SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
FIRST SECURITY CORPORATION
(Name of Registrant as Specified In Its Charter)
(same)
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of each class of securities to which transaction applies: n/a
2) Aggregate number of securities to which transaction applies: n/a
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:1 n/a
4) Proposed maximum aggregate value of transaction:
------------------
(1)Set forth the amount on which the filing fee is calculated and state how it
was determined.
[ ] 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 paid
previously. 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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FIRST SECURITY CORPORATION
79 S. Main Street
Salt Lake City, Utah 84111
Notice of Annual Meeting of Shareholders
April 26, 1999, at 3 p.m.
March 22, 1999
Dear Shareholder,
You are cordially invited to First Security Corporation's Annual Meeting of
Shareholders, which will be held April 26, 1999, at 3 p.m. in the Empire Room of
the Joseph Smith Memorial Building, 15 E. South Temple in Salt Lake City, Utah.
The meeting will begin with voting on the items described on pages 17-26 of the
Proxy Statement and on other business properly brought before the meeting.
Management will then present an update on the corporation's progress. The
meeting is expected to conclude before 4:30 p.m.
We hope that you will be able to attend, but if you cannot, it is important that
your shares be voted by proxy. Please immediately sign and complete the enclosed
Proxy Designation and Instruction Card and return it in the envelope provided so
that your shares may be represented. No postage is required if the proxy card is
mailed in the United States. If you own Common Stock and cumulative convertible
preferred stock, please sign and return both proxies. If a majority of
outstanding shares is not present at the Annual Meeting, either in person or by
proxy, the meeting must be adjourned and additional expense incurred to
resolicit shareholders for a new meeting date.
By order of the Board of Directors,
/s/ Brad D. Hardy
BRAD D. HARDY
Executive Vice President and
Secretary of First Security Corporation
NOTE: The close of business on March 8, 1999, was established by the Board of
Directors as the Record Date for the determination of the shareholders entitled
to notice of and to vote at the 1999 Annual Meeting. A list of First Security's
shareholders entitled to vote at the 1999 Annual Meeting will be available for
examination at First Security's offices at 79 S. Main St., Second Floor, Salt
Lake City, Utah, for 10 business days prior to the Annual Meeting, between 9
a.m. and 5 p.m. The list also will be available for examination during the
Annual Meeting.
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First
Security(R)
PROXY STATEMENT
March 22, 1999
TABLE OF CONTENTS
Page
SHAREHOLDER QUESTIONS AND ANSWERS.............................................2
GENERAL INFORMATION FOR SHAREHOLDERS..........................................3
LAST YEAR'S (April 27, 1998) ANNUAL MEETING...................................4
INDEPENDENT AUDITORS..........................................................4
MANAGEMENT OF FIRST SECURITY..................................................5
Board of Directors............................................................5
Executive Officers..........................................................6
COMPENSATION OF MANAGEMENT....................................................7
Director Compensation.......................................................7
Summary of Compensation to Certain Executive Officers.......................9
Company Contributions to Employee Savings Plan and Salary
Deferral Agreements.......................................................9
Stock Options and Similar Awards to Management.............................10
Retirement Benefits........................................................11
Compensation Committee Report on Executive Compensation....................12
Compensation Committee Interlocks and Insider Participation................14
CERTAIN TRANSACTIONS BY AND WITH MANAGEMENT AND OTHERS.......................15
Directors' and Officers' Liability Insurance...............................15
Credit Extensions..........................................................15
Compliance with Section 16 Reporting Obligations...........................15
Employment Agreements......................................................15
Other Transactions ........................................................16
PRINCIPAL SHAREHOLDERS.......................................................16
COMPARATIVE PERFORMANCE OF FIRST SECURITY'S COMMON STOCK.....................16
PROPOSALS FOR SHAREHOLDER ACTION.............................................17
1. Election of Directors...................................................17
2. Increase the Number of Shares Reserved for the Comprehensive
Management Incentive Plan ............................................20
OTHER BUSINESS...............................................................26
DEADLINE FOR SHAREHOLDER PROPOSALS...........................................26
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SHAREHOLDER QUESTIONS AND ANSWERS
Q. When and where is the Annual Meeting?
A. The Annual Meeting will be held Monday, April 26, 1999, in the Empire
Room, Joseph Smith Memorial Building, 15 E. South Temple, Salt Lake
City, Utah. The meeting should last from 3 to 4:30 p.m.
Mountain Time.
Q. Who can vote at the Annual Meeting?
A. All shareholders of record as of March 8, 1999, can attend and vote at
the Annual Meeting.
Q. What does "of record" mean?
A. You are a shareholder "of record" if you own First Security common or
preferred stock in your name as of the close of business on March 8,
1999, the Record Date.
Q. What may I vote on?
You may vote on:
(1) The election of nominees to serve on the Board of Directors; and
(2) The approval of new shares for the Comprehensive Management
Incentive Plan.
Q. How does the Board recommend I vote on the proposals?
A. The Board recommends a vote FOR each of the nominees and FOR approval
of the new shares for the Comprehensive Management Incentive Plan.
Q. How do I vote?
A. Sign and date each Proxy Card you receive and return it in the prepaid
envelope. If you return your signed Proxy Card but do not mark the
boxes showing how you wish to vote, your shares will be voted FOR the
two proposals. You have the right to revoke your Proxy at any time
before the meeting by:
(1) notifying First Security's Corporate Secretary;
(2) returning a later-dated proxy card; or
(3) voting in person.
Q. What does it mean if I receive a white proxy card AND a white with
green-stripe proxy card?
A. White proxy cards designate common shares; white with green-stripe
proxy cards designate preferred shares. You will receive both cards if
you hold both common and preferred shares.
Q. What does it mean if I get more than one white or white with green-
stripe proxy card?
A. If you hold shares in more than one account, you will receive more than
one card. Sign and return all proxy cards to ensure that all your
shares are voted. We encourage you to have all accounts registered in
the same name and address whenever possible. You can consolidate your
accounts by contacting our transfer agent, First Chicago Trust Company
of New York, toll-free at (800)756-8200.
Q. Who will count the votes?
A. Representatives of First Chicago Trust Company of New York will count
the votes.
Q. Is my vote confidential?
A. Proxy cards, ballots and voting tabulations that identify individual
shareholders are mailed or returned directly to First Chicago Trust
Company of New York and are handled in a manner that protects your
voting privacy. Your vote will not be disclosed except: (1) as needed
to permit First Chicago Trust to tabulate and certify the vote; (2) as
required by law; or (3) in limited circumstances such as a proxy
contest in opposition to the Board.
YOUR VOTE IS IMPORTANT
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GENERAL INFORMATION FOR SHAREHOLDERS
This Proxy Statement is furnished by First Security Corporation, a
Delaware corporation, to its Shareholders, in connection with the solicitation
by the current Board of Directors of proxies for use at the 1999 Annual Meeting
of Shareholders. The Annual Meeting will held in the Empire Room of the Joseph
Smith Memorial Building at 15 E. South Temple, Salt Lake City, Utah, on Monday,
April 26, 1999, at 3 p.m., and at any and all adjournments thereof.
A Proxy Designation and Instruction Card ("Proxy" "or Proxy Card") for
your use in connection with the Annual Meeting is enclosed. If you own Common
Stock and Cumulative Convertible Preferred Stock, you should have received two
Proxy Cards. You should date and sign both of these Proxy Cards and return them
in the envelope provided.
Voting Securities
The Board of Directors has fixed the close of business on March 8,
1999 as the Record Date for determination of shareholders entitled to notice of
and to vote at the 1999 Annual Meeting (the "Record Date"). As of the Record
Date, there were issued and outstanding 194,622,212 shares of Common Stock and
9,063 shares of $3.15 Series "A" Cumulative Convertible Preferred Stock
("Preferred Stock"). The holders of record of the shares of First Security's
Common Stock and of shares of First Security's Preferred Stock on the Record
Date entitled to be voted at the Annual Meeting are entitled to cast one vote
per share on each matter submitted to a vote at the Annual Meeting.
As of August 28, 1989, First Security adopted a Shareholder Rights
Agreement ("the Plan") and the Board of Directors of First Security on that date
(a) declared a dividend of one "Right" for each share of Common Stock held of
record as of the close of business on September 8, 1989, and (b) authorized the
issuance of one Right to attach to each share of Common Stock issued after
September 8, 1989, and prior to the occurrence of certain events described in
the Plan. The Rights are attached to all Common Stock certificates that were
outstanding on September 8, 1989, or have been issued since that date, and no
separate Rights Certificates have been or will be distributed until the
occurrence of certain events described in the Rights Agreement. Until such
separation, no Right may be exercised or traded separately from the Common Stock
certificate to which it is attached. Following separation, the Rights may,
depending upon the occurrence of certain events described in the Rights
Agreement, entitle the holders thereof to either purchase or receive additional
shares of Common Stock. Technical amendments were made to the Plan twice between
1989 and October 28, 1998. The Rights will expire at the close of business on
August 28, 1999, unless earlier redeemed by First Security in accordance with
the terms of the Plan.
On October 26, 1998, First Security amended the price at which a
registered holder would be entitled to purchase from First Security one
one-thousandth of a share of First Security's Junior Series B Preferred Stock,
without par value. The Exercise Price had formerly been set at $100 per right
(before adjustment for First Security's 1991, 1992, 1996, 1997 and 1998 3-for-2
stock splits, or $13.17 after split adjustments), and has been amended to so as
to be set at $85 per right (after adjustment for such stock splits).
The Board also adopted a new plan with legal and technical innovations
over the Plan (the "Successor Rights Plan") in its action on October 26, 1998.
The Successor Rights Plan will take effect upon the expiration of the existing
rights on August 28, 1999. There is no material difference between the Plan, as
now amended, and the Successor Rights Plan that will be effective upon the
expiration of the Plan. In connection with the Successor Rights Plan, the Board
declared a dividend of one right (a "Successor Right") for each outstanding
share of Common Stock payable on August 28, 1999, to the shareholders of record
as of that date.
Proxies
Shares of Preferred Stock and Common Stock which are entitled to be
voted at the Annual Meeting and which are represented by properly executed
Proxies will be voted in accordance with the instructions indicated on such
Proxies. If no instructions are indicated, such shares will be voted FOR the
election of each of the Director nominees; and, in the discretion of the
designated Proxy holders, as to any other matters that may properly come before
the Annual Meeting.
Any Shareholder signing and delivering a Proxy has the power to
revoke it at any time before the vote at the Annual Meeting (a) by notifying the
Secretary of First Security in writing prior to 3 p.m. Mountain Time on April
26, 1999, (b) by signing and dating a later Proxy and submitting the new Proxy
in time to be counted for the Annual Meeting, or (c) by attending the Annual
Meeting and voting contrary to the submitted Proxy at the time votes are
requested.
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A Shareholder may designate someone other than the designated person(s)
named on the Proxy Card as his authorized agent to vote at the 1999 Annual
Meeting by crossing out the names of all of the designated person(s) printed on
the Proxy Card and by writing in the name of another person or persons (not more
than two) to act as agent for the Shareholder in voting his shares. Such a
special designation signed by the Shareholder(s) must be presented at the Annual
Meeting by the person or persons designated on the Proxy Card.
For Shareholders participating in the Dividend Reinvestment Plan
offered by First Security, the Plan Administrator will vote all shares of First
Security Common Stock that it holds for a participant's account in accordance
with the Proxy Card returned by the participant with respect to the shares of
Common Stock that the participant holds of record. If a participant in the
Dividend Reinvestment Plan fails to sign and return a Proxy Card, the
participant's shares held in the Plan will not be voted, nor will they be
considered present at the 1999 Annual Meeting.
The cost of preparing, assembling and mailing this Proxy Statement and
related materials will be borne by First Security. The solicitation of Proxies
by the Directors is being made by mail and may also be made by agents of First
Security, in person, by telephone, or by mail. No additional compensation will
be given to employees or Directors for such solicitation. Non-employee agents
may be retained to assist in the Proxy solicitation process at a cost to First
Security, if any, not expected to exceed $70,000. Custodians of securities held
for Shareholders of record (for example, banks, brokers, etc.) may be paid their
reasonable out-of-pocket expenses incurred in forwarding Proxy Cards and this
Proxy Statement to Shareholders.
This Proxy Statement and the enclosed form of Proxy are being mailed to
Shareholders beginning on March 22, 1999. Mailed together with this Proxy
Statement is a copy of First Security's 1998 Annual Report to Shareholders.
Shareholders who do not receive a copy of the 1998 Annual Report with this Proxy
Statement, or who desire extra copies, should contact First Security at (801)
246-5048.
Votes Required For Action to be Taken at the 1999 Annual Meeting
A majority of the share votes entitled to be cast at the Annual Meeting
(legal ownership of outstanding shares as of the Record Date) must be present in
person or by Proxy for a quorum to exist at the Annual Meeting. Abstentions and
broker non-votes are counted "present" for determining the presence or absence
of a quorum for the transaction of business.
In the election of Directors, the twenty nominees receiving the highest
number of votes cast in their favor will be elected as the Board of Directors of
First Security to serve until the 2000 Annual Shareholders' Meeting.
Accordingly, abstentions and broker non-votes will not affect the outcome of the
election of Directors. In voting on the increase in the common shares reserved
for the Comprehensive Management Incentive Plan, a majority of the shareholders
present at the meeting must vote in favor of the plan. Abstentions and broker
non-votes will have the effect of a "no" vote.
Holders of shares of Preferred Stock and Common Stock are entitled to
one vote at the Annual Meeting for each share held of record at the Record Date.
LAST YEAR'S (April 27, 1998) ANNUAL MEETING
The 1998 Annual Meeting of the Shareholders was held on April 27, 1998,
in Salt Lake City, Utah. There were 138,464,369 shares of Common Stock and 5,437
shares of Preferred Stock represented at the 1998 Annual Meeting in person or by
proxy, which shares constituted a legal quorum. Each of the nominees to the
Board of Directors presented to the 1998 Annual Meeting was voted upon
separately, and each was elected by the affirmative vote of more than 98% of the
shares present and voting. The second proposal for shareholder action set out in
last year's Proxy Statement was also approved by the vote of more than 87% of
the shares present and voting at the 1998 Annual Meeting.
INDEPENDENT AUDITORS
The Board of Directors has appointed Deloitte & Touche as the
independent auditors to examine the accounts of First Security and its
subsidiaries for the 1999 calendar year. This firm or a predecessor firm has
audited First Security's accounts since at least 1940 and is one of the largest
and best-known firms of independent certified public accountants. Deloitte &
Touche rotates its personnel assigned to First Security Corporation at least
once every seven years, with assignments beyond three years of supervising
partners responsible for the First Security Corporation engagement reviewed and
approved in advance by the Audit Committee. A partner in Deloitte & Touche will
be in attendance at the 1999 Annual Meeting to make a statement on behalf of the
firm if he so desires and to answer appropriate questions, if any, from
Shareholders.
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MANAGEMENT OF FIRST SECURITY
Board of Directors
The business of First Security is managed under the direction of its
Board of Directors. The Board has responsibility for establishing broad
corporate policies, for the overall performance of First Security and for the
election and compensation of officers of First Security. It is not, however,
involved in managing First Security and its operating units on a day-to-day
basis. The Board is kept advised of First Security's operations and results
through regular written reports from, and discussions with, the Chairman, the
President, the Chief Financial Officer and other executive officers of First
Security.
The Board of Directors meets regularly during the year to review
significant developments affecting First Security and to act on matters
requiring Board approval. It also holds special meetings when one or more
important matters requires Board action between scheduled meetings. Executive
officers responsible for significant operations or supervisory activities are
frequently invited to meet with the Board of Directors to discuss their areas of
responsibility.
As disclosed to First Security, at year end the current Directors of
First Security beneficially owned as a group 18,094,123 shares, or approximately
9.3% of First Security's outstanding Common Stock at the Record Date, including
2,540,905 option shares exercisable within 60 days but which were unexercised,
and including 757 shares beneficially owned by Dr. Chase N. Peterson, First
Security's only Honorary Director.
During 1998, the Board of Directors held seven meetings and one
conducted by unanimous consent. All Directors attended the meeting conducted by
unanimous consent, and all of the seven Board meetings except Messrs. Garff,
Joklik, Machen, Maloof and Wilson, who attended six meetings, and Ms. Huntsman,
who attended five meetings.
The Executive Committee of the Board of Directors exercises the powers
of the Board in the management of the business and affairs of First Security
between Board of Directors meetings or when the Board could not reasonably or
timely be convened. The Executive Committee keeps regular minutes of its
meetings and reports to the Board of Directors at the regular meetings of the
Board. The Executive Committee met twelve times during 1998. Messrs. Beardall,
Brady, Eccles, Evans, and Heiner attended all of the meetings; Mr. Dee attended
eleven meetings; and Mr. Parker attended ten meetings.
The Audit Committee of the Board, which met four times during 1998,
reports to the Board of Directors with respect to various auditing and
accounting matters, the scope of audit procedures, the performance of the
internal auditors and examiners, and accounting and compliance practices of
First Security. All members of the Audit Committee attended all of the scheduled
meetings, except Dr. Papen-Daniel, who attended three meetings.
The Compensation Committee administers the various incentive award and
equity plans of First Security on behalf of the Board of Directors. The
Compensation Committee also determines compensation for the Executive Officers
of First Security who serve on the Management Committee (Messrs. Caughlin,
Eccles, Evans, Golden, Hardy, Howell, McMurray, Nelson and Ulbrich). The
Compensation Committee met on January 26, 1998, and all members of the Committee
attended the meeting.
The Nominating Committee selects and nominates candidates to fill
vacancies on the Board of Directors and proposes these nominees to the Board of
Directors and Shareholders. This Committee is willing to consider nominees for
future election to the Board of Directors, and Shareholders may submit in
writing the names and qualifications of proposed nominees to the Secretary of
First Security. The Nominating Committee meets as needed. The membership in the
Nominating Committee is the same as for the Executive Committee. The Nominating
Committee met on January 20, 1998, and all members of the Nominating Committee
attended the meeting.
Honorary Directors are provided information about First Security on the
same basis as regular Directors, and are invited to meetings of the Board of
Directors, although Honorary Directors do not vote on any matter before the
Board. Currently Dr. Chase N. Peterson is serving as the only Honorary Director
of First Security. He beneficially owned 757 shares of First Security's Common
Stock at year-end 1998.
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Executive Officers
Set forth on Table 1 are the names, ages, primary areas of
responsibility, and economic and beneficial stock ownership (as of December 31,
1998) of First Security's Executive Officers except Messrs. Eccles (Chairman and
Chief Executive Officer) and Evans (President and Chief Operating Officer) whose
biographical and share ownership information is found with the other Director
nominees later in this Proxy Statement. Executive Officers serve at the pleasure
of the Board of Directors, although as disclosed later in this Proxy Statement,
certain Executive Officers have entered into agreements governing the
termination of their employment with First Security.
Table 1
Executive Officers of First Security Corporation
Jay S. Bachman, 49, is Senior Vice President for First Security and Manager of
Corporate Development. At year-end 1998, Mr. Bachman was the beneficial owner of
42,293 shares of Common Stock, including 32,462 option shares exercisable within
60 days, but not yet exercised, 4,314 shares held in his account in First
Security's Incentive Savings Plan, and 517 stock equivalency units1 held in his
deferred compensation account.
Michael P. Caughlin, 46, is Executive Vice President-Technology and Processing
Services of First Security, a member of First Security's Management Committee
and is a Director of First Security Bank, N.A. At year-end 1998, Mr. Caughlin
beneficially owned 93,768 shares of Common Stock, including 57,600 option shares
exercisable within 60 days, but not yet exercised, 7,408 shares held in his
account in First Security's Incentive Savings Plan, and 2,058 stock equivalency
units1 in his deferred compensation account. This number of shares is
approximately 0.05% of the total outstanding shares of Common Stock at the
Record Date.
David R. Golden, 42, is Executive Vice President-Risk Management of First
Security, a member of First Security's Management Committee, and a Director of
First Security Bank, N.A. At year-end 1998, Mr. Golden beneficially owned 8,554
shares of Common Stock, including 4,836 option shares exercisable within 60
days, but not yet exercised, and 3,718 shares held in his account in First
Security's Incentive Savings Plan.
Brad D. Hardy, 45, is Executive Vice President-Corporate Services, General
Counsel, Chief Financial Officer, Secretary of First Security, a member of First
Security's Management Committee and a Director of First Security Bank, N.A. At
year-end 1998, Mr. Hardy beneficially owned 98,506 shares of Common Stock,
including 94,590 option shares exercisable within 60 days, but not yet
exercised, 377 shares held in his account in First Security's Incentive Savings
Plan, and 1,864 stock equivalency units1 held in his deferred compensation
account. This number of shares is approximately 0.05% of the total outstanding
shares of Common Stock at the Record Date.
Mark D. Howell, 46, is Executive Vice President-Business Lending Services of
First Security, a member of First Security's Management Committee and a Director
of First Security Bank, N.A. At year-end 1998, Mr. Howell beneficially owned
172,885 shares of Common Stock, including 163,095 option shares exercisable
within 60 days, but not yet exercised, 5,107 shares held in his account in First
Security's Incentive Savings Plan, and 1,438 stock equivalency units1 held in
his deferred compensation account. These share numbers do not include 28,754
shares of First Security's Common Stock held by a revocable trust as to which
Mr. Howell is a named beneficiary upon the death of the currently living
trustor, and as to which Mr. Howell disclaims any beneficial interest. This
number of shares is approximately 0.08% of the total outstanding shares of
Common Stock at the Record Date.
Kelly K. Matthews, 54, is Executive Vice President and Chief Economist of First
Security. At year-end 1998, Mr. Matthews was the beneficial owner of 90,482
shares of Common Stock, including 37,921 option shares exercisable within 60
days, but not yet exercised, and 13,753 shares held in his account in First
Security's Incentive Savings Plan.
J. Patrick McMurray, 50, is Executive Vice President-Community Banking Services
of First Security, and also serves as Director and President of First Security
Bank, N.A., as Chairman of First Security Bank of Nevada, and as a member of
First Security's Management Committee. At year-end 1998, he was the beneficial
owner of 408,549 shares of Common Stock, including 351,880 option shares
exercisable within 60 days, but not yet exercised, and 25,006 shares held in his
account in First Security's Incentive Savings Plan. This number of shares is
approximately 0.21% of the total outstanding shares of Common Stock at the
Record Date.
L. Scott Nelson, 60, is Executive Vice President-Retail Lending Services of
First Security, and also serves as Director and Chairman of First Security Bank,
N.A. and of First Security Bank of New Mexico, N.A., and as a member of First
Security's Management Committee. At year-end 1998, he was the beneficial owner
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of 594,853 shares of Common Stock including certain shares held by Mr. Nelson's
spouse in her name, and including 559,727 option shares exercisable within 60
days, but not yet exercised, 11,850 shares held in his account in First
Security's Incentive Savings Plan, and 897 stock equivalency units1 held in his
deferred compensation account. This number of shares is approximately 0.31% of
the total outstanding shares of Common Stock at the Record Date.
Leslie F. Paskett, 54, is Senior Vice President and Comptroller. At year-end
1998, he was the beneficial owner of 77,692 shares of Common Stock, including
64,421 option shares exercisable within 60 days, but not yet exercised, 8,265
shares held in his account in First Security's Incentive Savings Plan, and 315
stock equivalency units1 held in his deferred compensation account.
Dennis G. Reeves, 59, is Senior Vice President and Chief Auditor of First
Security. At year-end 1998, Mr. Reeves was the beneficial owner of 27,200 shares
of Common Stock, including 23,448 option shares exercisable within 60 days, but
not yet exercised, 1,404 shares held in his account in First Security's
Incentive Savings Plan, and 348 stock equivalency units1 held in his deferred
compensation account.
Scott C. Ulbrich, 44, is Executive Vice President-Capital Markets, Treasury and
Investment Management, and a member of First Security's Management Committee. At
year-end 1998, he was the beneficial owner of 229,480 shares of Common Stock,
including 214,291 option shares exercisable within 60 days, but not yet
exercised, and 2,260 shares held in his account in First Security's Incentive
Savings Plan. This number of shares represents 0.12% of the total outstanding
shares of Common Stock at the Record Date.
Alonzo W. Watson, Jr., 76, is Assistant Secretary of First Security, and is a
shareholder and Director of Ray, Quinney & Nebeker (law firm). At year-end 1998,
he was the beneficial owner of 4,988 shares of Common Stock, which does not
include 709,267 shares as to which Mr. Watson holds voting and investment power
as Personal Representative of the Estate of Mrs. George S. Eccles; does not
include 3,523,807 shares held by the George S. and Dolores Dore Eccles
Foundation, of which Mr. Watson is a director; does not include 205,030 shares
held by the Marriner S. Eccles Charitable Trust, of which Mr. Watson is an
Advisory Director; and does not include 499,500 shares of First Security's
Common Stock owned by the Nora Eccles Treadwell Foundation, as to which Mr.
Watson serves as a Director and disclaims beneficial ownership; but does include
certain shares held by Mr. Watson's spouse in her own name.
David R. Wilson, 59, is President and Chief Executive Officer of First Security
Capital Markets, Inc. and Executive Vice President for First Security. At
year-end 1998, he was the beneficial owner of 106,908 shares of Common Stock
including 89,435 option shares exercisable within 60 days, but not yet
exercised, 8,499 shares held in his account in First Security's Incentive
Savings Plan, and 2,088 stock equivalency units1 held in his deferred
compensation account.
Chester A. Wood, Jr., 50, is Senior Vice President of First Security and Senior
Managing Director of Treasury Management. At year-end 1998, Mr. Wood was the
beneficial owner of 42,342 shares of Common Stock, including 37,845 option
shares exercisable within 60 days, but not yet exercised, 1,537 shares held in
his account in First Security's Incentive Savings Plan, and 2,960 stock
equivalency units1 held in his deferred compensation account.
Based on their disclosed share holdings at December 31, 1998, all of
First Security's Executive Officers as a group (16 persons, including Messrs.
Eccles and Evans, whose stock holdings are described in the Election of
Directors section, below), beneficially owned a total of 9,450,256 shares, or
approximately 4.86%, of First Security's Common Stock (including 4,171,331
shares subject to unexercised options exercisable within 60 days), 178,763
shares held in accounts in First Security's Incentive Savings Plan, 12,485 stock
equivalency units held in their deferred compensation account, and 63 shares, or
approximately 0.70% of First Security's Preferred Stock.
(1) Stock equivalency units will always be settled in cash and do not
represent voting securities.
COMPENSATION OF MANAGEMENT
Director Compensation
Cash Compensation. During 1998, a cash retainer of $12,000 was paid to
each Director, as well as a $1,000 fee for attendance at each meeting of the
Board of Directors (or a fee of $300 for each scheduled meeting not attended).
Director compensation is paid in four quarterly installments in arrears to those
Directors who do not defer their compensation, as described below, but the full
amount of the retainer is paid in advance at the start of the year for those
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Directors who defer their compensation as described below. Messrs. Eccles and
Evans do not receive the annual retainer, but they are paid the per meeting
fees. The Bylaws permit payment of Directors' expenses incurred in travelling to
and attending Board of Directors meetings.
Directors of First Security who are not Executive Officers may enter
into a compensation deferral agreement with First Security whereby the payment
of retainers and fees otherwise receivable by a Director for service as a
Director may be deferred and held in an account for the benefit of the Director.
The Director may choose whether this deferred compensation will be invested in
stock equivalency units or earn interest at a predetermined rate. A Director
selecting stock equivalency units will be credited with that number of stock
equivalency units equal to the result of dividing the total amount of deferred
compensation in the Director's account on the Annual Evaluation Date (usually
May 1) by the market price of First Security's common stock on that date.
Moreover, additions are made to the Director's account to represent the value of
dividends that otherwise would be paid on the stock equivalent units if they
were actual shares of Common Stock. A Director electing to earn interest only
will have interest added annually on the Valuation Date at a rate equal to First
Security's cost of funds for the applicable period. Directors may choose a lump
sum cash distribution upon retirement from the Board of Directors or a periodic
distribution program which could involve up to ten annual cash payment
installments. Amounts remaining in a Director's deferral account during any term
of periodic distributions will continue to be revalued annually.
Additional per meeting fees of $1,000 were paid in 1998 to Directors
who were members of the Audit Committee and the Compensation Committee, with the
Chairmen of these committees being paid an annual retainer of $2,000 in addition
to the per meeting fees. Directors who were members of the Executive Committee
and who are not Executive Officers of First Security were paid an additional fee
of $15,000 annually. Committee members who do not attend a meeting will get no
compensation for the missed committee meeting. These additional fees for
Directors' committee service may be deferred in the same manner (discussed
above) as are regular Directors' fees.
Honorary Directors are paid $1,000 per Board of Directors' Meeting that
they attend and $300 per Directors' Meeting not attended.
Director Stock Options. Each Non-Employee Director elected at the 1998
Annual Shareholders Meeting was granted, as of May 1, 1998, an Option to
purchase 3,000 shares of First Security's Common Stock. Thereafter, on May 1
immediately following the date as of which a new Non-Employee Director is first
elected to the Board of Directors, such new Non-Employee Director will be
granted an Option to purchase a number of shares of Company Common Stock which
corresponds to the remaining vesting period for any pre-existing as yet unvested
Director Options. If a Non-Employee Director remains a Director through the
three-year vesting period of an Option, that Director automatically will be
granted another Option to purchase an additional 3,000 shares of Company Common
Stock vesting over another three-year period.
Each Option vests 33 1/3% (normally 1,000 shares) per year over a
normal vesting term of three years from the date of grant. Persons who are first
elected as a Non-Employee Director after the beginning of a three-year vesting
period for Options granted to pre-existing Non-Employee Directors will receive
an Option for fewer shares and with a shortened vesting schedule to coincide
with the operation of the then pending three-year vesting period applicable to
the pre-existing Non-Employee Directors' Options.
The term of each Option is ten years from the date the Option is
granted, subject to earlier termination under specified circumstances. Options
become immediately exercisable in full for their full term upon (i) the death or
disability of the Director, or (ii) the liquidation, dissolution, merger,
consolidation or reorganization of First Security. Upon a Director's retirement
from the Board of Directors or an unsuccessful attempt by a Director to win
re-election to the Board, the Director's Options will be honored strictly
according to their terms.
Once vested, lifetime transfers of options are allowed, subject to
approval of legal counsel to First Security.
The exercise price per share of an Option will be equal to the fair
market value per share of Common Stock on the Grant Date. The fair market value
per share of Common Stock on any date is equal to the Last Sale price per share
of First Security's common stock as reported on the Nasdaq National Market
System on the date immediately preceding such date or, in the event such
immediately preceding date is not a day on which the Nasdaq National Market
System is operating, the next previous date on which the Nasdaq National Market
System was operating.
8
<PAGE>
Summary of Compensation to Certain Executive Officers
Set out in Table 2 is a Summary Compensation Table showing the various
elements of compensation earned during 1998 and during the previous two years by
First Security's Chief Executive Officer and the next five highest paid
Executive Officers (whose compensation for each year was determined for this
purpose on the same basis as for the Chief Executive Officer):
<TABLE>
<CAPTION>
Table 2
Summary Compensation Table
=========================================================================== ====================================================
Annual Compensation Long-Term Compensation
Awards
=========================================================================== ====================================================
Name and Year Salary1 Bonus2 Restricted Options/ All Other
Principal Position ($) ($) Stock SARs3 Compensation4
Award(s) (#) ($)
($)
- ------------------------------------- --------- ------------- ------------- ------------------ ------------ --------------------
<S> <C> <C> <C> <C> <C> <C>
Spencer F. Eccles, 1998 594,504 343,901 -0- 150,528 17,338
Chairman and Chief Executive Officer 1997 550,015 218,858 -0- 106,704 18.088
1996 539,215 165,105 -0- 152,496 12,057
- ------------------------------------- --------- ------------- ------------- ------------------ ------------ --------------------
1998 452,520 204,054 -0- 69,984 27,411
Morgan J. Evans, 1997 435,301 133,563 -0- 84,240 22,760
President and Chief Operating 1996 409,451 102,259 -0- 107,856 19,890
Officer
- ------------------------------------- --------- ------------- ------------- ------------------ ------------ --------------------
L. Scott Nelson, 1998 324,844 149,524 -0- 38,784 18,049
Executive Vice President-Retail 1997 320,206 98,751 -0- 61,632 17,436
Lending Services 1996 308,456 96,582 -0- 58,896 15,318
- ------------------------------------- --------- ------------- ------------- ------------------ ------------ --------------------
J. Patrick McMurray, 1998 284,379 130,108 -0- 28,800 6,554
Executive Vice President-Community 1997 278,917 85,944 -0- 61,632 12,293
Bank Services 1996 266,117 79,816 -0- 42,336 20,251
- ------------------------------------- --------- ------------- ------------- ------------------ ------------ --------------------
Brad D. Hardy,
Executive Vice President- 1998 232,418 112,778 -0- 25,056 9,998
Corporate Services, Chief Financial 1997 219,450 74,379 -0- 61,632 9,581
Officer, General Counsel and 1996 204,250 77,554 -0- 31,680 7,501
Secretary
- ------------------------------------- --------- ------------- ------------- ------------------ ------------ --------------------
Scott C. Ulbrich, 1998 232,418 112,778 -0- 25,056 9,998
Executive Vice President- 1997 219,450 74,679 -0- 61,632 9,427
Capital Markets, Treasury and 1996 204,260 72,103 -0- 31,680 9,642
Investment Management
=========================================================================== ====================================================
</TABLE>
1 Includes Director's Fees paid by First Security or its affiliates, if
applicable.
2 Bonuses are listed in the year earned and normally accrued, although such
bonuses may be paid in the following year. Stock bonuses are valued at the
market value on the date of receipt.
3 First Security has never issued SARs to Executive Officers.
4 Amounts shown include premiums paid on insurance policies, contributions by
First Security to the account of each of the named Executive Officers in the
First Security Incentive Savings Plan, a 401(k) plan open to all full-time
employees of First Security, and contributions made by First Security to the
deferred compensation accounts of these Executive Officers under a program
open to all Executive Officers of First Security.
Company Contributions to Employee Savings Plan and Salary Deferral Agreements
Executive Officers, together with all full-time employees of First
Security, are permitted to participate in the Incentive Savings Plan, whereby a
portion of an employee's compensation may be contributed on a pre-tax basis to
an investment account in the employee's name, and that account can be invested
at the direction of the employee into one of several investment funds, including
a First Security Stock Fund composed of First Security's Common Stock and other
Company securities. First Security contributes an amount equal to 50% of the
9
<PAGE>
participating employee's contribution to the plan, up to a maximum of 3% of
compensation. The employer contribution is separately invested for the
employee's benefit in an Employee Stock Ownership Plan (ESOP) which is a part of
the Incentive Savings Plan.
Executive Officers also may enter into a compensation deferral
agreement with First Security, separate and apart from the Incentive Savings
Plan described above, whereby compensation otherwise receivable for service as
an Executive Officer may be deferred and held in an account for the benefit of
the Executive Officer. First Security will match 50% of the Executive Officer's
annual deferred amount up to a maximum of 3% of total compensation, and will add
this amount to the Executive Officer's deferral account (less any employer
contribution to the Executive Officer's Incentive Savings Plan). The Executive
Officer may choose whether this deferred compensation will be invested in stock
equivalency units or earn interest at a predetermined rate. An Executive Officer
selecting stock equivalency units will be credited with that number of stock
equivalency units equal to the result of dividing the total amount of deferred
compensation on the Quarterly Evaluation Date (last day of each quarter) by the
market price of First Security's Common Stock on that date. Moreover, additions
are made to the Executive Officer's account to represent the value of dividends
that otherwise would be paid on the stock equivalency units if they were actual
shares of stock. An Executive Officer electing to earn interest will have
interest added quarterly on the Valuation Date (last day of each quarter) at a
rate equal to the yield on ten-year treasury securities plus 1%. Treasury yields
will be measured as the average monthly yield each December, March, June and
September, as published by the Federal Reserve. Such rate shall be effective for
the quarter commencing three months later. Executive Officers using this
deferred compensation option may choose a lump sum distribution upon death,
disability or retirement, or in quarterly or annual installments over a period
of up to twenty years. Amounts remaining in a deferral account during any term
of periodic distributions will continue to be revalued quarterly. No switching
between the stock equivalency units and the interest rate option will be
permitted. All payouts to employees will be in cash. At December 31, 1998, the
named Executive Officers had the following balances in their deferred income
accounts: Mr. Eccles, $0; Mr. Evans, $810,958; Mr. Nelson, $165,242; Mr.
McMurray, $85,795; Mr. Hardy, $163,161, and Mr. Ulbrich, $120,032.
Stock Options and Similar Awards To Management
The following two tables provide information concerning the stock
options and similar awards provided to the Executive Officers listed in Table 2
during 1998 (Table 3) and exercises of stock options and similar awards by these
listed Executive Officers during 1998 (Table 4):
<TABLE>
<CAPTION>
Table 3
Options Granted to Certain Executive Officers During 1998
================================================================================================================================
% of
Total Black-
Options/SARs Scholes
Options/SARs Granted to Exercise Method Grant
Granted1 All Employees Base Price2 Expiration Date Value3
Name (#) In Fiscal Year ($/Sh) Date ($)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Spencer F. Eccles 150,528 11.2 22.58 01/26/08 1,282,100
- --------------------------------------------------------------------------------------------------------------------------------
Morgan J. Evans 69,984 5.2 22.58 01/26/08 596,078
- --------------------------------------------------------------------------------------------------------------------------------
L. Scott Nelson 38,784 2.9 22.58 01/26/08 330,337
- --------------------------------------------------------------------------------------------------------------------------------
J. Patrick McMurray 28,880 2.1 22.58 01/26/08 245,300
- --------------------------------------------------------------------------------------------------------------------------------
Brad D. Hardy 25,056 1.9 22.58 01/26/08 213,411
- --------------------------------------------------------------------------------------------------------------------------------
Scott C. Ulbrich 25,056 1.9 22.58 01/26/08 213,411
================================================================================================================================
</TABLE>
1 First Security has never issued SARs to Executive Officers. Options granted
in 1998 vest in four equal increments on January 15 of 1999, 2000, 2001, and
2002.
2 The 1998 Options were awarded by the Compensation Committee on January 26,
1998. The exercise price is the "last sale" price quotation for First
Security's Common Stock on the last business day prior to the date of grant.
3 The Black-Scholes model assumes (a) stock volatility of 0.3714; (b) a
risk-free interest rate of 5.51%; (c) a dividend yield of 3.18%; (d) a full
10-year term; and (e) no discount for the risk of forfeiture or restrictions
on transferability.
10
<PAGE>
<TABLE>
<CAPTION>
Table 4
Options Exercised by Certain Executive Officers During 1998
and Year-End Options Values
- -----------------------------------------------------------------------------------------------------------------------------------
Value of Unexercised
Unexercised In-the-Money Share
stock options options as of 12/31/981
- -----------------------------------------------------------------------------------------------------------------------------------
Shares
Acquired on Value
Name Exercise Realized1 Exercisable Unexercisable Exercisable Unexercisable
(#) ($) (#) (#) ($) ($)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Spencer F. Eccles 251,733 4,352,454 1,648,698 352,326 28,116,878 2,152,749
- -----------------------------------------------------------------------------------------------------------------------------------
Morgan J. Evans 95,808 1,935,304 553,850 210,852 8,513,904 1,447,868
- -----------------------------------------------------------------------------------------------------------------------------------
L. Scott Nelson 95,864 1,933,284 500,673 133,680 8,150,436 981,627
-----------------------------------------------------------------------------------------------------------------------------------
J. Patrick McMurray 22,680 416,547 301,949 112,932 4,585,193 856,340
- -----------------------------------------------------------------------------------------------------------------------------------
Brad D. Hardy 0 0 64,998 87,120 774,733 545,127
- -----------------------------------------------------------------------------------------------------------------------------------
Scott C. Ulbrich 14,428 293,639 175,141 96,678 2,607,381 690,687
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 Net value is realized from the difference between the exercise price of
First Security option shares and the sale price or fair market value.
Stock options are awarded to key employees, including the named
Executive Officers, upon recommendation of the Compensation Committee under the
First Security Comprehensive Management Incentive Plan ("CMIP"). Under this
plan, First Security may grant key employees bonus shares of Common Stock, stock
options, stock appreciation rights, and other equity-based incentive awards.
This plan is geared to creating a unity of interest between management and the
Shareholders in looking toward maximizing the share price of First Security's
Common Stock. The grant of options and bonus shares is also a key element of
First Security's compensation policy for its senior managers. (See "Report of
the Compensation Committee.")
Under the CMIP, shares of "Restricted Stock" may be granted to
employees of First Security and its subsidiaries, including the six Executive
Officers named in Table 2. Shares of Restricted Stock have been awarded to
Executive Officers of First Security in the past under the CMIP and its
predecessor plans, but no Restricted Stock awards were made in 1998.
Retirement Benefits
First Security provides a Retirement Plan to its employees, including
to Executive Officers, that is funded by First Security. First Security also
maintains an ERISA Excess Plan which provides for payment to highly paid
executive officers and their beneficiaries of that portion of otherwise payable
benefits under the terms of the Retirement Plan that cannot be paid by the
Retirement Plan because of benefit restrictions imposed on the Retirement Plan
by Section 415 of the Internal Revenue Code. Executive Officers also have
benefits available under a Supplemental Executive Retirement Plan that provides
for the payment of a competitive level of retirement income to certain key
managers in order to attract, retain and motivate qualified executive officers.
Table 5 illustrates the estimated annual retirement benefits payable to
the Executive Officers listed in Table 2 under all applicable retirement plans
based on various assumptions of final compensation levels and service years upon
which retirement benefits are based:
(See Table Next Page)
11
<PAGE>
<TABLE>
<CAPTION>
Table 5
Pension Plan Table
======================================== ================== =================== ==============================================
Final Average Earnings 15 Years of 20 Years of 24 or More Years of Service
Service Service
======================================== ================== =================== ==============================================
<S> <C> <C> <C> <C>
$ 150,000 $ 56,250 $ 75,000 $ 90,000
200,000 75,000 100,000 120,000
225,000 84,375 112,500 135,000
250,000 93,750 125,000 150,000
300,000 112,500 150,000 180,000
400,000 150,000 200,000 240,000
450,000 168,750 225,000 270,000
500,000 187,500 250,000 300,000
600,000 225,000 300,000 360,000
750,000 281,250 375,000 450,000
======================================== ================== =================== ==============================================
</TABLE>
The estimated retirement benefits shown in Table 5 are subject to
reduction for Social Security payments received by the retiree and income from
accumulated employer contributions to the Incentive Savings Plan. These benefits
are computed on a joint survivor annuity basis.
Compensation to Executive Officers for 1998 included in the earnings
base for the purpose of calculating total retirement benefits as shown in Table
5 is equal to the three-year final average salary including bonus. If they
remain employed until they reach the age of 65, the years of credited service
for the five named Executive Officers in Table 2 will be as follows: 38 years
for Mr. Eccles, 39 years for Mr. Evans, 34 years for Mr. Nelson, 42 years for
Mr. McMurray, 23 years for Mr. Hardy, and 35 years for Mr. Ulbrich.
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors currently consists
of four non-employee Directors. The Committee meets one or more times annually
to review and determine matters pertaining to the compensation of the Executive
Officers of First Security who are members of First Security's Management
Committee, including the six named officers in Table 2. The Committee met on
January 19, 1999 to discuss and adopt resolutions affecting base salary and both
short-term and long-term incentive compensation for these Executive Officers.
To the Shareholders of First Security Corporation:
The Compensation Committee annually reviews the elements of
compensation for the Executive Officers of First Security who are members of
First Security's Management Committee, and sets the level of compensation for
these Executive Officers. The Committee is provided with detailed information
and proposals from independent compensation consultants as well as from internal
compensation specialists. The Committee's decisions are made within the context
of a uniform structure and set of compensation principles which apply to all of
First Security's executives, including the Executive Officers subject to the
Committee's review.
Chief among these principles is that First Security will provide total
compensation opportunities that are competitive with those provided by
comparable financial institutions and commensurate with First Security's overall
performance. The three main elements of the compensation package are base
salary, short-term (annual) incentives, and long-term incentives. Total
compensation for Executive Officers can be described as consisting of an average
or below-average base salary, an average annual cash incentive opportunity based
on performance, and an above-average long-term equity-based incentive
opportunity tied to increases in Shareholder value. The Committee believes that
this compensation mix is in the best interests of the Shareholders and supports
the business and financial objectives of First Security.
BASE SALARY. Executive Officer base salaries at First Security are
managed using a structured approach. Each year, First Security participates in
formal third-party compensation surveys that provide compensation statistics
from over 100 financial institutions, both independent and affiliated,
nationwide. Salary data from these surveys are carefully matched by position and
adjusted for institutional size, or other appropriate scope measurement, to
provide a reliable measure of median executive officer salaries for comparable
12
<PAGE>
positions at comparable financial institutions. These market median salaries are
used to establish salary ranges within which First Security's Executive
Officers' base salaries may be periodically increased based on considerations of
performance, experience, and internal equity. (Participants in the two market
surveys relied upon most heavily by First Security typically include all, or
nearly all, of the companies represented in the KBW index that is used in the
cumulative stock performance comparison shown in Table 7.)
The base salary for each Executive Officer is allowed to vary only
within a 23% range determined by the appropriate market median salary for
his/her position. One of First Security's key salary administration policies is
that the market median represents the maximum base salary that any Executive
Officer can be paid. The Committee believes it is necessary to maintain salaries
within the designated ranges through periods of both strong and weak corporate
performance if First Security is to attract and retain top quality executives.
In times of excellent corporate performance, Executive Officers may receive
substantial supplemental rewards through the short-term and long-term
incentives.
Chief Executive Officer Salary Action. In the January 19, 1999 meeting,
the Committee approved a resolution recommended by Mr. Eccles that included no
increase in Mr. Eccles' base salary. Mr. Eccles explained to the Committee that
Mr. Evans has assumed responsibilities that are broader than is typical for a
Chief Operating Officer and felt that additional compensation, if any, should be
directed to Mr. Evans. The Committee noted that an increase for Mr. Eccles could
certainly be justified since his salary is well below the appropriate market
median as determined by internal compensation specialists, and since the general
financial performance of First Security is good. Nonetheless, in consideration
of the expanded role and scope of Mr. Evans' position, no increase to base pay
was made at this time for Mr. Eccles.
Other Named Executive Officers. The other five Executive Officers named
in Table 2 received increases averaging 7.2%, effective April 1, 1999. These
increases were based on an examination of incumbents' current salaries relative
to their salary range midpoints and our judgment of these Executive Officers'
contributions and worth to First Security. These increases include consideration
for new responsibilities associated with organizational growth and
restructuring.
SHORT-TERM INCENTIVES. All the named Executive Officers participate in
the Management Annual Cash Incentive Bonus Plan (MACIBP), which pays the named
Executive Officers for the achievement of pre-set corporate goals. In 1998,
these corporate objectives comprised growth in First Security's net income and
performance relative to a peer group for First Security's return on average
assets (ROAA) and percent increase in earnings per share (EPS).
After review and discussion on the merits of the plan, the Committee
has approved the continuation of the MACIBP in 1999, with the following changes:
Growth in earnings per share (EPS) and return on average assets (ROAA)
will each be weighted 25%, and net income will be weighted 50%. In 1998, these
three components were all weighted equally. In reviewing First Security and peer
group results from throughout the year, it became apparent that the peer
group-based relative goals (i.e., EPS and ROAA) were subject to considerable
variation. For example, in the fourth quarter of 1998, a large number of
companies in the peer group reported significant non-recurring charges,
generally associated with merger and restructuring costs. This led to year-end
First Security bonus payments that were much higher than third quarter
projections. In general, it is believed that placing greater weight on the net
income component will better meet the objectives of the plan and the interests
of First Security while still incorporating peer group results.
The peer group used last year will continue to be used for the relative
measurements, EPS and ROAA. The Committee still believes that a good measurement
of relative performance will be attained by including a large number of banking
companies in the peer group. Consequently, the companies in the KBW index, which
are already utilized in the cumulative stock performance comparison (Table 7)
and which collectively provide much of the market data used for compensation
comparisons, will continue to be used as the peer group for the MACIBP relative
performance measurements. Threshold and Target performance goals for 1999 have
been established as the 35th and 50th percentiles, respectively, of the peer
group result.
As in recent years, Target performance for net income will represent
full achievement of the annual business plan; Threshold performance is set at
90% of target. No bonus will be paid in any category for performance which is
below threshold.
13
<PAGE>
Chief Executive Officer Bonus. Mr. Eccles is eligible to receive a
bonus of up to 92% of his salary range midpoint for outstanding performance
under the MACIBP. Mr. Eccles' bonus is based entirely on First Security's
results in the 1998 corporate performance categories outlined above. In 1998,
First Security's performance for both net income and EPS fell between the target
and maximum objectives established by this Committee, while the result for ROAA
was above the threshold objective but less than the target.
Accordingly, Mr. Eccles earned a 1998 bonus equal to 56.5% of his
maximum bonus opportunity, the bonus amount being entirely determined by the
relationship of the performance results to the performance targets as stipulated
by the terms of the MACIBP.
Other Named Executive Officers. The other named Executive Officers were
eligible in 1998 to earn bonuses of up to 80% of their salary range midpoints
for outstanding performance under MACIBP, with the bonus amounts being entirely
determined by First Security's results in the 1998 corporate performance
categories outlined above. These five named Executive Officers earned bonuses
equal to 56.5% of their maximum bonus opportunities.
LONG-TERM INCENTIVES. On January 19, 1999 the Committee awarded
Non-Statutory Stock Options (NSOs) as the only long-term incentive award for
Executive Officers. First Security has made these awards to a group comprising
all Executive Officers and up to 85 other key executives every year since 1987,
with the exception of 1995. The Committee determines the number of NSOs to be
granted to this group under the terms of the Comprehensive Management Incentive
Plan (CMIP). The size of these awards is determined by: 1) using information
obtained from compensation surveys of comparable financial institutions to
assign relative award levels between the different grades, or groups; 2)
obtaining an approximate value for each option share awarded using the
Black-Scholes model; and 3) adjusting the total number of options awarded until
the total direct compensation (salary, bonus, and options) of this entire group
approaches the 60th percentile of the appropriate market comparison group.
Broad-based Awards. In 1998, the Committee granted small NSO awards,
consisting of 768 option shares (as adjusted for stock dividends) to an
additional group of key employees as identified by Management. In 1997, there
were about 300 recipients; in 1998, this group comprised about 690 additional
employees; for 1999, these awards have been extended to approximately 840
employees who will each receive 768 shares. We remain convinced that it is in
First Security's best interest to expand the influence of equity-based
compensation to valued contributors in management, sales and staff positions. We
fully expect returns in the form of team building, motivation, and retention to
far outweigh the cost of these awards.
Repricing of Options. First Security has never repriced options (other
than as a result of stock splits). The Compensation Committee has no such
intention at this time.
/s/ Thomas D. Dee II, Chair
/s/ Rodney H. Brady
/s/ G. Frank Joklik
/s/ James R. Wilson
Compensation Committee Interlocks and Insider Participation
Members of First Security's Board of Directors' Compensation Committee,
through companies with whom each of these Directors is affiliated, had borrowing
and other credit transactions with one or more of First Security's subsidiary
banks during 1998. The terms of each of these transactions is believed by First
Security to have been done in the ordinary course of the subsidiary bank's
lending business, and on the same or substantially similar terms to other
similar loan or credit transactions with unrelated persons. Specifically,
Messrs. Dee and Joklik (or their affiliates) had credit extensions and/or credit
commitments during 1998 of less than $100,000; Mr. Brady (or his affiliates) had
credit extensions and/or credit commitments during 1998 of approximately
$16,000,000; and Mr. J. Wilson (or his affiliates) had credit extensions and/or
credit commitments during 1998 of approximately $18,000,000.
14
<PAGE>
CERTAIN TRANSACTIONS BY AND WITH MANAGEMENT AND OTHERS
Directors' and Officers' Liability Insurance
First Security has purchased directors' and officers' liability
insurance, including corporate reimbursement, on behalf of the directors and
officers of First Security and its subsidiaries. The program that includes this
coverage was effective August 1, 1998, and expires August 1, 2001. CNA is the
lead underwriter for this insurance program. Management believes the premium
expense for this policy to be worth the protection afforded to its directors and
officers.
Credit Extensions
Most of the Directors and Executive Officers of First Security, members
of their immediate families, and corporations and other organizations of which
they are affiliates, are borrowers from one or more of First Security's
subsidiary banks. During 1998, these persons, firms and corporations have had
loan transactions with one or more of these banks, all of which were done in the
ordinary course of business and were on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with unaffiliated persons, and did not involve more than the normal
risk of collectability or present other unfavorable features to First Security.
Specifically, Messrs. Evans, Golden, Hardy, Howell, McMurray, Reeves, Ulbrich,
D. Wilson and Dr. Papen-Daniel (or their affiliates) had credit extensions
and/or credit commitments during 1998 in excess of $60,000 but less than
$500,000; Messrs. Gardner, Kastler, Sorenson, and Watson (or their affiliates)
had credit extensions and/or credit commitments during 1998 in excess of
$500,000 but less than $10,000,000; Messrs. Brady, Harris, Heiner, J. Wilson,
and Parker (or their affiliates) had credit extensions and/or credit commitments
during 1998 in excess of $10,000,000 but less than $20,000,000; Mrs. Huntsman
and Mr. Maloof (or their affiliates) had credit extensions and/or credit
commitments during 1998 in excess of $20,000,000 but less than $50,000,000;
Messrs. Beardall, Garff, and Steele (or their affiliates) had credit extensions
and/or credit commitments during 1998 in excess of $50,000,000 but less than
$100,000,000; and Mr. Eccles (or his affiliates) had credit extensions and/or
credit commitments during 1998 in excess of $100,000,000 but less than
$200,000,000. None of these outstanding loans or credit commitments are in
default, and all are current in all respects as of the date of this Proxy
Statement. First Security's subsidiary banks expect to continue to have such
transactions on similar terms with Directors and Executive Officers and their
affiliates in the future.
Compliance with Section 16 Reporting Obligations
The Directors and Executive Officers of First Security are required
under the Securities Exchange Act of 1934 to file reports with the Securities
and Exchange Commission evidencing their ownership of, and their current
transactions in, First Security's equity securities. This is a personal
obligation of the Executive Officers and Directors. Based on information
provided to First Security by its Directors and Executive Officers, it appears
that all Directors and Executive Officers filed these reports in a timely manner
during 1998, except Mr. Maloof who apparently failed to timely file a Form 4
Report for a call option transaction.
Employment Agreements
Messrs. Caughlin, Eccles, Evans, Golden, Hardy, Howell, McMurray,
Nelson and Ulbrich have entered into agreements with First Security providing
for the terms of their compensation and providing that in the event of a "change
of control" of First Security, or the Executive Officer's employer, if
different, if the Executive Officer is terminated without cause; or if the
Executive Officer's duties are significantly changed, he is entitled to special
severance compensation. Payments received by these officers under these
agreements will be offset by certain other payments to be received by these
Executive Officers through other plans maintained by First Security. The
complete text of these agreements is on file with the Securities and Exchange
Commission.
A Severance Pay Plan is available to Executive Officers who do not
have an employment contract providing benefits for certain involuntary
terminations of employment. In case of certain involuntary terminations of
employment, the basic benefit payable under this Plan varies by years of
eligible employment up to a maximum of eight weeks of then-current salary. In
the event of a change of control of First Security (as defined in the Plan), the
basic benefit payable under this Plan varies by years of eligible employment up
to a maximum of 104 weeks of then-current salary. This Plan is unfunded, and
benefits will be paid out of general corporate funds.
15
<PAGE>
Other Transactions
During 1998, First Security paid approximately $3.5 million in
legal fees to Ray Quinney & Nebeker, a law firm of which Mr. Alonzo Watson,
Assistant Secretary of First Security, is a shareholder and director.
PRINCIPAL SHAREHOLDERS
The following table provides information with respect to any person
known to First Security to be the beneficial owner (within the meaning of
applicable governmental regulations) of five percent or more of any class of
First Security's voting securities as of the Record Date:
Table 6
Principal Shareholders of First Security
================================================================================
Title of Amount and Nature of Percent
Name and Address Class Beneficial Ownership of Class
================================================================================
First Security Bank, N.A.
Trust Group Common 17,261,112 shares1 as 8.87%
79 S. Main Street Stock Trustee of separate
Salt Lake City, UT 84111 trust accounts
================================================================================
1 Of the 17,261,112 shares that the Trust Group of First Security Bank of
Utah, N.A. holds in various fiduciary capacities, it has voting power over
15,264,951 shares (7.84% of the total outstanding shares) and no power to
vote the remaining 1,996,161 shares.
================================================================================
COMPARATIVE PERFORMANCE OF FIRST SECURITY'S COMMON STOCK
Set out in Table 7 is a five-year comparison and graphic display of
the relative performance of $100 invested on January 1, 1993, in First
Security's Common Stock and the same amount invested on the same day in the
Nasdaq Broad Market Index and in the KBW 50 Index, respectively:
(See Table Next Page)
<PAGE>
Table 7
Comparison of Five-Year Cumulative Total Return1
Among First Security Corporation, the Nasdaq Broad Market Index
And the KBW 50 Index2
=========================== ====== ======= ======== ======== ======= =======
INDEX 1993 1994 1995 1996 1997 1998
=========================== ====== ======= ======== ======== ======= =======
First Security Corporation 100 91.64 159.08 221.06 416.93 356.84
Nasdaq Broad Mkt. Index 100 94.90 151.99 215.00 314.32 340.34
KBW 50 Index 100 97.00 136.24 166.79 203.72 281.99
1 Total Return Assumes Quarterly Reinvestment of Dividends.
2 The KBW 50 Index is published by Keefe, Bruyette & Woods, Inc., an
investment banking firm specializing in the bank and thrift industry. This
index is weighted according to market capitalization and is made up of 50 of
the nation's most important banking companies, including all money center
and most major regional banks, and is meant to be representative of the
price performance of the nation's large banks. Dividends are assumed to be
reinvested quarterly. First Security Corporation is included in the KBW 50.
[OBJECT OMITTED]
PROPOSALS FOR SHAREHOLDER ACTION
Item No. 1: Election of Directors
The Nominating Committee of the Board has nominated the Directors standing
for election. Nominations for election as a Director also will be accepted from
any Shareholder at the 1998 Annual Meeting. While no formal procedure exists
with respect to nominations for Director outside of the Annual Meeting other
than through the function of the Nominating Committee, Shareholders are free to
write to the Nominating Committee, c/o Brad D. Hardy, Secretary, First Security
Corporation, 79 S. Main Street, Salt Lake City, Utah 84111, with any suggestions
concerning nominations to the Board of Directors.
The 20 persons named in Table 8 have been nominated as Directors by the
Board's Nominating Committee for election at the 1999 Annual Meeting to serve
until the next Annual Meeting or until their successors are elected and
qualified. The Bylaws of First Security provide for a Board of Directors of 20
members, subject to amendment of such provision by the Directors.
All duly signed and delivered proxies will be voted FOR the election of
ALL of the nominees listed below in the absence of contrary direction. The
Directors know of no reason why any nominee listed below may be unable to serve
as a Director. If any nominee is unable to serve, the shares present at the 1999
Annual Meeting through proxies will be voted FOR the election of such other
person(s) as the Board of Directors may nominate at the Annual Meeting, or the
current Directors may conclude to reduce the number of Directors to be elected.
17
<PAGE>
If all 20 nominees listed are elected at the 1999 Annual Meeting, the
composition of the new Board will be 16 Directors whose principal occupation or
employment is and has been outside of First Security Corporation, two Directors
who are retired First Security Executive Officers and two Directors who are
currently Executive Officers of First Security.
All of the nominees were elected to their present term of office by a vote
of the Shareholders at the 1998 Annual Meeting.
Table 8 lists each of the 20 nominees of the Nominating Committee for
election as a Director of First Security, his/her age, the year he/she first
became a Director of First Security, his/her principal occupation, his/her
business experience during the past five years, other material officerships or
directorships in other companies held at this time, and beneficial stock
ownership in First Security as of December 31, 1998. Directors serving on the
Executive(*), Audit(+), Compensation(#), or Nominating (@) Committees of the
Board of Directors are also so identified:
Table 8
NOMINEES FOR DIRECTOR
*@+JAMES C. BEARDALL, 59, has been a Director of First Security since 1989 and
is Chairman of the Board's Audit Committee. He is Chairman, President and Chief
Executive Officer of Anderson Lumber Company. At year-end 1998, Mr. Beardall was
the beneficial owner of 48,762 shares of First Security's Common Stock,
including 10,125 option shares exercisable within 60 days, but not yet
exercised, and 35,600 stock equivalency units held5 in his deferred compensation
account.
*@#RODNEY H. BRADY, 66, has been a Director of First Security since 1985. He is
President and Chief Executive Officer of Deseret Management Corporation (private
holding company for several businesses). Mr. Brady is also a Director of Bergen
Brunswig Corporation (pharmaceuticals), Deseret Mutual Benefit Association
(employee benefit insurance) and Management Training Corporation (operator of
training centers). At year-end 1998, he beneficially owned 150,329 shares of
First Security's Common Stock, including 10,125 option shares exercisable within
60 days, but not yet exercised, and 45,538 stock equivalency units5 held in his
deferred compensation account.
JAMES E. BRUCE, 78, has been a Director of First Security since 1983. He is a
retired Chairman and Chief Executive Officer of Idaho Power Company. At year-end
1998, Mr. Bruce beneficially owned 63,139 of First Security's Common Stock,
including 3,750 option shares exercisable within 60 days, but not yet exercised.
*@#THOMAS D. DEE II, 78, has been a Director of First Security since 1976, and
is Chairman of the Board's Compensation Committee1. He is President of The Dee
Company (investments). At year-end 1998, Mr. Dee beneficially owned
237,937shares of First Security's Common Stock.
*@SPENCER F. ECCLES, 64, has been a Director of First Security since 1967. He is
Chairman and Chief Executive Officer of First Security and Chairman of the
Executive Committee and of the Management Committee. Mr. Eccles serves as a
Director of First Security Bank, N.A. Mr. Eccles also serves as a Director of
ZCMI (department store chain), Anderson Lumber Company (lumber) and Union
Pacific Corporation (railroad and operations). At year-end 1998, he was the
beneficial owner of 6,735,087 shares of First Security's Common Stock2,3,
including 1,796,651 option shares exercisable within 60 days, but not yet
exercised, and 66.989 shares held in his account in First Security's Incentive
Savings Plan, and 63 shares of First Security's Preferred Stock. This number of
shares represents 3.46% of the total outstanding shares of Common Stock at the
Record Date
*@MORGAN J. EVANS, 61, has been a director since 1991. He is President and Chief
Operating Officer of First Security and is a member of First Security's
Management Committee. Mr. Evans also serves as a Director of First Security
Bank, N.A. At year-end 1998, Mr. Evans was the beneficial owner of 716,669
shares of First Security's Common Stock, including 643,129 option shares
exercisable within 60 days, but not yet exercised, 18,276 shares held in his
account in First Security's Incentive Savings Plan. This number of shares
represents 0.37% of the total outstanding shares of Common Stock at the Record
Date.
DR. DAVID P. GARDNER, 65, has been a Director of First Security since 19761. He
is a former President of the University of California System, and is presently
President of the William and Flora Hewlett Foundation and Chairman and Chief
Executive Officer of the George S. and Delores Dore' Eccles Foundation
(philanthropy). Dr. Gardner is also a Director of Fluor Corporation
(construction) and of the United Funds (registered investment company). At
year-end 1998, Dr. Gardner beneficially owned 16,1293 shares of First Security's
Common Stock, which number includes 3,514 shares held in a trust established by
his deceased spouse as to which Dr. Gardner acts as trustee, which number
includes 10,125 option shares exercisable within 60 days, but not yet exercised,
and 6,004 stock equivalency units5 held in his deferred compensation account.
18
<PAGE>
ROBERT H. GARFF, 54, has been a Director of First Security since 1996. He is
Chief Executive Officer of Garff Enterprises, Inc. (management of automobile
dealerships and other enterprises). At year-end 1998, Mr. Garff beneficially
owned 19,837 shares of First Security's Common Stock, including 10,125 option
shares exercisable within 60 days, but not yet exercised, and 7,435 stock
equivalency units5 held in his deferred compensation account.
JAY DEE HARRIS, 81, has been a Director of First Security since 1975. He is the
President and a Director of Harris Truck and Equipment, Inc. (construction
equipment). At year-end 1998, Mr. Harris beneficially owned 17,450 shares of
First Security's Common Stock, including 10,125 option shares exercisable within
60 days, but not yet exercised, and 13,530 stock equivalency units5 held in his
deferred compensation account.
*@+ROBERT T. HEINER, 74, has been a Director of First Security since 1981. He is
a retired President and Chief Administrative Officer of First Security. Mr.
Heiner is a Director of Management Training Corporation (operator of training
centers). At year-end 1998, Mr. Heiner was the beneficial owner of 111,554
shares of First Security's Common Stock, including 4,000 option shares
exercisable within 60 days, but not yet exercised, and 23,179 stock equivalency
units5 held in his deferred compensation account.
KAREN H. HUNTSMAN, 61, has been a Director of First Security since 1992. She is
a Director and Executive Officer of Huntsman Chemical Corporation (private
diversified chemical company). At year-end 1998, Mrs. Huntsman beneficially
owned 27,000 shares of First Security's Common Stock.
#G. FRANK JOKLIK, 71, has been a Director of First Security since 1981. Mr.
Joklik is President and Chief Executive Officer of MK Gold Company (gold
exploration and development). He retired as President and Chief Executive
Officer of Kennecott Corporation (mining) in 1994. Mr. Joklik is also a director
of Cleveland Cliffs, Inc., a company engaged in mining and related businesses.
At year-end 1998, Mr. Joklik beneficially owned 10,125 shares of First
Security's Common Stock, including 10,125 option shares exercisable within 60
days, but not yet exercised.
+B.Z. KASTLER, 78, has been a Director of First Security since 1979. Mr. Kastler
is a retired Chairman, Chief Executive Officer and Director of Questar
Corporation (integrated oil and gas company). He is a Director of Bonneville
International Corporation (broadcasting). At year-end 1998, Mr. Kastler
beneficially owned 16,179 shares of First Security's Common Stock.
DR. J. BERNARD MACHEN, 54, has been a Director of First Security since 1998. Dr.
Machen was installed as the President of the University of Utah on January 1,
1998. Prior to this position, he was a tenured professor at the University of
Michigan. At year-end 1998, Dr. Machen was the beneficial owner of no shares of
First Security's Common Stock.
JOSEPH G. MALOOF, 43, has been a Director of First Security since 1996. Mr.
Maloof is President and Chief Executive Officer of the Maloof Companies of
Albuquerque, New Mexico (diversified investments-entertainment). At year-end
1998, Mr. Maloof beneficially owned 7,517,822 shares of First Security's Common
Stock, including 10,125 option shares exercisable within 60 days, but not yet
exercised. The number of shares is approximately 3.86% of the total outstanding
shares of Common Stock at the Record Date.
+MICHELE PAPEN-DANIEL, PH.D, 55, has been a Director of First Security since
1998. Since 1986, Dr. Papen-Daniel has been engaged in private practice as a
psychoanalyst in the Los Angeles area. Since 1992, she has also lectured in
psychotherapy as an adjunct professor at Antioch University. From 1996 until its
acquisition by First Security in February 1998, Dr. Papen-Daniel was President
and a Director of Rio Grande Bancshares, Inc. At year-end 1998, Dr. Papen-Daniel
beneficially owned 1,941,001 shares of First Security's Common Stock. The number
of shares is approximately 1.00% of the total outstanding shares of Common Stock
at the Record Date.
19
<PAGE>
*@+SCOTT S. PARKER, 64, has been a Director of First Security since 1985. He was
formerly President of Intermountain Health Care, Inc. (integrated health care
provider). He is currently a Director of Questar Corporation (integrated oil and
gas company). At year-end 1998, Mr. Parker beneficially owned 55,328 shares of
First Security's Common Stock, including 10,125 option shares exercisable within
60 days, but not yet exercised, and 43,433 stock equivalency units5 held in his
deferred compensation account.
JAMES L. SORENSON, 76, has been a Director of First Security since 1980. He is
Chairman and Chief Executive Officer of Sorenson Development, Inc. (holding
company and investments). At year-end 1998, Mr. Sorenson Beneficially owned
10,125 shares of First Security's Common Stock.
HAROLD J. STEELE, 85, has been a Director of First Security since 1959. He is a
retired President of First Security Bank of Utah, and is a Director of Anderson
Lumber Company. Mr. Steele is married to a cousin of Spencer F. Eccles. At
year-end 1998, Mr. Steele beneficially owned 379,9644 shares of First Security's
Common Stock, including 10,125 option shares exercisable within 60 days, but not
yet exercised,
#JAMES R. WILSON, 58, has been a Director of First Security since 1996. He is
Chairman, President and Chief Executive Officer and a Director of Cordant
Technologies, Inc. (aerospace and industrial manufacturing), having been elected
President, CEO and a Director in 1993 and Chairman in 1995. Previously he was
Executive Vice President of Cordant. In addition to First Security, Mr. Wilson
is also a director of Cooper Industries Inc. (industrial manufacturing), The
B.F. Goodrich Company (aerospace and chemicals) and Howmet International Inc.
(aerospace and industrial). At year-end 1998, Mr. Wilson beneficially owned
8,929 shares of First Security's Common Stock, including 2,250 options shares
exercisable within 60 days, but not yet exercised, and 3,307 stock equivalency
units5 held in his deferred compensation account.
1 A daughter of Dr. Gardner is married to a son of Mr. Dee.
2 Includes 3,125,172 shares of Common Stock as to which Mr. Eccles has power
of attorney or is trustee for living and/or deceased family members and has
shared voting and investment powers; does not include 205,030 shares of
First Security's Common Stock owned by the Marriner S. Eccles Charitable
Trust, as to which Mr. Eccles serves as a Director and disclaims beneficial
ownership; does not include 563,229 shares of First Security's Common Stock
owned by the Emma Eccles Jones Foundation, as to which Mr. Eccles serves as
a Trustee and disclaims beneficial ownership; and does not include 499,500
shares of First Security's Common Stock owned by the Nora Eccles Treadwell
Foundation, as to which Mr. Eccles serves as a Director and disclaims
beneficial ownership.
3 Does not include 3,523,807 shares of First Security's Common Stock held of
record by the George S. and Dolores Dore' Eccles Foundation as to which
Messrs. Eccles and Gardner serve as Directors and disclaim beneficial
ownership.
4 Includes 324,325 shares of Common Stock owned by Mr. Steele's spouse for
which Mr. Steele has voting power, but does not include 205,030 shares of
Common Stock of First Security held of record by the Marriner S. Eccles
Charitable Trust, of which Mr. Steele is a Director, and as to which shares
Mr. Steele disclaims beneficial ownership.
5 Stock equivalency units will always be settled in cash and do not represent
voting securities.
Item No. 2: Proposed increase in the number of shares available under First
Security's Comprehensive Management Incentive Plan
General
The First Security Comprehensive Management Incentive Plan (the "Plan")
was first adopted by the Board of Directors in 1989 as a successor and
replacement for two previously approved incentive plans. The original 950,000
shares approved for the Plan in 1989 was increased in 1991 and 1994 by actions
of the Shareholders, and since 1991, five 3-for-2 stock splits in the form of
50% stock dividends have been declared by First Security's Board of Directors,
having the aggregate effect on the Plan of increasing the number of shares now
available under the Plan to 21,726.563 shares. Because these shares have been
substantially exhausted through incentive awards made over the life of the Plan
to date, on January 25, 1999, First Security's Board of Directors approved,
subject to Shareholder consent, an increase of the maximum number of shares that
may be awarded under the Plan from the current 21,726.563 shares to 27,726.563
shares.
20
<PAGE>
The following description of the Plan does not purport to be complete
and is qualified in its entirety by reference to the full text of the Plan. A
copy of the full text of the Plan, as amended and restated, may be obtained by a
Shareholder from First Security by calling (801)246-5048 during normal business
hours (9 a.m. to 5 p.m. Mountain Time).
DESCRIPTION OF THE PLAN
Purpose. The purpose of the Plan is to promote the long-term success of
First Security and the creation of incremental shareholder value by (a)
encouraging key employees of First Security and its subsidiaries to focus on
critical long-range objectives, (b) encouraging the attraction and retention of
key employees with exceptional qualifications, and (c) linking the interests of
key employees of First Security directly to shareholder interests through
increased stock ownership.
Administration. The Plan is administered by the Compensation Committee
(the "Committee") of the Board of Directors consisting of a sufficient number of
disinterested members of the Board of Directors so as to qualify the Committee
to administer the Plan as contemplated by Rule 16b-3 promulgated pursuant to the
Exchange Act. The Committee selects the key employees who are to receive awards
under the Plan, determines the amount, vesting requirements and other conditions
of such awards, interprets the Plan, executes agreements setting forth the terms
of such awards (each an "Award Agreement") and makes all other decisions
relating to the operation of the Plan.
Term of the Plan. The Plan became effective in 1989, with Shareholder
approval of certain amendments in 1994. The Plan will remain in effect until
2004, unless earlier terminated by First Security's Board of Directors.
Notwithstanding the termination of the Plan, the Plan will continue in effect
after such termination for purposes of the administration of any award granted
prior to the termination of the Plan.
Number of Shares Subject to the Plan. The Plan provides for the
issuance of Incentive Stock Options ("Incentive Options"), as that term is
defined in Section 422 of the Code (Section 422A before redesignation by the
Revenue Reconciliation Act of 1990), nonqualified stock options which are not
governed by the provisions of Section 422 of the code ("Nonqualified Options")
for shares of Common Stock (Incentive Options and Nonqualified Options may be
referred to collectively as the "Options"), certain corresponding stock
appreciation rights ("SARs"), restricted shares of Common Stock ("Restricted
Shares") and other stock based units, described below, or any combination
thereof (the various awards are referred to collectively as the "Awards"). The
maximum number of Options, Restricted Shares and other stock based awards that
now may be awarded under the Plan is currently equal to 21,726.563 shares.
SHAREHOLDERS ARE ASKED TO APPROVE AN INCREASE IN THIS NUMBER TO 27,726.563
SHARES. If any Options, Restricted Shares or stock units are forfeited or if any
Option terminates for any reason before being exercised, then such Options,
Restricted Shares or stock units again become available for Awards under the
Plan. Notwithstanding the above, if any Options are surrendered because
corresponding SARs are exercised, such Options will not become available again
for Awards under the Plan. Any Common Stock issued pursuant to the Plan may be
authorized but unissued shares or treasury shares.
Shares of Common Stock to be issued upon the exercise of Awards granted
pursuant to the Plan have been registered with the Commission under a
Registration Statement on Form S-8, on file with the Commission. An amendment to
this Registration Statement will be filed to cover the additional shares
available under the Plan if the amended Plan is approved by the Shareholders.
This registration statement, which will contain the text of the Plan now
proposed to be amended with additional shares, may be accessed through the
Commission's web site, www.sec.gov, under First Security's name.
In the event of a subdivision of the outstanding shares of First
Security's Common Stock, a declaration of a dividend payable in Common Stock, a
declaration of a dividend payable in a form other than Common Stock in an amount
that has a material effect on the price of the shares of Common Stock, a
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise) into a lesser number of shares of Common stock, a
recapitalization or similar occurrence (the occurrence of each of which may be
referred to as a "Capital Change"), the Committee will make appropriate
adjustments to the shares subject to the Plan and to then-outstanding Options,
Restricted Shares and stock units.
21
<PAGE>
Eligibility. Awards may be granted only to employees of First Security
and its subsidiaries that the Committee, in its sole discretion, determines to
be key employees (the "Key Employees"), including, without limitation, executive
officers of First Security who are determined by the Committee to be Key
Employees; and may also be granted in the Committee's discretion to outside
consultants and advisors to First Security. Members of the Committee are not
eligible to participate in the Plan.
Stock Options. The Committee, in its sole discretion, may grant both
Incentive Options and Nonqualified Options from time to time. The Committee has
complete authority, subject to the terms of the Plan, to determine the persons
to whom and the time or times at which grants of Options will be made. The Plan
provides that the exercise price of Options, restrictions upon the exercise of
Options and restrictions on the transferability of shares issued upon the
exercise of Options, will be determined by the Committee in its sole discretion,
except that (i) the exercise price of any Incentive Option may not be less than
the fair market value of a share of Common Stock as of the date of the grant,
(ii) in the case of an Incentive Option granted to any individual who, at the
time that the Incentive Option is granted, owns more than ten percent of the
total combined voting power of all classes of stock of First Security or any of
its subsidiaries (a "Restricted Shareholder"), the exercise price of such
Incentive Option may not be less than 110% of the fair market value, determined
pursuant to the Plan, of a share of Common Stock as of the date on which the
Option is granted, and (iii) the exercise price of any Nonqualified Option may
be not less than the par value of the Common Stock. The Committee, in its sole
discretion, may determine the time or times when each Option vests and becomes
exercisable. The term of an Incentive Option, however, may not be more than ten
years from the date of grant, and the term of any Incentive Option granted to a
Restricted Shareholder may not be more than five years from the date of grant.
During the lifetime of the employee receiving the Option (the "Optionee"), the
Option may be exercisable only by the Optionee and shall not be assignable or
transferrable. Each Option will become exercisable in such installments, at such
time or times, and is subject to such conditions, as the Committee, in its
discretion, may determine at or before the time the Option is granted. The
Committee may provide for the accelerated exercisability of an Option in the
event of the death, disability or retirement of the Optionee and may provide for
expiration of the Option prior to the end of its term in the event of the
termination of the Optionee's employment.
Exercise Price. The exercise price of Options granted under the Plan is
payable at the time of exercise in cash or, in the discretion of the Committee,
in shares of Common Stock or other forms approved by the Committee. In the case
of an Incentive Option, payment must be made only pursuant to the express
provisions with regard to exercise that the Committee determines to include in
the applicable Award Agreement. Any payment method approved by the Committee
must be consistent with applicable law, regulations and rules as well as the
terms and conditions of the Plan.
Stock Appreciation Rights. In connection with the grant of any Option,
the Committee, in its sole discretion, may also grant an SAR, which shall relate
to a specific Option granted to the Optionee. Such SAR shall entitle the
Optionee to surrender to First Security, unexercised, all or any part of that
portion of the Option which then is exercisable and to receive from First
Security an amount equal to the difference between the aggregate exercise price
of the shares of Common Stock subject to the Option and the fair market value,
as determined under the Plan, of such shares on the date of such exercise.
Payment by First Security of any amount owing pursuant to the exercise of an SAR
may be made in shares of Common Stock, cash or any combination of cash and
shares, as determined in the sole discretion of the Committee. The determination
of the Committee to include an SAR in an Incentive Option may be made only at
the time of the grant of the Incentive Option. The Committee may include an SAR
in a Nonqualified Option at the time of the grant and any time thereafter until
six months before the expiration of the Nonqualified Option.
An SAR may be exercised only to the extent the Option to which it is
applicable is exercisable and may not be exercised unless both the SAR and the
related Option have been outstanding for more than six months. If, on the date
an Option expires, the exercise price of the Option is less than the fair market
value of the shares of Common Stock on such date, then any SARs included in such
Option shall automatically be deemed to be exercised as of such date with
respect to any portion of such Option that has not been exercised or
surrendered.
Restricted Stock Awards. The Committee may grant shares of Common Stock
that are subject to vesting conditions as an Award under the Plan (the
"Restricted Shares"). The award of Restricted Shares may be made at any time and
for any year of the Plan. The Restricted Shares shall become vested, in full or
in installments, upon satisfaction of the conditions specified in the Stock
Award Agreement. The Committee shall select the vesting conditions, which may be
based upon the recipient's service and/or performance, First Security's
performance, or such other criteria as the Committee may adopt. The Award
Agreement may also provide for accelerated vesting in the event of the
recipient's death, disability or retirement. A recipient of Restricted Shares,
22
<PAGE>
as a condition to the grant of such Restricted Shares, shall be required to pay
First Security, in cash, an amount equal to the par value of the Restricted
Shares. The holders of Restricted Shares shall have the same voting, dividend
and other rights as First Security's other shareholders.
Other Stock Unit Awards. A stock unit or other similar equity-based
award is an unfunded and unsecured bookkeeping entry representing the equivalent
of one share of Common Stock, which is subject to certain vesting conditions (a
"Stock Unit"). Holders of Stock Units have no voting rights or other rights of a
shareholder, but are entitled to receive "Dividend Equivalents" in an amount
equal to the amount of cash dividends paid on the number of shares of Common
Stock represented by the Stock Units while the Stock Units are outstanding.
Stock Units and corresponding Dividend Equivalents will be settled at a time
determined by the Committee and may be paid, in the discretion of the Committee,
in the form of cash, shares of Common Stock or a combination thereof.
Stock Units may be awarded in combination with Restricted Shares or
Nonqualified Options, and the Committee may provide that the Stock Units will be
forfeited in the event that the related Nonqualified Options are exercised. No
cash consideration shall be required for an award of a Stock Unit. The Committee
may grant Stock Units at any time during the term of the Plan. The Committee
may, in its sole discretion, select the vesting conditions for each award of a
Stock Unit. The vesting conditions may be based upon the recipient's service or
performance, First Security's performance or such other criteria that the
Committee may adopt.
Amending the Plan. The Board of Directors may, at any time and for any
reason, amend or terminate the Plan. Any amendment to the Plan, however, is
subject to the approval of First Security's Shareholders to the extent required
by applicable laws, regulations or rules, and the Plan itself. For example, no
increase in the number of shares available under the Plan and no change in the
exercise price of outstanding options under the Plan may be made without
Shareholder approval. No amendment, suspension or termination of the Plan shall
affect an Award granted on or prior to the effective date of such amendment.
General Provisions. Neither the Plan nor the grant of any Award
thereunder will be deemed to give any individual the right to remain employed by
First Security or any of its subsidiaries. The Plan shall not inhibit First
Security's ability to terminate or modify the terms of the employment of any
employee at anytime, with or without cause. Participants in the Plan will have
no rights with respect to dividends, voting or any other privileges accorded to
First Security's shareholders prior to the issuance of stock certificates for
shares of Common Stock. Recipients of Options under the Plan will have no
obligation to exercise such Options. Participants in the Plan will not have any
rights or interest under the Plan in any Option or shares of First Security's
Common Stock prior to the grant of an Option, Restricted Share or Stock Unit to
such participant.
OUTSTANDING PLAN AWARDS
The benefits to be awarded to and received by Executive Officers of
First Security under the Plan in the future are not presently determinable.
Table 9 summarizes the benefits under the Plan that, upon satisfaction of the
applicable vesting, have been and will be received by the six executive officers
named in Table 3, as well as this information for the broader group of all
executive officers and all participants under the Plan since the inception of
the Plan:
(See Table Next Page)
23
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Table 9
================================================================================
NAME Dollar Options
Value (1) Granted (2)
($) (#)
================================================================================
Spencer F. Eccles 37,325,628 2,460,294
Morgan J. Evans 13,538,790 1,077,185
L. Scott Nelson 12,923,897 984,025
J. Patrick McMurray 7,388,728 671,519
Brad D. Hardy 1,319,860 152,118
Scott C. Ulbrich 3,966,355 339,252
- --------------------------------------------------------------------------------
All Executive Officers 87,533,838 6,779,888
(as a group)
(16 persons)
- --------------------------------------------------------------------------------
All Employees who are not 99,643,532 12,045,161
Executive Officers (as a group)
(1,176 persons)
================================================================================
(1) Includes the value of restricted stock on the date such shares vested, the
net value realized from options exercised, and the difference (if positive)
between the per share value of First Security's Common Stock on December 31,
1998, and the exercise price of outstanding options. The fair market value
of the Common Stock on December 31, 1998, as defined in the Plan was
$22,5625.
(2) Cancelled and/or repurchased options and shares may be re-awarded under the
terms of the Plan.
LIMIT ON THE NUMBER OF SHARES THAT CAN BE AWARDED TO ANY INDIVIDUAL UNDER
THE PLAN.
Section 162(m) of the Internal Revenue Code places a limit of $1
million on the tax-deductibility of compensation paid to individuals listed in
the proxy statements of publicly held corporations. Compensation for the
individual executives listed in company proxy statements that exceeds $1 million
may not be tax-deductible unless it meets certain requirements with respect to
being performance-based.
To ensure that its executive compensation program is in full compliance
with the provisions regarding performance-based compensation, the Plan provides
a specific limit on the number of stock options that may be granted to an
individual under the Plan. The individual limit is 20% of the shares authorized
and approved for grants under the Plan. This 20% figure would equal 5,545,313
shares, based on the requested new 27,726.563 Share authorization.
FEDERAL INCOME TAX CONSEQUENCES
The following tax discussion is a brief summary of federal income-tax law
applicable to the Plan. The discussion is intended solely for general
information and omits certain information which does not apply generally to all
participants in the Plan.
Initial Grants of Stock Options and Stock Appreciation Rights. A recipient
of Options, whether Nonqualified Options or Incentive Options or SARs, incurs no
income-tax liability, and First Security obtains no deduction from the grant of
Options or SARs.
Incentive Stock Options. The holder of an Incentive Option will not be
subject to federal income tax upon the exercise of the Incentive Option, and
First Security will not be entitled to a tax deduction by reason of such
exercise, provided that the holder is still employed by First Security (or
terminated employment no longer than three months before the exercise date).
Additional exceptions to this exercise timing requirement apply upon the death
or disability of the Optionee. A sale of the shares of Common Stock received
upon the exercise of an Incentive Option which occurs both more than one year
after the exercise of the Incentive Option and more than two years after the
grant of the Incentive Option will result in the realization of long-term
capital gain or loss in the amount of the difference between the amount realized
on the sale and the exercise price for such shares. Generally, upon a sale or
disposition of the shares prior to the foregoing holding requirements (referred
to as a "disqualifying disposition"), the Optionee will recognize ordinary
compensation income, and First Security will receive a corresponding deduction
equal to the lesser of (i) the excess of the fair market value of the shares on
the date of transfer to the Optionee over the exercise price, or (ii) the excess
of the amount realized on the disposition over the exercise price.
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The excess of the fair market value of the shares of Common Stock at the
time of the exercise of an Incentive Stock Option over the Option price will
increase the Optionee's alternative minimum taxable income subject to the
alternative minimum tax, unless a subsequent disqualifying disposition occurs in
the same taxable year of the Optionee in which the Common Stock was purchased.
NonQualified Stock Options. Upon the exercise of a Nonqualified Option, the
amount by which the fair market value of the shares of Common Stock on the date
of exercise exceeds the exercise price will be taxed to the Optionee as ordinary
compensation income. First Security will generally be entitled to a compensation
expense deduction in the same amount, provided it satisfies certain requirements
relating to the terms of the option and makes all required wage withholdings on
the compensation element attributable to the exercise. In general, the
Optionee's tax basis in the shares acquired by exercising a Nonqualified Option
is equal to the fair market value of such shares on the date of exercise. Upon a
subsequent sale of any such shares in a taxable transaction, the Optionee will
realize capital gain or loss in an amount equal to the difference between his or
her basis in the shares and the sale price.
Restricted Stock Grants. The recipient of an award of Restricted Shares
will be required to recognize income in the first year that (i) the Restricted
Shares become transferable by the recipient or (ii) the Restricted Shares are
not subject to a substantial risk of forfeiture. The various vesting conditions
imposed upon the Restricted Shares in the applicable Award Agreement will
determine if the Restricted Shares are subject to a substantial risk of
forfeiture. The amount of income that must be recognized in connection with a
grant of Restricted Shares will be equal to the difference between the fair
market value of the Restricted Shares in the year that income is recognized and
the value paid by the recipient for the Restricted Shares. The income recognized
will be taxed as ordinary income. The tax basis in the Restricted Shares will be
the value paid by the recipient plus any income recognized by the recipient.
A recipient of Restricted Shares may elect to recognize income in the year
he or she receives an award of Restricted Shares even if the Restricted Shares
are non-transferable and subject to a substantial risk of forfeiture. The
recipient's tax basis in the Restricted Shares will be the value paid by the
recipient plus any income recognized by the recipient. By making such election,
the recipient can defer recognizing as income the increase in value of the
Restricted Shares during such period until the Restricted Shares are sold or
transferred. Upon the subsequent sale of any Restricted Shares in a taxable
transaction, the recipient will realize capital gain or loss (long-term or
short-term, depending on whether the Restricted Shares were held for more than
twelve months before the sale) in an amount equal to the difference between his
or her basis in the Restricted Shares and the sale price.
Other Stock-based Units. Upon the exercise of an SAR and/or the payment of
Stock Units and corresponding Dividend Equivalents, a participant under the Plan
will recognize ordinary compensation income in the amount of both the cash and
the fair market value of the shares of Common Stock received upon the exercise
of the SAR or the payment of the Stock Unit and Dividend Equivalent, and
generally First Security will be entitled to a corresponding deduction. In the
event the participant receives shares of Common Stock upon the exercise of the
SAR or the payment of the Stock Unit or Dividend Equivalent, any shares so
acquired will have a tax basis equal to their fair market value on the date of
such exercise or payment, and the holding period of the shares will commence on
the day following that date. Upon a subsequent sale of such shares, the
participant will recognize capital gain or loss (long-term or short-term,
depending on whether the shares were held for more than twelve months before the
sale) in an amount equal to the difference between his or her basis in the
shares and the sale price.
Withholding Tax Obligations. To the extent required by applicable federal,
state, local or foreign law, the recipient of any payment or distribution under
the Plan will make arrangements satisfactory to First Security for the
satisfaction of any withholding tax obligations that arise by reason of such
payment or distribution. First Security will not be required to make such
payment or distribution until such obligations are satisfied. The Committee may
permit a Plan participant who exercises a Nonqualified Option to satisfy all or
part of his or her withholding tax obligation by having First Security withhold
a portion of the Common Stock that otherwise would be issued to the participant
under such Nonqualified Option.
PROPOSED INCREASE IN THE NUMBER OF SHARES AVAILABLE UNDER THE PLAN.
Currently, the Plan provides that the aggregate number of Restricted
Shares, Stock Units and Stock Options that may be awarded under the Plan may not
exceed 21,726.563 shares. As of January 31, 1999, the Committee had granted
Restricted Shares, Stock Units and Options relating to an aggregate of
20,709,476 shares of Common Stock; leaving only 1,017,087 shares available to be
awarded under the Plan. Following a review of the Awards made under the Plan to
25
<PAGE>
date and the Awards which the Board of Directors believes should be granted in
order to achieve the Plan's stated purposes, the Board of Directors has
determined that the number of Restricted Shares, Stock Units and Options
currently permitted under the Plan is insufficient to achieve the purposes of
the Plan. Based upon that determination, the Board of Directors has authorized
an increase in the aggregate number of shares that may be granted under the Plan
from 21,726.563 to 27,726.563 shares. The Board of Directors believes that the
best interests of First Security will be served by increasing the number of
shares available to be awarded under the Plan.
SHAREHOLDER APPROVAL AND EFFECT OF NON APPROVAL
Approval of the increased number of shares requires that the number of
votes cast in favor of the amendments at the Annual Meeting exceed the number of
votes cast in opposition to the amendment of the Plan. Approval of the new
additional shares for the Plan will not result directly in the grant of any
Awards to Executive Officers, Directors, key employees or consultants of First
Security. Shareholder approval will, however, increase the number of shares
which may be granted as incentive awards under the Plan, affecting grant
decisions in the future. If the increase in the number of shares available under
the Plan is not approved by the Shareholders, the Plan will remain in effect as
now constituted and the aggregate number of available shares will remain at
21,726.563.
INTERESTS OF CERTAIN PERSONS IN THIS PROPOSAL
In considering the recommendation of the Board of Directors with respect
to the new shares for the Plan, Shareholders should be aware that Messrs. Eccles
and Evans, who are members of the Board of Directors, are also Executive
Officers traditionally eligible to receive grants under the Plan.
The Board of Directors recognizes that adoption of the increase in the
number of Shares under the Plan may benefit such individual Directors of First
Security and their successors, but it believes that approval of the additional
Shares will strengthen First Security's ability to continue to attract, motivate
and retain certain qualified employees and officers. The Board of Directors
believes that the new shares are in the best interests of First Security and its
Shareholders and, therefore, unanimously recommends a vote FOR the proposal to
approve the new shares for the Plan. In considering the foregoing recommendation
of the Board of Directors, Shareholders should be aware that the current members
of the Board of Directors own, in the aggregate, approximately 9.3% of the
shares of First Security's issued and outstanding Common Stock, including option
shares exercisable within 60 days of the Record Date.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE SHAREHOLDER
APPROVAL OF THE INCREASE IN SHARES AVAILABLE UNDER THE COMPREHENSIVE
MANAGEMENT INCENTIVE PLAN, AS PROPOSED.
OTHER BUSINESS
Management does not know of any other business to be presented at the
Meeting. However, if any other business is presented, it is the intention of the
Proxies to vote according to their best judgment with respect to such other
business.
First Security's Annual Report to Shareholders is being sent to you
together with this Proxy Statement. This report includes First Security's
financial statement and the schedules thereto. Any questions regarding the
Annual Report, including a request for the copy that may not have arrived with
this Proxy Statement, may be directed to First Security Corporation, Attention:
Investor Relations, 79 S. Main Street, Salt Lake City, Utah, 84111, (801)
246-5048.
DEADLINE FOR SHAREHOLDER PROPOSALS
If any Shareholder wishes to present a proposal for action at the 2000
Annual Meeting of the Shareholders, the Shareholder must comply with applicable
Securities and Exchanges Commission Regulations including adequate notice to
First Security. Any proposal must be submitted in writing by Certified Mail -
Return Receipt Requested, to First Security Corporation, Attention: Secretary,
79 S. Main Street, Salt Lake City, Utah 84111, on or before December 31, 1999.
Moreover, the Bylaws of First Security provide notice requirements for any
Shareholder nomination or other business. A copy of the applicable Bylaw
provision may be obtained by writing to First Security at the same address. The
Bylaws are also an exhibit to First Security's Annual Report on Form 10-K for
the year ended December 31, 1997. First Security's filings with the Commission
may be accessed through the Commission's web site at www.sec.gov or through
First Security's web site at www.firstsecuritybank.com.
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