First Charter Corporation
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
ANNUAL REPORT PURSUANT TO SECTIONS 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT
OF 1934
þ ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year Ended
December 31, 2007
OR
o TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period
from
to
Commission File Number 0-15829
FIRST CHARTER
CORPORATION
(Exact Name of Registrant as
Specified in its Charter)
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North Carolina
(State or Other Jurisdiction of
Incorporation or Organization)
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56-1355866
(I.R.S. Employer
Identification No.)
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10200 David Taylor Drive, Charlotte, NC
(Address of Principal Executive Offices)
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28262-2373
(Zip Code)
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Registrants telephone number,
including area code
(704) 688-4300
Securities registered pursuant to
Section 12(b) of the Act:
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Title of each class
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Name of each exchange on which registered
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N/A
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N/A
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Securities registered pursuant to
Section 12(g) of the Act:
Title of Each Class
Common stock, no par value
Series X Junior Participating
Preferred Stock Purchase Rights
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o No þ
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or 15(d) of the
Act. Yes o No þ
Indicate by check mark whether the registrant: (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer, and smaller reporting company in
Rule 12b-2
of the Exchange Act.
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Large accelerated filer
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Accelerated
filer o
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Non-accelerated
filer o
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Smaller reporting
company o
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(Do not check if a
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smaller reporting company)
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Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the
Act). Yes o No þ
The aggregate market value of the registrants common stock
held by non-affiliates of the registrant as of June 30,
2007, determined using a per share closing sale price on that
date of $19.47, as quoted on the NASDAQ Global Select Market,
was $627,711,000.
As of February 15, 2008, the registrant had outstanding
35,004,515 shares of common stock, no par value.
Documents Incorporated by
Reference
Not applicable.
FIRST CHARTER
CORPORATION
FORM 10-K/A
FISCAL YEAR ENDED DECEMBER 31, 2007
All reports filed electronically by First Charter Corporation
with the United States Securities and Exchange Commission
(SEC), including its annual reports on
Form 10-K,
quarterly reports on
Form 10-Q,
and current reports on
Form 8-K,
as well as any amendments to those reports, are accessible at no
cost on the Corporations Web site at www.firstcharter.com.
These filings are also accessible on the SECs Web site at
www.sec.gov.
TABLE OF
CONTENTS
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FIRST CHARTER
CORPORATION
EXPLANATORY NOTE
First Charter Corporation (the Corporation) is
filing this amendment (the Amendment) to the
Corporations Annual Report on
Form 10-K
(the Original Filing), originally filed with the SEC
on February 29, 2008, solely for the purpose of amending
and supplementing Part III of the Original Filing. This
Amendment changes the Corporations Original Filing only by
amending and restating Items 10, 11, 12, 13, and 14 of
Part III and Item 15 of Part IV of the Original
Filing to contain currently dated certifications from the
Corporations Chief Executive Officer and principal
financial officer as required by Sections 302 and 906 of
the Sarbanes-Oxley Act of 2002 with respect to this Amendment.
The currently dated certifications of the Corporations
Chief Executive Officer and principal financial officer are
attached to this Amendment as Exhibits 31.1, 31.2, 32.1,
and 32.2.
As used in this Amendment, references to First
Charter, the Corporation, we,
our or us means First Charter
Corporation.
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PART III
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ITEM 10.
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DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
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EXECUTIVE
OFFICERS
The information required by this item with respect to the
Corporations executive officers is incorporated by
reference to the information included under Executive
Officers of the Registrant, in Part I, Item 4A
of the Original Filing.
DIRECTORS
The names, ages and principal occupations (which have continued
for the past five years unless otherwise indicated) and certain
other information for each of the directors are set forth below.
Each director also serves as a First Charter Bank director.
Jewell D. Hoover, age 59, has been the President of
Hoover & Associates, LLC, a bank consulting firm,
since 2003. Prior to that time, she was a Senior Bank Regulator
with the Office of the Comptroller of the Currency, until her
retirement in 2003. Ms. Hoover has been a director of the
Corporation since 2006. Ms. Hoovers term expires in
2010.
Walter H. Jones, Jr., age 66, is a partner in the law
firm of Jones, Childers, McLurkin & Donaldson PLLC.
Mr. Jones is the Chairman of the Board of First Charter
Bank and has been a director of the Corporation since 2000.
Mr. Jones term expires in 2010.
Samuel C. King, Jr., age 60, is the President of
Kings Office Supply, Inc., an office products retailer.
Mr. King is also the President of The UPS Store,
Lincolnton, North Carolina, a retail packaging and shipping
company. Mr. King has been a director of the Corporation
since 2000. Mr. Kings term expires in 2010.
Jerry E. McGee, age 65, is the President of Wingate
University. Dr. McGee has been a director of the
Corporation since 1995. Dr. McGees term expires in
2010.
John S. Poelker, age 65, has been the President of The
Poelker Consultancy, Inc., a financial services consulting firm,
since 2005. Prior to that time, he was the Executive Vice
President and Chief Financial Officer of Old National Bancorp
(Evansville, Indiana) until his retirement in 2005.
Mr. Poelker has been a director of the Corporation since
2006. Mr. Poelkers term expires in 2010.
Michael R. Coltrane, age 61, was the President, Chairman,
and Chief Executive Officer of CT Communications, Inc., a
telecommunications company, until August 31, 2007.
Mr. Coltrane is the Vice Chairman of the Board of the
Corporation. He served as a director of the Corporation from
1983 until 1985, and currently has served as a director of the
Corporation since 1988. Mr. Coltrane also served as a
director of CT Communications, Inc. until August 31, 2007,
and is presently a director of Centennial Communications Inc.
Mr. Coltranes term expires in 2009.
Charles A. James, age 61, is the President of Mt. Pleasant
Insurance Agency and the co-owner of Mt. Pleasant Bonded
Warehouse, a general commodity storage company. Mr. James
has been a director of the Corporation since 2000.
Mr. James term expires in 2009.
Robert E. James, Jr., age 57, has served as the
President and Chief Executive Officer of the Corporation since
2005, and of First Charter Bank since 2004. He served as
Executive Vice President of the Corporation from 1999 to 2005
and Executive Vice President of First Charter Bank from 1999 to
2004. Mr. James has been a director of the Corporation
since 2005. Mr. James term expires in 2009.
Ellen L. Messinger, age 49, is the Vice President of Curb
Fox Equipment, LLC, a manufacturing company. Ms. Messinger
has been a director of the Corporation since 2003.
Ms. Messingers term expires in 2009.
Hugh H. Morrison, age 60, is the President of E. L.
Morrison Holding Company, Inc., a real estate holding company,
owner of M.B. Commercial Real Estate, Inc., a real estate sales,
leasing and property management
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company and owner of Engineered Lumber Supply LLC, a wholesale
lumber company. Mr. Morrison has been a director of the
Corporation since 1984. Mr. Morrisons term expires in
2009.
William R. Black, age 59, is a medical doctor specializing
in oncology. Dr. Black is the Vice Chairman of the Board of
First Charter Bank and has been a director of the Corporation
since 1990. Dr. Blacks term expires in 2008.
James E. Burt, III, age 70, is a retired banker and
Chairman of the Board of the Corporation. Mr. Burt has been
a director of the Corporation since 2000. Mr. Burts
term expires in 2008.
Richard F. Combs, age 59, has served as the President and
Chief Operating Officer of High Rock Raceway since February of
2008 and has also been the President of Excella International
Corp., an advanced oxidation technology company in the food
preparation industry since 2005. Prior to that time, he was the
President of Pureflow Ultraviolet, Inc., an industrial water
treatment company, and subsidiary of Trojan Technologies, Inc.
Mr. Combs has been a director of the Corporation since
2006. Mr. Combs term expires in 2008.
John J. Godbold, Jr., age 67, is the President of
Godbold Financial Associates, Inc., a bank consulting company.
Mr. Godbold has been a director of the Corporation since
1997. Mr. Godbolds term expires in 2008.
L. D. Warlick, Jr., age 68, is the President of
Warlick Funeral Home. Mr. Warlick has been a director of
the Corporation since 2000. Mr. Warlicks term expires
in 2008.
William W. Waters, age 66, is the retired President of
Waters Construction Company, a homebuilder. Mr. Waters has
been a director of the Corporation since 2000.
Mr. Waters term expires in 2008.
Messrs. Charles A. James and Robert E. James, Jr. are
not related. No director has a family relationship as close as
first cousin with any other director or executive officer of the
Corporation.
SECTION 16(A)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 of the Securities Exchange Act of 1934, as
amended (the Exchange Act) requires our directors
and executive officers to file reports with the SEC indicating
their holdings of and transactions in our equity securities and
to provide copies of such reports to us. Based solely upon our
review of such copies or written representations related
thereto, we believe that all Section 16 filing requirements
of our directors and executive officers have been complied with
on a timely basis for 2007, except (i) Mr. Coltrane
reported a late transaction on Form 5 to report an indirect
ownership interest in the Corporation that he acquired in a
previous year; (ii) Mr. Robert E. James, Jr.
timely filed a Form 4 for an option exercise which
inadvertently omitted the corresponding sale of the acquired
shares and was promptly corrected (five transactions on the same
day); (iii) Mr. Morrison filed a late Form 5 to
report a gift from a previous year; (iv) Mr. Rownd
timely filed two Form 4s for option exercises which
inadvertently omitted the subsequent sales of the acquired
shares and was promptly corrected (one transaction and three
transactions, respectively); and (v) Mr. Jones filed a
Form 4 one day late which included the report of an option
exercise.
CODE OF BUSINESS
CONDUCT AND ETHICS AND CORPORATE GOVERNANCE GUIDELINES
The Corporations Board of Directors previously adopted the
First Charter Corporation Code of Business Conduct and
Ethics (the Code), applicable to the directors
and employees (including the Chief Executive Officer and the
interim principal financial officer) of the Corporation and its
subsidiaries. During 2007, the Board of Directors reaffirmed the
adoption of the Code. In addition, in furtherance of our
long-standing goal of providing effective corporate governance
of our business and affairs for the benefit of shareholders, the
Board of Directors previously adopted the First Charter
Corporation Corporate Governance Guidelines (the
Corporate Governance Guidelines). A copy of each of
the Code and the Corporate Governance Guidelines is available on
our website at www.FirstCharter.com under the Corporate
Governance section.
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CHANGES TO
PROCEDURES FOR SHAREHOLDERS TO NOMINATE PERSONS FOR ELECTION TO
THE BOARD OF DIRECTORS
There were no material changes made during fiscal year 2007 to
the procedures by which shareholders may recommend nominees to
the Corporations Board of Directors.
As discussed below, on August 15, 2007, the Corporation and
Fifth Third Bancorp (Fifth Third) entered into an
Agreement and Plan of Merger, as amended by the Amended and
Restated Agreement and Plan of Merger, dated September 14,
2007, (Merger Agreement) by and among the
Corporation, Fifth Third, and Fifth Third Financial Corporation
(Fifth Third Financial). Under the terms of the
Merger Agreement, the Corporation will be merged with and into
Fifth Third Financial. The Merger Agreement has been approved by
the Board of Directors of the Corporation, Fifth Third and Fifth
Third Financial. The Corporations shareholders approved
the Merger Agreement, and the merger has been approved by all
necessary state and federal regulatory agencies. The merger
remains subject to customary closing conditions. The Corporation
is planning for closing in the second quarter of 2008, and
pursuant to this plan, the Corporation does not intend to hold a
2008 annual meeting of shareholders. If First Charter were to
schedule an annual meeting of shareholders, First Charter will
provide notice of the date fixed for the annual meeting, as well
as the deadline for submitting shareholder proposals for such
meeting and to have shareholder proposals included in the
Corporations proxy statement.
AUDIT
COMMITTEE
The Audit Committee, among other things, is responsible for the
appointment, compensation, retention and oversight of the
Corporations independent auditors, and reviews the
Corporations financial statements, audit reports, internal
controls and internal audit procedures. The Audit Committee met
twenty-five times during 2007. William R. Black, Jewell D.
Hoover, Charles A. James, Samuel C. King, Jr., Ellen L.
Messinger and John S. Poelker (Chairman) are the current members
of the Audit Committee. As determined by the Board of Directors,
each of the members of the Audit Committee is an independent
director in accordance with the independence requirements of the
SEC and the NASDAQ Stock Market Marketplace Rules (the
NASDAQ Rules).
AUDIT COMMITTEE
FINANCIAL EXPERT
The Board of Directors has determined that John S. Poelker
qualifies as an audit committee financial expert.
Mr. Poelker is independent as that term is
defined in the NASDAQ Rules.
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ITEM 11.
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EXECUTIVE
COMPENSATION
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COMPENSATION
DISCUSSION AND ANALYSIS
EXECUTIVE
COMPENSATION PHILOSOPHY
The Corporations executive compensation program has been
designed as an active management tool that directs and rewards
specific results. The primary objective of the executive
compensation program is to reinforce the strategic goals and
objectives that management and the Board of Directors have
developed by directly aligning specific, targeted levels of
performance with specific levels of compensation. The impact of
performance on pay is intended to be clear, direct and easy to
understand.
The executive compensation program is founded upon the idea that
a strong, performance-oriented compensation program, aligned
with the practices of our peers, is a key ingredient in becoming
a leading performer relative to organizations of similar size,
and is, therefore, in the best interests of shareholders. We
also believe that a performance-based compensation program is
vital to attracting and retaining highly talented and motivated
executives to lead the Corporation.
As described elsewhere in this
Form 10-K/A,
the Compensation Committee of the Board of Directors is
responsible for the administration of and overall structure of
the Corporations executive compensation program. The
Compensation Committee is composed entirely of independent,
nonmanagement directors.
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PROPOSED MERGER
WITH FIFTH THIRD
On August 15, 2007, the Corporation and Fifth Third entered
into a Merger Agreement by and among the Corporation, Fifth
Third, and Fifth Third Financial. Under the terms of the Merger
Agreement, the Corporation will be merged with and into Fifth
Third Financial. The Merger Agreement has been approved by the
Board of Directors of the Corporation, Fifth Third and Fifth
Third Financial. The Corporations shareholders approved
the Merger Agreement, and the merger has been approved by all
necessary state and federal regulatory agencies. The merger
remains subject to customary closing conditions. The Corporation
is planning for closing in the second quarter of 2008.
The Merger Agreement contains a number of restrictive covenants
regarding the Corporations conduct prior to the effective
time of the merger, including restrictions on the
Corporations ability to grant stock options, restricted
shares and other equity-based awards and the ability to increase
compensation of the Corporations directors, executive
officers, and employees. The majority of the Corporations
compensation decisions for 2007 were made prior to the execution
of the Merger Agreement. However, as a result of the proposed
merger and the covenants contained in the Merger Agreement, the
Corporation has not evaluated its executive compensation for
2008 beyond providing annual salary increases permitted under
the Merger Agreement.
Consummation of the proposed merger will also trigger change in
control provisions under various benefits plans, employment
agreements, and change in control agreements of the Corporation.
In connection with the merger, certain named executive officers
entered into employment agreements with Fifth Third. Benefits
under these agreements include a salary, bonus, retirement and
fringe benefits, payment for covenants not to compete and
lump-sum payments as consideration for termination of such
executives employment agreements with the Corporation.
These employment agreements were independently negotiated by the
executives directly with Fifth Third. If the proposed merger is
consummated, the employment agreements with the Corporation,
including applicable change in control provisions, will
terminate in accordance with the new Fifth Third employment
agreements.
OVERVIEW OF
COMPENSATION PROGRAM
The Corporations executive compensation program is aligned
with our pay for performance philosophy. From a business
perspective, one of managements primary goals is to
enhance total return to shareholders. To reinforce this
overarching business goal, the Compensation Committee and
management seek to tie executive compensation to quantifiable
earnings metrics, such as the Corporations Operating
Earnings Per Share (EPS) and Cash Return on Equity
(ROE). However, the Compensation Committee maintains
discretion to modify the compensation of the executives based on
personal performance and other factors.
Based on a review of our competitors business practices
and our understanding of the relationship between pay and
performance within our Peer Group (defined below), the
Compensation Committee structures the executive compensation
program as follows:
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A long-term incentive plan (LTIP), tied to Operating
EPS growth, Cash ROE and Net Charge-offs (see discussion under
Elements of Compensation Long Term Incentive
Plan). The LTIP plan, which operates under the First
Charter 2000 Omnibus Stock Option and Award Plan has targeted
the level of compensation with lower payouts than typical for
lower than peer performance and higher payouts than typical for
higher than peer performance. For example, performance at the
25th percentile
of the Peer Group would result in a payout significantly less
than the
25th pay
percentile, and likewise,
75th percentile
performance would result in a payout greater than 75th pay
percentile.
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Share ownership guidelines to strengthen the link between the
interests of our directors and executive officers and those of
our shareholders (see discussion under Share Ownership
Guidelines).
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Although the Corporation considers the LTIP and its
performance-driven incentives to be a focal point of the
executive compensation program, it is only one element of a
comprehensive executive compensation program designed to align
pay with performance and to aid in the attraction and retention
of highly qualified executives. Each element of the program is
briefly described below along with a summary of its objectives:
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Compensation Element
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Description
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Objective
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Base Salary
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Fixed compensation that is usually increased annually based on
performance and an annual review of peer compensation.
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Provide a base level of compensation that fairly accounts for the job and scope of the role being performed, and
Reward the demonstrated proficiency of the incumbent.
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Annual Incentive Plan (AIP)
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Variable compensation earned based on performance against
pre-established annual goals.
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Reward for achieving critical annual operating goals
(typically, Operating EPS) and individual performance goals
which ultimately contribute to long-term total return to
shareholders.
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Long-Term Incentive Plan (LTIP)
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The value of the LTIP is comprised of 30% stock options that
vest over time and 70% performance shares that vest based on
achievement of three-year Charge-off, Cash ROE and Operating
EPS, as compared to the Peer Group.
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Motivate performance consistent with third quartile earnings and return performance which impacts total return to shareholders.
Align the economic interests of the participants with the shareholders by rewarding executives for stock price improvement.
Aid in retention.
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Supplemental Executive Retirement Plan (SERP)
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Non-qualified retirement benefit that provides additional
retirement income beyond what is provided in the
Corporations standard retirement plan through a pre-set,
fixed annuity value. Only the CEO and one other executive
officer are provided SERPs.
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Aid in recruiting of mid-career executives to the Corporation.
Aid in retention.
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Other Benefits and Perquisites
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Broad-based benefits provided to all the Corporations
employees (e.g., medical and group term life insurance), a
nonqualified deferred compensation arrangement, and certain
perquisites, including club memberships, car allowance and
supplemental welfare benefits.
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Provide a competitive total package to attract and
retain key executives.
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OPERATION OF
COMPENSATION COMMITTEE
The Compensation Committee is responsible for the overall
structure of the Corporations executive compensation
program. The Compensation Committee considers, recommends and
oversees the Corporations major benefit plans, including
incentive compensation plans, and equity-based plans in which
directors, the Corporations top level of executive
management (which consists of the Chief Executive Officer
and six other 16b executive officers), and other employees of
the Corporation and its subsidiaries may participate. The
executive officers named in the Summary Compensation Table,
which consists of the Chief Executive Officer, the former Chief
Financial Officer, the interim principal financial officer, and
three other members of executive management, are referred to as
NEOs or named executive officers. In
2007, two individuals served as the principal financial officer
of the Corporation. Prior to May 16, 2007, Charles A.
Caswell served as the Executive Vice President and Chief
Financial Officer of the Corporation. However, on May 16,
2007, Mr. Caswell commenced his transition from those
roles, and the Corporation appointed Sheila A. Stoke to serve as
its interim principal financial officer effective May 17,
2007. Consequently, both individuals are listed as named
executive officers for 2007. The Corporation entered into a
Transition Agreement and Release with Mr. Caswell which is
described herein under the caption, Narrative to Summary
Compensation Table.
The Compensation Committee also approves option grants and
restricted stock or other awards, and imposes such limitations,
restrictions and conditions upon those awards as the
Compensation Committee deems necessary or advisable. The
Compensation Committee is composed entirely of independent,
non-management directors. Except for the broad-based
compensation and benefit programs available to all employees,
the Compensation Committee approves all compensation-related
decisions for executive management.
OUTSIDE
CONSULTANT
In 2007, Semler Brossy Consulting Group, LLC, (Semler
Brossy) was retained as the independent executive
compensation advisor to the Compensation Committee. Semler
Brossy works directly for the Compensation Committee, reporting
to the Chairman.
During 2007, Semler Brossy consulted with the Compensation
Committee on the establishment of salary and incentive targets
for executive officers; long-term incentive grant levels for
2007 for other key officers; board member compensation for 2007;
short-term incentive plan amendments to provide rewards for
executive officers consistent with the other plan participants
(i.e., for the accomplishment of personal objectives); and the
change to a stipend approach for certain perquisites (which was
initially expected to be implemented in 2008).
The role and selection of the outside consultant is reviewed
against a set of standards on an annual basis. This review
includes feedback from management.
COMPETITIVE
BENCHMARKING AND POSITIONING
We believe that the compensation practices of our peers provide
important context to the Corporations executive
compensation program. The primary source of peer data for our
executive compensation program is a customized Peer Group
developed to specifically reflect banks with whom the
Corporation competes for talent, banks of similar size and scope
to the Corporation and banks that operate with a similar,
metropolitan focused branch footprint. Additionally, as a
secondary reference point, the Compensation Committee considers
data from financial services compensation surveys.
The Compensation Committee has developed a set of criteria to
consistently identify banks most similar to the Corporation in
size and scope of operations (the Peer Group). Under
these criteria, we consider our Peer Group to consist of
financial institutions that:
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Operate with a network of retail branches and commercial lending
activity, with these traditional banking activities representing
the core revenue of the bank;
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Are publicly traded and based in the United States; and
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Have an asset size relative to First Charter as of the end of
the most recent fiscal year that is either (i) within
$1 billion of the Corporations asset size or
(ii) within one-half to two times of the Corporations
asset size, while also operating a core number of branches and
conducting commercial lending activity in metropolitan
statistical areas (MSA) that are comparable to First
Charters MSA.
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The Compensation Committee intends to apply these criteria
annually, based on completed fiscal year results to update the
list of banks that comprise the Peer Group. Based on an
historical analysis, we believe that the majority of the
competitors in the Peer Group will remain in the Peer Group year
over year, with banks leaving and entering the Peer Group
primarily because of acquisition or divestiture activity. For
fiscal 2007, the Peer Group was comprised of the following 26
banks:
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1st Source Corp.
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Hancock Holding Co.
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Provident Bankshares Corp.
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Alabama National BanCorporation
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Independent Bank Corp.
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Sandy Spring Bancorp Inc.
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Amcore Financial Inc.
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Franklin Bank Corporation
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Sterling Bancshares Inc.
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Bank Atlantic Bancorp Inc.
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Frontier Financial Corporation
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Susquehanna Bancshares Inc.
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Chemical Financial Corp.
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MB Financial Inc.
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Umpqua Holdings Corp.
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CVB Financial Corp.
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National Penn Bancshares Inc.
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United Community Banks Inc.
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First Community Bancorp
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NBT Bancorp Inc.
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WesBanco Inc.
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First Financial Bancorp
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Park National Corp.
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WestAmerica Bancorp
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First Midwest Bancorp Inc.
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Prosperity Bancshares Inc.
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In general, the Corporation positions each element of
compensation at the median of the Peer Group to provide pay
opportunities comparable to the marketplace. When the
compensation design decisions were initially made, the
Corporations performance was assessed as below the median
of our Peer Group, measured by one-year and three-year total
shareholder return, earnings per share growth, return on equity
and return on assets. The Compensation Committee determined that
it was in the best interests of the shareholders to target 2007
compensation near the median level of the Peer Group to ensure
the Corporations ability to attract and retain the key
leadership talent that would ultimately be responsible for
improving the Corporations performance.
The Compensation Committee planned to obtain an independent
evaluation against the Peer Group of the measures of Operating
EPS and Cash ROE under the LTIP. However, due to the proposed
merger with Fifth Third, this evaluation has not yet been made.
In accordance with outstanding agreements, upon consummation of
the merger, all performance objectives with respect to
performance shares under the LTIP will be deemed to be satisfied
to the extent necessary to earn 100% of the performance shares
and the performance period shall be deemed to be complete.
The structure of the Corporations executive compensation
program coupled with the positioning of each compensation
element results in a mix of compensation that is heavily
weighted toward variable, at-risk compensation. Approximately
65% of Mr. James 2007 compensation opportunity and an
average of approximately 49% of the other NEOs 2007
compensation opportunity are performance-based, and therefore at
risk based on the Corporations performance. This structure
ensures that the interests of the NEOs are aligned with the
interests of the Corporations shareholders.
The Corporation maintains and monitors adherence to desired
positioning of its executive compensation program through a
combination of periodic reviews, as well as at the time of a new
plan introduction or modification and when individual
compensation decisions are made. While the Corporation does not
make compensation decisions solely based on Peer Group
positioning, compensation decisions are evaluated against their
impact on the desired positioning.
|
|
|
|
|
Periodic Review. Approximately every three
years, the Corporation conducts a comprehensive review of all
elements of its compensation program focusing on
questions of mix and total value. The last review was conducted
in the fourth quarter of 2005.
|
10
|
|
|
|
|
At Time of Plan Introduction. When a new
compensation plan is introduced or modified, the Corporation
reviews relevant information from the Peer Group and
compensation surveys.
|
|
|
|
At Time of Individual Compensation Action (e.g., salary
increase or change in target incentives). Each compensation
action is reviewed within the context of relevant competitive
compensation data. In addition, each compensation action is
reviewed within the context of that individuals total
compensation package.
|
ELEMENTS OF
COMPENSATION
Base
Salary
For all members of executive management, base salaries are
reviewed annually as well as at the time of a promotion or other
change in responsibilities. Increases are based on an evaluation
of the previous years performance of the executive, the
relative strategic importance of the position, market conditions
and median pay levels within the Peer Group. However, as
previously indicated, the Compensation Committee maintains
discretion to modify the compensation of the executives based on
personal performance and other factors.
For 2007, Mr. James received a 10% salary increase to
$385,000. The new salary level positions Mr. James below
the median pay level for the Peer Group. While the Compensation
Committee sought to increase Mr. James base pay
closer to the median of the Peer Group, it committed to make
such adjustments gradually when the Corporations
performance reached targeted levels.
The Compensation Committee considered the following factors when
increasing Mr. James compensation:
|
|
|
|
|
Competitive Peer Group salary information and salary survey
information;
|
|
|
|
Strong leadership and strategic direction provided during 2006;
|
|
|
|
Achievement of the performance goals agreed upon with the Board
of Directors; and
|
|
|
|
The Corporations earnings and return performance were
below target levels.
|
For 2007, base salaries of the NEOs (excluding the CEO) were
reviewed and, on average, increases of 6.2% were provided. These
increases resulted in base salaries consistent with the median
pay levels.
2007 Base Salary
Adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage
|
Name
|
|
2006 Base
Salary(1)
|
|
2007 Base
Salary(1)
|
|
Increase
|
|
Increase
|
|
|
Robert E. James, Jr.
|
|
$
|
350,000
|
|
|
$
|
385,000
|
|
|
$
|
35,000
|
|
|
|
10.0
|
%
|
Charles A. Caswell
|
|
|
245,000
|
|
|
|
265,000
|
|
|
|
20,000
|
|
|
|
8.2
|
|
Sheila A. Stoke
|
|
|
140,000
|
|
|
|
150,000
|
|
|
|
10,000
|
|
|
|
7.1
|
|
Stephen M. Rownd
|
|
|
245,000
|
|
|
|
257,000
|
|
|
|
12,000
|
|
|
|
4.9
|
|
Cecil O. Smith, Jr.
|
|
|
205,000
|
|
|
|
216,000
|
|
|
|
11,000
|
|
|
|
5.4
|
|
J. Scott Ensor
|
|
|
205,000
|
|
|
|
216,000
|
|
|
|
11,000
|
|
|
|
5.4
|
|
|
|
|
|
|
(1) |
|
Base salary represents the final
year-end salary for each NEO. Differences between the base
salary reported in this table and the salary reported in the
Summary Compensation Table are attributable to the timing and
administration of payroll increases. |
Annual Incentive
Plan
The Corporations Annual Incentive Plan (AIP)
is a performance-based annual incentive plan that is based on
achievement of targeted levels of Operating EPS and the
achievement of individual goals.
Management and the Board believe that successful performance
against Operating EPS is consistent with a well-run financial
services institution. (Accordingly, the LTIP also uses Operating
EPS as a key performance metric and both plans define the term
in the same way.) The Corporation believes that
11
Operating EPS better reflects the performance of the Corporation
than EPS presented in the Corporations financial
statements, which is calculated according to generally accepted
accounting principles (GAAP EPS), since certain
less frequently occurring items are excluded from the Operating
EPS calculation. Adjustments are made to GAAP EPS to derive
Operating EPS for the following types of items:
|
|
|
|
|
Branch Purchases and Sales;
|
|
|
|
Securities Gains and Losses;
|
|
|
|
Line of Business Purchase/Sale;
|
|
|
|
Direct Merger and Acquisition Expense;
|
|
|
|
Material Tax Penalties, Recoveries; and
|
|
|
|
Early Extinguishment of Debt and Derivative Securities.
|
Operating EPS is based on fully diluted shares outstanding. For
2007, AIP payments were based 70% on the achievement of
Operating EPS targets and 30% on the achievement of individual
goals established in advance by the Compensation Committee, as
agreed to by Mr. James on behalf of each member of
executive management. The intent of this change is to balance
the team-based incentive to achieve targeted corporate
performance with an individual accountability performance
measure.
The Operating EPS targets set for the AIP are the same Operating
EPS targets set forth in the annual business plan submitted by
executive management to the Board of Directors for their
approval. In determining the reasonableness of these annual
goals, the Board considers the following factors:
|
|
|
|
|
Long-term strategic plan for the Corporation;
|
|
|
|
Actual company results compared to peers and to historical
results;
|
|
|
|
Anticipated operational opportunities and challenges; and
|
|
|
|
Anticipated external economic events that could impact key
business drivers (e.g., yield curve).
|
In 2007, the Corporations Operating EPS goal was targeted
at $1.70 per share. Our actual Operating EPS for the year was
$1.20, which includes a net impact of the adjustments from
GAAP EPS ($1.18 per share) to Operating EPS of $0.02 per
share.
Commensurate with competitive practices within the Peer Group,
2007 target annual incentives were 65% of base salary for
Mr. James and 25% to 50% of base salary for other NEOs.
Officers may earn between 0% 125% of their targeted
award based on their performance against goals. Based on the
payout grid in place for 2007, the Operating EPS of $1.20
resulted in a payout based only on the achievement of personal
objectives (50% of the targeted award for Ms. Stoke, and
30% of the targeted award for the CEO and other NEOs). Awards to
the NEOs under the AIP for performance in 2007 are reflected in
column (g) of the Summary Compensation Table, included
under Compensation of Executive Officers section
below.
The Compensation Committee is responsible for reviewing this
result and can, in its discretion, adjust an individual dollar
award. For 2007, the Compensation Committee determined that,
although the EPS target had not been achieved, the achievement
of personal objectives deserved a commensurate reward. In 2007,
EPS was impacted by continued higher provision for loan losses
expense, largely due to certain real estate development and
ongoing merger expenses caused by the proposed merger with Fifth
Third. Therefore, AIP awards were adjusted downward for
executives with responsibility for real estate lending, and the
AIP payment was increased for Ms. Stoke and Mr. Smith
due to their instrumental role in connection with the proposed
merger with Fifth Third. No award was made to Mr. Caswell
in accordance with the terms of his separation agreement with
the Corporation. The Corporation entered into a Transition
12
Agreement and Release with Mr. Caswell which is described
herein under the caption, Narrative to Summary Compensation
Table.
|
|
|
|
|
|
Name
|
|
AIP Payment for 2007
|
|
|
Robert E. James, Jr.
|
|
$
|
74,800
|
|
Charles A. Caswell
|
|
|
|
|
Sheila A. Stoke
|
|
|
23,100
|
|
Stephen M. Rownd
|
|
|
34,650
|
|
Cecil O. Smith, Jr.
|
|
|
32,300
|
|
J. Scott Ensor
|
|
|
22,015
|
|
|
|
Long-Term
Incentive Plan
For 2007, the Compensation Committee approved the following
target levels of long-term awards based on its review of
competitive practices: 100% of base salary for Mr. James,
70% of base salary for all other NEOs with the exception of
Stoke, and 35% for Stoke. Consistent with the renewed emphasis
on performance, the new LTIP calls for 70% of this targeted LTIP
value to be delivered through performance shares and 30% to be
delivered through time-based stock options. (Stokes target
is delivered entirely through restricted stock, with a
time-based restriction.) We believe this mix is consistent with
our pay for performance philosophy. The number of stock options
granted was determined by dividing the value of the stock option
component of the award by our FAS 123(R) Black-Scholes
value as of the date of grant. The number of performance shares
granted was determined by dividing the value of the performance
share component of the award by the grant-date fair value of
$22.70, then adjusting the award to compensate for the value of
the dividends that participants will not receive on the award
during the performance period. The grant-date fair value of
$22.70 represented the closing market price on the date of the
grant, less the discounted present value of such dividends.
With the introduction of the new LTIP in 2006, a gap in the
long-term incentive program was created since the performance
shares component does not vest for three years. To offset this
gap, the target value of the performance share component was
increased by 33% in 2007.
Equity Award Timing Policy
All LTIP equity awards relating to fiscal 2007 performance were
granted on February 8, 2007, which was the day of the
meeting at which these awards were approved. In addition, these
awards were granted during an Open Trading Window,
defined under the Corporations Insider Trading Policy as a
time when trading in the Corporations common stock is
permitted following the announcement of the Corporations
earnings.
Effective for 2007, the Corporation adopted a policy to grant
equity awards to directors, members of executive management, and
other officers and employees annually only at such time as when
an Open Trading Window is scheduled to occur. This procedure is
designed to further the Corporations policy that it will
not have any program, plan or practice to time or select the
grant dates of any equity award in coordination with the
Corporations release of material non-public information.
In the event of a new hire or ad hoc grant, the
employee will be notified that his or her grant will be
recommended to the Compensation Committee at their next meeting
and effective the date of the Compensation Committee approval.
As previously disclosed, in connection with the proposed merger
with Fifth Third, the Corporation is currently restricted from
issuing additional awards under the LTIP and has not issued any
additional awards to the NEOs since February 2007.
Stock Options
It is the Compensation Committees belief that the members
of executive management are in the best position to have a
direct positive impact on the Corporations stock price.
Accordingly, stock options continue to be an element in the
incentive compensation package. Consistent with competitive
practice,
13
stock options are granted with an exercise price at not less
than the fair market value on date of grant. Additionally, the
Corporation has a policy that it will not re-price stock options.
Options typically vest ratably over five years, and expire ten
years after grant. However, under the terms of the First Charter
Corporation 2000 Omnibus Stock Option and Award Plan, and the
agreements thereunder, any unvested options fully vest upon a
Change in Control. Therefore, if the merger with Fifth Third is
consummated, options awarded under the 2007 LTIP will fully vest
at the close of the proposed merger with Fifth Third and such
options will be converted into options to purchase Fifth Third
common stock.
Performance Shares
Performance shares awarded under the terms of the First Charter
Corporation 2000 Omnibus Stock Option and Award Plan (and the
agreements thereunder) also fully vest upon a Change in Control.
Therefore, if the merger with Fifth Third is consummated, all
performance objectives with respect to performance shares under
the LTIP shall be deemed to be satisfied to the extent necessary
to earn 100% of the performance shares and the performance
period shall be deemed to be complete. Such performance shares
shall be deemed to be converted to actual performance share
awards and the actual performance share awards shall be paid out
in cash as soon as practicable upon the effective date of the
proposed merger.
Typically, the performance shares vest based on achievement of
three goals as evaluated over a three-year performance period.
It is the Compensation Committees intention that, when
achieved, these goals taken as a whole are consistent with third
quartile performance within the Peer Group.
First, Net Charge-offs must remain below 1% during the
performance period before any vesting would occur. Second,
assuming the Net Charge-off goal has been met, 70% of the shares
would vest based on Operating EPS growth assessed against the
Peer Group and 30% of the shares would vest based on Cash ROE
assessed against pre-established goals. Finally, the total value
of the shares received by the participant from the LTIP is a
function of the future value of the stock.
The following performance schedules are in place for the 2006 to
2008 and 2007 to 2009 performance periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating EPS Growth Versus Peers
|
|
|
|
(70% of Performance Share Award)
|
|
|
|
Percentile within
|
|
|
|
|
|
|
Peer Group
|
|
|
Vesting
|
|
|
|
|
Threshold
|
|
|
40th
|
|
|
|
25
|
%
|
Target
|
|
|
60th
|
|
|
|
100
|
%
|
Maximum
|
|
|
80th
|
|
|
|
175
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash ROE
|
|
|
|
(30% of Performance Share Award)
|
|
|
|
Cash ROE
|
|
|
Vesting
|
|
|
|
|
Threshold
|
|
|
12.5
|
%
|
|
|
0
|
%
|
Target
|
|
|
15.0
|
%
|
|
|
100
|
%
|
Maximum
|
|
|
17.5
|
%
|
|
|
150
|
%
|
|
|
Results between threshold and target and target and maximum will
be interpolated. In addition, participants will not receive
dividends or dividend equivalents on performance shares.
Supplemental
Executive Retirement Plan
From time to time, the Corporation has provided Supplemental
Executive Retirement Plans (SERPs) to select
executives through contractual agreements that guarantee
additional retirement benefits beyond
14
those made available through the Corporations qualified
retirement plan and deferred compensation arrangements. The
Corporations existing SERPs have been structured as a
pre-set, fixed annuity value.
Currently, the Corporation provides SERP benefits to two of the
NEOs: Messrs. James and Rownd. Mr. James was provided
a SERP when he was being recruited to First Charter to replace a
benefit that his previous employer provided.
Mr. Rownds SERP was provided primarily as a retention
device and to achieve equity parity with SERPs provided to other
members of executive management at that time. Under the SERPs,
upon reaching age 65 and subject to the satisfaction of the
vesting requirements, Mr. James is entitled to receive a
sum of $785,000 and Mr. Rownd is entitled to receive a sum
of $1,205,000. Mr. James and Mr. Rownd were 80% and
60% vested as of December 31, 2007, respectively, and will
continue to vest at a rate of 10% each year. However, if the
merger with Fifth Third is consummated, both executives shall
become 100% vested in their respective SERP benefits.
Additional details regarding the terms and provisions of the
SERPs are described in this
Form 10-K/A
in the section called Change in Control and Employment
Agreements.
Deferred
Compensation
Executive Management, as well as select members of senior
management, are eligible to participate in the
Corporations Option Plan Trust (OPT Plan)
which is a non-qualified deferred compensation plan. Under this
tax-deferred capital accumulation plan, executives may elect to
defer up to 100% of their base salary and cash annual incentive
and invest these deferrals in mutual funds. Subject to approval
by the Compensation Committee, the OPT Plan may provide a
restoration contribution for company matching contributions
otherwise limited under the broad-based qualified 401(k) plan as
a result of Internal Revenue Code restrictions on compensation
that can be recognized under qualified plans. Amounts
contributed by the Corporation to the account of each of the
NEOs under the OPT Plan during 2007 are reflected in the table
entitled Nonqualified Deferred Compensation for 2007
included under Compensation of Executive Officers
section below.
Perquisites and
Other Benefits
The Corporation provides certain perquisites to executive
management where they generally either (i) meet the
business needs of the organization, or (ii) provide a level
of benefits commensurate with the group insurance plans offered
all employees to recognize limitations on wages.
Company-owned vehicles are provided to certain executive
officers to meet the needs of the organization by facilitating
business travel and customer relations. The cost of certain golf
and social club memberships is covered for executive officers,
provided that the club membership provides for a business-use
opportunity such as use of the facilities for functions and
meetings, and client networking and entertainment.
As discussed last year, the Compensation Committee reviewed the
Corporations policies regarding perquisites and related
gross-up
payments for executive management for 2008 and beyond. The
Compensation Committee decided that perquisites would be a less
prevalent component of executive compensation; that perquisites
would be approved by the Compensation Committee for executive
officers using guidelines established; that certain perquisites
would be replaced with a fixed stipend, the amount which would
be revisited from time-to-time; and that, with few exceptions
(i.e., club initiation fees for compelling business purposes)
the stipend would not be
grossed-up
for taxes. However, in light of the proposed merger with Fifth
Third and the executives transition to Fifth Thirds
executive compensation program, the Corporation has not
implemented the stipend program.
On very limited occasions, spousal travel in connection with a
business-related event is also a covered expense. This is
limited to events sponsored for the purpose of building customer
or employee relationships where the travel is for an extended
period of time or extends into the personal time of the
executive, or it is expected or customary for the executive to
be accompanied by a spouse.
Other perquisites such as awarded travel, temporary housing, and
moving and relocation costs are provided from time to time,
commensurate with the same benefits afforded other employees.
The
15
Corporations policy has also been to
gross-up for
tax purposes certain relocation expenses for all employees.
Members of executive management generally participate in the
Retirement Savings Plan or 401(k) pursuant to which an eligible
employee may elect to defer between 1% and 50% of compensation,
and the Corporation contributes a quarterly match of 75 cents
for each dollar contributed up to 6% of eligible pay.
Additionally, the Corporation may contribute annually (i) a
discretionary matching amount based on an EPS target for such
year and (ii) a discretionary contribution allocated to
eligible employees, including executive officers, based on their
eligible compensation. Any and all discretionary contributions
are determined by the Board of Directors on an annual basis.
The Corporation provides income protection in the event of
disability or death under group insurance plans for all
employees. These group plans have limitations on income
replacement and, as a result, highly compensated employees are
not provided proportional income protection. Accordingly,
supplemental life and disability coverage are provided by the
Corporation to certain members of executive management. For
2007, Mr. James received supplemental term life coverage
and Messrs. James and Rownd received disability coverage.
Additionally, the Corporation provides Mr. James a whole
life insurance policy as a continuation of his plan under prior
employment.
Employment
Agreements
The Corporation currently maintains employment agreements with
Messrs. James and Rownd primarily as a means of retention
during periods of uncertainty and operational challenge.
As part of the employment contracts the executives also agree to
be bound by non-compete and non-disclosure provisions. These
agreements include provisions for, among other things:
|
|
|
|
|
Minimum compensation levels, benefits, and perquisites;
|
|
|
|
Non-compete and non-disclosure covenants;
|
|
|
|
Change in control benefits; and
|
|
|
|
A SERP.
|
Additionally, the Corporation entered into Change in Control
arrangements with Mr. James and the NEOs to provide
protection to those executives in the event of their termination
related to a change of control. The change in control
arrangements are designed to promote stability and continuity of
senior management during times of transition and change. The
Corporation attempts to ensure that the NEOs are incentivized to
achieve the greatest possible return for the Corporations
shareholders, including through a potential change in control
transaction, irrespective of such executives loss of
employment in connection with such a transaction. The
arrangements provide for a payout of base salary and average
bonus for 35 months for Messrs. James and Rownd,
24 months for Messrs. Smith and Ensor and
12 months for Ms. Stoke if, within a year of the
change in control, their employment is terminated other than For
Cause. The employment agreements for Messrs. James and
Rownd eliminate the tax-related ceiling on post-employment
compensation under Section 280G of the Internal Revenue
Code of 1986, as amended, by providing for a corresponding
payment by the Corporation of any taxes imposed by that section.
Additional details regarding the terms and provisions of the
employment contracts are described in this
Form 10-K/A
in the section called Employment Agreements, Change in
Control and Potential Payments Upon a Change In Control.
SHARE OWNERSHIP
GUIDELINES
The Board of Directors and the Compensation Committee believe
that directors and executives should have a reasonable and
tangible equity position in the Corporation which will further
the alignment of interests between these parties and the
shareholders. Therefore, during 2006, the Compensation
16
Committee and the Board, acting upon the recommendation of the
Corporate Governance and Nominating Committee, approved the
following share ownership guidelines for both directors and
members of executive management:
|
|
|
|
|
Directors are expected to maintain stock holdings in the
Corporation equal to 2.5 times aggregate annual director fees;
|
|
|
|
The CEO is expected to maintain stock holdings in the
Corporation equal to 2.5 times annual base salary; and
|
|
|
|
Members of executive management, other than the CEO, are
expected to maintain stock holdings in the Corporation equal to
1.5 times annual base salary.
|
These guidelines are considered by the Board to be modest;
however, given the relatively short tenure of the current
members of executive management and the relatively light
historical reliance on equity-based compensation by the
Corporation, the Compensation Committee and the Board believe
them to be appropriate and in the best interests of the
shareholders. Individuals have three years to achieve these
target levels of ownership. Failure to meet these requirements
within this timeframe will be taken into consideration when
granting future equity awards. Common stock held directly or
indirectly (e.g., 401(k) Plan, Deferred Compensation Plan or
family members sharing the same household) and restricted stock
subject to time-based vesting count towards the ownership for
purposes of these guidelines. Unvested performance shares and
unexercised stock options do not count for these purposes.
DEDUCTIBILITY OF
COMPENSATION EXPENSES
Section 162(m) of the Internal Revenue Code of 1986
generally limits the tax deductibility by the Corporation for
compensation paid to the CEO and the other most highly
compensated executive officers to $1 million per officer
per year, unless it qualifies as performance-based
compensation. To qualify as performance-based,
compensation payments must satisfy certain conditions, including
limitations on the discretion of the Compensation Committee in
determining the amounts of such compensation. It is the
Corporations current policy that, to the extent possible,
compensation paid to its NEOs is deductible under
Section 162(m) of the Internal Revenue Code. The
Compensation Committee believes that the compensation program
and actions taken during 2007 are consistent with this policy.
17
EXECUTIVE
COMPENSATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary Compensation
Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Qualified
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
Incentive Plan
|
|
Compensation
|
|
All Other
|
|
|
Name and
|
|
|
|
Salary
|
|
Bonus
|
|
Awards
|
|
Awards
|
|
Compensation
|
|
Earnings
|
|
Compensation
|
|
Total
|
Principal Position
|
|
Year
|
|
($)
|
|
($)(1)
|
|
($)(2)(3)
|
|
($)(4)
|
|
($)(5)
|
|
($)(6)
|
|
($)(7)(8)
|
|
($)
|
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(h)
|
|
(i)
|
|
(j)
|
|
Robert E. James, Jr.
|
|
|
2007
|
|
|
$
|
383,654
|
|
|
|
|
|
|
$
|
294,000
|
|
|
$
|
99,883
|
|
|
$
|
74,800
|
|
|
$
|
17,579
|
|
|
$
|
49,094
|
|
|
$
|
919,010
|
|
President and Chief Executive Officer
|
|
|
2006
|
|
|
|
348,923
|
|
|
|
|
|
|
|
114,662
|
|
|
|
97,644
|
|
|
|
|
|
|
|
21,110
|
|
|
|
69,079
|
|
|
|
651,418
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles A. Caswell
|
|
|
2007
|
|
|
|
167,788
|
|
|
|
|
|
|
|
75,832
|
|
|
|
6,252
|
|
|
|
|
|
|
|
|
|
|
|
125,854
|
|
|
|
375,726
|
|
Executive Vice President, Chief Financial Officer
|
|
|
2006
|
|
|
|
244,231
|
|
|
|
|
|
|
|
79,966
|
|
|
|
39,964
|
|
|
|
|
|
|
|
|
|
|
|
135,687
|
|
|
|
499,848
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sheila A. Stoke
|
|
|
2007
|
|
|
|
148,077
|
|
|
$
|
50,000
|
|
|
|
26,713
|
|
|
|
|
|
|
|
23,100
|
|
|
|
|
|
|
|
40,672
|
|
|
|
288,562
|
|
interim principal financial officer, Controller
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen M. Rownd
|
|
|
2007
|
|
|
|
256,539
|
|
|
|
|
|
|
|
106,368
|
|
|
|
21,706
|
|
|
|
34,650
|
|
|
|
17,001
|
|
|
|
33,599
|
|
|
|
469,863
|
|
Executive Vice President, Chief Banking Officer
|
|
|
2006
|
|
|
|
227,020
|
|
|
|
|
|
|
|
51,123
|
|
|
|
68,226
|
|
|
|
36,323
|
|
|
|
25,545
|
|
|
|
35,200
|
|
|
|
443,437
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cecil O. Smith, Jr.
|
|
|
2007
|
|
|
|
215,577
|
|
|
|
|
|
|
|
93,660
|
|
|
|
17,003
|
|
|
|
32,300
|
|
|
|
|
|
|
|
40,854
|
|
|
|
399,394
|
|
Executive Vice President, Chief Information Officer
|
|
|
2006
|
|
|
|
204,039
|
|
|
|
|
|
|
|
46,741
|
|
|
|
29,287
|
|
|
|
32,646
|
|
|
|
|
|
|
|
40,182
|
|
|
|
352,895
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J. Scott Ensor
|
|
|
2007
|
|
|
|
215,577
|
|
|
|
|
|
|
|
83,801
|
|
|
|
13,382
|
|
|
|
22,015
|
|
|
|
|
|
|
|
90,929
|
|
|
|
425,704
|
|
Executive Vice President, Chief Risk Officer
|
|
|
2006
|
|
|
|
173,654
|
|
|
|
|
|
|
|
43,941
|
|
|
|
33,978
|
|
|
|
40,824
|
|
|
|
|
|
|
|
12,602
|
|
|
|
304,999
|
|
|
|
|
|
|
(1) |
|
Performance bonuses for 2007
were paid under the Annual Incentive Plan. In accordance with
SEC requirements, these amounts are reported in the Non-Equity
Incentive Plan Compensation column (column (g)), and as a
result, column (d) entitled Bonus has been left
blank for each officer, except Ms. Stoke. Ms. Stoke
received a discretionary retention bonus for the year
2007. |
|
(2) |
|
Includes the FAS 123(R)
expense recognized in the years indicated for outstanding
performance share awards. For more information on the
outstanding performance shares held by the NEOs, please refer to
Outstanding Equity Awards at Fiscal Year-End for
2007. Performance shares were granted February 8,
2007, with a grant-date fair value of $22.70 per share. The
grant-date fair value represented the closing market price of
the date of grant, less the discounted present value of
dividends that participants will not receive on the award over
the performance period. The grant-date fair value is being
expensed ratably over the three-year performance period at the
target performance level. No forfeitures were assumed in
determining the expense. |
|
(3) |
|
Includes the FAS 123(R)
expense recognized for each of the outstanding shares of
restricted stock held by each of the following NEOs: $0 and
$23,730 in 2007 and 2006, respectively for Mr. Caswell;
$9,869 and $16,919 in 2007 and 2006, respectively for
Mr. Ensor; and $26,713 for Ms. Stoke in 2007. None of
the other NEOs held shares of restricted stock. For more
information on the outstanding shares of restricted stock held
by Messrs. Caswell and Ensor, please refer to
Outstanding Equity Awards at Fiscal Year-End for
2007. Restricted shares are expensed ratably over the
vesting period (five years for Mr. Caswell and three years
for Mr. Ensor) using the grant-date fair value,
representing the closing market price on the date of grant
($23.73 on February 14, 2005 for Mr. Caswell and
$22.34 on July 28, 2004 for Mr. Ensor). |
|
(4) |
|
Represents the FAS 123(R)
expense recognized in the year indicated for outstanding stock
options. For more information on the outstanding stock options
held by the NEOs, please refer to Outstanding Equity
Awards at Fiscal Year-End for 2007. The assumptions used
in the calculation of these amounts are included in Note 18
Share-Based Payments in the Notes to Consolidated
Financial Statements included within First Charters Annual
Report on
Form 10-K
for the fiscal year ended December 31, 2007. |
|
(5) |
|
This column contains
compensation paid to the NEOs under the Annual Incentive Plan
and, as described in the Compensation Discussion and
Analysis section above, Annual Incentive Plan awards are
paid to the NEOs when specific performance measures are achieved
and the payment is approved by the Compensation
Committee. |
|
(6) |
|
The amounts listed in column
(h) are attributable to the change in actuarial present
value for the SERPs of Messrs. James and Rownd from
December 31, 2006 to December 31, 2007. For a
discussion of the assumptions underlying this valuation, please
refer to the notes to the table below entitled Pension
Benefits for 2007. There were no changes of value
attributable to nonqualified deferred compensation
earnings. |
18
|
|
|
(7) |
|
All other compensation for each
of the NEOs consists of the following component
perquisites: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
B. James
|
|
C. Caswell
|
|
S. Stoke
|
|
S. Rownd
|
|
C. Smith
|
|
S. Ensor
|
|
|
Auto
|
|
$
|
6,373
|
|
|
$
|
6,591
|
|
|
$
|
|
|
|
$
|
8,354
|
|
|
$
|
11,918
|
|
|
$
|
7,061
|
|
Club
|
|
|
5,144
|
|
|
|
4,770
|
|
|
|
|
|
|
|
7,603
|
|
|
|
4,745
|
|
|
|
72,848
|
|
Whole life insurance
|
|
|
13,967
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term life insurance
|
|
|
3,987
|
|
|
|
528
|
|
|
|
1,221
|
|
|
|
777
|
|
|
|
2,896
|
|
|
|
439
|
|
Supplemental disability insurance
|
|
|
3,161
|
|
|
|
|
|
|
|
|
|
|
|
4,491
|
|
|
|
|
|
|
|
|
|
Relocation
|
|
|
|
|
|
|
|
|
|
|
21,964
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Relocation
gross-up
|
|
|
|
|
|
|
|
|
|
|
15,929
|
|
|
|
|
|
|
|
|
|
|
|
|
|
401(k) contributions
|
|
|
10,125
|
|
|
|
5,928
|
|
|
|
1,558
|
|
|
|
10,125
|
|
|
|
10,125
|
|
|
|
8,618
|
|
Restoration contributions
|
|
|
5,830
|
|
|
|
|
|
|
|
|
|
|
|
1,742
|
|
|
|
694
|
|
|
|
1,456
|
|
Tax preparation service
|
|
|
507
|
|
|
|
|
|
|
|
|
|
|
|
507
|
|
|
|
507
|
|
|
|
507
|
|
Payment of unused PTO
|
|
|
|
|
|
|
10,192
|
|
|
|
|
|
|
|
|
|
|
|
9,969
|
|
|
|
|
|
|
|
Total
|
|
$
|
49,094
|
|
|
$
|
28,009
|
|
|
$
|
40,672
|
|
|
$
|
33,599
|
|
|
$
|
40,854
|
|
|
$
|
90,929
|
|
|
|
|
|
|
(8) |
|
Mr. Caswells total
also includes $97,845 of severance payments made after his
separation date, August 17, 2007, pursuant to a Transition
Agreement and Release between the Corporation and
Mr. Caswell. |
Narrative to
Summary Compensation Table
For a discussion and analysis of the Corporations
compensation program, including a discussion of each element of
compensation provided to the NEOs, please refer to the
Compensation Discussion and Analysis section above.
As discussed in the Compensation Discussion and
Analysis section above, the Corporation entered into
Employment and Change in Control Agreements with certain members
of executive management. A discussion of these agreements
follows. For additional discussion of the benefits that will be
provided to each of the NEOs in the event of their termination
or a change in control of the Corporation, please refer to
Potential Payments Upon Termination or Change in
Control.
Robert E. James, Jr. Pursuant to an amended and
restated employment agreement between the Corporation and Robert
E. James, Jr. effective December 19, 2001 (and
subsequently amended and restated on November 2, 2007),
Mr. James is employed by the Corporation as President and
Chief Executive Officer for a rolling thirty-six month term
which, unless terminated earlier, automatically extends on the
last day of each successive month thereafter, with the last such
possible thirty-six month term expiring on October 31,
2015. Under the terms of the agreement, Mr. James will
receive an annual base salary of at least $385,000 per year,
plus benefits, and may be entitled to receive annual bonus
compensation from one or more arrangements including but not
limited to the Annual Incentive Plan. In addition,
Mr. James has certain other rights in connection with a
change in control as discussed below. The employment
agreements between the Corporation and Messrs. James and
Rownd were amended and restated in 2007 to comply with changes
in Code section 409A. Additionally, Messrs. James,
Rownd and Ensor have entered into employment agreements with
Fifth Third, to become effective if the proposed merger with
Fifth Third is completed. If the proposed merger is consummated,
First Charters employment agreements with
Messrs. James and Rownd, including applicable change in
control provisions within such agreements, will terminate in
accordance with the new Fifth Third employment agreements. These
employment agreements were independently negotiated directly by
the executives with Fifth Third.
Stephen M. Rownd. Pursuant to an amended and
restated employment agreement between the Corporation and
Stephen M. Rownd effective December 19, 2001, (and
subsequently amended and restated on November 2, 2007),
Mr. Rownd is employed by the Corporation as Executive Vice
President for a rolling thirty-six month term which, unless
terminated earlier, automatically extends on the last day of
19
each successive month thereafter, with the last such possible
thirty-six month term expiring on May 31, 2024. Under the
terms of the agreement, Mr. Rownd will receive an annual
base salary of at least $257,000 per year, plus benefits, and
may be entitled to receive annual bonus compensation from one or
more arrangements including but not limited to the Annual
Incentive Plan. In addition, Mr. Rownd has certain other
rights in connection with a change in control as
discussed below.
Charles A. Caswell. Charles A. Caswell was
previously employed as the Executive Vice President, Chief
Financial Officer, and Treasurer of the Corporation pursuant to
an Employment Agreement between the Corporation and
Mr. Caswell dated as of April 13, 2005. However,
pursuant to a Transition Agreement and Release between the
Corporation and Mr. Caswell dated as of May 16, 2007
(the Transition Agreement), the parties terminated
the Employment Agreement (with the exception of certain ongoing
restrictive covenants) and Mr. Caswell commenced his
transition from his role on May 17, 2007 (the
Transition Date).
Following the Transition Date, Mr. Caswell continued to be
employed by the Corporation and received his then-current
regular compensation and benefits until August 17, 2007
(the Separation Date). Following the Separation
Date, Mr. Caswell began to receive severance pay in the
aggregate amount of $98,967, payable in equal installments for
the period August 17, 2007 through December 31, 2007,
less appropriate deductions, including state and federal taxes.
In addition, Mr. Caswell was entitled to pro rated payouts
pursuant to his performance share award agreements; continued
participation in certain broad-based benefits through
December 31, 2007 or such earlier time as Mr. Caswell
became eligible under another group plan; reimbursement of club
membership dues through August 17, 2007; and outplacement
services.
In exchange for the severance and other benefits contained in
the Transition Agreement, Mr. Caswell agreed to continue to
honor all return of records, and applicable confidentiality and
conflict of interest obligations previously agreed to or in
accordance with applicable federal and state laws, fully release
the Corporation, its subsidiaries and affiliate companies from
all claims (subject to limited exceptions) and for a period of
one year after the Separation Date, refrain from engaging in
certain specified competitive activities.
Change in Control Provisions. The employment
agreements between the Corporation and Messrs. James and
Rownd contain provisions relating to a change in control of the
Corporation. In addition, Messrs. J. Scott Ensor and Cecil
O. Smith, Jr., and Ms. Sheila A. Stoke, are parties to
amended and restated change in control agreements with the
Corporation, dated November 2, 2007. The specific events
that constitute a change in control of the Corporation are
discussed below, under Potential Payments Upon Termination
or Change in Control.
The employment agreements for Mr. James and Mr. Rownd
also provide that under certain circumstances upon leaving the
employment of the Corporation, the NEO may not, within the
restricted territory and for a period of two years
after termination of employment, engage directly or indirectly
in the banking, financial services or any other business in
which the Corporation and its subsidiaries are engaged. The term
restricted territory means: (1) the geographic
area encompassing a twenty-five (25) mile radius of
Charlotte, North Carolina;
and/or
(2) any Metropolitan Statistical Area (as defined by the
United States Department of Commerce) from which First Charter
generated at least ten percent (10%) of its gross annual revenue
during the last two calendar years before the end of the
executives employment with First Charter. Additionally,
the employment agreements prohibit during the life of the
agreement and for three years afterwards, the solicitation or
inducement of any of the Corporations employees to
terminate their employment with the Corporation and join any
business activity with which the executive is or expects to be
directly or indirectly associated or employed.
20
Grants of
Plan-Based Awards for 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant
|
|
|
|
|
Estimated Future Payouts
|
|
Estimated Future Payouts
|
|
All Other
|
|
All Other
|
|
Exercise
|
|
Date
|
|
|
|
|
Under Non-Equity Incentive
|
|
Under Equity Incentive
|
|
Stock
|
|
Option
|
|
or
|
|
Fair
|
|
|
|
|
Plan
Awards(1)
|
|
Plan
Awards(2)
|
|
Awards
|
|
Awards
|
|
Base
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Number of
|
|
Price
|
|
of Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares of
|
|
Securities
|
|
of
|
|
and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock or
|
|
Underlying
|
|
Option
|
|
Option
|
|
|
Grant
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Units
|
|
Options
|
|
Awards
|
|
Awards
|
Name
|
|
Date
|
|
($)
|
|
($)
|
|
($)
|
|
(#)
|
|
(#)
|
|
(#)
|
|
(#)
|
|
(#)(3)
|
|
($/Share)(4)
|
|
($)(5)
|
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(h)
|
|
(i)
|
|
(j)
|
|
(k)
|
|
(l)
|
|
Robert E. James, Jr.
|
|
|
1/18/07
|
|
|
$
|
74,800
|
|
|
$
|
249,400
|
|
|
$
|
498,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/08/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,765
|
|
|
|
15,800
|
|
|
|
26,465
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
358,660
|
|
|
|
|
2/08/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,600
|
|
|
$
|
24.46
|
|
|
|
115,978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles A. Caswell
|
|
|
1/18/07
|
|
|
|
39,750
|
|
|
|
132,500
|
|
|
|
265,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/08/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,330
|
|
|
|
7,600
|
|
|
|
12,730
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
172,520
|
|
|
|
|
2/08/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,900
|
|
|
|
24.46
|
|
|
|
55,737
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sheila A. Stoke
|
|
|
1/18/07
|
|
|
|
18,500
|
|
|
|
37,000
|
|
|
|
55,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen M. Rownd
|
|
|
1/18/07
|
|
|
|
38,500
|
|
|
|
128,300
|
|
|
|
256,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/08/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,278
|
|
|
|
7,300
|
|
|
|
12,228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
165,710
|
|
|
|
|
2/08/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,600
|
|
|
|
24.46
|
|
|
|
54,048
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cecil O. Smith, Jr.
|
|
|
1/18/07
|
|
|
|
25,900
|
|
|
|
86,400
|
|
|
|
172,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/08/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,085
|
|
|
|
6,200
|
|
|
|
10,385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
140,740
|
|
|
|
|
2/08/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,100
|
|
|
|
24.46
|
|
|
|
45,603
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J. Scott Ensor
|
|
|
1/18/07
|
|
|
|
25,900
|
|
|
|
86,200
|
|
|
|
172,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/08/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,085
|
|
|
|
6,200
|
|
|
|
10,385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
140,740
|
|
|
|
|
2/08/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,100
|
|
|
|
24.46
|
|
|
|
45,603
|
|
|
|
|
|
|
(1) |
|
Amounts shown are estimated
threshold, target and maximum payouts for fiscal 2007 to the
NEOs under the Annual Incentive Plan. Actual bonuses received by
these named executive officers for fiscal 2007 are reported in
the Summary Compensation Table under the column entitled
Non-Equity Incentive Plan Compensation. As described
in the Compensation Discussion and Analysis section
above, the Annual Incentive Plan awards are paid to the NEOs
when specific performance measures are achieved and the payment
is approved by the Compensation Committee. |
|
(2) |
|
Amounts shown are estimated
threshold, target and maximum for performance shares that were
granted in 2007 under the Corporations 2000 Omnibus Stock
Option and Award Plan, which will result in the issuance of the
number of shares of First Charter common stock indicated three
years from the date of grant if the established performance
criteria are met. The vesting for performance shares is
contingent upon the achievement of Net Charge-off, Operating EPS
and Cash ROE goals over the three year performance period, as
described in the Compensation Discussion and
Analysis section above. |
|
(3) |
|
Stock options vest 20% per year
over the 5 year vesting period. |
|
(4) |
|
The option exercise price is the
closing price of First Charter common stock on the date of
grant. The closing price of First Charters common stock on
February 8, 2007, the date of the grant, was
$24.46. |
|
(5) |
|
The value of a performance share
award or option award is based on the fair value as of the grant
date of such award determined pursuant to FAS 123(R). The
grant date fair value for the performance shares is based on the
target award and the SFAS 123(R) value of $22.70. The grant
date fair value for the stock options is based on the
SFAS 123(R) value of $5.63. For a discussion of grant date
fair value calculations, please refer to footnote 2 to the
Summary Compensation Table. |
21
Outstanding
Equity Awards at Fiscal Year-End for 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
Equity Incentive
|
|
Equity Incentive
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
Plan Awards:
|
|
Plan Awards:
|
|
|
|
|
Number of
|
|
Plan Awards:
|
|
|
|
|
|
Number of
|
|
Market Value
|
|
Number of
|
|
Market or Payout
|
|
|
Number of
|
|
Securities
|
|
Number of
|
|
|
|
|
|
Shares or
|
|
of Shares
|
|
Unearned
|
|
Value of Unearned
|
|
|
Securities
|
|
Underlying
|
|
Securities
|
|
|
|
|
|
Units of
|
|
or Units
|
|
Shares, Units
|
|
Shares, Units or
|
|
|
Underlying
|
|
Unexercised
|
|
Underlying
|
|
Option
|
|
|
|
Stock that
|
|
of Stock
|
|
or Other Rights
|
|
Other Rights
|
|
|
Unexercised
|
|
Options
|
|
Unexercised
|
|
Exercise
|
|
Option
|
|
Have Not
|
|
that Have
|
|
That Have
|
|
that Have
|
|
|
Options (#)
|
|
(#)
|
|
Unearned
|
|
Price
|
|
Expiration
|
|
Vested
|
|
Not Vested
|
|
Not Vested
|
|
Not Vested
|
Name
|
|
Exercisable
|
|
Unexercisable(1)
|
|
Options (#)
|
|
($)
|
|
Date
|
|
(#)(2)
|
|
($)(3)
|
|
(#)(4)
|
|
($)(5)
|
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(h)
|
|
(i)
|
|
(j)
|
|
Robert E. James, Jr.
|
|
|
27,210
|
|
|
|
|
|
|
|
|
|
|
$
|
18.38
|
|
|
|
1/29/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
959
|
|
|
|
|
|
|
|
|
|
|
|
14.50
|
|
|
|
1/20/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,296
|
|
|
|
|
|
|
|
|
|
|
|
15.75
|
|
|
|
1/17/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,985
|
|
|
|
|
|
|
|
|
|
|
|
17.37
|
|
|
|
1/16/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,597
|
|
|
|
|
|
|
|
|
|
|
|
18.39
|
|
|
|
1/15/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,448
|
|
|
|
|
|
|
|
|
|
|
|
23.66
|
|
|
|
1/19/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,600
|
|
|
|
14,400
|
|
|
|
|
|
|
|
23.66
|
|
|
|
3/9/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,600
|
|
|
|
|
|
|
|
24.46
|
|
|
|
2/8/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,500
|
|
|
$
|
940,590
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles A. Caswell
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,967
|
|
|
|
178,175
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sheila A. Stoke
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,000
|
|
|
$
|
89,580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen M. Rownd
|
|
|
|
|
|
|
6,400
|
|
|
|
|
|
|
|
23.66
|
|
|
|
3/9/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,600
|
|
|
|
|
|
|
|
24.46
|
|
|
|
2/8/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,300
|
|
|
|
426,998
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cecil O. Smith, Jr.
|
|
|
4,237
|
|
|
|
|
|
|
|
|
|
|
|
23.60
|
|
|
|
2/28/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,480
|
|
|
|
5,920
|
|
|
|
|
|
|
|
23.66
|
|
|
|
3/9/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,100
|
|
|
|
|
|
|
|
24.46
|
|
|
|
2/8/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,600
|
|
|
|
376,236
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J. Scott Ensor
|
|
|
4,000
|
|
|
|
|
|
|
|
|
|
|
|
16.57
|
|
|
|
10/28/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,072
|
|
|
|
|
|
|
|
|
|
|
|
18.39
|
|
|
|
1/15/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,583
|
|
|
|
|
|
|
|
|
|
|
|
20.90
|
|
|
|
2/25/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,736
|
|
|
|
|
|
|
|
|
|
|
|
23.66
|
|
|
|
1/19/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
860
|
|
|
|
3,440
|
|
|
|
|
|
|
|
23.66
|
|
|
|
3/9/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,100
|
|
|
|
|
|
|
|
24.46
|
|
|
|
2/8/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,900
|
|
|
|
295,614
|
|
|
|
|
|
(1) |
|
Stock options vest 20% per year
over the five-year vesting period, with 100% vesting occurring
on 2/8/2012. |
|
(2) |
|
Restricted stock units granted
to Ms. Stoke will vest three years from the date of the
grant on November 15, 2009. |
|
(3) |
|
Calculated by multiplying the
unvested shares of restricted stock by the closing market price
of First Charters common stock on December 31, 2007
($29.86). |
|
(4) |
|
Amounts shown are target number
of performance shares granted in 2007. The actual vesting for
performance shares is contingent upon the achievement of Net
Charge-off, Operating EPS and Cash ROE goals over the three-year
performance period, as described in the Compensation
Discussion and Analysis section above. |
|
(5) |
|
Calculated by multiplying the
target number of performance shares by the closing market price
of First Charters common stock on December 31, 2007
($29.86). |
22
Option Exercises
and Stock Vested for 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
Number of Shares
|
|
|
|
|
|
|
|
|
Acquired on
|
|
Value Realized
|
|
Number of Shares
|
|
Value Realized
|
|
|
Exercise
|
|
on Exercise
|
|
Acquired on Vesting
|
|
on Vesting
|
Name
|
|
(#)
|
|
($)(1)
|
|
(#)
|
|
($)(2)
|
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
Robert E. James, Jr.
|
|
|
23,622
|
|
|
$
|
318,474
|
|
|
|
|
|
|
$
|
|
|
Charles A. Caswell
|
|
|
11,780
|
|
|
|
60,556
|
|
|
|
|
|
|
|
|
|
Sheila A. Stoke
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen M. Rownd
|
|
|
22,785
|
|
|
|
179,019
|
|
|
|
|
|
|
|
|
|
Cecil O. Smith, Jr.
|
|
|
2,901
|
|
|
|
18,160
|
|
|
|
|
|
|
|
|
|
J. Scott Ensor
|
|
|
|
|
|
|
|
|
|
|
2,272
|
|
|
|
41,804
|
|
|
|
|
|
|
(1) |
|
The value realized on exercise
represents the difference between the closing market price on
the day of exercise and the exercise price multiplied by the
number of shares acquired on exercise. |
|
(2) |
|
The value realized represents
the number of shares acquired on vesting multiplied by the
closing market price on the day of vesting. The closing market
price on December 31, 2007 ($29.86), was used to determine
value. |
Pension Benefits
for 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Present
|
|
|
|
|
|
|
|
|
Years
|
|
Value of
|
|
Payments
|
|
|
|
|
|
|
Credited
|
|
Accumulated
|
|
During
|
|
|
|
|
|
|
Service
|
|
Benefit
|
|
Last Fiscal Year
|
|
|
Name
|
|
Plan Name
|
|
(#)(1)
|
|
($)(2)
|
|
($)
|
|
|
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
|
|
Robert E. James, Jr.
|
|
Supplemental
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Retirement Plan
|
|
|
80
|
%
|
|
$
|
548,433
|
|
|
|
|
|
|
|
|
|
Charles A. Caswell
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sheila A. Stoke
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen M. Rownd
|
|
Supplemental
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Retirement Plan
|
|
|
60
|
|
|
|
742,273
|
|
|
|
|
|
|
|
|
|
Cecil O. Smith, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J. Scott Ensor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Benefits under the SERP
agreements vest in percentage increments each year, as described
herein under the caption, Narrative to Pension Benefits Table.
As of December 31, 2007, Messrs. James and Rownd were
80% and 60% vested, respectively, in their respective SERP
benefits. Each SERP provides a ten-year certain annuity, as
described in the narrative below. |
|
(2) |
|
Please refer to the accompanying
textual narrative for a discussion of the assumptions underlying
the present value calculation for the accumulated
benefits. |
Narrative to
Pension Benefits Table
Pursuant to the SERP between Mr. James and the Corporation
dated June 21, 1999, and as amended and restated on
December 19, 2001 (and subsequently amended and restated on
November 2, 2007), Mr. James will be entitled to
receive a total of $785,000 (or $6,541.67 a month, for
120 months), if certain conditions are satisfied, when he
reaches the age of 65 on October 17, 2016. This benefit
became 50% vested on January 1, 2004 and vests in
additional 10% increments on January 1 of each year thereafter,
beginning January 1, 2005, until fully vested on
January 1, 2009. As of December 31, 2007,
Mr. James was 80% vested in his SERP benefit. This benefit
will become fully vested if (i) Mr. James dies,
(ii) Mr. James becomes disabled, or (iii) upon a
change in control as described below, and the
unvested benefit is subject to forfeiture if Mr. James is
terminated for cause under his employment agreement.
23
Pursuant to the SERP between Mr. Rownd and the Corporation
effective December 19, 2001 (and subsequently amended and
restated on November 2, 2007), Mr. Rownd will be
entitled to receive a total of $1,205,000 (or $10,041.67 a
month, for 120 months), if certain conditions are
satisfied, when he reaches the age of 65 on May 23, 2025.
This benefit became 50% vested on January 1, 2006 and vests
in additional 10% increments on January 1 of each year
thereafter, beginning January 1, 2007, until fully vested
on January 1, 2011. As of December 31, 2007,
Mr. Rownd was 60% vested in his SERP benefit. This benefit
will become fully vested if (i) Mr. Rownd dies,
(ii) Mr. Rownd becomes disabled, or (iii) upon a
change in control as described below, and the
unvested benefit is subject to forfeiture if Mr. Rownd is
terminated for cause under his employment agreement.
The SERP agreements between the Corporation and
Messrs. James and Rownd were amended and restated in 2007
to comply with changes in Internal Revenue Code
section 409A.
In quantifying the present value of the current accrued benefit,
the following assumptions were made:
|
|
|
|
|
We have assumed the full benefit will be payable at the date the
participant becomes fully vested
(1/1/2009
and 1/1/2011
for Messrs. James and Rownd, respectively), rather than at
age 65.
|
|
|
|
Since the benefits are fixed in terms of the monthly amount and
the form of payment, the present value will not change due to
any benefit accruals. However, the present value will change
from year to year due to (i) the passage of time to reflect
the time value of money at a discount rate and
(ii) discount rate fluctuations from measurement date to
measurement date.
|
|
|
|
The present value at December 31, 2007 was determined using
a discount rate of 6.5%, which is consistent with assumptions
applicable to 2006 and 2007 FASB pension plan disclosure. Since
the benefits are payable as a ten-year certain annuity to the
participant, or to a beneficiary upon the participants
death, no discount for mortality applies.
|
Nonqualified
Deferred Compensation for
2007(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
|
|
|
|
Aggregate
|
|
Aggregate
|
|
|
Contributions
|
|
Registrant
|
|
Aggregate
|
|
Withdrawals
|
|
Balance at Last
|
|
|
in Last Fiscal
|
|
Contributions In
|
|
Earnings In Last
|
|
and/or
|
|
Fiscal Year
|
|
|
Year
|
|
Last Fiscal Year
|
|
Fiscal Year
|
|
Distributions
|
|
End
|
Name
|
|
($)
|
|
($)(2)
|
|
($)
|
|
($)
|
|
($)
|
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
Robert E. James, Jr.
|
|
$
|
|
|
|
$
|
10,502
|
|
|
$
|
962
|
|
|
$
|
|
|
|
$
|
25,142
|
|
Charles A. Caswell
|
|
|
|
|
|
|
3,845
|
|
|
|
28
|
|
|
|
|
|
|
|
1,588
|
|
Sheila A. Stoke
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen M. Rownd
|
|
|
|
|
|
|
2,587
|
|
|
|
189
|
|
|
|
|
|
|
|
10,816
|
|
Cecil O. Smith, Jr.
|
|
|
|
|
|
|
497
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
J. Scott Ensor
|
|
|
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Reflects deferred compensation
under the OPT Plan, which is described in the narrative
below. |
|
(2) |
|
Amounts in this column represent
contributions credited during 2007 for the year 2006 and were
included in the 2006 Summary Compensation Table. |
Narrative to
Nonqualified Deferred Compensation Table
The First Charter Corporation Option Plan Trust (OPT) (the
OPT Plan) is a tax-deferred capital accumulation
plan. Under the OPT Plan, eligible participants may defer up to
90% of base salary, up to 100% of annual incentive, and excess
deferrals, if any, pursuant to Internal Revenue Code
section 401(a)(17) and 401(k).
24
Participants may invest in six (6) mutual funds with
distinct investment objectives and risk tolerances. From day
one, participants are 100% vested in deferrals to the OPT Plan
and the earnings on those deferrals. Eligible employees for the
OPT Plan include executive management as well as key members of
senior management.
The OPT Plan was amended and restated in December 2007 to comply
with changes in Internal Revenue Code section 409A. Amounts
deferred under the OPT Plan will be distributed in the calendar
year following the year in which the participant has a
termination of service, or in any calendar year following the
year of termination of service provided that all benefit
payments have been made by the tenth (10th) calendar year (with
a minimum balance requirement). Distribution may be made in a
lump sum or in annual installments not to exceed a ten-year
period. However, in the event of death, payments will be made in
a lump sum as soon as practicable following the date of the
participants death; or, if benefits are in pay status,
unpaid amounts will continue to be paid to the beneficiary in
the form that the executive had elected to receive such amounts.
Potential
Payments Upon Termination or Change in Control
As discussed in Compensation Discussion and Analysis section and
the Narrative to Summary Compensation Table, the Corporation
entered into Employment Agreements with Messrs. James and
Rownd (and formerly, with Mr. Caswell), and into Change in
Control Agreements with Messrs. Ensor and Smith and
Ms. Stoke. If the proposed merger is consummated, First
Charters employment agreements with Messrs. James and
Rownd, including applicable change in control provisions within
such agreements, will terminate in accordance with the new Fifth
Third employment agreements. However, the potential payments to
the NEOs in the event of their termination or a change in
control are discussed below. In each case, it is assumed that
the date of termination is December 31, 2007.
Accrued and Vested Benefits. Each of the NEOs
has accrued various benefits under the Corporations
compensation programs and other broad-based employee benefit
plans. Many of these benefits and awards are fully vested and
each of the NEOs would receive all of their vested benefits and
awards in the event that their employment with the Corporation
ends for any reason, including termination by the Corporation
for cause or resignation without good
reason. (Cause is defined generally as willful
misconduct, use of narcotics or alcohol in a manner that affects
the officers duties, conviction of a crime involving moral
turpitude or for any felony, embezzlement or theft, gross
inattention or dereliction of duty or the breach by the officer
of certain other duties and obligations. Good reason
generally means a material reduction in the officers
duties or a change in title resulting in reduction of the
officers duties, a material reduction in salary or bonus,
or the relocation of the officer to an area farther than a
specified distance from their primary employment location.) In
the event of termination for cause or without good reason, each
of the NEOs is entitled only to receive all earned but unpaid
base salary, unreimbursed expenses
and/or
accrued, vested stock options and vested 401(k) or pension
benefits through the effective date of the termination.
The table below summarizes the accrued and vested benefits that
each of the NEOs would be entitled to, assuming they left the
Corporation for any reason on December 31, 2007.
Accrued and
Vested Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James
|
|
|
Caswell
|
|
|
Stoke
|
|
|
Rownd
|
|
|
Smith
|
|
|
Ensor
|
|
|
|
|
Severance/salary
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Vested SERP
|
|
|
628,000
|
|
|
|
|
|
|
|
|
|
|
|
723,000
|
|
|
|
|
|
|
|
|
|
Vested OPT balances
|
|
|
25,142
|
|
|
|
1,588
|
|
|
|
|
|
|
|
10,816
|
|
|
|
512
|
|
|
|
14
|
|
Vested
options(1)
|
|
|
1,311,475
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,269
|
|
|
|
172,865
|
|
|
|
Total
|
|
$
|
1,964,617
|
|
|
$
|
1,588
|
|
|
$
|
|
|
|
$
|
733,816
|
|
|
$
|
26,781
|
|
|
$
|
172,879
|
|
|
|
|
|
|
(1) |
|
The value of the vested stock
options is calculated by multiplying the number of options by
the difference between the exercise price over the closing
market price of First Charters common stock on
December 31, 2007 ($29.86). |
25
Death, Disability or Retirement. Under the
employment agreements with each of Messrs. James and Rownd,
if termination of employment occurs at any time due to the death
of executive, then executives estate will be paid all
earned but unpaid base salary, if any, and accrued bonus, and an
additional amount representing one years base salary. Each
executive would receive the same payments in the event of their
retirement from First Charter (with the consent of the
Corporation) or their disability, except that any salary
payments would be reduced by any amounts which executive
receives from the Corporations long-term disability plan.
For death or disability, all supplemental benefits (including
those provided under SERPs) and all equity awards will be fully
vested. For retirement, all equity awards will be fully vested.
The change in control agreements with each of Messrs. Ensor
and Smith and Ms. Stoke do not provide for any payments in
the event of their death, disability or retirement. However,
under the Corporations LTIP, each of Mr. Ensor and
Smith would be entitled to a pro-rata vesting (representing the
pro-rata service over the three-year performance period) of his
performance share award at the target level of the award.
Additionally, the vesting of the executives outstanding
stock option and restricted stock awards would be accelerated.
The table below summarizes the incremental benefits (beyond the
accrued and vested benefits) that each of the NEOs would be
entitled to, assuming their death, disability or retirement
occurred on December 31, 2007.
Death, Disability
or Retirement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James
|
|
|
Caswell
|
|
|
Stoke
|
|
|
Rownd
|
|
|
Smith
|
|
|
Ensor
|
|
|
|
|
Salary
|
|
$
|
385,000
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
257,000
|
|
|
$
|
|
|
|
$
|
|
|
AIP payments
|
|
|
74,800
|
|
|
|
|
|
|
|
|
|
|
|
38,500
|
|
|
|
|
|
|
|
|
|
Accelerated portion of
SERP(1)
|
|
|
157,000
|
|
|
|
|
|
|
|
|
|
|
|
482,000
|
|
|
|
|
|
|
|
|
|
Accelerated
options(2)
|
|
|
200,520
|
|
|
|
|
|
|
|
|
|
|
|
91,520
|
|
|
|
80,444
|
|
|
|
65,068
|
|
Accelerated restricted
stock(3)
|
|
|
|
|
|
|
|
|
|
|
89,580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accelerated/pro-rata performance
shares(3)
|
|
|
940,590
|
|
|
|
|
|
|
|
|
|
|
|
426,998
|
|
|
|
187,222
|
|
|
|
134,012
|
|
|
|
Total
|
|
$
|
1,757,910
|
|
|
$
|
|
|
|
$
|
89,580
|
|
|
$
|
1,296,018
|
|
|
$
|
267,666
|
|
|
$
|
199,080
|
|
|
|
|
|
|
(1) |
|
Vesting accelerates and benefit
is payable only in the event of death or disability and is not
payable in the event of retirement. |
|
(2) |
|
The value of the accelerated
stock options is calculated by multiplying the number of
accelerated options by the difference between the exercise price
over the closing market price of First Charters common
stock on December 31, 2007 ($29.86). |
|
(3) |
|
The value of the accelerated
performance shares and accelerated shares of restricted stock is
calculated by multiplying the number of accelerated shares by
the closing market price of First Charters common stock on
December 31, 2007 ($29.86). |
Termination Without Cause or Resignation For Good
Reason. Under the employment agreements with each
of Messrs. James and Rownd, if termination of employment
occurs at any time due to termination by the Corporation without
cause or due to resignation by the executive for good reason,
then the executive shall be entitled to (i) all accrued,
unpaid base salary and unreimbursed expenses through the date of
such termination; (ii) any prior year annual incentive
bonus earned but not yet paid; (iii) continued payment of
the executives base salary for the greater of the
remainder of the employment term under the agreement or two
(2) years; (iii) an annual bonus amount (calculated as
the average of the three most recent bonuses) for the greater of
the remainder of the employment term under the agreement or two
(2) years (the agreements have a three-year term and
automatically renew on a monthly basis); (iv) continuation
of health and welfare benefit coverage (including coverage for
the executives dependents to the extent such coverage is
provided by First Charter for its employees generally) under
such plans and programs to which the executive was entitled to
participate immediately prior to the date of the end of his
employment for the greater of the remainder of the employment
term under the agreement or two (2) years, provided such
continued participation is possible under the terms and
provisions of such plans and programs; and (v) acceleration
of vesting of all supplemental benefits, including but not
limited to all awards, grants, and options under any
supplemental agreement, stock option plan or grant
notwithstanding any other provision in such plan or grant.
26
The change in control agreements with each of Messrs. Ensor
and Smith do not provide for any payments in the event of their
termination without cause or resignation for good reason.
However, under the Corporations LTIP, in the event of
termination without cause, each of Mr. Ensor and Smith
would be entitled to a pro-rata vesting (representing the
pro-rata service over the three-year performance period) of his
performance share award at the target level of the award.
Additionally, in the event of termination without cause, the
vesting of the executives outstanding stock option and
restricted stock awards would be accelerated. In the event of
resignation for good reason, Messrs. Ensor and Smith and
Ms. Stoke would not receive any additional benefits.
The tables below summarize the incremental benefits (beyond the
accrued and vested benefits) that each of the NEOs would be
entitled to, assuming their termination without cause or
resignation for good reason occurred on December 31, 2007.
Termination
Without Cause/Resignation For Good Reason
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James
|
|
|
Caswell
|
|
|
Stoke
|
|
|
Rownd
|
|
|
Smith
|
|
|
Ensor
|
|
|
|
|
Severance/salary
|
|
$
|
1,155,000
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
771,000
|
|
|
$
|
|
|
|
$
|
|
|
AIP payment
|
|
|
226,236
|
|
|
|
|
|
|
|
|
|
|
|
154,223
|
|
|
|
|
|
|
|
|
|
Accelerated portion of
SERP(1)
|
|
|
157,000
|
|
|
|
|
|
|
|
|
|
|
|
482,000
|
|
|
|
|
|
|
|
|
|
Accelerated
options(2)
|
|
|
200,520
|
|
|
|
|
|
|
|
|
|
|
|
91,520
|
|
|
|
80,444
|
(4)
|
|
|
65,068
|
(4)
|
Accelerated restricted
stock(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accelerated performance
shares(3)
|
|
|
940,590
|
|
|
|
|
|
|
|
|
|
|
|
426,998
|
|
|
|
187,222
|
(4)
|
|
|
134,012
|
(4)
|
Welfare benefits
|
|
|
16,791
|
|
|
|
|
|
|
|
|
|
|
|
16,791
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,696,137
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,942,532
|
|
|
$
|
267,666
|
(4)
|
|
$
|
199,080
|
(4)
|
|
|
|
|
|
(1) |
|
Represents acceleration of SERP
balance in addition to the vested portion of the SERP at
December 31, 2007 ($628,000 for Mr. James and $723,000
for Mr. Rownd). |
|
(2) |
|
The value of the accelerated
stock options is calculated by multiplying the number of
accelerated options by the difference between the exercise price
over the closing market price of First Charters common
stock on December 31, 2007 ($29.86). |
|
(3) |
|
The value of the accelerated
performance shares and accelerated shares of restricted stock is
calculated by multiplying the number of accelerated shares by
the closing market price of First Charters common stock on
December 29, 2007 ($29.86). |
|
(4) |
|
For Messrs. Smith and Ensor
and Ms. Stoke, benefits are payable only in the event of
termination without cause and are not payable in connection with
resignation for good reason. |
Termination Following a Change in Control. The
respective employment and change in control agreements of the
NEOs provide for payment, in a lump sum, of base salary and
average bonus amounts, as well as certain continued benefits
following termination of employment in connection with a change
in control. If the employment of Messrs. James or Rownd is
terminated by the Corporation without cause, the Corporation
shall pay such executives base salary and average bonus
amounts, in a lump sum, for a period of 35 months. If,
within one year following the change in control, the employment
of either executive is terminated by the executive for good
reason, the Corporation shall pay to the executive, in a lump
sum, an amount equal to the present value of such
executives base salary and average bonus amounts for the
greater of the remainder of the employment term or two years
(the agreements have a three-year term and automatically renew
on a monthly basis). The change in control agreements of the
other NEOs provide for payments for a period of 24 months
with respect to Messrs. Ensor and Smith and for a period of
12 months with respect to Ms. Stoke for a termination
upon a change in control if such termination is other than for
cause or by the NEO for good reason. The employment agreements
for Messrs. James and Rownd eliminate the tax-related
ceiling on post-employment compensation under Section 280G
of the Internal Revenue Code of 1986, as amended, by providing
for a corresponding payment by the Corporation of any taxes
imposed by that section. In addition, upon a change in control,
the benefits provided for each of Messrs. James and Rownd
under their SERPs automatically vest 100%, if not fully vested
regardless of
27
whether employment is terminated. Similarly, for all the NEOs,
all outstanding options and restricted stock are exercisable in
full, and all performance objectives with respect to performance
shares shall be deemed to be satisfied to the extent necessary
to earn 100% of the performance shares and the performance
period shall be deemed to be complete regardless of whether
employment is terminated. Such performance shares shall be
deemed to be converted to actual performance share awards and
the actual performance share awards shall be paid out in cash.
For purposes of the agreements, a change in control
generally includes a merger or similar transaction involving the
Corporation in which the Corporations shareholders receive
less than 50% of the voting stock of the surviving corporation,
the sale or transfer of substantially all the Corporations
assets, certain acquisitions of more than 20% of the common
stock by any person or group other than a person or group who
owned more than 5% of the common stock as of the date of the
agreements unless prior approval of the Board is received,
certain instances in which the composition of the
Corporations Board of Directors changes by more than 50%
during a two year period, or any other transaction that would
constitute a change in control required to be reported by the
Corporation in a proxy statement or the acquisition of control
of the Corporation under applicable federal banking laws.
To be entitled to payment of the severance/cash benefits, AIP
payment, welfare benefits, and excise tax
gross-up
payments listed in the table below, upon a change in control,
(a) the officers employment must be terminated other
than for cause, or (b) the officer must terminate his
employment for good reason, in either case within one year
following the change in control.
The table below summarizes the incremental benefits (beyond the
accrued and vested benefits) that each of the NEOs would be
entitled to, assuming their termination following a change in
control occurred on December 31, 2007.
Termination
Following a Change in Control
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James
|
|
|
Caswell
|
|
|
Stoke
|
|
|
Rownd
|
|
|
Smith
|
|
|
Ensor
|
|
|
|
|
Severance/cash(1)
|
|
$
|
1,829,131
|
|
|
$
|
|
|
|
$
|
150,000
|
|
|
$
|
1,163,452
|
|
|
$
|
522,202
|
|
|
$
|
586,088
|
|
AIP payment
|
|
|
74,800
|
|
|
|
|
|
|
|
|
|
|
|
38,500
|
|
|
|
|
|
|
|
|
|
Accelerated portion of
SERP(2)
|
|
|
157,000
|
|
|
|
|
|
|
|
|
|
|
|
482,000
|
|
|
|
|
|
|
|
|
|
Accelerated
options(3)
|
|
|
200,520
|
|
|
|
|
|
|
|
|
|
|
|
91,520
|
|
|
|
80,444
|
|
|
|
65,068
|
|
Accelerated restricted
stock(4)
|
|
|
|
|
|
|
|
|
|
|
89,580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accelerated performance
shares(4)
|
|
|
940,590
|
|
|
|
|
|
|
|
|
|
|
|
426,998
|
|
|
|
376,236
|
|
|
|
295,614
|
|
Welfare benefits
|
|
|
36,742
|
|
|
|
|
|
|
|
11,282
|
|
|
|
36,742
|
|
|
|
23,294
|
|
|
|
24,149
|
|
Excise tax (280G)
gross-up(5)
|
|
|
1,416,189
|
|
|
|
|
|
|
|
|
|
|
|
743,360
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
4,654,972
|
|
|
$
|
|
|
|
$
|
250,862
|
|
|
$
|
2,982,572
|
|
|
$
|
1,002,716
|
(6)
|
|
$
|
970,919
|
(6)
|
|
|
|
|
|
(1) |
|
Represents amounts payable
following a change in control if the executive is terminated
without cause. |
|
(2) |
|
Represents acceleration of SERP
balance in addition to the vested portion of the SERP at
December 31, 2007 ($628,000 for Mr. James and $723,000
for Mr. Rownd). |
|
(3) |
|
The value of the accelerated
stock options is calculated by multiplying the number of
accelerated options by the difference between the exercise price
over the closing market price of First Charters common
stock on December 31, 2007 ($29.86). |
|
(4) |
|
The value of the accelerated
performance shares and accelerated shares of restricted stock is
calculated by multiplying the number of accelerated shares by
the closing market price of First Charters common stock on
December 31, 2007 ($29.86). |
|
(5) |
|
Pursuant to their employment
agreements, Messrs. James and Rownd will be entitled to a
payment from the Corporation consisting of the excise tax
payable in accordance with Internal Revenue Code
section 280G. Because the executive is entitled to receive
severance payments following a termination without cause where
there has been no change in control, a portion of the amount
reflected might not be deemed to have been paid in
connection with a change in control under Internal Revenue
Code section 280G and therefore would not cause the
executive to incur an excise tax that would be subject to a
gross-up
payment under the applicable employment agreement. Accordingly,
based on the facts and circumstances surrounding the termination
of the executive, the calculated excise tax and related
gross-up
could be substantially reduced or eliminated. |
|
(6) |
|
Total amounts for
Messrs. Smith and Ensor will be reduced due to Internal
Revenue Code section 280G limits . |
28
Change in Control
and Proposed Merger with Fifth Third
As previously indicated, consummation of the merger with Fifth
Third will be deemed a change in control under the employment
agreements with Messrs. James and Rownd and the Change in
Control Agreements with Messrs. Ensor and Smith and
Ms. Stoke. The change in control provisions of the
employment agreements of Messrs. James and Rownd will
terminate in accordance with the terms of their new Fifth Third
employment agreements. Similarly, Mr. Ensors change
in control agreement will expressly terminate in accordance with
his new employment agreement with Fifth Third. Conversely, Fifth
Third has agreed to honor the change in control agreements with
Mr. Smith and Ms. Stoke.
Caswell
Transition Agreement
The table below summarizes the payments that Mr. Caswell
received under the Transition Agreement and the accrued and
vested benefits that Mr. Caswell was entitled to based upon
his departure from the Corporation on August 17, 2007.
Payments Under
Transition Agreement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested
|
|
|
|
|
|
|
Severance/
|
|
|
|
Vested
|
|
Performance
|
|
Welfare
|
|
|
Name
|
|
Salary/ PTO
|
|
AIP Payment
|
|
Options
|
|
Shares(1)
|
|
Benefits
|
|
Total
|
|
|
Caswell
|
|
$
|
176,865
|
|
|
|
|
|
|
|
|
|
|
$
|
160,751
|
|
|
$
|
3,910
|
|
|
$
|
341,526
|
|
|
|
|
|
|
(1) |
|
Represents cash payment in
settlement of outstanding performance shares. |
COMPENSATION
COMMITTEE REPORT
The Compensation Committee is composed entirely of
non-management directors, each of whom has been determined in
the Boards business judgment to be independent based on
the standards for independence adopted by the Board of
Directors, which include the applicable Nasdaq Rules. The
Compensation Committee is responsible for executive compensation
and the broad-based compensation and benefit programs, including
an annual review of compensation for the Chief Executive Officer
and other executive officers, and an annual review and approval
of management incentive and equity-based programs.
The Compensation Discussion and Analysis section of this
Form 10-K/A
is managements report on the Corporations
compensation program and, among other things, explains the
material elements of the compensation paid to the Chief
Executive Officer and the other NEOs. The Compensation Committee
has reviewed and discussed the Compensation Discussion and
Analysis section of this
Form 10-K/A
with management. Based on this review and discussions, the
Compensation Committee recommended to the Board of Directors
that the Compensation Discussion and Analysis be incorporated by
reference into First Charters Annual Report on
Form 10-K
for the fiscal year ended December 31, 2007.
Submitted by the Compensation Committee of the Board of
Directors, whose current members are:
|
|
|
Jerry E. McGee (Chairman)
|
|
John S. Poelker
|
Michael R. Coltrane
|
|
L.D. Warlick, Jr.
|
Walter H. Jones, Jr.
|
|
|
29
DIRECTOR
COMPENSATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director Compensation for
2007(1)
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Value
|
|
|
|
|
|
|
Fees
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
Earned
|
|
|
|
|
|
|
|
Nonqualified
|
|
|
|
|
|
|
or
|
|
Stock
|
|
Option
|
|
Non-Equity
|
|
Deferred
|
|
All Other
|
|
|
|
|
Paid in
|
|
Awards
|
|
Awards
|
|
Incentive Plan
|
|
Compensation
|
|
Compensation
|
|
Total
|
Name
|
|
Cash ($)
|
|
($)(2)(3)(5)
|
|
($)(4)(5)
|
|
Compensation ($)
|
|
Earnings
|
|
($)(6)
|
|
($)
|
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(h)
|
|
William R. Black
|
|
|
60,750
|
|
|
|
16,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76,779
|
|
James E. Burt III
|
|
|
51,750
|
|
|
|
16,029
|
|
|
|
|
|
|
|
|
|
|
|
0(7
|
)
|
|
$
|
64,054
|
|
|
|
131,833
|
|
Michael R. Coltrane
|
|
|
55,250
|
|
|
|
16,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
71,279
|
|
Richard F. Combs
|
|
|
41,000
|
|
|
|
8,145
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49,145
|
|
John J. Godbold, Jr.
|
|
|
54,750
|
|
|
|
16,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70,779
|
|
Jewell D. Hoover
|
|
|
67,750
|
|
|
|
8,145
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,895
|
|
Charles A. James
|
|
|
60,250
|
|
|
|
16,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76,279
|
|
Walter H. Jones, Jr.
|
|
|
54,750
|
|
|
|
16,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70,779
|
|
Samuel C. King, Jr.
|
|
|
56,000
|
|
|
|
16,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
72,029
|
|
Jerry E. McGee
|
|
|
54,250
|
|
|
|
16,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70,279
|
|
Ellen L. Messinger
|
|
|
55,000
|
|
|
|
16,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
71,029
|
|
Hugh H. Morrison
|
|
|
50,000
|
|
|
|
16,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66,029
|
|
John S. Poelker
|
|
|
99,000
|
|
|
|
8,145
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
107,145
|
|
Thomas R.
Revels(8),
retired
|
|
|
12,250
|
|
|
|
6,246
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,496
|
|
Lawrence D. Warlick, Jr.
|
|
|
46,750
|
|
|
|
16,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62,779
|
|
William W. Waters
|
|
|
41,500
|
|
|
|
16,065
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57,565
|
|
|
|
|
|
|
(1) |
|
Robert E. James, First
Charters President and Chief Executive Officer, is not
included in this table because he is an employee of the
Corporation and thus receives no compensation for his service as
a director. The compensation received by Mr. James as an
employee of the Corporation is shown in the Summary Compensation
Table above. |
|
(2) |
|
Represents the FAS 123(R)
expense recognized in 2007 for outstanding shares of restricted
stock held by the directors. Restricted shares are expensed
ratably over the vesting period, assuming no forfeitures, using
the grant date fair value, as discussed in footnote 3,
below. |
|
(3) |
|
On February 8, 2007, each
of the non-employee directors received an award of
1,000 shares of restricted stock, each with a
FAS 123(R) grant date fair value of $24,460. Restricted
shares granted to directors during 2007 vest 1/3 annually with
vesting dates of 12/31/07, 12/31/08, and 12/31/09. |
|
(4) |
|
Represents the FAS 123(R)
expense recognized in 2007 for outstanding stock options. In
December 2006, the vesting for all outstanding stock options,
[except for awards made in 2006,] was accelerated so that all
such stock options were 100% vested. Stock options are no longer
granted to directors as part of their annual retainer, having
been replaced by restricted stock awards. Accordingly, the
Corporation recognized no FAS 123(R) expenses for directors
in 2007 except for President and Chief Executive Officer, Robert
E. James, Jr. (see Summary Compensation Table). |
|
(5) |
|
The outstanding equity awards
for each director as of December 31, 2007 were as
follows: |
30
Outstanding
Equity Awards at Fiscal Year-End for 2007
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
|
|
Number of
|
|
Stock Awards
|
|
|
Securities
|
|
Number of
|
|
|
Underlying
|
|
Shares or Units
|
|
|
Unexercised Options
|
|
Stock that have
|
|
|
(#)
|
|
not Vested
|
Name
|
|
Exercisable
|
|
(#)
|
|
(a)
|
|
(b)
|
|
(c)
|
|
William R. Black
|
|
|
|
|
|
|
1,332
|
|
James E. Burt III
|
|
|
12,100
|
|
|
|
1,332
|
|
Michael R. Coltrane
|
|
|
19,200
|
|
|
|
1,332
|
|
Richard F. Combs
|
|
|
|
|
|
|
666
|
|
John J. Godbold, Jr.
|
|
|
20,200
|
|
|
|
1,332
|
|
Jewell D. Hoover
|
|
|
|
|
|
|
666
|
|
Charles A. James
|
|
|
|
|
|
|
1,332
|
|
Walter H. Jones, Jr.
|
|
|
2,500
|
|
|
|
1,332
|
|
Samuel C. King, Jr.
|
|
|
13,240
|
|
|
|
1,332
|
|
Jerry E. McGee
|
|
|
10,300
|
|
|
|
1,332
|
|
Ellen L. Messinger
|
|
|
18,200
|
|
|
|
1,332
|
|
Hugh H. Morrison
|
|
|
|
|
|
|
1,332
|
|
John S. Poelker
|
|
|
|
|
|
|
666
|
|
Thomas R. Revels, retired
|
|
|
|
|
|
|
|
|
Lawrence D. Warlick, Jr.
|
|
|
8,520
|
|
|
|
1,332
|
|
William W. Waters
|
|
|
|
|
|
|
1,332
|
|
|
|
|
|
|
(6) |
|
On June 29, 2000, the
Corporation and Mr. Burt entered into a Separation and
Consulting Agreement terminating Mr. Burts employment
agreement with the Corporation and its successors. Pursuant to
the agreement, Mr. Burt served as a consultant to the
Corporation on a part-time basis. This agreement terminated on
July 31, 2007. During 2007, Mr. Burt received $64,054
for his consulting services. |
|
(7) |
|
The Corporation provides
Mr. Burt with monthly payments in the amount of $4,166.67
($50,000 a year) under a supplemental executive retirement plan.
Because these benefits are payable as a ten-year certain annuity
to the participant, the present value of the benefit will
decline each year. From December 31, 2006 to
December 31, 2007, the present value of this benefit
declined by $39,301. Mr. Burt is entitled to continue
receiving these monthly payments until August 2012. |
|
(8) |
|
Thomas R. Revels retired from
the Board of Directors, effective May 23, 2007, upon the
expiration of his term. Upon his retirement,
Mr. Revels unvested restricted stock awards expired.
He was permitted, under the appropriate plan(s), and pursuant to
the Corporations policy, to exercise vested stock options
over a
90-120 day
period expiring November 23, 2007. |
Narrative to
Director Compensation Table
During 2007, each director of the Corporation who was not
employed by the Corporation or its subsidiaries (an
outside director) was paid director fees of
(1) $3,000 per quarter for his or her services as a
director, (2) $1,500 for each meeting of the Board of
Directors of the Corporation attended in person, ($1,000 for
each telephonic attendance), and (3) $1,000 for each
committee meeting attended in person ($750 for each telephonic
attendance). In the event of an unscheduled meeting of the Board
of Directors or committee meeting of short duration (i.e., less
than one hour), a fee of $500 may be paid to each outside
director attending such meeting, in the discretion of the
Chairman of the Board or the committee chairperson. In addition,
the chairperson of the Audit Committee received an annual cash
retainer in the amount of $6,000 and the chairperson of each of
the other committees of the Board of Directors, except the
Executive Committee, received an annual cash retainer in the
amount of $4,000. In addition, for 2007, the Audit Committee
approved additional payments to Ms. Hoover and
Mr. Poelker of $10,000 and $25,000, respectively, as
recognition for their additional services. The compensation for
outside directors is periodically reviewed for adjustment by the
Compensation Committee. During 2006, the Compensation Committee
retained Semler Brossy to assist them with this review; no
changes to the compensation described above were made for 2007.
31
Deferred Compensation for Non-Employee
Directors. Effective May 1, 2001, the
Corporation amended and restated the First Charter Corporation
1994 Deferred Compensation Plan for Non-Employee Directors (the
Deferred Compensation Plan). Under the Deferred
Compensation Plan, eligible directors may elect to defer all or
part of their directors fees for a calendar year, in
exchange for common stock. The amount deferred, if any, must be
in multiples of 25% of their total directors fees. Each
participant is fully vested in his or her account balance under
the Deferred Compensation Plan. The Deferred Compensation Plan
generally provides for fixed payments or a lump sum payment, or
a combination of both, in shares of common stock after the
participant ceases to serve as a director for any reason.
The common stock purchased by the Corporation for the Deferred
Compensation Plan is maintained in the First Charter Corporation
Directors Deferred Compensation Trust, a Rabbi Trust (the
Trust), on behalf of the participants. The assets of
the Trust are subject to the claims of general creditors of the
Corporation. Dividends payable on the shares of common stock
held by the Trust will be reinvested in additional shares of
common stock and held in the Trust for the benefit of the
participants. Deferrals of director fees pursuant to this plan
amounted to $457,125 for 2007.
Effective May 1, 2001, the Corporation approved and adopted
a non-qualified compensation deferral arrangement called the
First Charter Corporation Directors Option Deferral Plan
(the Director OPT Plan). Under the Director OPT
Plan, eligible directors may elect to defer 100% of their
directors fees and invest these deferrals into mutual fund
investments. Participants are offered the opportunity to direct
an administrative committee to invest in separate investment
funds with distinct investment objectives and risk tolerances.
Deferrals of director fees pursuant to this plan amounted to $0
for 2007.
We also maintain the First Charter Stock Option Plan for
Non-Employee Directors (the Director Option Plan)
and the 2000 Omnibus Stock Option and Award Plan (the
Omnibus Stock Option Plan). The Compensation
Committee from time to time may grant non-qualified options to
purchase common stock
and/or
Restricted Stock Awards (RSA) to eligible directors
of the Corporation or a subsidiary in accordance with these
plans. The terms and provisions of any options granted,
including the termination, vesting and accelerated exercise of
the options, upon death, disability, retirement or otherwise, as
well as the terms and provisions of any RSA granted under these
plans, is subject to the discretion of the Compensation
Committee. The exercise price of any option granted must be
equal to the fair market value of the common stock on the date
of grant. In February 2007, the Compensation Committee approved
an RSA grant to each of the outside directors of the Corporation
in the amount of 1,000 shares of common stock, pursuant to
the Omnibus Stock Option Plan. These RSAs vest in cumulative
installments of one third per year over the next three years.
Burt Agreements. On June 29, 2000, the
Corporation and James E. Burt, III, a director of the
Corporation, entered into a Separation and Consulting Agreement
terminating Mr. Burts employment with the Corporation
and his prior employment agreements with the Corporation and its
successors (the Consulting Agreement). Pursuant to
the Consulting Agreement, Mr. Burt served as a consultant
to the Corporation on a part-time basis until July 31,
2007. Mr. Burt advised the Corporation on its business,
customers, products and services, and he remains under the terms
of an ongoing non-competition agreement with the Corporation
both during the term of the Consulting Agreement and for a
two-year period following the end of the Consulting Agreement.
During 2007, Mr. Burt received $64,054 for his consulting
services.
At the time of the merger between the Corporation and Carolina
First Bancshares, Inc., in April 2000 the Corporation assumed a
pre-existing supplemental executive retirement plan that
benefits Mr. Burt. Under this agreement, the Corporation
provides Mr. Burt with monthly payments in the amount of
$4,166.67 ($50,000 a year). Mr. Burt is entitled to
continue receiving these monthly payments until August 2012.
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Michael R. Coltrane, a member of the Compensation Committee, was
the President, Chairman, and Chief Executive Officer of CT
Communications, Inc. (CTC) until August 31,
2007. CTC (and a successor company) provide telecommunication
services to the Corporation. During 2007, the aggregate amount
of fees paid by the Corporation to CTC was approximately
$557,692 while Mr. Coltrane was employed by CTC.
32
|
|
ITEM 12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
|
EQUITY
COMPENSATION PLAN INFORMATION
The following table provides information as of December 31,
2007, regarding the number of shares of the common stock that
may be issued under the Corporations equity compensation
plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
Average
|
|
Shares
|
|
|
Shares to Be
|
|
Option
|
|
Available for
|
|
|
Issued Upon
|
|
Exercise
|
|
Future
|
|
|
Exercise(1)
|
|
Price
|
|
Grants
|
|
|
Plans approved by shareholders
|
|
|
1,099,948
|
|
|
$
|
20.37
|
|
|
|
1,489,285
|
|
Plans not approved by shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,099,948
|
|
|
$
|
20.37
|
|
|
|
1,489,285
|
|
|
|
|
|
|
(1) |
|
Does not include outstanding
options to purchase 24,584 shares of common stock assumed
through various acquisitions. As of December 31, 2007,
these assumed options had a weighted-average exercise price of
$16.25 per share and are all exercisable. |
SHARE OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the
beneficial ownership of the Corporations common stock by
each shareholder who is known by the Corporation to own
beneficially more than 5% of the Corporations outstanding
common stock. The percentages below are based on the number of
shares of First Charter common stock issued and outstanding as
of March 1, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
Shares Beneficially Owned
|
Name and Address of Beneficial
Owner
|
|
Number
|
|
Percent of Class
|
|
|
Carlson Capital, L.P.
|
|
|
|
|
|
|
|
|
Asgard Investment Corp.
|
|
|
|
|
|
|
|
|
Clint D. Carlson
2100 McKinney Avenue, Suite 1600
Dallas, Texas 75201
|
|
|
2,209,658
|
(1)
|
|
|
6.3
|
%
|
|
|
|
|
(1) |
|
Based on information contained
in Schedule 13G filed with the SEC on March 10, 2008.
The persons listed have the power to vote and dispose of
2,209,658 shares of the Corporations common stock for
certain accounts. |
33
OWNERSHIP OF
COMMON STOCK
The following table shows, as of March 1, 2008, the number
of shares of the Corporations common stock and the percent
of outstanding common stock beneficially owned by (i) each
director of the Corporation, (ii) each named executive
officer and (iii) all directors and executive officers as a
group.
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Beneficially
Owned(1)
|
|
Name
|
|
Number
|
|
|
Percent of Class
|
|
|
|
|
William R. Black
|
|
|
117,412
|
(2)
|
|
|
*
|
|
James E. Burt, III
|
|
|
162,713
|
(3)
|
|
|
*
|
|
Charles A. Caswell
|
|
|
9,260
|
(4)
|
|
|
*
|
|
Michael R. Coltrane
|
|
|
111,514
|
(5)
|
|
|
*
|
|
Richard F. Combs
|
|
|
129,511
|
(6)
|
|
|
*
|
|
J. Scott Ensor
|
|
|
23,003
|
(7)
|
|
|
*
|
|
John J. Godbold, Jr.
|
|
|
176,718
|
(8)
|
|
|
*
|
|
Jewell D. Hoover
|
|
|
4,712
|
(9)
|
|
|
*
|
|
Charles A. James
|
|
|
187,684
|
(10)
|
|
|
*
|
|
Robert E. James, Jr.
|
|
|
146,652
|
(11)
|
|
|
*
|
|
Walter H. Jones, Jr.
|
|
|
67,555
|
(12)
|
|
|
*
|
|
Samuel C. King, Jr.
|
|
|
81,388
|
(13)
|
|
|
*
|
|
Jerry E. McGee
|
|
|
44,794
|
(14)
|
|
|
*
|
|
Ellen L. Messinger
|
|
|
29,421
|
(15)
|
|
|
*
|
|
Hugh H. Morrison
|
|
|
57,451
|
(16)
|
|
|
*
|
|
John S. Poelker
|
|
|
5,017
|
(17)
|
|
|
*
|
|
Stephen M. Rownd
|
|
|
6,735
|
(18)
|
|
|
*
|
|
Cecil O. Smith, Jr.
|
|
|
13,395
|
(19)
|
|
|
*
|
|
Sheila A. Stoke
|
|
|
3,979
|
(20)
|
|
|
*
|
|
L. D. Warlick, Jr.
|
|
|
180,276
|
(21)
|
|
|
*
|
|
William W. Waters
|
|
|
78,478
|
(22)
|
|
|
*
|
|
All directors and executive officers of the Corporation as a
group (23 persons)
|
|
|
1,662,841
|
(23)
|
|
|
4.7
|
%
|
|
|
|
|
*
|
|
Less than 1%.
|
|
(1) |
|
Except as otherwise noted, the
persons named in the table have sole voting and investment power
with respect to the shares listed. |
|
(2) |
|
Includes 1,332 unvested
restricted shares granted under the Corporations
Restricted Stock Award Program as to which he has sole voting
power, but not investment power. |
|
(3) |
|
Includes 10,808 shares
owned by Mr. Burts spouse, as to which she has sole
voting and investment power. Also includes
(i) 12,100 shares that may be acquired by him upon the
exercise of stock options that are currently exercisable,
(ii) 9,555 shares as to which he may be deemed to be
the beneficial owner that are held pursuant to the Deferred
Compensation Plan, as to which he would have sole voting and
investment power upon acquisition and (iii) 1,332 unvested
restricted shares granted under the Corporations
Restricted Stock Award Program as to which he has sole voting
power, but not investment power. |
|
(4) |
|
Mr. Caswell ceased working
with the Corporation effective August 17, 2007. Includes
6,560 shares owned jointly by Mr. Caswell and his
spouse, as to which he has shared voting and investment
power. |
|
(5) |
|
Includes 19,200 shares that
may be acquired by Mr. Coltrane upon the exercise of stock
options that are currently exercisable. Also includes
(i) 11,776 shares as to which he may be deemed to be
the beneficial owner that are held pursuant to the Deferred
Compensation Plan, as to which he would have sole voting and
investment power upon acquisition, (ii) 8,924 shares
held in the Anne Collins Coltrane Trust as to which he may be
deemed to be the beneficial owner, as to which he has sole
voting and investment power, (iii) 1,332 unvested
restricted shares granted under the Corporations
Restricted Stock Award Program as to which he has sole voting
power, but not investment power and (iv) 30,037 shares
held by LDC Associates Limited Partnership as to which he has
shared voting power and investment power. |
|
(6) |
|
Includes 13,688 shares
owned by Mr. Combss spouse, as to which she has sole
voting and investment power. Also includes 666 unvested
restricted shares granted under the Corporations
Restricted Stock Award Program as to which he has sole voting
power, but not investment power. |
|
(7) |
|
Includes 20,731 shares that
may be acquired by Mr. Ensor upon the exercise of stock
options that are currently exercisable or become exercisable
within 60 days of March 1, 2008. |
|
(8) |
|
Includes 1,789 shares owned
by Mr. Godbolds spouse, as to which she has sole
voting and investing power. Also includes
(i) 20,200 shares that may be acquired by
Mr. Godbold upon the exercise of stock options that are
currently exercisable and |
34
|
|
|
|
|
(ii) 1,332 unvested
restricted shares granted under the Corporations
Restricted Stock Award Program as to which he has sole voting
power, but not investment power. |
|
|
|
(9) |
|
Includes 666 unvested restricted
shares granted under the Corporations Restricted Stock
Award Program as to which Ms. Hoover has sole voting power,
but not investment power. |
|
(10) |
|
Includes 19,200 shares
owned jointly by Mr. Charles A. James and his children, as
to which he has shared voting and investment power. Also
includes 1,332 unvested restricted shares granted under the
Corporations Restricted Stock Award Program as to which he
has sole voting power, but not investment power. |
|
(11) |
|
Includes 124,815 shares
that may be acquired by Mr. Robert E. James, Jr. upon the
exercise of stock options that are currently exercisable or
become exercisable within 60 days of March 1, 2008,
and 462 shares owned jointly by Mr. Jamess
children, as to which they have shared voting and investment
power. |
|
(12) |
|
Includes 528 shares owned
jointly by Mr. Jones and his spouse, as to which he has
shared voting and investment power. Also includes
(i) 33,101 shares owned by his spouse, as to which she
has sole voting and investment power, (ii) 174 shares
as to which he may be deemed to be the beneficial owner that are
held pursuant to the Deferred Compensation Plan, as to which he
would have sole voting and investment power upon acquisition and
(iii) 1,332 unvested restricted shares granted under the
Corporations Restricted Stock Award Program as to which he
has sole voting power, but not investment power. |
|
(13) |
|
Includes 6,514 shares owned
jointly by Mr. King and his spouse, as to which they have
shared voting and investment power. Also includes
(i) 4,782 shares owned by his spouse, as to which she
has sole voting and investment power, (ii)13,240 shares
that may be acquired by him upon the exercise of stock options
that are currently exercisable, and (iii) 1,332 unvested
restricted shares granted under the Corporations
Restricted Stock Award Program as to which he has sole voting
power, but not investment power. |
|
(14) |
|
Includes 10,300 shares that
may be acquired by Dr. McGee upon the exercise of stock
options that are currently exercisable. Also includes
(i) 11,220 shares as to which he may be deemed to be
the beneficial owner that are held pursuant to the Deferred
Compensation Plan, as to which he would have sole voting and
investment power upon acquisition and (ii) 1,332 unvested
restricted shares granted under the Corporations
Restricted Stock Award Program as to which he has sole voting
power, but not investment power. |
|
(15) |
|
Includes 447 shares owned
by Ms. Messingers spouse, as to which he has sole
voting and investment power. Also includes
(i) 18,200 shares that may be acquired by her upon the
exercise of stock options that are currently exercisable,
(ii) 1,524 shares held by Ms. Messinger as
custodian for her children, as to which they have shared voting
and investment power, (iii) 1,332 unvested restricted
shares granted under the Corporations Restricted Stock
Award Program as to which she has sole voting power, but not
investment power, and (iv) 156 shares as to which she
may be deemed to be the beneficial owner that are held pursuant
to the Deferred Compensation Plan, as to which she would have
sole voting and investment power upon acquisition. |
|
(16) |
|
Includes 1,451 shares owned
by Mr. Morrisons spouse, as to which she has sole
voting and investment power. Also includes (i) 1,332
unvested restricted shares granted under the Corporations
Restricted Stock Award Program as to which he has sole voting
power, but not investment power and (ii) 28,000 shares
pledged as collateral. |
|
(17) |
|
Includes 666 unvested restricted
shares granted under the Corporations Restricted Stock
Award Program as to which Mr. Poelker has sole voting
power, but not investment power. |
|
(18) |
|
Includes 3,520 shares that
may be acquired by Mr. Rownd upon the exercise of stock
options that are currently exercisable or become exercisable
within 60 days of March 1, 2008. |
|
(19) |
|
Includes 8,817 shares that
may be acquired by Mr. Smith upon the exercise of stock
options that are currently exercisable or become exercisable
within 60 days of March 1, 2008. |
|
(20) |
|
Includes 3,000 unvested
restricted shares granted under the Corporations
Restricted Stock Award Program as to which Ms. Stoke has
sole voting power, but not investment power. |
|
(21) |
|
Includes 3,062 shares held
by Mr. Warlicks spouse as custodian for their
children, as to which she has sole voting and investment power.
Also includes (i) 31,269 shares owned by his spouse,
as to which she has sole voting and investment power,
(ii) 8,520 shares that may be acquired by him upon the
exercise of stock options that are currently exercisable,
(iii) 1,070 shares as to which he may be deemed to be
the beneficial owner that are held pursuant to the Deferred
Compensation Plan, as to which he would have sole voting and
investment power upon acquisition, and (iv) 1,332 unvested
restricted shares granted under the Corporations
Restricted Stock Award Program as to which he has sole voting
power, but not investment power. |
|
(22) |
|
Includes 1,332 unvested
restricted shares granted under the Corporations
Restricted Stock Award Program as to which Mr. Waters has
voting power, but not investment power. |
|
(23) |
|
Includes 15,068 shares that
may be acquired by two other unnamed executive officers upon the
exercise of stock options that are currently exercisable or
become exercisable within 60 days of March 1, 2008.
Also includes 600 unvested restricted shares granted under the
Corporations Restricted Stock Award Program, as to which
one unnamed executive officer has sole voting power, but not
investment power. |
Changes in
Control
As previously disclosed, on August 15, 2007, the
Corporation and Fifth Third entered into the Merger Agreement by
and among the Corporation, Fifth Third, and Fifth Third
Financial. Under the terms of the Merger Agreement, the
Corporation will be merged with and into Fifth Third Financial.
The Merger Agreement has been approved by the Board of Directors
of the Corporation, Fifth Third and Fifth Third
35
Financial. The Corporations shareholders approved the
Merger Agreement, and the merger has been approved by all
necessary state and federal regulatory agencies. The merger
remains subject to customary closing conditions. The Corporation
is planning for closing in the second quarter of 2008.
|
|
ITEM 13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
|
CONFLICTS OF
INTEREST TRANSACTIONS
Pursuant to the Corporations Amended and Restated
Conflicts of Interest Transactions Policy for Directors and
Executive Officers, an executive officer or director, or
immediate family members of such persons, who has an actual or
possible conflict of interest in a transaction has a duty to
disclose to the Audit Committee that interest and describe all
material facts concerning the matter before entering into the
proposed transaction. The Audit Committee shall review the
proposed transaction and determine whether a conflict of
interest transaction exists and whether such transaction
should be approved by the Audit Committee, subject to the
approval of the disinterested directors of the Corporation. If
the conflict of interest transaction involves a director,
simultaneous with such review, the Audit Committee shall
disclose the proposed transaction to the Governance and
Nominating Committee to facilitate its ongoing monitoring of the
independence of the members of the Board of Directors. The
Governance and Nominating Committee shall inform the Board of
Directors as to its initial assessment of the potential impact
of the conflict of interest transaction upon the subject
directors independence. Thereafter, the disinterested
members of the Board of Directors shall determine by voting
whether the transaction should be approved and validated. On an
annual basis, the Corporations management discloses to the
Audit Committee and the Board of Directors for their review a
summary of all previously approved conflict of interest
transactions and the amounts paid by the Corporation pursuant to
such transactions during each of the two most recently completed
fiscal years. If at any time there is proposed to be a material
change in the amount or type of the continuing transactions
previously approved pursuant to this policy, such change must be
approved in advance in the same manner as a new conflict of
interest transaction.
A conflicts of interest transaction is defined as a
transaction involving the Corporation in which an executive
officer or director has a direct or indirect interest. Under the
policy, executive officers and directors will be deemed to have
a direct interest if they have or a member of their family has a
material financial interest in the transaction. The Corporation
believes that Related Person Transactions (as defined below)
that are required to be disclosed in the Corporations
annual proxy statement will constitute conflicts of
interest transactions and will therefore be subject to the
foregoing approval procedures.
The term Related Person Transaction generally means
a transaction, arrangement or relationship (or any series of the
same) in which the Corporation (including any of its
subsidiaries) was, is or will be a participant and the amount
involved exceeds $120,000, and in which any Related Person had,
has or will have a direct or indirect interest. A Related
Person generally means a director, director nominee or
executive officer of the Corporation; a person who is known to
be the beneficial owner of more than 5% of any class of the
Corporations common stock; and any immediate family member
of any of the foregoing persons, which means any child,
stepchild, parent, stepparent, spouse, sibling,
mother-in-law,
father-in-law,
son-in-law,
daughter-in-law,
brother-in-law,
or
sister-in-law
of the director, executive officer, nominee or more than 5%
beneficial owner, and any person (other than a tenant or
employee) sharing the household of such director, executive
officer, nominee or more than 5% beneficial owner.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
First Charter Bank has had, and expects to have in the future,
banking transactions in the ordinary course of business with
directors, officers and principal shareholders of the
Corporation and its subsidiaries and their associates. All loans
and commitments included in these transactions were made and are
expected to be made in the ordinary course of business and on
substantially the same terms, including interest rate and
collateral, as those prevailing at the time for comparable
transactions with other borrowers and did not and are not
expected to involve more than the normal risk of collectibility
or present other unfavorable features.
36
The relationship between the Corporation and Mr. Coltrane
is described above under Compensation Committee Interlocks
and Insider Participation.
DIRECTOR
INDEPENDENCE
Upon the consideration of the criteria and requirements
regarding director independence set forth in the NASDAQ Rules,
the Board of Directors has determined that each of the following
directors are independent directors: Dr. Black,
Mr. Coltrane, Mr. Combs, Mr. Godbold,
Ms. Hoover, Mr. Charles A. James, Mr. Jones,
Mr. King, Dr. McGee, Ms. Messinger,
Mr. Morrison, Mr. Poelker, Mr. Warlick, and
Mr. Waters. During its deliberations, the Board of
Directors also considered the following de minimis relationships
with directors deemed independent under the NASDAQ Rules:
(i) Samuel C. King, Jr. is the President of
Kings Office Supply, Inc., from which the Corporation
purchased office products and furniture during 2007 and
(ii) Walter H. Jones, Jr., is a Partner in the law
firm of Jones, Childers, McLurkin & Donaldson PLLC,
which during 2007 the Corporation engaged from time to time for
representation in various matters involving collections and
foreclosures. Mr. Revels, whose term expired at the 2007
Annual Meeting, was independent during his service on the Board
of Directors.
|
|
ITEM 14.
|
PRINCIPAL
ACCOUNTANT FEES AND SERVICES
|
The following table sets forth the aggregate fees billed by KPMG
LLP for services rendered to the Corporation for the fiscal
years indicated below:
|
|
|
|
|
|
|
|
|
|
|
Fees
|
|
2007
|
|
|
2006
|
|
|
|
|
Audit
fees(1)
|
|
$
|
919,000
|
|
|
$
|
1,100,000
|
|
Audit related
fees(2)
|
|
|
116,500
|
|
|
|
67,885
|
|
Tax
fees(3)
|
|
|
11,800
|
|
|
|
55,505
|
|
All other fees
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Audit fees are presented on an
audit year basis in accordance with SEC guidance. |
|
(2) |
|
Consists of aggregate fees
billed for audit of employee benefit plans and fees for
consultations related to audit and accounting matters. |
|
(3) |
|
Consists of aggregate fees
billed for tax compliance of $0 and $13,500 in 2007 and 2006,
respectively. Also consists of tax advice on return filings of
$11,800 and $42,005 in 2007 and 2006, respectively. |
POLICY ON AUDIT
COMMITTEE PRE-APPROVAL OF THE AUDIT AND PERMISSIBLE NON-AUDIT
SERVICES BY THE INDEPENDENT REGISTERED PUBLIC
ACCOUNTANTS
The Audit Committee is responsible for the appointment,
compensation, retention and oversight of the work of the
independent registered public accountants. As part of this
responsibility, the Audit Committee is required to pre-approve
the audit and non-audit services performed by the independent
registered public accountants in order to assure that they do
not impair the accountants independence from the
Corporation. Accordingly, the Audit Committee has adopted
procedures and conditions under which services proposed to be
performed by the independent registered public accountants must
be pre-approved.
Pursuant to this policy, the Audit Committee will consider
annually and approve the terms of the audit engagement. Any
proposed engagement relating to permissible non-audit services
must be presented to the Audit Committee and pre-approved on a
case-by-case
basis. In addition, particular categories of permissible
non-audit services that are recurring may be pre-approved by the
Audit Committee subject to pre-set fee limits. If a category of
services is so approved, the Audit Committee will be regularly
updated regarding the status of those services and the fees
incurred. The Audit Committee reviews requests for the provision
of audit and non-audit services by the Corporations
independent public accountants and determines if they should be
approved. Such requests could be approved either at a meeting of
the Audit Committee or upon approval of the Chair of the Audit
Committee, or another member of the Audit Committee. If a
permissible non-audit service is approved by the Chair or
another member of the Audit Committee, that decision is required
to be presented at the next meeting of the Audit Committee.
Prior to approving any services, the Audit Committee considers
whether the provision of such services is consistent with the
SECs rules on auditor independence and is compatible with
maintaining KPMG LLPs independence.
37
PART IV
|
|
ITEM 15.
|
EXHIBITS AND
FINANCIAL STATEMENT SCHEDULES
|
The following documents are filed as part of this report:
|
|
|
|
|
|
|
(1)
|
|
Financial Statements (previously filed with the Original Filing):
|
|
|
|
|
|
|
Reports of KPMG LLP, Independent Registered Public Accounting
Firm
|
|
|
|
|
|
|
Consolidated Balance Sheets as of December 31, 2007 and 2006
|
|
|
|
|
|
|
Consolidated Statements of Income for the years ended
December 31, 2007, 2006, and 2005
|
|
|
|
|
|
|
Consolidated Statements of Shareholders Equity for the
years ended December 31, 2007,
2006, and 2005
|
|
|
|
|
|
|
Consolidated Statements of Cash Flows for the years ended
December 31, 2007, 2006, and
2005
|
|
|
|
|
|
|
Notes to Consolidated Financial Statements
|
|
|
|
|
(2)
|
|
Financial Statement Schedules:
|
|
|
|
|
|
|
None
|
|
|
|
|
(3)
|
|
Exhibits.
|
|
|
|
|
38
|
|
|
Exhibit No.
|
|
|
(per Exhibit
|
|
|
Table in
|
|
|
Item 601 of
|
|
|
Regulation S K)
|
|
Description of Exhibits
|
|
2.1
|
|
Agreement and Plan of Merger, dated June 1, 2006, by and
between the Registrant and GBC Bancorp, Inc., incorporated
herein by reference to Exhibit 2.1 of the Registrants
Current Report on
Form 8-K,
dated June 1, 2006.
|
2.2
|
|
Agreement and Plan of Merger dated as of August 15, 2007 by
and between First Charter Corporation and Fifth Third Bancorp,
incorporated herein by reference to Exhibit 2.1 of the
Registrants Current Report on
Form 8-K,
dated August 15, 2007.
|
2.3
|
|
Amended and Restated Agreement and Plan of Merger dated as of
September 14, 2007, by and among First Charter Corporation,
Fifth Third Bancorp, and Fifth Third Financial Corporation,
incorporated herein by reference to Exhibit 2.1 of the
Registrants Current Report on
Form 8-K,
dated September 14, 2007.
|
3.1
|
|
Amended and Restated Articles of Incorporation of the
Registrant, incorporated herein by reference to Exhibit 3.1
of the Registrants Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2004.
|
3.2
|
|
Amended and Restated By-laws of the Registrant, as amended,
incorporated herein by reference to Exhibit 3.2 of the
Registrants Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2004.
|
4.1
|
|
Indenture dated June 28, 2005 between First Charter
Corporation and Wilmington Trust Company, as trustee,
incorporated herein by reference to Exhibit 4.1 of the
Registrants Current Report on
Form 8-K
dated June 28, 2005.
|
4.2
|
|
Indenture dated September 29, 2005 between First Charter
Corporation and Wilmington Trust Company, as trustee,
incorporated herein by reference to Exhibit 4.1 of the
Registrants Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2005.
|
4.3
|
|
Stockholder Protection Rights Agreement dated July 19, 2000
between the Registrant and Registrar and Transfer Company,
incorporated herein by reference to Exhibit 99.1 of the
Registrants Current Report on
Form 8-K,
dated July 19, 2000.
|
4.4
|
|
First Amendment to the Stockholder Protection Rights Agreement,
dated as of August 15, 2007 by and between First Charter
Corporation and Registrar and Transfer Company, incorporated
herein by reference to Exhibit 4.1 of the Registrants
Current Report on
Form 8-K,
dated August 15, 2007.
|
*10.1
|
|
Comprehensive Stock Option Plan, incorporated herein by
reference to Exhibit 10.1 of the Registrants Annual
Report on
Form 10-K
for the fiscal year ended December 31, 1992.
|
10.2
|
|
Amended and Restated Dividend Reinvestment and Stock Purchase
Plan, incorporated herein by reference to Exhibit 99.1 of
the Registrants Registration Statement
No. 333-60641,
dated August 8, 1998.
|
*10.3
|
|
Executive Incentive Bonus Plan, incorporated herein by reference
to Exhibit 10.3 of the Registrants Annual Report on
Form 10-K
for the year ended December 31, 1998.
|
*10.4
|
|
Amended and Restated Employment Agreement dated November 2,
2007 by and between the Registrant and Robert E. James,
incorporated herein by reference to Exhibit 10.6 of the
Registrants Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2007.
|
*10.5
|
|
Amended and Restated Supplemental Agreement dated
December 19, 2001 for Lawrence M. Kimbrough, incorporated
herein by reference to Exhibit 10.8 of the
Registrants Annual Report on
Form 10-K
for the year ended December 31, 2001.
|
39
|
|
|
Exhibit No.
|
|
|
(per Exhibit
|
|
|
Table in
|
|
|
Item 601 of
|
|
|
Regulation S K)
|
|
Description of Exhibits
|
|
*10.6
|
|
Amended and Restated Supplemental Agreement dated
December 19, 2001 for Robert O. Bratton, incorporated
herein by reference to Exhibit 10.9 of the
Registrants Annual Report on
Form 10-K
for the year ended December 31, 2001.
|
*10.7
|
|
Amended and Restated Supplemental Agreement dated
November 2, 2007 by and between the Registrant and Robert
E. James, incorporated herein by reference to Exhibit 10.8
of the Registrants Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2007.
|
*10.8
|
|
Restricted Stock Award Program, incorporated herein by reference
to Exhibit 99.1 of the Registrants Registration
Statement
No. 033-60949,
dated July 10, 1995.
|
*10.9
|
|
The 1999 Employee Stock Purchase Plan, incorporated herein by
reference to Exhibit 99.1 of the Registrants
Registration Statement
No. 333-54019,
dated May 29, 1998.
|
*10.10
|
|
The First Charter Corporation Comprehensive Stock Option Plan,
as amended effective March 26, 1996, incorporated herein by
reference to Exhibit 99.1 of the Registrants
Registration Statement
No. 333-54021,
dated May 29, 1998.
|
*10.11
|
|
The Stock Option Plan for Non-Employee Directors, incorporated
herein by reference to Exhibit 10.15 of the
Registrants Annual Report on
Form 10-K
for the year ended December 31, 1997.
|
*10.12
|
|
The Home Federal Savings and Loan Employee Stock Ownership Plan,
incorporated herein by reference to the Registrants
Registration Statement
No. 333-71495,
dated January 29, 1999.
|
*10.13
|
|
The HFNC Financial Corp. Stock Option Plan, incorporated herein
by reference to the Registrants Registration Statement
No. 333-71497,
dated February 1, 1999.
|
*10.14
|
|
Amended and Restated Employment Agreement dated November 2,
2007 by and between the Registrant and Stephen M. Rownd,
incorporated herein by reference to Exhibit 10.7 of the
Registrants Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2007.
|
*10.15
|
|
The First Charter Corporation 2000 Omnibus Stock Option and
Award Plan, incorporated herein by reference to
Exhibit 10.1 of the Registrants Registration
Statement
No. 333-132033.
|
*10.16
|
|
The First Charter 1994 Deferred Compensation Plan for
Non-Employee Directors, incorporated herein by reference to
Exhibit 10.26 of the Registrants Annual Report on
Form 10-K
for the year ended December 31, 2000.
|
*10.17
|
|
The First Charter Option Plan Trust, incorporated herein by
reference to Exhibit 10.27 of the Registrants Annual
Report on
Form 10-K
for the year ended December 31, 2000.
|
*10.18
|
|
The Carolina First BancShares, Inc. Amended 1990 Stock Option
Plan, incorporated herein by reference to Exhibit 10.28 of
the Registrants Annual Report on
Form 10-K
for the year ended December 31, 2000.
|
*10.19
|
|
The Carolina First BancShares, Inc. 1999 Long-Term Incentive
Plan, incorporated herein by reference to Exhibit 10.29 of
the Registrants Annual Report on
Form 10-K
for the year ended December 31, 2000.
|
*10.20
|
|
Deferred Compensation Agreement dated as of February 18,
1993 by and between Cabarrus Bank of North Carolina and Ronald
D. Smith, incorporated herein by reference to Exhibit 10.30
of the Registrants Annual Report on
Form 10-K
for the year ended December 31, 2000.
|
40
|
|
|
Exhibit No.
|
|
|
(per Exhibit
|
|
|
Table in
|
|
|
Item 601 of
|
|
|
Regulation S K)
|
|
Description of Exhibits
|
|
*10.21
|
|
Deferred Compensation Agreement dated as of December 31,
1996 by and between Carolina First BancShares, Inc. and James E.
Burt, III, incorporated herein by reference to
Exhibit 10.31 of the Registrants Annual Report on
Form 10-K
for the year ended December 31, 2000.
|
*10.22
|
|
Separation and Consulting Agreement between First Charter
Corporation and James E. Burt, III dated June 29,
2000, incorporated herein by reference to Exhibit 10.32 of
the Registrants Annual Report on
Form 10-K
for the year ended December 31, 2000.
|
*10.23
|
|
Carolina First BancShares, Inc. Amended and Restated
Directors Deferred Compensation Plan, incorporated herein
by reference to Exhibit 10.33 of the Registrants
Annual Report on
Form 10-K
for the year ended December 31, 2000.
|
*10.24
|
|
Amended and Restated Deferred Compensation Plan for Non-Employee
Directors, incorporated herein by reference to Exhibit 10.1
of the Registrants Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2001.
|
*10.25
|
|
First Charter Corporation Directors Option Deferral Plan,
incorporated herein by reference to Exhibit 10.35 of the
Registrants Annual Report on
Form 10-K
for the year ended December 31, 2001.
|
*10.26
|
|
Amended and Restated Supplemental Agreement dated
November 2, 2007 by and between the Registrant and Stephen
M. Rownd, incorporated herein by reference to Exhibit 10.9
of the Registrants Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2007.
|
*10.27
|
|
Form of Award Agreement for Incentive Stock Options Granted
under the First Charter Corporation 2000 Omnibus Stock Option
and Award Plan, incorporated herein by reference to
Exhibit 10.32 of the Registrants Annual Report on
Form 10-K
for the year ended December 31, 2004.
|
*10.28
|
|
Form of Award Agreement for Nonqualified Stock Options Granted
under the First Charter Corporation 2000 Omnibus Stock Option
and Award Plan, incorporated herein by reference to
Exhibit 10.33 of the Registrants Annual Report on
Form 10-K
for the year ended December 31, 2004.
|
*10.29
|
|
Form of First Charter Corporation Incentive Stock Option
Agreement Pursuant to First Charter Corporation Comprehensive
Stock Option Plan, incorporated herein by reference to
Exhibit 10.34 of the Registrants Annual Report on
Form 10-K
for the year ended December 31, 2004.
|
*10.30
|
|
Form of First Charter Corporation Nonqualified Stock Option
Agreement Pursuant to First Charter Corporation Comprehensive
Stock Option Plan, incorporated herein by reference to
Exhibit 10.35 of the Registrants Annual Report on
Form 10-K
for the year ended December 31, 2004.
|
*10.31
|
|
Form of First Charter Corporation Restricted Stock Award
Agreement for use under the Restricted Stock Award Program,
incorporated herein by reference to Exhibit 10.5 of the
Registrants Current Report on
Form 8-K,
dated February 27, 2006.
|
*10.32
|
|
Separation Agreement and Release, dated February 1, 2005,
by and between the Registrant and Robert O. Bratton,
incorporated herein by reference to Exhibit 10.1 of the
Registrants Current Report on
Form 8-K,
dated February 1, 2005.
|
*10.33
|
|
Employment Agreement, dated April 13, 2005, by and between
the Registrant and Charles A. Caswell, incorporated herein by
reference to Exhibit 10.1 of the Registrants Current
Report on
Form 8-K,
dated April 13, 2005.
|
41
|
|
|
Exhibit No.
|
|
|
(per Exhibit
|
|
|
Table in
|
|
|
Item 601 of
|
|
|
Regulation S K)
|
|
Description of Exhibits
|
|
*10.34
|
|
Amended and Restated Change in Control Agreement dated
November 2, 2007 by and between the Registrant and Cecil O.
Smith, incorporated herein by reference to Exhibit 10.4 of
the Registrants Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2007.
|
*10.35
|
|
Amended and Restated Change in Control Agreement dated
November 2, 2007 by and between the Registrant and Stephen
J. Antal, incorporated herein by reference to Exhibit 10.1
of the Registrants Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2007.
|
*10.36
|
|
Transition Agreement and Release, dated April 27, 2005, by
and between the Registrant and Lawrence M. Kimbrough,
incorporated herein by reference to Exhibit 10.1 of the
Registrants
Form 8-K,
dated April 27, 2005.
|
*10.37
|
|
Form of Performance Shares Award Agreement under the First
Charter Corporation 2000 Omnibus Stock Option and Award Plan,
incorporated herein by reference to Exhibit 10.1 of the
Registrants Current Report on
Form 8-K,
dated February 27, 2006.
|
*10.38
|
|
Form of Restricted Stock Award Agreement under the First Charter
Corporation 2000 Omnibus Stock Option and Award Plan,
incorporated herein by reference to Exhibit 10.2 of the
Registrants Current Report on
Form 8-K,
dated February 27, 2006.
|
*10.39
|
|
Description of 2006 Compensation for Non-Employee Directors,
incorporated herein by reference to Item 1.01 of the
Registrants Current Report on
Form 8-K,
dated January 25, 2006.
|
*10.40
|
|
Description of 2006 Performance Goals for Executive Officers,
incorporated herein by reference to Item 1.01 of the
Registrants Current Report on
Form 8-K,
dated February 27, 2006.
|
*10.41
|
|
Amended and Restated Change in Control Agreement dated
November 2, 2007 by and between the Registrant and
Josephine P. Sawyer, incorporated herein by reference to
Exhibit 10.2 of the Registrants Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2007.
|
*10.42
|
|
Transition Agreement and Release, dated September 27, 2006,
by and between the Registrant and Richard A. Manley,
incorporated herein by reference to Exhibit 10.1 of the
Registrants Current Report on
Form 8-K,
dated September 27, 2006.
|
*10.43
|
|
Amended and Restated Change in Control Agreement dated
November 2, 2007 by and between the Registrant and Jeffrey
S. Ensor, incorporated herein by reference to Exhibit 10.3
of the Registrants Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2007.
|
*10.44
|
|
Amended and Restated Change in Control Agreement dated
November 2, 2007 by and between the Registrant and Sheila
A. Stoke, incorporated herein by reference to Exhibit 10.5
of the Registrants Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2007.
|
*10.45
|
|
Transition Agreement, dated May 16, 2007, by and between
the Registrant and Charles A. Caswell, incorporated herein by
reference to Exhibit 10.1 of the Registrants Current
Report on
Form 8-K,
dated May 16, 2007.
|
*10.46
|
|
Description of retention bonus compensation arrangement between
the Registrant and Sheila A. Stoke, incorporated herein by
reference to the Registrants Current Report on
Form 8-K,
dated May 16, 2007.
|
**11.1
|
|
Statement regarding computation of per share earnings,
incorporated herein by reference to Note 1 of the
Consolidated Financial Statements
|
42
|
|
|
Exhibit No.
|
|
|
(per Exhibit
|
|
|
Table in
|
|
|
Item 601 of
|
|
|
Regulation S K)
|
|
Description of Exhibits
|
|
**12.1
|
|
Computation of Ratio of Earnings to Fixed Charges
|
**21.1
|
|
List of subsidiaries of the Registrant
|
**23.1
|
|
Consent of KPMG LLP
|
31.1
|
|
Certification of Chief Executive Officer Pursuant to
Rule 13a-14(a)/15d-14(a)
of the Securities Exchange Act of 1934, as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
|
31.2
|
|
Certification of principal financial officer Pursuant to
Rule 13a-14(a)/15d-14(a)
of the Securities Exchange Act of 1934, as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
|
32.1
|
|
Certification of the Chief Executive Officer Pursuant to
18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
|
32.2
|
|
Certification of the principal financial officer Pursuant to
18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
* |
|
Indicates a management contract or compensatory plan. |
|
** |
|
Previously filed with the Original Filing |
43
SIGNATURES
Pursuant to the requirements of Section 13 or
Section 15(d) of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
|
|
|
|
|
|
|
|
|
|
|
|
FIRST CHARTER CORPORATION
(Registrant)
|
|
|
|
|
|
Date: April 22, 2008
|
|
By:
|
|
/s/ Robert
E. James, Jr.
|
|
|
|
|
|
|
|
|
|
Robert E. James, Jr.,
President and Chief Executive Officer
|
44