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Bank of America DEF 14A 2009
Definitive Notice and Proxy Statement
Table of Contents

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 (Amendment No.    )

 

Filed by the Registrant  x

 

Filed by a Party other than the Registrant  ¨

 

Check the appropriate box:

 

¨

   Preliminary Proxy Statement     

¨

   Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

x

   Definitive Proxy Statement     

¨

   Definitive Additional Materials     

¨

   Soliciting Material Pursuant to §240.14a-12     

 

 

Bank of America Corporation


(Name of Registrant as Specified in its Charter)

 

 

 


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

 

PAYMENT OF FILING FEE (Check the appropriate box):

 

x No fee required.

 

¨   Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

 

  1)   Title of each class of securities to which transaction applies:

 

  

 
  2)   Aggregate number of securities to which transaction applies:

 

  

 
  3)   Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

  

 
  4)   Proposed maximum aggregate value of transaction:

 

  

 
  5)   Total fee paid:

 

  

 

 

¨   Fee paid previously with preliminary materials.

 

¨   Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

  1)   Amount Previously Paid:

 

  

 
  2)   Form, Schedule or Registration Statement No.:

 

  

 
  3)   Filing Party:

 

  

 
  4)   Date Filed:

 

  

 


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LOGO

 

 

March 18, 2009

 

Dear Stockholder:

 

I am pleased to invite you to the Bank of America Corporation 2009 Annual Meeting of Stockholders. The meeting will be held at 10:00 a.m., local time, on April 29, 2009, in the Belk Theater of the North Carolina Blumenthal Performing Arts Center, 130 North Tryon Street, Charlotte, North Carolina. If you are unable to attend, you will be able to listen to the meeting and view our slide presentation over the Internet at http://investor.bankofamerica.com.

 

Enclosed are a notice of matters to be voted on at the meeting, our proxy statement, a proxy card and our 2008 Annual Report.

 

Whether or not you plan to attend, please submit a proxy to vote your shares in one of three ways: via Internet, telephone or mail. Instructions regarding Internet and telephone voting are included on the proxy card (or, if applicable, in your electronic delivery notice). If you choose to submit a proxy by mail, please mark, sign and date the proxy card and return it in the enclosed postage-paid envelope. You may revoke your proxy at any time before it is exercised as explained in the proxy statement.

 

If you plan to attend, please bring the admission ticket attached to your proxy card and photo identification. If your shares are held in the name of a broker or other nominee, please bring with you a letter (and a legal proxy if you wish to vote your shares) from the broker or nominee confirming your ownership as of the record date.

 

Sincerely yours,

LOGO

Kenneth D. Lewis

Chairman, Chief Executive Officer and President


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BANK OF AMERICA CORPORATION

Bank of America Corporate Center

Charlotte, North Carolina 28255

 


NOTICE OF 2009 ANNUAL MEETING OF STOCKHOLDERS


 

Important Notice Regarding the Availability of Proxy Materials for the

Stockholder Meeting to be Held on April 29, 2009

 

The Proxy Statement and Annual Report to Stockholders

are available at http://investor.bankofamerica.com

 

Date:   April 29, 2009
Time:  

10:00 a.m., local time

Place:   Belk Theater of the North Carolina Blumenthal Performing Arts Center
130 North Tryon Street, Charlotte, North Carolina 28202

 

Webcast of the Annual Meeting: You may listen to a live audiocast of the meeting on our website at http://investor.bankofamerica.com at 10:00 a.m., local time, on April 29, 2009.

 

Items of Business:

 

  Item 1: Election to the Board of the 18 nominees named in this proxy statement;

 

  Item 2: Ratification of the independent registered public accounting firm for 2009;

 

  Item 3: An advisory (non-binding) vote approving executive compensation;

 

  Item 4: Consider a stockholder proposal regarding disclosure of government employment;

 

  Item 5: Consider a stockholder proposal regarding advisory vote on executive compensation;

 

  Item 6: Consider a stockholder proposal regarding cumulative voting;

 

  Item 7: Consider a stockholder proposal regarding special stockholder meetings;

 

  Item 8: Consider a stockholder proposal regarding independent board chairman;

 

  Item 9: Consider a stockholder proposal regarding predatory credit card lending practices;

 

  Item 10: Consider a stockholder proposal regarding adoption of principles for health care reform;

 

  Item 11: Consider a stockholder proposal regarding limits on executive compensation; and

 

  Consider any other business properly brought before the meeting.

 

Record Date: You are entitled to notice of and to vote at the Annual Meeting (or any adjournment or postponement thereof) if you were a stockholder of record on March 4, 2009. In accordance with Delaware law, for 10 days prior to the Annual Meeting, a list of those registered stockholders entitled to vote at the Annual Meeting will be available for inspection in the office of the Corporate Secretary, Bank of America Corporation, Bank of America Plaza, 101 South Tryon Street, NC1-002-29-01, Charlotte, North Carolina 28255. The list also will be available at the Annual Meeting.

 

Proxy Voting: Your vote is important. Please submit your proxy as soon as possible via either the Internet, telephone or mail.

 

By order of the Board of Directors:

 

LOGO

 

Alice A. Herald

Deputy General Counsel

and Corporate Secretary

 

March 18, 2009


Table of Contents

TABLE OF CONTENTS

 

GENERAL INFORMATION

   1

CORPORATE GOVERNANCE

   4

Commitment to Corporate Governance Best Practices

   4

Additional Corporate Governance Information, Committee Charters and Code of Ethics

   4

The Board of Directors

   4

Board Evaluation and Education

   5

Director Independence

   5

Board Attendance and Annual Meeting Policy

   5

Independent Lead Director

   6

Executive Sessions of the Board

   6

Board Committee Membership and Meetings

   6

2008/2009 Bank of America Committee Composition

   7

2009/2010 Bank of America Committee Composition

   7

Identifying and Evaluating Nominees for Director

   10

Communications with the Board of Directors

   11

Code of Ethics

   11

Charitable Giving and Political Contributions

   11

Director Compensation

   12

ITEM 1:  ELECTION OF DIRECTORS

   14

The Nominees

   15

STOCK OWNERSHIP

   18

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

   20

COMPENSATION AND BENEFITS COMMITTEE REPORT

   20

COMPENSATION DISCUSSION AND ANALYSIS

   21

EXECUTIVE COMPENSATION

   27

COMPENSATION AND BENEFITS COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

   42

CERTAIN TRANSACTIONS

   42

AUDIT COMMITTEE REPORT

   43

ITEM 2:  RATIFICATION OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2009

   44

Fees to Independent Registered Public Accounting Firm for 2008 and 2007

   44

Pre-approval Policies and Procedures

   44

ITEM 3:  ADVISORY (NON-BINDING) VOTE APPROVING EXECUTIVE COMPENSATION

   45

ITEMS 4 THROUGH 11:  STOCKHOLDER PROPOSALS

   45

PROPOSALS FOR THE 2010 ANNUAL MEETING OF STOCKHOLDERS

   58

Appendix A:  DIRECTOR INDEPENDENCE CATEGORICAL STANDARDS

   A-1


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BANK OF AMERICA CORPORATION

Bank of America Corporate Center

Charlotte, North Carolina 28255

 


PROXY STATEMENT


 

We are providing these proxy materials in connection with the solicitation of proxies by the Board of Directors of Bank of America Corporation for the 2009 Annual Meeting of Stockholders (the “Annual Meeting”). In this proxy statement, we refer to the Board of Directors as the “Board” and to Bank of America Corporation as “we,” “us,” “our company,” “Bank of America” or the “Corporation.” This proxy statement is being mailed starting on or about March 18, 2009.

 

GENERAL INFORMATION

 

Record Date. Only holders of record at the close of business on March 4, 2009 will be entitled to notice of and to vote at the Annual Meeting. Holders of the Corporation’s Common Stock (the “Common Stock”), the 7% Cumulative Redeemable Preferred Stock, Series B (the “Series B Preferred Stock”), the Floating Rate Non-Cumulative Preferred Stock, Series 1 (the “Series 1 Preferred Stock”), the Floating Rate Non-Cumulative Preferred Stock, Series 2 (the “Series 2 Preferred Stock”), the 6.375% Non-Cumulative Preferred Stock, Series 3 (the “Series 3 Preferred Stock”), the Floating Rate Non-Cumulative Preferred Stock, Series 4 (the “Series 4 Preferred Stock”), the Floating Rate Non-Cumulative Preferred Stock, Series 5 (the “Series 5 Preferred Stock”), the 6.70% Non-Cumulative Perpetual Preferred Stock, Series 6 (the “Series 6 Preferred Stock”), the 6.25% Non-Cumulative Perpetual Preferred Stock, Series 7 (the “Series 7 Preferred Stock”), and the 8.625% Non-Cumulative Preferred Stock, Series 8 (the “Series 8 Preferred Stock”), vote together without regard to class except as otherwise required by law.

 

As of the record date of March 4, 2009, there were 6,404,894,551 shares of Common Stock, 7,642 shares of the Series B Preferred Stock, 21,000 shares of the Series 1 Preferred Stock, 37,000 shares of the Series 2 Preferred Stock, 27,000 shares of the Series 3 Preferred Stock, 20,000 shares of the Series 4 Preferred Stock, 50,000 shares of the Series 5 Preferred Stock, 65,000 shares of the Series 6 Preferred Stock, 50,000 shares of the Series 7 Preferred Stock and 89,100 shares of the Series 8 Preferred Stock entitled to vote at the Annual Meeting. Each share of the Common Stock and Series B Preferred Stock is entitled to one vote. Each share of the Series 1-5 Preferred Stock and Series 8 Preferred Stock is entitled to 150 votes. Each share of the Series 6 and 7 Preferred Stock is entitled to five votes.

 

Voting By Proxy. Whether or not you plan to attend the Annual Meeting, you may submit a proxy to vote your shares via Internet, telephone or mail as more fully described below:

 

   

By Internet: Go to www.investorvote.com/bac and follow the instructions. You will need your proxy card or electronic delivery notice to submit your proxy.

 

   

By Telephone: Call 1.800.652.8683 and follow the voice prompts. You will need your proxy card or electronic delivery notice to submit your proxy.

 

   

By Mail: Mark your vote, sign your name exactly as it appears on your proxy card, date your proxy card and return it in the envelope provided.

 

If you properly submit a proxy without giving specific voting instructions, your shares will be voted in accordance with the Board’s recommendations as follows:

 

“FOR”:

 

   

Item 1: Election to the Board of the 18 nominees named in this proxy statement;

 

   

Item 2: Ratification of the independent registered public accounting firm for 2009; and

 

   

Item 3: An advisory (non-binding) vote approving executive compensation;

 

and “AGAINST” the stockholder proposals regarding:

 

   

Item 4: Disclosure of government employment;

 

   

Item 5: Advisory vote on executive compensation;

 

 


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Item 6: Cumulative voting;

 

   

Item 7: Special stockholder meetings;

 

   

Item 8: Independent board chairman;

 

   

Item 9: Predatory credit card lending practices;

 

   

Item 10: Adoption of principles for health care reform; and

 

   

Item 11: Limits on executive compensation.

 

If other matters properly come before the Annual Meeting, the persons appointed to vote the proxies will vote on such matters in accordance with their best judgment. Such persons also have discretionary authority to vote to adjourn the Annual Meeting, including for the purpose of soliciting proxies to vote in accordance with the Board’s recommendations on any of the above items.

 

Revoking Your Proxy. You may revoke your proxy at any time before it is exercised by:

 

   

written notice of revocation to the Corporate Secretary;

 

   

a properly executed proxy of a later date; or

 

   

voting in person at the Annual Meeting.

 

Cost of Proxy Solicitation. We will pay the cost of soliciting proxies. In addition to soliciting proxies by mail or electronic delivery, we also may use some of our associates, who will not be specially compensated, to solicit proxies, either personally or by telephone, facsimile or written or electronic mail. In addition, we have agreed to pay Georgeson Inc. $17,000 and Laurel Hill Advisory Group, LLC $17,500 plus expenses to assist us in soliciting proxies from banks, brokers and nominees. We also will reimburse banks, brokers and other nominees for their expenses in sending proxy materials to their customers who are beneficial owners.

 

Quorum Required to Hold the Annual Meeting. In order to hold the Annual Meeting, a quorum consisting of the holders of a majority of the aggregate voting power of the Common Stock and the Series B Preferred Stock, Series 1 Preferred Stock, Series 2 Preferred Stock, Series 3 Preferred Stock, Series 4 Preferred Stock, Series 5 Preferred Stock, Series 6 Preferred Stock, Series 7 Preferred Stock and Series 8 Preferred Stock must be present in person or represented by proxy at the Annual Meeting. For purposes of determining the presence or absence of a quorum, we intend to count as present shares present in person but not voting and shares for which we have received proxies but for which holders thereof have abstained. Furthermore, shares represented by proxies returned by a broker holding the shares in nominee or “street” name will be counted as present for purposes of determining whether a quorum is present, even if the shares are not entitled to be voted on matters where discretionary voting by the broker is not allowed (“broker non-votes”).

 

Majority Vote Standard for Election of Directors. In October 2006, the Board amended our Bylaws to provide that a nominee for director in an uncontested election shall be elected to the Board if the votes cast for such nominee’s election exceed the votes cast against his or her election. Abstentions from voting, as well as broker non-votes, if any, are not treated as votes cast and, therefore, will have no effect on the proposal to elect 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 will be a plurality of the votes cast at the meeting.

 

If a nominee who is currently serving as a director is not elected at the Annual Meeting, under Delaware law the director will continue to serve on the Board as a “holdover director.” However, under our Corporate Governance Guidelines, any director who fails to be elected must offer to resign from the Board. The director whose resignation is under consideration will abstain from participating in any decision regarding that resignation. The Corporate Governance Committee and the Board may consider any factors they deem relevant in deciding whether to accept a director’s resignation. The Board will publicly disclose its decision regarding the resignation within 90 days after results of the election are certified. If the resignation is not accepted, the director will continue to serve until the next annual meeting and until the director’s successor is elected and qualified. If a nominee who is not

 

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already serving as a director is not elected at the Annual Meeting, under Delaware law that nominee will not become a director and will not serve on the Board as a “holdover director.”

 

The Board will nominate for re-election only candidates who have tendered irrevocable resignations that will be effective upon: (i) the failure to receive the required vote at the next annual meeting at which they are nominated for re-election; and (ii) Board acceptance of such resignation. In addition, the Board will fill director vacancies and new directorships only with candidates who agree to tender, promptly following their appointment to the Board, the same form of irrevocable resignation.

 

Votes Required to Adopt Other Proposals. Approval of each of the other proposals requires the votes cast in favor of each such proposal to exceed the votes cast against such proposal. Abstentions from voting, as well as broker non-votes, if any, are not treated as votes cast and, therefore, will have no effect on any such proposal.

 

Voting by Associates. If you participate in The Bank of America 401(k) Plan, The Bank of America 401(k) Plan for Legacy Companies, the Countrywide Financial Corporation 401(k) Savings and Investment Plan, the Merrill Lynch & Co. Inc. Retirement Accumulation Plan, the Merrill Lynch & Co. Inc. Employee Stock Ownership Plan, the Merrill Lynch & Co. Inc. 401(k) Savings & Retirement Plan or the First Republic Bank Employee Stock Ownership Plan, and your plan account is invested in Bank of America Common Stock, you must provide voting instructions to the trustee of the plan (either via the proxy card or by Internet or telephone) in order for the shares represented by your investment to be voted as you instruct. If no voting instructions are received, the trustee of the plan will vote these shares in the same ratio as the shares for which voting instructions have been provided to the trustee. Your voting instructions will be held in strict confidence. If you participate in the Merrill Lynch Employee Stock Purchase Plan, your shares must be voted in order to count. The deadline to cast votes for shares held in the foregoing plans is April 28, 2009 at 8:00 a.m. EST. You will not be able to change your vote after this deadline.

 

Householding. Unless we have received contrary instructions, we send a single copy of the annual report, proxy statement and notice of annual or special meeting to any household at which two or more stockholders reside if we believe the stockholders are members of the same family. Each stockholder in the household will continue to receive a separate proxy card. This process, known as “householding,” reduces the volume of duplicate information received at your household and helps reduce our expenses.

 

If you would like to receive your own set of the annual report, proxy statement and notice of annual meeting this year or in future years, follow the instructions described below:

 

If your shares are registered in your own name, please contact our transfer agent and inform them of your request to revoke householding by calling them at 1.800.642.9855 or writing to them at Computershare Trust Company, N.A., P.O. Box 43078, Providence, Rhode Island 02940-3078. Within 30 days of your revocation, we will send to you individual documents.

 

If a bank, broker or other nominee holds your shares, please contact your bank, broker or other nominee directly.

 

If two or more stockholders residing in the same household individually receive copies of the annual report, proxy statement and notice of annual or special meeting and as a household wish to receive only one copy, you may contact our transfer agent at the address and telephone number listed in the preceding paragraph in the case of registered holders, or your bank, broker or other nominee directly if such bank, broker or other nominee holds your shares, and request that householding commence as soon as practicable.

 

Electronic Delivery. In addition to householding, we can also reduce our expenses if you elect to receive annual reports and proxy materials via the Internet. If you request, you can receive email notifications when these documents are available electronically on the Internet. If you have an account maintained in your name at Computershare Investor Services, you may sign up for this service at www.computershare.com/bac.

 

Questions. If you hold your shares directly, please call Computershare Trust Company at 1.800.642.9855. If your shares are held in street name, please contact the telephone number provided on your voting instruction form or contact your broker directly.

 

Rules of Conduct for the Annual Meeting

 

We anticipate significant stockholder attendance at the Annual Meeting. If you plan to attend, please bring the admission ticket attached to your proxy card and photo identification. If your shares are held in the name of a broker or other nominee, please bring with you a letter (and a legal proxy if you wish to vote your shares) from

 

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the broker or nominee confirming your ownership as of the record date, which is March 4, 2009. Failure to bring such a letter may delay your ability to attend or prevent you from attending the meeting.

 

A number of stockholders have expressed an interest in speaking at the meeting. The Board appreciates the opportunity to hear the views of stockholders. In fairness to all stockholders and participants at the meeting, and in the interest of an orderly and constructive meeting, rules of conduct will be enforced. Copies of these rules will be available at the meeting. Only stockholders or their valid proxy holders may address the meeting. Depending on the number of stockholders who wish to speak, we cannot assure that every stockholder who wishes to speak will be able to do so for as long as they might want to hold the floor.

 

Only proposals that meet the requirements of Rule 14a-8 of the Securities Exchange Act of 1934 or our Bylaws will be eligible for consideration at the meeting. This year the only proposals that meet the criteria are those set forth in this proxy statement. Therefore, proposals raised at the meeting that are not identified in this proxy statement will not be considered during the Annual Meeting.

 

Stockholders may submit proposals and other matters for consideration at the 2010 Annual Meeting as described in “Proposals for the 2010 Annual Meeting of Stockholders” on page 58.

 

CORPORATE GOVERNANCE

 

Commitment to Corporate Governance Best Practices

 

Bank of America’s business and affairs are managed by or under the direction of the Board. In its oversight of Bank of America, the Board sets the tone for the highest ethical standards and performance of our management, associates and the Corporation as a whole. The Board strongly believes that good corporate governance practices are important for successful business performance. Our corporate governance practices are designed to align the interests of the Board and management with those of our stockholders and to promote honesty and integrity throughout Bank of America. Over the past several years, we have enhanced our corporate governance practices in many important ways, and we continually seek out best practices to promote a high level of performance from the Board and management. The Board has adopted Corporate Governance Guidelines that embody long-standing practices of Bank of America as well as current corporate governance best practices. Highlights of our corporate governance practices are described below.

 

Additional Corporate Governance Information, Committee Charters and Code of Ethics

 

More corporate governance information about us can be found on our website at http://investor.bankofamerica.com under the heading Corporate Governance. Information available at this website includes our: (i) Certificate of Incorporation; (ii) Bylaws; (iii) Corporate Governance Guidelines (including the Related Person Transactions Policy); (iv) Code of Ethics; (v) charters of each of the committees of the Board; and (vi) Director Independence Categorical Standards. This information is also available in print free of charge upon written request addressed to: Bank of America Corporation, Attention: Shareholder Relations, 101 South Tryon Street, NC1-002-29-01, Charlotte, North Carolina 28255.

 

The Board of Directors

 

The basic responsibility of the Board is to oversee the businesses and affairs of Bank of America. Key responsibilities of the Board and its committees include:

 

   

monitoring the performance of the Chief Executive Officer;

 

   

appropriately compensating the Chief Executive Officer and other executives;

 

   

creating a succession plan for the position of Chief Executive Officer and reviewing succession plans for other executive officers and senior management;

 

   

approving our annual and strategic business plans; and

 

   

establishing a high ethical tone for Bank of America.

 

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Board Evaluation and Education

 

Each year, the Board and the Audit, Compensation and Benefits and Corporate Governance Committees evaluate their effectiveness. The Board views self-evaluation as an ongoing process designed to achieve high levels of Board and committee performance.

 

All new directors participate in our orientation program in their first year as a director. This orientation includes presentations by senior management to familiarize new directors with our management, lines of business, strategic plans, significant financial, accounting and risk management matters, compliance programs, conflict policies, Code of Ethics and other policies. Directors receive ongoing continuing education through educational sessions at meetings and periodic mailings between meetings. In addition, all but two of the non-management directors participated in a half-day session on risk management matters in 2008. The session was led by our Chief Risk Officer and Chief Financial Officer. Our Executive Officers, Chief Accounting Officer, General Auditor, certain line of business managers and senior risk and finance officers covered key risks by line of business, market risks, accounting matters and new product and new business governance. Our General Counsel was also in attendance at the session. The Board also encourages directors to participate in continuing education programs and reimburses directors for the expenses of such participation.

 

Director Independence

 

The Board is composed at all times of at least a majority of directors who are independent. As described below, the Board has determined that 16 of the Board’s 18 director nominees, or approximately 89%, are independent directors. The Board has adopted categorical standards to assist it in making the annual affirmative determination of each director’s independence status. These Director Independence Categorical Standards (“Categorical Standards”) are attached as Appendix A and posted on our website. A director will be considered “independent” if he or she meets the requirements of the Categorical Standards and the criteria for independence set forth from time to time in the listing standards of the New York Stock Exchange (“NYSE”).

 

The Board has evaluated the relationships between each current director (and his or her immediate family members and related interests) and Bank of America and its subsidiaries. The Board has affirmatively determined, upon the recommendation of the Corporate Governance Committee, that each of the following directors is independent under the Categorical Standards and the NYSE listing standards: William Barnet, III; Frank P. Bramble, Sr.; Virgis W. Colbert; John T. Collins; Gary L. Countryman; Tommy R. Franks; Monica C. Lozano; Walter E. Massey; Thomas J. May; Patricia E. Mitchell; Joseph W. Prueher; Charles O. Rossotti; Thomas M. Ryan; O. Temple Sloan, Jr.; Meredith R. Spangler; Robert L. Tillman; and Jackie M. Ward.

 

The Board has determined that Charles K. Gifford and Kenneth D. Lewis do not meet the independence standards. Mr. Lewis is our Chief Executive Officer. Mr. Gifford was employed by Bank of America or a predecessor and receives compensation from the Corporation which exceeds the threshold set forth in the Categorical Standards.

 

In making its independence determinations, the Board considered that in the ordinary course of business the Corporation and its subsidiaries may provide commercial and investment banking, financial advisory and other services to some of the independent directors, or members of the directors’ families, and to business organizations and individuals associated with them. The Board also considered that in the ordinary course of business some business organizations with which an independent director is, or members of the director’s family are, associated may provide products and services to the Corporation and its subsidiaries. The Board has determined that, based on the information available to the Board, none of these relationships was material.

 

Board Attendance and Annual Meeting Policy

 

Directors are expected to attend our annual meeting of stockholders, regular and special meetings of the Board and meetings of the committees on which they serve. They are also expected to prepare for meetings in advance and to dedicate the time at each meeting as necessary to properly discharge their responsibilities. Informational materials, useful in preparing for meetings, are distributed in advance of each meeting. In 2008, there were thirteen meetings of the Board, and each of the directors attended at least 75% of the meetings of the Board and committees on which he or she served. In addition, all of the members of the Board, consistent with our policy, attended our 2008 Annual Meeting of Stockholders.

 

 

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The Board also encourages directors to participate in board information sessions via telephone conference which were commenced by our management in 2008. During these sessions, which are conducted by our Chief Executive Officer, directors have access to and receive updates from, senior management on the Corporation’s financial condition and lines of business. A total of eight sessions were held in 2008 and included reviews of developing market conditions.

 

Independent Lead Director

 

Our Corporate Governance Guidelines provide that an independent Lead Director be elected annually for a one-year term. In 2006, Mr. Sloan was elected by the independent directors to serve as independent Lead Director, and has since been re-elected to serve for additional one-year terms through April 2009.

 

The independent Lead Director’s duties, which the Board updated in 2008, include:

 

   

chairing meetings of the non-management and independent directors;

 

   

presiding at meetings of the Board in the absence or at the request of the Chairman of the Board;

 

   

acting as a liaison between the independent directors and the Chairman of the Board;

 

   

approving meeting agendas;

 

   

ensuring that appropriate information is sent to the Board;

 

   

providing an important communication link between the other independent directors and our stockholders; and

 

   

calling additional meetings of the independent directors as appropriate.

 

As independent Lead Director, Mr. Sloan regularly communicates with our Chief Executive Officer on a variety of issues including business strategy and succession planning.

 

The Board periodically considers its structure and the role and responsibilities of the independent Lead Director to reflect its commitment to corporate governance best practices.

 

Executive Sessions of the Board

 

Our non-management directors meet in executive session at each regular Board meeting. Our independent Lead Director chairs these executive sessions. In addition, if at any time the group of non-management directors includes directors who are not independent under the NYSE listing standards and our Categorical Standards, the independent directors will meet separately in executive session at least once a year.

 

Board Committee Membership and Meetings

 

During 2008, the Board had five standing committees: Asset Quality; Audit; Compensation and Benefits; Corporate Governance; and Executive. All of the members of the committees are nominated by the Corporate Governance Committee and appointed by the Board.

 

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The table below provides membership information for each of the Board’s committees.

 

2008/2009 Bank of America Committee Composition

 

Director Name  

Asset

Quality

Committee

 

Audit

Committee

 

Compensation
and Benefits

Committee

 

Corporate
Governance

Committee

 

Executive

Committee

William Barnet, III

      X            

Frank P. Bramble, Sr.

  X                

Virgis W. Colbert

  X†                

John T. Collins

      X            

Gary L. Countryman

          X†   X†   X

Tommy R. Franks

      X            

Charles K. Gifford

  X†               X

Kenneth D. Lewis

                  X

Monica C. Lozano

  X                

Walter E. Massey

      X            

Thomas J. May

      X*            

Patricia E. Mitchell

          X   X    

Joseph W. Prueher

      X†            

Charles O. Rossotti

          X†   X†    

Thomas M. Ryan

          X   X*    

O. Temple Sloan, Jr.**

          X*   X   X*

Meredith R. Spangler

          X   X    

Robert L. Tillman

  X               X†

Jackie M. Ward

  X*                
*   Committee Chairman
**   Independent Lead Director
  Assignment effective January 28, 2009

 

In addition, the Board has made, subject to election of the director nominees by the stockholders at the Annual Meeting, the following committee assignments to be effective as of the Annual Meeting:

 

2009/2010 Bank of America Committee Composition

 

Director Name  

Asset

Quality

Committee

 

Audit

Committee

 

Compensation
and Benefits

Committee

 

Corporate
Governance

Committee

 

Executive

Committee

William Barnet, III

      X            

Frank P. Bramble, Sr.

  X                

Virgis W. Colbert

  X                

John T. Collins

      X            

Gary L. Countryman

          X   X   X

Tommy R. Franks

      X            

Charles K. Gifford

  X               X

Kenneth D. Lewis

                  X

Monica C. Lozano

  X                

Walter E. Massey

      X            

Thomas J. May

      X*            

Patricia E. Mitchell

          X   X    

Joseph W. Prueher

      X            

Charles O. Rossotti

          X   X    

Thomas M. Ryan

          X   X*    

O. Temple Sloan, Jr.**

          X*   X   X*

Robert L. Tillman

  X               X

Jackie M. Ward

  X*                
*   Committee Chairman
**   Independent Lead Director

 

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While each committee has its own charter and designated responsibilities, the committees act on behalf of the entire Board and regularly report on their activities to the entire Board. The committee charters are posted on our website and key information about each committee is described below.

 

Asset Quality Committee. The Asset Quality Committee currently consists of six directors. During 2008, the Committee held six meetings. Duties of the Asset Quality Committee include:

 

   

reviewing asset quality trends and performance;

 

   

monitoring management’s adherence to prudent and sound credit policies and practices;

 

   

reviewing credit concentrations, credit risk inherent in selected products and businesses, country risk and loan loss reserves;

 

   

reviewing adequacy of the allowance for loan and lease losses and related written policies and procedures;

 

   

reviewing market risk reports; and

 

   

approving credit risk policies and management disciplines as required by the Basel II accord or other regulatory requirements.

 

Audit Committee. The Audit Committee currently consists of six directors, all of whom are independent under the NYSE listing standards, the Categorical Standards and Securities and Exchange Commission (“SEC”) rules and regulations applicable to audit committees. The Board has determined that all six directors are financially literate in accordance with the NYSE listing standards and Mr. Barnet and Mr. May also qualify as audit committee financial experts under SEC rules. During 2008, the Audit Committee held ten meetings. Duties of the Audit Committee include the following:

 

   

reviewing annually the scope of the proposed internal audit, external audit and credit review activities, as well as the actual coverage of those activities;

 

   

discussing the contents of our annual and quarterly consolidated financial statements with management, the independent registered public accounting firm and the general auditor;

 

   

appointing or terminating, determining the compensation of and evaluating the qualifications, performance and independence of the independent registered public accounting firm;

 

   

pre-approving the scope of services provided by and fees paid to the independent registered public accounting firm for audit, audit-related and permitted non-audit services;

 

   

overseeing the corporate audit function;

 

   

reviewing the scope and content of examinations of the Corporation by banking and other regulatory agencies and reporting their conclusions to the Board, including comments as to the suitability of necessary corrective action taken, and to the response made to the regulators; and

 

   

reviewing with management and the Corporation’s General Counsel the nature and status of significant legal matters.

 

Compensation and Benefits Committee. The Compensation and Benefits Committee currently consists of six directors, including our independent Lead Director, all of whom are independent under the NYSE listing standards and our Categorical Standards. During 2008, the Compensation and Benefits Committee held five meetings. Duties of the Committee include:

 

   

overseeing the establishment, maintenance and administration of our compensation and benefits programs;

 

   

reviewing our performance and approving the compensation of our executive officers, and subject to further approval by the Board, our Chief Executive Officer’s compensation; and

 

   

making recommendations to the Board on director compensation.

 

The Committee may create subcommittees with authority to act on the Committee’s behalf. The Committee has delegated to the Stock Plan Award Subcommittee (which consists of the chairman of the Committee) the Committee’s authority to make awards and determine the terms and conditions of stock options, stock appreciation rights and restricted stock awards (both shares and units) under the Bank of America Corporation 2003 Key Associate Stock Plan (the “Key Associate Stock Plan”) that was most recently approved by stockholders in December 2008. However, this delegation of authority does not extend to awards to our executive officers.

 

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The Committee may delegate to management certain of its duties and responsibilities, including with respect to the adoption, amendment, modification or termination of benefit plans and with respect to the awards of stock options under certain stock plans. Significant delegations made by the Committee include the following:

 

   

The Management Compensation Committee has the authority to direct the compensation for all of our associates and officers except for those persons serving as our executive officers;

 

   

The Corporate Benefits Committee has responsibility for substantially all of our employee benefit plans; and

 

   

The Chief Administrative Officer has the authority to make awards of stock options and stock appreciation rights under the Key Associate Stock Plan to other associates who are not executive officers, provided the awards are on terms and conditions that have been pre-approved by the Committee or the Stock Plan Award Subcommittee.

 

The Committee actively engages in its duties and follows procedures intended to ensure excellence in the governance of our pay-for-performance philosophy:

 

   

The Committee regularly meets throughout the year. Customarily at each meeting it reviews: (i) company performance; (ii) executive compensation strategy, approach and trends; (iii) equity usage and effect on dilution; and (iv) other topics as appropriate;

 

   

Throughout the year, the Committee reviews each executive officer’s total compensation package, including base salary, cash and stock incentive awards, accumulated realized and unrealized stock option and restricted stock gains, qualified and nonqualified retirement and deferred compensation benefit accruals and the incremental cost of all perquisites. The Committee uses, and makes available to the full Board, an executive compensation statement, or “tally sheet,” for each executive officer for this purpose;

 

   

The Committee members receive materials for meetings in advance and participate in individual premeetings with management to review the materials. The Committee members also receive any resolutions and advance copies of the actual plan documents or agreements under consideration with appropriate summaries;

 

   

The Committee retains a compensation consultant, which it meets with regularly without the presence of management. In addition, the chairman of the Committee regularly meets alone with the compensation consultant;

 

   

The Committee regularly meets in executive session without the presence of management or the compensation consultant; and

 

   

The Committee reports on its meetings to the full Board. After a performance review, the Board approves the total annual compensation awards for our Chief Executive Officer.

 

The form and amount of compensation paid to our non-employee directors is reviewed from time to time by the Committee. Any changes to director compensation are recommended by the Committee to the Board for approval.

 

Our executive officers are generally not engaged directly with the Committee in setting the amount or form of executive officer or director compensation. However, as part of the annual performance review for our executive officers other than the Chief Executive Officer, the Committee considers the Chief Executive Officer’s perspective on each executive officer’s individual performance and compensation as well as the performance of our various business segments and lines of business. As discussed in the Compensation and Discussion Analysis beginning on page 21, in light of the extraordinary economic environment that evolved in 2008, year-end compensation decisions for all of our executive officers were made by the full Board, excluding Mr. Lewis, and were based, in part, on the recommendation of Mr. Lewis.

 

The Committee uses the services of a compensation consultant to assist it in performing its duties. The Committee has the sole authority and responsibility under its charter to approve the engagement of any compensation consultant. The consultant must have no relationship with us that would interfere with its ability to provide independent advice. The Committee reviews any relationships between management and the consultant, as well as the amount of work performed for us by the consultant in areas other than executive officer and director compensation. If the compensation consultant provides services to us other than in connection with the evaluation of director, chief executive officer or executive officer compensation and benefits, the Committee will approve the annual amount of aggregate fees permitted for such other services.

 

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The Committee retained Frederic W. Cook & Company (“Cook”) for matters relating to 2008 executive and director compensation. Cook’s business is limited to providing independent executive and director compensation consulting services to its clients. It does not provide any other management or human resources-related services. The Committee asked Cook to provide it with external market and performance comparisons and to advise it with respect to executive officer and Chief Executive Officer compensation. Towers Perrin, the Committee’s compensation consultant for 2007 executive compensation decisioning, provided the Committee with some preliminary analysis of 2008 executive compensation levels early in the year. Due to the extraordinary economic environment that evolved in 2008, that early analysis ultimately was not a factor in our 2008 compensation decisions.

 

Corporate Governance Committee. The Corporate Governance Committee currently consists of six directors, including our independent Lead Director, all of whom are independent under the NYSE listing standards and the Categorical Standards. During 2008, the Corporate Governance Committee held four meetings. Duties of the Corporate Governance Committee include:

 

   

identifying individuals qualified to become Board members, and recommending to the Board, consistent with criteria approved by the Board, director nominees;

 

   

recommending our Corporate Governance Guidelines, Code of Ethics, Insider Trading Policy and other corporate governance policies to the Board;

 

   

leading the Board and its committees in their annual self-evaluation and the annual review of the Board’s performance;

 

   

recommending committee appointments to the Board;

 

   

recommending a successor in the event of a vacancy in the offices of the Chief Executive Officer and Chairman of the Board, together with the Executive Committee;

 

   

overseeing the director education program; and

 

   

recommending changes to our charter documents.

 

Executive Committee. The Executive Committee currently consists of five directors, including our independent Lead Director. During 2008, the Executive Committee held six meetings although it has only one regularly scheduled meeting per year. The Executive Committee has the power to act on behalf of the Board between regular Board meetings. The Executive Committee reports its actions to the full Board at the next regular meeting.

 

Identifying and Evaluating Nominees for Director

 

The Corporate Governance Committee is responsible for evaluating candidates and recommending proposed director nominees to the Board. The Corporate Governance Committee will consider candidates proposed or suggested by Board members, management, third party search firms retained by the Corporate Governance Committee and stockholders. The Corporate Governance Committee follows the same process and uses the same criteria for evaluating candidates whether proposed by Board members, management, third party search firms or stockholders.

 

Our Corporate Governance Guidelines set forth the standards for evaluating candidates as director nominees. The Corporate Governance Committee and the Board consider the overall experience and expertise represented by the Board as well as the qualification of each candidate. Specifically, the standards for evaluating candidates are as follows:

 

   

at least a majority of the Board must be composed of independent directors;

 

   

candidates shall be capable of working in a collegial manner with persons of diverse educational, business and cultural backgrounds;

 

   

candidates shall be individuals of the highest character and integrity who possess significant experience or skills that will benefit Bank of America;

 

   

candidates shall be free of conflicts of interest that would interfere with their ability to discharge their duties or violate any applicable laws or regulations; and

 

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candidates shall be capable of devoting the necessary time to discharge their duties, taking into account memberships on other boards and other responsibilities, and shall have a desire to represent the interests of all stockholders.

 

In addition, a director who has reached the age of 72 will not be nominated for election to the Board. A director who changes his or her principal occupation shall offer to resign, and the Corporate Governance Committee, along with the Chairman of the Board, will determine whether to accept such resignation. Management directors will resign from the Board when they leave their executive officer positions.

 

Any stockholder recommending a candidate to be considered by the Corporate Governance Committee for nomination at an annual meeting of stockholders must submit the proposal in writing by no later than October 15th of the preceding year. The proposal must include the following:

 

   

the name and address of the stockholder;

 

   

a representation that the stockholder is a holder of Bank of America’s voting stock (including the number and class of shares held);

 

   

a description of all arrangements or understandings among the stockholder and the candidate and any other person or persons (naming such person or persons) pursuant to which the recommendation is made by the stockholder;

 

   

a statement signed by the candidate recommended by the stockholder acknowledging that the candidate will serve if elected by the stockholders and will comply with our Bylaws, Code of Ethics, Corporate Governance Guidelines and any other applicable rule, regulation, policy or standard of conduct applicable to the Board and its members; and

 

   

a description of the candidate’s background and experience and the reasons why he or she meets the standards for director nominees set forth in our Corporate Governance Guidelines.

 

Our Corporate Governance Guidelines provide that the Board shall nominate for election or re-election as directors only candidates who agree to tender, following the annual meeting at which they are elected or re-elected as directors, irrevocable resignations that will be effective upon: (i) the failure to receive the required vote at the next annual meeting at which they are nominated for re-election; and (ii) Board acceptance of such resignation. In addition, the Board shall fill director vacancies and new directorships only with candidates who agree to tender, promptly following their appointment to the Board, the same form of irrevocable resignation tendered by other directors in accordance with our Corporate Governance Guidelines.

 

Communications with the Board of Directors

 

The Board has established a process for stockholders and other interested parties to communicate with the Board, any director (including the independent Lead Director), non-management members of the Board as a group or any Board committee. Parties may send a letter to Bank of America Corporation, Attention: Corporate Secretary, 101 South Tryon Street, NC1-002-29-01, Charlotte, North Carolina 28255. For further information, refer to “Contact the Board” on our website.

 

Code of Ethics

 

The Board has adopted a Code of Ethics that applies to all of our directors, officers and associates, including our Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer. The Code of Ethics embodies our commitment to the highest standards of ethical and professional conduct. All directors, officers and associates are required to annually certify that they have read and complied with the Code of Ethics. The Code of Ethics consists of basic standards of business practice as well as professional and personal conduct. We intend to post any amendments to the Code of Ethics, or waivers thereof (to the extent applicable to the Chief Executive Officer, Chief Financial Officer or Chief Accounting Officer), on our website.

 

Charitable Giving and Political Contributions

 

The Board annually reviews a report on our charitable giving and political contribution programs. Information regarding our policy on political contributions and activities can be found in our “Corporate Political Contributions Policy Statement” on our website.

 

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Director Compensation

 

Mr. Lewis is our sole employee director and he does not receive any compensation for his services as a director. We provide the following elements of annual compensation for our non-employee directors:

 

   

cash award of $80,000;

 

   

restricted stock award of $160,000;

 

   

retainer of $30,000 for the independent Lead Director;

 

   

retainer of $30,000 for the chairman of the Audit Committee; and

 

   

retainer of $20,000 for the chairman of each of the Asset Quality, Compensation and Benefits and Corporate Governance Committees.

 

Non-employee directors who begin their Board service mid-year receive a pro-rata portion of the annual compensation.

 

The annual restricted stock award is provided under the Bank of America Corporation Directors’ Stock Plan (the “Directors’ Stock Plan”) and is subject to a one-year vesting requirement. The number of shares awarded equals the dollar value of the award divided by the closing price of our Common Stock on the grant date, rounded down to the next whole share, with cash payable for any fractional share.

 

Non-employee directors can elect to defer any or all of their compensation through the Bank of America Corporation Director Deferral Plan (the “Director Deferral Plan”). If a director elects to defer their annual restricted stock award, we credit a “stock account” with a number of whole and fractional “stock units” of equal value, with each stock unit having the same value as our Common Stock. These stock units are subject to the same one-year vesting requirement that applies under the Directors’ Stock Plan. Directors can choose to defer their annual cash award, as well as any independent Lead Director or committee chairman retainers, into the stock account or a “cash account.” We credit the stock account with dividend equivalents in the form of additional stock units and credit the cash account with interest at a long-term bond rate. Following retirement from the Board, a non-employee director receives the balances of his or her stock account (to the extent vested) and cash account in a single lump sum cash payment or in 5 or 10 annual cash installments per the director’s prior election. Because stock units are not actual shares of our Common Stock, they do not have any voting rights.

 

The following table presents the compensation we paid, accrued or expensed with respect to our non-employee directors for their services in 2008:

 

        Stock Awards             
Director  

Fees Earned

or Paid in
Cash

($) (1)

 

2008 Stock

Awards

($) (2)

 

Other

Stock-Based

Accounting

Adjustments

($) (3)

   

Total Stock

Awards

($) (4)

   

All Other

Compensation

($)

   Total
($)
 

William Barnet, III

  80,000   160,000   0     160,000     0    240,000  

Frank P. Bramble, Sr.

  80,000   160,000   (112,624 )   47,376     0    127,376  

John T. Collins

  80,000   160,000   (98,882 )   61,118     0    141,118  

Gary L. Countryman

  0   240,000   (112,624 )   127,376     0    127,376  

Tommy R. Franks

  80,000   160,000   (112,624 )   47,376     0    127,376  

Charles K. Gifford (5)

  0   240,000   (112,624 )   127,376     1,504,020    1,631,396  

W. Steven Jones (retired)

  0   0   (13,742 )   (13,742 )   0    (13,742 )

Monica C. Lozano

  80,000   160,000   (112,624 )   47,376     0    127,376  

Walter E. Massey

  80,000   160,000   (112,624 )   47,376     0    127,376  

Thomas J. May

  0   270,000   (112,624 )   157,376     0    157,376  

Patricia E. Mitchell

  80,000   160,000   (112,624 )   47,376     0    127,376  

Thomas M. Ryan

  0   260,000   (112,624 )   147,376     0    147,376  

O. Temple Sloan, Jr.

  130,000   160,000   0     160,000     0    290,000  

Meredith R. Spangler

  0   240,000   (112,624 )   127,376     0    127,376  

Robert L. Tillman

  80,000   160,000   (112,624 )   47,376     0    127,376  

Jackie M. Ward

  0   260,000   (112,624 )   147,376     0    147,376  

 

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(1)   The amounts in this column represent the following two items:

 

   

amounts paid in cash during 2008 comprised of: (i) the annual cash award paid in 2008; and (ii) independent Lead Director and committee chairman retainers paid in 2008; and

 

   

cash amounts otherwise payable in 2008 described above that were deferred into the director’s cash account under the Director Deferral Plan.

 

This column does not include any such cash awards that were deferred under the Director Deferral Plan into a director’s stock account. Those amounts are instead reflected in the “2008 Stock Awards” column.

 

(2)   The amounts in this column represent the following two items:

 

   

the grant date fair value of the restricted stock award granted on April 23, 2008, in the amount of $160,000, whether or not such awards were deferred under the Director Deferral Plan; and

 

   

the value of stock units credited to a director’s stock account during 2008 related to a cash award otherwise payable during 2008 that the director elected to defer into the director’s stock account under the Director Deferral Plan.

 

(3)   Amounts in this column represent the change in fair value recognized during 2008 for unvested stock units credited under the Director Deferral Plan. Stock units credited in April 2007 were unvested until April 2008; the units credited in April 2008 were unvested through the end of 2008. These amounts generally will be positive in years in which our stock price goes up and negative in years, like last year, in which our stock price goes down. Using the same approach, the change in fair value recognized during 2008 for vested stock units credited under the Director Deferral Plan (which generally are stock units credited in years prior to 2007) was as follows: William Barnet, III – ($20,614); Frank P. Bramble, Sr. – ($160,845); John T. Collins – $4,213; Gary L. Countryman – ($311,493); Tommy R. Franks – ($160,845); Charles K. Gifford – ($155,877); W. Steven Jones – ($271,962); Monica C. Lozano – ($160,845); Walter E. Massey – ($204,083); Thomas J. May – ($376,888); Patricia E. Mitchell – ($177,896); Thomas M. Ryan – ($346,800); O. Temple Sloan, Jr. – ($4,525); Meredith R. Spangler – ($379,893); Robert L. Tillman – ($172,252); and Jackie M. Ward – ($416,013).

 

(4)   The amounts in this column are the sum of the amounts under “2008 Stock Awards” and “Other Stock-Based Accounting Adjustments.” As of December 31, 2008, our non-employee directors held the following number of unexercised stock options and the following whole number of unvested shares of restricted stock or unvested stock units:

 

Director   

Unexercised

Options

(#)

  

Unvested Shares of

Restricted Stock or

Stock Units

(#)

William Barnet, III

   0    4,340

Frank P. Bramble, Sr.

   0    4,340

John T. Collins

   0    4,340

Gary L. Countryman

   2,630    4,340

Tommy R. Franks

   0    4,340

Charles K. Gifford

   0    4,340

W. Steven Jones (retired)

   0    0

Monica C. Lozano

   0    4,340

Walter E. Massey

   8,000    4,340

Thomas J. May

   2,630    4,340

Patricia E. Mitchell

   8,000    4,340

Thomas M. Ryan

   0    4,340

O. Temple Sloan, Jr.

   8,000    4,340

Meredith R. Spangler

   8,000    4,340

Robert L. Tillman

   0    4,340

Jackie M. Ward

   8,000    4,340

 

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(5)   Mr. Gifford entered into a Retirement Agreement with us in connection with his retirement as an associate effective January 31, 2005. The Retirement Agreement remains in effect for a five-year initial period and is renewable annually thereafter, but ends earlier in the case of Mr. Gifford’s death. Under the Retirement Agreement, Mr. Gifford provides consulting services as requested by us, including advice to the Bank of America Foundation regarding philanthropic activities in the Northeast and to the Northeast marketing executive regarding our initiatives in that market. Mr. Gifford also acknowledged that his retirement did not constitute a termination for “good reason” under his prior FleetBoston Financial Corporation (“FleetBoston”) change in control agreement (which agreement was previously disclosed in the joint proxy statement-prospectus relating to the Bank of America and FleetBoston merger and in other public filings of FleetBoston) and gave a general release of claims.

 

In consideration for his consulting services and other agreements, Mr. Gifford receives: (i) a $50,000 retainer for each of the first five years of the Retirement Agreement; (ii) use of company-provided aircraft for up to 120 hours per year for each of the first five years of the Retirement Agreement and up to 100 hours per year for any additional year the Retirement Agreement remains in effect thereafter; and (iii) office space (for as long as he requests) and secretarial support (for the first five years of the Retirement Agreement, renewable annually thereafter) that is both reasonable and appropriate in size and scope.

 

For 2008, the value of these benefits equaled the following: (i) $50,000 in consulting fees; (ii) $947,682 in aircraft usage (which is the amount paid to a third party vendor); and (iii) $225,031 in office and administrative support. In addition, we paid Mr. Gifford a tax gross-up in the amount of $281,307 related to his use of company-provided aircraft. We did this because in 2006 we began imputing income for personal use of company-provided aircraft using a third-party “charter” value, rather than the more common IRS-approved Standard Industry Fare Level (SIFL). By changing to the charter value, we made it more expensive for our executive officers to use company-provided aircraft for personal travel. However, this change also made the aircraft usage for Mr. Gifford more expensive, which was not the intent when the Retirement Agreement was originally entered into. The tax gross-up represents the difference in the taxes Mr. Gifford is required to pay using charter values versus what he would have had to pay had we continued using SIFL values.

 

Upon his retirement as an associate, Mr. Gifford became entitled to receive compensation as a non-employee director as more fully described above.

 

Stock Ownership Requirements for Directors. We have formal stock ownership requirements that apply to our non-employee directors. Under these requirements, each non-employee director is required to own and hold a minimum of 10,000 shares of our Common Stock. All full value shares beneficially owned are included in the calculation. New non-employee directors have up to five years to achieve compliance. All non-employee directors who have served on the Board for at least five years comply with our requirements. Non-employee directors cannot sell the restricted stock they receive as compensation (except as necessary to pay taxes upon vesting) until termination of their service.

 

ITEM 1: ELECTION OF DIRECTORS

 

The Board has nominated each of the following individuals for election at the Annual Meeting. Each director elected will serve until the next annual meeting of stockholders when his or her successor has been duly elected and qualified, or until the director’s earlier resignation or removal. If any nominee is unable to stand for election for any reason, the persons appointed to vote the proxies may vote at the Annual Meeting for another person proposed by the Board, or the number of directors constituting the Board may be reduced. Pursuant to the Agreement and Plan of Merger, dated as of September 15, 2008, as amended, between Bank of America and Merrill Lynch & Co., Inc. (“Merrill Lynch”), we agreed to expand the Board and appoint three additional directors from among the directors serving on the Merrill Lynch board of directors immediately prior to the closing of the acquisition. As a result, in January 2009, the Corporate Governance Committee recommended the appointment of, and the Board appointed, the following former Merrill Lynch directors to the Board: Virgis W. Colbert; Retired Admiral Joseph W. Prueher; and Charles O. Rossotti.

 

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The Nominees

 

Set forth below are each nominee’s name, principal occupation and five year business history.

 

The Board recommends a vote “FOR” all of the nominees listed below for election as directors (Item 1 on the proxy card).

 

LOGO    WILLIAM BARNET, III (66), Chairman, President and Chief Executive Officer, The Barnet Company, Spartanburg, South Carolina, a real estate and other investments firm. He has been in his present position since 2001 and has been President of Barnet Development Corporation, a real estate investment firm, since 1990. He has also served as Chairman of William Barnet & Son, LLC, a synthetic fiber processing company, from 2001 to 2006, and served as Chief Executive Officer from 2000 to 2001. He served as President and Chief Executive Officer of William Barnet & Son, Inc. from 1976 to 2000. He has been the Mayor of Spartanburg, South Carolina since 2002. He has been a director of the Corporation since April 2004 and is a member of the Audit Committee. He also serves as a director of Duke Energy Corporation.
LOGO    FRANK P. BRAMBLE, SR. (60), Former Executive Officer, MBNA Corporation, Wilmington, Delaware. He served as an advisor to the Executive Committee of MBNA Corporation, a financial services company, from April 2005 to December 2005 when it was acquired by the Corporation. Prior to that time, he had served as Vice Chairman of MBNA from July 2002 to April 2005. He also served as a director of Allfirst Financial, Inc. and Allfirst Bank from April 1994 to May 2002, and from December 1999 to May 2002 as Chairman of the Board. He has been a director of the Corporation since January 2006 and is a member of the Asset Quality Committee.
LOGO    VIRGIS W. COLBERT (69), Senior Advisor, MillerCoors Company, Milwaukee, Wisconsin, a brewing company. He served as Miller Brewing Company’s Executive Vice President of Worldwide Operations from 1997 to 2005; Senior Vice President and Vice President of Operations from 1993 to 1997; and also held other key leadership positions at Miller Brewing Company since 1979. He is Chairman Emeritus of the Thurgood Marshall College Fund and former Chairman of the Board of Trustees of Fisk University. He has been a director of the Corporation since January 2009 and is a member of the Asset Quality Committee. He also serves as a director of Lorillard, Inc., The Manitowoc Company, Inc., Sara Lee Corporation and The Stanley Works.
LOGO    JOHN T. COLLINS (62), Chief Executive Officer, The Collins Group, Inc., Boston, Massachusetts, a venture capital, private equity investments and management firm. He has been in his present position since 1995. He has been a director of the Corporation since April 2004 and is a member of the Audit Committee.
LOGO    GARY L. COUNTRYMAN (69), Chairman Emeritus and Director, Liberty Mutual Group, Boston, Massachusetts, an international and property and casualty insurance company. He served as Chairman of Liberty Mutual Group from 1986 to 2000. He also served as Chief Executive Officer from 1986 to 1998. He has been a director of the Corporation since April 2004 and is a member of the Compensation and Benefits, Corporate Governance and Executive Committees. He also serves as trustee of NSTAR and a director of CBS Corporation.
LOGO    TOMMY R. FRANKS (63), Retired General, United States Army, Roosevelt, Oklahoma. General Franks has operated Franks & Associates, LLC, a private consulting firm, since 2003. He served in the United States Army from 1965 to 2003. In August 2003, he retired as a four star general. He has been a director of the Corporation since January 2006 and is a member of the Audit Committee.

 

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LOGO    CHARLES K. GIFFORD (66), Former Chairman, Bank of America Corporation, Charlotte, North Carolina. He served as Chairman of the Corporation from April 2004 until January 2005. Prior to that time, he had served as Chairman and Chief Executive Officer of FleetBoston since 2002. He also served as President and Chief Executive Officer of FleetBoston from 2001 to 2002 and President and Chief Operating Officer from 1999 to 2001. He has been a director of the Corporation since April 2004 and is a member of the Asset Quality and Executive Committees. He also serves as a trustee of NSTAR and a director of CBS Corporation.
LOGO    KENNETH D. LEWIS (61), Chairman, Chief Executive Officer and President, Bank of America Corporation, Charlotte, North Carolina. He has served as Chief Executive Officer since April 2001, President since July 2004 and Chairman since February 2005. He previously served as Chairman from April 2001 to April 2004 and President from January 1999 to April 2004. He also served as Chief Operating Officer from October 1999 to April 2001. He also serves as Chairman, Chief Executive Officer, President and a director of Bank of America, N.A. and as Chairman and a director of Merrill Lynch & Co., Inc. He has been a director of the Corporation since 1999 and is a member of the Executive Committee.
LOGO    MONICA C. LOZANO (52), Publisher and Chief Executive Officer, La Opinion, Los Angeles, California, the largest Spanish-language newspaper in the United States. She has been in her present position since January 2004. In addition, she has served as Senior Vice President of ImpreMedia, LLC, the parent of La Opinion, since January 2004. From 2000 to 2004, Ms. Lozano served as President and Chief Operating Officer of Lozano Enterprises. She also served as a member of the Board of Regents of the University of California since December 2001 and as trustee of the University of Southern California since 1991. She has been a director of the Corporation since April 2006 and is a member of the Asset Quality Committee. She also serves as a director of The Walt Disney Company.
LOGO    WALTER E. MASSEY (70), President Emeritus, Morehouse College, Atlanta, Georgia. He served as President of Morehouse College from August 1995 to June 2007. He has been a director of the Corporation since 1998 and is a member of the Audit Committee. He also serves as a director of McDonald’s Corporation.
LOGO    THOMAS J. MAY (61), Chairman, President and Chief Executive Officer, NSTAR, Boston, Massachusetts, an energy utility company. He has served as President of NSTAR and its subsidiaries since 2002 and as Chairman, Chief Executive Officer and Trustee since 1999. He has been a director of the Corporation since April 2004 and is chairman of the Audit Committee.
LOGO    PATRICIA E. MITCHELL (66), President and Chief Executive Officer, The Paley Center for Media, New York, New York, a non-profit organization dedicated to advancing the understanding of the media. She has served in her present position since March 2006. Prior to that time, she had served as President and Chief Executive Officer of Public Broadcasting Service, a private non-profit media enterprise, from March 2000 to March 2006. She also has served as President of CNN Productions and Time Inc. Television, a division of Time Warner, Inc. She has been a director of the Corporation since 2001 and is a member of the Compensation and Benefits and Corporate Governance Committees. She also serves as a director of SunMicro Systems Incorporated.

 

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LOGO    JOSEPH W. PRUEHER (66), Retired Admiral, United States Navy, Virginia Beach, Virginia. Admiral Prueher has served as a Consulting Professor at the Stanford University Center for International Security and Cooperation since 2001 and as a Senior Advisor at the Preventive Defense Project since 2001. He served as United States Ambassador to the People’s Republic of China from 1999 to 2001. He also served in the United States Navy from 1964 to 1999 and last served as Commander-in-Chief of the U.S. Pacific Command. He has been a director of the Corporation since January 2009 and is a member of the Audit Committee. He also serves as a director of DynCorp International, Emerson Electric Co., Fluor Corporation and New York Life Insurance Company.
LOGO    CHARLES O. ROSSOTTI (68), Senior Advisor, The Carlyle Group, Washington D.C., a private global investment firm. He has served in his present position since 2003. From 1997 to 2002, he served as Commissioner of Internal Revenue of the Internal Revenue Service. In 1970, he co-founded American Management Systems, Inc., an international business and information technology consulting firm, and served at various times as President, Chief Executive Officer and Chairman of the Board until 1997. He has been a director of the Corporation since January 2009 and is a member of the Compensation and Benefits and Corporate Governance Committees. He also serves as a director of The AES Corporation.
LOGO    THOMAS M. RYAN (56), Chairman, President and Chief Executive Officer, CVS/Caremark Corporation, Woonsocket, Rhode Island, an integrated provider of pharmacy and related healthcare services. He has served as President and Chief Executive Officer since May 1998 and as Chairman since April 1999. He has been a director of the Corporation since April 2004 and is chairman of the Corporate Governance Committee and a member of the Compensation and Benefits Committee. He also serves as a director of Yum! Brands, Inc.
LOGO    O. TEMPLE SLOAN, JR. (70), Chairman, General Parts International, Inc., Raleigh, North Carolina, a distributor of automotive replacement parts. He has served in his present position since 1961. From 1961 to December 2008, he also served as Chief Executive Officer. He has been a director of the Corporation since 1996. He is the Corporation’s independent Lead Director and is chairman of the Compensation and Benefits and Executive Committees and a member of the Corporate Governance Committee. He also serves as Chairman of the Board of Highwoods Properties, Inc. and as a director of Lowe’s Companies, Inc.
LOGO    ROBERT L. TILLMAN (65), Former Chairman and CEO Emeritus, Lowe’s Companies, Inc., Mooresville, North Carolina, a home improvement retailer. He served as Chairman and Chief Executive Officer of Lowe’s Companies, Inc. from January 1998 until January 2005. He has been a director of the Corporation since April 2005 and is a member of the Asset Quality and Executive Committees.
LOGO    JACKIE M. WARD (70), Retired Chairman/CEO, Computer Generation, Inc., Atlanta, Georgia, a telecommunications software company. She served as Chairman of Computer Generation Inc., from May 2000 to December 2000 and as Chairman, President and Chief Executive Officer from October 1968 to May 2000. She has been a director of the Corporation since 1994 and is chairman of the Asset Quality Committee. She also serves as a director of Flowers Foods, Inc., Sanmina-SCI Corporation, SYSCO Corporation and Wellpoint, Inc.

 

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STOCK OWNERSHIP

 

As of December 31, 2008, we had two classes of voting securities, Common Stock and Series B Preferred Stock. Effective January 1, 2009 with the Merrill Lynch acquisition, eight additional classes of voting preferred stock were added. Our classes of voting securities are the Common stock, Series B Preferred Stock, Series 1 Preferred Stock, Series 2 Preferred Stock, Series 3 Preferred Stock, Series 4 Preferred Stock, Series 5 Preferred Stock, Series 6 Preferred Stock, Series 7 Preferred Stock and Series 8 Preferred Stock. As of February 9, 2009, we did not know of any person who beneficially owned 5% or more of the Common Stock or the Series 1-8 Preferred Stock (collectively, along with the Series B Preferred Stock, the “Preferred Stock”). The following table sets forth as of February 9, 2009, information regarding the sole holder known to us to beneficially own more than 5% of the Series B Preferred Stock.

 

Name and Address

of Beneficial Owner


   Amount and Nature
of Beneficial Ownership (1)

   Percent
of Class

 

Carolyn C. Glassman & Albert Irl Dubinsky
TR UA Apr 8 82
Carolyn Glassman Trust
1815 Locust Street
St. Louis, MO 63103

   2,018 shares    26 %

(1)   All shares of Series B Preferred Stock indicated in the table are subject to the sole investment and voting power of the named individuals.

 

The following table sets forth information as of February 9, 2009, with respect to the beneficial ownership of Common Stock by: (i) each director and nominee for director; (ii) each executive officer named in the Summary Compensation Table; and (iii) all directors, nominees and executive officers as a group. As of February 9, 2009, no director, nominee or executive officer of the Corporation owned any shares of the Preferred Stock other than as disclosed below.

 

Name


   Amount and Nature
of Beneficial Ownership (1)(2)(3)(4)(5)

William Barnet, III (6)

   197,130

Frank P. Bramble, Sr.

   123,806

Virgis W. Colbert

   21,062

John T. Collins (7)

   191,859

Gary L. Countryman (8)

   73,908

Barbara J. Desoer (9)

   1,946,832

Tommy R. Franks

   53,105

Charles K. Gifford (10)

   325,745

Bruce L. Hammonds (11)

   1,198,493

Kenneth D. Lewis (12)

   4,697,070

Monica C. Lozano

   13,126

Walter E. Massey (13)

   56,539

Thomas J. May (14)

   69,590

Liam E. McGee (15)

   1,063,184

Patricia E. Mitchell

   34,334

Joe. L. Price (16)

   944,020

Joseph W. Prueher (17)

   15,715

Charles O. Rossotti (18)

   26,135

Thomas M. Ryan (19)

   117,905

O. Temple Sloan, Jr. (20)

   310,816

Meredith R. Spangler (21)

   32,087,301

Robert L. Tillman

   235,993

Jackie M. Ward (22)

   169,455

All directors, nominees and executive officers as a group
(26 persons) (23)

   48,833,387

 

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  (1)   The numbers in the table represent shares of Common Stock. Each director, nominee and executive officer beneficially owned less than 1% of the shares of Common Stock outstanding.

 

  (2)   All shares of Common Stock indicated in the table are subject to the sole voting and investment power of the directors, nominees and executive officers, except as otherwise set forth in the footnotes below.

 

  (3)   Includes the following number of units of Common Stock equivalents credited to the following non-employee directors under the Director Deferral Plan as of February 9, 2009: Mr. Barnet, 12,124 units; Mr. Bramble, 12,126 units; Mr. Collins, 4,639 units; Mr. Countryman, 28,714 units; Mr. Franks, 12,126 units; Mr. Gifford, 12,256 units; Mrs. Lozano, 12,126 units; Dr. Massey, 44,831 units; Mr. May, 32,818 units; Ms. Mitchell, 25,024 units; Mr. Ryan, 31,087 units; Mr. Sloan, 3,419 units; Mrs. Spangler, 75,677 units; Mr. Tillman, 15,993 units; Ms. Ward, 78,666 units; and all directors as a group, 401,626 units. These units, which are held in individual accounts in each director’s name, will be paid in cash upon the director’s retirement to the extent vested based on the fair market value of the Common Stock at that time. See “Corporate Governance—Director Compensation.”

 

  (4)   Includes restricted stock units awarded under the Key Associate Stock Plan (or its predecessor, the Bank of America Corporation Key Employee Stock Plan), as of February 9, 2009, to the following named executive officers: Ms. Desoer, 217,961 units; Mr. Hammonds, 133,193 units; Mr. Lewis, 1,168,839 units; Mr. McGee, 242,980 units; and Mr. Price, 89,949 units. As of February 9, 2009, all executive officers as a group held 2,340,012 restricted stock units. Each restricted stock unit has a value equal to the fair market value of a share of Common Stock and receives dividend equivalents but does not have any voting rights. These units will be paid in shares of Common Stock at vesting or, in certain circumstances, after termination of employment.

 

  (5)   Includes, for each of the following directors, 8,000 shares of Common Stock which such directors could acquire within 60 days after February 9, 2009 through the exercise of stock options: Dr. Massey; Ms. Mitchell; Mr. Sloan; Mrs. Spangler; and Ms. Ward.

 

  (6)   Includes 70,128 stock units held under the FleetBoston Directors Deferred Compensation and Stock Unit Plan (the “FleetBoston Director Stock Unit Plan”) and a total of 65,245 shares of Common Stock owned by certain family members, the Barnet Revocable Trust, the Mary G. Barnet Revocable Trust, the Barnet Company and Barnet Development Corporation.

 

  (7)   Includes 30,500 stock units held under the FleetBoston Director Stock Unit Plan and 6,600 shares of Common Stock owned by Mr. Collin’s spouse.

 

  (8)   Includes 12,534 stock units held under the FleetBoston Director Stock Unit Plan, 16,655 stock units held under the BankBoston Director Retirement Benefits Exchange Program (the “BKB Exchange Program”), 483 stock units held under the BankBoston Director Stock Award Plan (the “BKB Director Stock Award Plan”) and 2,630 shares that Mr. Countryman could acquire within 60 days after February 9, 2009 under the BankBoston Director Stock Option Plan for Non-Employee Directors (the “BKB Director Stock Option Plan”).

 

  (9)   Includes 1,567,200 shares of Common Stock which Ms. Desoer could acquire within 60 days after February 9, 2009 through the exercise of stock options.

 

(10)   Includes 1,090 shares of Common Stock held as a custodian for two of Mr. Gifford’s children. At February 9, 2009, 100,000 of these shares of Common Stock had been pledged as collateral.

 

(11)   Includes 363,093 shares of Common Stock which Mr. Hammonds could acquire within 60 days after February 9, 2009 through the exercise of stock options.

 

(12)   Includes 1,325,000 shares of Common Stock which Mr. Lewis could acquire within 60 days after February 9, 2009 through the exercise of stock options and 400,000 shares of Common Stock owned by Mr. Lewis’ spouse. In addition, as of February 9, 2009, Mr. Lewis owned 86,000 Depositary shares of 8.20% Non-Cumulative Preferred Stock, Series H which represents less than 1% of such Preferred Stock.

 

(13)   Includes 490 shares of Common Stock over which Dr. Massey shares voting and investment power with his spouse.

 

(14)   Includes 21,983 stock units held under the FleetBoston Director Stock Unit Plan, 3,052 stock units held under the BKB Exchange Program, 5,362 stock units held under the BKB Director Stock Award Plan, an interest in 1,603 shares under a deferred compensation plan of Mr. May’s current employer, 2,630 shares that Mr. May could acquire within 60 days after February 9, 2009 under the BKB Director Stock Option Plan and 450 shares of Common Stock jointly held with his spouse.

 

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(15)   Includes 741,500 shares of Common Stock which Mr. McGee could acquire within 60 days after February 9, 2009 through the exercise of stock options.

 

(16)   Includes 791,500 shares of Common Stock that Mr. Price could acquire within 60 days after February 9, 2009 through the exercise of stock options and 17,756 shares of Common Stock owned by his spouse.

 

(17)   Mr. Prueher’s beneficial ownership includes 3,908 shares acquired by exchange in the Merrill Lynch acquisition on January 1, 2009 and 745 shares of Common Stock owned by Mr. Prueher’s spouse.

 

(18)   Mr. Rossotti’s beneficial ownership includes 3,867 shares acquired by exchange in the Merrill Lynch acquisition on January 1, 2009, and includes 6,206 stock units payable in cash held under the Merrill Lynch Non-Employee Fee Deferral Plan.

 

(19)   Includes 27,579 stock units held under the FleetBoston Director Stock Unit Plan and 804 shares of Common Stock owned by Mr. Ryan’s spouse.

 

(20)   Includes 3,200 shares of Common Stock owned by Mr. Sloan’s spouse.

 

(21)   Includes 32,003,624 shares of Common Stock owned by Mrs. Spangler’s spouse, certain other family members for whom Mrs. Spangler’s spouse acts in a fiduciary capacity and C. D. Spangler Construction Company, Golden Eagle Industries, Inc., C. D. Spangler Foundation, Delcap, Inc. and Delcor, Inc., all of which are parties related to Mrs. Spangler’s spouse, and over which Mrs. Spangler shares voting and investment power. At February 9, 2009, an unspecified number of these shares of Common Stock had been pledged as collateral.

 

(22)   Includes 40,000 shares of Common Stock that could be acquired at any time upon conversion of 2,000 shares of Non-Cumulative Convertible Preferred Stock, Series L held by Ms. Ward, which represents less than 1% of such Preferred Stock, 3,540 shares of Common Stock that could be acquired at any time upon conversion of 177 shares of Non-Cumulative Convertible Preferred Stock, Series L held by Ms. Ward’s spouse (which together with Ms. Ward’s Series L Preferred Stock represents less than 1% of such Preferred Stock), and 1,375 shares of Common Stock held by Ms. Ward’s spouse. In addition, 1,000 Depositary shares of Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series M are held by Ms. Ward and 400 depositary shares of Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series M are held by Ms. Ward’s spouse, representing in the aggregate less than 1% of such Preferred Stock.

 

(23)   Includes 8,670,304 shares of Common Stock which such persons could acquire within 60 days after February 9, 2009, through the exercise of stock options. Such persons had sole voting and investment power over 16,827,823 shares of Common Stock and shared voting or investment power or both over 32,005,564 shares.

 

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors and some of our officers to file reports with the SEC indicating their holdings of, and transactions in, our equity securities. Based solely on a review of the copies of such reports we received, and written representations from the reporting persons, we believe that, during 2008, our reporting persons complied with all Section 16(a) filing requirements, except that, due to an administrative error on the part of the Corporation, a late Form 4 was filed on behalf of Mr. Lewis to report the purchase of 86,000 shares of 8.20% Non-Cumulative Preferred Stock, Series H, and 3,714 restricted stock units were inadvertently omitted from a Form 3 filed on behalf of Mr. Rosato.

 

COMPENSATION AND BENEFITS COMMITTEE REPORT

 

The Compensation and Benefits Committee has reviewed and discussed with management the Compensation Discussion and Analysis that immediately follows this report. Based on this review and discussion, the Compensation and Benefits Committee has recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference into our Annual Report on Form 10-K for the year ended December 31, 2008.

 

The Corporation is participating in the Troubled Assets Relief Program (TARP) established by the United States Department of the Treasury under the Emergency Economic Stabilization Act of 2008.

 

As required by the TARP, the Compensation and Benefits Committee certifies that it has reviewed with our senior risk officers the TARP Senior Executive Officer incentive compensation arrangements for 2008 and has made rea-

 

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sonable efforts to ensure that such arrangements do not encourage our TARP Senior Executive Officers to take unnecessary and excessive risks that threaten the value of our company. See “Troubled Assets Relief Program (TARP)” on page 25 for additional information concerning our TARP Senior Executive Officers.

 

Submitted by the Compensation and Benefits Committee of the Board:

 

O. Temple Sloan, Jr., Chairman*

Patricia E. Mitchell*

Thomas M. Ryan*

Meredith R. Spangler*

 

Gary L. Countryman**

Charles O. Rossotti**

 

 *Member of the Committee throughout all of 2008 and through the February 26, 2009 Committee meeting at which this Report was approved, and involved in all deliberations and actions of the Committee during and with respect to 2008.

 

**Member of the Committee effective January 28, 2009. Accordingly, Messrs. Countryman and Rossotti did not participate in any deliberations or actions of the Committee before that date, including Committee actions with respect to compensation decisions for 2008 and the Committee’s review of the TARP Senior Executive Officer incentive compensation arrangements for 2008.

 

COMPENSATION DISCUSSION AND ANALYSIS

 

Executive Summary

 

Although we were one of the few major financial institutions to be profitable for 2008, our results did not meet our expectations. Therefore, consistent with our pay-for-performance philosophy, Mr. Lewis recommended that no year-end compensation be paid to him or any other executive officer.

 

The Board of Directors reviewed our 2008 performance and after careful consideration of Mr. Lewis’ recommendation, ultimately concluded that no year-end cash or equity incentive compensation should be awarded to Mr. Lewis or any other executive officer for 2008, including the named executive officers whose compensation is set forth in the Summary Compensation Table on page 27.

 

Overview of 2008 Executive Compensation Program

 

We operate a large, global financial services business in a very competitive environment. There are many challenges inherent in running a business of our size and scope. To best meet these challenges, we have designed our executive compensation program to attract and retain the highest quality executive officers and directly link pay to our performance. This pay-for-performance philosophy results in a compensation program that aligns our executive officers’ interests with those of our stockholders, provides pay that varies depending on performance and can be easily understood by our stockholders.

 

The key compensation element for our executive officers is an opportunity to earn a year-end incentive award based on our performance. The Compensation and Benefits Committee may, in its discretion, provide this award in a mix of cash incentive, restricted stock and stock option awards. Historically, the Committee has delivered most of the year-end incentive award in a balanced mix of restricted stock and stock options because stock ownership is the simplest, most direct way to align our executive officers’ interests with those of our stockholders.

 

The Compensation and Benefits Committee determines these year-end incentive awards in the exercise of its informed discretion without formulas or weightings. The Committee places the greatest emphasis on company-wide financial performance, with a particular focus on operating earnings, operating earnings per share, total stockholder return and revenue as collectively the best indicators of our financial performance. The Committee gen- erally reviews growth in these measures over one-year and multi-year periods. The Committee may also consider the financial performance of individual lines of business and other factors such as quality and sustainability of earnings and successful implementation of strategic initiatives.

 

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Our executive officers also receive base salary in order to have a level of predictable income. Base salary forms only a minor part of the total compensation opportunity. The Compensation and Benefits Committee establishes the base salary levels for our executive officers to reflect each executive officer’s scope of responsibility and accountability within the company and to be part of a competitive total compensation package.

 

Historically, the Compensation and Benefits Committee took into account compensation practices and financial performance at a group of leading U.S. financial services companies when deciding base salary levels and year-end compensation awards for our executive officers. Review of competitor compensation practices and financial performance is by necessity a backwards looking exercise, based on data from prior years. The extraordinary economic environment experienced in the financial services industry during 2008 caused such historic competitor data to become less relevant and was therefore not considered in making 2008 executive compensation decisions.

 

Prior to 2008, our practice was to establish a target total compensation package for each executive officer at the beginning of each year comprised of base salary and year-end cash incentive, restricted stock and stock option target awards. However, due to the extraordinary economic environment during 2008, the target total compensation packages established at the beginning of 2008 ultimately were not a factor in our 2008 compensation decisions.

 

Pay-for-Performance Features of Our Program

 

Our year-end compensation decisions over the last several years most clearly illustrate the direct linkage between our executive officers’ pay and our company’s performance. For 2006, our company achieved good performance results, and accordingly the total compensation awards for our executive officers approximated target levels. For 2007, we awarded compensation for our executive officers significantly below target levels based on our performance. And as discussed more fully below, our executive officers received no year-end cash or equity compensation awards for 2008 as a result of our company’s performance.

 

Many of our program’s unique features further demonstrate the commitment to our pay-for-performance philosophy.

 

Conditions of Stock Ownership

 

   

We encourage long-term stock ownership by our executive officers, with award features such as no vesting on restricted stock and stock option awards until the third anniversary of the grant and an additional three-year hold requirement on net proceeds from stock option exercises. See “Grants of Plan-Based Awards” beginning on page 31 for more details about the vesting rules, including the impact of termination of employment on vesting.

 

   

In addition, our Corporate Governance Guidelines include stock ownership requirements for our executive officers. Under these requirements, our Chief Executive Officer must hold at least 500,000 shares of our Common Stock and our other executive officers at least 150,000 shares. We disregard stock options (whether vested or unvested) for this purpose. New executive officers have up to five years to meet these requirements. As of December 31, 2008, all of our executive officers who have been executive officers for at least five years met these requirements.

 

   

Our Key Associate Stock Plan, which is the plan under which we make equity awards to our executive officers and other key associates, prohibits discounted stock options, reload stock options or stock option re-pricing.

 

Severance and SERPs

 

   

We do not have any employment, severance or change in control agreements with any of our executive officers.

 

   

We also have a policy prohibiting future employment or severance agreements with our executive officers that provide severance benefits exceeding two times base salary and bonus, unless the agreement has been approved by our stockholders.

 

   

Executive officers do not earn additional retirement income under any supplemental executive retirement plans.

 

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Option Grant Practices

 

   

We have an annual stock option award process that provides for a pre-established, regular grant date following written policies and procedures. If we award stock options other than as part of the annual process, those awards also have a pre-established regular grant date following our written policies.

 

Recoupment Policies

 

   

Since October 2007, we have had a recoupment policy under which the Board can require reimbursement of any incentive compensation paid to an executive officer whose fraud or intentional misconduct caused the company to restate its financial statements. In October 2008, we broadened the recoupment policy in accordance with the Troubled Assets Relief Program (TARP). See page 25 for additional information about TARP recoupment.

 

Our 2008 Compensation Decisions

 

One of the Compensation and Benefits Committee’s primary responsibilities is to review our performance and approve the compensation of our executive officers, and subject to further approval by the Board, our Chief Executive Officer’s compensation. However, in light of the extraordinary economic environment that evolved during 2008, the 2008 year-end compensation decisions for all of the executive officers were made by the full Board, excluding Mr. Lewis. Salary and all other elements of compensation actually paid for 2008 and reflected in the Summary Compensation Table on page 27 were approved by the Compensation and Benefits Committee.

 

Our executive officers are not engaged directly with the Committee in setting the amount or form of executive officer compensation. However, as part of the annual performance review for our executive officers other than the Chief Executive Officer, the Committee considers the Chief Executive Officer’s perspective on each executive officer’s individual performance and compensation as well as the performance of our various business segments and lines of business.

 

The full Board, excluding Mr. Lewis, reviewed our financial performance for 2008. The Board also considered the recommendation of Mr. Lewis that no year-end compensation be awarded to him or any other executive officer.

 

Even with the exceptional challenges presented by the economic environment, we were one of the few major financial institutions to be profitable for 2008. We also made progress on a number of projects during 2008 that we expect will create value for our company in future years. We acquired both Countrywide and Merrill Lynch, in addition to completing a highly successful transition at LaSalle.

 

Regardless of our profitability and continued progress and growth, our performance for 2008 did not meet our expectations, including a loss for the fourth quarter.

 

Based on these results and Mr. Lewis’ recommendation, and given the pay-for-performance directive of our executive compensation program, the Board, after careful consideration and deliberation, ultimately determined that no year-end cash incentive, restricted stock or stock option awards should be awarded to Mr. Lewis or any other executive officer for 2008 performance.

 

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The following chart shows the results of these compensation decisions:

 

Compensation Decisions For Performance Year 2008

 

Name    Base
Salary
($)
   Cash
Incentive
($)
  

Restricted
Stock

($)

   Stock
Options
(#)

Kenneth D. Lewis

   1,500,000    0    0    0

Joe L. Price

   800,000    0    0    0

Barbara J. Desoer

   800,000    0    0    0

Bruce L. Hammonds (1)

   800,000    0    0    0

Liam E. McGee

   800,000    0    0    0
 
  (1)   The Compensation and Benefits Committee established Mr. Hammonds’ total target compensation effective as of July 1, 2008 commensurate with his new role as an executive officer. Prior to becoming an executive officer, Mr. Hammonds’ base salary was $600,000.

 

The 2008 row in the Summary Compensation Table on page 27 shows amounts expensed in the financial statements during 2008 for restricted stock and stock option awards made for performance in 2005, 2006 and 2007. Therefore, none of the equity amounts in the Summary Compensation Table reflect compensation decisions for performance in 2008.

 

Our Other Compensation Practices

 

Other Elements of Compensation

 

The other elements of our executive compensation program are as follows:

 

Retirement Benefits

 

Executive officers participate in our various employee benefit plans designed to provide retirement income. Our qualified and nonqualified pension plans provide a retirement income base, and our qualified and nonqualified 401(k) plans permit additional retirement savings. To encourage retirement savings under the qualified and nonqualified 401(k) plans, we provide an employer matching contribution.

 

We limit eligible compensation for earning benefits under the qualified and nonqualified pension plans and for employer matching contributions under the qualified and nonqualified 401(k) plans to the first $250,000 in annual cash compensation. As a result, the Compensation and Benefits Committee’s decisions to grant annual performance-based cash incentive, restricted stock and stock option awards do not create any additional retirement benefits earned under these plans.

 

Our executive officers do not earn additional retirement income under any SERPs. We believe that our executive officers should be able to provide for their retirement needs from the compensation they earn based on our performance.

 

   

Consistent with our pay-for-performance philosophy, we froze benefits effective December 31, 2002 under the Bank of America Corporation and Designated Subsidiaries Supplemental Executive Retirement Plan (the “Bank of America SERP”) in which Mr. Lewis and Ms. Desoer participate. Accordingly, no additional benefits are earned under the Bank of America SERP for compensation or service for periods beginning after December 31, 2002.

 

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Prior to his retirement on December 31, 2008, Mr. Hammonds participated in the MBNA Corporation Supplemental Executive Retirement Plan (the “MBNA SERP”), which had been in place for a number of years prior to Bank of America’s acquisition of MBNA. The MBNA SERP provided that the amount of his benefits were based on his salary level with MBNA prior to the acquisition, because that was a higher salary level than provided by Bank of America after the acquisition.

 

For more information about these plans, see “Pension Benefits” and “Nonqualified Deferred Compensation” on pages 36 and 38 respectively.

 

Perquisites and Other Fringe Benefits

 

Our executive officers receive health and welfare benefits, such as group medical, group life and long-term disability coverage, under plans generally available to all other United States-based salaried associates. Consistent with our pay-for-performance philosophy, we provide very few executive fringe benefits. Because we have internal expertise on tax and financial planning matters, we make those services available at no cost to our executive officers for their personal tax and financial planning needs. We also provide our executive officers with secured parking and home security systems. Our executive officers have access to our corporate aircraft on a limited basis for personal travel pursuant to company guidelines.

 

Troubled Assets Relief Program (TARP)

 

We are participating in the Troubled Assets Relief Program (TARP) established by the United States Department of the Treasury (“Treasury Department”) under the Emergency Economic Stabilization Act of 2008.

 

TARP requires the Compensation and Benefits Committee to identify our senior executive officers and review their incentive compensation arrangements with our senior risk officers to ensure that the arrangements do not encourage the senior executive officers to take unnecessary and excessive risks that threaten the value of our company. Our named executive officers who were senior executive officers under TARP for 2008 were Mr. Lewis, Mr. Price, Ms. Desoer and Mr. McGee (collectively, the “TARP Senior Executive Officers”).

 

As required by TARP, the Compensation and Benefits Committee has certified that it has reviewed with our senior risk officers the TARP Senior Executive Officer incentive compensation arrangements for 2008 and has made reasonable efforts to ensure that such arrangements do not encourage our TARP Senior Executive Officers to take unnecessary and excessive risks that threaten the value of our company. See “Compensation and Benefits Committee Report” on page 20 for the Compensation and Benefits Committee’s certification.

 

Participation in TARP also requires certain limitations on executive compensation during the period that the Treasury Department holds a debt or equity interest in our company. The material features of these executive compensation limits applicable to the TARP Senior Executive Officers as of the printing of this proxy, are as follows:

 

   

Payment of any severance benefit is prohibited. Severance benefits for this purpose exclude amounts previously vested and payable at retirement;

 

   

The incentive compensation pool for the TARP Senior Executive Officers and certain other executive officers for 2009 is limited to 60% of the incentive compensation pool paid with respect to 2007 for such positions;

 

   

The incentive compensation pool for the TARP Senior Executive Officers and certain other executive officers for 2008 was also limited to 60% of the 2007 pool. However, the Board’s decision to award no year-end incentives to our executive officers for 2008 rendered this limitation of no practical effect for the TARP Senior Executive Officers;

 

   

A TARP Senior Executive Officer must reimburse the company for any incentive compensation paid that was based on materially inaccurate financial statements or any other materially inaccurate performance metric criteria; and

 

   

A TARP Senior Executive Officer must also reimburse the company for any other payment in excess of the limitations described above.

 

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On February 17, 2009, the American Recovery and Reinvestment Act of 2009, which includes additional restrictions on executive compensation applicable to companies participating in the TARP, was signed into law by President Obama. This law will provide further restrictions on the amount and type of compensation we pay to our executive officers and certain other highly compensated employees; however, the details of those restrictions will not be known until the Treasury Department proposes and finalizes regulations to effectuate the law.

 

Recoupment Policy

 

In addition to the recoupment requirements described above as a result of our participation in TARP, if our Board or an appropriate Board committee has determined that any fraud or intentional misconduct by one or more executive officers caused us, directly or indirectly, to restate our financial statements, the Board or committee will take, in its sole discretion, such action as it deems necessary to remedy the misconduct and prevent its recurrence. The Board or committee may require reimbursement of any bonus or incentive compensation awarded to such officers or cancel unvested restricted stock or outstanding stock option awards previously granted to such officers in the amount by which such compensation exceeded any lower payment that would have been made based on the restated financial results.

 

Timing of Equity Grants

 

Awards of restricted stock and stock options to executive officers and other eligible key associates are made on a regular award date each year shortly after the end of the applicable performance year. This is the same date that we pay cash incentive awards for the performance year, and is scheduled to give us sufficient time to complete all performance reviews and obtain all necessary approvals. For the past few years, the award date has been February 15, or the immediately preceding business day if February 15 is not a business day.

 

We occasionally make awards of restricted stock or stock options other than on the regular annual award date, usually in connection with hiring a new key associate or awards under annual performance plans that follow a different timing cycle. We make these awards on the first day of the calendar month following approval, which for newly hired associates is on or after their actual hire date.

 

Formal approval for awards is obtained prior to the grant dates. We do not coordinate the timing of our awards with the release of material non-public information. The exercise price for the stock options equals the closing price of our Common Stock for the grant date.

 

Section 162(m)

 

Section 162(m) of the Internal Revenue Code limits the deductibility of compensation paid to certain executive officers in excess of $1,000,000, but excludes “performance-based compensation” from this limit.

 

Cash incentive compensation and restricted stock awards are provided under the stockholder-approved Executive Incentive Compensation Plan (EIC Plan). Under the EIC Plan’s compensation formula, participating executive officers may receive maximum deductible incentive compensation for a year up to 0.20% of our net income for that year. Under the EIC Plan, the Compensation and Benefits Committee can determine to make all or any portion of the annual incentive award in the form of a restricted stock award under our Key Associate Stock Plan.

 

In addition, compensation realized by our executive officers through the exercise of stock options should be fully deductible to us as “performance-based compensation” under Section 162(m).

 

TARP imposes additional requirements under Code Section 162(m). For certain “covered executives” for purposes of Code Section 162(m)(5), during the period that the Treasury Department holds a debt or equity interest in our company, we cannot deduct annual compensation for the covered executives in excess of $500,000. The “performance-based exception” does not apply to this TARP-related deduction limit.

 

Some compensation payable to our executive officers for 2008 exceeds the applicable Section 162(m) deduction limit. All compensation decisions for our executive officers are made with full consideration of the Internal Revenue Code Section 162(m) implications.

 

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EXECUTIVE COMPENSATION

 

Summary Compensation Table. The following table shows compensation paid, accrued or expensed with respect to our named executive officers during the year indicated:

 

Summary Compensation Table (1)

 

Name and

Principal Position (2)

  Year   Salary
($) (3)
  Stock
Awards
($) (4)
  Option
Awards
($)
  Non Equity
Incentive Plan
Compensation
($) (3)
  Change in
Pension Value
and Non
Qualified
Deferred
Compensation
Earnings
($) (5)
  All Other
Compensation
($) (6)
  Total
($)
                 

Kenneth D. Lewis

  2008   1,500,000   4,255,012   3,074,683   0   854,256   275,125   9,959,076

Chairman, Chief Executive

  2007   1,500,000   11,065,798   4,573,585   4,250,000   3,242,446   212,211   24,844,040

Officer and President

  2006   1,500,000   11,698,865   4,966,715   6,500,000   2,987,799   219,969   27,873,348

Joe L. Price (7)

  2008   800,000   1,673,247   1,506,884   0   0   41,037   4,021,168

Chief Financial Officer

  2007   800,000   2,732,437   1,253,902   1,555,000   51,724   93,654   6,486,717

Barbara J. Desoer

  2008   800,000   2,302,726   1,527,211   0   121,090   2,664,820   7,415,847

President, Bank of

  2007   800,000   4,652,694   2,174,096   2,400,000   452,811   52,912   10,532,513

America Mortgage, Home Equity and Insurance Services

  2006   800,000   3,444,102   2,153,060   3,575,000   432,363   31,606   10,436,131

Bruce L. Hammonds (7)

  2008   700,000   2,125,222   668,108   0   213,217   7,393,938   11,100,485

Former President, Bank of America Global Card Services

                               

Liam E. McGee

  2008   800,000   2,653,122   1,898,871   0   0   35,757   5,387,750

President, Bank of

  2007   800,000   5,582,142   2,585,575   3,050,000   101,700   33,610   12,153,027

America Consumer and Small Business Banking

  2006   800,000   3,656,670   2,034,274   3,875,000   122,507   45,511   10,533,962

(1)   The SEC disclosure rules require that the 2008 row in the Summary Compensation Table show amounts expensed in the financial statements during 2008 for restricted stock and stock option awards made for performance in 2005, 2006 and 2007. Therefore, none of the equity amounts in the Summary Compensation Table reflect compensation decisions for performance in 2008. For the 2008 performance year, the Board determined that no cash incentive, restricted stock or stock option awards should be paid to Mr. Lewis or any other executive officers.

 

The grant date fair value of restricted stock awards expensed in 2008 was based on the closing price of the Common Stock on the applicable grant date. The grant date fair value of stock option awards expensed in 2008 was determined based on the assumptions in the following chart:

 

    Assumptions (a)
Grant Dates  

Expected

Volatility

(%)

 

Expected

Dividend

Yield

(%)

 

Risk-Free

Interest Rate

(%)

 

Exercise

Price

($)

 

Expected

Term

2/1/2005

  20.53   4.60   3.94   46.68   6

2/15/2006

  17-27   4.50   4.59 - 4.70   44.36   6.5

2/15/2007

  16-27   4.40   4.72 - 5.16   53.85   6.5

2/15/2008

  26-36   5.30   2.05 - 3.85   42.70   6.6
 
 

(a)

 

Prior to January 1, 2006, we estimated the grant date fair value of stock options using the Black-Scholes option-pricing model. On January 1, 2006, we changed to a lattice option-pricing model for this purpose. Lattice option-pricing models incorporate ranges of assumptions for inputs and those ranges are disclosed in the table. The risk-free rate for periods within the contractual life of the

 

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stock option is based on the U.S. Treasury yield curve in effect at the time of grant. Expected volatilities are based on implied volatilities from traded stock options on our Common Stock, historical volatility of our Common Stock and other factors. We use historical data to estimate stock option exercise and employee termination within the model. The expected term of stock options granted is derived from the output of the model and represents the period of time that stock options granted are expected to be outstanding. The estimates of fair value from these models are theoretical values for stock options and changes in the assumptions used in the models could result in materially different fair value estimates. The actual value of the stock options will depend on the market value of our Common Stock when the stock options are exercised.

 

(2)   The listed positions are those held as of December 31, 2008. Mr. Hammonds retired effective December 31, 2008.

 

(3)   Includes any amounts deferred under our qualified and nonqualified 401(k) plans.

 

(4)   Grants of restricted stock include the right to receive cash dividends. The following lists the amounts of cash dividends received by the named executive officers during 2008 on unvested restricted stock:

 

Name   

Dividend

Equivalents on

Unvested

Restricted

Stock ($)

Kenneth D. Lewis

   1,050,986

Joe L. Price

   115,089

Barbara J. Desoer

   367,434

Bruce L. Hammonds

   298,352

Liam E. McGee

   405,095

 

(5)   The following table shows the change in pension value and the amount of any above-market earnings on nonqualified deferred compensation for the named executive officers:

 

Name   

Change

in

Pension

Value

($)

   

Above-Market

Earnings on

Nonqualified

Deferred

Compensation

($)

Kenneth D. Lewis

   854,256     0

Joe L. Price

   (148,992 )   0

Barbara J. Desoer

   121,090     0

Bruce L. Hammonds

   213,217     0

Liam E. McGee

   (266,074 )   0

 

The “Change in Pension Value” equals the change in the actuarial present value of all pension benefits from December 31, 2007 to December 31, 2008. For this purpose, in accordance with SEC rules, the present value was determined using the same assumptions applicable for valuing pension benefits for purposes of our financial statements. See “Pension Benefits” on page 36.

 

Consistent with our pay-for-performance philosophy, the named executive officers are not accruing significant additional pension benefits. This is because pension benefits accrue on no more than the first $250,000 of compensation.

 

The amounts listed above under “Change in Pension Value” for Mr. Lewis and Ms. Desoer result primarily because they have frozen annuity benefits under a prior supplemental executive retirement plan. These frozen

 

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benefits are an annual annuity payment beginning at age 60 (or later for retirement after age 60). The amount of this annuity payment has been unchanged for each executive officer since the applicable freeze date. However, the lump sum value of the frozen annuity amount will increase each year based on the passage of time (i.e., the time-value of money) because the executive officer is one year closer to his retirement age when payment of the annuity is scheduled to commence. Under the MBNA SERP, Mr. Hammonds’ benefits are also expressed as an annuity beginning at age 60. However, the MBNA SERP does not provide for any actuarial increase in the amount of the annual annuity payments for retirement after age 60.

 

(6)   The following table lists all amounts included in the “All Other Compensation” column for each named executive officer:

 

Name   Year     Tax
Preparation
& Financial
Planning
($)
    Use of
Corporate
Aircraft
($)
    Matching
Contributions
($)
    Value of
Split
Dollar
Coverage
($)
    Life
Insurance
Coverage
($)
    Relocation
Benefits
($)
    Tax
Gross
Up
($)
    Home
Security
and
Secured
Parking
($)
    Other
($)
    Total
($)
 

Kenneth D. Lewis

  2008      18,401      220,267      12,500      10,166      0      0      0      13,791      0      275,125   
    2007     16,740     127,643     12,500     38,995     0     0     0     16,333     0     212,211  
    2006     15,972     110,899     8,500     58,872     0     0     0     25,726     0     219,969  

Joe L. Price

  2008     18,401     0     12,500     0     0     0     0     10,136     0     41,037  
    2007     16,740     0     12,500     0     0     0     0     64,414     0     93,654  

Barbara J. Desoer

  2008     18,401     0     12,500     0     0     1,523,161     1,097,659     13,099     0     2,664,820  
    2007     16,740     15,512     12,500     0     0     0     0     8,160     0     52,912  
    2006     15,972     0     12,500     0     0     0     0     3,134     0     31,606  

Bruce L. Hammonds

  2008     18,401     379,874     12,500     0     107,187     0     75,976     0     6,800,000     7,393,938  

Liam E. McGee

  2008     18,401     0     12,500     0     0     0     0     4,856     0     35,757  
    2007     16,740     0     12,500     0     0     0     0     4,370     0     33,610  
    2006     15,972     11,798     12,500     0     0     0     0     5,241     0     45,511  

 

Certain of the amounts in this table are based on the incremental cost to us in providing the benefits, explained in more detail as follows:

 

Benefit    Determination of Incremental Cost
Tax Preparation & Financial Planning    Determined using a method that takes into account our actual direct expenses (such as rent, compensation and benefits, and travel) paid with respect to our associates who provide tax preparation and financial planning services to our executive officers and other eligible officers.
Use of Corporate Aircraft    For corporate-owned aircraft, determined using a method that takes into account all variable costs such as landing fees, aircraft fuel expense, maintenance and plane repositioning costs. Since our aircraft are used primarily for business travel, we do not include the fixed costs that do not change based on usage, such as crew salaries and the acquisition costs of corporate-owned or leased aircraft. For aircraft provided by a third party vendor, determined using a method that takes into account the contracted per-hour costs, fuel charges, segment fees and taxes, as well as a proportional share of the monthly management fee and insurance costs.
Home Security    Determined based upon amounts paid by us to third parties for installation, servicing and monitoring of home security and related systems.
Secured Parking    Determined based upon the monthly rental that we charge to third parties for parking in the same corporate-owned parking structure.

 

The table does not include any amounts for personal benefits provided to our executive officers for which we believe there is no aggregate incremental cost to us, including use of corporate-owned or leased apartments.

 

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The value of split-dollar coverage represents the economic value of premiums that have been paid by us for certain life insurance coverage for Mr. Lewis and his spouse, which premiums will be recovered by us in the future when the insurance policy matures. We have not paid any premiums for such coverage since 2001.

 

Under the terms of the MBNA Supplemental Executive Insurance Plan, we pay premiums on a whole life insurance policy owned by Mr. Hammonds as well as a related tax gross-up amount each year until 2018, when the last premium payment is due. The value of life insurance coverage represents the amount of premiums we paid during 2008 on Mr. Hammonds’ whole life insurance policy. The tax gross-up amount reflects the amount we paid to Mr. Hammonds in 2008 to cover the taxes he incurred as a result of the premium payment.

 

The relocation benefit for Ms. Desoer represents the costs we incurred in connection with Ms. Desoer’s relocation from Charlotte, North Carolina to Calabasas, California to lead our home loan and insurance services business. Those costs were comprised of $111,199 related to relocation costs including household goods shipment and storage, duplicate housing, house-hunting expenses, and other costs, $1,411,962 related to purchase of the new residence including mortgage subsidy and closing costs, and $1,097,659 tax gross-up on applicable amounts. In December 2008, an independent relocation company purchased Ms. Desoer’s former residence on our behalf based on the average of the appraised values of the residence as determined by two independent appraisal services. When the relocation company sells the residence to a third party, we will be responsible for additional costs associated with the sale customarily paid by the seller and any loss on sale.

 

The amount in the “Other” column for Mr. Hammonds represents a $6,800,000 payment accrued in 2008 and paid in January 2009 in consideration for the cancellation of the retention agreement previously entered into between Mr. Hammonds and Bank of America following the merger of MBNA and Bank of America.

 

(7)   Mr. Price was not an executive officer of our company prior to 2007. Mr. Hammonds was not an executive officer of our company prior to 2008.

 

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Grants of Plan-Based Awards. The following table shows additional information regarding: (i) the target level of annual cash incentive awards for our named executive officers for performance during 2008, as established by the Compensation and Benefits Committee during 2008; and (ii) restricted stock and stock option awards granted in February 2008 that were awarded for performance during 2007. No restricted stock or stock option awards were granted in February 2009 for performance during 2008. In addition, no annual cash incentive award was received by the executive officers for performance during 2008, which is reflected in the Summary Compensation Table.

 

Grants of Plan-Based Awards

 

Name   Grant
Date
  Stock &
Option
Award
Approval
Date
 

Estimated
Possible
Payouts
Under
Non-Equity
Incentive
Plan Awards

Target
($)

  All
Other
Stock
Awards:
Number
of
Shares
of Stock
or Units
(#)
  All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)
  Exercise
or Base
Price of
Option
Awards
($)
  Grant
Date
Fair
Value of
Stock
and
Option
Awards
($) (1)

Kenneth D. Lewis

  n/a       6,750,000                
  2/15/2008   1/23/2008       99,649           4,255,012
  2/15/2008   1/23/2008           333,333   42.70   2,973,330

Joe L. Price

  n/a       3,700,000                
  2/15/2008   1/23/2008       38,570           1,646,939
  2/15/2008   1/23/2008           166,667   42.70   1,486,670

Barbara J. Desoer

  n/a       3,245,000                
  2/15/2008   1/23/2008       53,928           2,302,726
  2/15/2008   1/23/2008           166,667   42.70   1,486,670

Bruce L. Hammonds

  n/a       3,245,000                
  2/15/2008   1/23/2008       44,421           1,896,777
  2/15/2008   1/23/2008       5,350           228,445
  2/15/2008   1/23/2008           74,900   42.70   668,108

Liam E. McGee

  n/a       3,700,000                
  2/15/2008   1/23/2008       62,134           2,653,122
  2/15/2008   1/23/2008           208,333   42.70   1,858,330

(1)   The applicable assumptions for determining the grant date fair value of restricted stock and option awards are described in footnote 1 to the Summary Compensation Table.

 

The Compensation and Benefits Committee delivers the aggregate amount of the annual cash incentive award and the annual restricted stock award under the terms of the stockholder-approved EIC Plan. Under this plan, our stockholders have authorized an award of up to 0.20% of our net income each year for each executive officer. This award may be delivered in any combination of cash or restricted stock as the Committee determines. This stockholder approved formula acts as a maximum amount of compensation that can be delivered to our executive officers as annual cash incentives and restricted stock awards. Under the plan, though, the Committee can determine to award any amount below the maximum. As described in the Compensation Disclosure and Analysis, the Board determined that no year-end cash incentive, restricted stock or stock option awards should be awarded to Mr. Lewis or his direct reports for performance in 2008.

 

The following describes the material terms of the restricted stock awards granted to our executive officers in February 2008 for their performance in 2007:

 

   

These awards become vested and payable on the third anniversary of the grant date, and are payable, net of applicable taxes, in shares of our Common Stock; and

 

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For restricted stock awards granted for performance in 2007 and later years, cash dividends will be paid only if and when the underlying award becomes vested. For restricted stock awards granted for performance in 2006, cash dividends are payable prior to vesting at the same time and in the same amount as if the awards were issued and outstanding shares of our Common Stock.

 

The following chart shows the impact on vesting in case of termination of employment before the vesting date:

 

Restricted Stock

 

Reason for Termination    Impact on Vesting
   
Death, disability or involuntary termination without cause    Full vesting; in case of disability or involuntary termination without cause vested amounts are paid per the original schedule.
   
Involuntary termination for cause or voluntary termination before meeting Rule of 60 (1)    Forfeiture.
   
Voluntary termination after meeting Rule of 60    Award continues to vest and be paid per original schedule, provided the executive officer: (i) does not go to work for a named competitor; and (ii) certifies in writing at least annually that he or she has not gone to work for a named competitor.

(1)   Rule of 60 is met when an associate has at least 10 years of vesting service under our pension plan in which he or she participates and his or her age and years of service add up to at least 60. Currently each of the named executive officers meets the Rule of 60.

 

The following describes the material terms of stock option awards granted to our executive officers in February 2008 for their performance in 2007:

 

   

These awards become vested and exercisable on the third anniversary of the grant date. They have a ten-year term and an exercise price equal to the closing price of our Common Stock on the grant date; and

 

   

When the option is exercised, the executive must hold for an additional three years the net shares received after covering the exercise price, taxes and any transaction costs. This hold period ends upon termination of employment.

 

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The following chart shows the impact on vesting and exercise period in case of termination of employment:

 

Stock Options

 

Reason for Termination    Impact on Vesting and Exercisability
   

Death or disability

  

Full vesting.

 

Options remain exercisable for full option term if the executive officer meets Rule of 60, or for one year (not to exceed original expiration date) if the executive officer does not meet Rule of 60.

   
Involuntary termination due to workforce reduction or divestiture   

Full vesting.

 

Options remain exercisable for one year (not to exceed original expiration date), or for full option term if the executive officer meets the Rule of 60 and, during the original vesting period, the executive officer: (i) does not go to work for a named competitor; and (ii) certifies in writing at least annually that he or she has not gone to work for a named competitor.

   

Involuntary termination for cause

  

Forfeiture of unvested options.

 

Vested options cease to be exercisable.

   
Voluntary termination or involuntary termination without cause (other than workforce reduction or divestiture), having met Rule of 60   

Award continues to vest per original schedule, provided the executive officer: (i) does not go to work for a named competitor; and (ii) certifies in writing at least annually that he or she has not gone to work for a named competitor

 

Vested options remain exercisable for 90 days (not to exceed original expiration date), or for full option term if, during the original vesting period, the executive officer: (i) does not go to work for a named competitor; and (ii) certifies in writing at least annually that he or she has not gone to work for a named competitor.

 

 

Mr. Hammonds was not an executive officer in February 2008, and his equity awards received at that time for performance during 2007 instead follow the provisions generally applicable to senior management associates who are not executive officers. These provisions are similar to those applicable to our executive officers, but have a few differences including:

 

   

The awards vest on a pro-rata basis over three years (that is, one-third in February 2009, one-third in February 2010 and one-third in February 2011) rather than on the third anniversary of the grant date;

 

   

The awards have a one-year (rather than three-year) hold requirement for the net shares received upon exercise of stock options; and

 

   

For stock options and a portion of the restricted stock award, in case of an involuntary termination due to workforce reduction or divestiture, the next one-third increment vests (rather than full vesting), and the remaining two-thirds are treated as though there had been a voluntary termination. In the case of any other involuntary termination without cause, stock options and a portion of the restricted stock award are treated like a voluntary termination.

 

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Equity Exercised or Vested and Year-End Equity Values. The following tables show information regarding the value of options exercised and restricted stock vested during 2008 and certain information about unexercised options and unvested restricted stock at December 31, 2008.

 

Options Exercised and Stock Vested

 

     Option Awards    Stock Awards
Name   

Number of

Shares

Acquired on

Exercise

(#)

  

Value Realized

on Exercise

($) (1)

  

Number of

Shares

Acquired on

Vesting

(#)

  

Value Realized

on Vesting

($) (2)

Kenneth D. Lewis

   0    0    251,655    10,745,669

Joe L. Price

   0    0    12,127    523,648

Barbara J. Desoer

   0    0    59,245    2,529,762

Bruce L. Hammonds

   6,629    57,341    64,669    2,761,366

Liam E. McGee

   0    0    67,144    2,867,049

(1)   Value represents market value of our Common Stock at exercise less the exercise price.
(2)   Value represents the market value of our Common Stock on the vesting date.

 

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Outstanding Equity Awards as of December 31, 2008

 

    Option Awards     Stock Awards
Name   Number of
Securities
Underlying
Unexercised
Options
(#) Exercisable
  Number of
Securities
Underlying
Unexercised
Options
(#) Unexercisable
    Option
Exercise
Price
($)
   Option
Expiration
Date
    Number of
Shares/Units
of Stock That
Have Not
Vested
(#)
    Market Value of
Shares/Units of
Stock That Have
Not Vested
($) (1)

Kenneth D. Lewis

  400,000         40.78    2/2/2014     263,697  (2)   3,712,854
  500,000         46.68    2/1/2015     205,493  (3)   2,893,341
      425,000  (2)   44.36    2/15/2016     99,649  (4)   1,403,058
      400,000  (3)   53.85    2/15/2017            
      333,333  (4)   42.70    2/15/2018            

Joe L. Price

  22,000         24.22    1/3/2010     2,250  (2)   31,680
  150,000         26.64    2/1/2011     4,793  (2)   67,485
  150,000         30.68    2/1/2012     12,050  (3)   169,664
  150,000         35.02    2/3/2013     24,286  (3)   341,947
  120,000         40.78    2/2/2014     8,000  (3)   112,640
  105,000         46.68    2/1/2015     38,570  (4)   543,066
  63,000   31,500  (2)   44.36    2/15/2016            
      112,000  (3)   53.85    2/15/2017            
      166,667  (4)   42.70    2/15/2018            

Barbara J. Desoer

  360,000         26.64    2/1/2011     77,632  (2)   1,093,059
  420,000         30.68    2/1/2012     86,401  (3)   1,216,526
  200,000         35.02    2/3/2013     53,928  (4)   759,306
  200,000         40.78    2/2/2014            
  200,000         46.68    2/1/2015            
      180,000  (2)   44.36    2/15/2016            
      200,000  (3)   53.85    2/15/2017            
      166,667  (4)   42.70    2/15/2018            

Bruce L. Hammonds

  2,717         36.80    2/28/2011  (7)   10,280  (2)   144,742
  265,410         40.76    5/28/2012  (7)   35,636  (2)   501,755
  35,000   70,000  (5)   53.85    2/15/2017     15,070  (5)   212,186
      74,900  (6)   42.70    2/15/2018     5,000  (5)   70,400
                       17,436  (5)   245,499
                       15,534  (6)   218,719
                       5,350  (6)   75,328
                       28,887  (6)   406,729

Liam E. McGee

  37,500         30.68    2/1/2012     77,632  (2)   1,093,059
  180,000         35.02    2/3/2013     103,214  (3)   1,453,253
  144,000         40.78    2/2/2014     62,134  (4)   874,847
  200,000         46.68    2/1/2015            
      180,000  (2)   44.35    2/15/2016            
      250,000  (3)   53.85    2/15/2017            
      208,333  (4)   42.70    2/15/2018            

(1)   Value represents the market value of our Common Stock on December 31, 2008.
(2)   Award is scheduled to vest February 15, 2009.
(3)   Award is scheduled to vest February 15, 2010.
(4)   Award is scheduled to vest February 15, 2011.
(5)   Half of remaining award is scheduled to vest February 15, 2009 and half February 15, 2010.
(6)   Award is scheduled to vest one-third each year on February 15, 2009, February 15, 2010 and February 15, 2011.
(7)   Due to his retirement on December 31, 2008, under the terms of his award, the options are cancelled if not exercised by December 31, 2010.

 

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Pension Benefits. The following table provides information regarding the actuarial present value of each named executive officer’s accumulated benefits under the pension plans in which the named executive officer participates. For this purpose, in accordance with SEC rules, the present value was determined using the same assumptions applicable for valuing pension benefits for purposes of our financial statements. See Note 16 to the Notes of Consolidated Financial Statements for the 2008 fiscal year included in our Form 10-K filed on February 27, 2009.

 

Name   Plan Name  

Number of

Years

Credited

Service

(#) (1)

 

Present Value of

Accumulated

Benefit

($)

 

Payments

During Last

Fiscal Year

($)

Kenneth D. Lewis

  Bank of America Pension Plan   39.33   523,064   0
  Pension Restoration Plan   39.33   2,464,138   0
  Bank of America SERP (frozen)   15.00   50,263,801   0

Joe L. Price

  Bank of America Pension Plan   16.00   127,485   0
  Pension Restoration Plan   16.00   221,027   0

Barbara J. Desoer

  Bank of America Pension Plan   31.42   332,952   0
  Pension Restoration Plan   31.42   699,805   0
  Bank of America SERP (frozen)   15.00   8,840,281   0

Bruce L. Hammonds

  Legacy MBNA Pension Plan   29.58   885,645   0
  MBNA SERP   n/a   24,542,398   0

Liam E. McGee

  Bank of America Pension Plan   18.00   238,946   0
  Pension Restoration Plan   18.00   691,865   0

(1)   The named executive officers’ years of credited service under the Bank of America SERP differ from their years of credited service under the other pension plans and from their actual service with us because the Bank of America SERP is a frozen plan. The Bank of America SERP was frozen effective December 31, 2002, and the named executive officers’ years of credited service under the Bank of America SERP only reflect service through the date of the freeze. In addition, the Bank of America SERP did not take into account more than 15 years of service in its benefit formula before it was frozen, and that limit is also reflected in the table. Service is not used for the benefit formula under the MBNA SERP.

 

The following describes the material features of the pension plans presented in the table.

 

Qualified Pension Plans. We sponsor The Bank of America Pension Plan (the “Bank of America Pension Plan”), a tax-qualified cash balance pension plan which is available to nearly all of our associates (subject to certain minimum service requirements), other than associates who are covered by The Bank of America Pension Plan for Legacy MBNA (the “Legacy MBNA Pension Plan”), or certain other pension plans for legacy organizations. The named executive officers participate in the Bank of America Pension Plan, other than Mr. Hammonds, who participates in the Legacy MBNA Pension Plan.

 

The Bank of America Pension Plan generally expresses benefits as a hypothetical cash balance account established in each participant’s name. A participant’s account receives two forms of credits: “compensation credits” and “investment/interest credits.”

 

Compensation credits equal a percentage of a participant’s compensation. “Compensation” for this purpose includes both salary and bonus. Compensation for this purpose is subject to the compensation limit applicable to tax-qualified plans ($230,000 for 2008). The applicable compensation credit percentage ranges from 2% to 6% under the Bank of America Pension Plan and is based on a schedule that depends on years of service and age measured at certain points in time.

 

The amount of “investment/interest credits” under the Bank of America Pension Plan depend on when the related compensation credits were made. Compensation credits made before 2008 receive “investment credits” based on the performance of certain hypothetical investment measures selected by the participant from a menu of invest-

 

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ment measures, which correspond to the investment funds available under The Bank of America 401(k) Plan. Compensation credits made after 2007 receive “interest credits” equal to the yield on a 10-year U.S. T-constant maturities.

 

At termination of employment after having completed at least three years of service, a participant is eligible to receive the amount then credited to the participant’s cash balance account in an actuarially equivalent joint and survivor annuity (if married) or single life annuity (if not married). The participant may also choose from other optional forms of benefit, including a lump sum payment in the amount of the cash balance account.

 

The plan also includes certain protected minimum benefits, some of which relate to pension formulas from prior pension plans that have merged into the plan and some of which relate to the conversion to a cash balance form of plan. One of these protected minimum benefits guarantees that the cash balance account will not be less than the opening cash balance account at conversion plus subsequent compensation credits.

 

Benefits under the Legacy MBNA Pension Plan are calculated based on average annual compensation, which includes salary, but not bonuses, and may not exceed the compensation limit applicable to tax-qualified plans ($230,000 for 2008). Annual benefits at age 65, the normal retirement age under the Legacy MBNA Pension Plan, are 1.3% of final average compensation times years of credited service plus 0.5% of final average compensation above Social Security Covered Compensation times years of credited service. Final average compensation is the participant’s base pay for the five consecutive years during the participant’s last ten years of pension plan participation in which the participant’s base pay was highest. Social Security Covered Compensation is the 35-year average of amounts with respect to which Social Security taxes must be paid. Benefits payable under the Legacy MBNA Pension Plan are not subject to deductions for Social Security and other offset amounts. Participants who have attained at least age 50 with at least 15 years of service can retire and commence benefits before age 65, subject to reduction in the amount of the benefits to reflect early commencement. Retirement benefits are payable as a joint and survivor annuity (if married) or single life annuity (if not married). The participant may also choose from other optional annuity forms of benefit.

 

Pension Restoration Plan. The named executive officers other than Mr. Hammonds participate in the Bank of America Pension Restoration Plan (the “Pension Restoration Plan”). Mr. Hammonds does not participate in a comparable plan.

 

The Pension Restoration Plan is a nonqualified deferred compensation plan that provides “make up” benefits for participants in the Bank of America Pension Plan whose plan benefits are reduced due to limits applicable to tax-qualified plans or due to participation in other nonqualified deferred compensation plans. However, since 2005, no benefits are accrued on a combined basis under the Bank of America Pension Plan and the Pension Restoration Plan, on any compensation for the year in excess of $250,000.

 

At termination of employment after having completed at least three years of service, a participant is eligible to receive the amount then credited to the participant’s Pension Restoration Plan. As part of a design change to satisfy new federal tax laws affecting nonqualified deferred compensation plans, participants in the Pension Restoration Plan were given a one-time opportunity during 2006 to elect the form of payment as either a lump sum or annual installments over a period of up to 10 years, and were also allowed to elect the timing of payment to be either the year following termination of employment or any later year, not to exceed the year in which the participant reaches age 75. Pension Restoration Plan participants may change their payment elections in limited circumstances.

 

Frozen SERP. Mr. Lewis and Ms. Desoer participate in the Bank of America SERP. Consistent with our pay-for-performance philosophy, the Bank of America SERP was frozen effective December 31, 2002. As a result, no further benefits accrue under either the Bank of America SERP for either named executive officer.

 

Prior to being frozen, the SERP provided a target retirement benefit expressed as a percentage of final average compensation, offset by benefits from the applicable tax-qualified pension plan and pension restoration plan and offset by Social Security. The frozen SERP benefits are expressed as an annual joint and 75% survivor annuity commencing at age 60.

 

The frozen annuity benefit is actuarially reduced for commencement prior to age 60 or actuarially increased for commencement after age 60. Actuarially equivalent lump sum and installment payment options may also be elect-

 

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ed. Actuarial equivalency is based on the actuarial assumptions that were in effect under the Bank of America Pension Plan for 2002, the year that SERP was frozen.

 

MBNA SERP. Prior to his retirement on December 31, 2008, Mr. Hammonds participated in the MBNA SERP, which had been in place for a number of years prior to our acquisition of MBNA. The MBNA SERP provides a retirement benefit payable as an annuity for Mr. Hammonds’ life following retirement equal to 80% of Mr. Hammonds’ highest average salary for any 12-month period during the 144 months preceding retirement, capped at $2,500,000. Mr. Hammonds did not accrue any additional retirement benefit under the MBNA SERP during 2008 because he had already reached the maximum retirement benefit under the plan as of the closing of our acquisition of MBNA. Benefits are reduced by pension and Social Security benefits. The MBNA SERP also provides for salary continuation in the event of death. In the case of death after retirement, Mr. Hammonds’ surviving spouse would receive 100% of his retirement benefit for 10 years following his retirement and 50% thereafter for life.

 

Nonqualified Deferred Compensation. The following table shows information about the participation by each named executive officer in our nonqualified deferred compensation plans:

 

Name   Plan Name   Executive
Contributions
in 2008
($) (1)
  Registrant
Contributions
in 2008
($) (2)
  Aggregate
Earnings
in 2008
($)
    Aggregate
Withdrawals/
Distributions
($)
  Aggregate
Balance at
December 31,
2008
($) (3)

Kenneth D. Lewis

  401(k) Restoration Plan   12,700   10,250   (42,216 )   0   66,112
  Deferred Compensation Plan   0   0   119,023     0   2,102,746
  1999 Restricted Stock Grant   0   0   (14,964,000 )   1,344,000   8,448,000

Joe L. Price

  401(k) Restoration Plan   220,000   1,250   (653,945 )   0   1,219,121

Barbara J. Desoer

  401(k) Restoration Plan   5,786   1,250   (4,210,831 )   0   10,591,159