Schedule 14A
(Rule 14A-101)
Information Required In Proxy Statement
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
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WACHOVIA CORPORATION
March [.], 2002
Dear Stockholder:
On behalf of the board of directors, we are pleased to invite you to the Annual
Meeting of Stockholders in Charlotte, North Carolina, on Tuesday, April 16,
2002, at 9:30 a.m. The notice of meeting and proxy statement on the following
pages contain information about the meeting.
This is our first stockholders' meeting since creating the new Wachovia
Corporation on September 1, 2001 with the merger of First Union Corporation and
the former Wachovia Corporation. In addition to the matters contained in this
proxy statement, we will also review operating results for the past year and
present other information concerning Wachovia. The meeting should be
interesting and informative, and we hope you will be able to attend.
We are pleased to offer record holders of common stock (those who hold stock
certificates registered in their own names and not in the name of a bank,
broker or other nominee) the option of voting through the telephone or Internet.
In order to ensure your shares are voted at the meeting, please return the
enclosed proxy card at your earliest convenience or vote through the telephone
or Internet. Voting procedures are described on the proxy card. Every
stockholder's vote is important.
Sincerely yours,
/s/ L.M. Baker, Jr. /s/ G. Kennedy Thompson
L. M. Baker, Jr. G. Kennedy Thompson
Chairman President and Chief Executive Officer
Wachovia Corporation, 301 South College Street, Charlotte, North Carolina
28288-0013
Wachovia Corporation
301 South College Street, Charlotte, North Carolina 28288-0013
NOTICE OF ANNUAL MEETING
TO BE HELD ON APRIL 16, 2002
March [.], 2002
The Annual Meeting of Stockholders will be held in the Grand Ballroom, at the
Charlotte Marriott Center City, 100 West Trade Street, Charlotte, North
Carolina 28202, on Tuesday, April 16, 2002, at 9:30 a.m., to consider the
following:
. A Wachovia proposal to elect the 12 nominees named in the attached proxy
statement as directors, six nominees to serve as Class I directors with
terms expiring at the 2005 Annual Meeting of Stockholders, three nominees
to serve as Class II directors with terms expiring at the 2003 Annual
Meeting of Stockholders, and three nominees to serve as Class III
directors with terms expiring at the 2004 Annual Meeting of Stockholders,
in each case until their successors are duly elected and qualified.
. A Wachovia proposal to ratify the appointment of KPMG LLP as auditors for
the year 2002.
. A Wachovia proposal to amend Wachovia's articles of incorporation to allow
stockholders owning at least 25% of outstanding shares of Wachovia common
stock entitled to vote to call a special meeting of stockholders.
. Such other business as may properly come before the meeting or any
adjournments.
Only holders of record of Wachovia common stock on February 20, 2002, are
entitled to notice of and to vote at the meeting.
By order of the board of directors,
/s/ Mark C. Treanor
Mark C. Treanor
Secretary
Whether or not you plan to attend, please either return the enclosed proxy card
or vote through the telephone or Internet voting procedures described on your
proxy card, to ensure your shares are voted at the meeting. Your vote is
important, whether you own a few shares or many.
TABLE OF CONTENTS
PROXY STATEMENT................................................... 1
General Information............................................ 1
ABOUT THE MEETING................................................. 1
PROPOSAL 1--ELECTION OF DIRECTORS................................. 4
General Information and Nominees............................... 4
Committees of the Board and Attendance......................... 9
Security Ownership of Management............................... 11
Security Ownership of Certain Beneficial Owners................ 13
Executive Compensation......................................... 13
Director Compensation.......................................... 19
Employment Contracts........................................... 20
Compensation Committee Interlocks and Insider Participation.... 21
Compensation Committee Report on Executive Compensation........ 22
Performance Graph.............................................. 25
Other Matters Relating to Executive Officers and Directors..... 26
PROPOSAL 2--PROPOSAL TO RATIFY THE APPOINTMENT OF AUDITORS........ 26
PROPOSAL 3--PROPOSAL TO AMEND WACHOVIA'S ARTICLES OF INCORPORATION 27
OTHER STOCKHOLDER MATTERS......................................... 28
MISCELLANEOUS..................................................... 28
Appendix A--AMENDMENT TO RESTATED ARTICLES OF INCORPORATION OF
WACHOVIA CORPORATION............................................ A-1
PROXY STATEMENT
General Information
The enclosed proxy is solicited on behalf of the board of directors in
connection with the Annual Meeting of Stockholders to be held in the Grand
Ballroom at the Charlotte Marriott Center City, 100 West Trade Street,
Charlotte, North Carolina 28202, on Tuesday, April 16, 2002, at 9:30 a.m., and
any adjournment. The proxy may be used whether or not you attend the meeting.
If you are a registered stockholder (that is, you hold stock certificates
registered in your own name) you may also vote by telephone or through the
Internet, by following the instructions described on your proxy card. If your
shares are held in "street name" you will receive separate voting instructions
with your proxy materials. Although most brokers and nominees offer telephone
and Internet voting, availability and specific procedures will depend on their
voting arrangements.
This proxy statement, the enclosed proxy card and Wachovia's 2001 Annual Report
to Stockholders are being first mailed to our stockholders on or about March
[.], 2002.
The merger of Wachovia Corporation ("Legacy Wachovia") and First Union
Corporation ("Legacy First Union") was effective September 1, 2001. Legacy
First Union changed its name to "Wachovia Corporation" on the date of the
merger. As the surviving corporate entity in the merger, information contained
in this proxy statement, unless indicated otherwise, includes information about
Legacy First Union only. Whenever we use the "Wachovia" name in this proxy
statement, we mean the new combined company and, before the merger, Legacy
First Union, unless indicated otherwise.
Your vote is very important. For this reason, the board of directors is
requesting that you permit your common stock to be represented at the annual
meeting by the individuals named on the enclosed proxy card. This proxy
statement contains important information for you to consider when deciding how
to vote on the matters brought before the meeting. Please read it carefully.
ABOUT THE MEETING
Who Can Vote
You may vote if you owned Wachovia common stock as of the close of business on
February 20, 2002. Each share of Wachovia common stock is entitled to one vote.
At the close of business on February 20, 2002, [.] shares of Wachovia common
stock were outstanding and eligible to vote. The enclosed proxy card shows the
number of shares that you are entitled to vote. If you own any shares in
Wachovia's Dividend Reinvestment and Stock Purchase Plan, the enclosed proxy
includes the number of shares you have in that plan on the record date for the
meeting, as well as the number of shares directly registered in your name. Your
individual vote is confidential and will not be disclosed to persons other than
those recording the vote or as may be required by applicable law.
How Do I Vote
You have four voting options:
. Over the Internet, which we encourage if you have Internet access, at the
address shown on your proxy card;
. By telephone through the number shown on your proxy card;
. By mail by completing, signing, dating and returning the enclosed proxy
card; or
. By attending the meeting and voting your shares in person.
Even if you plan to attend the meeting, we encourage you to vote your shares by
proxy. If you choose to attend the meeting, please bring proof of
identification or the enclosed proxy card for entrance to the meeting.
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If you hold your Wachovia shares in the name of a bank, broker or other
nominee, your ability to vote by Internet or telephone depends on their voting
process. Please follow their directions carefully. If you want to vote Wachovia
shares that you hold in street name at the meeting, you must request a legal
proxy from your bank, broker or other nominee that holds your shares and
present that proxy for entrance to the meeting.
Every vote is important! Please vote your shares promptly.
What Am I Voting On
There are three proposals that will be presented for your consideration at the
meeting:
. Electing 12 directors;
. Approving KPMG LLP as Wachovia's auditors for 2002; and
. Amending Wachovia's articles of incorporation to allow stockholders owning
at least 25% of outstanding shares of Wachovia common stock entitled to
vote to call a special meeting of stockholders.
Can I Change My Vote
You may revoke your proxy and change your vote at any time before the final
vote at the meeting. You may do this by either giving our Corporate Secretary
notice of your revocation, submitting a new signed proxy card with a later
date, voting on a later date by telephone or by the Internet (only your last
telephone or Internet proxy is counted), or by attending the meeting and voting
in person. However, your attendance at the meeting will not automatically
revoke your proxy; you must specifically revoke your proxy.
Votes Needed To Hold The Meeting
In order to conduct the annual meeting, a majority of Wachovia shares entitled
to vote must be present in person or by proxy. This is called a quorum. If you
return valid proxy instructions or vote in person at the meeting, you will be
considered part of the quorum. Abstentions and broker "non-votes" will be
counted as present and entitled to vote for purposes of determining a quorum.
New York Stock Exchange ("NYSE") rules allow banks, brokers or other nominees
to vote shares held by them for a customer on matters that the NYSE determines
to be routine, even though the bank, broker or nominee has not received
instructions from the customer. A broker "non-vote" occurs when a bank, broker
or other nominee has not received voting instructions from the customer and the
bank, broker or nominee cannot vote the shares because the matter is not
considered routine under NYSE rules.
Counting Your Vote
If you provide specific voting instructions, your shares will be voted as
instructed. If you hold shares in your name and sign and return a proxy card
without giving specific voting instructions, your shares will be voted as
recommended by our board of directors. If you hold your shares in your name and
do not return valid proxy instructions or vote in person at the meeting, your
shares will not be voted. If you hold your Wachovia shares in the name of a
bank, broker or other nominee, and you do not give that nominee instructions on
how you want your shares to be voted, the nominee generally has the authority
to vote your shares on certain "routine" matters as described above. At the
meeting, that would mean that the nominee can vote your shares for proposal 1
and for proposal 2 but could not vote those shares for proposal 3 if you do not
timely provide instructions for voting your shares.
What Vote Is Needed
Directors are elected by a plurality of the votes cast at the meeting.
"Plurality" means that the nominees receiving the largest number of votes cast
are elected as directors up to the maximum number of directors to be elected at
the meeting. At our meeting, the maximum number of directors to be elected is
12. Shares not voted, whether by marking "ABSTAIN" on your proxy card or
otherwise, will
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have no impact on the election of directors. Unless a properly executed proxy
card is marked "WITHHOLD AUTHORITY", the proxy given will be voted "FOR" each
of the nominees for director.
A majority of votes cast at the meeting is required to approve proposal 2.
Abstentions and broker "non-votes" will not be counted as votes cast.
In order to approve proposal 3 to amend Wachovia's articles of incorporation,
at least 80% of all outstanding shares of our common stock entitled to vote at
the meeting, or at least approximately [.], must vote in favor of the proposal.
This "supermajority" requirement is provided in our articles of incorporation.
Therefore, failure to vote for this proposal, by abstaining, not voting, or
voting "AGAINST" the proposal, will have the same effect as a vote "AGAINST"
the proposal. Broker "non-votes" will also have the same effect as a vote
"AGAINST" the proposal.
Our Voting Recommendations
Our board of directors recommends that you vote:
.. "FOR" each of our nominees to the board of directors;
.. "FOR" ratifying KPMG LLP as our auditors; and
.. "FOR" amending our articles of incorporation.
Proxies that are timely signed and returned but do not contain instructions on
how you want to vote will be voted in accordance with our board of directors'
recommendations.
Voting Results
The preliminary voting results will be announced at the meeting. The final
voting results will be published in our quarterly report on Form 10-Q for the
first quarter of fiscal year 2002.
Cost of This Proxy Solicitation
Wachovia will pay the costs of the solicitation. We have hired Georgeson
Shareholder Communications, Inc. as proxy solicitors to assist in the proxy
solicitation and tabulation. Their base fee is $20,000, plus expenses and an
additional fee per proxy tabulated. We may also, upon request, reimburse
brokerage firms and other persons representing beneficial owners of shares for
their expenses in forwarding voting materials to their customers who are
beneficial owners and obtaining their voting instructions. In addition to
Wachovia soliciting proxies by mail, over the Internet and by the telephone,
our board members, officers and employees may solicit proxies on our behalf,
without additional compensation.
Delivery of Proxy Materials
To reduce the expenses of delivering duplicate proxy materials to our
stockholders, we are taking advantage of SEC rules that permit us to deliver
only one proxy statement and annual report to multiple stockholders who share
an address unless we received contrary instructions from any stockholder at
that address. If you share an address with another stockholder and have
received only one proxy statement and annual report, you may write or call us
as specified below to request a separate copy of these materials and we will
promptly send them to you at no cost to you. For future meetings, you may
request separate copies of our proxy statement and annual report, or request
that we send only one set of these materials to you if you are receiving
multiple copies, by contacting us at: Investor Relations, Wachovia Corporation,
301 South College Street, Charlotte, North Carolina 28288-0206, or by
telephoning us at (704) 374-6782.
Electronic Delivery of Proxy Materials
You can also access Wachovia's proxy statement and 2001 Annual Report via the
Internet at either www.wachovia.com or www.firstunion.com and clicking on our
Investor Relations link. For next year's stockholder meeting, you can help us
save significant printing and mailing expenses by consenting to
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access the proxy statement, proxy card and annual report electronically over
the Internet. If you hold your shares in your own name (instead of through a
bank, broker or other nominee), you can choose this option by following the
instructions at the Internet voting website at [.], which has been established
for you to vote your shares for this year's stockholder meeting. If you choose
to receive your proxy materials and annual report electronically, then prior to
next year's stockholder meeting you will receive an e-mail notification when
the proxy materials and annual report are available for on-line review over the
Internet, as well as the instructions for voting electronically over the
Internet. Your choice for electronic distribution will remain in effect for
next year's stockholder meeting unless you revoke it prior to the meeting by
sending a written request to: Investor Relations, Wachovia Corporation, 301
South College Street, Charlotte, North Carolina 28288-0206.
A copy of our 2001 Annual Report on Form 10-K will be provided without charge
(except for exhibits) upon written request to Wachovia Corporation, Investor
Relations, 301 South College Street, Charlotte, NC 28288-0206.
PROPOSAL 1. ELECTION OF DIRECTORS
General Information and Nominees
Wachovia's board of directors is divided into three classes. At each annual
meeting of stockholders, you elect the members of one of the three classes to
three-year terms. Our directors determine the number of directors but it cannot
be fewer than nine or more than 30. The number of directors is currently fixed
at 18, with six directors in Class I, six directors in Class II, and six
directors in Class III. Radford D. Lovett, a director in Class II, will retire
as a director following the annual meeting. You are not being asked to elect
his successor at the annual meeting. The board of directors anticipates
electing a director to fill the vacancy on the board created by Mr. Lovett's
retirement in the future.
The terms of the directors serving in Class I will expire at the meeting and
the terms of the directors serving in Classes II and III will expire at the
2003 and 2004 Annual Meetings of Stockholders, respectively.
John D. Baker, II, Leslie M. Baker, Jr., Robert J. Brown, Peter C. Browning, G.
Kennedy Thompson, and John C. Whitaker, Jr. are being nominated to serve as
directors in Class I with terms expiring at the 2005 Annual Meeting of
Stockholders. F. Duane Ackerman, John T. Casteen, III, and Robert A. Ingram are
being nominated to serve as directors in Class II with terms expiring at the
2003 Annual Meeting of Stockholders. James S. Balloun, Lloyd U. Noland, III,
and Dona Davis Young are being nominated to serve as directors in Class III
with terms expiring at the 2004 Annual Meeting of Stockholders.
Directors who reach retirement age (70) during their term in office are to
retire from the board at the annual meeting of stockholders next following
their 70th birthday, subject to the board authorizing the retirement to be
deferred when deemed appropriate.
Directors are elected by a plurality of votes cast. Shares cannot be voted for
a greater number of persons than the number of nominees named in this proxy
statement. Should any nominee be unavailable for election by reason of death or
other unexpected occurrence, the enclosed proxy, to the extent permitted by
applicable law, may be voted with discretionary authority in connection with
the nomination by the board and the election of any substitute nominee. In
addition, the board may reduce the number of directors to be elected at the
meeting.
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Proxies, unless indicated to the contrary, will be voted "FOR" the election of
the 12 nominees named below as directors of Wachovia in the classes and for the
terms indicated.
As part of the merger of Legacy Wachovia and Legacy First Union, Wachovia's
articles of incorporation were amended to provide that Wachovia's board will be
comprised of an equal number of Legacy Wachovia board members and Legacy First
Union board members until the annual meeting of stockholders in 2004. As a
result, upon completion of the merger, our board of directors was comprised of
9 Legacy Wachovia directors and 9 Legacy First Union directors. Mr. Leslie M.
Baker, Jr. became Chairman of Wachovia and will serve as Chairman until the
2004 annual meeting of stockholders, unless he retires or resigns, or as
otherwise determined in our articles and bylaws. Mr. G. Kennedy Thompson became
Chief Executive Officer and President of Wachovia and will serve in such
positions, unless he retires or resigns, or as otherwise determined in our
articles and bylaws, and will succeed Mr. Baker as Chairman not later than the
2004 annual meeting.
Wachovia's articles of incorporation were amended to include provisions
intended to maintain the even split between Legacy First Union and Legacy
Wachovia nominated directors. These provisions create a nomination procedure
for director nominees who are to be nominated by the board of directors or who
are to fill a vacancy to be filled by the board of directors. In effect, if our
board of directors decides to increase or decrease the number of directors on
the board, or the board of directors is nominating persons for directorships
that are up for election, the persons nominated must be first chosen by a
nominating committee. For a position to be occupied by a person replacing a
former Legacy First Union director, a committee of two former Legacy First
Union directors will choose a person to qualify for nomination by the board.
For a position to be occupied by a person replacing a former Legacy Wachovia
director, a committee of two former Legacy Wachovia directors will choose a
person to qualify for nomination by the board. In accordance with the articles
of incorporation, once nominated, a nominee to fill a vacancy or newly created
directorship must be elected by a majority of the existing or remaining board,
and a nominee to be elected at an annual or special meeting of stockholders or
by written consent of stockholders must be elected by a plurality of the
stockholders voting at a meeting.
In addition, our articles of incorporation include provisions where votes of
the board of directors will require a "special majority" in the situations
described below. A special majority of the board of directors will be equal to
at least 75% of the board, plus a majority of both the former Legacy First
Union directors and the former Legacy Wachovia directors then serving on the
board. A special majority vote of the board will be needed for:
. nominating a director to fill a directorship in a manner other than as set
forth above;
. filling the positions of Chairman or Chief Executive Officer and President;
. removing Mr. Baker from the Chairman position or Mr. Thompson from the
Chairman (if he has succeeded Mr. Baker), Chief Executive Officer or
President positions;
. making any modification to Mr. Thompson's or Mr. Baker's employment
agreements; or
. making any recommendation to stockholders to modify the nomination
procedures and the special majority procedures of the articles of
incorporation.
These new provisions will lapse immediately following the 2004 annual meeting
of stockholders.
All of the nominees are currently directors. Listed below are the names of the
six nominees to serve as Class I directors, the three nominees to serve as
Class II directors, the three nominees to serve as Class III directors and the
five incumbent directors who will be continuing in office following the
meeting, together with: their ages; their principal occupations during the past
five years; any other directorships they serve with publicly-held companies;
and the year during which they were first elected a director of Wachovia,
Legacy Wachovia or Legacy First Union.
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Name, Age, Principal Occupation
and Certain Other Directorships
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NOMINEES FOR ELECTION TO CLASS I -- TERMS EXPIRING IN 2005
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[PHOTO] JOHN D. BAKER, II (53). President and Chief Executive Officer, Florida
Rock Industries, Inc., Jacksonville, Florida, a construction materials
company. Director, Florida Rock Industries, Inc., Hughes Supply, Inc. and
Patriot Transportation Holdings, Inc. He has been a director of Wachovia
since December 2001.
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[PHOTO] LESLIE M. BAKER, JR. (59). Chairman, Wachovia Corporation, since
September 2001. Formerly, Chairman of the Board (since April 1998),
Chief Executive Officer, and President of Legacy Wachovia. Director,
Acuity Brands Inc. He has been a director of Wachovia or Legacy
Wachovia since 1993.
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[PHOTO] ROBERT J. BROWN (67). Chairman and Chief Executive Officer, B&C
Associates, Inc., High Point, North Carolina, a public relations and
marketing research firm. Director, AutoNation, Inc., Duke Energy
Corporation and Sonoco Products Company. He has been a director of
Wachovia or Legacy First Union since 1993.
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[PHOTO] PETER C. BROWNING (60). Chairman of Nucor Corporation, Charlotte,
North Carolina, a steel products manufacturing company, since September
2000. Formerly, President and Chief Executive Officer of Sonoco Products
Company from April 1998 until July 2000 and President and Chief
Operating Officer from 1996 to 1998. Director, Lowe's Companies, Inc.,
National Service Industries, Inc., Nucor Corporation, and The Phoenix
Companies, Inc. He has been a director of Wachovia or Legacy Wachovia
since 1997.
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[PHOTO] G. KENNEDY THOMPSON (51). President (since December 1999) and
Chief Executive Officer (since April 2000), Wachovia Corporation.
Formerly, Chairman, March 2001 to September 2001, Vice Chairman,
October 1998 to December 1999, and Executive Vice President,
November 1996 to October 1998, of Wachovia. Director, Florida Rock
Industries, Inc. He has been a director of Wachovia or Legacy First Union
since 1999.
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Name, Age, Principal Occupation
and Certain Other Directorships
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[PHOTO] JOHN C. WHITAKER, JR. (64). Chairman of the Board and Chief
Executive Officer, Inmar Enterprises, Inc., Winston-Salem, North Carolina,
an information services and transaction processing company. He has been
a director of Wachovia or Legacy Wachovia since 1996.
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NOMINEES FOR ELECTION TO CLASS II--TERMS EXPIRING IN 2003
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[PHOTO] F. DUANE ACKERMAN (59). Chairman of the Board, President and
Chief Executive Officer of BellSouth Corporation, Atlanta, Georgia, a
telecommunications company, since December 1997. Formerly, Vice
Chairman of the Board, President and Chief Executive Officer from
December 1996 to December 1997. Director, Allstate Corporation and
BellSouth Corporation. He has been a director of Wachovia or Legacy
Wachovia since 2000.
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[PHOTO] JOHN T. CASTEEN III (58). President of the University of Virginia,
Charlottesville, Virginia. He has been a director of Wachovia or Legacy
Wachovia since 1997.
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[PHOTO] ROBERT A. INGRAM (59). Chief Operating Officer and President,
Pharmaceutical Operations, of GlaxoSmithKline, Research Triangle Park,
North Carolina, a pharmaceutical research and development company,
since December 2000. Formerly, Chief Executive Officer of Glaxo
Wellcome plc from 1997 to December 2000 and Executive Director from
September 1996 to October 1997, and Chief Executive Officer of Glaxo
Wellcome Inc. from 1994 to January 1999, Chairman from October 1997
to January 2001, and President from 1994 to January 1999. Director,
Lowe's Companies, Inc., Misys plc and Nortel Networks Corporation. He
has been a director of Wachovia or Legacy Wachovia since 1997.
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Name, Age, Principal Occupation
and Certain Other Directorships
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NOMINEES FOR ELECTION TO CLASS III--TERMS EXPIRING IN 2004
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[PHOTO] JAMES S. BALLOUN (63). Chairman, President and Chief Executive
Officer, Acuity Brands Inc., Atlanta, Georgia, a manufacturer and
distributor of lighting fixtures and chemical cleaning products and formerly
part of National Service Industries, Inc., since November, 2001. Formerly,
Chairman, President and Chief Executive Officer, National Service
Industries, Inc., prior to November, 2001. Director, Acuity Brands Inc.,
Georgia-Pacific Corporation and Radiant Systems, Inc. He has been a
director of Wachovia or Legacy Wachovia since 1997.
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[PHOTO] LLOYD U. NOLAND, III (58). Chairman, President, and Chief Executive
Officer of Noland Company, Newport News, Virginia, a wholesale
distributor of plumbing, heating, air conditioning and industrial/electrical
products. Director, Noland Company. He has been a director of Wachovia
or Legacy Wachovia since 1997.
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[PHOTO] DONA DAVIS YOUNG (48). President and Chief Operating Officer of
The Phoenix Companies, Inc., a provider of wealth management products
and services, since June 2001. Formerly, President (since February 2000)
and Chief Operating Officer (since February 2001) of Phoenix Home Life
Mutual Insurance Company, and Executive Vice President--Individual
Insurance and General Counsel prior to February 2000. Director, Foot
Locker, Inc., Sonoco Products Company and The Phoenix Companies, Inc.,
and trustee, The Phoenix Edge Series Fund. She has been a director of
Wachovia or Legacy Wachovia since 2000.
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INCUMBENT CLASS II DIRECTORS -- TERMS EXPIRING IN 2003
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[PHOTO] WILLIAM H. GOODWIN, JR. (61). Chairman, CCA Industries, Inc.,
Richmond, Virginia, a diversified holding company. He has been a director
of Wachovia or Legacy First Union since 1993.
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[PHOTO] MACKEY J. MCDONALD (55). Chairman (since October 1998),
President and Chief Executive Officer, VF Corporation, Greensboro, North
Carolina, an apparel manufacturer. Director, Hershey Foods Corporation
and VF Corporation. He has been a director of Wachovia or Legacy First
Union since 1997.
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Name, Age, Principal Occupation
and Certain Other Directorships
-------------------------------
INCUMBENT CLASS III DIRECTORS -- TERMS EXPIRING IN 2004
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[PHOTO] JOSEPH NEUBAUER (60). Chairman and Chief Executive Officer,
ARAMARK Corporation, Philadelphia, Pennsylvania, a service management
company. Director, ARAMARK Corporation, CIGNA Corporation,
Federated Department Stores, Inc., and Verizon Communications, Inc. He
has been a director of Wachovia or Legacy First Union since 1996.
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[PHOTO] RUTH G. SHAW (54). Executive Vice President and Chief Administrative
Officer, Duke Energy Corporation, Charlotte, North Carolina, an energy
company, since June 1997. Formerly, Senior Vice President, Corporate
Resources, and Chief Administrative Officer, Duke Energy Corporation. She
has been a director of Wachovia or Legacy First Union since 1990.
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[PHOTO] LANTY L. SMITH (59). Chairman, Soles Brower Smith & Co.,
Greensboro, North Carolina, an investment and merchant banking firm,
since December 1998. Also, Chairman, Precision Fabrics Group, Inc.,
Greensboro, North Carolina, a manufacturer of engineered, specification
textile products, since November 1997. Prior to November 1997,
Chairman and Chief Executive Officer, Precision Fabrics Group, Inc. He
has been a director of Wachovia or Legacy First Union since 1987.
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Committees of the Board and Attendance
Attendance. The board held eight meetings in 2001. In 2001, all of the
directors attended at least 75% of the meetings of the board and the relevant
committees. Legacy First Union's board of directors had the following
committees for much of 2001 prior to the merger with Legacy Wachovia: Executive
Committee, Nominating Committee, Audit Committee, Human Resources Committee,
and Credit/Market Risk Committee. Following the merger, Wachovia's board
adopted new committees, which are discussed below. Where appropriate, this
discussion includes the number of meetings held in 2001 by Legacy First Union
predecessor committees or Legacy First Union committees having similar duties
to the applicable Wachovia committees.
Executive Committee. The Executive Committee held three meetings in 2001.
The Committee is authorized, between meetings of the board, to perform all
duties and exercise all authority of the board, except for those duties and
authorities delegated to other committees of the board or that are exclusively
reserved to the board by our bylaws or by statute. In addition, the Chairman of
the Executive Committee, a non-employee director, also serves as the lead
independent director of the board. The responsibilities of the lead independent
director include, among other things, assisting the Chairman of the board with
certain board-related matters, and acting, as necessary, as the principal
liaison between the independent directors and the Chairman of the board. The
following directors are the current members of the Committee: Messrs. Smith
(Chairman), Leslie M. Baker, Jr., Browning, Ingram, Goodwin, Neubauer, Thompson
and Whitaker.
9
Credit & Finance Committee. The Credit & Finance Committee held two
meetings in 2001 and the Legacy First Union Credit/Market Risk Committee held
three meetings in 2001. The primary responsibilities of the Credit & Finance
Committee are to assist the board in overseeing, and receiving information
regarding, Wachovia's policies, procedures and practices relating to asset and
liability management, and credit, market and operational risk. The following
directors are the current members of the Committee: McDonald (Chairman), John
D. Baker, II, Noland and Young.
Merger Integration & Technology Committee. The Merger Integration &
Technology Committee held two meetings in 2001. The primary responsibilities of
the Committee are to assist the board in overseeing, and receiving information
regarding, Wachovia's policies, procedures and practices relating to technology
and the merger integration process, risks, status and planning. The following
directors are the current members of the Committee: Neubauer (Chairman),
Balloun, Lovett (a retiring director) and Whitaker.
Management Resources & Compensation Committee. The Management Resources &
Compensation Committee (the "Compensation Committee") held two meetings in 2001
and the Legacy First Union Human Resources Committee held four meetings in
2001. The Compensation Committee is authorized, among other things, to review
and make recommendations to the board regarding employee compensation, to
administer various employee benefit plans, to act as the executive compensation
committee, to monitor conditions of employment and our personnel policies and
to study the compensation of directors and recommend changes when appropriate.
The following directors are the current members of the Compensation Committee:
Browning (Chairman), Brown, Ingram and Shaw.
Corporate Governance & Nominating Committee. The Corporate Governance &
Nominating Committee held one meeting in 2001 and the Legacy First Union
Nominating Committee held two meetings in 2001. The Committee assists the board
in establishing and maintaining effective corporate governance practices and
procedures and, in connection therewith, is authorized, among other things, to
recommend the number of directors to be elected to the board, to recommend any
changes in board membership, to recommend director prospects, to recommend
board committee assignments and to assess the board's overall corporate
governance practices and performance. The following directors are the current
members of the Committee: Whitaker (Chairman), Browning, Goodwin, Ingram,
Neubauer and Smith. Our bylaws include provisions setting forth specific
conditions under which persons may be nominated as directors at an annual
meeting of stockholders. A copy of such provisions is available upon request
to: Wachovia Corporation, 301 South College Street, Charlotte, North Carolina
28288-0013, Attention: Corporate Secretary.
Audit & Compliance Committee. The Audit & Compliance Committee held two
meetings in 2001 and the Legacy First Union Audit Committee held three meetings
in 2001. The Committee operates pursuant to a written charter adopted by the
board. As set forth in the charter, the Committee's principal responsibilities
are to assist the board in overseeing Wachovia's financial reporting process.
The following directors are the current members of the Committee: Casteen
(Chairman), Ackerman, Goodwin and Smith. The board, in its business judgment,
has determined that all of the members of the Committee are "independent", in
accordance with the applicable sections of the NYSE's listing standards.
Audit & Compliance Committee Report
The role of the Audit & Compliance Committee is to assist the board in its
oversight of Wachovia's financial reporting process. As set forth in the
Committee's charter, management is responsible for the preparation,
presentation and integrity of Wachovia's financial statements. Accordingly,
management is responsible for maintaining appropriate accounting and financial
reporting principles and policies and internal controls and procedures designed
to assure compliance with accounting standards and applicable laws and
regulations. The independent auditors are responsible for auditing Wachovia's
10
financial statements and expressing an opinion as to their conformity with
generally accepted accounting principles. The members of the Committee are not
professionally engaged in the practice of auditing or accounting and are not
full-time employees of Wachovia. Members of the Committee rely without
independent verification on the information provided to them and on the
representations made by management and the independent auditors.
In the performance of its oversight function, the Committee has reviewed and
discussed the audited financial statements with management and the independent
auditors. The Committee has also discussed with the independent auditors the
matters required to be discussed by Statement of Auditing Standards No. 61,
Communications with Audit Committees, as currently in effect. Finally, the
Committee has received the written disclosures and the letter from the
independent auditors required by Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees, as currently in effect, has
considered whether the provision of information technology services relating to
financial information systems design and implementation and other non-audit
services by the independent auditors to Wachovia is compatible with maintaining
the auditor's independence, and has discussed with the auditors the auditors'
independence.
Based upon the review and discussions described in this report, and subject to
the limitations on the role and responsibilities of the Committee referred to
above and in the Committee's charter, the Committee recommended to the board
that the audited financial statements be included in Wachovia's Annual Report
on Form 10-K for the year ended December 31, 2001, to be filed with the SEC.
John T. Casteen, III, Chairman
F. Duane Ackerman
William H. Goodwin, Jr.
Lanty L. Smith
Security Ownership of Management
The following table shows the number of shares of common stock and common stock
equivalents beneficially owned as of February 20, 2002, by each nominee for
director, each incumbent director, the executive officers named in the summary
compensation table, and all directors and executive officers as a group. In
addition, the table shows the number of Wachovia Dividend Equalization
Preferred shares ("DEPs") beneficially owned as of February 20, 2002, for each
such person and group. The DEPs do not have voting rights at the meeting.
Unless otherwise indicated, each of the named individuals and each member of
the group has sole voting power and sole investment power with respect to the
shares shown. The number of shares beneficially owned, as that term is defined
by Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the "1934
Act"), by all directors, nominees and executive officers as a group totals less
than 1% of the outstanding common stock as of February 20, 2002.
11
Name of Individual Common Stock (2) DEPs
------------------ ---------------- -----
F. Duane Ackerman........................................... 9,408 --
John D. Baker, II (1)....................................... 30,208 --
Leslie M. Baker, Jr. (1)(3)(4).............................. 1,647,135 --
James S. Balloun............................................ 15,362 --
Robert J. Brown (1)......................................... 10,816 --
Peter C. Browning (1)....................................... 11,472 --
John T. Casteen, III........................................ 9,855 --
Stephen E. Cummings (3)..................................... 198,893 --
William H. Goodwin, Jr. (1)................................. 1,076,303 --
Robert A. Ingram............................................ 15,612 --
Benjamin P. Jenkins, III (3)................................ 514,907 --
Radford D. Lovett (5)....................................... 417,826 --
Mackey J. McDonald.......................................... 15,252 --
Donald A. McMullen, Jr. (3)................................. 496,662 --
Joseph Neubauer............................................. 25,647 --
Lloyd U. Noland, III........................................ 194,049 --
Ruth G. Shaw (1)............................................ 16,713 --
Lanty L. Smith.............................................. 70,236 --
G. Kennedy Thompson (1)(3).................................. 993,616 --
John C. Whitaker, Jr........................................ 26,879 --
Dona Davis Young (1)........................................ 6,159 2,000
All directors and executive officers as a group (32 persons) 9,395,917 3,946
(1) The foregoing directors, nominees and named executive officers have sole
voting and investment power over the shares of common stock beneficially
owned by them on February 20, 2002, except for the following shares over
which the directors share voting and/or investment power: Mr. J. Baker:
11,630 shares; Mr. L. Baker: 31,776 shares; Mr. Brown: 400 shares; Mr.
Browning: 3,500 shares; Mr. Cummings: 2,400 shares; Mr. Goodwin: 1,050,000
shares; Mr. Jenkins: 18,200 shares; Dr. Shaw: 1,700 shares; Mr. Thompson:
35,616 shares; and Ms. Young: 837 shares.
(2) The amounts reported include the number of units of common stock
equivalents held by directors, as of February 20, 2002, under deferred
compensation arrangements as follows: Mr. Ackerman: 1,648 units; Mr. J.
Baker: 398 units; Mr. Balloun: 9,862 units; Mr. Brown: 8,874 units; Mr.
Browning: 7,569 units; Mr. Casteen: 4,414 units; Mr. Goodwin: 20,303 units;
Mr. Ingram: 11,212 units; Mr. Lovett: 54,734 units; Mr. McDonald: 11,252
units; Mr. Neubauer: 13,983 units; Mr. Noland: 14,049 units; Dr. Shaw:
14,013 units; Mr. Smith: 50,236 units; Mr. Whitaker: 14,734 units; Ms.
Young: 3,322 units; and all directors as a group: 240,611 units. These
units will be paid in cash, based on the fair market value of the common
stock at the time of payment, which would generally occur following
retirement as a director. There are no voting rights with respect to these
units. See "Director Compensation".
(3) Included in the shares set forth above are the following shares held under
certain of Wachovia's employee benefit plans, including options exercisable
on February 20, 2002, or within 60 days thereafter, by each of the
following named executive officers and by all of the directors and all of
our executive officers as a group: Mr. Thompson:693,955 shares; Mr. L.
Baker:1,008,744 shares; Mr. Jenkins:408,276 shares; Mr. McMullen:420,140
shares; Mr. Cummings:37,327 shares; and members of the group (including the
foregoing):5,024,619 shares. Non-employee directors are not eligible to
participate in any of Wachovia's stock option or other employee benefit
plans. Non-employee directors of Legacy Wachovia received restricted stock
awards under the Legacy Wachovia Stock Plan, which shares are reflected in
the table.
(4) The following directors disclaim beneficial ownership of certain shares of
common stock held by certain of their related interests, as a result of
which these shares are not included in the number of shares indicated
above: Mr. L. Baker: 180 shares.
(5) Mr. Lovett will retire as a director following the annual meeting on April
16, 2002.
12
Security Ownership of Certain Beneficial Owners
We are not aware of any stockholder who was the beneficial owner of more than
5% of the outstanding shares of common stock on the record date.
Executive Compensation
The following information relates to compensation paid or payable to the
current Chief Executive Officer ("CEO"), and the four other most highly
compensated executive officers who were serving as such at December 31, 2001
(the current CEO and those four other executive officers, the "Named Officers").
Summary Compensation Table
The following table sets forth for the Named Officers: (i) their name and
principal position on December 31, 2001 (column (a)); (ii) years covered
(column (b)); (iii) annual compensation (columns (c), (d) and (e)), including
(A) base salary (column (c)), (B) bonus (column (d)), and (C) other annual
compensation not properly categorized as salary or bonus (column (e)); (iv)
long-term compensation (columns (f), (g) and (h)), including (A) the dollar
value of any award of restricted stock (calculated by multiplying the closing
sale price of the common stock on the date of grant by the number of shares
awarded) (column (f)), (B) the sum of the number of stock options granted
(column (g)) and (C) the dollar value of all payments pursuant to long-term
incentive plans ("LTIPs") (column (h)); and (v) all other compensation for the
covered year that we believe could not be properly reported in any other column
of the table (column (i)).
SUMMARY COMPENSATION TABLE
Long-Term Compensation
--------------------------------
Awards
---------------------
Annual Compensation Payouts
----------------------------------- Restricted Securities -------
Other Annual Stock Underlying LTIP All Other
Salary Bonus Compensation Awards Options/SARs Payouts Compensation
Name and Position Year ($) (1) ($) (1) ($) (2) ($)(3) (#)(4) ($) (1) ($) (5)
----------------- ---- --------- --------- ------------ ---------- ------------ ------- ------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
G. Kennedy Thompson 2001 1,000,000 2,600,000 74,050 -- 1,098,800(4) -- 126,533
President and CEO 2000 940,000 -- 30,834 697,531 477,900 -- 4,255,158
1999 500,000 -- 16,183 824,063 35,800 -- 106,020
Leslie M. Baker, Jr. 2001 998,667 1,500,000(6) -- 7,021,200 380,000 -- 424,956
Chairman
Benjamin P. Jenkins, III 2001 541,667 1,250,000 69,306 -- 384,300 -- 178,730
Senior Executive Vice 2000 525,000 600,000 523,632 473,438 334,500 -- 298,095
President and 1999 445,000 -- 426,876 809,986 67,900 300,000 210,972
President-General
Bank
Donald A. McMullen, Jr. 2001 508,333 2,200,000 59,711 -- 305,000 -- 76,725
Senior Executive Vice 2000 500,000 2,063,000 23,531 552,344 272,500 -- 106,628
President and 1999 490,000 -- 18,495 979,975 42,962 441,403 76,069
President-Capital
Management
Stephen E. Cummings 2001 233,333 2,400,000 3,591,909 -- 80,000 -- 223,781
Senior Executive Vice.. 2000 200,000 2,148,368(7) 3,526,227 -- -- -- 169,604
President and Co- 1999 200,000 2,000,000 2,576,286 247,219 11,300 -- 9,843
Head, Corporate &
Investment Banking
13
--------
(1) Amounts include dollars deferred by the Named Officers under our deferred
compensation plans. At the election of the participants in such plans,
account balances are paid in a lump sum or in ten annual installments upon
termination of employment due to death, disability or retirement, except in
the event of a "change in control" of Wachovia where the successor or
acquiring corporation does not elect to continue such plans, in which case
such balances are to be paid in a lump sum. A nonqualified retirement trust
has been established to fund certain nonqualified benefit plans, including
our deferred compensation plans. Prior to a "change in control" of
Wachovia, benefits are paid from the trust only upon our direction. Upon
the occurrence of a "change in control", we are required to contribute an
amount to the trust sufficient to pay the benefits required to be paid
under such plans as of the date on which the "change in control" occurs.
(2) Represents reimbursement for (i) payment of taxes, and (ii) personal
benefits, if the personal benefits exceed the lesser of $50,000 or 10% of
the total of the amounts in columns (c) and (d). Personal benefits for a
Named Officer which exceeded 25% of the Named Officer's total personal
benefits in 2001 were as follows:
Thompson Baker Jenkins McMullen Cummings
-------- ----- ------- -------- ---------
Expense allowance...................... $54,000 -- 42,000 42,000 --
Amounts reimbursed for relocation...... -- -- 8,820 -- --
Amounts reimbursed for payment of taxes 5,462 -- 10,424 7,231 --
Acquisition-related retention payment.. -- -- -- 3,587,409
For the years 1999-2001, Mr. Cummings received retention payments in
connection with Legacy First Union's acquisition of Bowles Hollowell Conner
& Co. in 1998. Those retention payments were not made pursuant to any
performance incentive compensation plan or arrangement with Mr. Cummings. In
the event Mr. Cummings continues to be an employee of Wachovia on April 30,
2002, he will receive the final retention payment in connection with that
acquisition.
(3) The aggregate number of shares or units of restricted stock held as of
December 31, 2001, and the value thereof as of such date, were as follows:
Thompson: 46,016 shares ($1,443,062); Baker: 284,934 units ($8,935,530);
Jenkins: 31,823 shares ($997,969); McMullen 32,716 shares ($1,025,974); and
Cummings 5,200 shares ($163,072). During 2001, Mr. Baker was awarded 80,000
units with a four-year restriction period before vesting 100% at the end of
the restriction period, and 120,000 units that were immediately vested
prior to completion of the merger, in accordance with his Legacy Wachovia
employment agreement. Upon vesting, units of restricted stock convert to an
equal number of shares of common stock. No dividends are paid on restricted
stock units during the restriction period. See also "Employment Contracts".
Shares of restricted stock generally vest at a rate of 20% per year over
five years or upon termination due to death, disability, retirement (as
defined in the applicable stock plan), or a "change in control" of Wachovia.
Dividends are paid on shares of restricted stock grants to Messrs. Thompson,
Jenkins, McMullen and Cummings at the same time dividends on the other
outstanding shares of common stock are paid. See also footnote (7) below.
(4) Mr. Thompson received a special one-time stock option grant of 250,000
shares in January 2001 in connection with terminating Legacy First Union's
Supplemental Retirement Plan (the "SERP"), as of December 31, 2000. The
amount of option grant was based upon the projected value of the SERP over
the five years following SERP termination. Due to then-present limitations
in the number of shares available for issuance to an individual under our
1998 Stock Incentive Plan, we were unable in 2000 to award Mr. Thompson a
sufficient number of stock options equal to his projected SERP value. To
more closely approximate his projected SERP value, we granted Mr. Thompson
these stock options in January 2001.
(5) Amounts shown for 2001 consist of the following:
Thompson Baker Jenkins McMullen Cummings
-------- ------- ------- -------- --------
Savings plan matching contributions........... $60,300 59,920 31,800 30,300 10,500
Value of life insurance premiums*............. 24,041 357,901 49,618 45,056 270
Value of disability insurance................. 1,136 7,134 3,166 -- --
Above market interest on deferred compensation 41,056 -- 94,147 1,369 --
Carried interest plan termination............. -- -- -- -- 213,011
14
* The value of life insurance premiums includes the value of premiums advanced
by us under split-dollar life insurance agreements. We may terminate certain
of such agreements and receive our interest in the related life insurance
policies under certain conditions, provided we may not terminate such
agreements if certain of such conditions occur after a "change in control"
of Wachovia.
(6) Pursuant to his employment agreement with Wachovia, Mr. Baker's annual base
salary and annual cash incentive bonus are to be determined by the board of
directors, but in no event is his base salary and annual bonus to be less
than that of Mr. Thompson's. Notwithstanding that provision, Mr. Baker
declined to accept a 2001 annual bonus equal to Mr. Thompson's and instead
recommended he receive a 2001 annual bonus calculated pursuant to Legacy
Wachovia's management incentive plan, which provided the 2001 annual bonus
indicated.
(7) In 2000, Mr. Cummings participated in an annual incentive bonus plan for
the Corporate & Investment Banking Group that requires 30% of his annual
incentive bonus to be paid in shares of restricted stock (the "Bonus
Shares"). We matched 25% of the Bonus Shares with additional shares of
restricted stock. The shares of restricted stock awarded under the plan
will vest in three equal annual installments beginning on the first
anniversary of the incentive award. The bonus amounts set forth in the
Summary Compensation Table represent the total bonus, including the
portions attributable to those matched shares of restricted stock. These
shares of restricted stock are not included in footnote (3) above or in
column (f).
Option/SAR Grants Table
The following table sets forth with respect to grants of stock options made
during 2001 to each of the Named Officers: (i) the name of such officer (column
(a)); (ii) the number of options granted (column (b)); (iii) the percent the
grant represents of the total options granted to all employees during 2001
(column (c)); (iv) the per share exercise price of the options granted (column
(d)); (v) the expiration date of the options (column e)); and (vi) the
Black-Scholes value of the options at grant date (column (f)).
OPTION/SAR GRANTS IN 2001
Individual Grants
-----------------
% of Total
Number of Securities Options/SARs
Underlying Options/SARS Granted to Exercise or Black-Scholes
Granted Employees in Base Price Expiration Grant Date Value (5)
Name (#) 2001 ($/Sh) Date ($)
---- ----------------------- ----------------- ----------- ---------- --------------------
(a) (b) (c) (d) (e) (f)
Thompson 250,000 (1) 31.0625 01/04/11 2,587,500
500,000 (2) 30.40 04/17/11 5,025,000
348,800 (3) 34.92 07/31/11 4,164,672
-----------
Total: 1,098,800 5.08%
Baker 380,000 (4) 1.76% 33.69 01/26/11 3,739,200
Jenkins 175,000 (2) 30.40 04/17/11 1,758,750
209,300 (3) 34.92 07/31/11 2,499,042
-----------
Total: 384,300 1.78%
McMullen 150,000 (2) 30.40 04/17/11 1,507,500
155,000 (3) 34.92 07/31/11 1,850,700
-----------
Total: 305,000 1.41%
Cummings 80,000 (2) 0.37% 30.40 04/17/11 804,000
--------
(1) Legacy First Union terminated its SERP in December 2000. These options were
granted under our 1998 Stock Incentive Plan to Mr. Thompson and other SERP
participants in lieu of future participation in the SERP and are
nonqualified stock options. The option exercise price is equal to the
market value of the common stock on the date of grant. The options are
exercisable 33 1/3% per year in 2002, 2003 and 2004. See footnote (4) of
"Summary Compensation Table" and footnote (5) below.
15
(2) These options are nonqualified stock options. The options are exercisable
over a three-year period in 33 1/3% annual increments, at an option
exercise price equal to the market price of the common stock on the date of
grant. These options were granted from our 1998 Stock Incentive Plan. See
footnote (5) below.
(3) We terminated our 2000 Cash Performance and Retention Plan upon
consummation of the merger with Legacy Wachovia. These options were granted
under our 1998 Stock Incentive Plan to participants in the 2000 Cash
Performance and Retention Plan in lieu of future participation in that plan
and are nonqualified stock options. The option exercise price is equal to
the market price of the common stock on the date of grant. The options
become exercisable on December 31, 2003. See "Compensation Committee Report
on Executive Compensation" and footnote (5) below.
(4) These options are nonqualified stock options. The options become
exercisable over a five-year period in 20% annual increments, at an option
price equal to the market price of the common stock on the date of grant.
These options were granted from the Legacy Wachovia Stock Plan. See
footnote (5) below.
(5) The values shown for the options referred to in footnote (1) reflect
standard application of the Black-Scholes pricing model using (i) 60-month
volatility (36.25%) and daily stock prices for the five years prior to
grant date, (ii) an option term of ten years, (iii) an interest rate that
corresponds to the U.S. Treasury rate with a seven-year maturity (5.13%),
and (iv) dividends at the annualized rate in place on the date of grant
($0.96). The values shown for the options referred to in footnote (2)
reflect standard application of the Black-Scholes pricing model using (i)
60-month volatility (36.47%) and daily stock prices for the five years
prior to grant date, (ii) an option term of ten years, (iii) an interest
rate that corresponds to the U.S. Treasury rate with a seven-year maturity
(5.03%), and (iv) dividends at the annualized rate in place on the date of
grant ($0.96). The values shown for the options referred to in footnote (3)
reflect standard application of the Black-Scholes pricing model using (i)
60-month volatility (37.06%) and daily stock prices for the five years
prior to grant date, (ii) an option term of ten years, (iii) an interest
rate that corresponds to the U.S. Treasury rate with a seven-year maturity
(4.51%), and (iv) dividends at the annualized rate in place on the date of
grant ($0.96). The values shown for the options referred to in footnote (4)
reflect standard application of the Black-Scholes pricing model using (i)
60-month volatility (33.04%) and daily stock prices for the five years
prior to grant date, (ii) an option term of ten years, (iii) an interest
rate that corresponds to the U.S. Treasury rate with a seven-year maturity
(5.13%) and (iv) dividends at the annualized rate in place at Legacy
Wachovia on the date of grant ($1.20). The values do not take into account
risk factors such as non-transferability and limits on exercisability. The
Black-Scholes options possibilities of future stock returns (dividends plus
share price appreciation) resemble a normal "bell-shaped" curve. In
assessing the values indicated in the above table, it should be kept in
mind that no matter what theoretical value is placed on a stock option on
the date of grant, the ultimate value of the option is dependent on the
market value of the common stock at a future date, which will depend to a
large degree on the efforts of the Named Officers to bring future success
to Wachovia for the benefit of all stockholders.
16
Aggregated Option/SAR Exercises and Year-End Option/SAR Value Table
The following table sets forth with respect to each exercise of stock options
(or tandem stock appreciation rights ("SARs")) and freestanding SARs during
2001 by each of the Named Officers and the year-end value of unexercised
options and SARs on an aggregated basis: (i) the name of such officer (column
(a)); (ii) the number of shares received upon exercise, or if no shares were
received, the number of securities with respect to which the options or SARs
were exercised (column (b)); (iii) the aggregate dollar value realized upon
exercise (column (c)); (iv) the total number of unexercised options and SARs
held at December 31, 2001, separately identifying the exercisable and
unexercisable options and SARs (column (d)); and (v) the aggregate dollar value
of in-the-money, unexercised options and SARs held at December 31, 2001,
separately identifying the exercisable and unexercisable options and SARs
(column (e)).
AGGREGATED OPTION/SAR EXERCISES IN 2001 AND
DECEMBER 31, 2001 OPTION/SAR VALUES
Number of Securities
Underlying Unexercised Value of Unexercised In-the-
Options/SARs Money Options/SARs
at 12/31/01 (#)(1) at 12/31/01 ($)(2)
-------------------------- ----------------------------
Shares Acquired Value
Name on Exercise (#) Realized ($)(3) Exercisable/ Unexercisable Exercisable/ Unexercisable
---- --------------- --------------- -------------------------- ----------------------------
(a) (b) (c) (d) (e)
Thompson 26,400 220,440 533,488/1,202,106 666,239/1,235,918
Baker 4,570 57,811 912,078/1,026,508 4,638,596/126,967
Jenkins -- -- 361,462/160,640 863,206/607,600
McMullen -- -- 370,140/382,306 366,459/435,139
Cummings -- -- 10,660/80,640 0/76,800
--------
(1) Upon a "change in control" of Wachovia, all outstanding options will become
exercisable.
(2) Values represent the difference between the option exercise price and the
market value of Wachovia common stock on December 31, 2001, rounded to the
nearest dollar. Options which have an exercise price above the market value
on that date have an attributed value of zero.
(3) Values represent the difference between the option exercise price and the
market value of Wachovia common stock on the date of exercise, rounded to
the nearest dollar.
Long-Term Incentive Plan Awards Table
The following table sets forth, with respect to each award made to a Named
Officer in 2001 under any LTIP: (i) the name of such officer (column (a)); (ii)
the number of shares, units or other rights awarded under any LTIP (column
(b)); (iii) the performance or other time period until payout or maturation of
the award (column (c)); and (iv) for LTIPs not based on stock price, the dollar
value of the estimated payout or range of estimated payouts under the award
(threshold, target and maximum amount), whether such award is denominated in
stock or cash (columns (d) through (f)).
LONG-TERM INCENTIVE PLANS--AWARDS IN 2001
Estimated Future Payments under
Non-Stock Price-Based Plans
-------------------------------
Number of Shares, Performance or Other
Units or Other Period Until Maturation Threshold Target Maximum
Name Rights (#) Or Payout ($ or #) ($ or #) ($ or #)
---- ----------------- ----------------------- --------- -------- --------
(a) (b) (c) (d) (e) (f)
Thompson 0 -- -- -- --
Baker 0 -- -- -- --
Jenkins 0 -- -- -- --
McMullen 0 -- -- -- --
Cummings 0 -- -- -- --
--------
17
As more fully described in "Compensation Committee Report on Executive
Compensation," in 2001, we terminated our Management Long-Term Cash Incentive
Plan and our 2000 Cash Performance and Retention Plan. No payments were made to
any executive officers in 2001 under either of these plans. Upon termination of
the 2000 Cash Performance and Retention Plan, participants in that plan,
including Messrs. Thompson, Jenkins, and McMullen, were granted stock options
in lieu of future participation in that plan. See "Option/SAR Grants in 2001"
for a description of those option grants.
Pension Plan and Other Retirement Arrangements Table
The following table sets forth the estimated annual benefits payable upon
retirement under Wachovia's tax qualified pension plan in the specified
compensation and years of service classifications indicated below.
Estimated annual pension plan retirement benefit, assuming a
Average annual married participant, a straight life annuity and the years of service
Compensation indicated (1)
------------ ---------------------------------------------------------------------
15 years 20 years 25 years 30 years 35 years
-------- -------- -------- -------- --------
$ 200,000....................................... $37,328 $49,771 $62,214 $74,657 $87,100
400,000......................................... 37,328 49,771 62,214 74,657 87,100
600,000......................................... 37,328 49,771 62,214 74,657 87,100
800,000......................................... 37,328 49,771 62,214 74,657 87,100
1,000,000....................................... 37,328 49,771 62,214 74,657 87,100
1,200,000....................................... 37,328 49,771 62,214 74,657 87,100
--------
(1) For the year ending December 31, 2002, the annual retirement benefit
payable under our pension plan is limited by federal law to $160,000 and
the maximum covered compensation is limited to $200,000. The benefit
amounts listed above exclude any amount payable under Social Security.
The compensation covered by our pension plan includes basic compensation. The
portions of compensation which are considered covered compensation under our
pension plan for the Named Officers are the salary amounts indicated in the
Summary Compensation Table less deferred amounts. As of January 1, 2002, the
credited full years of service under our pension plan were as follows:
Thompson:26 years; Baker:31 years; Jenkins:29 years; McMullen:7 years; and
Cummings:3 years.
Legacy Wachovia entered into a nonqualified, un-funded retirement agreement
with a number of senior officers of Legacy Wachovia, including Leslie M. Baker,
Jr. As a result of the merger, these agreements became obligations of Wachovia.
Mr. Baker's agreement is intended to restore the benefits lost because of
statutory limits imposed by federal law and to supplement the retirement
payments received by Mr. Baker under our pension plan.
Under the terms of his supplemental retirement agreement, upon retirement, Mr.
Baker will be entitled to receive a supplemental benefit. The monthly amount of
the supplemental benefit is equal to one-twelfth of the product of 2.5% of Mr.
Baker's final average compensation times the number of years of creditable
service under our pension plan (up to a maximum of 62.5%), reduced by the
amount of monthly payments under our pension plan and any other pension plan.
"Final average compensation" means the average of Mr. Baker's annual
compensation for the three full years within the final five years of employment
that produce the highest average. Annual compensation for this purpose includes
total cash remuneration from Wachovia, including base salary, incentive
compensation to the extent approved by the Compensation Committee, salary
reduction amounts under qualified and unqualified plans or arrangements, and
deferrals under deferred compensation plans and agreements. The supplemental
benefit generally is paid in the form of a single life annuity for Mr. Baker's
life, although payments may be made in a lump sum in certain circumstances. The
agreement also provides for the payment of reduced supplemental benefits in the
event of Mr. Baker's death or disability.
18
The agreement with Mr. Baker provides that, in the event of a change of control
of Legacy Wachovia, his rights to benefits under the agreement will be fully
vested, without regard to his termination for any reason (other than cause).
Further, if Mr. Baker is voluntarily or involuntarily terminated during the
three-year period following a change of control of Legacy Wachovia, his
supplemental benefit will be deferred until the end of the compensation period
under any applicable employment agreement with Wachovia and adjusted to reflect
any continuation benefits under his employment agreement. The merger between
Legacy Wachovia and First Union constituted a change in control under Mr.
Baker's supplemental retirement agreement.
The following table sets forth estimated total annual benefits which would
become payable to Mr. Baker under the formula in his retirement agreement
(which amounts will be reduced by the benefits paid under our pension plan)
based upon final average compensation and years of credited service.
Average Compensation
During Highest
Three Years in the Last Five Years Estimated Annual Retirement Benefits
Before Retirement for Years of Credited Service
----------------- ------------------------------------------------------
15 years 20 years 25 years 30 years 35 years
---------- ---------- ---------- ---------- ----------
$500,000.............. $ 187,500 $ 250,000 $ 312,500 $ 312,500 $ 312,500
1,000,000............ 375,000 500,000 625,000 625,000 625,000
1,500,000............ 562,500 750,000 937,500 937,500 937,500
2,000,000............ 750,000 1,000,000 1,250,000 1,250,000 1,250,000
2,500,000............ 937,500 1,250,000 1,562,500 1,562,500 1,562,500
3,000,000............ 1,125,000 1,500,000 1,875,000 1,875,000 1,875,000
3,500,000............ 1,312,500 1,750,000 2,187,500 2,187,500 2,187,500
--------
None of the other Named Officers have a supplemental retirement arrangement
with Wachovia. See footnote (4) to "Summary Compensation Table" and footnote
(1) to "Option/SAR Grants in 2001".
Director Compensation
Non-employee directors receive a quarterly retainer of $12,500. If more than
six board or committee meetings are held in an annual period, directors receive
an additional $1,500 for each additional committee meeting attended and $2,000
for each additional board meeting attended. The Chairman of each committee
receives a quarterly fee of $2,500. In addition, each director is credited
under the Deferred Compensation Plan for Non-Employee Directors, as described
below, a quarterly amount equal to $13,750, in the director's common stock
equivalent deferred account. Wachovia reimburses directors for travel and
accommodation expenses. Directors who are Wachovia employees do not receive any
directors' fees. Directors' fees totaling $1,191,286 were either paid to the
directors in 2001 (including Legacy First Union directors) or deferred under
the terms of our Deferred Compensation Plan for Non-Employee Directors. These
directors' fees do not include directors' fees paid by Legacy Wachovia in 2001.
19
Under the Deferred Compensation Plan for Non-Employee Directors, directors who
are not Wachovia employees may defer payment of all or any part of their
directors' fees. Deferred amounts are payable after the end of the calendar
year in which the director ceases to be a director, in annual installments over
a ten-year period, unless otherwise determined by the Compensation Committee.
In 2001, 23 directors (including Legacy First Union directors) deferred
$964,124 of their 2001 directors' fees. These deferred fees do not include any
fees deferred under the Legacy Wachovia directors' deferred compensation plan.
Deferred fees may either earn interest or be valued based on the market value
of Wachovia common stock, at the director's option.
Directors having their deferred fees valued based on the market value of
Wachovia common stock are investing in common stock equivalents. This means
that the value of their deferred account is based on the market value of
Wachovia common stock and will rise and fall as if the account was actually
invested in the stock. As of February 20, 2002, a total of 16 directors had an
aggregate of $7,095,879 in their common stock equivalent deferred accounts,
which would equate to an aggregate of 232,652 shares of Wachovia common stock
based on the market value of Wachovia common stock on that date. These common
stock equivalent amounts include common stock equivalents credited to directors
under predecessor companies' deferred compensation plans. Common stock
equivalents do not have voting rights.
The foregoing does not include payments made to five former directors for
serving as special advisory consultants to the board. Those former directors
retired as of the 1998 Annual Meeting of Stockholders, are to be paid a $60,000
annual retainer fee for the three-year period from April 1998 to April 2001,
and are eligible during that period to participate in the same benefit programs
in which the current directors are eligible to participate.
Employment Contracts
Thompson. In November 1999, we entered into an employment agreement with G.
Kennedy Thompson, the current CEO and President of Wachovia. Mr. Thompson
requested an amendment to that agreement in February 2002 resulting in the
employment agreement having a three-year (five-year prior to the February 2002
amendment) employment period, which is consistent with other Wachovia executive
officers. The employment agreement is automatically extended on an annual basis
unless either party determines otherwise prior to the annual extension date.
The agreement provides that if we terminate his employment for reasons other
than "cause", death, disability or retirement or he terminates his employment
for "good reason", then he will be entitled to (i) a pro rata annual bonus for
the period prior to his termination date, based on the highest bonus paid to
him during either the three-year period prior to his termination or the
three-year period prior to the date of the agreement, (ii) an amount equal to
three times (five times prior to the February 2002 amendment) his annual base
salary and the highest bonus determined under (i) above, and (iii) medical and
life insurance benefits for him and his family for three years (five years
prior to the February 2002 amendment) after his termination date (or for life
if the termination date occurs after a "change in control" of Wachovia). The
agreement also provides for a gross-up payment equal to the amount of excise
taxes (plus the applicable federal and state income, FICA and excise taxes due
on such gross-up payment) payable by him if his employment is terminated in
conjunction with a "change in control" of Wachovia and such taxes become
payable as a result of payments to him under the agreement or otherwise, being
deemed to be "excess parachute payments" for federal tax purposes.
20
Baker. In connection with the merger, Wachovia entered into a three-year
employment agreement with Leslie M. Baker, Jr., Chairman, President and Chief
Executive Officer of Legacy Wachovia. The agreement provides that he will serve
as Chairman of the board of the combined company during the term of his
employment. Mr. Baker will be entitled to receive a minimum annual base salary
and an annual cash incentive bonus in an amount to be determined by the
combined company's board of directors, but in no event may Mr. Baker's base
salary and annual bonus be less than that of Mr. Thompson's. In addition, he
will be eligible to participate in various employee benefit plans and will be
entitled to certain fringe benefits. The employment agreement also provides for
the payment of premium amounts with respect to Mr. Baker's existing split
dollar life insurance agreement and executive life insurance program as set
forth in the applicable agreement or program, regardless of whether he
continues to be employed by us. Also, upon the earlier of the expiration of his
employment period or the termination of his employment for any reason, Wachovia
will honor Mr. Baker's current supplemental retirement agreement, which will
entitle Mr. Baker to receive an annual retirement benefit in addition to his
normal pension benefit. See also "Pension Plan and Other Retirement
Arrangements Table". Upon termination of employment, Mr. Baker will also
receive a payment of $200,000 per year for life, net of taxes, for office
space, secretarial support and transportation. The employment agreement also
preserved Mr. Baker's right to an award of 120,000 units of restricted stock
which was approved by the Legacy Wachovia board of directors in 1999 and
provided in Mr. Baker's employment agreement with Legacy Wachovia. Those units
vested immediately prior to completion of the merger.
The agreement provides that Mr. Baker's employment will automatically
terminate upon his death, disability or retirement. In addition, Wachovia may
terminate his employment for "cause" and he may terminate his employment for
any reason. If Mr. Baker's employment is terminated for any reason other than
for illegal conduct then he will be entitled to (i) a pro rata annual bonus for
the period prior to his termination based on the highest bonus paid to him
during either the three-year period prior to his termination date or the
three-year period prior to the date of the agreement, (ii) an amount equal to
his annual base salary plus the bonus determined under (i) above multiplied by
the sum of the number of years and fractions of years remaining in his
employment period, or by three if the termination occurs after a "change in
control" of Wachovia, plus one, (iii) medical, dental and life insurance
benefits for him and his family for the period from the termination date to the
expiration of the employment period, or for life if the termination date occurs
after a "change in control" of Wachovia, and (iv) continue to vest in
restricted stock and options. Also, Mr. Baker will be entitled to a gross-up
payment equal to the amount of excise taxes, plus the applicable income taxes
due on such gross-up payment, payable by him if such taxes become payable under
his agreement or otherwise, including such taxes which become payable as a
result of the merger between Legacy Wachovia and Legacy First Union.
Other Employment Agreements. We have also entered into employment
agreements with Messrs. Jenkins, McMullen, and Cummings and certain other
executive officers that contain terms substantially similar to our employment
agreement with Mr. Thompson.
Compensation Committee Interlocks and Insider Participation
The current members of the Compensation Committee are Brown, Browning, Ingram
and Shaw, none of whom is, or has been, an officer or employee of Wachovia.
G. Kennedy Thompson serves on the board of Florida Rock Industries, Inc. and as
one of the outside directors on its Compensation Committee during 2001. John D.
Baker, II, a director of Wachovia, serves as President and Chief Executive
Officer of Florida Rock Industries, Inc. See also "Other Matters Relating to
Executive Officers and Directors".
21
Compensation Committee Report on Executive Compensation
The Compensation Committee administers Wachovia's senior management
compensation program. The Compensation Committee is responsible for the
establishment, approval and oversight of the total compensation and benefit
policies, plans, programs and agreements for senior management and consists
entirely of nonemployee Directors who are not eligible to participate in the
management compensation program. During 2001, the following individuals served
on the Compensation Committee: Robert J. Brown, Peter C. Browning, Robert A.
Ingram, and Ruth G. Shaw. None of these individuals is, or has been, an officer
or employee of Wachovia.
Compensation Philosophy
The Compensation Committee has established guiding principles for our
compensation program. The program is intended to:
. Reinforce the alignment of the interest of senior management employees
with the interest of Wachovia's stockholders;
. Attract and retain key talent needed for Wachovia to compete successfully
in an intensely competitive environment;
. Motivate executives with reasonable and competitive total compensation
opportunities based on the sustained performance of Wachovia and the
individual's contributions to that performance;
. Emphasize performance-based compensation over fixed salary; and
. Use long-term equity programs based on the performance of Wachovia common
stock to further align the interests of senior management with our
stockholders.
The executive compensation program is reviewed periodically to ensure it meets
our strategic needs. During 2001, a special review was conducted with a
nationally recognized executive compensation consultant to ensure our program
continues to accomplish the following objectives:
. Executive compensation strategy supports our company strategy;
. The overall compensation package, including the mix of base salary, short
term and long term cash incentives and common stock incentives is
competitive; and
. Ensure the overall program is strongly aligned with stockholder interests.
This program utilizes competitive peer group information to determine base
salary, targeted and maximum incentive pay levels and stock award guidelines.
These peer groups differ for each of the businesses headed by executive and
senior officers and generally consist of those comparable financial
institutions that compete in the same markets, providing similar financial
services and products. The peer groups will change over time and will consist
of other major U. S. bank holding companies and other selected competitors that
will vary depending upon the business unit. The Compensation Committee believes
that the most direct competitors for executive talent are not necessarily all
of the companies that would be included in a published industry index for
comparing total stockholder value; therefore, peer groups will not directly
correspond to the broad list of institutions that make up the indices shown on
page 25.
Compensation Program
Compensation paid to the executive officers for 2001 consisted primarily of
salary, performance-based incentives and awards of stock options and, for the
Legacy Wachovia executives, restricted stock. The payment of incentives and
awards of stock options and restricted stock are directly related to corporate
and individual performance, as well as business unit performance, where
relevant.
22
Base Salary
Members of senior management receive base salaries determined by the
responsibilities, skills and experience related to their respective positions.
Other factors considered in base salary determination are individual
performance, the success of each business unit in the individual's area of
responsibility in achieving established profit and business plans, the
competitiveness of the executive's total compensation and Wachovia's ability to
pay an appropriate and competitive salary. Members of senior management are
eligible for periodic increases in their base salary as a result of individual
performance or significant increases in their duties and responsibilities. The
amount and timing of an increase depends upon the individual's performance,
position of salary to the competitive market median salary, and the time
interval and any added responsibilities since the last salary increase. The
salary increases during 2001 for certain executives, including the Named
Officers, were based on an evaluation by the Compensation Committee of the
above-described factors. These salary increases are reflected in the Summary
Compensation Table.
Annual Cash Incentives
The short-term Senior Management Incentive Plan covering executive officers is
funded based on Wachovia's actual financial performance relative to
pre-established financial performance goals. Individual awards are determined
as a percentage of base salary, and are targeted to the competitive market
median trends. Determination of individual awards is based primarily on
financial performance, but includes a subjective assessment of individual
performance, as appropriate. Measures of individual performance include meeting
business unit objectives, customer service goals, promoting corporate values
and providing leadership to employees. For 2001, financial performance was
measured using EPS for each legacy company for the first eight months of the
year, and combined EPS for the final four months of the year. Wachovia
substantially achieved the full year 2001 EPS goal set by the Compensation
Committee. The Compensation Committee has the discretion to supplement the
final allocated award by up to 25% if certain economic benchmarks are achieved.
Certain executive officers, including Mr. Baker, received annual cash incentive
awards for 2001 from the Legacy Wachovia Management Incentive Plan ("MIP"). The
financial performance criteria for the MIP were similar to those in the Senior
Management Incentive Plan. In 2001, Mr. Baker advised the board that he would
not accept an award higher than that provided under the MIP even though he was
entitled to receive an award equal to that of the CEO pursuant to his
employment agreement.
Long-Term Cash Compensation
In 2001, the Compensation Committee discontinued the 2000 Cash Performance and
Retention Plan ("CPRP") under which certain key executives, including the Named
Officers (with the exception of Messrs. Baker and Cummings), were granted
performance units. The unit valuations were to have an annual performance
component determined by annual increases in earnings per share over a
three-year period, beginning January 1, 2001, and a long-term retention
component so that in no event would the performance units have a total value
less than the applicable executive's base salary as of December 31, 2001. The
Compensation Committee determined that the revised projections of earnings per
share of the combined company would result in incentive amounts that would not
properly reflect the original intent of the CPRP. Contingent upon the
consummation of the merger, the Compensation Committee terminated the CPRP and
granted 1.55 nonqualified stock options for each performance unit. The number
of options granted for each performance unit was determined based on the
estimated value of the CPRP using projected Legacy First Union performance on a
pre-merger, stand alone basis. The exercise price of the options was set at the
closing price of the common stock on the date of consummation. The options have
a ten-year term, expiring on July 31, 2011, and will vest 100% on December 31,
2003 (the original vesting date of the CPRP). See "Options/SAR Grants Table".
23
In 2000, the Compensation Committee terminated the Legacy First Union
Management Long-term Cash Incentive Plan. Legacy Wachovia did not have a
long-term cash incentive plan.
Long-Term Equity-Based Compensation
Prior to the merger the legacy companies awarded long-term equity-based awards
using two different compensation philosophies. The Compensation Committee has
retained a nationally recognized executive compensation consulting firm to
assist them in developing a new long-term equity compensation strategy to meet
the needs of the combined company. The results of this review will be reflected
in a number of changes for 2002.
In 2001, Legacy First Union awarded nonqualified stock options to members of
senior management. The stock options were granted under the 1998 Stock
Incentive Plan, and will vest in three equal annual installments beginning on
the first anniversary of the grant. Prior to 2001, stock options generally
vested after one year, and restricted stock awards vested in five equal annual
installments. The change in stock option vesting impacted equity awards to all
participants, including the Named Officers. These changes were approved to make
the terms of the equity awards more competitive with those of peer financial
institutions.
In 2001, Legacy Wachovia awarded nonqualified stock options and restricted
stock units to members of senior management. The stock options will vest in
three equal annual installments beginning on the first anniversary of the
grant, and the restricted stock units will vest in four equal annual
installments beginning on the first anniversary of the grant.
Deductibility of Executive Compensation
The Compensation Committee's review of executive compensation relative to the
$1,000,000 limit on tax-deductible compensation under Section 162(m) of the
Internal Revenue Code was made in the context of insuring the ability to
balance sound compensation decisions with appropriate fiscal responsibility.
The Compensation Committee's intention has been to modify our executive
compensation plans to minimize the possibility of lost deductions. However, it
is also the Compensation Committee's intent to balance the effectiveness of
such plans against the materiality of any possible lost deductions.
2001 Compensation for the CEO
The Chief Executive Officer's compensation is determined based on the same
basic factors as described above for other members of senior management. In
establishing the base salary, incentive awards and stock awards for 2001, the
Compensation Committee considered Wachovia's overall performance in meeting the
needs of stockholders, customers, communities served and employees. The
Compensation Committee determined that Mr. Thompson had continued to lead
Wachovia successfully during an ever-changing and intensely competitive
environment, and through the implementation of merger integration. In addition,
Mr. Thompson led a substantial increase in customer service scores, a
successful corporate expense reduction initiative, the sale of the mortgage and
credit card loan portfolio, and other strategic restructuring initiatives.
These factors, along with Mr. Thompson's personal leadership and
accomplishments, were considered in conjunction with Wachovia's financial
results in relation to its established business plan and in comparison with the
performance of peer organizations. Mr. Thompson's 2001 Senior Management
Incentive Plan award was based on the above considerations and Wachovia's
achieving the annual performance goals as described above in this report under
the heading "Annual Cash Incentives".
In January 2001, Mr. Thompson received the second of two stock options grants
approved by the Compensation Committee in 2000, in consideration of the
termination of the Legacy First Union Supplemental Executive Retirement Plan.
The special stock option grants are intended to make Mr. Thompson's future
retirement benefits more contingent on stock price appreciation and less
dependent on cash entitlements for service tenure. See "Option/SAR Grants
Table".
24
In 2001, Mr. Thompson received a one-time stock option grant in consideration
of the termination of the CPRP as described above in this report under the
heading "Long-term Cash Compensation". See "Option/SAR Grants Table".
PETER C. BROWNING, Chairman
ROBERT J. BROWN
ROBERT A. INGRAM
RUTH G. SHAW
Performance Graph
The following graph compares (i) the yearly change in the cumulative total
stockholder return on Wachovia common stock with (ii) the cumulative return of
the Standard & Poor's 500 Stock Index ("S&P 500") and the Keefe, Bruyette &
Woods, Inc. 50 Index ("KBW 50"). The graph assumes that the value of an
investment in Wachovia common stock and in each index was $100 on December 31,
1996, and that all dividends were reinvested.
The S&P 500 and the KBW 50 are market-capitalization-weighted indices, meaning
that companies with a higher market value count for more in both indices. The
KBW 50 is comprised of 50 bank holding companies, including all money-center
and major regional bank holding companies.
[CHART]
December 31,
12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
Wachovia $100.00 142.16 173.45 98.36 88.54 102.81
S&P 500 100.00 133.32 171.34 207.35 188.46 166.16
KBW 50 100.00 146.19 158.29 152.80 183.45 175.89
December 31,
------------------------------------------
1996 1997 1998 1999 2000 2001
------- ------ ------ ------ ------ ------
Wachovia $100.00 142.16 173.45 98.36 88.54 102.81
S&P 500. 100.00 133.32 171.34 207.35 188.46 166.16
KBW 50.. 100.00 146.19 158.29 152.80 183.45 175.89
25
Other Matters Relating to Executive Officers and Directors
The directors (including organizations with which they are affiliated and their
immediate family members) and executive officers are customers of ours. In
management's opinion, the lending relationships with these directors and
officers were made in the ordinary course of business and on substantially the
same terms, including interest rates, collateral and repayment terms, as
comparable transactions with other customers and do not involve more than
normal collection risk or present other unfavorable features. During 2001, the
aggregate monthly outstanding loan balances made by us to these directors and
officers, including to certain related interests, ranged from a high of
approximately $[.] billion to a low of approximately $[.] billion. In addition
to these lending relationships, some directors and their affiliated
organizations provide services or otherwise do business with Wachovia and its
affiliated entities, and we in turn provide services or otherwise do business
with the directors and their organizations, in each case in the ordinary course
of business.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the 1934 Act requires the directors and executive officers
covered by that Section to file reports with the SEC and the NYSE relating to
their Wachovia common stock ownership and any changes in that ownership. To our
knowledge, based solely on a review of the copies of those reports or other
written representations, during the year ended December 31, 2001, all Section
16(a) filing requirements applicable to directors and executive officers were
complied with, except as set forth in prior proxy statements and except for
late filings by: Robert Hoak, a former Section 16(a) reporting officer,
relating to the sale of 500 shares and Benjamin P. Jenkins, III, a Section
16(a) reporting officer, relating to the withholding of 970 shares for payment
of taxes in connection with the exercise of a stock option in 2000.
PROPOSAL 2. PROPOSAL TO RATIFY THE APPOINTMENT OF AUDITORS
The accounting firm of KPMG LLP has been appointed as Wachovia's auditors for
the year 2002 and in accordance with established policy, that appointment is
being submitted to stockholders for ratification. In the event the appointment
is not ratified by a majority of votes cast, in person or by proxy, it is
anticipated that no change in auditors would be made for the current year
because of the difficulty and expense of making any change so long after the
beginning of the current year, but that vote would be considered in connection
with the auditors' appointment for 2003.
KPMG LLP were our auditors for the year ended December 31, 2001, and a
representative of the firm is expected to attend the meeting, respond to
appropriate questions and if the representative desires, which is not now
anticipated, make a statement.
Set forth below is information relating to the aggregate KPMG LLP fees for
professional services rendered for the fiscal year ended December 31, 2001.
2001
-----------
Audit Fees, excluding Audit Related fees (1).................... $ 6,619,127
Financial Information Systems Design and Implementation Fees (2) $ 201,000
All Other Fees (3)
Audit Related (4)............................................ $ 1,880,688
Other Non-Audit Services (5)................................. $18,376,423
-----------
Total All Other Fees..................................... $20,257,111
-----------
--------
(1) Aggregate fees for professional services rendered for the audit of
Wachovia's annual financial statements and for the reviews of the
consolidated unaudited financial statements included in Wachovia's
Quarterly Reports on Form 10-Q during 2001.
26
(2) Aggregate fees for professional services rendered for information
technology services related to financial information systems design and
implementation.
(3) Aggregate fees for professional services rendered other than for the
services described in (1) and (2) above.
(4) Includes fees related to subsidiary audits and other attestation reports,
SEC filings and comfort letters.
(5) Primarily includes tax services and risk management services.
See also "Proposal 1--Committees of the Board and Attendance; Audit &
Compliance Committee".
The board recommends that stockholders vote "FOR" this proposal. Proxies,
unless indicated to the contrary, will be voted "FOR" this proposal.
PROPOSAL 3. PROPOSAL TO AMEND WACHOVIA'S ARTICLES OF INCORPORATION
We have taken several recent proactive measures to enhance our corporate
governance policies. Some of these measures include:
. appointing a lead independent director;
. reducing the size of our board of directors;
. mandating minimum stock ownership guidelines for senior management;
. increasing reliance on stock-based compensation to more closely align
management and stockholder interests; and
. appointing a corporate governance committee of our board.
To further advance our corporate governance policies, the board of directors
has adopted an amendment to our articles of incorporation to allow stockholders
owning at least 25% of Wachovia's outstanding common stock entitled to vote to
call a special meeting of stockholders. In order for this amendment to become
effective, our stockholders must also approve this amendment at the annual
meeting. Pursuant to our articles of incorporation, the affirmative vote of the
holders of at least 80% of the shares entitled to vote at the annual meeting,
or votes representing at least [.] shares, is required to approve this
amendment. Appendix A contains the terms of the amendment to our articles of
incorporation and the discussion below is a summary, and does not purport to be
fully descriptive, of the amendment to the articles of incorporation as set
forth in Appendix A.
Presently, Wachovia's articles of incorporation allow our board of directors,
Chairman of the Board or President to call a special meeting of stockholders.
The proposal amending our articles of incorporation would extend this to allow
holders of at least 25% of the votes entitled to be cast on each issue proposed
to be considered at the proposed special meeting to make a signed and dated
written demand for the calling of a special meeting and describing the purpose
or purposes for which it is to be held. Any written demand would cease to be
effective on the 61/st/ day after the date of signature appearing on the demand
unless prior to the 61/st/ day the corporation has received effective written
demands from holders sufficient to call the special meeting. A special meeting
would be called within a reasonable time after receipt of those written
demands. In the event sufficient written demands are not received within 120
days after the first receipt of a written demand for a special meeting of
stockholders (the "Initial Demand"), no written demand for a special meeting of
stockholders for the same purpose or purposes as set forth in the Initial
Demand would be effective until the first anniversary of our receipt of the
Initial Demand.
The board of directors believes that the proposal to amend our articles of
incorporation is an appropriate corporate governance measure. We support the
rights of stockholders to call a special meeting of
27
stockholders and believe the amendment to our articles will make our company
even more responsive to stockholder concerns.
This amendment to our articles of incorporation would not alter other
provisions of our articles of incorporation or bylaws, which include provisions
prescribing the size and classes of the board of directors and prescribing
various procedural requirements for submitting matters or proposals to be
considered at a stockholders' meeting.
The board recommends that stockholders vote "FOR" this proposal. Proxies,
unless indicated to the contrary, will be voted "FOR" this proposal.
OTHER STOCKHOLDER MATTERS
Management is not aware of any other matters to be voted on at the meeting. If
any other matters are presented for a vote, the enclosed proxy confers
discretionary authority to the individuals named as proxies to vote the shares
represented by proxy, as to those matters.
Stockholder proposals intended to be included in our proxy statement and voted
on at the 2003 Annual Meeting of Stockholders must be received at our offices
at 301 South College Street, Charlotte, North Carolina 28288-0013, Attention:
Corporate Secretary, on or before November [.], 2002. Applicable SEC rules and
regulations govern the submission of stockholder proposals and our
consideration of them for inclusion in next year's proxy statement and form of
proxy.
Pursuant to Wachovia's bylaws, in order for any business not included in the
proxy statement for the 2003 Annual Meeting of Stockholders to be brought
before the meeting by a stockholder entitled to vote at the meeting, the
stockholder must give timely written notice of that business to Wachovia's
Corporate Secretary. That meeting is scheduled to be held on April 22, 2003,
and to be timely, the notice must not be received any earlier than January 16,
2003 (90 days prior to April 16, 2003, the first anniversary of this year's
annual meeting date), nor any later than February 15, 2003 (60 days prior to
April 16, 2003). If the date of the meeting is advanced by more than 30 days or
delayed by more than 60 days from April 16, 2003, the notice must be received
no earlier than the 90/th/ day prior to the 2003 annual meeting and not later
than either the 60/th/ day prior to the 2003 annual meeting or the tenth day
after public disclosure of the actual meeting date, whichever is later. The
notice must state (i) a brief description of the business desired to be brought
before the meeting and the reasons for so doing, (ii) the name and address of
the stockholder and the number of shares of Wachovia common stock the
stockholder owns, and (iii) any material interest of the stockholder in that
business, other than having an interest as a stockholder. A proxy may confer
discretionary authority to vote on any matter at a meeting if we do not receive
notice of the matter within the time frames described above. A copy of our
bylaws is available upon request to: Wachovia Corporation, 301 South College
Street, Charlotte, North Carolina 28288-0013, Attention: Corporate Secretary.
Matters which are not properly presented in accordance with these requirements
may be excluded by the Chairman of the meeting.
MISCELLANEOUS
The information referred to under the captions "Compensation Committee Report
on Executive Compensation", "Performance Graph" and "Audit & Compliance
Committee Report" (to the extent permitted under the 1934 Act) (i) shall not be
deemed to be "soliciting material" or to be "filed" with the SEC or subject to
Regulation 14A or the liabilities of Section 18 of the 1934 Act, and (ii)
notwithstanding anything to the contrary that may be contained in any filing by
Wachovia under the 1934 Act or the 1933 Act, shall not be deemed to be
incorporated by reference in any such filing.
March [.], 2002
28
Appendix A
AMENDMENT TO RESTATED ARTICLES OF INCORPORATION
OF WACHOVIA CORPORATION
The following amendment shall be made to the restated articles of
incorporation of Wachovia Corporation following stockholder approval of such
amendment:
Paragraph 6 of Article 7 shall be amended to read in its entirety as follows:
"Special meetings of the shareholders, other than special meetings called
under specified circumstances for holders of any class or series of stock of
the corporation having a preference over the common stock as to dividends or
upon liquidation, may be called at any time by the Board of Directors, the
Chairman of the Board or the President of the corporation. In addition,
subject to the terms and conditions set forth below, special meetings of the
shareholders, other than special meetings called under specified
circumstances for holders of any class or series of stock of the corporation
having a preference over the common stock as to dividends or upon
liquidation, may be called at the request of holders of at least 25 percent
of all the votes entitled to be cast on each issue proposed to be considered
at the proposed special meeting pursuant to one or more signed and dated
written demands for the meeting describing the purpose or purposes for which
it is to be held. Any such written demand shall cease to be effective on the
sixty-first day after the date of signature appearing on the demand unless
prior to the sixty-first day the corporation has received effective written
demands from holders sufficient to call the special meeting. The corporation
shall call such a special meeting within a reasonable time after receipt of
such written demands. In the event that sufficient written demands are not
received by the corporation within 120 days after the corporation's first
receipt of a written demand for a special meeting of shareholders (the
"Initial Demand"), no written demand for a special meeting of shareholders
for the same purpose or purposes as set forth in the Initial Demand shall be
effective until the first anniversary of the corporation's receipt of the
Initial Demand."
A-1
TO VOTE BY MAIL, PLEASE DETACH PROXY CARD HERE
--------------------------------------------------------------------------------
WACHOVIA CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS
APRIL 16, 2002
PROXY
The undersigned holder of shares of common stock of Wachovia Corporation (the
"Corporation") hereby constitutes and appoints [o],[o] and [o], or any of
them, the lawful attorneys and proxies of the undersigned, each with full power
of substitution, for and on behalf of the undersigned, to vote as specified on
the matters set forth on the reverse side, all of the shares of the
Corporation's common stock held of record by the undersigned on February 20,
2002, at the Annual Meeting of Stockholders of the Corporation to be held on
April 16, 2001, at 9:30 a.m., in the Grand Ballroom,at the Charlotte Marriott
Center City, 100 West Trade Street, Charlotte, North Carolina 28202, and at any
adjournments or postponements thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS SPECIFIED ON THE REVERSE
SIDE. IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED "FOR" PROPOSALS 1,
2 AND 3. IF ANY OTHER MATTERS ARE VOTED ON AT THE MEETING, THIS PROXY WILL BE
VOTED BY THE PROXYHOLDERS ON SUCH MATTERS IN THEIR SOLE DISCRETION.
(PLEASE COMPLETE, DATE AND SIGN THIS PROXY ON THE REVERSE SIDE AND
MAIL WITHOUT DELAY IN THE ENCLOSED ENVELOPE.)
--------------------
SEE REVERSE SIDE
--------------------
TO VOTE BY MAIL, PLEASE DETACH PROXY CARD HERE
--------------------------------------------------------------------------------
X
Please mark votes,
as in this example.
--------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1 THROUGH 3.
--------------------------------------------------------------------------------
1. A Wachovia proposal to elect FOR all nominees listed WITHHOLD
directors. Class I: John D. (except as indicated to authority to vote
Baker, II, Leslie M. Baker, the contrary) for all nominees
Jr., Robert J. Brown, Peter C. [ ] [ ]
Browning, G. Kennedy Thompson
and John C. Whitaker, Jr. Class
II: F. Duane Ackerman, John T.
Casteen, III, and Robert A.
Ingram. Class III: James S.
Balloun, Lloyd U. Noland, III,
and Dona Davis Young.
INSTRUCTIONS: To withhold
authority to vote for any
individual nominee(s), write
the name(s) of such nominee(s)
in the space provided below.
--------------------------------
2. A Wachovia proposal to ratify FOR AGAINST ABSTAIN
the appointment of KPMG LLP as [ ] [ ] [ ]
auditors for the year 2002.
3. A Wachovia proposal to amend FOR AGAINST ABSTAIN
Wachovia's articles of [ ] [ ] [ ]
incorporation to allow stockholders
owning at least 25% of outstanding
shares of Wachovia common stock
entitled to vote to call a special
meeting of stockholders.
Date:-------------------------------, 2002
-------------------
-------------------
SIGNATURE(s)
NOTE: Signature(s)
should agree with
name(s) on proxy
form. Executors,
administrators,
trustee and other
fiduciaries, and
persons signed on
behalf of
corporations, or
partnerships,
should so indicate
when signing.