UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A
(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934

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CAPITAL CITY BANK GROUP, INC.
(Exact name of Registrant as specified in its charter)

_________________________________________________
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

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Notice of 2008 Annual Meeting
of Shareowners and Proxy Statement































                                                
217 North Monroe Street
Tallahassee, Florida 32301


 

 
 
 
 
 
CONTENTS
  
   
LETTER TO SHAREOWNERS
  
   
NOTICE OF ANNUAL MEETING OF SHAREOWNERS
  
   
PROXY STATEMENT
  
   
General Information
1
Corporate Governance
3
Board and Committee Membership
5
Director Compensation
7
Proposal No. 1 – Nominees for Election as Directors
9
Continuing Directors and Executive Officers
10
Share Ownership
12
Executive Officers and Transactions with Related Persons
14
Executive Compensation
16
Audit Committee Report
30
Proposal No. 2 –Ratification of Auditors
31
Audit Fees and Related Matters
32
Other Matters
33



 
i
 

LETTER TO SHAREOWNERS




 
217 North Monroe Street
Tallahassee, Florida 32301



March 28, 2008


Dear Fellow Shareowners:

You are cordially invited to attend the 2008 Annual Meeting of Shareowners at 10:00 a.m., Eastern Time, on Thursday, April 24, 2008, at the University Center Club, Building B, Floor 3, University Center, Florida State University, Tallahassee, Florida.

At the meeting, I will give an update on Capital City’s business and plans for the future.  Also, we will elect three Class II directors to the Board of Directors and ratify the appointment of our accountants for fiscal 2008.

Your Board of Directors encourages every shareowner to vote.  Your vote is very important.  Whether or not you plan to attend the meeting, we hope you will vote as soon as possible.  You may vote by mailing a completed proxy card, by telephone, or over the Internet.  Voting your proxy will ensure your representation at the Annual Meeting.

The meeting will begin at 10:00 a.m.  I hope you will come early and join your friends for light refreshments at 9:30 a.m.

Sincerely,
 
William G. Smith, Jr.
Chairman, President,
and Chief Executive Officer

 
 
 
NOTICE OF ANNUAL MEETING OF SHAREOWNERS

BUSINESS 
(1) Elect three Class II directors to the Board of Directors;
 
(2) Ratify the appointment of Ernst & Young LLP as our independent registered public
      accounting firm for the current fiscal year; and
 
(3) Transact other business properly coming before the meeting or any postponement or
      adjournment of the meeting.
 
DOCUMENTS
The Proxy Statement, proxy card, and Capital City Bank Group Annual Report are included in this mailing.
 
RECORD DATE
Shareowners owning Capital City Bank Group shares at the close of business on February 29, 2008, are entitled to notice of, attend, and vote at the meeting.  A list of these shareowners will be available at the Annual Meeting and for 10 days before the Annual Meeting between the hours of 9:00 a.m. and 5:00 p.m., at our principal executive offices at 217 North Monroe Street, Tallahassee, Florida 32301.
  
TIME 
10:00 a.m., Eastern Time, April 24, 2008
 
PLACE 
University Center Club
Building B, Floor 3
University Center
Florida State University
Tallahassee, Florida
 
 
VOTING 
Even if you plan to attend the meeting in Tallahassee, Florida, please provide us your voting instructions in one of the following ways as soon as possible:
 
(1) Internet - use the Internet address on the proxy card;
 
(2) Telephone - use the toll-free number on the proxy card; and
 
(3) Mail - mark, sign, and date the proxy card and return in the enclosed postage-paid envelope.
 
 
 
By Order of the Board of Directors
 
 
J. Kimbrough Davis
Executive Vice President, Chief Financial Officer,
and Corporate Secretary
 
Tallahassee, Florida
March 28, 2008
  


 
 
 
PROXY STATEMENT – GENERAL INFORMATION

Why am I receiving this Proxy Statement and proxy card?
 
We are providing these proxy materials in connection with the solicitation by the Board of Directors of Capital City Bank Group, Inc., a Florida corporation, of proxies to be voted at our 2008 Annual Meeting of Shareowners and at any adjournments or postponements of this Annual Meeting.
 
We will hold our 2008 Annual Meeting at 10:00 a.m., Eastern Time, Thursday, April 24, 2008, at the University Center Club, Building B, Floor 3, University Center, Florida State University, Tallahassee, Florida.
 
We are providing this Proxy Statement and the proxy card to our shareowners on or about March 28, 2008.
 
At Capital City, and in this Proxy Statement, we refer to our employees as “associates.”  Also in the Proxy Statement, we refer to Capital City as the “Company,” “we,” or “us” and to the 2008 Annual Meeting as the “Annual Meeting.”
 
What is being voted upon?
 
You are being asked to elect three Class II directors and to ratify our appointment of Ernst & Young LLP as our independent registered public accounting firm for 2008.  The proposals to be considered will not create appraisal or dissenter’s rights.
 
How does the Board recommend that I vote?
 
Our Board recommends that you vote your shares FOR each of the nominees for election to the Board and FOR the ratification of the appointment of our independent registered public accounting firm.
 
Could other matters be decided at the Annual Meeting?
 
We are not aware of any matters to be presented at the Annual Meeting other than those referred to in this Proxy Statement.  If other matters are properly presented at the Annual Meeting, the holders of the proxies (those persons named on your proxy card) will have the discretion to vote on those matters for you.
 
Who can vote?
 
All shareowners of record at the close of business on the record date of February 29, 2008 are entitled to receive these proxy materials.  On that date, there were 17,179,096 shares of our common stock outstanding and entitled to vote, and these shares were held of record by approximately 1,750 shareowners.
 
How much does each share count?
 
Each share counts as one vote.  For the proposals scheduled to be voted upon at the Annual Meeting, withheld votes on directors, abstentions, and shares held by a broker that the broker fails to vote are all counted to determine a quorum, but are not counted for or against the matters being considered; however, pursuant to a recent amendment to our Bylaws, if a director nominee in an uncontested election does not receive at least a majority of the votes cast at any meeting for the election of directors at which a quorum is present, the director must tender his or her resignation to the Board, as more particularly described under the heading “Corporate Governance-Director Elections.”  There is no cumulative voting.
 
How many votes are required to have a quorum?
 
In order for us to conduct the Annual Meeting, a majority of the shares entitled to vote must be present in person or by proxy.
 
How many votes are required to elect directors and to ratify Ernst & Young’s appointment?
 
Directors are elected by a plurality of the votes cast.  “Plurality” means that the nominees receiving the largest number of votes cast are elected as directors up to the maximum number of directors who are nominated to be elected at the meeting.  At our Annual Meeting, the maximum number of directors to be elected is three.  Although our directors are elected by plurality, we have recently amended our Bylaws such that if a director nominee in an uncontested election does not receive at least a majority of the votes cast at any meeting for the election of directors at which a quorum is present, the director must tender his or her resignation to the Board.
 
Ernst & Young’s appointment will be ratified if the affirmative votes cast by the shareowners present, or represented, at the Annual Meeting and entitled to vote on the matter exceed the votes cast in opposition.
 
What is the difference between holding shares as a shareowner of record and as a beneficial owner?
 
Many of our shareowners hold their shares through a broker, trustee, or other nominee rather than directly in their own name.  As summarized below, there are some distinctions between shares held of record and those shares owned beneficially.
 
§  
Shareowner of Record.  If your shares are registered directly in your name with our transfer agent, American Stock Transfer & Trust Company, you are considered, with respect to those shares, the “shareowner of record.”  As the shareowner of record, you have the right to grant your voting proxy directly to us or to a third party, or to vote in person at the Annual Meeting.
 
Capital City Bank Group, Inc. Notice of Annual Meeting and Proxy Statement
1
 
§  
Beneficial Owner.  If your shares are held in a brokerage account, by a trustee or, by another nominee, you are considered the “beneficial owner” of those shares.  As the beneficial owner of those shares, you have the right to direct your broker, trustee, or nominee how to vote and you also are invited to attend the Annual Meeting.  However, because a beneficial owner is not the shareowner of record, you may not vote these shares in person at the Annual Meeting unless you obtain a “legal proxy” from the broker, trustee or nominee that holds your shares, giving you the right to vote the shares at the Annual Meeting.
 
How do I vote my shares in person at the Annual Meeting?
 
Shares held in your name as the shareowner of record may be voted in person at the Annual Meeting.  Shares for which you are the beneficial owner but not the shareowner of record may be voted in person at the Annual Meeting only if you obtain a legal proxy from the broker, trustee, or other nominee that holds your shares giving you the right to vote the shares.  Even if you plan to attend the Annual Meeting, we recommend that you vote by proxy as described below so that your vote will be counted if you later decide not to attend the Annual Meeting.
 
The vote you cast in person will supersede any previous votes that you submitted, whether by Internet, phone, or mail.
 
How can I vote my shares without attending the Annual Meeting?
 
Whether you hold shares directly as a shareowner of record or through a broker, trustee, or other nominee, you may direct how your shares are voted without attending the Annual Meeting.  You may give voting instructions by the Internet, by telephone, or by mail.  Instructions are on the proxy card.  The appropriate individuals named on the enclosed proxy card will vote all properly executed proxies that are delivered in response to this solicitation, and not later revoked, in accordance with the instructions given by you.
 
How will my voting instructions be treated?
 
If you provide specific voting instructions, your shares will be voted as instructed.
 
If you hold shares as the shareowner of record and sign and return a proxy card or vote by telephone or Internet without giving specific voting instructions, then your shares will be voted as recommended by our Board of Directors.
 
If you are the beneficial owner of shares held through a broker, trustee, or other nominee, and you do not give instructions to that nominee on how you want your shares voted, then generally your nominee can vote your shares on certain “routine” matters.  At our Annual Meeting, both Proposals 1 and 2 are considered routine, which means that your broker, trustee, or other nominee can vote your shares on these proposals if you do not timely provide instructions to vote your shares.
 
If you are the beneficial owner of shares held through a broker, trustee, or other nominee, and that nominee does not have discretion to vote your shares on a particular proposal and you do not give your broker instructions on how to vote your shares, then the votes will be considered broker non-votes.  A “broker non-vote” will be treated as unvoted for purposes of determining approval for the proposal and will have the effect of neither a vote for nor a vote against the proposal.
 
What is the deadline for voting my shares?
 
If you hold shares as the shareowner of record, then your vote by proxy must be received before 11:59 p.m., Eastern Time, on April 23, 2008 (the day before the Annual Meeting).
 
If you are the beneficial owner of shares held through a broker, trustee, or other nominee, please follow the instructions provided by your broker, trustee, or other nominee.
 
Can I change my vote?
 
Yes, you may revoke your proxy by submitting a later proxy or by written request received by our corporate secretary before the Annual Meeting. You may also revoke your proxy at the Annual Meeting and vote in person.
 
Who pays for soliciting proxies?
 
We pay the cost of soliciting proxies.  Our officers or other associates may solicit proxies to have a larger representation at the Annual Meeting.
 
What does it mean if I get more than one proxy card?
 
You will receive a proxy card for each account you have.  Please vote proxies for all accounts to ensure that all your shares are voted.
 
Where can I find voting results of the Annual Meeting?
 
We will announce preliminary voting results at the Annual Meeting and publish final voting results in our quarterly report on Form 10-Q for our quarter ended June 30, 2008 or, if we elect, in an earlier filed Form 8-K.
 
Capital City Bank Group, Inc. Notice of Annual Meeting and Proxy Statement
2
CORPORATE GOVERNANCE 
 
GOVERNING PRINCIPLES
 
We are a financial holding company managed by a core group of officers and governed by a Board of Directors.  We are committed to maintaining a business atmosphere where only the highest ethical standards and integrity prevail.  An unwavering adherence to high ethical standards provides a strong foundation on which our business and reputation can thrive, and is integral to creating and sustaining a successful, high-caliber company.
 
INDEPENDENT DIRECTORS
 
Our common stock is listed on the NASDAQ Global Select Market.  NASDAQ requires that a majority of our directors be “independent,” as defined by NASDAQ’s rules.  Generally, a director does not qualify as an independent director if the director or a member of a director’s immediate family has had in the past three years certain relationships or affiliations with us, our external or internal auditors, or other companies that do business with us.  Our Board has affirmatively determined that a majority of our directors are independent directors under the categorical guidelines our Board has adopted, which includes all objective standards of independence set forth in the NASDAQ rules.  The categorical independence standards adopted by our Board are posted to the Corporate Governance section of our website, www.ccbg.com.  Based on these standards, our Board determined that our independent directors include the following current directors and nominees for director: DuBose Ausley, Frederick Carroll, III, Cader B. Cox, III, J. Everitt Drew, John K. Humphress, Lina S. Knox, Ruth A. Knox, and Henry Lewis III.
 
CORPORATE GOVERNANCE GUIDELINES
 
The Board has adopted Corporate Governance Guidelines that give effect to the NASDAQ corporate governance listing standards and various other corporate governance matters.
 
INDEPENDENT DIRECTOR MEETINGS IN EXECUTIVE SESSIONS
 
Our independent directors have established a policy to meet separately from the other directors in regularly scheduled executive sessions at least twice annually, and at such other times as may be deemed appropriate by our independent directors.  Any independent director may call an executive session of independent directors at any time.  In 2007, the independent directors met in an executive session five times.
 
LEAD DIRECTOR
 
The independent directors of our Board of Directors annually elect an independent director to serve in a lead capacity.  Although annually elected, the lead director is generally expected to serve for more than one year. 
 
Mr. Cox currently serves as our lead director.  Effective May 1, 2008, Mr. Drew will begin to serve as our lead director.  The lead director’s duties, which are listed in a Board approved charter, include presiding at all meetings of the Board at which the Chairman is not present, calling meetings of the independent directors, coordinating with the Chairman the planning of meeting agenda items, and serving as an independent point of contact for shareowners wishing to communicate with the Board other than through the Chairman.  We have posted all of the lead director duties on our website, www.ccbg.com.
 
SHAREOWNER COMMUNICATIONS
 
Our Corporate Governance Guidelines provide for a process by which shareowners may communicate with the Board, a Board committee, the independent directors as a group, or individual directors.  Shareowners who wish to communicate with the Board, a Board committee, or any other directors or individual directors may do so by sending written communications addressed to the Board of Directors of Capital City Bank Group, a Board committee, or such group of directors or individual directors:
 
Capital City Bank Group, Inc.
c/o Corporate Secretary
217 North Monroe Street
Tallahassee, Florida 32301
 
Communications will be compiled by our Corporate Secretary and submitted to the Board, a committee of the Board, or the appropriate group of directors or individual directors, as appropriate, at the next regular meeting of the Board.  The Board has requested that the Corporate Secretary submit to the Board all communications received, excluding those items that are not related to board duties and responsibilities, such as: mass mailings; job inquiries and resumes; and advertisements, solicitations, and surveys.
 
CODES OF CONDUCT AND ETHICS
 
The Board has adopted Codes of Conduct applicable to all directors, officers, and associates, and a Code of Ethics applicable to our Chief Executive Officer and our financial and accounting officers, all of which are available, without charge, upon written request to:
 
Capital City Bank Group, Inc.
c/o Corporate Secretary
217 North Monroe Street
Tallahassee, Florida 32301
 
These codes are designed to comply with NASDAQ and U.S. Securities and Exchange Commission requirements.
 
Capital City Bank Group, Inc. Notice of Annual Meeting and Proxy Statement
3
BOARD AND COMMITTEE EVALUATIONS
 
The Corporate Governance Committee uses written questionnaires to evaluate the Board as a whole and its committees.  The evaluation process occurs annually.  Directors submit completed questionnaires to the Chair of the Corporate Governance Committee, who summarizes the results without attribution.  The full Board discusses the summary of the Board evaluation, and each committee discusses the summary of its own evaluation.
 
DIRECTOR NOMINATING PROCESS
 
The Nominating Committee annually reviews and makes recommendations to the full Board regarding the composition and size of the Board so that the Board consists of members with the proper expertise, skills, attributes, and personal and professional backgrounds needed by the Board, consistent with applicable NASDAQ and regulatory requirements.
 
The Nominating Committee believes that all directors, including nominees, should possess the highest personal and professional ethics, integrity, and values, and be committed to representing the long-term interests of our shareowners.  The Nominating Committee will consider criteria including the nominee’s current or recent experience as a senior executive officer, whether the nominee is independent, as that term is defined in Rule 4200(a)(15) of the NASDAQ listing standards, the business experience currently desired on the Board, geography, the nominee’s banking industry experience, and the nominee’s general ability to enhance the overall composition of the Board.
 
Our Nominating Committee will identify nominees for directors primarily based upon suggestions from shareowners, current directors, and executives.  The Chair of the Nominating Committee and at least one other member of the Nominating Committee will interview director candidates.  The full Board will formally nominate candidates for director to be included in the slate of directors presented for shareowner vote based upon the recommendations of the Nominating Committee following this process.
 
DIRECTOR SERVICE ON OTHER BOARDS
 

Directors may not serve on more than three other Boards of public companies in addition to our Board.
 

SUCCESSION PLANNING
 

The Board plans for succession to the position of Chief Executive Officer as well as certain other senior management positions.  To assist the Board, William G. Smith, Jr., our Chairman, President, and CEO annually provides the Board with an assessment of senior managers and of their potential to succeed him.  He also provides the Board with an assessment of persons considered potential successors to certain senior management positions.  The Nominating Committee and our independent directors in an executive session annually review this updated assessment.
 

CHANGE IN DIRECTOR OCCUPATION
 

A director whose principal occupation or business association changes substantially during the director’s tenure must tender a resignation for consideration by the Nominating Committee.  The Nominating Committee will recommend to the Board the action, if any, to be taken with respect to the resignation.
 
DIRECTOR ELECTIONS
 
In November 2007, the Board of Directors amended our Bylaws to provide that in an uncontested election, if a nominee for director does not receive the vote of at least the majority of the votes cast at any meeting for the election of directors at which a quorum is present, the director will promptly tender his or her resignation to the Board of Directors.  The Nominating Committee will make a recommendation to the Board of Directors as to whether to accept or reject the tendered resignation, or whether other action should be taken.  The Board of Directors will act on the tendered resignation and publicly disclose its decision and the rationale behind the decision within 90 days from the date of the certification of the election results.  If a director’s resignation is not accepted by the Board of Directors, such director will continue to serve until the next annual meeting for the year in which his or her term expires and until his or her successor is duly elected, or his or her earlier resignation or removal.  If a nominee’s resignation is accepted by the Board of Directors, then the Board of Directors, in its sole discretion, may fill any remaining vacancy or decrease the size of the Board of Directors. To be eligible to be a nominee for election or reelection as our director, a person must deliver to our Corporate Secretary a written agreement that such person will abide by these requirements.
 

 


Capital City Bank Group, Inc. Notice of Annual Meeting and Proxy Statement
4
BOARD AND COMMITTEE MEMBERSHIP

BOARD OF DIRECTORS
 
Our Board of Directors oversees our business, property, and affairs pursuant to the Florida Business Corporation Act and our Articles of Incorporation and Bylaws.  Members of our Board are kept informed of our business through discussions with our senior management team, by reviewing materials provided to them, and by participating in Board and Committee meetings.
 
Our Board met 11 times in 2007.  All of our directors attended at least 75 percent of the total aggregate number of Board and Committee meetings on which they served.
 
We expect all directors to attend our Annual Meeting.  All directors, who were directors at the time of our Annual Meeting in 2007, attended the Annual Meeting.
 
COMMITTEES OF THE BOARD
 
Our Board of Directors has four standing committees: Audit, Compensation, Corporate Governance, and Nominating.  The Board has adopted written charters for each of its four standing committees.  The Audit, Compensation, and Nominating Committee charters are published on the Corporate Governance section of our website at www.ccbg.com.  The Board has determined that all members of the Audit, Compensation, Corporate Governance, and Nominating Committees are “independent” as that term is defined under applicable NASDAQ and Securities and Exchange Commission rules.  As of January 1, 2008, the committee composition was as follows:
 
 
Name
 
Audit
 
Compensation
Corporate Governance
 
Nominating
DuBose Ausley
  
X
X
  
Thomas A. Barron
        
Frederick Carroll, III*
Chair
      
Cader B. Cox, III
  
Chair
  
X
J. Everitt Drew*
X
X
    
John K. Humphress*
X
  
Chair
  
L. McGrath Keen, Jr.
        
Lina S. Knox
    
X
X
Ruth A. Knox
    
X
Chair
Henry Lewis III
X
    
X
William G. Smith, Jr.**
        
 
*      Qualifies as a financial expert
**    Chairman of the Board of Directors
 
Audit Committee
 
The Audit Committee met 14 times in 2007.  Our Board has determined that Frederick Carroll, III, Chairman of the Audit Committee, John K. Humphress, and J. Everitt Drew are each an “audit committee financial expert” as defined by the Securities and Exchange Commission.
 
Management has the primary responsibility for our financial statements and reporting process, including the systems of internal controls and reporting.  Our independent auditors are responsible for performing an independent audit of our consolidated financial statements in accordance with U.S. generally accepted auditing standards, issuing a report thereon, and annually opining on the effectiveness of our internal control over financial reporting.  The Audit Committee monitors the integrity of our financial reporting process, system of internal controls, and the independence and performance of our independent and internal auditors.
 
In addition, the Audit Committee:  (a) monitors and reviews our compliance with Section 112 of the Federal Deposit Insurance Corporation Improvement Act of 1991 and reviews regulatory reports; (b) reviews independent auditors’ report on our financial statements, significant changes in accounting principles and practices, significant proposed adjustments, and any unresolved disagreements with management concerning accounting or disclosure matters; and (c) recommends independent auditors and reviews their independence and qualifications, services, fees, and the scope and timing of audits.
 
Capital City Bank Group, Inc. Notice of Annual Meeting and Proxy Statement
5
Compensation Committee
 
The Compensation Committee met six times in 2007.  The Compensation Committee: (a) reviews and approves corporate goals and objectives relevant to the Chief Executive Officer’s compensation, evaluates the performance of the Chief Executive Officer in light of those goals and objectives, and sets the Chief Executive Officer’s base salary, short-term incentive compensation, and long-term incentive compensation based on this evaluation; (b) reviews and approves base salary, short-term incentive compensation, and long-term incentive compensation of our executive officers; (c) reviews the compensation of our senior management team other than our executive officers; (d) reviews and approves benefits, including retirement benefits and perquisites of our executive officers; (e) reviews and approves employment agreements, severance agreements, and change-in-control agreements for executive officers; (f) evaluates and recommends the appropriate level of director compensation, including compensation for service as a member or chair of a Board committee; and (g) establishes and reviews stock ownership guidelines for directors and executive officers.
 
Nominating Committee
 
The Nominating Committee met three times in 2007.  The Nominating Committee:  (a) develops and reviews background information for candidates for the Board of Directors, including candidates recommended by shareowners, and makes recommendations to the Board of Directors about these candidates; (b) evaluates the performance of current Board members proposed for reelection; (c) recommends to the Board for approval a slate of nominees for election to the Board; (d) reviews all candidates for nomination submitted by shareowners; and (e) develops plans for our managerial succession.
 
Corporate Governance Committee
 
The Corporate Governance Committee met seven times in 2007.  The Corporate Governance Committee: (a) develops, implements, and monitors policies and practices relating to corporate governance; (b) coordinates director orientation and appropriate continuing education programs for directors; (c) oversees the annual self-assessment of the Board and Board Committees; and (d) reviews all shareowner proposals.
 

Capital City Bank Group, Inc. Notice of Annual Meeting and Proxy Statement
6
DIRECTOR COMPENSATION

COMPENSATION ELEMENTS
 
We currently have eight non-associate directors who qualify for compensation for Board service.  The elements of compensation include:
 
Cash Compensation
 
        Basic Annual Retainer.  The basic annual retainer is $12,000.  There was no change from 2006.
 
Audit Committee.  Members of the Audit Committee receive an annual fee of $6,000 and the chairman of the Audit Committee receives an annual chairman fee of $6,000.  There was no change from 2006.
 
Compensation Committee.  Members of the Compensation Committee receive an annual fee of $4,000 and the chairman of the Compensation Committee receives an annual chairman fee of $4,000.  There was no change from 2006.
 
Nominating Committee.  Members of the Nominating Committee receive an annual fee of $2,000 and the chairman of the Nominating Committee receives an annual chairman fee of $2,000.  There was no change from 2006.
 
Corporate Governance Committee.  Members of the Corporate Governance Committee receive an annual fee of $2,000 and the chairman of the Corporate Governance Committee receives an annual chairman fee of $2,000.  There was no change from 2006.
 
Lead Outside Director Annual Fee.  The Lead Outside Director receives an annual fee of $2,000.  There was no change from 2006.
 
Board Meeting Fees.  Directors receive $750 for each board meeting attended.  There was no change from 2006.
 
Equity Compensation
 
Quarterly Stock Grant.  As part of annual director compensation, each director who participates in our Director Stock Purchase Plan earns 100 shares of our common stock per quarter, price based on the closing price of our common stock on the NASDAQ as determined on the last stock trading day of the quarter.  Directors not participating in our Director Stock Purchase Plan receive all 400 shares each January in the year following the year for which service relates based on the average of the high and low prices of the shares of our common stock on the NASDAQ for the last 10 trading days of the previous year.
 
Director Stock Purchase Plan.  Directors are also permitted to purchase shares of common stock at a 10% discount from fair market value under the Director Stock Purchase Plan. This Plan had 93,750 shares of common stock authorized for issuance.  During 2007, 10,238 shares were purchased.  As of December 31, 2007, there were 66,209 shares of common stock available for issuance.  Purchases under this Plan were not permitted to exceed the annual retainer and committee and meeting fees received.  Our shareowners adopted the Director Stock Purchase Plan at our 2004 Annual Meeting.
 
Perquisites and Other Personal Benefits
 
We provide directors with perquisites and other personal benefits that we believe are reasonable, competitive and consistent with our overall director compensation program.  The value of the perquisites for each director in the aggregate is less than $10,000.
 

Capital City Bank Group, Inc. Notice of Annual Meeting and Proxy Statement
7

DIRECTOR COMPENSATION TABLE
 
The following table sets forth a summary of the compensation we paid to our directors, other than directors who are also executive officers, in 2007:
 
 
 
Name
Fees Earned or Paid in Cash
($)
Stock Awards
 ($)(1)
All Other Compensation(2)
($)
Total
($)
  
DuBose Ausley
 $               23,000 $                         10,683 $                                  0 $                       33,683  
Frederick Carroll, III
 31,500 11,122 0 42,622  
Cader B. Cox, III
 33,000 11,122 2,500 46,622  
J. Everitt Drew
 31,000 10,683 0 41,683  
John K. Humphress
 30,250 10,683 0 40,933  
L. McGrath Keen, Jr.
 0 0 0 0 (3)
Lina S. Knox
 22,250 10,683 0 32,933  
Ruth A. Knox
 30,250 11,122 1,000 42,372  
Henry Lewis III
 26,250 11,122 0 37,372  
 
1.  
We pay each non-employee director an annual stock grant of 400 shares of our common stock, issued under our Director Stock Purchase Plan.  Under the terms of the Director Stock Purchase Plan, each non-employee director has the opportunity to participate in the Director Stock Purchase Plan under two separate options.  The first option, Option A, permits non-employee directors to make an election (“Option A Participants”) each January indicating the dollar amount of his or her annual retainer and fees received from serving as a director in the preceding year which he or she would like to be applied to the purchase of shares of our common stock.  The second option, Option B, permits non-employee directors to make an election (“Option B Participants”) each December indicating the percentage of his or her annual retainer and fees to be received from serving as a director in the upcoming year which he or she would like to be applied to the purchase of shares of Common Stock.  Option A Participants receive their annual stock grant each January for the preceding year’s service as director.  Option B Participants will receive their annual stock grant in four equal quarterly installments during the year to which the non-employee director’s service relates.  Messrs. Drew, Humphress, and Ausley and Ms. Lina Knox are Option A Participants, and therefore did not receive their stock grants in 2007.  Instead, these directors received their stock grants in January 2008.  The amounts recognized in the fiscal year for financial statement reporting purposes in accordance with Statement of Financial Accounting Standards 123, as revised (SFAS 123(R)) are the same as the amount reported in this column.
 
2.  
The amounts in this column represent director fees paid to the director for serving as directors for certain subsidiaries of ours.
 
3.
Mr. Keen has been employed by Capital City Bank since the acquisition of Farmers and Merchants Bank in October 2004.  As our associate, Mr. Keen receives a base salary, and may receive other benefits that our associates receive, such as pension benefits.  He received no compensation for his board service in 2007.
 
STOCK OWNERSHIP EXPECTATIONS
 
We maintain stock ownership guidelines for all independent directors. Under our current guidelines, all independent directors are expected to own our common stock equal in value to 10 times their annual director compensation at the time they were elected. Directors have 10 years from the date they are first appointed or elected to our Board to meet the stock ownership requirement.  The Compensation Committee has determined that as of December 31, 2007, all directors have met our share ownership expectations or are on track to meet the ownership expectations within the stated time period of 10 years from date of appointment or election.
 

Capital City Bank Group, Inc. Notice of Annual Meeting and Proxy Statement
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PROPOSAL NO. 1 - NOMINEES FOR ELECTION AS DIRECTORS

ELECTION OF DIRECTORS
 
The Board of Directors is divided into three classes, designated Class I, Class II, and Class III.  The directors in each class are elected for terms of three years or until their successors are duly elected and qualified. At the Annual Meeting, the shareowners will elect three Class II directors.  The Board of Directors proposes the following three nominees for election as directors at the Annual Meeting.  The individuals named on the enclosed proxy card will vote, unless instructed otherwise, each properly delivered proxy for the election of the following nominees as directors.
 
If a nominee is unable to serve, the shares represented by all valid proxies that have not been revoked will be voted for the election of a substitute as the Board of Directors may recommend, or the Board of Directors may by resolution reduce the size of the Board of Directors to eliminate the resulting vacancy.  At this time, the Board of Directors knows of no reason why any nominee might be unable to serve.
 
The Board of Directors has been set at 11 members.  If all three director nominees are elected, the Board of Directors will have no vacancies.
 
Majority Vote Standard for Election of Directors.  Our Bylaws require that each director be elected by a plurality of votes cast with respect to such director in uncontested elections.  Our Bylaws, however, also provide that in an uncontested election, if a nominee for director does not receive the vote of at least the majority of the votes cast at any meeting for the election of directors at which a quorum is present, the director will promptly tender his or her resignation to the Board of Directors.  In a contested election (a situation in which the number of nominees exceeds the number of directors to be elected), the standard for election of directors would be a plurality of the shares represented in person or by proxy at any such meeting and entitled to vote on the election of directors.  Whether an election is contested or not is determined as of a date that is the day immediately preceding the date we first mail our notice of meeting for such meeting to the shareowners; this year’s election was determined to be an uncontested election, and the majority vote standard will apply.
 
NOMINEES TO SERVE FOR A THREE-YEAR TERM EXPIRING IN 2011
 
 
 
 
 
 
 
 
  
THOMAS A. BARRON
Mr. Barron, 55, has been a director since 1982.  He is our Treasurer and was appointed President of Capital City Bank in 1995.
 
 
 
 
 
 
 
  
J. EVERITT DREW
Mr. Drew, 52, has been a director since 2003.  From 2000 through January 2007, he was President of St. Joe Land Company where his duties included overseeing the sale and development efforts of several thousand acres of St. Joe property in northwest Florida and southwest Georgia. Since January 2007, Mr. Drew has been President of SouthGroup Equities, Inc., a private real estate investment and development company.
 
 
 
 
 
 
 
  
LINA S. KNOX
Ms. Knox, 63, has been a director since 1998.  She is a dedicated community volunteer.  Ms. Knox is the first cousin of Mr. Smith.
 
The Board of Directors unanimously recommends a vote “FOR” the nominees.
 
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CONTINUING DIRECTORS AND EXECUTIVE OFFICERS

CONTINUING CLASS III DIRECTORS (Term expiring in 2009)

 
 
 
 
 
  
DuBOSE AUSLEY
Mr. Ausley, 70, has been a director since 1982, and was our Chairman from 1982 until 2003.  He is employed by the law firm of Ausley & McMullen and was Chairman of this firm and its predecessor for more than 20 years until 2002.  Since 1992, he has served as a director of TECO Energy, Inc.  In addition, Mr. Ausley has served as a director of Huron Consulting Group, Inc. since 2004 and a director of Blue Cross and Blue Shield of Florida, Inc. since 1982.
 
 
 
 
 
 
  
FREDERICK CARROLL, III
Mr. Carroll, 57, has been a director since 2003.  Since 1990, he has been the Managing Partner of Carroll and Company, CPAs, an accounting firm specializing in tax and audit based in Tallahassee, Florida.
 
 
 
 
 
 
 
  
JOHN K. HUMPHRESS
Mr. Humphress, 59, has been a director since 1994.  Since 1973, he has been a shareholder of a public accounting firm, Wadsworth, Humphress, Hollar, & Konrad, P.A. (and its predecessors).
 
 
 
 
 
 
 
  
HENRY LEWIS III
Dr. Lewis, 58, has been a director since 2003.  He is a Professor and Director of the College of Pharmacy and Pharmaceutical Studies at Florida A&M University.  Prior to Dr. Lewis’s appointment to his position as director in 2004, Dr. Lewis served as Dean of the College of Pharmacy and Pharmaceutical Studies at Florida A&M University since 1994.
 
CONTINUING CLASS I DIRECTORS (Term expiring in 2010)
 
 
 
 
 
 
  
CADER B. COX, III
Mr. Cox, 58, has been a director since 1994.  From 1976 to May 2006, he has served as President, and since May 2006, he has served as CEO of Riverview Plantation, Inc., a resort and agricultural company.
 
 
 
 
 
 
  
L. McGRATH KEEN, JR.
Mr. Keen, 54, has been a director since 2004. He served as President (2000-2004) and director (1980-2004) of Farmers and Merchants Bank, prior to its merger with us. He was a principal shareowner of Farmers and Merchants Bank at the time of the merger.  Since 2004, Mr. Keen has served as an associate of Capital City Bank.
 

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RUTH A. KNOX
Ms. Knox, 54, has been a director since 2003.  Since 2003, she has served as President of Wesleyan College, Macon, Georgia.  Prior to this appointment, she practiced law in Atlanta and Macon, Georgia for 25 years.
 
 
 
 
 
 
  
WILLIAM G. SMITH, JR.
Mr. Smith, 54, is our Chairman of the Board and has been a director since 1982.  In 1995, he was appointed our President and Chief Executive Officer and Chairman of Capital City Bank.  In 2003, Mr. Smith was elected our Chairman of the Board of Directors.  Mr. Smith has served as a director of Southern Company since February 2006.  Mr. Smith is the first cousin of Lina S. Knox.
 
NON-DIRECTOR EXECUTIVE OFFICER
 
 
 
 
 
 
  
J. KIMBROUGH DAVIS
Mr. Davis, 54, was appointed our Executive Vice President and Chief Financial Officer in 1997.  He served as Senior Vice President and Chief Financial Officer from 1991 to 1997.  In 1998, he was appointed Executive Vice President and Chief Financial Officer of Capital City Bank.
 

Capital City Bank Group, Inc. Notice of Annual Meeting and Proxy Statement
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SHARE OWNERSHIP

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
 
Section 16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers, and parties owning beneficially more than 10% of our common stock, to file reports with the U.S. Securities and Exchange Commission to reflect their interests in our common stock.  Copies of these reports must be furnished to us.
 
Based solely upon on a review of these reports received by us for 2007 and any written representations from reporting persons, we believe that during 2007 each required Section 16(a) report for 2007 was filed on time.
 
SHARE OWNERSHIP TABLE
 
The following table sets forth information, as of February 29, 2008, with respect to the number of shares of our common stock beneficially owned by our directors, executive officers named in the Summary Compensation Table, and all executive officers and directors as a group. The following table also provides information with respect to each person known by us to beneficially own more than 5% of our common stock.
 
As of February 29, 2008, there were 17,179,096 shares of our common stock outstanding.
 
Name
  
Shares Beneficially
                Owned (1)
Percentage of Outstanding Shares Owned(2)
DuBose Ausley
  
640,593
(3)
3.73%
Thomas A. Barron
  
296,785
(4)
1.73%
Frederick Carroll, III
  
6,989
  
*
Cader B. Cox, III
  
402,384
(5)
2.34%
J. Kimbrough Davis
  
71,400
(6)
*
J. Everitt Drew
  
7,649
(7)
*
John K. Humphress
  
511,455
(8)
2.98%
L. McGrath Keen, Jr.
  
375,927
(9)
2.19%
Lina S. Knox (10)
  
68,563
(11)
*
Ruth A. Knox
  
6,092
  
*
Henry Lewis III
  
4,626
  
*
Private Capital Management, L.P.
8889 Pelican Bay Blvd., Naples, Florida 34108
  
1,543,721
(12)
8.99%
Robert H. Smith (10)
Post Office Box 30935, Sea Island, Georgia 31561
  
3,102,641
(13)
18.06%
William G. Smith, Jr. (10)
Post Office Box 11248, Tallahassee, Florida 32302
  
3,385,990
(14)
19.71%
All Directors and Executive Officers as a Group
(12 Persons)
  
5,402,438
  
31.45%

 
 
(Please refer to the footnotes on the following page.)
 

 
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1.
For purposes of this table, a person is deemed to be the beneficial owner of any shares of common stock if he or she has or shares voting or investment power with respect to the shares or has a right to acquire beneficial ownership at any time within 60 days from the record date.  “Voting power” is the power to vote or direct the voting of shares and “investment power” is the power to dispose or direct the disposition of shares.
 
2.
An asterisk in this column means that the respective director or executive officer is the beneficial owner of less than 1% of our common stock.
 
3.
Includes (i) 285,431 shares held in trust under which Mr. Ausley serves as trustee and has sole voting and investment power; (ii) 12,500 shares owned by Mr. Ausley’s wife, of which he disclaims beneficial ownership; and (iii) 350 shares owned by Mr. Ausley and his wife.
 
4.
Includes (i) 56,825 shares held in trusts under which Mr. Barron serves as trustee; (ii) 716 shares for which Mr. Barron has power of attorney and may be deemed to be a beneficial owner; and (iii) 28,906 shares owned by Mr. Barron's wife, of which he disclaims beneficial ownership.  Of the shares of our common stock beneficially owned by Mr. Barron, 133,799 shares are pledged as security.
 
5.
Includes (i) 376,015 shares held in a trust under which Mr. Cox shares voting and investment power as a co-trustee; and (ii) 2,500 shares owned by Mr. Cox’s wife, all of which he disclaims beneficial ownership. Of the shares beneficially owned by Mr. Cox, 376,015 shares are also beneficially owned by Mr. Humphress.
 
6.
Includes (i) 1,162 shares in accounts for his children for which Mr. Davis is custodian; (ii) 20,559 shares owned jointly by Mr. Davis and his wife; and (iii) 5,708 shares owned by Mr. Davis’s wife, directly and through an Individual Retirement Account of which he disclaims beneficial ownership.
 
7.
Includes 624 shares in accounts for his children for which Mr. Drew is custodian.
 
8.
Includes (i) 90,890 shares held by a limited partnership of which Mr. Humphress is a general partner and shares voting and investment power; and (ii) 376,015 shares held in a trust under which Mr. Humphress shares voting and investment power as a co-trustee, of which he disclaims beneficial ownership.  Of the shares beneficially owned by Mr. Humphress, 376,015 shares are also beneficially owned by Mr. Cox.
 
9.
Includes 118,490 shares held in trust of which Mr. Keen serves as sole trustee.
 
10.
Robert H. Smith and William G. Smith, Jr. are brothers, and Lina S. Knox is their first cousin.
 
11.
Includes 3,750 shares owned jointly by Ms. Knox and her husband.
 
12.
As reported in a Schedule 13G amendment dated February 14, 2008.  Private Capital Management, L.P., a registered investment adviser, reported that it is deemed to be the beneficial owner of the shares held by Private Capital Management’s clients and managed by Private Capital Management.  Private Capital Management reported shared voting and investment power over 1,543,721 shares, and disclaimed beneficial ownership of all shares.
 
13.
Includes (i) 100,294 shares in accounts for his children for which Mr. Smith is custodian; (ii) 569,524 shares held in certain trusts under which Mr. Smith shares voting and investment power as a co-trustee; and (iii) 617,423 shares held by a partnership under which Mr. Smith shares voting and investment power.  Of the shares beneficially owned by Robert H. Smith, 1,186,947 shares are also beneficially owned by William G. Smith, Jr.
 
14.
Includes (i) 569,524 shares held in certain trusts under which Mr. Smith shares voting and investment power as a co-trustee; (ii) 617,423 shares held by a partnership under which Mr. Smith shares voting and investment power; (iii) 44,644 shares owned by Mr. Smith’s wife, of which he disclaims beneficial ownership; and (iv) 47,968 shares that may be acquired pursuant to non-voting stock options that are or will become exercisable within 60 days.  Of the shares beneficially owned by William G. Smith, Jr., 1,186,947 shares are also beneficially owned by Robert H. Smith.  Of the shares of our common stock beneficially owned by Mr. Smith, 333,024 shares are pledged as security, including 223,024 shares of the 617,423 shares held by a partnership under which Mr. Smith shares voting and investment.
 

Capital City Bank Group, Inc. Notice of Annual Meeting and Proxy Statement
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EXECUTIVE OFFICERS AND TRANSACTIONS WITH RELATED PERSONS

EXECUTIVE OFFICERS
 
Executive officers are elected annually by the Board of Directors at its meeting following the annual meeting of shareowners to serve for a one-year term and until their successors are elected and qualified.  Thomas A. Barron and William G. Smith, Jr. serve as directors and executive officers and J. Kimbrough Davis is an executive officer.  For information pertaining to the business experience and other positions held by these individuals, see “NOMINEES FOR ELECTION AS DIRECTORS” and “CONTINUING DIRECTORS AND EXECUTIVE OFFICERS.”
 
PROCEDURES FOR REVIEW, APPROVAL, OR RATIFICATION OF RELATED PERSON TRANSACTIONS
 

We recognize that related person transactions may raise questions among our shareowners as to whether the transactions are consistent with our best interests and our shareowners’ best interests. We generally do not enter into or ratify a related person transaction unless our Board of Directors, acting through the Audit Committee or otherwise, determines that the related person transaction is in, or is not inconsistent with, our best interests and our shareowners’ best interests. We have adopted a written Related Person Transaction Policy, and expect to fully implement this policy in 2008.
 
For the purpose of our procedures, a “related person transaction” is a transaction in which we participate and in which any related person has a direct or indirect material interest, other than
 
(1) transactions available to all associates or clients generally, (2) transactions involving less than $120,000 when aggregated with all similar transactions, (3) loans made by Capital City Bank in the ordinary course of business, made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with persons not related to the lender, and not involving more than the normal risk of collectibility or presenting other unfavorable features, or (4) employment arrangements with executive officers that are reviewed and approved by the Compensation Committee.
 
Under our procedures, each director, executive officer, and nominee for director submits to our designated compliance officer, to the best of his or her knowledge, the following information: (a) a list of his or her immediate family members; (b) for each person listed and the director, executive officer, or nominee for director, each firm, corporation or other entity in which such person is an executive officer, a partner or principal or in a similar position or in which such person has a 5% or greater beneficial ownership interest; and (c) for each person listed and the director, executive officer, or nominee for director, each charitable or non-profit organization for which the person actively serves as a director or trustee. We call this list our Related Parties List.
 
On an ongoing basis, and to the best of their knowledge, directors and executive officers are expected to notify our designated compliance officer of any updates to the Related Parties List, changes regarding their employment, and relationships with charitable organizations. On an annual basis, our designated compliance officer re-circulates the most current information to the directors and executive officers for review and re-verification of the information. Each director and executive officer must either (i) update the list to reflect changes in family, changes in employment, and the addition of new parent companies, subsidiaries and sibling companies, or (ii) confirm in writing that no changes have occurred.
 
We use our best efforts to follow similar procedures with each shareowner who owns more than 5% of our common stock.
 
Our designated compliance officer distributes the Related Parties List (and the periodic updates thereof) to (a) each senior manager who oversees our purchasing decisions and (b) the Chief Financial Officer and Chief Executive Officer for use in monitoring of corporate transactions. In addition, our designated compliance officer distributes the portion of the Related Parties List containing the names of immediate family members of directors, executive officers and nominees for director to the Chief People Officer and the portion of the Related Parties List containing the names of related charitable and non-profit organizations to the Capital City Bank Group, Inc. Foundation, President. The recipients of the Related Parties List use the compiled information to implement the review and approval requirements of this policy.
 
 
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We use our best efforts to have our Audit Committee pre-approve all related person transactions. In the event a related person transaction was not pre-approved by the Audit Committee, the transaction is immediately submitted for the Audit Committee’s review for ratification or attempted rescission.
 
Prior to our fully implementing the policy described above, we have historically circulated a questionnaire each quarter to our directors and executive officers, in which each respondent was required to disclose, to the best of their knowledge, all related person transactions that occurred in the previous quarter. We intend to continue to circulate these questionnaires.
 
TRANSACTIONS WITH RELATED PERSONS
 
Based on our current practice, for the year ended December 31, 2007, we have not identified any transactions or series of similar transactions for which we are a party in which the amount involved exceeded or will exceed $120,000 and in which any current director, executive officer, holder of more than 5% of our capital stock had or will have a direct or indirect material interest.

 

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EXECUTIVE COMPENSATION
 
COMPENSATION COMMITTEE PROCESS AND PROCEDURES
 
Scope of Authority
 
The Compensation Committee has strategic and administrative responsibility for a broad range of issues, including reviewing, authorizing, and approving compensation to be paid to our executive officers, directors, and our senior management team.  The Nominating Committee recommends to the Board, and the Board appoints, each member of the Compensation Committee.  The Corporate Governance Committee has evaluated, and the Board has determined, that each member of the Compensation Committee is an independent director.
 
The Compensation Committee’s policy is to review executive compensation, including incentive goals, at least annually.  The Compensation Committee also periodically reviews benefits and perquisites, reviews and provides oversight of our compensation philosophy, serves as the administrative committee for our equity-based plans, and reviews stock ownership guidelines for our executive officers and directors.
 
Delegation of Authority
 
The Compensation Committee’s charter permits the delegation of its authority to our Chief People Officer to administer compensation and benefits programs.  In 2007, the Compensation Committee delegated the administration of all associate compensation, benefit and welfare plans to Bethany H. Corum, our Executive Vice President and Chief People Officer.
 
None of the members of the Compensation Committee is an executive officer of a public company of which one of our executive officers is a director.
 
Independent Consultants
 
In carrying out its responsibilities, the Compensation Committee evaluates the information and recommendations put forth by management and its independent advisors in making its decisions regarding executive compensation.  The Compensation Committee’s decisions are made with the objective of providing fair, equitable and performance-based compensation to executives in a manner that is affordable and cost effective for our shareowners.
 
The Compensation Committee did not engage any independent compensation consultants in 2007.
 
Management’s Role
 
The Compensation Committee sets compensation for the Chief Executive Officer based on data provided by the Chief People Officer.  In addition, the Compensation Committee reviews and approves recommendations for other executive officers’ compensation.  In making these decisions, the Compensation Committee relies on information and recommendations provided by the Chief Executive Officer and Chief People Officer.  The key elements of management’s role in determining compensation levels for our named executive officers (other than William G. Smith, Jr., our Chairman, President, and Chief Executive Officer) are as follows: 
 
§  
Develop performance measures: identify appropriate performance measures and recommend performance targets that are used to determine annual and long-term awards for the Chief Executive Officer and senior managers of the company.
 
§  
Compile benchmark data: management participates in compensation surveys through reputable third-party firms which are used to gather data on base salary, annual cash and long-term performance awards. In 2007, we used Watson-Wyatt’s survey report on Financial Institution’s Compensation General Executive Positions.  The Chief People Officer also provides historical compensation data for each position reviewed by the Compensation Committee.
 
§  
Develop compensation guidelines: using the benchmark survey data and publicly disclosed compensation information as the foundation, management develops compensation guidelines for each executive position. These guidelines are provided to the CEO as the basis for his recommendations regarding individual compensation actions.  In addition, executives are briefed on the guidelines established for their positions.
 
 
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The key members of management involved in the compensation process were Mr. Smith and Ms. Corum.  Mr. Smith was not present during the Compensation Committee’s deliberations regarding his compensation.  Ms. Corum attends all meetings of the Compensation Committee to provide information to the Compensation Committee members and to take minutes of the meetings.  At times, the Compensation Committee conducts executive sessions.  Ms. Corum is excused from all executive sessions and the Chairman of the Committee communicates any decisions for inclusion in minutes.
 
COMPENSATION DISCUSSION AND ANALYSIS
 
Introduction
 
Compensation and Benefits Philosophy.  Our compensation philosophy provides broad guidance on executive compensation and more specifically on the compensation of the named executive officers.  Specifically, the compensation philosophy is to:
 
§  
Align compensation with shareowner value;
§  
Provide a direct and transparent link between the performance of the Company and pay for the CEO and top management;
§  
Make wise use of the Company’s equity resources to ensure compatibility between management and shareowner interests;
§  
Align the interests through performance-based incentive plans of the Company’s senior executive officers with that of shareowners; and
§  
Award total compensation that is both reasonable and effective in attracting, motivating and retaining key associates.
 
We believe that accomplishing corporate goals is essential for our continued success and sustained financial performance. Therefore, we believe that executive officer compensation should be largely performance-based. Specific targets and weightings used for establishing short-term and long-term performance goals are subject to change at the beginning of each measurement period, and are influenced by the Board’s desire to emphasize performance in certain areas. Each year, the Compensation Committee reviews and approves all executive officer performance-based goals.
 
The compensation and benefits programs for our executives are designed with the goal of providing compensation that is fair, reasonable and competitive. The programs are intended to help us recruit and retain qualified executives, and provide rewards that are linked to performance while also aligning the interests of executives with those of our shareowners.
 
Compensation Committee Activity in 2007. The Compensation Committee met six times in 2007, including two executive sessions with only the Compensation Committee members present.  The chair of the Compensation Committee sets the meeting dates and agenda for the committee.
 
In January, the Compensation Committee met in Executive Session to discuss the 2006 performance of the Chief Executive Officer and to set 2007 compensation.  In accordance with the Compensation Committee charter, Compensation Committee Chairman Cader Cox distributed an evaluation to all outside directors, and then collected and compiled the results of the evaluations.  He presented the results for review by the Compensation Committee.  Based in part on this review, the Compensation Committee approved Mr. Smith’s 2007 base salary of $275,000 and target cash incentive of $225,000.  Mr. Smith’s base salary determination was primarily a function of the Compensation Committee’s attempt to gradually increase Mr. Smith’s base salary to the peer benchmark level as we discuss below.  The Compensation Committee also reviewed and approved Capital City Bank President Thomas A. Barron’s 2007 base salary of $236,000 and target cash incentive of $190,000 and Chief Financial Officer J. Kimbrough Davis’s 2007 base salary of $230,000 and target cash incentive of $75,000.  The increase in compensation for Messrs. Barron and Davis was primarily a function of maintaining their compensation at the predetermined peer benchmark level as we discuss below.
 
The Compensation Committee authorized replacement of Mr. Smith’s Stock Option Plan with a Performance Share Units Plan based on the compound annual growth rate in Diluted Earnings Per Share over a three-year period.
 
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In March, the Compensation Committee reviewed 2007 compensation for our 12 senior managers. The Compensation Committee also reviewed director compensation and made no changes to the fee structure for 2007.  The Compensation Committee approved the 2007 Profit Participation Plan at this meeting.
 
In July, the Compensation Committee met with Mr. Smith to discuss strategic compensation  issues.  No actions were taken during this meeting.
 
Compensation Objectives
 
The Compensation Committee, with Board approval, has set the following compensation objectives:
 
§  
Pay base salaries to our senior executives at a level that is greater than the 60th percentile of our selected peer group of banks;
§  
Provide total direct compensation (salary and incentive compensation) to our senior executives at a level greater than the 75th percentile of our selected peer group of banks;
§  
Provide total incentive compensation (the sum of cash incentives and equity incentives) at a level greater than 30 percent of total direct compensation; and
§  
Continue, over time, the alignment of senior management’s interest with that of shareowners (the percentage of equity compensation should increase relative to total incentive compensation).
 
We discuss the composition of our peer group and our benchmarking practices in further detail below.
 
Executive Compensation Policy Decisions
 
The Compensation Committee has adopted a number of policies to further the goals of our executive compensation program, particularly with respect to strengthening the alignment of our executives’ interests with our shareowners’ long-term interests.
 
Stock Ownership Expectations. We maintain stock ownership expectations for all senior managers, including our executive officers.  In October 2007, after review of other publicly-traded company guidelines, the stock ownership guidelines were changed.  Under the new guidelines, all senior managers are expected to own shares of our common stock equal in value to at least two times their annual base salary; Mr. Barron and Mr. Davis are expected to own shares of our common stock equal in value to at least three times their annual base salary; and Mr. Smith is expected to own shares of our common stock equal in value to at least five times his annual base salary. The Compensation Committee has determined that as of December 31, 2007, all named executive officers have met our share ownership expectations and all other senior managers covered by this program are making significant strides in meeting the ownership expectations.
 
Expensing Stock Options. We have expensed stock options since 2003.
 
Prohibition on Repricing Stock Options. By the terms of the 2005 Associate Incentive Plan, which is the only plan we use to grant stock options, repricing stock options is prohibited without shareowner approval.
 
Employment Agreements and Severance Agreements. We believe the employment of our executive officers should remain “at will.”  Therefore, none of our executive officers have employment agreements or severance agreements with us.
 
The Compensation Committee believes the above policies are effective for the following reasons:  stability of management team, our ability to attract talent from outside the Company, and historical stock performance.
 
Compensation Program Design
 
Compensation Framework.  We design our specific compensation elements based on the following:
 
§  
Performance: We believe that the best way to accomplish alignment of compensation plans with the participants’ interests is to link pay directly to individual and company performance.
§  
Competitiveness:  Compensation and benefits programs are designed to be competitive with those provided by companies with whom we compete for talent.  Benefits programs are designed to be competitive with other companies’ programs and are not based on performance.
§  
Cost:  Compensation and benefit programs are designed to be cost-effective and affordable, ensuring that the interests of our shareowners are considered.
§  
Comparator Group:  The relevant comparator group for compensation and benefits programs consists of commercial banks and thrifts, with a geographic footprint or asset base similar to ours.
 
 
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Specific Compensation Elements.  Our executive compensation program is comprised of five discrete elements:
 
§  
Base salary
§  
Short-term incentives
§  
Long-term incentives
§  
Benefits and perquisites
§  
Post-termination compensation and benefits
 
Benchmarking. In setting 2007 CEO compensation, we used a peer group chosen and published by SNL Financial based on their similarities to us relative to our asset size, performance, and markets served.  The 2007 peer group composition changed slightly from 2006, primarily due to merger and acquisition.  Seven new institutions were added and five institutions were removed. The asset size ranged from $720 million to $2.65 billion and averaged $1.89 billion as of December 31, 2006 (see chart below for peer group).  Approximately 30% of the peer group includes institutions that serve the same geographic region as we do.  A compensation study is one of the many tools we use to determine the level of compensation for our named executive officers.  
 
The compensation peer group is not identical to the peer group used to measure company performance, due to difficulty in gathering compensation dated from non-public companies.  Company performance can be gathered from financial institution call reports for public and non-public financial institutions.  However, many of the institutions represented on the compensation peer group are included in the company performance peer group.  We continue to seek a credible, published source that identifies the same peer group for company performance and compensation.
 
FINANCIAL INSTITUTIONS
Ameris Bancorp
Bank of the Ozarks
Bank of Florida Corp.
Cadence Financial Corp.
Cardinal Financial Corp.
CenterState Banks of Florida, Inc.
City Holding Company
Coast Financial Holdings
Fidelity Southern Corp.
First Bancorp
First Community Bancshares, Inc.
Florida Community Banks, Inc.
FNB United Corp.
GB&T Bancshares
Great Florida Bank
Green Bankshares, Inc.
Home Bancshares, Inc.
Pinnacle Financial Partners, Inc.
Renasant Corporation
SCBT Financial Corp.
Seacoast Banking Corp.
Security Bank Corp.
Simmons First National Corp.
StellerOne Corp.
TIB Financial Corp.
TowneBank
Union Bankshares Corp.
 
Virginia Commerce Bancorp
  
 
Base Salary
 
We grant annual base salary increases to our named executive officers based on performance and standing as relative to established compensation guidelines of 60th percentile for base salary and 75th percentile for total direct compensation.  We chose the 60th and 75th percentiles based on our philosophy that these levels will attract and retain the talent necessary to achieve performance goals. Base salaries for the named executive officers are determined by assessing available competitive market data by position and the experience and performance of the individual.  In 2007, Mr. Smith’s base compensation was significantly below the 60th percentile and the Compensation Committee recommended and the Board approved, an increase to base salary of 20%.  Mr. Smith’s low base compensation is not reflective of his performance or experience level.  It has been historically low and the Compensation Committee has placed great emphasis on bringing Mr. Smith’s base salary in line with the stated objective.  Mr. Barron’s and Mr. Davis’s base salaries were at the 60th percentile for their respective positions.  
 
Capital City Bank Group, Inc. Notice of Annual Meeting and Proxy Statement
19
Short-term Incentives
 
Each named executive officer has the opportunity to earn annual cash bonuses.  These cash bonuses, paid through the profit participation plan, are based solely on whether we achieve a target earnings per share (EPS). The Compensation Committee selected EPS as the goal based on a perceived correlation of EPS to overall stock performance.  EPS goals are set at the beginning of the year, based on the budget as recommended by management and approved by the Board of Directors.  In 2007, no bonuses would be paid if our actual EPS was 75% or less of the targeted EPS. Bonuses ranging from 4% to 200% of a specified target award are paid to named executive officers if our actual EPS is between 75% and 125% of targeted EPS of $1.91.
 
In 2007, nine associates, including the named executive officers, participated in the profit participation plan.
 
In 2007, the target awards for the Executive Officers were $225,000 for Mr. Smith, $190,000 for Mr. Barron, and $75,000 for Mr. Davis.  The target awards for cash incentive are set relative to each executive’s cash compensation against the peer group.  Mr. Smith’s base and cash incentive placed him below the 75th percentile for total cash compensation.  Mr. Barron and Mr. Davis’s base and cash incentive placed them at the 75th percentile for total cash compensation, relative to their respective peer groups.
 
In 2007, EPS was $1.66, resulting in a payout of 50.9% of target.  In 2006, the payout was 90.77% of target, and in 2005, the payout was 102.4% of target.
 
Long-term Incentives
 
The Compensation Committee believes a competitive compensation package will include cash bonus and equity awards.  The equity component creates ownership in the Company and focuses attention on the Company’s performance.  The Compensation Committee believes incentive compensation equal to or greater than 30% of compensation is sufficient to change behaviors relative to performance.   As a result, we believe our total incentive-based compensation of 30% of total compensation is appropriate.
 
Stock Options. During the course of 2006, the Compensation Committee made the determination that the granting of stock options should be discontinued.  After careful consideration, the Compensation Committee voted to discontinue Mr. Smith's stock option plan, effective December 31, 2006, in favor of a more simple to administer long-term incentive plan, discussed below.
 
Performance Share Units.
 
           Stock Based Incentive Plan.  In April 2006, following the completion of a compensation study conducted by our independent consultant, the Compensation Committee and Board approved a new design for earning Performance Share Units based on one goal — the earnings progression necessary to achieve our goal of $50 million by 2010.  We call this our Stock-Based Incentive Plan.
 
In early 2008, our management determined that, while on track to achieve its goal through 2006, due to recent changes in financial market conditions and the unknown duration of the current economic cycle, both of which are outside of our control, we now anticipate that we will not reach this goal.  Thus, while it is unlikely that any further payouts will be made under the Stock-Based Incentive Plan, the plan remains in effect and, to date, has not been replaced by other forms of compensation.
 
The Stock-Based Incentive Plan is a performance-based equity bonus plan in which selected members of management, including all named executive officers, are eligible to participate.  The Stock-Based Incentive Plan is administered under our 2005 Associate Incentive Plan.  The Stock-Based Incentive Plan replaced all of our previous stock-based compensation plans.
 
The Stock-Based Incentive Plan consists of performance shares, as well as a tax supplement bonus paid in cash, and is designed to align the economic interests of management with our previously announced Project 2010.  Under the Stock-Based Incentive Plan, all participants are eligible to earn an equity award in each year of the five-year period ending December 31, 2010.  Annual awards are tied to the earnings progression necessary to achieve the Project 2010 goal.  The Compensation Committee has predetermined the earnings goals for each of the five years covered by the Stock-Based Incentive Plan.  If we achieve 100% of the predetermined earnings goal in any year, the Stock-Based Incentive Plan participants will receive 100% of the performance share award for that particular year.  For each year from 2006 through 2009, if we achieve at least 75% of the predetermined year over year growth in earnings required to meet the Project 2010 goal, but less than the predetermined earnings goal, then the Stock-Based Incentive Plan participants will receive 75% of the performance share award for that particular year.  No award will be granted for a year when less than 75% of the predetermined year over year growth in earnings required to meet the Project 2010 goal is achieved.  For the year 2010, no award may be earned unless we meet our Project 2010 goal.  We believe a payout in years 2006 through 2009 at a level less than 100% is appropriate considering actual earnings don’t necessarily follow a linear progression to the 2010 goal, given that in any one year, the economy and the local market conditions may not support 10% growth without engaging in business activities which subject the Company to an unacceptable level of risk.
 
Capital City Bank Group, Inc. Notice of Annual Meeting and Proxy Statement
20
 
For each of the five years covered by the Stock-Based Incentive Plan, the named executive officers are eligible to receive the following shares:
 
Name
Annual 75% Payout
Annual 100% Payout
Maximum Payout
William G. Smith, Jr.
2,657
3,543
17,715
Thomas A. Barron
2,254
3,005
15,025
J. Kimbrough Davis
1,757
2,316
11,580

The number of shares an executive officer is eligible to earn is based on a five year smoothing of base salary and cash incentives, using a formula of 15% of total cash compensation and 19.08% of base salary for Mr. Smith; and 15% of total cash compensation and 15.27% of base salary, for Messrs. Barron and Davis.  The formula assumes a 4% increase in total compensation each year and uses a December 31, 2005 stock price of $34.29 to arrive at the number of shares.  Maximum payout assumes a 100% payout for each of the five years covered by the Incentive Plan.   The varying amounts are a subjective judgment meant to recognize the different levels of responsibility and authority for each executive officer.
 
At the end of each calendar year, the Compensation Committee will confirm that the performance goals have been met prior to the payout of any awards.  Any performance shares earned under the Stock-Based Incentive Plan will be issued in the calendar quarter following the calendar year in which the shares were earned.  For the past three years, any performance shares earned were awarded in February.  Participants will also receive a cash payment equal to 31% of the market value of the performance shares at the time of issue as a tax supplement bonus.   The tax supplement bonus allows the associate to retain all of the shares he/she receives, rather than having to sell a portion of the shares to satisfy any tax obligation.  This supports our philosophy of ownership expectations and aligns the interest of our officers with that of the shareowner.
 
Long-term Incentive Plan - Compound Annual Growth Rate in Diluted EPS.  In January 2007, the Compensation Committee entered into an agreement with Mr. Smith to award Performance Share Units as provided in the 2005 Associate Incentive Plan.  Only Mr. Smith participates in this particular compensation plan because our Compensation Committee believes that it is in the best interests of our shareowners for our Chief Executive Officer to have more of his compensation “at risk” with a bigger potential reward when our stock price outperforms the Board’s expectations.  
 
Under the agreement, we agreed to award Performance Share Units with an economic value equivalent ranging from $0 to $500,000, including a 31% tax supplement bonus.  The target award of $250,000 is based on 10% Compound Annual Growth Rate in Diluted Earnings Per Share over a three-year period, with a phased in approach in years 2007 and 2008.   No award is earned if actual performance is below a 7.5% Compound Annual Growth Rate in Diluted Earnings Per Share, the minimum performance level. A maximum award of $500,000 is earned if the Compound Annual Growth Rate in Diluted Earnings Per Share equals or exceeds 12.5%, the maximum performance level.  The Compensation Committee selected the $500,000 target because if the full target is met and the $500,000 award was paid to Mr. Smith, Mr. Smith’s total direct compensation would be at the 75th percentile of our selected peer group of banks.  As with all of our stock-based plans, the Compensation Committee has determined to pay a tax supplement bonus to help ensure that the executive retains all of the shares he or she received, rather than having to sell a portion of the shares to satisfy any tax obligation.
 
Capital City Bank Group, Inc. Notice of Annual Meeting and Proxy Statement
21
 
Benefits and Perquisites
 
Determining Benefit Levels. Benefit levels are reviewed periodically to ensure that the plans and programs provided are competitive and cost-effective for us, and support our human capital needs.  Benefit levels are not tied to company, business area or individual performance.
 
Perquisites.  We provide our named executive officers with perquisites that we believe are reasonable, competitive and consistent with our overall executive compensation program.  The value of the perquisites for each named executive officer in the aggregate is less than $10,000.
 
Health, Dental, Disability and Life Insurance Coverage. The core insurance package for our named executive officers and senior management team includes health, dental, disability and basic group life insurance coverage.  Our named executives and senior management participate in these benefits on the same basis as our other associates.
 
Paid Time-Off Benefits.  We provide vacation and other paid holidays to all associates, including our named executive officers and senior management team, which are comparable to those provided at similarly sized financial institutions.
 
Post-Termination Compensation and Benefits
 
Retirement Plans.  We provide retirement benefits to named executive officers and senior management through a combination of qualified (under the Internal Revenue Code) and nonqualified plans.  The objectives of our retirement program is (1) to provide our named executive officers with reasonable and competitive levels of protection against contingencies, including retirement, death and disability, which could interrupt their employment with and income received from us and (2) reward the named executive officers for continued service with us.
 
§  
Retirement Plan: The Retirement Plan is a tax-qualified, noncontributory defined benefit plan intended to provide for an associate’s financial security in retirement. All full-time and part-time associates with 1,000 hours of service annually are eligible for the Retirement Plan.
§  
401(k) Plan: The 401(k) plan provides associates the opportunity to save for retirement on a tax-favored basis.  We studied the overall competitiveness of our retirement benefits package and its long-term costs.  To better align the retirement benefits package with associates’ preferences and recruitment needs, a decision was made to change the benefit design of the Retirement Plan and the 401(k) Plan.  For associates hired after January 1, 2002, the pension benefit under the Retirement Plan was reduced and in the 401(k) Plan, a 50% matching contribution was introduced into the 401(k) Plan.  This change was intended to be cost-neutral.  Executives may elect to participate in the 401(k) Plan on the same basis as our other similarly situated associates.  No named executive officers are currently eligible for the company-sponsored match.
§  
Supplemental Executive Retirement Plan (SERP):  Each of our named executive officers participates in our SERP, a nonqualified plan which provides benefits in excess of the Retirement Plan. The SERP is designed to restore a portion of the benefits Messrs. Smith, Barron, and Davis would otherwise receive under our Retirement Plan, if these benefits were not limited by U.S. tax laws.  This more closely aligns the benefits of Messrs. Smith, Barron, and Davis with those of other Retirement Plan participants.  We have no obligation to fund the SERP but accrue for our anticipated obligations under the SERP on an annual basis.
 
Impact of Regulatory Requirements
 
Tax Deductibility of Compensation.  Section 162(m) of the Internal Revenue Code imposes a $1 million limit on the amount that a publicly traded company may deduct for compensation paid to an executive officer who is employed on the last day of the fiscal year. “Performance-based compensation” is excluded from this $1 million limitation.  In general, our policy is to provide compensation that we may fully deduct for income tax purposes. However, in order to maintain ongoing flexibility of our compensation programs, our Compensation Committee may from time to time approve annual compensation that exceeds the $1 million limitation. We recognize that the loss of the tax deduction may be unavoidable under these circumstances.
 
Accounting for Stock-Based Compensation.  In 2003, we began accounting for stock-based payments in accordance with Statement of Financial Accounting Standards 123R, “Share-Based Payment.”
 
Capital City Bank Group, Inc. Notice of Annual Meeting and Proxy Statement
22
 
Conclusion
 
The Compensation Committee believes the philosophy and objectives set forth have allowed us to attract and retain talent needed to deliver above average shareowner return.  We believe by placing a significant portion of pay at risk, behaviors are changed and management focus is placed on strategic objectives of the company.  This philosophy, along with the stock ownership expectations and current levels of ownership by our senior management, aligns the interests of management with that of shareowners.  We believe our compensation philosophy and objectives have been successful in attracting and retaining qualified executives with capabilities that enable the Company to achieve or exceed its designated performance targets.
 
COMPENSATION COMMITTEE REPORT
 
We, as a Compensation Committee, have reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K included in this Proxy Statement.  Based on that review and discussion, we have recommended to the Board of Directors of the Company that the Compensation Discussion and Analysis be included in this Proxy Statement.
 
2007 COMPENSATION COMMITTEE

CADER B. COX, III CHAIR
J. EVERITT DREW
DR. HENRY LEWIS III
 
This report shall not be deemed to be incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act of 1933, or the Securities Exchange Act of 1934, and shall not otherwise be deemed filed under these acts.
 

Capital City Bank Group, Inc. Notice of Annual Meeting and Proxy Statement
23

INFORMATION ABOUT EXECUTIVE COMPENSATION
 
Summary Compensation Table
 
The following summary compensation table shows compensation information for our principal executive officer, principal financial officer, and our president (the other executive officer whose total compensation exceeded $100,000) for the fiscal year ended December 31, 2007.
 
We have no employment agreements with our named executive officers.  None of the named executive officers were entitled to receive payments which would be characterized as “Bonus” payments for 2005, 2006 or 2007.  Amounts listed under column (g), “Non-Equity Incentive Plan Compensation” are determined by the Compensation Committee at its first meeting following the year in which the compensation is earned and paid to the executives shortly after such determination is made.
 
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
 
 
 
 
 
 
 
Name and Principal Position
 
 
 
 
 
 
 
Year
 
 
 
 
 
 
Salary
($)
 
 
 
 
 
 
Bonus
($)
 
 
 
 
 
Stock Awards
  ($)(1)
 
 
 
 
 
Option
Awards
  ($)(2)
 
 
 
 
Non-Equity Incentive Plan Compensation
  ($)(3)
Change in Pension Value and Nonqualified Deferred Compensation Earnings
     ($)(4)
 
 
 
 
 
 
All Other Compensation
   ($)(5)
 
 
 
 
 
 
Total
($)
William G. Smith, Jr.,
Chairman, President, and Chief Executive Officer
2007
   $    275,000
      $      0
     $      0
     $   125,004
      $      114,525
         $   326,151
           $    552
      $    841,232
2006
230,000
0
91,109
 
205,176
204,233
174,214
29,467
934,199
2005
210,000
0
40,803
 
192,884
230,423
239,894
12,798
926,802
Thomas A. Barron,
President, Capital City Bank
2007
236,000
0
0
--
96,710
208,106
1,032
541,848
2006
220,000
0
77,290
 
--
172,463
92,660
25,057
587,470
2005
200,000
0
38,474
 
--
215,061
246,618
12,076
712,229
J. Kimbrough Davis,
Executive Vice President and Chief Financial Officer
2007
230,000
0
0
--
38,175
193,720
552
462,447
2006
200,000
0
59,562
 
--
77,155
122,355
19,399
478,471
2005
185,000
0
25,322
 
--
87,048
156,770
7,999
462,139

1.
The amounts in column (e) reflect the dollar amount recognized for financial statement reporting purposes for the respective fiscal year, in accordance with SFAS 123R of awards under our Stock-Based Incentive Plan.  Thus, they may include amounts from awards granted prior to the year in which the compensation is reported in this table.
 
2.
The amounts in column (f) reflect the dollar amount recognized for financial statement reporting purposes for the respective fiscal year, in accordance with SFAS 123R of awards pursuant to our Stock Option Program, and thus may include amounts from awards granted prior to the year in which the compensation is reported in this table.  Awards are discussed in further detail on page 20 under the heading “Stock Options.”  Assumptions used in the calculation of these amounts are included in footnote 11 to our audited consolidated financial statements for the fiscal year ended December 31, 2007 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 17, 2008.
 
3.
The amounts in column (g) reflect the cash awards to the named individuals under the Cash Bonus Plan, which is discussed in further detail on page 20 under the heading “Short-term Incentives.”  Awards were paid out at 50.9%, 90.77% and 102.41% of the target awards for 2007, 2006 and 2005, respectively.
 
4.
The amounts in column (h) reflect the actuarial increase in the present value of the named executive officer’s benefits under all pension plans established by us determined using the assumptions consistent with those used in our financial statements, which are discussed in further detail on page 28 under the heading “Pension Benefits.”
 
5.  
The amount shown in column (i) reflects for each named executive officer: tax supplement bonus paid and life insurance premium.  In 2007, no tax supplement bonuses were paid.
 
Capital City Bank Group, Inc. Notice of Annual Meeting and Proxy Statement
24
 
Grants of Plan-Based Awards in 2007
 
As discussed in the Compensation Discussion and Analysis, cash bonus plan payouts, stock options and performance share units are granted only when we achieve board approved established levels of performance.  Each stock option permits Mr. Smith to purchase one share of our common stock at the market price of our stock on the date of grant.  Stock options generally expire 10 years from the date of grant.    As of December 31, 2006, our Compensation Committee terminated Mr. Smith’s stock option plan.
 
 
 
 
 
(a)
 
 
 
 
 
 
Name
 
 
 
 
 
 
 
 
 
 
Award
Type
 
 
 
 
 
(b)
 
 
 
 
 
Grant Date
 
Estimated Possible Payouts Under Non-Equity Incentive Plan Awards
Estimated Future Payouts Under Equity Incentive Plan Awards
 
 
 
 
(l)
 
Grant Date Fair Value of Options and Stock Awards
 
 
 
(c)
 
 
 
 
 
Threshold
($)
 
 
(d)
 
 
 
 
 
Target
($)
 
 
(e)
 
 
 
 
 
Maximum
($)
 
 
 
(f)
 
 
 
 
 
Threshold
(#)
 
 
(g)
 
 
 
 
 
Target
(#)
 
 
(h)
 
 
 
 
 
Maximum
(#)
William G. Smith, Jr.
Cash1
N/A
$            0
$  225,000
$  450,000
--
--
--
N/A
PSU2
1/18/07
--
--
--
$            0
$ 250,000
$ 500,000
$            0
Thomas A. Barron
Cash1
N/A
0
190,000
380,000
--
--
--
N/A
J. Kimbrough Davis
Cash1
N/A
0
75,000
150,000
--
--
--
N/A
 
1.
The amounts shown in column (c) reflect the minimum payment level under our Cash Bonus Plan.   The amount shown in column (e) is 200% of the target amount.  The Compensation Committee determines these amounts annually.
 
2.
As discussed in the Compensation Discussion and Analysis, performance share units are awarded pursuant to our 2005 Associate Incentive Plan.  In 2007, we entered into an agreement with Mr. Smith to award him performance share units with an economic value equivalent ranging from $0 to $500,000, including a 31% tax supplement bonus.  The award would be paid if our compound annual growth rate in diluted earnings per share EPS met certain levels as discussed in detail on page 21.  Since our EPS compound growth rate was less than 7.5% in 2007, Mr. Smith did not receive an award.  Thus, no amount is shown in column (l)
 
Outstanding Equity Awards at Fiscal Year-End 2007
 
The following table provides information, for our executive officers named in the Summary Compensation Table, on stock option holdings at the end of 2007.
 
 
 
Option Awards
 
 
 
 
 
Number of Securities Underlying Unexercised Options
(#)
 
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options
(#)
Option Exercise Price
($)
 
 
 
 
 
Option Expiration Date
 
Name
 
Exercisable
 
Unexercisable
William G. Smith, Jr.
23,138
0
--
32.96
3/12/2014
24,831
12,415
--
32.69
3/14/2015

 
 
Capital City Bank Group, Inc. Notice of Annual Meeting and Proxy Statement
25
Option Exercises
 
There were no exercises of stock options by any of our named executive officers during the 2007 fiscal year.
 
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
 
The amount of compensation (if any) that is payable to our named executive officers upon termination of employment depends on the nature and circumstances under which employment is ended.
 
Change in Control
 
In the event of a change in control, our named executive officers will be credited with an additional two years of credited service for purposes of computation of retirement benefits payable under the SERP.  Accrued benefits based upon normal retirement are payable to the named executive officer upon a change in control.  A “change in control” under the SERP means the sale of substantially all of our assets, a change in share ownership of greater than 50% within a 24-month period, or any other determination of change in control made by our Board of Directors.
 
In the event of a change in control, our named executive officers would not receive any additional benefit under the Retirement Plan but would have the same benefits as any associate who separates employment with the Company.
 
In the event of a change in control, any stock options previously granted to one of our named executive officers under the 1996 or 2005 Associate Incentive Plans would become immediately vested.  A “change in control” for purposes of the immediate vesting of options means an acquisition of 25% of our Common Stock by any “person” as defined in the Securities Exchange Act of 1934, or, during any period of two consecutive years, individuals who at the beginning of such period constitute the Board cease for any reason to constitute at least a majority of the Board, unless the election or the nomination for election by our shareowners of each new director was approved by a vote of at least three-quarters of the directors then still in office who were directors at the beginning of the period.
 
We have no post-employment compensation programs designed to provide benefits upon a change in control of the Company, other than those discussed above.
 
Payments Upon Termination of Employment
 
Voluntary Termination.  If a named executive officer voluntarily resigns from our employment, no amounts are payable under the Cash Bonus Plan or the Stock-Based Incentive Plan. The executive may be entitled to receive benefits from the Retirement Plan, and the SERP to the extent those benefits have been earned under the provisions of the plans and the executive officer has met the vesting requirements of the plans. In addition, the executive would be entitled to receive any amounts voluntarily deferred (and the earnings on deferrals) under the 401(k) Plan.
 
Early Retirement.  Currently, Mr. Barron is the only named executive officer eligible to retire as defined by the Retirement Plan and the SERP.  As such, he may be entitled to receive benefits from the Retirement Plan and SERP to the extent those benefits have been earned under the provisions of the plans.  No other named executive officer is eligible for early retirement from the Retirement Plan or the SERP.
 
Death.  If a named executive officer dies while employed by us, the Retirement Plan and the SERP will provide benefits to heirs of the deceased executive.  The benefits are of the same value as those provided for a voluntary termination or early retirement as applicable.
 
Involuntary Termination with or without Cause.  If a named executive officer’s employment is involuntarily terminated, the executive may be entitled to receive benefits from the Retirement Plan and the SERP to the extent those benefits have been earned under the provisions of the plans and the executive officer has met the vesting requirements of the plans.  In addition, the executive would be entitled to receive any amounts voluntarily deferred (and the earnings on deferrals) under the 401(k) Plan.
 
Disability.  In the event that a named executive officer becomes disabled on a long-term basis, the executive officer’s employment by us would not necessarily terminate.  Therefore, we do not disclose any such amounts in the table below.  If a named executive officer becomes disabled under the terms of the Retirement Plan and SERP, the executive will continue to accrue a retirement benefit until the earliest of recovery, death or retirement.  This benefit cannot be paid as a lump sum distribution.
 
Capital City Bank Group, Inc. Notice of Annual Meeting and Proxy Statement
26
Payment Tables
 
William G. Smith, Jr. would have received the following payments had he terminated on December 31, 2007 under the following triggering events:
 
Compensation Components
Change in Control1
  
Voluntary Termination1
  
Early
Retirement1
  
Death1
  
Disability 2
  
Involuntary Termination1
  
(a)
(b)
  
(c)
  
(d)
  
(e)
  
(f)
  
(g)
  
Retirement Plan
 $ 863,084   $ 863,084  
Not eligible
   $ 863,084   $ 15,000   $ 863,084  
SERP
   1,152,006     1,146,031  
Not eligible
     1,146,031     10,446     1,146,031  
Accelerated Vesting of Stock options
   0     0     0     0     0     0  
 
Thomas A. Barron would have received the following payments had he terminated on December 31, 2007 under the following triggering events:
 
Compensation Components
Change in Control1
  
Voluntary Termination1
  
Early
Retirement1
  
Death1
  
Disability2
  
Involuntary Termination1
  
(a)
(b)
  
(c)
  
(d)
  
(e)
  
(f)
  
(g)
  
Retirement Plan
 $ 1,341,600  
Not eligible
   $ 1,341,600   $ 1,341,600   $ 15,000   $ 1,341,600  
SERP
   1,314,179  
Not eligible
     1,314,179     1,314,179     6,708     1,314,179  
 
J. Kimbrough Davis would have received the following payments had he terminated on December 31, 2007 under the following triggering events:
 
Compensation Components
Change in Control1
  
Voluntary Termination1
  
Early
Retirement1
  
Death1
  
Disability 2
  
Involuntary
Termination1
  
(a)
(b)
  
(c)
  
(d)
  
(e)
  
(f)
  
(g)
  
Retirement Plan
 $ 787,976   $ 787,976  
Not eligible
   $ 787,976   $ 14,688   $ 787,976  
SERP
   408,831     316,758  
Not eligible
     316,758     1,648     316,758  
 
PENSION BENEFITS
 
Retirement Plan
 
The key provisions of the Retirement Plan are as follows:
 
Monthly Benefit.  Named executive officers with a vested benefit will be eligible to receive the following retirement benefits each month for the rest of their lives beginning at age 65:
 
§  
1.90% of final average monthly compensation multiplied by years of service after 1988 (limited to 30 years), plus
§  
0.40% of final average monthly compensation in excess of $2,000 multiplied by years of service after 1988 (generally limited to 30 years), plus
§  
the monthly benefit accrued as of December 31, 1988 updated for salary increases since 1988
 
1 Lump Sum.  Lump sum payments are determined as of December 31, 2007 using the Retirement Plan’s applicable basis, namely, the mortality table found in Revenue Ruling 2001-62 and an interest rate of 4.69%.  Under the Retirement Plan and the SERP, lump sum payments are triggered upon a change in control, voluntary termination, retirement, death, and involuntary termination.  No further benefits would be payable after the lump sum payment is made.
 
2 Annuity Payments.  In the event that a named executive officer becomes disabled on a long-term basis, the named executive officer would receive annuity payments beginning at age 65.  These payments coordinate with our long-term disability program.
 

Capital City Bank Group, Inc. Notice of Annual Meeting and Proxy Statement
27

Total benefits are limited by the Internal Revenue Code.  In 2007, the limit was $180,000 per year or $15,000 per month.  Additional provisions may apply for participants who were hired after January 1, 2002 or who worked for a bank that we acquired.
 
Final Average Monthly Compensation.  The final average monthly compensation is the average of the highest five consecutive years of W-2 earnings (plus 401(k) deferrals). Compensation is limited to the limits described in Internal Revenue Code, which was $225,000 per year (or $18,750 per month) for 2007.
 
Beginning in 2008, the value of stock awarded under any of our incentive compensation plans will be included in the average monthly compensation.
 
Vesting.  Participants become vested after reaching five years of service.
 
Early Retirement Benefits.  Participants may elect to retire prior to their Normal Retirement Date.
 
§  
Reduced Retirement:  If participants are at least age 55 and have at least 15 years of service, then they may commence benefits early on a reduced basis.  The monthly benefit will be calculated using the benefit formula described above, reduced 6.67% times the number of years (up to five) that the Benefit Commencement Date precedes the Normal Retirement Date, and 3.33% times any additional years (up to five).
 
§  
Unreduced Retirement:  If they are at least age 61 and have at least 30 years of service, then they may commence benefits early on an unreduced basis.  The monthly benefit will be calculated using the benefit formula described above, reduced 6.67% times the number of years (up to five) that the Benefit Commencement Date precedes the later of age 61 or 30 years of service, and 3.33% times any additional years (up to five).
 
Form of Payment.  Participants may receive their pension benefit as an annuity or as a lump sum.
 
SERP
 
In general, the plan provisions for the SERP are identical to the provisions of the Retirement Plan, except the benefits are calculated without regard to the limits set by the Internal Revenue Code on compensation and benefits.  The net benefit payable from the SERP is the difference between this gross benefit and the benefit payable by the Retirement Plan.  The SERP limits gross benefits to 60% of final average monthly compensation.  As a general rule, we do not grant extra years of service under the SERP.  Exceptions may occur in limited instances such as a mid-career hire.
 
2007 Pension Benefit Tables
 
The following table shows the years of credited service, present value of the accumulated benefit for the named executive officers as of December 31, 2007, assuming payment at age 61, and payments made during the last fiscal year.
 
 
 
Name
 
 
Plan Name
Number of Years of Credited Service
(#)
 
Present Value of Accumulated Benefit
($)
Payments During Last Fiscal Year
($)
William G. Smith, Jr.
Retirement Plan
29
$     963,431
$              0
Supplemental Executive Retirement Plan
29
1,294,313
0
Thomas A. Barron
Retirement Plan
33
1,119,294
0
Supplemental Executive Retirement Plan
33
1,109,304
0
J. Kimbrough Davis
Retirement Plan
26
879,590
0
Supplemental Executive Retirement Plan
26
357,743
0
 
Assumptions Used to Calculate Pension Values
 
Because the pension amounts shown in the Summary Compensation Table and the Pension Benefits Table are projections of future retirement benefits, numerous assumptions must be applied.  In general, the assumptions should be the same as those used to calculate the pension liabilities in accordance with SFAS No. 87, Employers’ Accounting for Pensions on the measurement date, although the Security and Exchange Commission specifies some exceptions (as noted in the table below).
 
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The key assumptions used to determine the pension values are summarized below.  The changes in the pension values shown in the Summary Compensation Table are determined as the change in the values during the fiscal year (including the impact of changing assumptions from the prior fiscal year).  The accumulated pension values shown in the Pension Benefits Table are based on the assumptions as of the end of the fiscal year.
 
Assumption
Basis for assumption
12/31/2004
12/31/2005
12/31/2006
12/31/2007
Discount rate
Under SEC rules, discount rate used to measure pension liabilities under SFAS No. 87, Employers’ Accounting for Pensions
6.00%
 
5.75%
6.00%
 
6.25%
Rate of future salary increases
Under SEC rules, no salary projection
0.00%
0.00%
0.00%
0.00%
Form of payment
Retirement Plan: form elected by officer
80% elect a lump sum and 20% elect an annuity
80% elect a lump sum and 20% elect an annuity
80% elect a lump sum and 20% elect an annuity
80% elect a lump sum and 20% elect an annuity
SERP: form elected by officer
Lump sum
Lump sum
Lump sum
Lump sum
Lump sum interest rate
Interest rate defined by the plan for the upcoming plan year
6.00%
6.00%
6.00%
6.00%
Date of retirement
As per SEC guidance, use first age eligible for unreduced retirement
61
61
61
61
Post-retirement mortality
Retirement Plan: same assumption used to measure pension liabilities under SFAS No. 87, Employers’ Accounting for Pensions
For lump sums, the long-term IRC § 417(e) basis
 
For annuity payments, RP2000 Mortality Table for males
For lump sums, the long-term IRC § 417(e) basis
 
For annuity payments, RP2000 Mortality Table for males
For lump sums, the long-term IRC § 417(e) basis
 
For annuity payments, RP2000 Mortality Table for males
For lump sums, the long-term IRC §
417(e) basis
 
 
For annuity payments, RP2000 Mortality Table for males



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29
 
AUDIT COMMITTEE REPORT

The Audit Committee, which operates under a written charter adopted by the Board of Directors, monitors the Company’s financial reporting process on behalf of the Board of Directors.  This report reviews the actions taken by the Audit Committee with regard to the Company’s financial reporting process during 2007 and particularly with regard to the Company’s audited consolidated statements of financial condition as of December 31, 2007 and 2006, and the related statements of income, changes in shareowners’ equity, and cash flows for each of the years in the three-year period ended December 31, 2007.
 
The Audit Committee believes that it has taken the actions necessary or appropriate to fulfill its oversight responsibilities under the Audit Committee’s charter.  In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed with management the audited financial statements to be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007, including a discussion of the quality (rather than just the acceptability) of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements.
 
The Audit Committee also reviewed with Ernst & Young their judgments as to quality (rather than just the acceptability) of the Company’s accounting principles and such other matters as are required to be discussed with the Audit Committee under Statement on Auditing Standards No. 61, Communication with Audit Committees.  In addition, the Audit Committee discussed with Ernst & Young, the auditor’s independence from management and the Company, including the written disclosures, letter, and other matters required of Ernst & Young by Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees.
 
Additionally, the Audit Committee discussed with the Company’s internal and independent auditors the overall scope and plan for their respective audits.  The Audit Committee met with the internal and independent auditors, with and without management present, to discuss the results of their examinations, their evaluations of the Company’s internal controls, and the overall quality of the Company’s financial reporting.
 
In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007, for filing with the Securities and Exchange Commission.
 
THE AUDIT COMMITTEE

                        FREDERICK CARROLL, III, CHAIRMAN                                                                                J. EVERITT DREW
                        JOHN K. HUMPHRESS                                                                                                RUTH A. KNOX


This report shall not be deemed to be incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, and shall not otherwise be deemed filed under these acts.

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PROPOSAL NO. 2 - RATIFICATION OF AUDITORS

 
APPOINTMENT OF AUDITOR
 
Our Audit Committee appointed Ernst & Young LLP as our independent auditor for the 2008 fiscal year.  Shareowner ratification of the selection of Ernst & Young as our independent public accountants is not required by our Bylaws or other applicable legal requirement.  However, the Board is submitting the selection of Ernst & Young to the shareowners for ratification as a matter of good corporate practice.  If the shareowners fail to ratify the selection, the Audit Committee will reconsider whether or not to retain that firm.  Even if the selection is ratified, the Audit Committee at its discretion may direct the appointment of a different independent accounting firm at any time during the year if it determines that such a change would be in our and our shareowners’ best interests.
 
Representatives of Ernst & Young may attend the 2008 Annual Meeting and, if in attendance, will have an opportunity to make a statement if they so desire and to respond to appropriate questions.
 
The proposal to ratify Ernst & Young as independent auditors will be approved if the votes cast by the shareowners present, or represented, at the Annual Meeting and entitled to vote on the matter favoring this proposal exceed the votes cast in opposition to the proposal.
 
CHANGE IN AUDITOR
 
During 2006, the Audit Committee solicited proposals from four major accounting firms and conducted an extensive evaluation process in connection with the selection of our independent auditor for the fiscal year ending December 31, 2007.  Following this process, on December 21, 2006, the Audit Committee dismissed KPMG LLP as our independent auditor for our fiscal year ending December 31, 2007, and appointed Ernst & Young to serve as our independent auditor for 2007.  KPMG served as our independent auditor for the fiscal year ended December 31, 2006.
 
KPMG’s audit report on our consolidated financial statements as of and for the fiscal year ended December 31, 2006 did not contain an adverse opinion or disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope, or accounting principles.
 
During the fiscal year ended December 31, 2006 and the subsequent interim period through March 15, 2007, the date we filed our Annual Report on Form 10-K for the fiscal year ended December 31, 2006, (i) there were no disagreements between us and KPMG on any matters of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of KPMG, would have caused KPMG to make reference to the subject matter of the disagreement in its report on our consolidated financial statements, and (ii) there were no “reportable events” as that term is defined in Item 304(a)(1)(v) of Regulation S-K.
 
During the fiscal year ended December 31, 2006 and the subsequent interim period through March 15, 2007, neither we nor anyone acting on our behalf consulted Ernst & Young regarding (1) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our consolidated financial statements; or (2) any matter that was either the subject of a disagreement as defined in Item 304(a)(1)(iv) of Regulation S-K or a “reportable event” described in Item 304(a)(1)(v) of Regulation S-K.
 
The Board of Directors unanimously recommends a vote “FOR”
ratification of the appointment of Ernst & Young.

 

 

 

 

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AUDIT FEES AND RELATED MATTERS 
 
FEES PAID TO PRINCIPAL ACCOUNTANTS
 
The following table represents aggregate fees, including out-of-pocket expenses, paid or to be paid to Ernst & Young for the 2007 fiscal year and paid or to be paid to KPMG for the 2006 fiscal year.
 
 
2007
  
2006
Audit Fees
$  582,269
  
$  703,490
Audit-Related Fees
-
  
11,850
Tax Fees
74,000
  
43,000
All Other Fees
-
  
-
Total
$  656,269
  
$  758,340
 
 
Audit fees primarily represent amounts billed to us for auditing our annual consolidated financial statements (including services incurred with rendering an opinion under Section 404 of the Sarbanes-Oxley Act of 2002), reviewing the financial statements included in our Quarterly Reports on Form 10-Q, and for services that are normally provided by the auditor in connection with statutory and regulatory filings.  Also included are $70,749 and $68,500 in out-of-pocket expenses in the 2007 and 2006 fees, respectively.  Audit-Related Fees were fees paid to KPMG in connection with the transition of the auditor of our annual financial statements from KPMG to Ernst & Young.  Tax fees are fees related to the preparation of our original and amended tax returns, claims for refunds, and tax planning.
 
POLICY ON AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND NON-AUDIT SERVICES OF INDEPENDENT AUDITOR
 
The Audit Committee’s policy is to pre-approve all audit and non-audit services provided by the independent auditors.  These services may include audit services, audit-related services, tax services, and other services.  Pre-approval is generally provided for up to 12 months from the date of pre-approval, and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget.  The Audit Committee may delegate pre-approval authority to one or more of its members when expedition of services is necessary.  The independent auditors and management are required to periodically report to the full Audit Committee regarding the extent of services provided by the independent auditors in accordance with this pre-approval policy and the fees for the services performed to date.  The Audit Committee pre-approved all audit and non-audit services provided by Ernst & Young in 2007 and KPMG in 2006.
 
The Audit Committee has determined that the non-audit services provided by Ernst & Young during the fiscal year ended December 31, 2007, were compatible with maintaining their independence.
 

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OTHER MATTERS

ANNUAL REPORT
 
We filed an annual report for the fiscal year ended December 31, 2007, on Form 10-K with the U.S. Securities and Exchange Commission.  Shareowners may obtain, free of charge, a copy of our annual report on Form 10-K by writing to our Corporate Secretary at our principal offices.
 
HOUSEHOLDING
 
We have adopted a procedure approved by the Securities and Exchange Commission known as “householding.”  Under this procedure, shareowners of record who have the same address and last name will receive only one copy of our Notice of Annual Meeting, Proxy Statement, and Annual Report, unless one or more of these shareowners notifies our transfer agent that they wish to continue receiving individual copies.  This procedure will reduce our printing costs and postage fees.  If you wish to receive your own copy of these materials, you may contact our transfer agent, American Stock Transfer & Trust Company, in writing, by telephone, or on the Internet:
 
American Stock Transfer & Trust Company
59 Maiden Lane, Plaza Level
New York, NY 10038
(800) 937-5449 (U.S. and Canada)
(718) 921-8124 (International)
www.amstock.com
 
Shareowners who participate in householding will continue to receive separate proxy cards.  Also, householding will not in any way affect dividend check mailings.  If you are eligible for householding, but you and other shareowners of record with whom you share an address currently receive multiple copies of our Notice of Annual Meeting, Proxy Statement, and Annual Report, or if you hold stock in more than one account, and in either case you wish to receive only a single copy of each document for your household, please contact our transfer agent as indicated above.  Beneficial owners can request information about householding from their banks, brokers, or other holders of record.
 
SHAREOWNER PROPOSALS
 
Shareowner proposals that are to be included in the Proxy Statement for the 2009 meeting must be received by December 1, 2008.  Shareowner proposals for the 2009 meeting that are not intended to be included in the Proxy Statement for that meeting must be received by January 31, 2009, or the Board of Directors can vote the proxies in its discretion on the proposal.  Proposals must comply with the proxy rules and be submitted in writing to J. Kimbrough Davis, Corporate Secretary, at our principal offices.
 
DIRECTOR NOMINATIONS
 
Any shareowner entitled to vote generally in the election of directors may recommend a candidate for nomination as a director.  A shareowner may recommend a director nominee by submitting the name and qualifications of the candidate the shareowner wishes to recommend, pursuant to Article VII of our Articles of Incorporation, to:
 
Nominating Committee of the Board of Directors
c/o Capital City Bank Group, Inc.
217 North Monroe Street
Tallahassee, Florida 32301
 
To be considered, recommendations with respect to an election of directors to be held at an annual meeting must be received no earlier than 180 days and no later than 120 days prior to March 31, 2009, the first anniversary of this year’s Notice of Annual Meeting date.  In other words, director nominations must be received no earlier than October 2, 2008, and no later than December 1, 2008.  Recommendations with respect to an election of directors to be held at a special meeting called for that purpose must be received by the 10th day following the date on which notice of the special meeting was first mailed to shareowners.  Recommendations meeting these requirements will be brought to the attention of the Nominating Committee.  Candidates for director recommended by shareowners are afforded the same consideration as candidates for director identified by our directors, executive officers, or search firms, if any, employed by us.
 

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