Termination
and Amendment of the 2007 Equity Plan
Unless
sooner terminated, the 2007 Equity Plan will continue in effect for a period
of
seven years from the date it is approved by the Company’s shareholders and
becomes effective by its terms. The Board may at any time alter, suspend,
terminate or discontinue the 2007 Equity Plan. The Board may not, without the
consent of a participant, make any alteration that would deprive the participant
of his rights with respect to any previously granted Awards. Termination of
the
2007 Equity Plan will not affect any previously granted Awards.
Federal
Income Taxes
General.
The
following is a brief description of the Federal income tax consequences to
the
participants and the Company of the issuance and exercise of stock options
under
the 2007 Equity Plan, as well as the grant of restricted stock, stock awards
and
performance units. All ordinary income recognized by a participant with respect
to Awards under the 2007 Equity Plan shall be subject to both wage withholding
and employment taxes. The deduction allowed to the Company for the ordinary
income recognized by a participant with respect to an Award under the 2007
Equity Plan will be limited to amounts that constitute reasonable, ordinary
and
necessary business expenses of the Company.
Stock
Options.
The
grant of an option under the 2007 Equity Plan is not a taxable event; the
recipient of the Option does not recognize income for federal income tax
purposes, and the Company does not get a tax deduction.
Incentive
Options are designed to qualify as “incentive stock options” under Section 422
of the Internal Revenue Code. If the employee observes certain rules applicable
to the exercise of the Options and the sale of the shares thereafter, then
the
exercise of the Option does not result in the recognition of taxable income,
and
the Company is not entitled to a tax deduction as a result of such exercise.
However, if the employee does not follow the
Page
40
rules
applicable to incentive stock options (for example, if shares purchased pursuant
to the exercise of an Incentive Option are sold within two years from the date
of grant or within one year after the transfer of such shares to the
participant), then the difference between the fair market value of the shares
at
the date of exercise and the exercise price will be considered ordinary income,
and the Company will be entitled to a tax deduction at the same time and in
the
same amount. In addition, under certain circumstances the difference between
the
fair market value of shares subject to an incentive stock option and the
exercise price for such shares is an adjustment to income for purposes of the
alternative minimum tax (AMT) under the Internal Revenue Code.
Non-qualified
options cannot qualify for incentive stock option treatment. When the holder
of
a non-qualified option exercises the option, the individual will recognize
taxable income in the amount by which the fair market value of the shares at
the
date of exercise exceeds the exercise price, and the Company will be entitled
to
a tax deduction at the same time and in the same amount.
Stock
Appreciation Rights.
At the
time any part of the stock appreciation rights are exercised, the Participant
will be treated as having received ordinary income equal to the fair market
value of the stock appreciation rights that were exercised, whether such stock
appreciation rights are settled in cash or by delivery of shares of Common
Stock. In the year a Stock Appreciation Right is exercised, the Company would
be
allowed a deduction for federal income tax purposes equal to the amount of
ordinary income which the Participant receives, and the Participant will report
as ordinary income the value of the stock appreciation right.
Restricted
Stock.
If a
participant receiving a grant of restricted stock under the 2007 Equity Plan
makes an election with respect to such shares under Section 83(b) of the Code
not later than 30 days after the date the shares are transferred to the
participant pursuant to such grant, the participant will recognize ordinary
income at the time of receipt of such restricted stock in an amount equal to
the
excess of the fair market value of the shares of common stock as of the date
of
receipt (determined without regard to any vesting conditions or other
restrictions other than a restriction which by its terms will never lapse)
over
the price paid (if any) for such restricted stock. In the absence of such an
election, the participant will recognize ordinary income at the time the
restrictions lapse in an amount equal to the excess of the fair market value
of
the shares of common stock as of the date the restrictions lapse over the price
paid (if any) for such stock. At the first to occur of the election or the
lapsing of the restrictions, the Company will be allowed a deduction for Federal
income tax purposes equal to the amount of ordinary income attributable to
the
participant. The participant’s holding period for the shares of Common Stock
acquired will commence upon the first to occur of the date the participant
makes
an election under Section 83(b) of the Code or on the date that the restrictions
lapse, and the tax basis of the shares will be the greater of their fair Market
Value on that date or the price paid for the shares (if any).
If
an
election is made under Section 83(b) of the Code, dividends received on shares
of restricted stock will be treated as dividends. If a participant does not
make
an election under Section 83(b) of the Code, dividends received on the shares
of
restricted stock prior to the date that such restrictions lapse will be treated
as additional compensation and not as dividend income for Federal income tax
purposes.
If
(i) an
election is made under Section 83(b) of the Code and (ii) before the
restrictions on the shares lapse, the shares which are subject to such election
are forfeited to or reacquired by the Company then (A) no deduction would be
allowed to such participant for the amount included in the income of such
participant by reason of such election, and (B) the participant would realize
a
loss in an amount equal to the excess, if any, of the ordinary income previously
recognized by the participant with respect to such shares over the value of
such
shares at the time of forfeiture. Such loss would be a capital loss if the
shares are held as a capital asset at such time. In such event, the Company
would be required to include in its income the amount of any deduction
previously allowable to it in connection with the transfer of such
shares.
Stock
Awards.
At the
time a stock award is granted, the participant will be treated as having
received ordinary income equal to the Fair Market Value of the shares of Common
Stock acquired. At that time, the Company will be allowed a deduction for
federal income tax purposes equal to the amount of ordinary income which the
participant received. The participant’s holding period for the shares of Common
Stock acquired will commence on the date of grant, and the tax basis of the
shares will be their Fair Market Value at that time.
Performance
Units. At
the
time performance units are earned, the participant will be treated as having
received ordinary income equal to the Fair Market Value of the shares of Common
Stock subject to such performance shares, whether such performance shares are
settled in cash or by delivery of shares of Common Stock. At that time,
the
Page
41
Company
will be allowed a deduction for federal income tax purposes equal to the amount
of ordinary income which the participant receives. The participant’s holding
period for the shares of common stock acquired (if any) will commence on the
date of grant, and the tax basis of such shares will be their fair market value
at that time.
Plan
Benefits Table
The
Company does not expect any Awards to be granted to any employees of the Company
during 2007. If this proposal is approved, it is expected that the Company’s
non-employee directors will each receive stock options to purchase 2,250 shares
on June 1, 2007, for an aggregate of 24,750 shares (assuming 11 persons are
serving as non-employee directors on June 1, 2007). With the assistance of
a
benefits consultant, the Company has been evaluating a possible structure for
awards beginning in 2008 that would include the grant of a mix of stock options
and performance units to certain members of management, with service periods
and
the attainment of certain performance goals as vesting
requirements.
No
awards
have been made under the 2007 Equity Plan, and, other than the expected awards
to non-employee directors described above, the Company cannot currently
determine the number of awards that will be granted to any person in
2007.
The
affirmative vote of the holders of a majority of shares of common stock
represented and voting at the meeting (either in person or by proxy) is required
for approval of the proposal to adopt the 2007 Equity Plan. The Board of
Directors recommends that shareholders vote “FOR” this proposal. Proxies, unless
indicated to the contrary, will be voted “FOR” this
proposal.
Page
42
SHAREHOLDERS
PROPOSALS FOR 2008 MEETING
Shareholders
may submit proposals appropriate for shareholder action at the Company’s 2008
annual meeting consistent with the regulations of the Securities and Exchange
Commission. For proposals to be considered for inclusion in the proxy statement
for the 2008 annual meeting, they must be received by the Company no later
than
November 27, 2007. Such proposals should be directed to First Bancorp, Attn.
Anna G. Hollers, 341 North Main Street, Troy, North Carolina 27371-0508.
The
bylaws of the Company establish an advance notice procedure for shareholder
proposals to be brought before a meeting of shareholders of the Company. Subject
to any other applicable requirements, only such business may be conducted at
a
meeting of the shareholders as has been brought before the meeting by, or at
the
direction of, the Board of Directors or by a shareholder who has given to the
Secretary of the Company timely written notice, in proper form, of the
shareholder’s intention to bring that business before the meeting. The presiding
officer at such meeting has the authority to make such determinations. To be
timely, notice of other business to be brought before any meeting must generally
be received by the Secretary of the Company not less than 60 nor more than
90
days in advance of the shareholders’ meeting. The notice of any shareholder
proposal must set forth the various information required under the bylaws.
The
person submitting the notice must provide, among other things, the name and
address under which such shareholder appears on the Company's books and the
class and number of shares of the Company’s capital stock that are beneficially
owned by such shareholder. Any shareholder desiring a copy of the Company’s
bylaws will be furnished one without charge upon written request to the
Secretary of the Company at the Company’s address noted above.
DELIVERY
OF PROXY STATEMENTS
As
permitted by the Securities and Exchange Act of 1934, as amended, only one
copy
of the proxy statement and annual report is being delivered to shareholders
residing at the same address, unless such shareholders have notified the Company
of their desire to receive multiple copies of the proxy statement.
The
Company will promptly deliver, upon oral or written request, a separate copy
of
the proxy statement and annual report to any shareholder residing at an address
to which only one copy was mailed. Requests for additional copies and/or
requests for multiple copies of the proxy statement and annual report in the
future should be directed to First Bancorp, Attn. Anna G. Hollers, 341 North
Main Street, Troy, North Carolina 27371-0508, or by calling 1-800-548-9377
and
asking to speak to Anna Hollers.
Shareholders
residing at the same address and currently receiving multiple copies of the
proxy statement and annual report may contact the Company as noted above to
request that only a single copy of the proxy statement and annual report be
mailed in the future.
OTHER
MATTERS
As
of the
date of this proxy statement, the Board of Directors does not know of any other
business to be presented for consideration or action at the annual meeting.
If
other matters properly come before the annual meeting, the enclosed proxy will
be deemed to confer discretionary authority to the individuals named as proxies
therein to vote the shares represented by such proxy as to any such
matters.
By
Order
of the Board of Directors,
Anna
G.
Hollers
Secretary
March
28,
2007
Page
43
Appendix
A
(Last
Approved on March 6, 2007)
FIRST
BANCORP
AMENDED
AND RESTATED
CHARTER
OF THE
AUDIT
COMMITTEE OF THE BOARD OF DIRECTORS
|
I.
|
PURPOSE
|
The
primary function of the Audit Committee is to assist the Board of Directors
in
fulfilling its oversight responsibilities by monitoring: (i) the financial
reports and other financial information provided by First Bancorp (the
“Corporation”) to governmental bodies and the public; (ii) the Corporation’s
systems of internal controls regarding finance, accounting and legal compliance
that management and the Board have established; and (iii) the Corporation’s
auditing, accounting and financial reporting processes generally.
The
Audit
Committee’s primary duties and responsibilities are to:
· Serve
as
an independent and objective party to monitor the Corporation’s financial
reporting process and internal control system regarding finance, accounting
and
legal compliance.
· Review
and appraise the audit efforts and independence of the Corporation’s independent
auditors and internal auditing department.
· Provide
an open avenue of communication among the independent auditors, financial and
senior management, the internal auditing department, and the Board of
Directors.
The
Audit
Committee is not responsible for planning or conducting audits or for
determining that the Corporation’s financial statements are complete, accurate
and in accordance with generally accepted accounting principles. Management
and
the independent auditors have this responsibility.
The
independent auditors are accountable to the Board and to the Audit Committee,
and the Audit Committee has the authority and duty to select, evaluate, and
if
appropriate, replace, the independent auditors. In addition, the Audit Committee
has direct responsibility for the compensation and oversight of the independent
auditors.
The
Audit
Committee has the authority to conduct any investigation appropriate to
fulfilling its responsibilities and has direct access to the independent
auditors as well as anyone at the Corporation. The Audit Committee has the
authority to retain, at the Corporation’s expense, special legal, accounting or
other consultants or experts it deems necessary in the performance of its
duties.
The
Corporation shall provide appropriate funding for the payment of compensation
to
the independent auditors for all services approved by the Audit Committee and
for the discharge of the Audit Committee’s responsibilities.
The
Audit
Committee will primarily fulfill its responsibilities by carrying out activities
enumerated in Section IV of this Charter.
|
II.
|
COMPOSITION
|
The
Audit
Committee shall be comprised of three or more directors as determined by the
Board upon the recommendation of the Nominating and Corporate Governance
Committee, each of whom shall be independent directors (as defined in Nasdaq
rules and SEC regulations), and free from any relationship that, in the opinion
of the
Page
44
Board,
would interfere with the exercise of his or her independent judgment as a member
of the Committee. All members of the Committee shall have a basic understanding
of finance and accounting and be able to read and understand fundamental
financial statements. At least one director must have past employment experience
in finance or accounting, requisite professional certification in accounting,
or
other comparable experience or background, including a current or past position
as chief executive or financial officer or other senior officer with financial
oversight responsibilities. The Committee members must not have participated
in
the preparation of the financial statements of the Corporation or any current
subsidiary of the Corporation during the last three years. To the extent
feasible, at least one member of the Audit Committee must be an “audit committee
financial expert,” as defined in applicable SEC regulations and Nasdaq
rules.
The
Audit
Committee Chair is customarily the Chairman of the Board of Directors, provided
that the Board of Directors Chairman is an independent director (as defined
in
the Nasdaq rules and SEC regulations). In the event the Chairman of the Board
of
Directors is not an independent director, the Audit Committee shall elect a
Chairman, subject to ratification by the Board of Directors.
|
III.
|
MEETINGS
|
The
Committee shall meet at least four times annually, or more frequently as
circumstances dictate. As part of its job to foster open communication, the
Committee should meet at least annually with management, the director of the
internal auditing department, the independent auditors and the Committee itself
in separate executive sessions to discuss any matters that the Committee or
each
of these groups believe should be discussed privately. In addition, the
Committee or at least its Chair should discuss with the independent auditors
and
management the Corporation’s quarterly financial information and significant
findings based upon the auditors’ limited review procedures, consistent with
Section IV below. In the event the independent auditors have any significant
findings, disagreements with management, review differences, or other matters
which are required to be reported to the Audit Committee pursuant to SAS 71,
the
Chair will call a special meeting of the Audit Committee to discuss such
matters.
|
IV.
|
RESPONSIBILITIES
AND DUTIES
|
To
fulfill its responsibilities and duties the Audit Committee shall:
Review
Procedures:
|
1.
|
Review
and update this Charter at least annually, prior to the publication
of the
Corporation’s proxy statement and annual report. Recommend revisions to
the Board and submit the Charter to the Board for approval. Have
the
document published periodically in accordance with SEC
regulations.
|
|
2.
|
Review
the Corporation’s annual financial statements and reports, including any
certification, report, opinion, or review rendered by the independent
auditors.
|
|
3.
|
In
consultation with management, the independent auditors and internal
auditors, consider the integrity of the Corporation’s financial reporting
process and controls. Discuss significant financial risk exposures
and the
steps management has taken to monitor, control and report such exposures.
Review significant findings prepared by the independent auditors
and the
internal auditing department together with management’s
responses.
|
|
4.
|
Review
with management and the independent auditors the Corporation’s quarterly
financial results prior to the filing of the Corporation’s quarterly
financial statements with the SEC. The Chair of the Committee may
represent the entire Committee for this purpose.
|
|
5.
|
Discuss
any significant changes to the Corporation’s accounting principals and any
items required to be communicated by the independent auditors in
accordance with SAS 61 and SAS 71. The Chair of the Committee may
represent the entire Audit Committee for purposes of this review.
In the
event the independent auditors have any significant findings,
disagreements with management, review differences,
or
|
Page
45
other
matters which are required to be reported to the Audit Committee pursuant to
SAS
71, the Chair may call a special meeting of the Audit Committee to discuss
such
matters.
Independent
Auditors:
|
6.
|
On
an annual basis, the Committee should review and discuss with the
independent auditors all significant relationships they have with
the
Corporation to determine their independence. In connection with this
discussion, the Committee should obtain from the independent auditors
the
communication required by ISB No. 1.
|
|
7.
|
Review
the performance of the independent auditors and report to the Board
about
any proposed discharge of the independent auditors when and if
circumstances warrant.
|
|
8.
|
Review
the independent auditors’ audit plan - discuss scope, staffing, locations,
reliance upon management and internal audit and their general audit
approach.
|
|
9.
|
Prior
to filing the form 10-K, discuss the results of the audit with the
independent auditors. Discuss certain matters required to be communicated
to audit committees in accordance with AICPA SAS
61.
|
|
10.
|
Periodically
consult with the independent auditors out of the presence of management
about internal controls and the fullness and accuracy of the
organization’s financial statements. This process should also remind the
independent auditors that the Audit Committee - not management -
is the
independent auditors’ client.
|
|
11.
|
Select
and retain the independent auditors, considering independence and
effectiveness. Approve the scope of the proposed audit for each fiscal
year and the fees and other compensation to be paid to the independent
auditors for the audit. At least annually, evaluate the qualifications,
performance and independence of the independent auditors, including
considering whether the provision of permitted non-audit services
is
compatible with maintaining the accountants’ independence, and taking into
account the opinions of management and the internal
auditors.
|
|
12.
|
Discuss
with the independent auditors their judgments about the quality and
appropriateness, not just acceptability, of the Corporation’s accounting
principles as applied in its financial
reporting.
|
|
13.
|
Pre-approve
all audit services and permitted non-audit services (including the
fees
and terms thereof) to be performed by the independent auditors, subject
to
such exceptions for non-audit services as permitted by applicable
laws and
regulations. The 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 Committee at its next
scheduled meeting.
|
Financial
Reporting Processes:
|
14.
|
Foster
an understanding by management and the independent auditors of their
duty
to report to the Audit Committee on significant financial reporting
issues
and practices on a timely basis.
|
|
15.
|
In
consultation with the independent auditors and the internal auditors,
review the integrity of the organization’s financial reporting processes,
both internal and external.
|
Process
Improvement:
|
16.
|
Establish
regular systems of reporting to the Audit Committee by each of management,
the independent auditors and the internal auditors regarding any
significant judgments made in management’s preparation of the financial
statements and the view of each as to appropriateness of such
judgments.
|
Page
46
|
17.
|
Review
with the independent auditors, the internal auditing department and
management the extent to which changes or improvements in financial
or
accounting practices, as approved by the Audit Committee, have been
implemented. (This review should be conducted at an appropriate time
subsequent to implementation of changes or improvements, as decided
by the
Committee.)
|
|
18.
|
If
applicable, after completion of the annual audit, review separately
with
both management and the independent auditors any significant difficulties
encountered during the audit, including any restrictions on the scope
of
work or access to required information.
|
Ethical
and Legal Compliance.
|
19.
|
Review
and update periodically a Code of Ethical Conduct and ensure that
management has established an appropriate system to enforce this
Code.
|
|
20.
|
Review
management’s monitoring of the Corporation’s compliance with the
organization’s Ethical Code.
|
|
21.
|
Establish
and periodically review the adequacy of 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.
|
|
22.
|
Receive
reports regarding, and review any “related party transactions,” as defined
by applicable Nasdaq rules and determine whether to ratify or approve
such
transactions.
|
|
23.
|
Review
activities, organizational structure, and qualifications of the internal
audit department.
|
|
24.
|
On
at least an annual basis, review with the Corporation’s counsel, legal
compliance matters including corporate securities trading
policies.
|
|
25.
|
On
at least an annual basis, review with the Corporation’s counsel, any legal
matter that could have a significant impact on the Corporation’s financial
statements.
|
Other
Audit Committee Responsibilities
|
26.
|
Annually
prepare a report to shareholders as required by the SEC. The report
should
be included in the Corporation’s annual proxy statement, and should state
whether the Audit Committee has:
|
· reviewed
and discussed the consolidated financial statements with
management;
· discussed
with the independent auditors the matters required to be discussed by SAS
61;
· received
certain disclosures from the auditors regarding their independence required
by
ISB No. 1;
· considered
whether the independent auditors’ provision of nonaudit services is compatible
with the concept of auditor independence; and
· concluded,
based on a review of the audited financial statements and discussions with
the
independent auditors, that the Audit Committee should recommend to the Board
of
Directors that the consolidated financial statements be included in the
Corporation’s Annual Report on Form 10-K for filing with the SEC.
|
27.
|
Approve
any report to be included in the Corporation’s annual report or proxy
statement that describes the Committee’s composition and responsibilities
and how they were discharged.
|
Page
47
|
28.
|
Report
to the Board periodically regarding Committee activities and conduct
and
present to the Board an annual evaluation of the Committee’s
performance.
|
|
29.
|
Perform
any other activities consistent with this Charter, the Corporation’s
By-laws and governing law, as the Committee or the Board deems necessary
or appropriate.
|
Page
48
Appendix
B
FIRST
BANCORP
2007
Equity Plan
THIS
PLAN
is made this 30th day of January, 2007, by First Bancorp, a North Carolina
corporation (the “Company”).
ARTICLE
I
PURPOSE
AND EFFECTIVE DATE
1.1
Purpose.
The
purpose of the Plan is to provide financial incentives for selected Employees
and Non-Employee Directors, thereby promoting the long-term growth and financial
success of the Company by (a) attracting and retaining Employees and
Non-Employee Directors of outstanding ability, (b) strengthening the Company’s
capability to develop, maintain, and direct a competent management team, (c)
providing an effective means for selected Employees and Non-Employee Directors
to acquire and maintain ownership of Company Stock, (d) motivating Employees
to
achieve long-range Performance Goals and objectives, and (e) providing incentive
compensation opportunities competitive with peer financial institution holding
companies.
1.2
Effective
Date and Expiration of Plan. The
Plan
will be effective upon its adoption by the Board and approval by affirmative
vote of the Shareholders required under applicable rules and procedures,
including those prescribed under Sections 162(m) and 422 of the Code and
applicable NASDAQ rules. Unless earlier terminated by the Board pursuant to
Section 12.2, the Plan shall terminate on the seventh anniversary of its
Effective Date. No
Award
shall be made pursuant to the Plan after its termination date, but Awards made
prior to
the
termination date may extend beyond that date. Notwithstanding the foregoing,
no
Incentive Stock Options may be granted more than seven years after the earlier
of (a) the adoption of this Plan by the Board or (b) the Effective
Date.
ARTICLE
II
DEFINITIONS
The
following words and phrases, as used in the Plan, shall have the meanings set
forth in this section. When applying these definitions and any other word,
term
or phrase used in this Plan, the form of any word, term or phrase will include
any and all of its other forms.
2.1
Award
means,
individually or collectively, any Option, SAR, Restricted Stock, Restricted
Performance Stock, unrestricted Company Stock or Performance Unit
Award.
2.2
Award
Agreement means
the
written agreement between the Company and each Participant that describes the
terms and conditions of each Award. If there is a conflict between the terms
of
the Plan and the Award Agreement, the terms of the Plan will
govern.
2.3
Board
means
the
Board of Directors of the Company.
2.4 Cause
with
respect to any Participant, means: (a) Gross negligence or gross neglect of
duties; or (b) Commission of a felony or of a gross misdemeanor involving moral
turpitude in connection with the Participant’s employment or service, as the
case may be, with the Company or any of its Subsidiaries; or (c) Fraud,
disloyalty, dishonesty or willful violation of any law or significant Company
policy committed in connection with the Participant’s employment or provision of
services, as the case may be; or (d) Issuance of an order for removal of the
Participant by any agency which regulates the activities of the Company or
any
of its Subsidiaries. Any determination of “Cause” under this Plan shall be made
by the Committee in its sole discretion.
2.5
Company
means
First Bancorp, a North Carolina corporation.
2.6 Company
Director means
a
non-employee member of the Board.
2.7
Company
Stock means
the
Company’s common shares, no par value per share.
Page
49
2.8 Code
means
the
Internal Revenue Code of 1986, as amended or superseded after the Effective
Date, and any applicable rulings or regulations issued thereunder.
2.9 Committee
means
the
Compensation Committee of the Board or a subcommittee thereof.
2.10 Disability
means:
(a) with respect to an Incentive Stock Option, “disabled” within the meaning of
Section 22(e)(3) of the Code; (b) with respect to any Award subject to Section
409A of the Code, “disabled” as defined under Section 409A of the Code; and (c)
with respect to any Award not described in subsections (a) and (b) of this
Section 2.10, a long-term disability as defined by the Company’s or Subsidiary’s
group disability insurance plan, or any successor plan that is applicable to
such Participant at the time of his or her Termination.
2.11 Effective
Date means
the
date on which the Plan is approved by the Shareholders of the Company, as
provided in Section 1.2.
2.12
Employee
means
any
person who, on any applicable date, is a common law employee of the Company
or
any Subsidiary. A worker who is classified as other than a common law employee
but who is subsequently reclassified as a common law employee of the Company
or
any Subsidiary for any reason and on any basis will be treated as a common
law
employee only from the date that reclassification occurs and will not
retroactively be reclassified as an Employee for any purpose of this
Plan.
2.13 Exchange
Act means
the
Securities Exchange Act of 1934, as amended.
2.14
Exercise
Price
means
the amount, if any, that a Participant must pay to exercise an Award (other
than
an Option).
2.15 Fair
Market Value means,
as
of any specified date, an amount equal to the reported closing price on the
specified date of a share of Company Stock on NASDAQ or any other established
stock exchange or quotation system on which the Company Stock is then listed
or
traded or, if no shares of Company Stock have been traded on such date, the
closing price of a share of Company Stock on NASDAQ or such other established
stock exchange or quotation system as reported on the first day prior thereto
on
which shares of Company Stock were so traded. If the preceding sentence does
not
apply, Fair Market Value shall be determined in good faith by the Committee
using other reasonable means.
2.16 Fiscal
Year means
the
fiscal year of the Company, which is the year ending on December
31.
2.17
Incentive
Stock Option means
an
option within the meaning of Section 422 of the Code.
2.18
Non-Employee
Director
means
either a Company Director or a Subsidiary Director.
2.19 Nonqualified
Stock Option means
an
option granted under the Plan other than an Incentive Stock Option.
2.20
Option
means
either a Nonqualified Stock Option or an Incentive Stock Option to purchase
Company Stock.
2.21
Option
Price means
the
price at which Company Stock may be purchased under an Option.
2.22
Participant
means
an
Employee or a Non-Employee Director to whom an Award has been made under the
Plan.
2.23
Performance
Goals means
goals established by the Committee pursuant to Section 4.5.
2.24
Performance
Period means
a
period of time over which performance is measured.
2.25
Performance
Unit means
the
unit of measure determined under Article IX by which is expressed the value
of a
Performance Unit Award.
Page
50
2.26
Performance
Unit Award means
an
Award granted under Article IX.
2.27
Personal
Representative means
the
person or persons who, upon the death, Disability, or incompetency of a
Participant, shall have acquired, by will or by the laws of descent and
distribution or by other legal proceedings, the right to exercise an Option
or
SAR or the right to any Restricted Stock Award or Performance Unit Award
theretofore granted or made to such Participant.
2.28
Plan
means
the
First Bancorp 2007 Equity Plan.
2.29
Predecessor
Plans means
the
First Bancorp 2004 Stock Option Plan and the First Bancorp 1994 Stock Option
Plan, as amended.
2.30
Restricted
Performance Stock means
Company Stock subject to Performance Goals.
2.31 Restricted
Stock means
Company Stock subject to the terms and conditions provided in Article VI and
including Restricted Performance Stock.
2.32
Restricted
Stock Award means
an
Award granted under Article VI.
2.33 Restriction
Period means
a
period of time determined under Section 6.2 during which Restricted Stock is
subject to the terms and conditions provided in Section 6.3.
2.34 Retirement
means
any normal or early retirement by a Participant pursuant to the terms of any
pension plan or policy of the Company or any Subsidiary that is applicable
to
such Participant at the time of the Participant’s Termination.
2.35 SAR
means
a
stock appreciation right granted under Section 5.7.
2.36 Shareholders
mean
the
shareholders of the Company.
2.37
Subsidiary
means
a
corporation or other entity the majority of the voting stock of which is owned
directly or indirectly by the Company.
2.39 Subsidiary
Director
means a
non-employee member of the board of directors of a Subsidiary who is not also
a
Company Director.
2.39 Termination,
unless
otherwise provided in the applicable Award Agreement, means a “separation from
service” as defined under Section 409A of the Code.
ARTICLE
III
ADMINISTRATION
3.1 Committee
to Administer. The
Plan
shall be administered by the Committee, in accordance with its Charter, as
adopted from time to time by the Board; provided, however, that the Board has
the authority to grant Awards to Company Directors.
3.2 Powers
of Committee.
(a) The
Committee and the Board shall have full power and authority to interpret and
administer the Plan and to establish and amend rules and regulations for its
administration. Any action or decision by the Board or the Committee shall
be
final, binding and conclusive with respect to the interpretation of the Plan
and
any Award made under it.
(b) Subject
to the provisions of the Plan, the Committee or the Board, as the case may
be,
shall have authority, in its discretion, to determine those Employees and
Non-Employee Directors who shall receive an Award; the time or times when such
Award shall be made; the vesting schedule, if any, for the Award; and the type
of Award
Page
51
to
be granted, the number of shares of Company Stock to be subject to each Option
and Restricted Stock Award, the value of each Performance Unit and all other
terms and conditions of any Award.
(c) The
Committee or the Board, as the case may be, shall determine and set forth in
an
Award Agreement the terms of each Award, including such terms, restrictions,
and
provisions as shall be necessary to cause certain Options to qualify as
Incentive Stock Options. The Committee or the Board, as the case may be, may
correct any defect or supply any omission or reconcile any inconsistency in
the
Plan or in any Award Agreement, in such manner and to the extent the Committee
or the Board, as appropriate, shall determine in order to carry out the purposes
of the Plan. The Committee or the Board, as the case may be, may, in its
discretion, accelerate (i) the date on which any Option or SAR may be exercised,
(ii) the date of termination of the restrictions applicable to a Restricted
Stock Award, or (iii) the end of a Performance Period under a Performance Unit
Award.
ARTICLE
IV
AWARDS
4.1 Awards.
Awards
under the Plan shall consist of Incentive Stock Options, Nonqualified Stock
Options, SARs, Restricted Stock, Restricted Performance Stock, unrestricted
Company Stock and Performance Units. All Awards shall be subject to the terms
and conditions of the Plan and to such other terms and conditions consistent
with the Plan as the Committee or the Board, as the case may be, deems
appropriate. Awards under a particular section of the Plan need not be uniform
and Awards under two or more sections may be combined in one Award Agreement.
Any combination of Awards may be granted at one time and on more than one
occasion to the same Employee or Non-Employee Director. Awards of Performance
Units and Restricted Performance Stock shall be earned solely upon attainment
of
Performance Goals and the Committee shall have no discretion to increase such
Awards.
4.2 Eligibility
for Awards. An
Award
may be made to any Employee selected by the Committee. In making this selection
and in determining the form and amount of the Award, the Committee may give
consideration to the functions and responsibilities of the respective Employee,
his or her present and potential contributions to the success of the Company
or
any of its Subsidiaries, the value of his or her services to the Company or
any
of its Subsidiaries, and such other factors deemed relevant by the Committee.
Non-Employee Directors are eligible to receive Awards pursuant to Article
VII.
4.3 Shares
Available Under the Plan.
(a) The
Company Stock to be offered under the Plan pursuant to Options, SARs,
Performance Unit Awards, Restricted Stock and unrestricted Company Stock Awards
must be (i) Company Stock previously issued and outstanding and reacquired
by
the Company or (ii) authorized but unissued Company Stock not reserved for
any
other purpose. Subject to adjustment under Section 12.1, the number of shares
of
Company Stock that may be issued pursuant to Awards under the Plan (the “Section
4.3 Limit”) shall
not
exceed, in the aggregate, 1,180,250 shares.
(b)
Any
shares of Company Stock subject to Restricted Stock, Restricted Performance
Stock, unrestricted Company Stock Awards, and Performance Units shall not exceed
50% of the total shares available under the Plan, and the maximum number of
shares of Company Stock that may be issued subject to Incentive Stock Options
is
1,100,000, subject to adjustment under Section 12.1. The Section 4.3
Limit shall not have counted against it shares of Company Stock subject to
an
Award which for any reason terminates by expiration, forfeiture, cancellation
or
otherwise without having been exercised or paid.
(c)
No
awards shall be granted under any Predecessor Plan on and after the date on
which the Plan is approved by the Shareholders.
4.4 Limitation
on Awards. The
maximum number of shares of Company Stock subject to Restricted Stock,
unrestricted Company Stock and Performance Units, to the extent they are
denominated in shares, may not exceed 50,000 shares of Company Stock to any
single Employee in any one Fiscal Year, subject to adjustment under Section
12.1, or alternatively to the extent that Performance Units are denominated
in
cash, the maximum amount of Performance Units awarded to any single Employee
in
any one Fiscal Year may not exceed $1,000,0000. The maximum number of shares
of
Common Stock for which Options or SARs may be granted to any single Participant
in any one Fiscal Year shall not exceed 75,000 subject to adjustment under
Section 12.1.
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4.5 General
Performance Goals.
(a) Performance
Goals relating to the payment or vesting of an Award that is intended to qualify
as “performance-based compensation” under Section 162(m) of the Code will be
comprised of one or more of the following performance criteria as the Committee
may deem appropriate:
(i) Earnings
per share (actual or targeted growth);
(ii) Net
income (before or after taxes);
(iii) Return
measures (including, but not limited to, return on average assets, risk-adjusted
return on capital, or return on average equity);
(iv) Efficiency
ratio;
(v) Assets
per employee;
(vi) Stock
price (including, but not limited to, growth measures and total shareholder
return);
(vii) Noninterest
income compared to total income ratio;
(viii) Expense
targets;
(ix) Operating
efficiency;
(x) Credit
quality measures;
(xi) Customer
satisfaction measures;
(xii) Loan
growth;
(xiii) Deposit
growth;
(xiv) Noninterest
income growth
(xv) Net
interest margin;
(xvi) Fee
income; and
(xvii) Operating
expense.
(b) For
any
Awards not intended to qualify as “performance-based compensation” under Section
162(m) of the Code, the Committee may establish Performance Goals based on
the
performance criteria listed in Section 4.5(a) or other performance criteria
as
it deems appropriate.
(c) Any
of
the performance criteria listed in Section 4.5(a) may be applied solely with
reference to the Company and/or any Subsidiary or relatively between the Company
and/or any Subsidiary and one or more unrelated entities. In addition, different
performance criteria may be applied to individual Participants or to groups
of
Participants and, as specified by the Committee, may be based on results
achieved (i) separately by the Company or any Subsidiary, (ii) any combination
of the Company and the Subsidiaries or (iii) any combination of business units
or divisions of the Company and the Subsidiaries.
(d) With
respect to each Performance Period, the Committee will establish the Performance
Goals in writing no later than the earlier of (i) 90 days after the beginning
of
the Performance Period or (ii) expiration of 25 percent of the Performance
Period.
(e) Except
as
otherwise provided in the Plan or the Award Agreement, as of the end of each
Performance Period, the Committee will certify in writing the extent to which
a
Participant has or has not met the Participant’s Performance Goal. To the extent
permitted under Section 162(m) of the Code, if applicable, the Committee may
disregard or offset the effect of any special charges or gains or cumulative
effect of a change in accounting in determining the attainment of Performance
Goals.
(f) To
the
extent permitted under Section 162(m) of the Code, if applicable, the Committee
shall make (i) appropriate adjustments to performance criteria to reflect the
effect on any performance criteria of any stock dividend or stock split
affecting Company Stock, recapitalization, merger, consolidation, combination,
spin-off, distribution of assets to Shareholders, exchange of shares or similar
corporate change and (ii) similar adjustments to any portion of performance
criteria that is not based on Company Stock but which is affected by an event
having an effect similar to those just described.
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53
ARTICLE
V
OPTIONS
AND STOCK APPRECIATION RIGHTS
5.1 Award
of Options. The
Committee may, from time to time, and on such terms and conditions as the
Committee may prescribe, award (a) Incentive Stock Options, subject to Section
5.5, to any eligible Employee of the Company or any parent or subsidiary
corporation (as permitted under Sections 422 and 424 of the Code) and (b)
Nonqualified Stock Options to any Employee.
5.2
Period
of Option.
(a) An
Option
granted under the Plan shall be exercisable only in accordance with the vesting
schedule approved by the Committee. The Committee may in its discretion
prescribe additional conditions, restrictions or terms on the vesting of an
Option, including the full or partial attainment of Performance Goals pursuant
to Section 4.5. After the Option vests, the Option may be exercised at any
time
during the term of the Option, in whole or in installments, as specified in
the
related Award Agreement. Subject to Article X and except as provided in Section
5.5, the duration of each Option shall not be more than ten years from the
date
of grant.
(b) Except
as
provided in Article X, a Participant may not exercise an Option unless such
Participant is then, and continually (except for sick leave, military service,
or other approved leave of absence) after the grant of the Option has been,
an
Employee or Non-Employee Director.
5.3 Award
Agreement. Each
Option shall be evidenced by an Award Agreement. The Award Agreement shall
specify whether the Option is intended to be an Incentive Stock Option or a
Nonqualified Stock Option.
5.4 Option
Price, Exercise and Payment.
(a) Except
as
provided in Section 5.5, the Option Price of Company Stock under each Option
shall be determined by the Committee but shall be a price not less than 100
percent of the Fair Market Value of Company Stock at the date such Option is
granted.
(b) Subject
to Section 12.2, the Committee may not (i) amend an Option to reduce its Option
Price, (ii) cancel an Option and regrant an Option with a lower Option Price
than the original Option Price of the cancelled Option, or (iii) take any other
action (whether in the form of an amendment, cancellation or replacement grant)
that has the effect of “repricing” an Option, as defined under applicable NASDAQ
rules or the rules of the established stock exchange or quotation system on
which the Company Stock is then listed or traded.
(c) Vested
Options may be exercised from time to time by giving written notice to the
Chief
Financial Officer of the Company or the Secretary of the Committee, or his
or
her designee, specifying the number of shares to be purchased. The notice of
exercise shall be accompanied by payment in full of the Option Price in cash
or
the Option Price may be paid in whole or in part through the transfer to the
Company of shares of Company Stock in accordance with procedures established
by
the Committee from time to time. In addition, in accordance with the rules
and
procedures established by the Committee for this purpose, an Option may also
be
exercised through a cashless exercise procedure involving a broker or dealer,
that affords Participants the opportunity to sell immediately some or all of
the
shares underlying the exercised portion of the Option in order to generate
sufficient cash to pay the Option Price and/or to satisfy withholding tax
obligations related to the Option.
(d) In
the
event such Option Price is paid, in whole or in part, with shares of Company
Stock, the portion of the Option Price so paid shall be equal to the value,
as
of the date of exercise of the Option, of such shares. The value of such shares
shall be equal to the number of such shares multiplied by the Fair Market Value
of such shares on the trading day coincident with the date of exercise of such
Option (or the immediately preceding trading day if the date of exercise is
not
a trading day). The Company shall not issue or transfer Company Stock upon
exercise of an Option until the Option Price is fully paid.
5.5 Limitations
on Incentive Stock Options. Each
provision of the Plan and each Award Agreement relating to an Incentive Stock
Option shall be construed so that each Incentive Stock Option shall be an
incentive stock option as defined in Section 422 of the Code, and any provisions
of the Award Agreement thereof that cannot be so construed shall be disregarded.
No Incentive Stock Option may be granted to any Employee who,
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54
at
the
time of such grant, owns stock possessing more than 10 percent of the total
combined voting power of all classes of stock of the Company or of its parent
or
subsidiary corporation (as determined under Sections 422 and 424 of the Code),
unless (a) the Option Price for such Incentive Stock Option is at least 110
percent of the Fair Market Value of a share of Company Stock on the date the
Incentive Stock Option is granted and (b) such Incentive Stock Option may not
be
exercised more than five years after it is granted. Notwithstanding anything
in
the Plan to the contrary, to the extent required by the Code, in the event
that
the number of Options intended to be Incentive Stock Options shall exceed the
$100,000 calendar year limit as set forth in Section 422 of the Code; the
remaining portion of such granted Options shall be deemed Nonqualified Stock
Options in accordance with Section 422 of the Code.
5.6 Rights
and Privileges. A
Participant shall have no rights as a Shareholder with respect to any shares
of
Company Stock covered by an Option until the issuance of such shares to the
Participant.
5.7
Award
of SARs.
(a) The
Committee may, from time to time, and on such terms and conditions as the
Committee may prescribe, award SARs to any Employee.
(b) A
SAR
shall represent the right to receive payment of an amount equal to (i) the
amount by which the Fair Market Value of one share of Company Stock on the
trading day immediately preceding the date of exercise of the SAR exceeds the
Exercise Price multiplied by (ii) the number of shares covered by the SAR.
Payment of the amount to which a Participant is entitled upon the exercise
of a
SAR shall be made in cash, Company Stock, or partly in cash and partly in
Company Stock at the discretion of the Committee. The shares shall be valued
at
their Fair Market Value on the date of exercise.
(c) SARs
awarded under the Plan shall be evidenced by an Award Agreement between the
Company and the Participant.
(d) The
Committee may prescribe conditions and limitations on the exercise of any SAR.
SARs may be exercised only when the Fair Market Value of a share of Company
Stock exceeds the Exercise Price.
(e) A
SAR
shall be exercisable only by written notice to the Chief Financial Officer
of
the Company or the Secretary of the Committee,
or his
or her designee.
(f) To
the
extent not previously exercised, all SARs shall automatically be exercised
on
the last trading day prior to their expiration, so long as the Fair Market
Value
of a share of Company Stock exceeds the Exercise Price, unless prior to such
day
the holder instructs the Chief Financial Officer or Secretary, Stock Option
Committee otherwise in writing.
(g) Subject
to Article X, each SAR shall expire on a date determined by the Committee at
the
time of grant.
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55
ARTICLE
VI
RESTRICTED
STOCK
6.1
Award
of Restricted Stock. The
Committee may make a Restricted Stock Award to any Employee, subject to this
Article VI and to such other terms and conditions as the Committee may
prescribe.
6.2
Restriction
Period. At
the
time of making a Restricted Stock Award, the Committee shall establish the
Restriction Period applicable to such Award. The Committee may establish
different Restriction Periods from time to time and each Restricted Stock Award
may have a different Restriction Period, in the discretion of the Committee.
Restriction Periods, when established for a Restricted Stock Award, shall not
be
changed except as permitted by Section 6.3.
6.3
Other
Terms and Conditions. Company
Stock, when awarded pursuant to a Restricted Stock Award, will be represented
in
a book entry account in the name of the Participant who receives the Restricted
Stock Award. The Participant shall be entitled to receive dividends during
the
Restriction Period and shall have the right to vote such Restricted Stock and
shall have all other Shareholder rights, with the exception that (i) unless
otherwise provided by the Committee, if any dividends are paid in shares of
Company Stock, those shares will be subject to the same restrictions as the
shares of Restricted Stock with respect to which they were issued, (ii) the
Participant will not be entitled to delivery of any stock certificate evidencing
the Company Stock underlying the Restricted Stock Award during the Restriction
Period, (iii) the Company will retain custody of the Restricted Stock during
the
Restriction Period, and (iv) a breach of a restriction or a breach of the terms
and conditions established by the Committee pursuant to the Restricted Stock
Award will cause a forfeiture of the Restricted Stock Award. The Committee
may,
in addition, prescribe additional restrictions, terms, or conditions upon or
to
the Restricted Stock Award including the attainment of Performance Goals in
accordance with Section 4.5.
6.4
Restricted
Stock Award Agreement. Each
Restricted Stock Award shall be evidenced by an Award Agreement.
6.5
Payment
for Restricted Stock. Restricted
Stock Awards may be made by the Committee under which the Participant shall
not
be required to make any payment for the Company Stock or, in the alternative,
under which the Participant, as a condition to the Restricted Stock Award,
shall
pay all (or any lesser amount than all) of the Fair Market Value of the Company
Stock, determined as of the date the Restricted Stock Award is made. If the
latter, such purchase price shall be paid in cash, or as otherwise provided
for
in the Award Agreement.
ARTICLE
VII
AWARDS
FOR NON-EMPLOYEE DIRECTORS
7.1
Awards
to Non-Employee Directors. The
Board
shall determine all Awards to Company Directors and the Committee shall
determine all Awards to Subsidiary Directors. The Board or the Committee, as
the
case may be, retains the discretionary authority to make Awards to Non-Employee
Directors and any type of Award (other than Incentive Stock Options) may be
granted to Non-Employee Directors under this Plan. All such Awards shall be
subject to the terms and conditions of the Plan and to such other terms and
conditions consistent with the Plan as the Board or the Committee, as the case
may be, deems appropriate.
7.2
No
Right to Continuance as a Director. None
of
the actions of the Company in establishing the Plan, the actions taken by the
Company, the Board, or the Committee under the Plan, or the granting of any
Award under the Plan shall be deemed (i) to create any obligation on the part
of
the Board or the board of directors of the applicable Subsidiary to nominate
any
Non-Employee Director for reelection or (ii) to be evidence of any agreement
or
understanding, express or implied, that the Non-Employee Director has a right
to
continue as a Non-Employee Director for any period of time or at any particular
rate of compensation.
ARTICLE
VIII
UNRESTRICTED
COMPANY STOCK AWARDS FOR EMPLOYEES
8.1 The
Committee may make awards of unrestricted Company Stock to Employees on such
terms and conditions as the Committee may prescribe.
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56
ARTICLE
IX
AWARD
OF PERFORMANCE UNITS
9.1 Award
of Performance Units. The
Committee may award Performance Units to any Employee. Each Performance Unit
shall represent the right of a Participant to receive an amount equal to the
value of the Performance Unit, determined in the manner established by the
Committee at the time of Award.
9.2
Performance
Period. At
the
time of each Performance Unit Award, the Committee shall establish, with respect
to each such Award, a Performance Period during which performance shall
be
measured. There may be more than one Performance Unit Award in existence at
any
one
time,
and Performance Periods may differ.
9.3
Performance
Measures. Performance
Units shall be awarded to a Participant and earned contingent upon the
attainment of Performance Goals in accordance with Section 4.5.
9.4
Performance
Unit Value. Each
Performance Unit shall have a maximum dollar value or number of shares
established by the Committee at the time of the Award. Performance Units earned
will be determined by the Committee in respect of a Performance Period in
relation to the degree of attainment of Performance Goals. The measure of a
Performance Unit may, in the discretion of the Committee, be equal to the Fair
Market Value of one share of Company Stock.
9.5
Award
Criteria. In
determining the number of Performance Units to be granted to any Participant,
the Committee shall take into account the Participant’s responsibility level,
performance, potential, cash compensation level, other incentive awards, and
such other considerations as it deems appropriate.
9.6 Payment.
(a) Following
the end of the applicable Performance Period, a Participant holding Performance
Units will be entitled to receive payment of an amount, not exceeding the
maximum value of the Performance Units, based on the achievement of the
Performance Goals for such Performance Period, as determined by the
Committee.
(b) Awards
may be paid in cash or stock, or any combination thereof, as determined by
the
Committee. Payment shall be made in a lump sum or in installments and shall
be
subject to such other terms and conditions as shall be determined by the
Committee.
9.7
Performance
Unit Award Agreements. Each
Performance Unit Award shall be evidenced by an Award Agreement.
ARTICLE
X
GENERAL
TERMINATION PROVISIONS
10.1
Termination.
Subject
to Article XI and unless otherwise specified in the applicable Award Agreement,
the following provisions will govern the treatment of a Participant’s
outstanding Awards following a Participant’s Termination.
(a) If
the
Participant’s Termination is due to death or Disability, all of the
Participant’s outstanding Options, SARs or Restricted Stock Awards shall become
fully vested and, if applicable, exercisable. Upon the Participant’s Termination
for any other reason, any Awards that are not vested and/or exercisable on
the
date of such Termination will immediately terminate and be of no further force
and effect.
(b) If
the
Participant Terminates for any reason other than (i) death, (ii) Disability,
(iii) Retirement or (iv) discharge for Cause, such Participant’s outstanding
SARs or Options may be exercised at any time within three months after such
Termination, to the extent of the number of shares covered by such Options
or
SARs which are exercisable at the date of such Termination; except that an
Option or SAR shall not be exercisable on any date beyond the expiration date
of
such Option or SAR.
(c) Upon
a
Termination for Cause, any Options or SARs held by the Participant (whether
or
not then exercisable) shall expire and any rights thereunder shall terminate
immediately, unless otherwise determined by the
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57
Committee
or the Board. Any non-vested Restricted Stock Awards of such Participant shall
immediately be forfeited and any rights thereunder shall terminate, unless
otherwise determined by the Committee or the Board.
(d)
Upon
a Termination due to the Participant’s death, any SARs or Options that are then
exercisable may be exercised by the Participant’s Personal Representative at any
time before the earlier of (i) one year after the Participant’s death or (ii)
the expiration date of the Award.
(e)
Upon
a Termination due to the Participant’s Disability or Retirement, any SARs or
Options that are then exercisable may be exercised by the Participant at any
time before the earlier of (i) one year after the date of such Termination
or
(ii) the expiration date of the Award; provided, however, that an Option which
is intended to qualify as an Incentive Stock Option will only be treated as
such
to the extent it complies with the requirements of Section 422 of the
Code.
(f)
If a
Participant who Terminates due to Retirement dies prior to exercising all of
his
or her outstanding Options or SARs, then such Options or SARs may be exercised
by the Participant’s Personal Representative at any time before the earlier of
(i) one year after the Participant’s death or (ii) the expiration date of the
Award; provided, however, that, an Option which is intended to qualify as an
Incentive Stock Option will only be treated as such to the extent it complies
with the requirements of Section 422 of the Code.
(g) Subject
to Article XI, a Performance Unit Award shall terminate for all purposes if
the
Participant Terminates at any time during the applicable Performance Period,
except as may otherwise be determined by the Committee. In the event that a
Participant holding a Performance Unit Terminates following the end of the
applicable Performance Period but prior to full payment according to the terms
of the Performance Unit Award, the Performance Unit Award shall terminate except
when the termination event is due to death, Disability or
Retirement.
ARTICLE
XI
CHANGE
IN CONTROL OF THE COMPANY
11.1
Contrary
Provisions. Notwithstanding
anything contained in the Plan to the contrary, the provisions of this Article
XI shall govern and supersede any inconsistent terms or provisions of the
Plan.
11.2 Definitions
(a) Change
in Control.
For
purposes of this Plan, unless as otherwise determined by the Committee in a
manner not inconsistent with Section 12.2(a), a change in control shall be
deemed to have occurred on:
(i)
the date
on which any “person” or “group” (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act), other than the Company or any entity owned,
directly or indirectly, by the stockholders of the Company in substantially
the
same proportions as their ownership of Common Stock, becomes the beneficial
owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act) of shares
representing more than 40% of the combined voting power of the then-outstanding
securities entitled to vote generally in the election of directors of the
Company; or
(ii)
the
date on which (i) the Company merges with any other entity, (ii) the
Company enters into a statutory share exchange with another entity, or
(iii) the Company conveys, transfers or leases all or substantially all of
its assets to any person; provided,
however,
that in
the case of subclauses (i) and (ii), a Change of Control shall not be
deemed to have occurred if the shareholders of the Company immediately before
such transaction own, directly or indirectly immediately following such
transaction, more than 60% of the combined voting power of the outstanding
securities of the corporation resulting from such transaction in substantially
the same proportions as their ownership of securities immediately before such
transaction.
11.3
Effect
of Change in Control on Certain Awards.
(a) If
the
Company is not the surviving corporation following a Change in Control, and
the
surviving corporation following such Change in Control or the acquiring
corporation (such surviving corporation or acquiring corporation is hereinafter
referred to as the “Acquiror”) does not assume the outstanding Options, SARs,
Restricted Stock, Restricted Performance Stock or Performance Units or does
not
substitute equivalent equity awards relating
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58
to
the
securities of such Acquiror or its affiliates for such Awards, then all such
Awards shall become immediately and fully exercisable (or in the case of
Restricted Stock, fully vested and all restrictions will immediately lapse).
In
the case of Restricted Performance Stock and Performance Units, the target
payout opportunities under all outstanding Awards of Restricted Performance
Stock and Performance Units shall be deemed to have been fully earned based
on
targeted performance being attained as of the effective date of the Change
in
Control. In addition, the Board or its designee may, in its sole discretion,
provide for a cash payment to be made to each Participant for the outstanding
Options, Restricted Stock, Restricted Performance Stock, SARs or Performance
Units upon the consummation of the Change in Control, determined on the basis
of
the fair market value that would be received in such Change in Control by the
holders of the Company’s securities relating to such Awards. Notwithstanding the
foregoing, any Option intended to be an Incentive Stock Option under Section
422
of the Code shall be adjusted in a manner to preserve such status.
(b) If
the
Company is the surviving corporation following a Change in Control, or the
Acquiror assumes the outstanding Options, SARs, Restricted Stock, Restricted
Performance Stock or Performance Units or substitutes equivalent equity awards
relating to the securities of such Acquiror or its affiliates for such Awards,
then all such Awards or such substitutes therefor shall remain outstanding
and
be governed by their respective terms and the provisions of the
Plan.
(c) If
(i) a
Participant Terminates without Cause within twenty-four (24) months following
a
Change in Control, and (ii) the Company is the surviving corporation following
such Change in Control, or the Acquiror assumes the outstanding Options, SARs,
Restricted Stock, Restricted Performance Stock or Performance Units or
substitutes equivalent equity awards relating to the securities of such Acquiror
or its affiliates for such Awards, then all outstanding Options, SARs,
Restricted Stock, Restricted Performance Stock or Performance Units shall become
immediately and fully exercisable (or in the case of Restricted Stock, fully
vested and all restrictions will immediately lapse). In the case of Restricted
Performance Stock and Performance Units, the target payout opportunities under
all outstanding Awards of Restricted Performance Stock and Performance Units
shall be deemed to have been fully earned based on targeted performance being
attained.
(d) If
(i)
the employment of a Participant with the Company and its Subsidiaries is
terminated for Cause within twenty-four (24) months following a Change in
Control and (ii) the Company is the surviving corporation following such Change
in Control, or the Acquiror assumes the outstanding Options, SARs, Restricted
Stock, Restricted Performance Stock, or Performance Units or substitutes
equivalent equity awards relating to the securities of such Acquiror or its
affiliates for such Awards, then any Options or SARs of such Participant shall
expire, and any non-vested Restricted Stock, Restricted Performance Stock or
Performance Units shall be forfeited, and any rights under such Awards shall
terminate immediately, unless otherwise determined by the Committee or the
Board.
(e) Outstanding
Options or SARs which vest in accordance with Section 11.3, may be exercised
by
the Participant in accordance with Article X; provided, however, that a
Participant whose Options or SARs become exercisable in accordance with Section
11.3(c) may exercise such Options or SARs at any time within one year after
such
Termination, except that an Option or SAR shall
not
be exercisable on any date beyond the expiration date of such Option or
SAR.
In
the
event of a Participant’s death after such Termination, the exercise of Options
and SARs shall be treated in the same manner as determined for retirement in
Section 10.1(e).
ARTICLE
XII
MISCELLANEOUS
PROVISIONS
12.1
Adjustments
Upon Changes in Stock. In
case
of any reorganization, recapitalization, reclassification, stock split, stock
dividend, distribution, combination of shares, merger, consolidation, rights
offering, or any other changes in the corporate structure or shares of the
Company, appropriate adjustments shall be made by the Committee or the Board,
as
the case may be, (or if the Company is not the surviving corporation in any
such
transaction, the board of directors of the surviving corporation) in the
aggregate number and kind of shares subject to the Plan, and the number and
kind
of shares and the Option Price per share subject to outstanding Options or
which
may be issued under outstanding Restricted Stock Awards or pursuant to
unrestricted Company Stock Awards in order to preserve the value of the Awards.
Appropriate adjustments shall also be made by the Committee or the Board, as
the
case may be, in the terms of any Awards under the Plan, subject to Article
XI,
to reflect such changes and to modify any other terms of outstanding Awards
on
an equitable basis. Any such adjustments made by
Page
59
the
Committee or the Board pursuant to this Section 12.1 shall be conclusive and
binding for all purposes under the Plan.
12.2
Amendment,
Suspension, and Termination of Plan.
(a) The
Board
shall have complete and exclusive power and authority to suspend, amend, modify
or terminate the Plan or any portion thereof at any time in any or all respects,
including, without limitation, to amend the Plan from time to time in such
respects as the Board may deem advisable in order that any Awards thereunder
shall conform to any change in applicable laws or regulations or in any other
respect the Board may deem to be in the best interests of the Company; provided,
however, that no such amendment shall, without shareholder approval, (i) except
as provided in Section 12.1, increase the number of shares of Company Stock
which may be issued under the Plan, (ii) expand the types of awards available
to
Participants under the Plan, (iii) materially expand the class of employees
eligible to participate in the Plan, (iv) materially change the method of
determining the Option Price of Options; (v) delete or limit the provision
in
Section 5.4 prohibiting the repricing of Options; (vi) extend the termination
date of the Plan or (vii) be made to the extent that Shareholder approval is
required to satisfy applicable law, regulation or any securities stock exchange,
market or other quotation system on or through which the Company Stock is listed
or traded. Except as otherwise provided in the Plan, no such amendment,
suspension, or termination shall materially adversely alter or impair any
outstanding Options, SARs, shares of Restricted Stock, or Performance Units
without the consent of the Participant affected thereby.
(b) The
Committee may amend or modify any outstanding Options, SARs, Restricted Stock
Awards, or Performance Unit Awards in any manner to the extent that the
Committee would have had the authority under the Plan initially to award such
Options, SARs, Restricted Stock Awards, or Performance Unit Awards as so
modified or amended, including without limitation, to change the date or dates
as of which such Options or SARs may be exercised, to remove the restrictions
on
shares of Restricted Stock, or to modify the manner in which Performance Units
are determined and paid.
(c) Notwithstanding
the foregoing, the Plan and any Award Agreements may be amended without any
additional consideration to affected Participants to the extent necessary to
comply with, or avoid penalties under, Section 409A of the Code, even if those
amendments reduce, restrict or eliminate rights granted prior to such
amendments.
12.3
Nonuniform
Determinations. The
Committee’s (or, if applicable, the Board’s) determinations under the Plan,
including without limitation, (a) the determination of the Employees and
Non-Employee Directors to receive Awards, (b) the form, amount, and timing
of
any Awards, (c) the terms and provisions of any Awards and (d) the Award
Agreements evidencing the same, need not be uniform and may be made by it
selectively among Employees and/or Non-Employee Directors who receive, or who
are eligible to receive, Awards under the Plan, whether or not such Employees
and/or Non-Employee Directors are similarly situated.
12.4
General
Restriction. Each
Award under the Plan shall be subject to the condition that, if at any time
the
Committee shall determine that (a) the listing, registration, or qualification
of the shares of Company Stock subject or related thereto upon NASDAQ or any
other established stock exchange, market or quotation system or under any state
or federal law, (b) the consent or approval of any government or regulatory
body, or (c) an agreement by the Participant with respect thereto, is necessary
or desirable, then such Award shall not become exercisable in whole or in part
unless such listing, registration, qualification, consent, approval, or
agreement shall have been effected or obtained free of any conditions not
acceptable to the Committee.
12.5
No
Right To Employment. None
of
the actions of the Company in establishing the Plan, the actions taken by the
Company, the Board or the Committee under the Plan, or the granting of any
Award
under the Plan shall be deemed (a) to create any obligation on the part of
the
Company or any Subsidiary to retain any person in the employ of, or continue
the
provision of services to, the Company or any Subsidiary, or (b) to be evidence
of any agreement or understanding, express or implied, that the person has
a
right to continue as an employee for any period of time or at any particular
rate of compensation.
12.6
Governing
Law. The
provisions of the Plan shall take precedence over any conflicting provision
contained in an Award Agreement. All matters relating to the Plan or to Awards
granted
hereunder shall be governed by and construed in accordance with the laws of
the
State of North Carolina without regard to the principles of conflict of
laws.
Page
60
12.7
Trust
Arrangement. All
benefits under the Plan represent an unsecured promise to pay by the Company.
The Plan shall be unfunded and the benefits hereunder shall be paid only from
the general assets of the Company resulting in the Participants having no
greater rights than the Company's general creditors; provided, however, nothing
herein shall prevent or prohibit the Company from establishing a trust or other
arrangement for the purpose of providing for the payment of the benefits payable
under the Plan.
12.8
Indemnification
of Board and Committee. Indemnification
of the members of the Board and/or the members of the Committee shall be in
accordance with the Articles of Incorporation and Bylaws of the Company or
any
indemnification agreement between such members and the Company as in effect
from
time to time.
12.9 No
Impact on Benefits. Awards
are not compensation for purposes of calculating a Participant’s rights under
any employee benefit plan that does not specifically require the inclusion
of
Awards in calculating benefits.
12.10 Beneficiary
Designation.
Each
Participant may name a beneficiary or beneficiaries to receive or exercise
any
vested Award that is unpaid or unexercised at the Participant’s death. Unless
otherwise provided in the beneficiary designation, each designation will revoke
all prior designations made by the same Participant, must be made on a form
prescribed by the Committee and will be effective only when filed in writing
with the Committee. If a Participant has not made an effective beneficiary
designation, the deceased Participant’s beneficiary will be the Participant’s
surviving spouse or, if none, the deceased Participant’s estate. The identity of
a Participant’s designated beneficiary will be based only on the information
included in the latest beneficiary designation form completed by the Participant
and will not be inferred from any other evidence.
12.11 Tax
Withholding.
The
Company shall have the power and the right to deduct or withhold, or require
a
Participant to remit to the Company, the minimum statutory amount to satisfy
federal, state and local taxes required by law or regulation to be withheld
with
respect to any taxable event arising as a result of the Plan. With respect
to
withholding required upon any taxable event arising as a result of an Award
granted hereunder, a Participant may elect, subject to the approval of the
Committee, to satisfy the withholding requirement, in whole or in part, by
having the Company withhold shares of Company Stock having a Fair Market Value
on the date the tax is to be determined equal to the minimum statutory total
tax
that could be imposed on the transaction. All such elections shall be
irrevocable, made in writing and signed by the Participant, and shall be subject
to any restrictions or limitations that the Committee, in its sole discretion,
deems appropriate.
Page
61
Directions
to the
James
H. Garner Conference Center
Location
of the 2007
First
Bancorp Annual Shareholders’ Meeting
Wednesday,
May 2, 2007 - 3:00 PM
First
Bancorp
This
Proxy is Solicited on Behalf of the Board of Directors
The
undersigned hereby appoints Jerry L. Ocheltree and Anna G. Hollers, and each
of
them, attorneys and proxies with full power of substitution, to act and vote
as
designated below the shares of common stock of First Bancorp held of record
by
the undersigned on March 13, 2007, at the annual meeting of shareholders to
be
held on May 2, 2007, or any adjournment or adjournments thereof.
|
1.
|
PROPOSAL
to elect fifteen (15) nominees to the Board of Directors to serve
until
the 2008 Annual Meeting of Shareholders, or until their successors
are
elected and qualified. The Board of Directors recommends a vote “FOR” all
nominees.
|
|
o
|
FOR
the 15 nominees listed below
|
o
|
WITHHOLD
AUTHORITY
|
|
|
(except
as marked to the contrary below).
|
to
vote for the 15 nominees
below.
|
|
(Instruction:
To withhold authority to vote for any individual nominee, strike
a line
through the nominee’s name in the list
below).
|
|
Jack
D. Briggs
|
James
G. Hudson, Jr.
|
Virginia
C. Thomasson
|
|
R.
Walton Brown
|
Jerry
L. Ocheltree
|
Goldie
H. Wallace
|
|
David
L. Burns
|
George
R. Perkins, Jr.
|
A.
Jordan Washburn
|
|
John
F. Burns
|
Thomas
F. Phillips
|
Dennis
A. Wicker
|
|
Mary
Clara Capel
|
Frederick
L. Taylor II
|
John
C. Willis
|
|
2.
|
PROPOSAL
to ratify the appointment of Elliott Davis, PLLC, as the independent
auditors of the Company for the current fiscal
year.
|
|
o
FOR
|
o
AGAINST
|
o
ABSTAIN
|
| 3. |
PROPOSAL
to approve the First Bancorp 2007 Equity Plan. o
FOR o
AGAINST o
ABSTAIN
|
|
4.
|
In
their discretion, the proxies are authorized to vote on any other
business
that may properly come before the
meeting.
|
| 5. |
Do
you plan to attend the May 2, 2007 annual meeting? o
YES oNO
|
This
proxy when properly executed will be voted as directed herein. If no direction
is made, this proxy will be voted “FOR” all nominees in Proposal 1 and “FOR”
Proposals 2 and 3. If, at or before the time of the meeting, any of the nominees
listed above has become unavailable for any reason, the proxies have the
discretion to vote for a substitute nominee or nominees.
|
Dated
____________________________________________, 2007
|
|
|
Signature
|
|
|
Signature
(if jointly held)
|
|
|
(Please
sign exactly as the name appears on this proxy. If signing as
attorney,
administrator, executor, guardian, or trustee, please give title
as such.
If a corporation, please sign in full corporate name by the President
or
other authorized officers. If a partnership, please sign in partnership
name by authorized
person.)
|
Please
mark, sign, date and return promptly in the envelope provided. If you attend
the
meeting, you may withdraw your proxy and vote in person. If you wish to vote
by
telephone or internet, please read the instructions below.
INSTRUCTIONS
FOR VOTING YOUR PROXY
Shareholders
of record have three alternative ways of voting their proxies:
1.
By
Mail (traditional method); or
2.
By
Telephone (using a Touch-Tone Phone): or
3.
By
Internet
Your
telephone or Internet vote authorizes the named proxies to vote your shares
in
the same manner as if you marked, signed, dated and returned your proxy card.
Please note all votes cast via the telephone or Internet must be cast prior
to
3:00 a.m. on May 2, 2007.
|
Vote
by Telephone
|
Vote
by Internet
|
|
It’s
fast, convenient and immediate!
|
It’s
fast, convenient, and your vote is immediately
confirmed and posted.
|
|
Call
Toll-Free on a Touch-Tone Phone: 1-866-287-9707
|
immediately
confirmed and posted.
|
|
Follow
these four easy steps:
|
Follow
these four easy steps:
|
|
1.
Read the accompanying Proxy Statement and
Proxy Card1.Read
the accompany Proxy Statement and Proxy Card
|
1.
Read the accompanying Proxy Statement and
Proxy Card
|
|
2. Call
the toll-free number:
1-866-287-9707
|
2.
Go to the website:
https://www.proxyvotenow.com/fbnc
|
|
3. Enter
the 9 digit Control Number located
on
your Proxy Card below.
|
3.
Enter your 9 digit Control Number located on your Proxy Card
below.
|
|
4. Follow
the recorded instructions
|
4.
Follow the instructions on the website.
|
|
Your
vote is important!
Call
1-866-287-9707 anytime
|
Your
vote is important!
Go
to https://www.proxyvotenow.com/fbnc
|
It
is not necessary to return your proxy card if you are voting by telephone or
internet.
Please
note that the last vote received, whether by telephone, internet, or by mail,
will be the vote counted.
For
Telephone/Internet Voting:
Control
Number
Control
Number Provided Here