UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
(Rule
14a-101)
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE
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Material Pursuant to Section 240-14a-12
CAPITAL
CITY BANK GROUP, INC.
(Exact
name of Registrant as specified in its charter)
_________________________________________________
(Name
of
Person(s) Filing Proxy Statement, if other than the Registrant)
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of Filing Fee (Check the appropriate box):
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required.
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computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
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state
how it was determined):
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paid:
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|
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NOTICE
OF 2007 ANNUAL MEETING
OF
SHAREOWNERS AND PROXY STATEMENT
[Capital
City Bank Group Star Logo]
[Capital
City Bank Group Logo]
217
North Monroe Street, Tallahassee, Florida 32301
LETTER
TO SHAREOWNERS
NOTICE
OF ANNUAL MEETING OF SHAREOWNERS
PROXY
STATEMENT
|
General
Information
|
1 |
| Corporate Governance | 3 |
| Board and Committee Membership | 5 |
| Director Compensation | 7 |
| Proposal No. 1 - Nominees for Election as Directors | 10 |
| Continuing Directors and Executive Officers | 12 |
| Share Ownership | 14 |
| Executive Officers and Transactions with Related Persons | 16 |
| Executive Compensation | 18 |
| Audit Committee Report | 36 |
| Proposal No. 2 - Ratification of Auditors | 37 |
| Audit Fees and Related Matters | 38 |
| Other Matters | 39 |
i
LETTER
TO SHAREOWNERS
CAPITAL
CITY BANK GROUP, INC.
217
North Monroe Street
Tallahassee,
Florida 32301
March
30,
2007
Dear
Fellow Shareowners:
You
are
cordially invited to attend the 2007 Annual Meeting of Shareowners at 10:00
a.m., local time, on Tuesday, April 24, 2007, at the University
Center Club, Building B, Floor 3, University Center, Florida State University,
Tallahassee, Florida.
At
the
meeting, I will give an update on Capital City’s business and plans for the
future. Also, we will elect four Class I directors to the Board of Directors
and
ratify our accountants for fiscal 2007.
Your
Board of Directors encourages every shareowner to vote. Your
vote is very important.
Whether
or not you plan to attend the meeting, please review the proxy materials and
return your proxy instructions by Tuesday, April 10, 2007.
The
meeting will begin at 10:00 a.m. I hope you will come early and join your
friends for light refreshments at 9:30 a.m.
Sincerely,
William
G. Smith, Jr.
Chairman,
President,
and
Chief
Executive Officer
NOTICE
OF ANNUAL MEETING OF SHAREOWNERS
|
BUSINESS
(1) Elect
four Class I directors to the Board of Directors;
(2) Ratify
the appointment of Ernst & Young LLP as the auditors for the fiscal
year ending December 31, 2007; and
(3) Transact
other business properly coming before the meeting or any adjournment
of
the meeting.
DOCUMENTS
The
Proxy Statement, proxy card, and Capital City Bank Group Annual Report
are
included in this mailing.
RECORD
DATE
Shareowners
owning Capital City Bank Group shares at the close of business on
February
26, 2007, are entitled to attend and vote at the meeting. A list
of these
shareowners will be available at the Annual Meeting and for 10 days
prior
to the Annual Meeting between the hours of 9:00 a.m. and 5:00 p.m.,
at our
principal executive offices at 217 North Monroe Street, Tallahassee,
Florida 32301.
|
TIME
10:00
a.m., local time, April 24, 2007
PLACE
University
Center Club
Building
B, Floor 3
University
Center
Florida
State University
Tallahassee,
Florida
VOTING
Even
if you plan to attend the meeting in Tallahassee, Florida, please
provide
us your voting instructions in one of the following ways as soon
as
possible:
(1) Internet
- use the Internet address on the proxy card;
(2) Telephone
- use the toll-free number on the proxy card; and
(3) Mail
- mark, sign, and date the proxy card and return in the enclosed
postage-paid envelope.
|
||
|
By
Order of the Board of Directors
J.
Kimbrough Davis
Executive
Vice President, Chief Financial Officer,
and
Corporate Secretary
Tallahassee,
Florida
March
30, 2007
|
|||
PROXY
STATEMENT -
GENERAL INFORMATION
Why
am I receiving this Proxy Statement and proxy card?
We
are
providing these proxy materials in connection with the solicitation by the
Board
of Directors of Capital City Bank Group, Inc., a Florida corporation, of proxies
to be voted at our 2007 Annual Meeting of Shareowners and at any adjournments
or
postponements of this meeting.
We
will
hold our 2007 Annual Meeting at 10:00 a.m., local time, Tuesday, April 24,
2007, at the University Center Club, Building B, Floor 3, University Center,
Florida State University, Tallahassee, Florida.
We
are
providing this Proxy Statement and the proxy card to our shareowners on or
about
March 30, 2007.
What
is being voted upon?
You
are
being asked to elect four Class I directors and to ratify our appointment of
Ernst & Young LLP as our auditors. The proposals to be considered will not
create appraisal or dissenter’s rights.
Could
other matters be decided at the Annual Meeting?
We
are
not aware of any matters to be presented at the meeting other than those
referred to in this Proxy Statement. If other matters are properly presented
at
the meeting, the holders of the proxies (those persons named on your proxy
card)
will have the discretion to vote on those matters for you.
Who
can vote?
All
shareowners of record at the close of business on the record date of February
26, 2007 are entitled to receive these proxy materials. On that date, there
were
18,357,569 shares of our common stock outstanding and entitled to vote, and
these shares were held of record by approximately 1,805
shareowners.
How
much does each share count?
Each
share counts as one vote. For the proposals scheduled to be voted upon at the
meeting, withheld votes on directors, abstentions, and shares held by a broker
that the broker fails to vote are all counted to determine a quorum, but are
not
counted for or against the matters being considered. There is no cumulative
voting.
How
many votes are required to have a quorum?
In
order
for us to conduct the Annual Meeting, a majority of the shares entitled to
vote
must be present in person or by proxy.
How
many votes are required to elect directors and to ratify Ernst & Young’s
appointment?
Directors
are elected by a plurality of the votes cast. “Plurality” means that the
nominees receiving the largest number of votes cast are elected as directors
up
to the maximum number of directors who are nominated to be elected at the
meeting. At our meeting, the maximum number of directors to be elected is four.
Ernst
& Young’s
appointment will be ratified if
the
affirmative votes cast by the shareowners present, or represented, at the
meeting and entitled to vote on the matter exceed the votes cast in
opposition.
How
do I give voting instructions?
You
may
attend the meeting and give instructions in person or by the Internet, by
telephone, or by mail. Instructions are on the proxy card. The appropriate
individuals named on the enclosed proxy card will vote all properly executed
proxies that are delivered in response to this solicitation and not later
revoked in accordance with the instructions given by you. If you want to vote
in
person at the Annual Meeting, and you hold your shares through a securities
broker (that is, in street name), you must obtain a proxy from your broker
and
bring that proxy to the meeting.
1
How
will my voting instructions be treated?
If
you
provide specific voting instructions, your shares will be voted as instructed.
If you hold your shares in your name and sign and return a proxy card or vote
by
telephone or Internet without giving specific voting instructions, then your
shares will be voted as recommended by our Board of Directors.
If
you
hold your shares in the name of a bank, broker, or other nominee, and you do
not
give instructions to that nominee on how you want your shares voted, then
generally your broker can vote your shares on certain “routine” matters. At our
meeting, both Proposals 1 and 2 are considered routine, which means that your
nominee can vote your shares on these proposals if you do not timely provide
instructions to vote your shares.
If
you
hold your shares in the name of a bank, broker, or other nominee, and that
nominee does not have discretion to vote your shares on a particular proposal
and you don’t give your broker instructions on how to vote your shares, then the
votes will be considered broker non-votes. A “broker non-vote” will be treated
as unvoted for purposes of determining approval for the proposal and will have
the effect of neither a vote for nor a vote against the proposal.
Can
I change my vote?
Yes,
you
may revoke your proxy by submitting a later proxy or by written request received
by our corporate secretary before the meeting. You may also revoke your proxy
at
the meeting and vote in person.
Who
pays for soliciting proxies?
We
pay
the cost of soliciting proxies. Our officers or other associates may solicit
proxies to have a larger representation at the meeting.
What
does it mean if I get more than one proxy card?
You
will
receive a proxy card for each account you have. Please vote proxies for all
accounts to ensure that all your shares are voted.
What
is “householding” and how does it affect me?
We
have
adopted a procedure approved by the Securities and Exchange Commission known
as
“householding.” Under this procedure, shareowners of record who have the same
address and last name will receive only one copy of our Notice of Annual
Meeting, Proxy Statement, and Annual Report, unless one or more of these
shareowners notifies our transfer agent that they wish to continue receiving
individual copies. This procedure will reduce our printing costs and postage
fees. If you wish to receive your own copy of these materials, you may contact
our transfer agent, American Stock Transfer & Trust Company, in
writing:
59
Maiden Lane, Plaza Level, New York, NY 10038; by telephone in the U.S., Puerto
Rico, or Canada, 800-937-5449; outside the U.S., Puerto Rico, or Canada,
718-921-8124; or on the Internet at www.amstock.com.
Shareowners
who participate in householding will continue to receive separate proxy cards.
Also, householding will not in any way affect dividend check mailings.
If
you
are eligible for householding, but you and other shareowners of record with
whom
you share an address currently receive multiple copies of our Notice of Annual
Meeting, Proxy Statement, and Annual Report, or if you hold stock in more than
one account, and in either case you wish to receive only a single copy of each
document for your household, please contact our transfer agent as indicated
above.
Beneficial
owners can request information about householding from their banks, brokers,
or
other holders of record.
2
CORPORATE
GOVERNANCE
GOVERNING
PRINCIPLES
We
are a
financial holding company managed by a core group of officers and governed
by a
Board of Directors. We are committed to maintaining a business atmosphere where
only the highest ethical standards and integrity prevail. An unwavering
adherence to high ethical standards provides a strong foundation on which our
business and reputation can thrive, and is integral to creating and sustaining
a
successful, high-caliber company.
INDEPENDENT
DIRECTORS
Our
common stock is listed on the NASDAQ Global Select Market. NASDAQ requires
that
a majority of our directors be “independent,” as defined by NASDAQ’s rules.
Generally, a director does not qualify as an independent director if the
director or a member of a director’s immediate family has had in the past three
years certain relationships or affiliations with us, our external or internal
auditors, or other companies that do business with us. Our Board has
affirmatively determined that a majority of our directors are independent
directors under the categorical guidelines our Board has adopted, which includes
all objective standards of independence set forth in the NASDAQ rules. The
categorical independence standards adopted by our Board are posted to the
Corporate Governance section of our website, www.ccbg.com.
Based
on these standards, our Board determined that our independent directors include
the following current directors and nominees for director: DuBose Ausley,
Frederick Carroll, III, Cader B. Cox, III, J. Everitt Drew, John K.
Humphress, Lina S. Knox, Ruth A. Knox, and Henry Lewis III. In addition, our
Board had determined that John R. Lewis, who retired from the Board in February
2006, was an independent director.
INDEPENDENT
DIRECTOR MEETINGS IN EXECUTIVE SESSIONS
Our
independent directors have established a policy to meet separately from the
other directors in regularly scheduled executive sessions at least twice
annually, and at such other times as may be deemed appropriate by our
independent directors. Any independent director may call an executive session
of
independent directors at any time. In 2006, the independent directors met in
an
executive session four times. Cader B. Cox, III serves as the lead independent
director.
SHAREOWNER
COMMUNICATIONS
Our
Corporate Governance Guidelines provide for a process by which shareowners
may
communicate with the Board, a Board committee, the non-management directors
as a
group, or individual directors. Shareowners who wish to communicate with the
Board, a Board committee, or any other directors or individual directors may
do
so by sending written communications addressed to the Board of Directors of
Capital City Bank Group, a Board committee, or such group of directors or
individual directors:
Capital
City Bank Group, Inc.
c/o
Corporate Secretary
217
North
Monroe Street
Tallahassee,
Florida 32301
Communications
will be compiled by our Corporate Secretary and submitted to the Board, a
committee of the Board, or the appropriate group of directors or individual
directors, as appropriate, at the next regular meeting of the Board. The Board
has requested that the Corporate Secretary submit to the Board all
communications received, excluding those items that are not related to board
duties and responsibilities, such as: mass mailings; job inquiries and resumes;
and advertisements, solicitations, and surveys.
3
CORPORATE
GOVERNANCE GUIDELINES
The
Board
has adopted Corporate Governance Guidelines that give effect to the NASDAQ
corporate governance listing standards and various other corporate governance
matters.
CODES
OF CONDUCT AND ETHICS
The
Board
has adopted Codes of Conduct applicable to all directors, officers, and
associates, and a Code of Ethics applicable to our Chief Executive Officer
and
our financial and accounting officers, all of which are available, without
charge, upon written request to:
Capital
City Bank Group, Inc.
c/o
Corporate Secretary
217
North
Monroe Street
Tallahassee,
Florida 32301
These
codes are designed to comply with NASDAQ and SEC requirements.
BOARD
AND COMMITTEE EVALUATIONS
The
Corporate Governance Committee uses written questionnaires to evaluate the
Board
as a whole and its committees. The evaluation process occurs annually. Directors
submit completed questionnaires to the Chair of the Corporate Governance
Committee, who summarizes the results without attribution. The full Board
discusses the summary of the Board evaluation, and each committee discusses
the
summary of its own evaluation.
DIRECTOR
NOMINATING PROCESS
The
Nominating Committee annually reviews and makes recommendations to the full
Board regarding the composition and size of the Board so that the Board consists
of members with the proper expertise, skills, attributes, and personal and
professional backgrounds needed by the Board, consistent with applicable NASDAQ
and regulatory requirements.
The
Nominating Committee believes that all directors, including nominees, should
possess the highest personal and professional ethics, integrity, and values,
and
be committed to representing the long-term interests of our shareowners. The
Nominating Committee will consider criteria including the nominee’s current or
recent experience as a senior executive officer, whether the nominee is
independent, as
that
term is defined in Rule 4200(a)(15) of the NASDAQ listing standards, the
business
experience currently desired on the Board, geography, the nominee’s banking
industry experience, and the nominee’s general ability to enhance the overall
composition of the Board.
Our
Nominating Committee will identify nominees for directors primarily based upon
suggestions from shareowners, current directors, and executives. The Chair
of
the Nominating Committee and at least one other member of the Nominating
Committee will interview director candidates. The full Board will formally
nominate candidates for director to be included in the slate of directors
presented for shareowner vote based upon the recommendations of the Nominating
Committee following this process.
DIRECTOR
SERVICE ON OTHER BOARDS
Directors
may not serve on more than three other Boards of public companies in addition
to
our Board.
CHANGE
IN DIRECTOR OCCUPATION
A
director whose principal occupation or business association changes
substantially during the director’s tenure must tender a resignation for
consideration by the Nominating Committee. The Nominating Committee will
recommend to the Board the action, if any, to be taken with respect to the
resignation.
4
BOARD
AND COMMITTEE MEMBERSHIP
BOARD
OF DIRECTORS
Our
Board
of Directors oversees our business, property, and affairs pursuant to the
Florida Business Corporation Act and our Articles of Incorporation and
Bylaws.
Members of our Board are kept informed of our business through discussions
with
our senior management team, by reviewing materials provided to them, and by
participating in Board and Committee meetings.
Our
Board
met 12 times in 2006. All of our directors attended at least 75 percent of
the
total aggregate number of Board
and
Committee meetings
on which
they served.
We
expect
all directors to attend our Annual Meeting. All
directors, who were directors at the time
of our
Annual Meeting in 2006, attended the Annual Meeting.
COMMITTEES
OF THE BOARD
Our
Board
of Directors has four standing committees: Audit, Compensation, Corporate
Governance, and Nominating. The Board has adopted written charters for each
of
its four standing committees. The Audit, Compensation, and Nominating Committee
charters are published on the Corporate Governance section of our website at
www.ccbg.com.
The
Board has determined that all members of the Audit, Compensation, Corporate
Governance, and Nominating Committees are independent as that term is defined
in
Rule 4200(a)(15) of the NASDAQ listing standards.
|
Name
|
Audit
|
Compensation
|
Corporate
Governance
|
Nominating
|
|
DuBose
Ausley
|
X
|
|||
|
Thomas
A. Barron
|
||||
|
Frederick
Carroll, III*
|
Chair
|
|||
|
Cader
B. Cox, III
|
Chair
|
X
|
||
|
J. Everitt
Drew
|
X
|
X
|
||
|
John
K. Humphress*
|
X
|
Chair
|
||
|
L.
McGrath Keen, Jr.
|
||||
|
Lina
S. Knox
|
X
|
|||
|
Ruth
A. Knox
|
X
|
Chair
|
||
|
Henry
Lewis III
|
X
|
X
|
||
|
William
G. Smith, Jr.**
|
* Qualifies
as a financial expert
** Chairman
of the Board of Directors
Audit
Committee
The
Audit
Committee met 11 times in 2006. The Audit Committee currently is composed of
four persons, all of whom are “independent,” as defined under NASDAQ rules. None
of the committee members is or has been an officer or employee of us or any
of
our subsidiaries. In addition, our Board has determined that Frederick
Carroll, III,
Chairman of the Audit Committee, and John K. Humphress are each an “audit
committee financial expert” as defined by the Securities and Exchange
Commission.
5
Management
has the primary responsibility for our financial statements and reporting
process, including the systems of internal controls and reporting. Our
independent auditors are responsible for performing an independent audit of
our
consolidated financial statements in accordance with U.S. generally accepted
auditing standards, issuing a report thereon, and annually auditing management’s
assessment of the effectiveness of internal control over financial reporting.
The Audit Committee monitors the integrity of our financial reporting process,
system of internal controls, and the independence and performance of our
independent and internal auditors.
In
addition, the Audit Committee: (a) monitors and reviews our compliance with
Section 112 of the Federal Deposit Insurance Corporation Improvement Act of
1991
and reviews regulatory reports; (b) reviews
independent auditors’ report on our financial statements, significant changes in
accounting principles and practices, significant proposed adjustments, and
any
unresolved disagreements with management concerning accounting or disclosure
matters; and (c) recommends
independent auditors and reviews their independence
and qualifications, services,
fees, and the scope and timing of audits.
Compensation
Committee
The
Compensation Committee met six times in 2006. The Compensation Committee: (a)
reviews and approves corporate goals and objectives relevant to the Chief
Executive Officer’s compensation, evaluates the performance of the Chief
Executive Officer in light of those goals and objectives, and sets the Chief
Executive Officer’s base salary, short-term incentive compensation, and
long-term incentive compensation based on this evaluation; (b) reviews and
approves base salary, short-term incentive compensation, and long-term incentive
compensation of our executive officers; (c) reviews the compensation of our
senior management team other than our executive officers; (d) reviews and
approves benefits, including retirement benefits and perquisites of our
executive officers; (e) reviews and approves employment agreements, severance
agreements, and change-in-control agreements for executive officers; (f)
evaluates
and recommends the appropriate level of director compensation, including
compensation for service as a member or chair of a Board committee; and (g)
establishes and reviews stock ownership guidelines for directors and executive
officers.
Nominating
Committee
The
Nominating Committee met three times in 2006. The Nominating Committee: (a)
develops
and reviews background information for candidates for the Board of Directors,
including candidates recommended by shareowners, and makes recommendations
to
the Board of Directors about these candidates; (b) evaluates the performance
of
current Board members proposed for standing for reelection; (c) recommends
to
the Board for approval a slate of nominees for election to the Board; (d)
reviews all candidates for nomination submitted by shareowners; and (e) develops
plans for our managerial succession.
Corporate
Governance Committee
The
Corporate Governance Committee met four times in 2006. The Corporate Governance
Committee: (a) develops, implements, and monitors policies and practices
relating to corporate governance; (b) coordinates director orientation and
appropriate continuing education programs for directors; (c) oversees the annual
self-assessment of the Board and Board Committees; and (d) reviews all
shareowner proposals.
6
DIRECTOR
COMPENSATION
DIRECTORS’
FEES
We
currently have eight non-associate directors who qualify for compensation for
Board service. The elements of compensation include:
Cash
Compensation
Basic
Annual Retainer. Effective
January 1, 2006, the basic annual retainer is $12,000. Prior to January 1,
2006,
the annual retainer was $12,500.
Audit
Committee Annual Fee. Effective
January 1, 2006, members of the Audit Committee receive an annual fee of
$6,000. Prior to January 1, 2006, members of the Audit Committee did not receive
an annual fee.
Effective
January 1, 2006, the chairman of the Audit Committee receives an annual chairman
fee of $6,000. Prior to January 1, 2006, the Audit Committee chairman fee was
$2,500.
Compensation
Committee Annual Fee. Effective
January 1, 2006, members of the Compensation Committee receive an annual fee
of
$4,000. Prior to January 1, 2006, members of the Compensation Committee did
not
receive an annual fee.
Effective
January 1, 2006, the chairman of the Compensation Committee receives an annual
chairman fee of $4,000. Prior to January 1, 2006, the Audit Compensation
Committee chairman fee was $1,250.
Nominating
Committee Annual Fee. Effective
January 1, 2006, members of the Nominating Committee receive an annual fee
of
$2,000. Prior to January 1, 2006, members of the Nominating Committee did not
receive an annual fee.
Effective
January 1, 2006, the chairman of the Nominating Committee receives an annual
chairman fee of $2,000. Prior to January 1, 2006, the Nominating Committee
chairman fee was $1,250.
Corporate
Governance Committee Annual Fee. Effective
January 1, 2006, members of the Corporate Governance Committee receive an annual
fee of $2,000. Prior to January 1, 2006, members of the Corporate Governance
Committee did not receive an annual fee.
Effective
January 1, 2006, the chairman of the Corporate Governance Committee receives
an
annual chairman fee of $2,000. Prior to January 1, 2006, the Corporate
Governance Committee chairman fee was $1,250.
Lead
Outside Director Annual Fee. Effective
January 1, 2006, the Lead Outside Director receives an annual fee of $2,000.
Prior to January 1, 2006, the Lead Outside Director did not receive an annual
fee.
Board
Meeting Fees. Effective
January 1, 2006, directors receive $750 for each board meeting attended. Prior
to January 1, 2006, meeting fees were $1,000.
7
Equity
Compensation
Quarterly
Stock Grant.
As part
of annual director compensation, each director who participates in our Director
Stock Purchase Plan earns 100 shares of our common stock per quarter, price
based on the closing price of our common stock on the NASDAQ as determined
on
the last stock trading day of the quarter. Directors not participating in our
Director Stock Purchase Plan receive all 400 shares each January in the year
following the year for which service relates based on the average of the high
and low prices of the shares of our common stock on the NASDAQ for the last
10
trading days of the previous year. Prior to January 1, 2006, no quarterly stock
grants were issued to Directors.
Director
Stock Purchase Plan. Directors
are also permitted to purchase shares of common stock at a 10% discount from
fair market value under the 2005 Director Stock Purchase Plan (“DSPP”). This
Plan had 93,750 shares of common stock authorized for issuance. During 2006,
10,714 shares were purchased. As of December 31, 2006, there are 76,447 shares
of common stock available for issuance. Purchases under this plan were not
permitted to exceed the annual retainer and meeting fees received. Our
shareowners adopted the 2005 Directors Stock Purchase Plan at our 2004 Annual
Meeting.
Perquisites
and Other Personal Benefits
We
provide directors with perquisites and other personal benefits that we believe
are reasonable, competitive, and consistent with our overall director
compensation program. The value of the perquisites for each director in the
aggregate is less than $10,000.
8
DIRECTOR
COMPENSATION TABLE
|
Name
|
Fees
Earned or Paid in Cash
($)
|
Stock
Awards
($)(1)
|
All
Other Compensation
($)
|
Total
($)
|
|
DuBose
Ausley
|
$
23,000
|
$
0
|
$
0
|
$
23,000
|
|
Frederick
Carroll, III
|
33,250
|
12,070
|
0
|
45,320
|
|
Cader
B. Cox, III
|
33,000
|
12,070
|
0
|
45,070
|
|
J. Everitt
Drew
|
31,250
|
0
|
0
|
31,250
|
|
John
K. Humphress
|
32,000
|
0
|
0
|
32,000
|
|
L.
McGrath Keen, Jr.
|
0
|
0
|
0
|
0(2)
|
|
Lina
S. Knox
|
22,250
|
0
|
0
|
22,250
|
|
Ruth
A. Knox
|
32,000
|
12,070
|
0
|
44,070
|
|
Henry
Lewis III
|
27,000
|
12,070
|
0
|
39,070
|
|
John
R. Lewis(3)
|
13,500
|
0
|
0
|
13,500
|
| 1. |
Beginning
in 2006, we pay each non-employee director an annual stock grant
of 400
shares of our common stock, issued under our DSPP. Under the terms
of the
DSPP, each non-employee director has the opportunity to participate
in the
DSPP under two separate options. The first option, Option A, permits
non-employee directors to make an election (“Option A Participants”) each
January indicating the dollar amount of his or her annual retainer
and
fees received from serving as a director in the preceding year which
he or
she would like to be applied to the purchase of shares of our common
stock. The second option, Option B, permits non-employee directors
to make
an election (“Option B Participants”) each December indicating the
percentage of his or her annual retainer and fees to be received
from
serving as a director in the upcoming year which he or she would
like to
be applied to the purchase of shares of Common Stock. Option A
Participants receive their annual stock grant each January for the
preceding year’s service as director. Option B Participants will receive
their annual stock grant in four equal quarterly installments during
the
year to which the non-employee director’s service relates. Messrs. Drew,
Humphress, and Ausley and Ms. Lina Knox are Option A Participants,
and
therefore did not receive their stock grants in 2006. Instead, these
directors received their stock grants in January 2007.
|
2. Mr.
Keen
has been employed
by Capital City Bank since the acquisition of Farmers and Merchants Bank in
October 2004. As our associate, Mr. Keen receives a base salary, and may receive
other benefits that our associates receive, such as pension benefits.
He
received no compensation for his Board service in 2006.
3. Mr.
John
R. Lewis retired from the Board of Directors in February 2006.
STOCK
OWNERSHIP EXPECTATIONS
We
maintain stock ownership expectations for all non-management directors. Under
our current guidelines, all non-management directors are expected to own our
common stock equal in value to 10 times their annual director compensation.
Directors have 10 years from the date they are first appointed or elected to
our
Board to meet the stock ownership expectations.
9
PROPOSAL
NO. 1 - NOMINEES FOR ELECTION AS DIRECTORS
ELECTION
OF DIRECTORS
The
Board
of Directors is divided into three classes, designated Class I, Class II, and
Class III. The directors in each class are elected for terms of three years
or until their successors are duly elected and qualified.
At
the
meeting, the shareowners will elect four Class I directors. The affirmative
vote
of a plurality of shares present and entitled to vote is required for the
election of directors. The Board of Directors proposes the following four
nominees for election as directors at the Annual Meeting. The individuals named
on the enclosed proxy card will vote, unless instructed otherwise, each properly
delivered proxy for the election of the following nominees as directors.
If
a
nominee is unable to serve, the shares represented by all valid proxies that
have not been revoked will be voted for the election of a substitute as the
Board of Directors may recommend, or the Board of Directors may by resolution
reduce the size of the Board of Directors to eliminate the resulting vacancy.
At
this time, the Board of Directors knows of no reason why any nominee might
be
unable to serve.
The
Board
of Directors has been set at 11 members. If all four director nominees are
elected, the Board of Directors will have no vacancies.
NOMINEES
TO SERVE FOR A THREE-YEAR TERM EXPIRING IN 2010
|
|
CADER
B. COX, III
Mr.
Cox, 57, has been a director since 1994. From 1976 to May 2006, he
has
served as President, and since May 2006, he has served as CEO of
Riverview
Plantation, Inc., a resort and agricultural company.
|
|
|
L.
McGRATH KEEN, JR.
Mr.
Keen, 53, has been a director since 2004. He served as President
(2000-2004) and director (1980-2004) of Farmers and Merchants Bank,
prior
to its merger with us. He was a principal shareowner of Farmers and
Merchants Bank at the time of the merger. Since 2004, Mr. Keen has
served
as an associate of Capital City
Bank.
|
10
|
|
RUTH
A. KNOX
Ms.
Knox, 53, has been a director since 2003. Since 2003, she has served
as
President of Wesleyan College, Macon, Georgia. Prior to this appointment,
she practiced law in Atlanta and Macon, Georgia for 25
years.
|
|
|
WILLIAM
G. SMITH, JR.
Mr.
Smith, 53, is our Chairman of the Board and has been a director since
1982. In 1995, he was appointed our President and Chief Executive
Officer
and Chairman of Capital City Bank. In 2003, Mr. Smith was elected
our
Chairman of the Board of Directors. Mr. Smith has served as a director
of
Southern Company since February 2006. Mr. Smith is the first cousin
of
Lina S. Knox.
|
The
Board of Directors unanimously recommends a vote “FOR” the
nominees.
11
CONTINUING
DIRECTORS AND EXECUTIVE OFFICERS
CONTINUING
CLASS II DIRECTORS (Term expiring in 2008)
|
|
THOMAS
A. BARRON
Mr.
Barron, 54, has been a director since 1982. He is our Treasurer and
was
appointed President of Capital City Bank in 1995.
|
|
|
J.
EVERITT DREW
Mr.
Drew, 51, has been a director since 2003. From 2000 through January
2007,
he was President of St. Joe Land Company where his duties included
overseeing the sale and development efforts of several thousand acres
of
St. Joe property in northwest Florida and southwest Georgia. Since
January
2007, Mr. Drew has been President of South Group Equities, Inc.,
a private
real estate investment and development company.
|
|
|
LINA
S. KNOX
Ms.
Knox, 62, has been a director since 1998. She is a dedicated community
volunteer. Ms. Knox is the first cousin of Mr.
Smith.
|
|
CONTINUING
CLASS III DIRECTORS (Term expiring in 2009)
|
|
|
DuBOSE
AUSLEY
Mr.
Ausley, 69, has been a director since 1982, and was our Chairman
from 1982
until 2003. He is employed by the law firm of Ausley & McMullen and
was Chairman of this firm and its predecessor for more than 20 years
until
2002. Since 1992, he has served as a director of TECO Energy, Inc.
In
addition, Mr. Ausley has served as a director of Huron Consulting
Group,
Inc. since 2004 and a director of Blue Cross and Blue Shield of Florida,
Inc. since 1982.
|
12
|
|
FREDERICK
CARROLL, III
Mr.
Carroll, 56, has been a director since 2003. Since 1990, he has been
the
Managing Partner of Carroll and Company, CPAs, an accounting firm
specializing in tax and audit based in Tallahassee,
Florida.
|
|
|
JOHN
K. HUMPHRESS
Mr.
Humphress, 58, has been a director since 1994. Since 1973, he has
been a
shareholder of Wadsworth,
Humphress, Hollar, & Konrad, P.A., a public accounting firm.
|
|
|
HENRY
LEWIS III
Dr.
Lewis, 57, has been a director since 2003. He is a Professor and
Director
of the College of Pharmacy and Pharmaceutical Studies at Florida
A&M
University. Prior to Dr. Lewis’s appointment to his position as director
in 2004, Dr. Lewis served as Dean of the College of Pharmacy and
Pharmaceutical Studies at Florida A&M University since
1994.
|
|
NON-DIRECTOR
EXECUTIVE OFFICER
|
|
|
J.
KIMBROUGH DAVIS
Mr.
Davis, 53, was appointed our Executive Vice President and Chief Financial
Officer in 1997. He served as Senior Vice President and Chief Financial
Officer from 1991 to 1997. In 1998, he was appointed Executive Vice
President and Chief Financial Officer of Capital City
Bank.
|
13
SHARE
OWNERSHIP
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section
16(a) of the Securities Exchange Act of 1934 requires our directors and
executive officers, and parties owning beneficially more than 10% of our common
stock, to file reports with the SEC to reflect their interests in our common
stock. Copies of these reports must be furnished to us.
Based
solely upon on a review of these reports received by us for 2006 and any written
representations from reporting persons, we believe that during 2006 each
required Section 16(a) report for 2006 was filed on time, except one late Form
4
filing reporting three transactions for Mr. Ausley.
SHARE
OWNERSHIP TABLE
The
following table sets forth information, as
of
February 26, 2007, with
respect to the number of shares of our common stock beneficially owned by our
directors,
executive officers named in the Summary Compensation Table, and all executive
officers and directors as a group. The following table also provides information
with respect to each person known by us to beneficially own more than 5% of
our
common stock.
As
of
February 26, 2007, there were 18,357,569 shares
of
our common stock outstanding.
|
Name
|
Shares
Beneficially
Owned (1)
|
Percentage
of Outstanding Shares Owned(2)
|
||
|
DuBose
Ausley
|
704,268
|
(3)
|
3.84%
|
|
|
Thomas
A. Barron
|
299,870
|
(4)
|
1.62%
|
|
|
Frederick
Carroll, III
|
6,629
|
*
|
||
|
Cader
B. Cox, III
|
400,240
|
(5)
|
2.18%
|
|
|
J.
Kimbrough Davis
|
70,128
|
(6)
|
*
|
|
|
J.
Everitt Drew
|
7,249
|
(7)
|
*
|
|
|
John
K. Humphress
|
511,193
|
(8)
|
2.78%
|
|
|
L.
McGrath Keen, Jr.
|
574,364
|
(9)
|
3.13%
|
|
|
Lina
S. Knox (10)
|
68,563
|
(11)
|
*
|
|
|
Ruth
A. Knox
|
4,622
|
*
|
||
|
Henry
Lewis III
|
3,848
|
*
|
||
|
Private
Capital Management, L.P.
8889
Pelican Bay Blvd., Naples, Florida 34108
|
993,446
|
(12)
|
5.41%
|
|
|
Robert
H. Smith (11)
Post
Office Box 11248, Tallahassee, Florida 32302
|
3,091,062
|
(13)
|
16.84%
|
|
|
William
G. Smith, Jr. (11)
Post
Office Box 11248, Tallahassee, Florida 32302
|
3,351,029
|
(14)
|
18.25%
|
|
|
All
Directors and Executive Officers as a Group (12 Persons)
|
5,625,988
|
30.65%
|
||
(Please
refer to the footnotes on the following page.)
14
1. For
purposes of this table, a person is deemed to be the beneficial owner of any
shares of common stock if he or she has or shares voting or investment power
with respect to the shares or has a right to acquire beneficial ownership at
any
time within 60 days from the record date. “Voting power” is the power to vote or
direct the voting of shares and “investment power” is the power to dispose or
direct the disposition of shares.
2. An
asterisk in this column means that the respective director or executive officer
is the beneficial owner of less than 1% of our common stock.
3. Includes
(i) 285,431 shares held in trust under which Mr. Ausley serves as trustee
and has sole voting and investment power; (ii) 12,500 shares owned by Mr.
Ausley’s wife, of which he disclaims beneficial ownership; and (iii) 350 shares
owned by Mr. Ausley and his wife.
4. Includes
(i) 56,031 shares held in trusts under which Mr. Barron serves as trustee;
(ii) 716 shares for which Mr. Barron has power of attorney and may be
deemed to be a beneficial owner; and (iii) 28,906 shares owned by Mr. Barron’s
wife, of which he disclaims beneficial ownership. Of
the
shares of our common stock beneficially owned by Mr. Barron,
59,786
shares are pledged
as
security and 57,992 shares are held in margin accounts.
5. Includes
(i) 376,015 shares held in a trust under which Mr. Cox shares voting and
investment power as a co-trustee; and (ii) 2,500 shares owned by Mr. Cox’s wife,
all of which he disclaims beneficial ownership.
Of the
shares beneficially owned by Mr. Cox, 376,015 shares are also beneficially
owned
by Mr. Humphress.
6. Includes
(i) 1,514 shares in accounts for his children for which Mr. Davis is custodian;
(ii) 20,103 shares owned jointly by Mr. Davis and his wife; and (iii) 5,578
shares owned by Mr. Davis’s wife, directly and through an Individual Retirement
Account, all of which he disclaims beneficial ownership.
7. Includes
624 shares in accounts for his children for which Mr. Drew is
custodian.
8. Includes
(i) 90,890 shares held by a limited partnership of which Mr. Humphress is a
general partner and shares voting and investment power; and (ii) 376,015 shares
held in a trust under which Mr. Humphress shares voting and investment
power as a co-trustee, of which he disclaims beneficial ownership. Of the shares
beneficially owned by Mr. Humphress, 376,015 shares are also beneficially owned
by Mr. Cox.
9.
Includes
(i) 94,792 shares held in trust of which Mr. Keen serves as trustee; (ii)
161,508 shares held in trust under which Mr. Keen serves as co-trustee; and
(iii) 682 shares owned by Mr. Keen’s wife, of which he disclaims beneficial
ownership.
10. Robert
H.
Smith and William G. Smith, Jr. are brothers, and Lina S. Knox is their first
cousin.
11. Includes
3,750 shares owned jointly by Ms. Knox and her husband.
12. As
reported in a Schedule 13G amendment dated February 14, 2007. Private Capital
Management, L.P., a registered investment adviser, reported that it is deemed
to
be the beneficial owner of the shares held by Private Capital Management’s
clients and managed by Private Capital Management. Private Capital Management
reported shared voting and investment power over 993,446 shares.
13. Includes
(i) 100,234 shares in accounts for his children for which Mr. Smith is
custodian; (ii) 567,653 shares held in certain trusts under which Mr. Smith
shares voting and investment power as a co-trustee; and (iii) 615,849 shares
held by a partnership under which Mr. Smith shares voting and investment power.
Of the shares beneficially owned by Robert H. Smith, 1,183,502 shares are also
beneficially owned by William G. Smith, Jr.
14. Includes
(i) 567,653 shares held in certain trusts under which Mr. Smith shares
voting and investment power as a co-trustee; (ii) 615,849 shares held by a
partnership under which Mr. Smith shares voting and investment power; (iii)
44,556 shares owned by Mr. Smith’s wife, of which he disclaims beneficial
ownership; and (iv) 47,968 shares that may be acquired pursuant to non-voting
stock options that are or will become exercisable within 60 days. Of the shares
beneficially owned by William G. Smith, Jr., 1,183,502 shares are also
beneficially owned by Robert H. Smith. Of the shares of our common stock
beneficially owned by Mr. Smith,
333,024
shares are pledged
as
security, including 223,024 shares of the 615,849 shares held by a partnership
under which Mr. Smith shares voting and investment.
15
EXECUTIVE
OFFICERS AND TRANSACTIONS WITH RELATED PERSONS
EXECUTIVE
OFFICERS
Executive
officers are elected annually by the Board of Directors at its meeting following
the annual meeting of shareowners to serve for a one-year term and until their
successors are elected and qualified. Messrs. Barron and William G. Smith,
Jr.
serve as directors and executive officers and Mr. Davis is an executive officer.
For information pertaining to the business experience and other positions held
by these individuals, see “NOMINEES FOR ELECTION AS DIRECTORS” and “CONTINUING
DIRECTORS AND EXECUTIVE OFFICERS.”
PROCEDURES
FOR REVIEW, APPROVAL, OR RATIFICATION OF RELATED PERSON
TRANSACTIONS
We
recognize that related person transactions may
raise
questions among our shareowners as to whether the transactions are consistent
with our best interests and our shareowners’ best interests. We generally do not
enter into or ratify a related
person transaction unless
our Board of Directors, acting through the Audit Committee or otherwise,
determines that the related
person transaction is
in, or
is not inconsistent with, our best interests and our shareowners’ best
interests. Portions of our procedures are documented in writing in our Codes
of
Conduct, Regulation O Policy, and the materials used by our disclosure
committee.
For
the
purpose of our procedures, a “related person transaction” is a transaction in
which we participate and in which any related person has a direct or indirect
material interest, other than (1) transactions available to all associates
or clients generally, (2) transactions involving less than $120,000 when
aggregated with all similar transactions, or (3)
loans
made by Capital City Bank in the ordinary course of business, made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable loans with persons not related to the
lender, and not involving more than the normal risk of collectibility or
presenting other unfavorable features.
Under
our
procedures, we review quarterly all related person transactions required to
be
disclosed under Item 404 of Regulation S-K. We circulate a questionnaire to
our
directors and executive officer, and each respondent must disclose all related
person transactions that occurred in the previous quarter. In addition, we
maintain a written Regulation O Policy, which requires preapproval of all loans
to our executive officers, directors, persons who own more than 10% of the
shares of our common stock, and certain related interests of our executive
officers, directors, and 10% shareowners. Generally, at the beginning of each
year we provide blanket pre-approval to certain loans that are consistent with
Regulation O, and are in, or not inconsistent with, our best interests and
our
shareowners’ best interests.
TRANSACTIONS
WITH RELATED
PERSONS
In
2006,
we did not enter into any related person transactions. All related person
transactions since January 1, 2006, which were required to be reported in this
Proxy Statement, were approved by the Board of Directors.
16
Although
we did not deem the following transactions to be related person transactions,
and therefore do not require disclosure, we note the following:
During
2006, Capital City Bank, our wholly owned subsidiary, had outstanding loans
to
several of our directors, executive officers, their associates, and members
of
the immediate families of these directors and executive officers. These loans
were made in the ordinary course of business and were made on substantially
the
same terms, including interest rates and collateral, as those prevailing at
the
time for comparable transactions with others. These loans do not involve more
than the normal risk of collectability or present other unfavorable
features.
Mr.
Ausley is employed by and is the former Chairman of Ausley & McMullen, our
general counsel. During 2006, we paid legal fees to this law firm of
approximately $907,000.
Capital
City Bank’s Apalachee Parkway Office is located on land leased from the Smith
Interests General Partnership L.L.P. (“SIGP”) in which William G. Smith, Jr.,
Chairman of the Board, President, and Chief Executive Officer, Robert H. Smith,
a Vice President and owner of more than 10% of our common stock, and Lina S.
Knox, a director, are partners. In addition, a trust for the benefit of Elaine
W. Smith, a relative of Messers. Smith and Smith and Ms. Knox, of which Mr.
Ausley is trustee, is also a partner of SIGP. As trustee of this trust, Mr.
Ausley has the power to vote the SIGP interests owned by the trust. Under a
lease agreement expiring in 2024, Capital City Bank makes monthly lease payments
to SIGP. Lease payments are adjusted periodically for inflation. Actual lease
payments made by Capital City Bank to SIGP in 2006 amounted to $109,000. The
terms of this lease are comparable to the terms we would have received if we
had
leased the property from a third party.
17
EXECUTIVE
COMPENSATION
COMPENSATION
COMMITTEE PROCESS AND PROCEDURES
Scope
of Authority. The
Compensation Committee has strategic and administrative responsibility for
a
broad range of issues, including reviewing, authorizing, and approving
compensation to be paid to our executive officers, directors, and our senior
management team. The Board appoints each member of the Compensation Committee
and has determined that each is an independent director.
The
Compensation Committee’s policy is to review executive compensation, including
incentive goals, at least annually. The Compensation Committee also periodically
reviews benefits, including retirement benefits, and perquisites, reviews and
provides oversight of our compensation philosophy, serves as the administrative
committee for our equity-based plans, and reviews stock ownership guidelines
for
our executive officer and directors.
Delegation
of Authority.
The
Compensation Committee’s charter permits the delegation of its authority to our
Chief People Officer to administer compensation and benefits programs. In 2006,
the Compensation Committee delegated the administration of all associate
compensation, benefit, and welfare plans to Bethany H. Corum, our Executive
Vice
President and Chief People Officer.
None
of
the members of the Compensation Committee is an executive officer of a public
company of which one of our executive officers is a director.
Independent
Consultants.
Under
the
authority granted by its charter, in 2004 the Compensation Committee engaged
an
independent outside compensation consultant, Clark Consulting Group, to provide
advice on CEO and senior management compensation. Other than the engagement
of
Clark Consulting Group by the Compensation Committee, neither the Company nor
management has ever engaged Clark Consulting Group to analyze compensation.
In
conducting its review, the independent consultant was asked to:
| § |
Assess
competitive compensation levels for our competitors in the financial
services industry;
|
| § |
Assess
competitive compensation levels for companies similar to us in size
(assets and associates) and complexity (businesses);
and
|
| § |
For
the above comparisons, evaluate all aspects of CEO compensation,
including
base salary, annual and long-term compensation, and retirement
benefits.
|
In
carrying out its responsibilities, the Compensation Committee evaluates the
information and recommendations put forth by management and its independent
advisors in making its decisions regarding executive compensation. The
Compensation Committee’s decisions are made with the objective of providing
fair, equitable, and performance-based compensation to executives in a manner
that is affordable and cost effective for our shareowners.
The
independent consultant completed the engagement in April 2006, and the
Compensation Committee did not engage any additional independent compensation
consultants in 2006.
18
Management’s
Role.
The
key
elements of management’s role in determining compensation levels for our named
executive officers (other than William G. Smith, Jr., our Chairman, President,
and Chief Executive Officer) are as follows:
| § |
Develop
performance measures:
identify appropriate performance measures and recommend performance
targets that are used to determine annual and long-term
awards.
|
| § |
Compile
benchmark data:
management participates in compensation surveys through reputable
third-party firms which are used to gather data on base salary, annual
cash, and long-term performance awards. In 2006, we used Watson-Wyatt’s
survey report on Financial Institution’s Compensation General Executive
Positions.
|
| § |
Develop
compensation guidelines:
using the benchmark survey data and publicly disclosed compensation
information as the foundation, management develops compensation guidelines
for each executive position. These guidelines are provided to the
CEO as
the basis for his recommendations regarding individual compensation
actions. In addition, executives are briefed on the guidelines established
for their positions.
|
The
key
members of management involved in the compensation process were Mr. Smith,
Mr.
Davis, our Executive Vice President and Chief Financial Officer, and Ms. Corum.
Mr. Smith was not present during the Compensation Committee’s deliberations
regarding his compensation. Both Mr. Davis and Ms. Corum regularly attend
meetings of the Compensation Committee to provide information to the
Compensation Committee members and to take minutes of the meetings.
COMPENSATION
DISCUSSION AND ANALYSIS
Introduction
Compensation
and Benefits Philosophy.
Our
compensation philosophy provides broad guidance on executive compensation and
more specifically on the compensation of the named executive officers.
Specifically, the compensation philosophy is to:
| § |
Align
compensation with shareowner value;
|
| § |
Provide
a direct and transparent link between the performance of the Company
and
pay for the CEO and top management;
|
| § |
Make
wise use of the Company’s equity resources to ensure compatibility between
management and shareowner
interests;
|
| § |
Align
the interests through performance-based incentive plans of the Company’s
senior executive officers with that of shareowners;
and
|
| § |
Award
total compensation that is both reasonable and effective in attracting,
motivating, and retaining key
associates.
|
We
believe that accomplishing corporate goals is essential for our continued
success and sustained financial performance. Therefore, we believe that
executive officer compensation should be largely performance-based. Specific
targets and weightings used for establishing short-term and long-term
performance goals are subject to change at the beginning of each measurement
period, and are influenced by the Board’s desire to emphasize performance in
certain areas. Each year, the Compensation Committee reviews and approves all
executive officer performance-based goals.
19
The
compensation and benefits programs for our executives are designed with the
goal
of providing compensation that is fair, reasonable, and competitive. The
programs are intended to help us recruit and retain qualified executives, and
provide rewards that are linked to performance while also aligning the interests
of executives with those of our shareowners.
Compensation
Committee Activity in 2006. The
Compensation Committee met six times in 2006, including two executive sessions
with only the Compensation Committee members present. The chair of the
Compensation Committee sets the meeting dates and agenda for the
committee.
In
January, the Compensation Committee met in Executive Session to discuss the
2005
performance of the Chief Executive Officer and to set 2006 compensation.
Compensation Committee Chairman Cader B. Cox, III distributed an evaluation
to
all outside directors, and then collected and compiled the results of the
evaluations. He presented the results for review by the Compensation Committee.
Based in part on this review, the Compensation Committee approved Mr. Smith’s
2006 base salary of $230,000 and target cash incentive of $225,000. The
Compensation Committee also reviewed and approved Capital City Bank President
Thomas A. Barron’s 2006 base salary of $220,000 and target cash incentive of
$190,000 and Mr. Davis’s 2006 base salary of $200,000 and target cash incentive
of $85,000.
In
March,
the Compensation Committee reviewed 2006 compensation for our 12 senior
managers. The Compensation Committee also reviewed director compensation and
made changes to the fee structure to properly recognize the varying workloads
of
each committee. The new fee structure is discussed under “Director
Compensation.”
In
April,
the Compensation Committee modified the Stock-Based Incentive Program by
approving goals for 2006 through 2010. The action was taken following the
completion of a compensation study conducted by Clark Consulting Group, which
recommended a modified compensation structure, adjusting certain components
of
cash compensation and adding an additional equity component for executive
officers and senior managers. The intent of the proposed compensation structure
is to, over time, move the compensation of the senior managers toward the
objectives of our Compensation Philosophy.
Under
the
modified Stock-Based Incentive Program, each executive officer and senior
manager is eligible to earn an award in each year of the five-year program.
The
annual awards are tied to the earnings progression necessary to achieve our
goal
of earning $50 million by 2010. The new equity component was proposed at
one-half of the amount recommended by Clark Consulting Group. The Compensation
Committee will periodically review the Stock-Based Incentive
Program.
In
November, the Compensation Committee discontinued Mr. Smith’s Stock Option Plan,
effective December 31, 2006. In January 2007, the Compensation Committee
replaced the Stock Option Plan with a Performance Share Units Plan based on
the
compound annual growth rate in Diluted Earnings Per Share over a three-year
period.
20
Compensation
Objectives
The
Compensation Committee, with Board approval, has set the following compensation
objectives:
| § |
Pay
base salaries to our senior executives at a level that is greater
than the
60th
percentile of our selected peer group of
banks;
|
| § |
Provide
total direct compensation (salary and incentive compensation) to
our
senior executives at a level greater than the 75th
percentile of our selected peer group of
banks;
|
| § |
Provide
total incentive compensation (the sum of cash incentives and equity
incentives) at a level greater than 30 percent of total direct
compensation; and
|
| § |
Continue,
over time, the alignment of senior management’s interest with that of
shareowners (the percentage of equity compensation should increase
relative to total incentive
compensation).
|
We
discuss the composition of our peer group and our benchmarking practices in
further detail below.
Executive
Compensation Policy Decisions
The
Compensation Committee has adopted a number of policies to further the goals
of
our executive compensation program, particularly with respect to strengthening
the alignment of our executives’ interests with our shareowners’ long-term
interests.
Stock
Ownership Expectations. We
maintain stock ownership expectations for all senior managers, including our
executive officers. Under our current guidelines, all senior managers are
expected to own shares of our common stock equal in value to at least two times
their annual compensation. The Compensation Committee has determined that as
of
December 31, 2006, all named executive officers have met our share
ownership expectations and all other senior managers covered by this program
are
making significant strides in meeting the ownership expectations.
Expensing
Stock Options. We
have
expensed stock options since 2003.
Prohibition
on Repricing Stock Options. By
the
terms of the 2005 Associate Incentive Plan, which is the only plan we use to
grant stock options, repricing stock options is prohibited without shareowner
approval.
Employment
Agreements and Severance Agreements. We
believe the employment of our named executive officers should remain “at will.”
Therefore, none of our named executive officers have employment agreements
or
severance agreements with us.
The
Compensation Committee believes these policies are effective for the following
reasons: stability of management team, our ability to attract talent from
outside the Company, and historical stock performance.
21
Compensation
Program Design
Compensation
Framework.
We
design our specific compensation elements based on the following:
| § |
Performance: We
believe that the best way to accomplish alignment of compensation
plans
with the participants’ interests is to link pay directly to individual,
business area, and company
performance.
|
| § |
Competitiveness:
Compensation and benefits programs are designed to be competitive
with
those provided by companies with whom we compete for talent. Benefits
programs are designed to be competitive with other companies’ programs and
are not based on performance.
|
| § |
Cost:
Compensation
and benefit programs are designed to be cost effective and affordable,
ensuring that the interests of our shareowners are
considered.
|
| § |
Comparator
Group:
The relevant comparator group for compensation and benefits programs
consists of commercial banks and thrifts, with a geographic footprint
or
asset base similar to us.
|
Specific
Compensation Elements.
Our
executive compensation program is comprised of five discrete
elements:
| § |
Base
salary
|
| § |
Short-term
incentives - Cash Bonus Plan
|
| § |
Long-term
incentives
|
| § |
Benefits
and perquisites
|
| § |
Post-termination
compensation and benefits
|
Benchmarking.
During
2004 to 2006, we employed an outside compensation consultant who conducted
a
study comparing the total compensation of our named executive officers to a
peer
group of comparable commercial banks. The banks in the peer group were chosen
and published by SNL Financial based on their similarities to us relative to
our
asset size, performance, and markets served. The asset size ranged from $871
million to $2.5 billion and averaged $1.6 billion as of December 31, 2005
(see
chart on the following page for peer group).
Approximately 25% of the peer group includes institutions that serve the same
geographic region as we do. A compensation study is one of the many tools we
use
to determine the level of compensation for our named executive officers.
The
compensation peer group is not identical to the peer group used to measure
company performance. However, many of the institutions represented in the
compensation peer group are included in the company performance peer group.
We
continue to seek a credible, published source that identifies the same peer
group for company performance and compensation.
22
|
Institution
|
State
|
Total
Assets
|
|
TowneBank
|
Virginia
|
1,803,182
|
|
Fidelity
Southern Corp.
|
Georgia
|
1,405,703
|
|
Seacoast
Banking Corporation of Florida
|
Florida
|
2,132,174
|
|
Bank
of the Ozarks, Inc.
|
Arkansas
|
2,134,882
|
|
Simmons
First National Bank Corp.
|
Arkansas
|
2,523,768
|
|
Commercial
Bankshares, Inc.
|
Florida
|
1,032,720
|
|
Cadence
Financial Corp. (f.k.a. NBC Capital)
|
Mississippi
|
1,446,117
|
|
Renasant
Corporation
|
Mississippi
|
2,397,702
|
|
First
Community Bancshares
|
Virginia
|
1,952,483
|
|
Summit
Financial Group
|
West
Virginia
|
1,109,532
|
|
TIB
Financial Corp.
|
Florida
|
1,076,070
|
|
GB&T
Bancshares, Inc.
|
Georgia
|
1,584,094
|
|
City
Holding Company
|
West
Virginia
|
2,502,597
|
|
BancTrust
Financial Group, Inc.
|
Alabama
|
1,305,497
|
|
Virginia
Commerce Bancorp, Inc.
|
Virginia
|
1,518,425
|
|
Cardinal
Financial Corp.
|
Virginia
|
1,452,287
|
|
Ameris
Bancorp
|
Georgia
|
1,697,209
|
|
Southern
Community Financial Corporation
|
North
Carolina
|
1,285,524
|
|
SCBT
Financial Corp.
|
South
Carolina
|
1,925,856
|
|
Security
Bank Corp.
|
Georgia
|
1,662,413
|
|
Greene
County Bancshares, Inc.
|
Tennessee
|
1,619,989
|
|
First
M & F Corp.
|
Mississippi
|
1,267,118
|
|
FNB
Corporation
|
Virginia
|
1,481,482
|
|
Union
Bankshares Corp.
|
Virginia
|
1,824,958
|
|
Centerstate
Banks of Florida, Inc.
|
Florida
|
871,521
|
|
First
Bancorp
|
North
Carolina
|
1,801,050
|
Base
Salary
We
grant
annual base salary increases to our named executive officers based on standing
as relative to established compensation guidelines of 60th
percentile for base salary and 75th percentile
for total direct compensation. We chose the 60th
and
75th
percentiles based on our philosophy that these levels will attract and retain
the talent necessary to achieve performance goals. Base salaries for the named
executive officers are determined by assessing the competitive market, the
responsibilities required by the position, and the experience and performance
of
the individual.
For
the
year ended December 31, 2005, the Company outperformed its peer group in return
on assets ("ROA") and slightly underperformed the peer group in return on equity
("ROE"). ROE and ROA comparisons for the year ended December 31, 2006, were
not
readily available at the time of proxy. For the five-year period ended December
31, 2006, our stock has outperformed the NASDAQ composite as well as the SNL
Financial $1B - $5B Bank Index.
Short-term
Incentives - Cash Bonus Plan
Each
named executive officer has the opportunity to earn annual cash bonuses. These
cash bonuses, paid through the profit participation plan, are based solely
on
whether we achieve a target earnings per share ("EPS"). The Compensation
Committee selected EPS as the goal based on a perceived correlation of EPS
to
overall stock performance. EPS goals are set at the beginning of the year,
based
on the budget as recommended by management and approved by the Board of
Directors. In 2006, no bonuses would be paid if our actual EPS is 75% or less
of
the targeted EPS. Bonuses ranging from 4% to 200% of a specified target award
are paid to named executive officers if our actual EPS is between 75% and 125%
of targeted EPS of $1.82.
23
In
2006,
thirty-four (34) associates, including the named executive officers,
participated in the profit participation plan.
In
2006,
the target awards for the Executive Officers were $225,000 for Mr. Smith,
$190,000 for Mr. Barron, and $85,000 for Mr. Davis. In 2006, EPS was $1.79,
resulting in a payout of 90.77% of target. In 2005, the payout was 102.4% of
target, and in 2004, the payout was 87.31% of target.
Long-term
Incentives
Stock
Options. Mr.
Smith
is the only named executive officer who is currently eligible to be granted
stock options. On March 23, 2006, we entered into an agreement with Mr. Smith
to
award stock options as provided in the 2005 Associate Incentive Plan. Under
the
agreement, we agreed to award a fixed dollar Black-Scholes equivalent value
of
stock options based on achieving a three-year compound growth rate in EPS.
The
target award for achieving a 10% compound growth rate in EPS is $250,000. No
award is earned if actual performance is below a 7.5% compound growth rate
in
EPS, the minimum performance level. A maximum award of $500,000 is earned if
the
EPS compound growth rate equals or exceeds 12.5%, the maximum performance level.
If the compound growth rate in EPS is greater than the minimum performance
level
and less than or equal to the maximum performance level, then the award will
be
made on a pro-rata basis. The compound growth rate in EPS for the three years
ending on December 31, 2006, was 5.4%; therefore, Mr. Smith did not earn
any stock options in 2006.
During
the course of 2006, the Compensation Committee made the determination that
the
granting of stock options should be discontinued. After careful consideration,
the Compensation Committee voted to discontinue Mr. Smith's stock option
plan in favor of a more simple to administer long-term incentive
plan. In January 2007, the Compensation Committee entered into an
agreement with Mr. Smith to award Performance Share Units as provided in the
2005 Associate Incentive Plan. Under the agreement, we agreed to award
Performance Share Units with an economic value ranging from $0 - $500,000,
including a 31% tax supplement bonus. The target award of $250,000 is based
on
10% Compound Annual Growth Rate ("CAGR") in Diluted Earnings Per Share ("DEPS")
over a three-year period, with a phased’ in approach in years 2007 and 2008. No
award is earned if actual performance is below a 7.5% CAGR in DEPS, the minimum
performance level. A maximum award of $500,000 is earned if the DEPS CAGR equals
or exceeds 12.5%, the maximum performance level.
Performance
Share Units. In
April
2006, following the completion of a compensation study conducted by our
independent consultant, the Compensation Committee and Board approved a new
design for earning Performance Share Units based on one goal — the earnings
progression necessary to achieve our goal of $50 million in annual earnings
by
2010. We call this our Stock-Based Incentive Plan.
The
Stock-Based
Incentive Plan
is a
performance-based equity bonus plan in which selected members of management,
including all named executive officers, are eligible to participate.
The
Stock-Based Incentive Plan is administered under our 2005 Associate Incentive
Plan. The Stock-Based Incentive Plan replaced
all of our previous stock-based compensation plans.
24
The
Stock-Based Incentive Plan consists
of performance shares, as well as a tax supplement bonus paid in cash, and
is
designed to align the economic interests of management with our previously
announced Project 2010. Our Project 2010 goal is to achieve $50 million in
annual earnings by December 31, 2010. In 2003, annual earnings for the Company
were $25 million. Using a 10% compound annual increase produces $50 million
earnings in 2010. For the period 2001 through 2006, the compound annual increase
was 14.55%.
Under
the
Stock-Based Incentive Plan, all participants are eligible to earn an equity
award in each year of the five-year period ending December 31, 2010. Annual
awards are tied to the earnings progression necessary to achieve the Project
2010 goal. The Compensation Committee has predetermined the earnings goals
for
each of the five years covered by the Stock-Based Incentive Plan. If we achieve
100% of the predetermined earnings goal in any year, the Stock-Based Incentive
Plan participants
will receive 100% of the performance share award for that particular year.
For
each year from 2006 through 2009, if we achieve at least 75% of the
predetermined year over year growth in earnings required to meet the Project
2010 goal, but less than the predetermined earnings goal, then the Stock-Based
Incentive Plan participants will receive 75% of the performance share award
for
that particular year. No award will be granted for a year when less than 75%
of
the predetermined year over year growth in earnings required to meet the Project
2010 goal is achieved for that year. For the year 2010, no award may be earned
unless we meet our Project 2010 goal. We believe a payout in years 2006 through
2009 at a level less than 100% is appropriate considering actual earnings do
not
necessarily follow a linear progression to the 2010 goal, given that in any
one
year, the economy and the local market conditions may not support 10% growth
without engaging in business activities which subject the Company to an
unacceptable level of risk.
For
each
of the five years covered by the Stock-Based Incentive Plan, the named executive
officers are eligible to receive the following shares:
|
Name
|
Annual
75% Payout
|
Annual
100% Payout
|
Maximum
Payout
|
|
William
G. Smith, Jr.
|
2,657
|
3,543
|
17,715
|
|
Thomas
A. Barron
|
2,254
|
3,005
|
15,025
|
|
J.
Kimbrough Davis
|
1,757
|
2,316
|
11,580
|
The
number of shares an executive officer is eligible to earn is based on a formula
of base salary and cash incentives, using a formula of 15% of total cash
compensation and 19.08% of base salary for Mr. Smith; and 15% of total cash
compensation and 15.27% of base salary, for Messrs. Barron and Davis. The
formula assumes a 4% increase in total compensation each year and uses a
December 31, 2005, stock price of $34.29 to arrive at the number of shares.
Maximum payout assumes a 100% payout for each of the five years covered by
the
Incentive
Plan.
The
varying amounts recognize the different levels of responsibility and authority
for each executive officer.
At
the
end of each calendar year, the Compensation Committee will confirm that the
performance goals have been met prior to the payout of any awards. Any
performance shares earned under the Stock-Based Incentive Plan will
be
issued in the calendar quarter following the calendar year in which the shares
were earned. Participants will also receive a cash payment equal to 31% of
the
market value of the performance shares at the time of issue as a tax supplement
bonus. The tax supplement bonus allows the associate to retain all of the shares
the associate receives, rather than having to sell a portion of the shares
to
satisfy any tax obligation. This supports our philosophy of ownership
expectations and aligns the interest of our officers with that of the
shareowner.
25
The
Compensation Committee believes a competitive compensation package will include
cash bonus and equity awards. The equity component creates ownership in the
Company and focuses attention on the Company’s performance. The Compensation
Committee believes incentive compensation equal to or greater than 30% of
compensation is sufficient to change behaviors relative to performance. As
a
result, we believe our total incentive-based compensation of 30% of total
compensation is appropriate.
Benefits
and Perquisites
Determining
Benefit Levels. Benefit
levels are reviewed periodically to ensure that the plans and programs provided
are competitive and cost effective for us, and support our human capital needs.
Benefit levels are not tied to company, business area, or individual
performance.
Perquisites.
We
provide our named executive officers with perquisites that we believe are
reasonable, competitive, and consistent with our overall executive compensation
program. The value of the perquisites for each named executive officer in the
aggregate is less than $10,000.
Health,
Dental, Disability, and Life Insurance Coverage. The
core
insurance package for our named executive officers and senior management team
includes health, dental, disability, and basic group life insurance coverage.
Our named executives and senior management participate in these benefits on
the
same basis as our other associates.
Paid
Time-off Benefits.
We
provide vacation and other paid holidays to all associates, including our named
executive officers and senior management team, which are comparable to those
provided at similarly sized financial institutions.
Post-termination
Compensation and Benefits
Retirement
Plans.
We
provide retirement benefits to named executive officers and senior management
through a combination of qualified (under the Internal Revenue Code) and
non-qualified plans.
| § |
Retirement
Plan:
The Retirement Plan is a tax-qualified, non-contributory defined
benefit
plan intended to provide for an associate’s financial security in
retirement. All full-time and part-time associates with 1,000 hours
of
service annually are eligible for the Retirement
Plan.
|
| § |
401(k)
Plan: The
401(k) Plan provides associates the opportunity to save for retirement
on
a tax-favored basis. We studied the overall competitiveness of our
retirement benefits package and its long-term costs. To better align
the
retirement benefits package with associates’ preferences and recruitment
needs, a decision was made to change the benefit design of the Retirement
Plan and the 401(k) Plan. For associates hired after January 1, 2002,
the
pension benefit under the Retirement Plan was reduced and in the
401(k)
Plan, a 50% matching contribution was introduced into the 401(k)
Plan.
This change was intended to be cost-neutral. Executives may elect
to
participate in the 401(k) Plan on the same basis as our other similarly
situated associates. No named executive officers are currently eligible
for the company-sponsored match.
|
| § |
Supplemental
Executive Retirement Plan ("SERP"):
Each
of our named executive officers participates in our SERP, a non-qualified
plan which provides benefits in excess of the Retirement Plan. The
SERP is
designed to restore a portion of the benefits Messrs. Smith, Barron,
and
Davis would otherwise receive under our Retirement Plan, if these
benefits
were not limited by U.S. tax laws. This more closely aligns the benefits
of Messrs. Smith, Barron, and Davis with those of other Retirement
Plan
participants. We have no obligation to fund the SERP but accrue for
our
anticipated obligations under the SERP on an annual
basis.
|
26
Impact
of Regulatory Requirements
Tax
Deductibility of Compensation. Section
162(m) of the Internal Revenue Code imposes a $1 million limit on the amount
that a publicly traded company may deduct for compensation paid to a named
executive officer who is employed on the last day of the fiscal year.
“Performance-based compensation” is excluded from this $1 million limitation. In
general, our policy is to provide compensation that we may fully deduct for
income tax purposes. However, in order to maintain ongoing flexibility of our
compensation programs, our Compensation Committee may from time to time approve
annual compensation that exceeds the $1 million limitation. We recognize that
the loss of the tax deduction may be unavoidable under these
circumstances.
Accounting
for Stock-Based Compensation. In
2003,
we began accounting for stock-based payments in accordance with Statement of
Financial Accounting Standards 123R, “Share-Based
Payment.”
Conclusion
The
Compensation Committee believes the philosophy and objectives set forth have
allowed us to attract and retain talent needed to deliver above average
shareowner return. We believe by placing a significant portion of pay at risk,
behaviors are changed and management focus is placed on our strategic
objectives. This philosophy, along with the stock ownership expectations and
current levels of ownership by our senior management, aligns the interests
of
management with that of shareowners. We believe our compensation philosophy
and
objectives have been successful in attracting and retaining qualified executives
with capabilities that enable us to achieve or exceed our designated performance
targets.
COMPENSATION
COMMITTEE REPORT
We,
as a
Compensation Committee, have reviewed and discussed with management the
Compensation Discussion and Analysis required by Item 402(b) of Regulation
S-K
included in this Proxy Statement. Based on that review and discussion, we have
recommended to the Board of Directors of the Company that the Compensation
Discussion and Analysis be included in this Proxy Statement.
Compensation
Committee:
Cader
B.
Cox, III, Chair
J.
Everitt Drew
Dr.
Henry
Lewis III
This
report shall not be deemed to be incorporated by reference by any general
statement incorporating by reference this Proxy Statement into any filing under
the Securities Act of 1933, or the Securities Exchange Act of 1934, and shall
not otherwise be deemed filed under these acts.
27
INFORMATION
ABOUT EXECUTIVE COMPENSATION
Summary
Compensation Table
The
following summary compensation table shows compensation information for our
principal executive officer, principal financial officer, and the President
of
Capital City Bank (the only other executive officer whose total compensation
exceeded $100,000) for the fiscal year ended December 31, 2006.
We
have
no employment agreements with our named executive officers. None of the named
executive officers were entitled to receive payments which would be
characterized as “Bonus” payments for 2005 or 2006. Amounts listed under column
(g), “Non-Equity Incentive Plan Compensation” are determined by the Compensation
Committee at its first meeting following the year in which the compensation
is
earned and paid to the executives shortly after such determination is
made.
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
(i)
|
(j)
|
|
Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)(1)
|
Option
Awards
($)(2)
|
Non-Equity
Incentive Plan Compensation
($)(3)
|
Change
in Pension Value and Nonqualified Deferred Compensation
Earnings
($)(4)
|
All
Other Compensation
($)(5)
|
Total
($)
|
|
William
G. Smith, Jr.,
Chairman,
President, and Chief Executive Officer
|
2006
|
$
230,000
|
$
0
|
$
91,109
|
$
205,176
|
$
204,233
|
$174,214
|
$
29,467
|
$
934,199
|
|
2005
|
210,000
|
0
|
40,803
|
192,884
|
230,423
|
239,894
|
12,798
|
926,802
|
|
|
Thomas
A. Barron,
President,
Capital City Bank
|
2006
|
220,000
|
0
|
77,290
|
--
|
172,463
|
92,660
|
25,057
|
587,470
|
|
2005
|
200,000
|
0
|
38,474
|
--
|
215,061
|
246,618
|
12,076
|
712,229
|
|
|
J.
Kimbrough Davis,
Executive
Vice President and Chief Financial Officer
|
2006
|
200,000
|
0
|
59,562
|
--
|
77,155
|
122,355
|
19,399
|
478,471
|
|
2005
|
185,000
|
0
|
25,322
|
--
|
87,048
|
156,770
|
7,999
|
462,139
|
1. The
amounts in column (e) reflect the dollar amount recognized for financial
statement reporting purposes for the respective fiscal year, in accordance
with
SFAS 123R of awards under our Stock-Based Incentive Plan. Thus, they may include
amounts from awards granted prior to the year in which the compensation is
reported in this table.
2. The
amounts in column (f) reflect the dollar amount recognized for financial
statement reporting purposes for the respective fiscal year, in accordance
with
SFAS 123R of awards pursuant to our Stock Option Program, and thus may include
amounts from awards granted prior to the year in which the compensation is
reported in this table. Awards are discussed in further detail on page 24 under
the heading “Stock Options.” Assumptions used in the calculation of these
amounts are included in footnote 11 to our audited consolidated financial
statements for the fiscal year ended December 31, 2006, included in our Annual
Report on Form 10-K filed with the Securities and Exchange Commission on March
15, 2007.
3. The
amounts in column (g) reflect the cash awards to the named individuals under
the
Cash Bonus Plan, which is discussed in further detail on page 23 under the
heading “Short-term Incentives - Cash Bonus Plan.” Awards were paid out at
90.77% and 102.41% of the target awards for 2006 and 2005, respectively.
4. The
amounts in column (h) reflect the actuarial increase in the present value of
the
named executive officer’s benefits under all pension plans established by us
determined using the assumptions consistent with those used in our financial
statements, which are discussed in further detail on page 33 under the heading
“Pension Benefits.”
5. The
amount shown in column (i) reflects for each named executive officer:
tax
supplement bonus paid and life insurance premium.
28
Grants
of Plan-Based Awards in 2006
As
discussed in the Compensation Discussion and Analysis, cash bonus plan payouts,
stock options, and performance share units are granted only when we achieve
Board-Approved established levels of performance. Each stock option permits
Mr.
Smith to purchase one share of our common stock at the market price of our
stock
on the date of grant. Stock options generally expire 10 years from the date
of
grant. Our
Compensation Committee approved awards under our 2005 Associate Incentive Plan
to Mr. Smith in 2006; however, the performance targets were not met. Therefore,
no grant was awarded in 2006. Our Compensation Committee has determined it
will
cease offering stock options.
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
(l)
|
||||
|
Estimated
Possible Payouts Under Non-Equity Incentive Plan Awards
|
Estimated
Future Payouts Under Equity Incentive Plan Awards
|
Grant
Date Fair Value of Options and Stock Awards
|
||||||||||
|
Name
|
Award
Type
|
Grant
Date
|
Threshold
($)
|
Target
($)
|
Maximum
($)
|
Threshold
(#)
|
Target
(#)
|
Maximum
(#)
|
||||
|
William
G. Smith, Jr.
|
Cash1
|
N/A
|
$
0
|
$
225,000
|
$450,000
|
--
|
--
|
--
|
N/A
|
|||
|
Options2
|
3/23/06
|
--
|
--
|
--
|
$
0
|
$
250,000
|
$
500,000
|
$
0
|
||||
|
PSU3
|
4/25/06
|
--
|
--
|
--
|
0
|
--
|
17,715
|
607,447
|
||||
|
Thomas
A. Barron
|
Cash1
|
N/A
|
0
|
190,000
|
380,000
|
--
|
--
|
--
|
N/A
|
|||
|
PSU3
|
4/25/06
|
--
|
--
|
--
|
0
|
--
|
15,025
|
515,207
|
||||
|
J.
Kimbrough Davis
|
Cash1
|
N/A
|
0
|
85,000
|
170,000
|
--
|
--
|
--
|
N/A
|
|||
|
PSU3
|
4/25/06
|
--
|
--
|
--
|
0
|
--
|
11,580
|
397,078
|
||||
1.
The
amounts shown in column (c) reflect the minimum payment level under our Cash
Bonus Plan. The amount shown in column (e) is 200% of the target amount. The
Compensation Committee determines these amounts annually.
2. As
discussed in the Compensation Discussion and Analysis, stock options are awarded
pursuant to our 2005 Associate Incentive Plan. In 2006, we entered into an
agreement with Mr. Smith to award him stock options with the underlying stock
valued at the award date of $500,000, provided that our EPS compound growth
rate
exceeded 12.5%. The target award of $250,000 of stock options would be paid
if
our EPS compound growth rate was at least 10%. Since our EPS compound growth
rate was less than 7.5% in 2006, no stock options were awarded. Thus, no amount
is shown in column (l).
3. The
number of Performance Share Units shown in column (h) represents the total
number of shares of common stock to be issued pursuant to our Stock-Based
Incentive Plan for the years 2006 - 2010. The amount shown in column (l)
reflects the dollar amount recognized over the same period for financial
statement reporting purposes, in accordance with SFAS 123R.
29
Outstanding
Equity Awards at Fiscal Year-End 2006
The
following table provides information, for our executive officers named in the
Summary Compensation Table, on stock option holdings at the end of
2006.
|
Option
Awards
|
|||||
|
Number
of Securities Underlying Unexercised Options
(#)
|
Equity
Incentive Plan Awards: Number of Securities Underlying Unexercised
Unearned Options
(#)
|
Option
Exercise Price
($)
|
Option
Expiration Date
|
||
|
Name
|
Exercisable
|
Unexercisable
|
|||
|
William
G. Smith, Jr.
|
15,425
|
7,713
|
--
|
$32.96
|
3/12/2014
|
|
12,415
|
24,831
|
--
|
32.69
|
3/14/2015
|
|
Option
Exercises
There
were no exercises of stock options by any of our named executive officers during
the 2006 fiscal year.
POTENTIAL
PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
The
amount of compensation (if any) that is payable to our named executive officers
upon termination of employment depends on the nature and circumstances under
which employment is ended.
Changes
in Control
In
the
event of a change in control, our named executive officers will be credited
with
an additional two years of credited service for purposes of computation of
retirement benefits payable under the SERP. Accrued benefits based upon normal
retirement are payable to the named executive officer upon a change in control.
A “change in control” under the SERP means the sale of substantially all of our
assets, a change in share ownership of greater than 50% within a 24-month
period, or any other determination of change in control made by our Board of
Directors.
In
the
event of a change in control, our named executive officers would not receive
any
additional benefit under the Retirement Plan but would have the same benefits
as
any associate who separates employment from us.
In
the
event of a change in control, any stock options previously granted to one of
our
named executive officers under the 1996 or 2005 Associate Incentive Plans would
become immediately vested. A “change in control” for purposes of the immediate
vesting of options means an acquisition of 25% of our common stock by any
“person” as defined in the Securities Exchange Act of 1934, or, during any
period of two consecutive years, individuals who at the beginning of such period
constitute the Board cease for any reason to constitute at least a majority
of
the Board, unless the election or the nomination for election by our shareowners
of each new director was approved by a vote of at least three-quarters of the
directors then still in office who were directors at the beginning of the
period.
30
We
have
no post-employment compensation programs designed to provide benefits upon
a
change in control of the Company, other than those discussed above.
Payments
Upon Termination of Employment
Voluntary
Termination. If
a
named executive officer voluntarily resigns from our employment, no amounts
are
payable under the Cash Bonus Plan or the Stock-Based Incentive Plan. The
executive may be entitled to receive benefits from the Retirement Plan and
the
SERP to the extent those benefits have been earned under the provisions of
the
plans and the executive officer has met the vesting requirements of the plans.
In addition, the executive would be entitled to receive any amounts voluntarily
deferred (and the earnings on deferrals) under the 401(k) Plan.
Early
Retirement.
Currently, no named executive officer is eligible for early retirement from
the
Retirement Plan or the SERP.
Death.
If a
named executive officer dies while employed by us, the Retirement Plan and
the
SERP will provide benefits to heirs of the deceased executive. The benefits
are
of the same value as those provided for a voluntary termination.
Involuntary
Termination with or without Cause. If
a
named executive officer’s employment is involuntarily terminated, the executive
may be entitled to receive benefits from the Retirement Plan and the SERP to
the
extent those benefits have been earned under the provisions of the plans and
the
executive officer has met the vesting requirements of the plans. In addition,
the executive would be entitled to receive any amounts voluntarily deferred
(and
the earnings on deferrals) under the 401(k) Plan.
Disability.
In
the
event that a named executive officer becomes disabled on a long-term basis,
the
executive officer’s employment by us would not necessarily terminate. Therefore,
we do not disclose any such amounts in the table below. If a named executive
officer becomes disabled under the terms of the Retirement Plan and the SERP,
the executive will continue to accrue a retirement benefit until the earliest
of
recovery, death, or retirement. This benefit cannot be paid as a lump sum
distribution.
31
Payment
Tables
William
G. Smith, Jr.
would
have received the following payments had he terminated on December 31, 2006
under the following triggering events:
|
Compensation
Components
|
Change
in Control
|
Voluntary
Termination
|
Death
|
Disability
|
Involuntary
Termination
|
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
|
Retirement
Plan
|
$
765,9451
|
$
765,9451
|
$
765,9451
|
$
14,5832
|
$
765,9451
|
|
SERP
|
998,5591
|
925,4541
|
925,4541
|
9,0902
|
925,4541
|
|
Accelerated
Vesting of Stock Options
|
85,857
|
0
|
0
|
0
|
0
|
Thomas
A. Barron
would
have received the following payments had he terminated on December 31, 2006
under the following triggering events:
|
Compensation
Components
|
Change
in Control
|
Voluntary
Termination
|
Death
|
Disability
|
Involuntary
Termination
|
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
|
Retirement
Plan
|
$
882,3781
|
$
882,3781
|
$
882,3781
|
$
14,5832
|
$
882,3781
|
|
SERP
|
870,7271
|
870,7271
|
870,7271
|
7,7892
|
870,7271
|
J.
Kimbrough Davis
would
have received the following payments had he terminated on December 31, 2006
under the following triggering events:
|
Compensation
Components
|
Change
in Control
|
Voluntary
Termination
|
Death
|
Disability
|
Involuntary
Termination
|
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
|
Retirement
Plan
|
$
696,6291
|
$
696,6291
|
$
696,6291
|
$
14,3562
|
$
696,6291
|
|
SERP
|
299,0301
|
219,3881
|
219,3881
|
4092
|
219,3881
|
(1) Lump
sum
payments are determined as of December 31, 2006 using the Retirement Plan’s
applicable basis, namely, the mortality table found in Revenue Ruling 2001-62
and an interest rate of 4.69%. Under the Retirement Plan and the SERP, lump
sum
payments are triggered upon a change in control, voluntary termination, death,
and involuntary termination. No further benefits would be payable after the
lump
sum payment is made.
(2) In
the
event that a named executive officer becomes disabled on a long-term basis,
the
named executive officer would receive annuity payments beginning at age 65.
These payments coordinate with our long-term disability program.
32
PENSION
BENEFITS
Retirement
Plan
The
key
provisions of the Retirement Plan are as follows:
Monthly
Benefit.
Participants with a vested benefit will be eligible to receive the following
retirement benefits each month for the rest of their lives beginning at age
65:
| § |
1.90%
of final average monthly compensation multiplied by years of service
after
1988 (limited to 30 years), plus
|
| § |
0.40%
of final average monthly compensation in excess of $2,000 multiplied
by
years of service after 1988 (generally limited to 30 years),
plus
|
| § |
the
monthly benefit accrued as of December 31, 1988, updated for salary
increases since 1988
|
Total
benefits are limited by the Internal Revenue Code. In 2006, the limit was
$175,000 per year or $14,583 per month. Additional provisions may apply for
participants who were hired after January 1, 2002, or who worked for a bank
that
we acquired.
Final
Average Monthly Compensation.
The
final average monthly compensation is the average of the highest five
consecutive years of W-2 earnings (plus 401(k) deferrals). Compensation is
limited to the limits described in Internal Revenue Code, which was $220,000
per
year (or $18,333 per month) for 2006.
Vesting.
Participants become vested after reaching five years of service.
Early
Retirement Benefits.
Participants may elect to retire prior to their Normal Retirement
Date.
| § |
Reduced
Retirement: If participants are at least age 55 and have at least
15 years
of service, then they may commence benefits early on a reduced basis.
The
monthly benefit will be calculated using the benefit formula described
above, reduced 6.67% times the number of years (up to five) that
the
Benefit Commencement Date precedes the Normal Retirement Date, and
3.33%
times any additional years (up to
five).
|
| § |
Unreduced
Retirement: If they are at least age 61 and have at least 30 years
of
service, then they may commence benefits early on an unreduced basis.
The
monthly benefit will be calculated using the benefit formula described
above, reduced 6.67% times the number of years (up to five) that
the
Benefit Commencement Date precedes the later of age 61 or 30 years
of
service, and 3.33% times any additional years (up to
five).
|
Form
of Payment.
Participants may receive their pension benefit as an annuity or as a lump
sum.
SERP
In
general, the plan provisions for the SERP are identical to the provisions of
the
Retirement Plan, except the benefits are calculated without regard to the limits
set by the Internal Revenue Code on compensation and benefits. The net benefit
payable from the SERP is the difference between this gross benefit and the
benefit payable by the Retirement Plan. The SERP limits gross benefits to 60%
of
final average monthly compensation. As a general rule, we do not grant extra
years of service under the SERP. Exceptions may occur in limited instances
such
as a mid-career hire.
2006
Pension Benefit Tables
The
following table shows the years of credited service, present value of the
accumulated benefit for the named executive officers as of December 31, 2006,
assuming payment at age 61, and payments made during the last fiscal
year.
|
Name
|
Plan
Name
|
Number
of Years of Credited Service
(#)
|
Present
Value of Accumulated Benefit
($)
|
Payments
During Last Fiscal Year
($)
|
|
William
G. Smith, Jr.
|
Retirement
Plan
|
28
|
$
871,017
|
$
0
|
|
Supplemental
Executive Retirement Plan
|
28
|
1,060,576
|
0
|
|
|
Thomas
A. Barron
|
Retirement
Plan
|
32
|
1,013,055
|
0
|
|
Supplemental
Executive Retirement Plan
|
32
|
1,007,437
|
0
|
|
|
J.
Kimbrough Davis
|
Retirement
Plan
|
25
|
792,193
|
0
|
|
Supplemental
Executive Retirement Plan
|
25
|
251,420
|
0
|
Assumptions
Used to Calculate Pension Values
Because
the pension amounts shown in the Summary Compensation Table and the Pension
Benefits Table are projections of future retirement benefits, numerous
assumptions must be applied. In general, the assumptions should be the same
as
those used to calculate the pension liabilities in accordance with SFAS No.
87,
Employers’
Accounting for Pensions on
the
measurement date, although the Security and Exchange Commission specifies some
exceptions (as noted in the table on the following page).
The
key
assumptions used to determine the pension values are summarized on the following
page. The changes in the pension values shown in the Summary Compensation Table
are determined as the change in the values during the fiscal year (including
the
impact of changing assumptions from the prior fiscal year). The accumulated
pension values shown in the Pension Benefits Table are based on the assumptions
as of the end of the fiscal year.
34
|
Assumption
|
Basis
for Assumption
|
12/31/2004
|
12/31/2005
|
12/31/2006
|
|
Discount
Rate
|
Under
SEC rules, discount rate used to measure pension liabilities under
SFAS
No. 87, Employers’
Accounting for Pensions
|
6.00%
|
5.75%
|
6.00%
|
|
Rate
of Future Salary Increases
|
Under
SEC rules, no salary projection
|
0.00%
|
0.00%
|
0.00%
|
|
Form
of Payment
|
Retirement
Plan: form elected by officer
|
80%
elect a lump sum and 20% elect an annuity
|
80%
elect a lump sum and 20% elect an annuity
|
80%
elect a lump sum and 20% elect an annuity
|
|
SERP:
form elected by officer
|
Lump
sum
|
Lump
sum
|
Lump
sum
|
|
|
Lump
Sum Interest Rate
|
Interest
rate defined by the plan for the upcoming plan year
|
6.00%
|
6.00%
|
6.00%
|
|
Date
of Retirement
|
As
per SEC guidance, use first age eligible for unreduced
retirement
|
61
|
61
|
61
|
|
Post-Retirement
Mortality
|
Retirement
Plan: same assumption used to measure pension liabilities under SFAS
No.
87, Employers’
Accounting for Pensions
|
For
lump sums, the long-term IRC § 417(e) basis
For
annuity payments, RP2000 Mortality Table for males
|
For
lump sums, the long-term IRC § 417(e) basis
For
annuity payments, RP2000 Mortality Table for males
|
For
lump sums, the long-term IRC § 417(e) basis
For
annuity payments, RP2000 Mortality Table for
males
|
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The
following non-employee directors were the members of the Compensation Committee
of the Board of Directors during 2006: Cader B. Cox, III (Chairman), J. Everitt
Drew, and Henry Lewis, III. In addition, John R. Lewis served on the
Compensation Committee until he retired from our Board in February 2006. None
of
the members of the Compensation Committee is a current or former officer or
employee of ours or any of our subsidiaries. In addition, there were no
“compensation committee interlocks” during 2006.
35
AUDIT
COMMITTEE REPORT
The
Audit
Committee, which operates under a written charter adopted by the Board of
Directors, monitors the Company’s financial reporting process on behalf of the
Board of Directors. This report reviews the actions taken by the Audit Committee
with regard to the Company’s financial reporting process during 2006 and
particularly with regard to the Company’s audited consolidated statements of
financial condition as of December 31, 2006 and 2005, and the related
statements of income, changes in shareowners’ equity, and cash flows for each of
the years in the three-year period ended December 31, 2006.
The
Audit
Committee believes that it has taken the actions necessary or appropriate to
fulfill its oversight responsibilities under the Audit Committee’s charter. In
fulfilling its oversight responsibilities, the Audit Committee reviewed and
discussed with management the audited financial statements to be included in
the
Company’s Annual Report on Form 10-K for the year ended December 31,
2006, including a discussion of the quality (rather than just the acceptability)
of the accounting principles, the reasonableness of significant judgments,
and
the clarity of disclosures in the financial statements.
The
Audit
Committee also reviewed with KPMG their judgments as to quality (rather than
just the acceptability) of the Company’s accounting principles and such other
matters as are required to be discussed with the Audit Committee under Statement
on Auditing Standards No. 61, Communication
with Audit Committees.
In
addition, the Audit Committee discussed with KPMG, the auditor’s independence
from management and the Company, including the written disclosures, letter,
and
other matters required of KPMG by Independence Standards Board Standard
No. 1, Independence
Discussions with Audit Committees.
Additionally,
the Audit Committee discussed with the Company’s internal and independent
auditors the overall scope and plan for their respective audits. The Audit
Committee met with the internal and independent auditors, with and without
management present, to discuss the results of their examinations, their
evaluations of the Company’s internal controls, and the overall quality of the
Company’s financial reporting.
In
reliance on the reviews and discussions referred to above, the Audit Committee
recommended to the Board of Directors that the audited financial statements
be
included in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2006, for filing with the Securities and Exchange Commission.
THE
AUDIT COMMITTEE
FREDERICK
CARROLL, III,
CHAIRMAN
J.
EVERITT DREW
JOHN
K.
HUMPHRESS RUTH
A.
KNOX
This
report shall not be deemed to be incorporated by reference by any general
statement incorporating by reference this Proxy Statement into any filing under
the Securities Act of 1933 or the Securities Exchange Act of 1934, and shall
not
otherwise be deemed filed under these acts.
36
PROPOSAL
NO. 2 - RATIFICATION OF AUDITORS
During
2006, the Audit Committee solicited proposals from four major accounting firms
and conducted an extensive evaluation process in connection with the selection
of our independent auditor for the fiscal year ending December 31, 2007.
Following this process, on December 21, 2006, the Audit Committee dismissed
KPMG
as our independent auditor for our fiscal year ending December 31, 2007, and
appointed Ernst & Young to serve as our independent auditor for 2007. KPMG,
which served as our independent auditor for the two most recent fiscal years,
continued as the Company’s independent auditor for the remainder of the fiscal
year ended December 31, 2006.
KPMG’s
audit reports on our consolidated financial statements as of and for the fiscal
years ended December 31, 2006 and 2005 did not contain an adverse opinion or
disclaimer of opinion, nor were they qualified or modified as to uncertainty,
audit scope, or accounting principles.
During
the fiscal years ended December 31, 2006 and 2005 and the subsequent interim
period through March 15, 2007, the date we filed our Annual Report on Form
10-K,
(i) there were no disagreements between us and KPMG on any matters of accounting
principles or practices, financial statement disclosure, or auditing scope
or
procedure, which disagreements, if not resolved to the satisfaction of KPMG,
would have caused KPMG to make reference to the subject matter of the
disagreement in its report on our consolidated financial statements, and (ii)
there were no “reportable events” as that term is defined in Item 304(a)(1)(v)
of Regulation S-K.
During
the fiscal years ended December 31, 2006 and 2005 and the subsequent interim
period through March 15, 2007, neither we nor anyone acting on our behalf
consulted Ernst & Young regarding (1) the application of accounting
principles to a specified transaction, either completed or proposed, or the
type
of audit opinion that might be rendered on our consolidated financial
statements; or (2) any matter that was either the subject of a disagreement
as
defined in Item 304(a)(1)(iv) of Regulation S-K or a “reportable event”
described in Item 304(a)(1)(v) of Regulation S-K.
Representatives
of Ernst
& Young or KPMG may attend the 2007 Annual Meeting and, if in attendance,
will have an opportunity to make a statement if they so desire and to respond
to
appropriate questions.
Shareowner
ratification of the selection of Ernst & Young as our independent public
accountants is not required by our bylaws or other applicable legal requirement.
However, the Board is submitting the selection of Ernst & Young to the
shareowners for ratification as a matter of good corporate practice. If the
shareowners fail to ratify the selection, the Audit Committee will reconsider
whether or not to retain that firm. Even if the selection is ratified, the
Audit
Committee at its discretion may direct the appointment of a different
independent accounting firm at any time during the year if it determines that
such a change would be in our and our shareowners’ best interests.
The
proposal to ratify Ernst & Young as
independent auditors will be approved if the votes cast by the shareowners
present, or represented, at the meeting and entitled to vote on the matter
favoring this proposal exceed the votes cast in opposition to the
proposal.
The
Board of Directors unanimously recommends a vote
“FOR”
ratification
of the appointment of Ernst
& Young.
37
AUDIT
FEES AND RELATED MATTERS
FEES
PAID TO PRINCIPAL ACCOUNTANTS
The
following table represents aggregate fees, including out-of-pocket expenses,
paid to KPMG for the audit of our annual financial statements for 2006 and
2005
and fees billed for other services:
|
2006
|
2005
|
||
|
Audit
Fees (1)
|
$
703,490
|
$
661,500
|
|
|
Audit-Related
Fees (2)
|
11,850
|
54,000
|
|
|
Tax
Fees (3)
|
47,500
|
74,370
|
|
|
All
Other Fees (4)
|
-
|
-
|
|
|
Total
|
762,840
|
$
789,870
|
|
1. Audit
Fees - Audit fees billed to us by KPMG for auditing our annual consolidated
financial statements (including services incurred with rendering an opinion
under Section 404 of the Sarbanes-Oxley Act of 2002), reviewing the financial
statements included in our Quarterly Reports on Form 10-Q, and for services
that
are normally provided by the auditor in connection with statutory and regulatory
filings. Also included are $68,500 and $75,000 in out-of-pocket expenses in
the
2006 and 2005 fees, respectively.
2. Audit-Related
Fees - In 2005, the audit-related fees billed to us by KPMG included fees
related to the audit of our employee benefit plans.
In
2006, we hired a separate auditor for our employee benefit plans.
3. Tax
Fees
- Tax fees billed to us by KPMG include fees related to the preparation of
our
original and amended tax returns, claims for refunds, and tax planning.
4. All
Other
Fees - All other fees billed to us by KPMG.
POLICY
ON AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND NON-AUDIT SERVICES OF INDEPENDENT
AUDITOR
The
Audit
Committee’s policy is to pre-approve all audit and non-audit services provided
by the independent auditors. These services may include audit services,
audit-related services, tax services, and other services. Pre-approval is
generally provided for up to 12 months from the date of pre-approval, and any
pre-approval is detailed as to the particular service or category of services
and is generally subject to a specific budget. The Audit Committee may delegate
pre-approval authority to one or more of its members when expedition of services
is necessary. The independent auditors and management are required to
periodically report to the full Audit Committee regarding the extent of services
provided by the independent auditors in accordance with this pre-approval policy
and the fees for the services performed to date. The Audit Committee
pre-approved all audit and non-audit services provided by KPMG in 2005 and
2006.
The
Audit
Committee has determined that the non-audit services provided by KPMG during
the
fiscal year ended December 31, 2006, were compatible with maintaining their
independence.
38
OTHER
MATTERS
ANNUAL
REPORT
We
filed
an annual report for the fiscal year ended December 31, 2006, on Form 10-K
with the SEC. Shareowners may obtain, free of charge, a copy of our annual
report on Form 10-K by writing to our Corporate Secretary at our principal
offices.
SHAREOWNER
PROPOSALS
Shareowner
proposals that are to be included in the Proxy Statement for the 2008 meeting
must be received by December 2, 2007. Shareowner proposals for the 2008 meeting
that are not intended to be included in the Proxy Statement for that meeting
must be received by February 24, 2008, or the Board of Directors can vote
the proxies in its discretion on the proposal. Proposals must comply with the
proxy rules and be submitted in writing to J. Kimbrough
Davis, Corporate Secretary,
at our
principal offices.
DIRECTOR
NOMINATIONS
Any
shareowner entitled to vote generally in the election of directors may recommend
a candidate for nomination as a director. A shareowner may recommend a director
nominee by submitting the name and qualifications of the candidate the
shareowner wishes to recommend, pursuant to Article VII of our Articles of
Incorporation, to:
Nominating
Committee of the Board of Directors
c/o
Capital City Bank Group, Inc.
217
North
Monroe Street
Tallahassee,
Florida 32301
To
be
considered, recommendations with respect to an election of directors to be
held
at an annual meeting must be received no earlier than 180 days and no later
than
120 days prior to March 30, 2008, the first anniversary of this year’s
Notice of Annual Meeting date. In other words, director nominations must be
received no earlier than October 2, 2007, and no later than December 2, 2007.
Recommendations with respect to an election of directors to be held at a special
meeting called for that purpose must be received by the 10th day following
the
date on which notice of the special meeting was first mailed to shareowners.
Recommendations meeting these requirements will be brought to the attention
of
the Nominating Committee. Candidates for director recommended by shareowners
are
afforded the same consideration as candidates for director identified by our
directors, executive officers, or search firms, if any, employed by
us.
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