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SCHEDULE 14A
(Rule 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
FIRST AMERICAN CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), or 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:
Common
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
N/A
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
N/A
- --------------------------------------------------------------------------------
/ / 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:
- --------------------------------------------------------------------------------
- -------------
(1) Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE> 2
FIRST
AMERICAN
CORPORATION
March 17, 1994
Dear Shareholder:
I am pleased to invite you to First American's annual shareholders meeting,
which will be held in the fifth floor auditorium of the First American Center in
Nashville, Tennessee on Thursday, April 21, 1994 at 10:30 a.m.
Details on the items of business that will be discussed and voted upon at
this year's meeting are included in this proxy statement.
In addition to these agenda items, we will be giving you a report on our
progress in 1993 which was an excellent year for First American. The Company
earned $101.8 million, or $3.93 per share, and recorded a return on equity and a
return on assets of 19.90% and 1.50%, respectively. In addition, credit quality
improved significantly, the Company issued $50 million of subordinated debt,
increased its dividend 50% and acquired First American National Bank of
Kentucky, formerly First Federal Savings and Loan of Bowling Green, on October
1, 1993. These and other achievements will be discussed at the annual meeting.
As in the past, we will allot time for any questions or comments you may have.
This year's meeting will mark the retirement of Toy F. Reid as a director.
Toy has served the Company with distinction and devotion during the last nine
years, and has been the Chairman of our Audit Committee since 1992. Toy's
contributions to our Board are greatly appreciated and he will be deeply missed.
I hope that you will be able to attend the annual meeting. However, if you
cannot attend in person, please return the enclosed proxy card as soon as
possible to ensure that your shares are represented at the annual meeting. If
your plans change and you are able to attend the meeting, you may choose to
withdraw your proxy and vote in person.
On behalf of the board of directors and employees of First American, let me
express our appreciation for your continued support and confidence.
Sincerely,
/S/ Dennis C. Bottorff
----------------------
Dennis C. Bottorff
President and Chief Executive Officer
<PAGE> 3
FIRST AMERICAN CORPORATION
First American Center
Nashville, Tennessee 37237
(615) 748-2000
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of First American Corporation:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the "Annual
Meeting") of First American Corporation will be held in the fifth floor
auditorium, First American Center, Fourth and Union, Nashville, Tennessee on
April 21, 1994, at 10:30 a.m., CDT, for the following purposes:
(1) To elect one (1) director to serve until the Annual Meeting in
1995, and six (6) directors to serve until the Annual Meeting in 1997.
(2) To consider and approve an amendment to the First American
Corporation 1991 Employee Stock Incentive Plan increasing the number of
shares of common stock reserved thereunder by one million two hundred fifty
thousand (1,250,000) shares.
(3) To transact such other business as may properly come before the
Annual Meeting.
Only shareholders of record at the close of business on February 10, 1994,
will be entitled to vote at the Annual Meeting or any adjournment thereof.
All shareholders are cordially invited to attend the Annual Meeting. TO
ENSURE YOUR REPRESENTATION AT THE MEETING, PLEASE COMPLETE AND PROMPTLY MAIL
YOUR PROXY IN THE RETURN ENVELOPE ENCLOSED. This will not prevent you from
voting in person, should you so desire, but will help to secure a quorum and
avoid added solicitation costs. Your proxy may be revoked at any time before it
is voted. Your attention is directed to the proxy statement accompanying this
notice for a more complete statement regarding the matters proposed to be acted
upon at the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Martin E. Simmons
---------------------
Martin E. Simmons
Executive Vice
President - Administration,
General Counsel and Secretary
Nashville, Tennessee
March 17, 1994
<PAGE> 4
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the "Board") of First American Corporation
(the "Company"), which, unless otherwise indicated, includes all corporate
predecessors and subsidiaries of the Company, from holders of the Company's
shares of $5.00 par value common stock (the "Shares") to be voted at the 1994
annual meeting of the shareholders of the Company (the "Annual Meeting") to be
held in the fifth floor auditorium of the First American Center, Fourth and
Union, Nashville, Tennessee on Thursday, April 21, 1994, at 10:30 a.m. CDT, and
any adjournments or postponements thereof for the purposes set forth in the
accompanying notice. A proxy may be revoked by a shareholder at any time prior
to its use by filing with the Secretary of the Company a written revocation or a
duly executed proxy bearing a later date, or by attending the Annual Meeting and
voting in person. Any written notice revoking a proxy should be sent to: Martin
E. Simmons, Executive Vice President - Administration, General Counsel and
Secretary, First American Corporation, 606 First American Center, Nashville,
Tennessee 37237-0606. The Board has fixed the close of business on February 10,
1994, as the record date (the "Record Date") for the determination of
shareholders entitled to notice of and to vote at the Annual Meeting. This Proxy
Statement and the accompanying form of proxy have been mailed on or about March
18, 1994, to holders of the Company's Shares as of the Record Date. The
information contained herein is as of the date of the accompanying notice unless
otherwise indicated.
The Company's principal executive office is located in the First American
Center, Nashville, Tennessee 37237.
OTHER MEETING AND VOTING INFORMATION
Proxies may be solicited by mail, telephone, telegraph or in person. All
costs will be borne by the Company. Further solicitation will be made in the
same manner under the direction of Corporate Investor Communications, Inc. of
Carlstadt, New Jersey, at an anticipated cost of $3,000, not including out of
pocket expenses, which are estimated at $4,000. The Company will also reimburse
brokerage firms and other nominees for their expenses in forwarding proxy
materials to beneficial owners of the Company's stock.
The Shares represented by such proxies will be voted in accordance with the
choices specified therein. If no choice has been specified, the Shares will be
voted FOR election of the nominees for director named herein, FOR the approval
of the amendment to the First American Corporation 1991 Employee Stock Incentive
Plan (the "1991 Plan"), and in the proxies' discretion on any other matter which
may properly come before the shareholders at the Annual Meeting.
The Board does not know of any other matters which will be presented for
action at the Annual Meeting, but the persons named in the proxy (who are
directors of the Company) intend to vote or act with respect to any other
proposal which may be presented for action according to their best judgment.
As of the Record Date, the Company had outstanding 26,052,826 Shares.
Holders of the Shares are entitled to one vote for each Share held on all
matters to come before the shareholders at the Annual Meeting. Cumulative voting
is not permitted. In order to constitute a quorum for the Annual Meeting, the
holders of 13,026,414 Shares must be present or represented by proxies.
The affirmative vote of a plurality of the votes cast is required in the
election of the nominees for director. The affirmative vote of a majority of the
votes cast at the meeting is required to approve the proposed amendment to the
1991 Plan. Under Tennessee law and the Company's Charter and
<PAGE> 5
By-Laws, the aggregate number of votes entitled to be cast by all shareholders
present in person or represented by proxy at the Annual Meeting, whether those
shareholders vote "for", "against" or "abstain" from voting, and broker
non-votes will be counted for purposes of determining whether a quorum is
present. Abstentions and broker non-votes on returned proxies and ballots will
be counted as neither FOR nor AGAINST a matter or nominee.
No person is authorized to give any information or to make any
representation not contained in this Proxy Statement, and if given or made, such
information or representation should not be relied upon as having been
authorized. This Proxy Statement does not constitute the solicitation of a proxy
in any jurisdiction from any person to whom it is unlawful to make such proxy
solicitation in such jurisdiction. The delivery of this Proxy Statement shall
not, under any circumstances, imply that there has not been any change in the
information set forth herein since the date of this Proxy Statement.
SHAREHOLDER PROPOSALS
In order for appropriate proposals by shareholders to be included in the
1995 proxy materials and to be considered at the 1995 annual meeting, all such
proposals intended for presentation at the 1995 annual meeting must be mailed to
Martin E. Simmons, Executive Vice President - Administration, General Counsel
and Secretary, First American Corporation, 606 First American Center, Nashville,
Tennessee 37237-0606, and must be received no later than November 17, 1994.
PROPOSAL 1: ELECTION OF DIRECTORS
The Company's By-Laws provide that the Board shall consist of not less than
nine nor more than twenty-seven directors and shall be divided into three
classes, each class to be as nearly equal in number as possible. As permitted in
the By-Laws, effective as of April 21, 1994, the Board has fixed the number of
directors at nineteen. The terms for seven of the Company's directors expire at
the 1994 Annual Meeting. The terms for six of the Company's directors expire at
the 1995 annual meeting. The terms for six of the Company's directors expire at
the 1996 annual meeting. In each case, directors were elected until their
respective successors are duly elected and qualified. At each annual meeting,
one class of directors is to be elected for a three-year term.
The Company's By-Laws further provide that a vacancy on the Board occurring
during the course of the year, including a vacancy created by an increase in the
number of directors, may be filled by the remaining directors, though less than
a quorum, and that a newly elected director shall serve for the unexpired term
of his predecessor or, if there is no predecessor, until the next annual
meeting. Acting upon this authority, Robert A. McCabe, Jr. was elected in
January 1994 to serve until the 1994 Annual Meeting.
At the 1994 Annual Meeting, one director will be elected to hold office
until the 1995 annual meeting and until his successor has been elected and
qualified and six directors will be elected to hold office until the 1997 annual
meeting and until their successors have been elected and qualified. As a result,
the division of the Company's directors into three classes will be seven
directors, six directors and six directors with terms expiring at the 1995, 1996
and 1997 annual meetings, respectively. The nominee for the class of 1995 is
DAVID K. WILSON and the nominees for the class of 1997 are DENNIS C. BOTTORFF,
JAMES A. HASLAM II, WALTER G. KNESTRICK, ROBERT A. MCCABE, JR., WILLIAM O.
MCCOY, AND TOBY S. WILT.
Unless a proxy shall specify otherwise, the persons named in the proxy
shall vote the Shares covered thereby FOR the nominees designated by the Board
as listed above. Each nominee has consented to be a candidate and to serve, if
elected. While the Board has no reason to believe that
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<PAGE> 6
any nominee will be unavailable, if such an event should occur, it is intended
that such Shares will be voted for such substitute nominee as may be selected by
the current Board.
All of the Company's Directors also serve as directors of First American
National Bank, Nashville, Tennessee.
NOMINEES FOR ELECTION TO THE BOARD
DAVID K. WILSON Age -- 74
Director, Chairman of the Executive Committee Director since 1974
and Member of the Human Resources and Term to expire 1995
Nominating Committees
Since January 1, 1986, Mr. Wilson has served as Chairman of the Board of
Directors of First American Trust Company, N.A. Mr. Wilson is Chairman of
Cherokee Equity Corporation, a holding company. He also serves as a member of
the Vanderbilt University Board of Trusts, and is a director of Tennessee
Wholesale Drug Co.
DENNIS C. BOTTORFF Age -- 49
Director, President and Chief Executive Officer, Director since 1991
and Member of the Executive, Asset Policy and Term to expire 1997
Community Affairs Committees
Mr. Bottorff serves as President and Chief Executive Officer of the Company and
as Chief Executive Officer of First American National Bank. From November 1991
through January 1994, Mr. Bottorff also served as President of First American
National Bank. From September 1990 until November 1991 he was President and
Chief Operating Officer of C&S/Sovran Corporation. From April 1989 until
September 1990 he was President, from November 1987 until April 1989 he was Vice
Chairman and from April 1988 until September 1990 he was Chief Operating Officer
of Sovran Financial Corp. From July 1987 until April 1988, Mr. Bottorff served
as Chairman and Chief Executive Officer, and prior to July 1987 as Chairman,
President and Chief Executive Officer of Commerce Union Corporation. Mr.
Bottorff also serves as a director of Shoney's, Inc., Ingram Industries, Inc.,
and First American Trust Company, N.A., and serves as a member of the Vanderbilt
University Board of Trusts and as a member of its Executive Committee.
JAMES A. HASLAM II Age -- 63
Director, Chairman of the Nominating Committee Director since 1983
and Member of the Executive, Asset Policy and Term to expire 1997
Human Resources Committees
Mr. Haslam has served as President and Chief Executive Officer of Pilot
Corporation, a retail operator of travel centers and convenience stores/gasoline
stations since its founding in November 1958. He is a member of the University
of Tennessee Board of Trustees.
Robert A. McCabe, Jr., a Director and Executive Officer of the Company, is
married to the daughter of Mrs. Haslam.
WALTER G. KNESTRICK Age -- 56
Director and Chairman of the Asset Policy Committee Director since 1990
and Member of the Executive and Audit Committees Term to expire 1997
Mr. Knestrick founded Walter Knestrick Contractor, Inc., a commercial and
industrial building contractor and has served as its Chairman of the Board since
1969.
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NOMINEES FOR ELECTION OF DIRECTORS -- (CONTINUED)
ROBERT A. MCCABE, JR. Age -- 43
Director, Vice Chairman, and President - First American Enterprises Director
since 1994
Term to expire 1997
Since January, 1994 Mr. McCabe has served as Vice Chairman of the Corporation
and First American National Bank and President - First American Enterprises.
From December 1991 to January 1994 he served as President, General Bank, First
American National Bank. Mr. McCabe served as President, Corporate Bank, First
American National Bank from April 1991 to December 1991 and served as President,
First American National Bank - East Tennessee Region from June 1987 to April
1991. Mr. McCabe also serves as a member of the Board of Directors of First
American Trust Company, N.A.
WILLIAM O. MCCOY Age -- 60
Director, Chairman of the Human Resources Committee Director since 1979
and Member of the Executive, Term to expire 1997
Systems Review and Nominating Committees
Since January 1, 1986, Mr. McCoy has been President and Chief Executive Officer
of BellSouth Enterprises, Inc. Since January 1, 1984, Mr. McCoy has been Vice
Chairman of BellSouth Corporation, a telephone utility holding company. He is a
director of both BellSouth Enterprises, Inc. and BellSouth Corporation. Mr.
McCoy also serves as a director of The Liberty Corporation.
TOBY S. WILT Age -- 49
Director and Member of the Audit Director since 1992
and Asset Policy Committees Term to expire 1997
Mr. Wilt is the President of TSW Investment Company, a private investment
company in Nashville, Tennessee and Chairman of The Christie Cookie Co., a
gourmet baking company. Mr. Wilt also serves as Vice Chairman of the Nashville
Metropolitan Airport Authority, director of The Christie Cookie Company and
director of Volunteer Capital Corporation.
CONTINUING DIRECTORS UNTIL 1995 MEETING
REGINALD D. DICKSON Age -- 47
Director and Member of the Nominating, Director since 1981
Human Resources and Community Affairs Committees Term to expire 1995
Mr. Dickson is President Emeritus of INROADS, Inc., a non-profit minority career
development organization. From 1983 through 1992, Mr. Dickson served as
President and Chief Executive Officer of INROADS, Inc. Mr. Dickson is Chairman
of New Age Bank Corp., a minority bank holding company in organization in St.
Louis, Missouri. Mr. Dickson also serves as a director of Dollar General
Corporation.
T. SCOTT FILLEBROWN, JR. Age -- 67
Director and Member of the Systems Director since 1968
Review and Audit Committees Term to expire 1995
Since March 1988, Mr. Fillebrown has been a private investor and consultant.
From July 1985 until March 1988, Mr. Fillebrown served as Chairman of First
Choice Health Plan, a health maintenance organization.
GENE C. KOONCE Age -- 62
Director and Member of the Director since 1981
Systems Review Committee Term to expire 1995
Mr. Koonce is President, Chief Executive Officer and a member of the Board of
Directors of United Cities Gas Company, a natural and propane gas distribution
company. Mr. Koonce serves as a director of First American Trust Company, N.A.
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CONTINUING DIRECTORS UNTIL 1995 MEETING -- (CONTINUED)
DALE W. POLLEY Age -- 44
Director, Vice Chairman and Director since 1991
Principal Financial Officer, Term to expire 1995
President of First American National Bank
and Member of the Systems Review Committee
Since January, 1994 Mr. Polley has served as Vice Chairman of the Company and as
President of First American National Bank. He also serves on the Board of
Directors of First American National Bank of Kentucky. From December 1991 to
January 1994 Mr. Polley served as Vice Chairman and Chief Administrative Officer
of the Company and First American National Bank. Since November 1992 he has also
served as principal financial officer of the Company and First American National
Bank. From 1990 until December 1991, he was Group Executive Vice President and
Treasurer of C&S/Sovran Corporation. From 1988 until 1990, he was Senior
Executive Vice President, Chief Financial Officer and Treasurer of Sovran
Financial Corp.
JAMES F. SMITH, JR. Age -- 64
Director, Chairman of the Board, Director since 1983
Chairman of the Systems Review Committee Term to expire 1995
and Member of the Executive and Asset Policy Committees
Since 1991, Mr. Smith has served as Chairman of the Board of the Company and
First American National Bank. From February 8, 1991 until November 15, 1991, Mr.
Smith also served as President and Chief Executive Officer of the Company and
First American National Bank. From May 29, 1990 until February 8, 1991, Mr.
Smith served as Interim Chairman of the Board, President and Chief Executive
Officer of the Company and First American National Bank. From January 1, 1990,
until May 29, 1990, Mr. Smith served as Vice Chairman of First American National
Bank. From August 22, 1989, until May 29, 1990, Mr. Smith served as Vice
Chairman of the Company. Until December 31, 1989 Mr. Smith served as Chairman of
the Board, Chief Executive Officer and Director of First American National Bank,
Knoxville. Mr. Smith also serves as a director of Pilot Corporation,
Plasti-Line, Inc. and Computational Systems, Inc.
CAL TURNER, JR. Age -- 54
Director and Member of the Human Resources Director since 1989
and Community Affairs Committees Term to expire 1995
Since 1988 Mr. Turner has held the position of Chairman, President and Chief
Executive Officer of Dollar General Corporation, a chain of discount retail
stores. Mr. Turner serves as a director of Thomas Nelson Publishers, Inc.,
Shoney's, Inc., and is Chairman of the Executive Committee of Lindsey Wilson
College.
CONTINUING DIRECTORS UNTIL 1996 MEETING
SAMUEL E. BEALL, III Age -- 43
Director and Member of the Director since 1992
Human Resources and Nominating Committees Term to expire 1996
Mr. Beall is President and Chief Executive Officer and a member of the Board of
Directors of Morrison Restaurants Inc., a full-service restaurant and restaurant
management company. From 1985 until June 1992, he served as President and Chief
Operating Officer of Morrison Restaurants Inc. Mr. Beall also serves as a
director of Pilot Corporation and Profitt's, Inc.
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CONTINUING DIRECTORS UNTIL 1996 MEETING -- (CONTINUED)
EARNEST W. DEAVENPORT, JR. Age -- 55
Director and Member of the Director since 1989
Systems Review and Audit Committees Term to expire 1996
Since January 1994 Mr. Deavenport has been Chairman of the Board and Chief
Executive Officer of Eastman Chemical Company, a chemical concern. From February
1989 to January 1994 Mr. Deavenport served as Group Vice President, Eastman
Kodak Company, a photographic, chemical and pharmaceutical concern and President
of Eastman Chemical Company. From 1985 until February 1989, Mr. Deavenport
served as Vice President of Eastman Kodak Company and Assistant General Manager
of Eastman Chemicals Division in Kingsport, Tennessee.
MARTHA R. INGRAM Age -- 58
Director and Member of the Audit Director since 1993
and Community Affairs Committees Term to expire 1996
Mrs. Ingram is the Director of Public Affairs and member of the Board of
Directors of Ingram Industries Inc., a diversified transportation and energy
company and distributor of consumer products. Mrs. Ingram also serves as a
member of the Board of Directors and as Chairman of the Public Policy Committee
of Baxter International, Inc.
JAMES R. MARTIN Age -- 50
Director and Member of the Director since 1989
Community Affairs and Audit Committees Term to expire 1996
Mr. Martin is the Chairman of the Board of Directors and Chief Executive Officer
of Plasti-Line, Inc., a Knoxville-based manufacturer of indoor and outdoor sign
products and point of purchase marketing products for corporate identification
programs. From 1976 through June, 1992, he served as President of Plasti-Line,
Inc. Mr. Martin also serves as a director of Signal Thread Company.
ROSCOE R. ROBINSON Age -- 64
Director and Member of the Director since 1992
Community Affairs and Nominating Committees Term to expire 1996
Dr. Robinson has served as Vice Chancellor for Health Affairs of Vanderbilt
University and Professor of Medicine at Vanderbilt University Medical Center in
Nashville, Tennessee since 1981. Dr. Robinson also serves as President of
Vanderbilt Health Services, Inc.
WILLIAM S. WIRE II Age -- 62
Director, Chairman of the Community Affairs Director since 1989
Committee and Member of the Executive, Term to expire 1996
Asset Policy and Nominating Committees
Mr. Wire is the former Chairman and Chief Executive Officer of Genesco, Inc., a
manufacturer and retailer of footwear and related products, and a manufacturer
of tailored clothing. He served as Chairman of Genesco from March 1986 until his
retirement in January 1994. From March 1986 to February 1993 he also served as
Chief Executive Officer and from March 1986 until June 1988 as President of
Genesco. Mr. Wire also serves as a director of Genesco and Dollar General
Corporation.
RETIRING DIRECTOR NOT STANDING FOR ELECTION
TOY F. REID Age -- 70
Director and Chairman of the Audit Committee Director since 1985
and Member of the Executive Committee Term to expire 1994
Mr. Reid was Executive Vice President and a Director of Eastman Kodak Co. and
General Manager of Eastman Chemical Division until his retirement in February
1989. Mr. Reid also serves as a director of American Electric Power Company.
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DESCRIPTION OF THE BOARD AND COMMITTEES
During 1993 the Board held thirteen regular meetings and no special
meetings. The Board has seven standing committees: Executive, Asset Policy,
Audit, Community Affairs, Human Resources, Nominating and Systems Review.
The Executive Committee consists of the Chief Executive Officer and not
less than three other directors who are elected by the Board. At present, the
Executive Committee is comprised of the Chief Executive Officer and six other
directors who are the chairmen of the other standing committees plus an
additional director who serves as Chairman of the Executive Committee. The
Committee can act on behalf of the full Board on all matters concerning the
management and conduct of the business affairs of the Company except those
matters which cannot by law be delegated by the Board. The Executive Committee
meets on the call of the Chairman of the Committee or the Chief Executive
Officer. The Executive Committee met twice in 1993.
The Asset Policy Committee consists of five directors who are not officers
or employees of the Company and the Chief Executive Officer. The Committee is
responsible for all credit related matters, including the approval of credit
policies and procedures. It monitors the loan portfolio of First American
National Bank ("FANB"), reviews significant loan transactions, reviews credit
examinations, and monitors compliance with regulatory requirements and
applicable laws and regulations. The Committee also reviews internal loan
audits, the allowance for loan losses and regulatory examinations, as well as
asset/liability policies and procedures. The Asset Policy Committee met thirteen
times in 1993.
The Audit Committee consists of seven directors who are not officers or
employees of the Company. During 1993, the Audit Committee was composed of
Messrs. Reid (Chairman), Fillebrown, Knestrick, Martin, and Wilt and Mrs.
Ingram. Mr. Deavenport became a member of the Audit Committee in January 1994.
Under the Federal Deposit Insurance Corporation Act of 1991 ("FDICIA"), the
Audit Committee must consist wholly of outside directors, must include at least
two members who have banking or financial management expertise and may not
include any "large customers" of FANB. The Audit Committee of the Company meets
all of these requirements. The Committee acts on behalf of the Board to ensure
that the affairs and operations of the Company and its subsidiaries are subject
to proper financial audits and internal control procedures. It approves the
selection of independent public accountants, oversees the relationship between
the Company's independent public accountants and its management, reviews the
arrangements for and scope of internal and external audits, considers comments
from internal and external auditors and management's replies, discusses areas of
concern, and monitors the adequacy of internal controls and supervises the
internal audit function. The Committee also reviews the allowance for loan
losses. It reports to the Board in connection with the activities, findings and
reports of both the internal and independent auditors of the Company and its
subsidiaries, provides guidance and assistance to the auditors, and ensures that
the auditors are free to exercise their function independently of management,
wherever appropriate. The Audit Committee also reviews the various reports
required to be filed with bank regulatory agencies. The Audit Committee met six
times during 1993.
The Community Affairs Committee, consisting of six directors who are not
officers or employees of the Company and the Chief Executive Officer, advises
and counsels management in matters of community activities, contributions,
government affairs and compliance with the Community Reinvestment Act and other
laws or regulations of similar purpose. In 1993, the Community Affairs Committee
met four times.
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The Human Resources Committee, consisting of six directors who are not
officers or employees of the Company, serves as the Company's compensation
committee and oversees all personnel practices and procedures of the Company and
its subsidiaries. It oversees all benefit programs and acts with regard to
salary administration. The Committee sets the salaries of certain officers of
the Company and recommends to the full Board the salaries of officers of the
Company who are also directors. The Human Resources Committee met seven times
during 1993.
The Nominating Committee, comprised of seven directors who are not officers
or employees of the Company, establishes criteria for the evaluation of members
of the Board, evaluates the Board and recommends whether members should be
nominated for re-election. The Committee also evaluates the size and composition
of the Board, establishes criteria for director nominations and identifies and
recommends nominees for membership on the Board. The By-Laws of the Company
provide that the Nominating Committee may receive recommendations from
shareholders of the Company for membership on the Board if written notice of the
recommendation is submitted to the Chief Executive Officer of the Company within
60 days prior to the meeting of the Committee, containing the name, address, and
principal occupation of the proposed nominee, and the name, address and number
of shares owned by the notifying shareholder. During 1993, the Nominating
Committee was composed of Messrs. Haslam (Chairman), Beall, McCoy, Robinson,
Wilson and Wire. Mr. Dickson became a member of the Nominating Committee in
January 1994. The Nominating Committee met twice during 1993.
The Systems Review Committee is comprised of five directors who are not
officers or employees of the Company and the Vice Chairman and President of
FANB. The Committee serves as an oversight committee to review all policies,
plans, development, implementation and other activities relating to the
operational functions, product line and administrative systems of FANB, and the
quality and extent of management information systems. The Systems Review
Committee met four times in 1993.
No incumbent director except Mr. Beall attended fewer than 75% of the
aggregate of (i) the total number of meetings held during 1993 by the Board, and
(ii) the total number of meetings held during 1993 by all committees of the
Board of which such director was a member. Mr. Beall attended 69% of the total
number of Board meetings held in 1993 and 60% of the meetings of committees of
which he was a member in 1993.
REPORTS OF BENEFICIAL OWNERSHIP
Under the securities laws of the United States, the Company's executive
officers and directors, and persons who own more than ten percent of the common
stock of the Company are required to report their ownership of such stock and
any changes in that ownership with the Securities and Exchange Commission
("SEC"). These persons are also required to furnish the Company with copies of
these reports.
Based solely on its review of the copies of such forms received by it, or
written representations from reporting persons, the Company believes that all of
these filing requirements were satisfied during the period ended December 31,
1993, except that Mr. McCabe filed an amended Form 3 on May 7, 1993 to report
his direct ownership of 137 shares held in an individual retirement account and
the indirect ownership of 137 shares held by his wife in an individual
retirement account which had not been previously reported.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
There are no persons who are the beneficial owners of more than 5% of the
Company's common stock, its only class of voting securities.
The following table sets forth the number of Shares held beneficially,
directly or indirectly, as of the Record Date, by all directors and nominees for
director, the Company's Chief Executive Officer and the Company's four most
highly compensated officers other than the Chief Executive Officer (these five
executive officers being hereinafter referred to as the "Named Executive
Officers") and by all directors and executive officers as a group, together with
the percentage of the outstanding Shares which such ownership represents.
<TABLE>
<CAPTION>
SHARES
NAME OF BENEFICIALLY PERCENTAGE
BENEFICIAL OWNER OWNED OF CLASS
- ------------------------------------------- ----------------- ----------
<S> <C> <C> <C>
Samuel E. Beall, III....................... 1,000 shares *
Dennis C. Bottorff......................... 156,736 shares(1) .6%
John W. Boyle, Jr.......................... 17,544 shares(2) *
Earnest W. Deavenport, Jr.................. 2,874 shares(3) *
Reginald D. Dickson........................ 1,156 shares *
T. Scott Fillebrown, Jr.................... 24,022 shares(4) .1%
James A. Haslam, II........................ 63,261 shares(5) .2%
Martha R. Ingram........................... 3,000 shares *
Walter G. Knestrick........................ 357,422 shares(6) 1.4%
Gene C. Koonce............................. 3,048 shares *
James R. Martin............................ 5,000 shares(7) *
Robert A. McCabe, Jr....................... 65,220 shares(8) .2%
William O. McCoy........................... 4,084 shares *
Robert E. McNeilly, Jr..................... 45,984 shares(9) .2%
Dale W. Polley............................. 43,468 shares(10) .2%
Toy F. Reid................................ 3,332 shares(11) *
Roscoe R. Robinson......................... 1,000 shares *
James F. Smith, Jr......................... 184,630 shares(12) .7%
Cal Turner, Jr............................. 64,039 shares(13) .2%
David K. Wilson............................ 416,861 shares(14) 1.6%
Toby S. Wilt............................... 100,000 shares .4%
William S. Wire, II........................ 9,366 shares *
All Directors, Nominees for Director and
Executive Officers as a Group............ 1,826,563 shares(15) 6.9%(16)
</TABLE>
- ---------------
* less than .1%
(1) Includes 1,736 shares held in Mr. Bottorff's FIRST Plan accounts (the
Company's sec.401k Plan), 40,000 shares (over which Mr. Bottorff has voting
but not investment authority) granted pursuant to a restricted stock award
under the 1991 Plan, and includes options for 80,000 shares issued pursuant
to the 1991 Plan which are currently exercisable.
(2) Includes 544 shares held in Mr. Boyle's FIRST Plan accounts, 11,000 shares
(over which Mr. Boyle has voting but not investment authority) granted
pursuant to a restricted stock award under the 1991 Plan, and includes
options for 5,000 shares issued pursuant to the 1991 Plan which are
currently exercisable.
(3) Includes 160 shares held by Mr. Deavenport's son over which Mr. Deavenport
has sole voting and investment power and 161 shares held by Mr.
Deavenport's daughter as to which he disclaims beneficial ownership.
9
<PAGE> 13
(4) Includes 18,793 shares owned by Mrs. Fillebrown as to which Mr. Fillebrown
disclaims beneficial ownership.
(5) Includes 7,312 shares owned by Mrs. Haslam as to which Mr. Haslam disclaims
beneficial ownership.
(6) Includes 76,722 shares held by a trust for which Mr. Knestrick acts as
trustee.
(7) Includes 1,000 shares held by a trust for which Mr. Martin acts as trustee
and 1,000 owned by his spouse as to which he disclaims beneficial
ownership.
(8) Includes 6,543 shares held in Mr. McCabe's FIRST Plan accounts, 8,423
shares owned by his spouse and children as to which he disclaims beneficial
ownership, 12,500 shares (over which Mr. McCabe has voting but not
investment authority) granted pursuant to a restricted stock award under
the 1991 Plan, and includes options for 5,000 shares issued pursuant to the
1991 Plan which are currently exercisable and 27,361 shares which Mr.
McCabe may acquire under stock options granted pursuant to the Company's
STAR Award Plan which are currently exercisable.
(9) Includes 3,486 shares held in Mr. McNeilly's FIRST Plan accounts, 29,181
shares which Mr. McNeilly may acquire under stock options granted pursuant
to the STAR Award Plan which are currently exercisable, 3,900 shares (over
which Mr. McNeilly has voting but not investment authority) granted
pursuant to a restricted stock award under the 1991 Plan, and includes
options for 3,000 shares issued pursuant to the 1991 Plan which are
currently exercisable.
(10) Includes 1,398 shares held in Mr. Polley's FIRST Plan accounts, 13,500
shares (over which Mr. Polley has voting but not investment authority)
granted pursuant to a restricted stock award under the 1991 Plan, and
includes options for 24,000 shares issued pursuant to the 1991 Plan which
are currently exercisable.
(11) Includes 792 shares owned by Mrs. Reid and 1,108 shares owned by Mr. Reid's
daughter, as to which Mr. Reid disclaims any beneficial ownership.
(12) Includes 20,059 shares owned by Mrs. Smith as to which Mr. Smith disclaims
beneficial ownership, and options for 32,723 shares issued pursuant to the
1991 Plan which are currently exercisable.
(13) Includes 1,023 shares held by a trust for which Mr. Turner acts as trustee
and 3,122 shares by another trust for which Mr. Turner acts as trustee and
as to which he has no pecuniary interest.
(14) Includes 300,000 shares owned by a corporation beneficially owned by Mr.
Wilson.
(15) Includes 442,869 shares of common stock owned by or for spouses, children,
other relatives, trusts and firms which a director or officer controls,
where such beneficial ownership may be attributed to the director or
officer. This amount also includes 121,700 shares granted pursuant to
restricted stock awards under the 1991 Plan to executive officers over
which the officers have voting but not investment authority, 151,685 shares
which officers have the right to acquire under the STAR Award Plan which
are currently exercisable, options for 172,463 shares issued pursuant to
the 1991 Plan which are currently exercisable, and 42,032 shares held in
FIRST Plan accounts.
(16) For purposes of computing this percentage, shares which may be acquired by
officers under stock options which were exercisable as of the Record Date
or within 60 days thereof are deemed to be outstanding.
10
<PAGE> 14
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes the compensation paid or accrued by the
Company during the three fiscal years ended December 31, 1993 to the Named
Executive Officers.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------------------
AWARDS
ANNUAL COMPENSATION ------------------------ PAYOUTS
-------------------------------- RESTRICTED SECURITIES -------
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION AWARDS OPTIONS/ PAYOUTS COMPENSATION
POSITION YEAR ($) ($) ($) ($)(2) SARS(#) ($) ($)(3)
- -------------------------- ------ ------- ------- ------------ ---------- ---------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dennis C. Bottorff(1)..... 1993 436,000 218,000 -- -- -- -- 14,831(5)
President and Chief 1992 400,000 140,000 -- -- -- -- 6,865
Executive Officer 1991 50,000 -- -- 517,500 200,000 --
Dale W. Polley(1)......... 1993 280,000 140,000 -- -- -- -- 12,331
Vice Chairman and 1992 250,000 87,500 -- -- -- -- 4,997
Principal Financial 1991 20,833 -- -- 168,750 60,000 -- --
Officer and President,
First American National
Bank
Robert A. McCabe, Jr...... 1993 220,000 118,250 -- -- -- -- 14,300(5)
Vice Chairman and 1992 210,000 73,500 -- 205,875 25,000 -- 5,020
President -- First 1991 185,000 45,000 -- -- 15,000 -- --
American Enterprises
John W. Boyle, Jr.(1)..... 1993 210,000 112,875 -- -- -- -- 10,821
President -- Corporate 1992 200,000 70,000 -- 205,875 25,000 -- 53,365(4)
Bank
Robert E. McNeilly, Jr.... 1993 196,000 57,428 -- 39,563 5,000 -- 14,085(5)
President -- First 1992 196,000 37,240 -- -- 10,000 -- 4,976
American Trust Company, 1991 196,000 10,000 -- -- 10,000 -- --
N.A.
</TABLE>
- ---------------
(1) Mr. Bottorff was hired on November 15, 1991. Mr. Polley was hired on
December 2, 1991. Mr. Boyle was hired on January 1, 1992.
(2) As of December 31, 1993, Mr. Bottorff held 30,000 restricted shares valued
at $517,500 as of the date of grant (November 15, 1991) and at $960,000 as
of December 31, 1993; Mr. Polley held 10,000 restricted shares valued at
$168,750 as of the date of grant (December 2, 1991) and at $320,000 as of
December 31, 1993. Mr. McCabe held 9,000 restricted shares valued at
$205,875 as of the date of grant (April 23, 1992) and at $288,000 as of
December 31, 1993, Mr. Boyle held 9,000 restricted shares valued at
$205,875 as of the date of grant (April 23, 1992) and at $288,000 as of
December 31, 1993, and Mr. McNeilly held 1,500 restricted shares valued at
$39,563 as of the date of grant (January 27, 1993) and at $48,000 as of
December 31, 1993. The vesting of all of these shares, except 5,000 of Mr.
Polley's shares (which are not subject to performance criteria and which
vest in five years), is subject to the attainment of certain performance
criteria. If the performance criteria are attained, up to one-third of each
grant will vest on December 31, 1994, 1995 and 1996 for Messrs. Bottorff,
Polley, McCabe and Boyle and up to 100% of Mr. McNeilly's shares will vest
on December 31, 1995. Dividends are paid during the performance period to
the extent otherwise paid on common stock. If the performance criteria are
not met, vesting on these shares will not occur until a total of fifteen
years have elapsed (subject to the executive's continued employment),
during which period all dividends are forfeited.
(3) Amounts in this column represent Company matching contributions under the
Company's FIRST Plan (sec. 401k).
(4) For Mr. Boyle, this amount includes a one-time payment of $48,376 made in
connection with his employment in 1992 and relocation to Nashville,
Tennessee.
(5) Includes amounts reimbursed during the fiscal year for preparation of
federal income tax returns.
11
<PAGE> 15
OPTION GRANTS
Shown below is information concerning stock options granted during 1993
pursuant to the 1991 Plan to the Named Executive Officers.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------- POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
NUMBER OF TOTAL ANNUAL RATES OF
SECURITIES OPTIONS/SARS STOCK PRICE
UNDERLYING GRANTED APPRECIATION FOR
OPTIONS/ TO EMPLOYEES EXERCISE OPTION TERM
SARS IN FISCAL YEAR OF BASE EXPIRATION --------------------
NAME GRANTED(#) 1993 PRICE($/SH) DATE 5%($) 10%($)
- ------------------------- ---------- --------------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Dennis C. Bottorff....... -- -- -- -- -- --
Dale W. Polley........... -- -- -- -- -- --
Robert A. McCabe, Jr..... -- -- -- -- -- --
John W. Boyle, Jr........ -- -- -- -- -- --
Robert E. McNeilly, Jr... 5,000 2.3% $27.75 01/21/03 $87,412 $220,612
</TABLE>
Options were granted to Mr. McNeilly on January 21, 1993 and vest 20% per
year on the anniversary date of grant for five years. The Company granted no
stock appreciation rights ("SARs") in 1993.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
Shown below is information with respect to exercises by the Named Executive
Officers during 1993 of options to purchase shares pursuant to the Company's
stock option plans and information with respect to unexercised options to
purchase shares held by the Named Executive Officers as of December 31, 1993.
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS AT DECEMBER 31, OPTIONS/SARS AT DECEMBER 31,
ACQUIRED 1993(#) 1993($)
ON VALUE ----------------------------- -----------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Dennis C. Bottorff.......... -- -- 80,000 120,000 $1,380,000 $ 2,070,000
Dale W. Polley.............. -- -- 24,000 36,000 $ 390,000 $ 585,000
Robert A. McCabe, Jr........ 1,700 $34,850 37,427 18,984 $ 418,147 $ 179,604
John W. Boyle, Jr........... -- -- 7,516 17,484 $ 68,583 $ 159,541
Robert E. McNeilly, Jr...... 6,100 $35,140 30,453 14,729 $ 433,145 $ 125,312
</TABLE>
Based on the closing price per share on December 31, 1993 -- $32.00. The
Company granted no stock appreciation rights ("SARs") in 1993.
12
<PAGE> 16
RETIREMENT PLANS
The following table shows the estimated annual retirement benefit payable
to participating employees, including officers, in the salary ranges and years
of service classifications indicated, under the combined terms of the First
American Master Retirement Plan (which covers most officers and other salaried
employees on a non-contributory basis) and Supplemental Executive Retirement
Program. Consequently, the benefit and compensation limits imposed under
Internal Revenue Code sections 415 and 401(a)(17) have not been applied. The
table assumes retirement at age 65 in 1994.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
-------------------------------------------------------------------------------
10 15 20 25 30 35
REMUNERATION 5 YEARS YEARS YEARS YEARS YEARS YEARS YEARS
- ------------ ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 175,000 $12,147 $24,295 $36,442 $51,477 $66,512 $81,547 $96,582
200,000 13,960 27,920 41,880 59,140 76,400 93,660 110,920
250,000 17,585 35,170 52,755 74,465 96,175 117,885 139,595
300,000 21,210 42,420 63,630 89,790 115,950 142,110 168,270
350,000 24,835 49,670 74,505 105,115 135,725 166,335 196,945
400,000 28,460 56,920 85,380 120,440 155,500 190,560 225,620
450,000 32,085 64,170 96,255 135,765 175,275 214,785 254,295
500,000 35,710 71,420 107,130 151,090 195,050 239,010 282,970
550,000 39,335 78,670 118,005 166,415 214,825 263,235 311,645
600,000 42,960 85,920 128,880 181,740 234,600 287,460 340,320
650,000 46,585 93,170 139,755 197,065 254,375 311,685 368,995
700,000 50,210 100,420 150,630 212,390 274,150 335,910 397,670
750,000 53,835 107,670 161,505 227,715 293,925 360,135 426,345
800,000 57,460 114,920 172,380 243,040 313,700 384,360 455,020
</TABLE>
Covered compensation includes salary and bonus. The calculation of
retirement benefits under the plans generally is based upon average earnings for
the highest five consecutive years of the fifteen years preceding retirement.
The credited years of service for Messrs. Bottorff, Polley, McCabe, Boyle and
McNeilly are 2, 2, 17, 2, and 7 respectively. Benefits are calculated on the
basis of straight life income payments and are not subject to any deduction for
Social Security or other offset amounts.
COMPENSATION OF DIRECTORS
Directors who are not officers of the Company receive an annual retainer of
$18,000 plus $1,000 for attendance of each regular or special board meeting, and
each committee meeting. The Chairmen of the Asset Policy, Community Affairs,
Systems Review, Human Resources and Audit Committees receive additional annual
retainers of $6,000 each. In 1993 directors of the Company who were also
directors of the Company's wholly-owned subsidiary, First American Trust
Company, N.A., received directors' and committee fees from that entity. During
1993 the total directors' fees paid by the Company and its subsidiaries to each
of the directors of the Company ranged from $28,500 to $66,450. In addition,
under the 1993 Non-Employee Director Stock Option Plan, each non-employee
director is annually granted the option to purchase 1,000 shares of the
Company's common stock at a purchase price equal to market price on the day of
the annual meeting of shareholders. In 1993, the purchase price was $33.125 per
share. These options vest 20% per year over five years. Under the Company's
Director's Deferred Compensation Plan, each Director may annually elect to defer
payment of all or a portion of his or her retainer and fees until attaining the
age of 65. Such deferred amounts become payable upon the termination of the
tenure of a director provided the director has attained the age of 65.
13
<PAGE> 17
Effective January 1, 1993, FANB entered into a consulting agreement with
Mr. James F. Smith, a former President and Chief Executive Officer of the
Company, pursuant to which Mr. Smith has agreed to provide support in various
areas of operations. Under this agreement which terminates on December 31, 1994,
Mr. Smith receives $125,000 per year.
HUMAN RESOURCES COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION.
During 1993, the Board's Human Resources Committee was composed of Messrs.
McCoy (Chairman), Beall, Dickson, Haslam, Turner and Wilson. None of these
persons has at any time been an officer or employee of the Company or any of its
subsidiaries. During 1993, none of these persons had any relationship requiring
disclosure by the Company under Item 404 of SEC regulation S-K and there existed
no relationships involving the executive officers, directors or Human Resources
Committee members and the executive officers, directors or compensation
committee members of any other entity such as to constitute an interlock for
disclosure purposes under applicable SEC regulations.
HUMAN RESOURCES COMMITTEE REPORT ON EXECUTIVE COMPENSATION
OVERALL POLICY
The Company's compensation strategy has been designed to correlate a
significant portion of executive compensation to the Company's success in
meeting specified performance goals and to appreciation in the Company's stock
price. In 1993, the performance goals included the achievement of specified
minimum asset quality and capital adequacy levels and the achievement of
established levels of return on assets and productivity. In general, the
objectives of this strategy are to attract and retain highly qualified executive
talent, to motivate these executives to achieve the Company's performance goals,
to link executive and shareholder interest through stock incentive-based plans,
and finally to provide a compensation package that recognizes individual
contributions as well as overall Company results.
Generally, executive officer compensation determinations for the Company
and its subsidiaries are made by the Human Resources Committee of the Board of
Directors (the "Committee"). The Committee has sole authority with respect to
the grant of stock options and restricted share awards to all executive
officers. The Committee also has sole authority with respect to salary and
bonuses for executive officers, except that salary and bonus recommendations for
those executive officers who are also directors are made by the Committee and
approved by the non-employee members of the Board. No material modifications
were made to the Committee's recommendations with respect to these officers for
1993.
The Committee conducts an anuual review of the Company's entire
compensation program, including that portion for executives. The executive
program is comprised of three major components: base salaries, annual incentive
opportunities and long-term incentive opportunities. Typically, the total
compensation achievable by the Company's executive officers ranges from the 50th
to the 75th percentile when compared with similar positions in selected
comparable institutions. In 1993, the Committee utilized a total of twenty-one
companies for comparisons of base salaries and annual bonuses. Of these, eleven
are included in the KBW50 Index shown in the Shareholders Return Performance
Graph. For determining long-term incentive compensation awards, the Committee
relies upon market information provided by an independent compensation
consultant. Both the annual and long-term elements of actual compensation are
based on the Company's and the individual's performance. Appreciation in the
value of the Company's stock is also a key element of the long-term component.
14
<PAGE> 18
Incentive criteria for the performance-based components are approved
annually by the Committee and are designed to be consistent with the financial
and other goals established for that year in the Company's three-year plan.
Generally, executive officers have the opportunity to earn annual
performance-based compensation (cash bonuses and restricted stock grants) worth
an estimated maximum of 75% to 100% of base salary, and the opportunity to
receive stock options worth up to an estimated 25% of base salary, in each case
depending upon the executive's position.
In 1993, section 162(m) was added to the Internal Revenue Code pursuant to
the Omnibus Budget Reconciliation Act of 1993. This section generally limits the
corporate deduction for compensation paid to the Company's chief executive
officer and each of the four other highest paid executive officers to $1 million
per year unless certain requirements are met. The provisions of this section did
not apply to executive compensation discussed in this report for 1993 and prior
years, and the Company had no policy on qualifying executive compensation for
deductibility under that section during the applicable time periods. Because the
Company's policy is to increase earnings and shareholder value, in the future
compensation awards will be structured to maximize the Company's federal tax
deduction for executive compensation above the threshold level.
BASE SALARIES
Base salaries for new executive officers are initially determined by
evaluating the responsibilities of the position and the officer's experience,
with reference to the competitive marketplace for experienced executive talent
in the financial services industry, including a comparison with base salaries of
comparable positions at other financial institutions. Adjustments are determined
by evaluating the performance of the Company and the executive officer, and also
take into account new or added responsibilities and overall merit adjustment
guidelines and market adjustments.
ANNUAL CASH BONUSES
Executive officers also are eligible for annual cash bonuses, generally
varying percentages of base salary, depending upon the officer's position and
responsibilities. The actual percentage received depends upon the degree to
which established corporate, and in some cases unit or individual, performance
goals are achieved. In 1993, the Committee established, and the Board of
Directors approved, corporate performance goals relating to a soundness as a
threshold for the award of cash bonuses. These goals were comprised of maximum
ratios of criticized and classified assets to capital and nonperforming loans to
total loans and other real estate owned, and a minimum ratio of common equity to
average total assets. If the soundness threshold was not met, no bonuses would
have been payable. Once the soundness threshold was met, the amount of bonus
received, to the extent based upon corporate performance, depended upon the
Company's return on total assets and productivity, both of which were weighted
at 50% of the corporate portion of the award. In 1993, all corporate performance
goals were established at levels higher (i.e. more beneficial to the Company and
more difficult to achieve) than in 1992. In 1993, the soundness threshold was
exceeded, as were the target levels of return on assets and productivity, and
bonuses were paid to executive officers in accordance with the compensation
program. In calculating bonus amounts, extraordinary items of income and expense
were excluded from the calculations, which in 1993 resulted in the exclusion of
$42 million of net negative provisions for loan and lease losses and a $10
million charitable contribution to First American Foundation. For executive
officers other than Messrs. Bottorff and Polley, the Committee also considered
unit and individual performance measures.
15
<PAGE> 19
RESTRICTED STOCK GRANTS
Like annual cash bonuses, the vesting of restricted stock grants is also
tied to corporate performance. Restricted stock awards are grants of shares of
the Company's common stock which are issued in the officer's name but are held
by the Company and cannot be sold or transferred during the restriction period.
These awards generally are granted annually, and the number of shares granted is
determined by the Committee based upon the importance of the executive to
achievement of the Company's long-term performance goals. The amount of options
and restricted stock currently held by participants is not considered by the
Committee in making this determination. For this purpose, the Committee utilizes
a model developed in conjunction with a national independent compensation
consulting firm which is based on the Black/Scholes valuation model. In applying
the model, each grant covers a three-year performance period. Dividends are paid
to the executive on these shares during this period. For each year of the
performance period, an executive may earn one, two or three points, depending
upon the achievement of established levels of return on assets. However, if the
Company does not achieve specified minimum asset quality and capital adequacy
levels, two points are deducted. If less than three points are earned over the
performance period, no restricted stock becomes vested in the executive at the
end of the period. At the end of the period, up to 100% of the restricted shares
may be transferred to the executive free of restriction, with the percentage
varying (from 50% to 100%) based upon the number of points earned. The shares
which are not transferred to the executive free of restrictions at the end of
the performance period remain restricted for twelve more years, and any
dividends on these remaining shares are forfeited during that period. In any
event, after the passage of fifteen years, the restrictions lapse if the
executive is still employed by the Company. In 1993, participants earned three
points based on the achievement of performance goals.
STOCK OPTION GRANTS
Stock options may also be granted to executive officers on an annual basis.
The Committee sets guidelines for the size of these awards based on competitive
compensation data furnished to the Committee by an independent compensation
consultant, the responsibilities and experience of the executive and the
recommendation of the chief executive officer. Stock options normally are
granted at an exercise price equal to market value on the date of grant and vest
over five years at a rate of 20% per year. Stock options are designed to more
closely align the interests of executive officers with those of shareholders,
and, because the full value of the Company's compensation package cannot be
realized unless stock price appreciation occurs over a number of years, to
retain key executives and to provide an incentive for them to create long-term
shareholder value.
CHIEF EXECUTIVE OFFICER COMPENSATION
Dennis C. Bottorff was hired by the Company in November 1991. His 1992 base
salary, minimum bonus, number and price of stock options and number of
restricted shares granted were negotiated at that time and were not altered by
the Committee. In 1993, the Committee considered the base salaries of chief
executive officers of comparable bank holding companies, the attainment of
performance objectives established by the Committee in 1992 and the Company's
overall merit increase guidelines in determining Mr. Bottorff's compensation.
With Board approval, Mr. Bottorff's salary was increased by the Committee to
$436,000 per annum effective January 1, 1993. At that time, the Committee also
addressed incentive compensation for Mr. Bottorff, all of which is based solely
on the achievement of the established corporate performance goals. In 1993, the
achievement of these goals resulted in a bonus of $218,000 payable to Mr.
Bottorff. Mr. Bottorff was also granted incentive compensation in the form of
stock options and restricted shares which contain provisions for accelerated
vesting and lapse of restrictions if certain performance criteria were attained.
The
16
<PAGE> 20
performance criteria were established by the Committee in January 1993 so as to
be generally consistent with the annual and long-term incentive components for
other executive officers, except that, in Mr. Bottorff's case, performance
criteria were also established for the vesting of his stock options. Mr.
Bottorff's stock options (which represent approximately the same number as would
have been granted to the chief executive officer over three years under the
long-term plan) vest at the rate of 20% per year from 1992 through 1996, so long
as the performance measures established by the Committee (which for 1993 are the
same as the corporate performance measures established under the annual
incentive plan) are met. With respect to Mr. Bottorff's restricted share awards
(which also represent approximately the same number as would have been granted
to the chief executive officer over three years under the long-term plan), the
restrictions on up to one-third of the shares will lapse each December 31 from
1994 through 1996, if the corporate performance goals for each three-year period
are met. Any shares which do not become unrestricted through the attainment of
performance goals remain restricted for twelve more years, and any dividends on
these remaining shares are forfeited during the twelve-year period.
In 1993, the Company surpassed the asset quality, capital adequacy and
profitability threshold levels established for the year, so that Mr. Bottorff
earned three points toward the first third of the restricted shares granted to
him in 1991. These three points earned in 1993 also apply to the second third of
the restricted shares awarded him in 1991. In 1992, two points were earned.
Therefore, since his employment by the Company in 1991, Mr. Bottorff has earned
a total of five points on the first third of the restricted shares awarded to
him and three points on the second third. The restrictions on these shares lapse
upon the attainment of at least six points over each three-year performance
period. In 1993 he also satisfied the vesting and performance requirements on
options for 40,000 shares. Therefore, he has also satisfied the vesting and
performance requirements of 80,000 of the 200,000 shares of stock options
originally granted to him in 1991.
Submitted by the Human Resources Committee of the Company's Board of
Directors.
William O. McCoy (Chairman)
Samuel E. Beall, III
Reginald D. Dickson
James A. Haslam II
Cal Turner, Jr.
David K. Wilson
17
<PAGE> 21
SHAREHOLDER RETURN PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the return on
the the Company's common stock with Standard & Poor's 500 Stock Index and the
KBW 50 Index for the past five years.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN
-------------------------------------------------------------
1989 1990 1991 1992 1993
----- ----- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C>
FIRST AMERICAN CORP 100 99 31 87 135 160
S & P 500 100 132 128 166 179 197
KBW 50 100 119 85 135 172 182
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</TABLE>
(1) $100 invested on December 31, 1988 in stock or index -- including
reinvestment of dividends. Fiscal year ending December 31.
(2) The KBW 50 Index is a market-capitalization weighted bank-stock index
comprised of fifty major banking companies and is published daily by Keefe,
Bruyette & Woods, Inc.
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CERTAIN TRANSACTIONS
Some of the Company's executive officers and directors are at present
customers of the Company's subsidiary banks and some of the Company's executive
officers and directors are directors or officers of corporations, or members of
partnerships, which are customers of the Company's subsidiary banks. As such
customers they had transactions in the ordinary course of business with such
banks, including borrowings, all of which are on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons and do not involve more than the
normal risk of collectibility or present any other unfavorable features. During
1993, the Company solicited competitive proposals from three vendors for the
design, fabrication, installation and maintenance of a new retail merchandising
system to be implemented in 1994 in all of the Company's branches. Following
review of the proposals submitted, Design Performance Group, a division of
American Sign and Marketing Services, Inc., a wholly owned subsidiary of
Plasti-Line, Inc. was selected as the vendor for this project. Mr. Martin, a
member of the Board of Directors of the Company, is the Chairman of the Board of
Directors and Chief Executive Officer of Plasti-Line, Inc. and has an equity
interest of approximately 50% in Plasti-Line, Inc. Mr. Smith, Chairman of the
Board of Directors of the Company, also serves on the Board of Directors of
Plasti-Line, Inc. Based on the proposal submitted by Design Performance Group,
the Company estimates that the amount of this transaction will be approximately
$1,000,000 in 1994. In accordance with Company policy relating to business
transactions with directors and their related interests, the Board of Directors
of the Company approved the selection of Design Performance Group as the vendor
for this project with Messrs. Martin and Smith abstaining from the vote.
PROPOSAL 2: AMENDMENT OF 1991 EMPLOYEE STOCK INCENTIVE PLAN
Upon the recommendation of the Human Resources Committee, in January 1994
the Board of Directors adopted, subject to shareholder approval, an amendment to
the First American Corporation 1991 Employee Stock Incentive Plan (the "1991
Plan" or "Plan") increasing the number of shares of common stock reserved
thereunder by 1,250,000 shares. If approved by the shareholders, the amendment
to the Plan will become effective immediately. If the proposal is approved by
the shareholders, the only revision to the 1991 Plan will be changing the number
"1,000,000" in the first sentence of section 3 thereof to "2,250,000", so that
this paragraph of the Plan will thereafter read as follows:
SECTION 3. STOCK SUBJECT TO PLAN
The total number of shares of Stock reserved and available for
distribution under the Plan shall be 2,250,000 shares, plus [10]% of
any increase (other than any increase due to stock awards under this
Plan or any other similar plan of the Company for the benefit of key
employees) in the number of authorized and issued shares of Stock
above 23,311,382 shares (the number of authorized and outstanding
shares as of December 31, 1990), up to the total number of authorized
shares of Stock as of December 31, 1990. Such shares may consist, in
whole or in part, of authorized and unissued shares.
A copy of the entire Plan as amended is available to any shareholder upon
request. A summary of the Plan follows.
The Plan is an equity-based compensation plan originally adopted in 1991.
It provides for a variety of equity-based compensation awards including stock
options, restricted stock grants and deferred stock. Eligible participants
include any key employee of the Company, its subsidiaries and affiliates.
Directors of the Company are not eligible to participate in the 1991 Plan unless
they are regular employees of the Company. Directors who are also executive
officers, currently Messrs. Bottorff, McCabe and Polley, are eligible to
participate in the Plan. The Company estimates
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that the number of employees currently eligible to participate in the Plan is
approximately 175. The 1991 Plan is administered by the Human Resources
Committee. The Board of Directors may amend the Plan; provided that, no
amendment may be made which would impair the rights of any participant without
the participant's consent; and provided, further, that approval of the
shareholders is necessary if the amendment would (1) increase the total number
of shares reserved under the 1991 Plan; (2) change the pricing terms provided
for stock options; (3) change the employees or class of employees eligible to
participate; or (4) extend the maximum option period for stock options granted.
Subject to the foregoing, the Board of Directors has broad authority to amend
the 1991 Plan to take into account changes in applicable securities and tax
laws, accounting rules and other developments.
Both incentive stock options and non-qualified stock options may be granted
under the 1991 Plan for such number of shares of the Company's $5.00 par value
common stock as the Human Resources Committee may determine, and may be granted
alone, in conjunction with or in tandem with other awards under the 1991 Plan
and/or cash awards outside of the 1991 Plan. Such options are also exercisable
at such times and upon such terms and conditions as the Human Resources
Committee may determine, provided that the term is no more than ten years from
the date of grant. In general, the option price for incentive stock options may
not be less than 100% of the fair market value of the Company's common stock as
of the date of grant, and for non-qualified stock options, may not be less than
85% of the fair market value as of the date of grant. The market value of the
Company's common stock as of February 10, 1994 was $29.875 based on the closing
price as quoted on the National Market System of the National Association of
Securities Dealers Automated System.
Generally, no income is recognized by optionees upon the grant of
non-qualified options. When the options are exercised, ordinary income in an
amount equal to the excess of the then fair market value of the shares over the
option purchase price is recognized. The holding period to determine whether at
disposition any appreciation (or depreciation) after the options are exercised
is treated as short-term or long-term capital gain or loss begins on the date of
exercise. Subject to Section 162(m) of the Internal Revenue Code discussed
below, the Company is entitled to a business deduction equal to the amount that
is taxable as ordinary income to the optionee in the year that such income
becomes taxable.
With respect to incentive stock options, generally the optionee recognizes
no income upon grant or exercise and the Company is not entitled to a business
deduction. Upon a subsequent sale or other disposition obtained through the
exercise of incentive stock options, if such sale or disposition occurs at least
two years after the date of grant and one year after the exercise of the option,
any gain or loss is taxable to the optionee as a capital gain. However, unless
both requirements are satisfied, the gain or loss will be taxed to the optionee
as ordinary income whereupon the Company may become entitled to a corresponding
deduction.
Section 162(m) of the Internal Revenue Code of 1986, as amended, which was
adopted in 1993 under the Omnibus Budget and Reconciliation Act, generally
limits the deduction allowed publicly-held companies for compensation paid to
certain executive officers to $1 million per annum for taxable years beginning
on or after January 1, 1994. Under this section, compensation may include the
value of restricted stock upon vesting, dividends on restricted stock, gain
realized on non-qualified stock options under certain circumstances and gain
realized on certain dispositions of stock acquired through the exercise of
incentive stock options. However, compensation payable under a written binding
contract in effect on February 17, 1993 is not affected by the deduction
limitation and performance-based compensation which meets the requirements
specified in Section 162(m) is not included in the $1 million limit. To the
extent that compensation paid under the 1991 Plan to the Chief Executive Officer
or any of the other Named Executive Officers (except
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such compensation which either falls within the grandfather provisions of
Section 162(m) or meets the criteria for performance-based compensation) when
aggregated with all other compensation paid to any such Named Executive Officer
exceeds $1 million per annum, the Company will not be entitled to a deduction
for federal income tax purposes.
The amendment to the Plan is being submitted to the shareholders of the
Company for approval to insure the availability of an adequate number of shares
of the Company's $5.00 par value common stock to effect awards of incentive
compensation under the Plan. The number of shares originally reserved under the
Plan was 1,000,000. The Plan contains a provision (the "evergreen provision")
which effects an automatic increase in the number of shares reserved under the
Plan equal to ten percent of any increase in the number of outstanding of the
Company's common stock following its adoption (other than increases due to
awards under the Plan or any similar plan). This provision remains unchanged,
and as of December 31, 1993 has resulted in an increase in the number of shares
reserved under the 1991 Plan of 210,760, most of which was attributable to the
Company's common stock offering of 2,012,500 shares in September, 1992. As of
December 31, 1993, 91,400 shares of common stock had been issued pursuant to
awards under the Plan, 859,005 shares were subject to outstanding awards, and
260,355 shares (including shares available pursuant to the evergreen provision)
were available for award under the Plan. In January, 1994 annual awards of
45,200 shares of restricted stock and 428,050 stock options were granted subject
(to the extent that the number granted exceeds the amount of shares available
for issuance) to shareholder approval of the increase in shares reserved under
the 1991 Plan. If the proposed amendment is approved by the shareholders,
approximately 1,250,000 shares of common stock will thereafter be available for
award under the Plan, of which 212,895 shares will be utilized for purposes of
the stock options granted in January, 1994.
The following table reflects the number of shares of stock options and
restricted stock outstanding as of the Record Date for the Chief Executive
Officer, the other Named Executive Officers, all executive officers as a group,
all non-executive officers as a group and all employees including non-executive
officers as a group.
PLAN BENEFITS
FIRST AMERICAN CORPORATION 1991 EMPLOYEE STOCK INCENTIVE PLAN
<TABLE>
<CAPTION>
DOLLAR VALUE
STOCK OPTIONS DOLLAR VALUE RESTRICTED OF
GRANTED OF STOCK SHARES RESTRICTED
NAME OR GROUP #(1)(2) OPTIONS $(3) GRANTED#(1) SHARES $(4)
- --------------------------------------------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Dennis C. Bottorff........................... 250,000 3,025,000 40,000 1,195,000
President and Chief Executive Officer
Dale W. Polley............................... 78,000 847,500 13,500 403,312
Vice Chairman and Principal Financial Officer
and President, First American National Bank
Robert A. McCabe, Jr......................... 43,000 175,000 12,500 373,437
Vice Chairman and President - First American
Enterprises
John W. Boyle................................ 35,500 175,000 11,000 328,625
President - Corporate Bank
Robert E. McNeilly, Jr....................... 24,800 80,625 3,900 116,512
President - First American Trust Company,
N.A.
Current Executive Officers as a group........ 646,500 4,926,000 122,200 3,650,725
Non-Executive Director Group(5).............. -- -- -- --
Non-Executive Officers/Employees as a
group(6)................................... 640,555 2,262,875 9,700 289,787
All employees including non-executive
officers as a group(6)..................... 1,287,055 7,188,875 131,900 3,940,512
</TABLE>
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(1) Grants of stock options and awards of restricted stock under the 1991 Plan
are entirely within the discretion of the Human Resources Committee. The
Company cannot determine the nature or amount of grants or awards that will
be made in the future.
(2) The options to purchase these shares vest 20% per year from the date of
grant. The options to purchase 200,000 shares which were granted to Mr.
Bottorff and options to purchase 35,000 shares which were granted to Mr.
Polley in 1991 are also subject to performance criteria.
(3) The Dollar Value of the options granted have been calculated only for
options which were exercisable on February 10, 1994 and is the amount by
which the market price of the Company's stock quoted on the National Market
System of the National Association of Securities Dealers Automated System
("NASDAQ") as the closing price on February 10, 1994 ($29.875) exceeds the
exercise price of the options granted (which ranges from $14.750 to $29.950
per share). Options which have an exercise price greater than $29.875 have
been valued at $0.
(4) Based on the closing market price on February 10, 1994.
(5) Not eligible to participate.
(6) Includes options granted to six employees who retired since the date of
grant.
If the proposed amendment is approved by the shareholders, the Company will
seek to register the additional shares reserved under the Plan under the
Securities Act of 1933 as soon as practicable.
The Board recommends that shareholders vote FOR this proposal.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
KPMG Peat Marwick, Certified Public Accountants, has been the Company's
independent auditors since 1971 and reported on the Company's consolidated
financial statements for the year ended December 31, 1993. The Audit Committee
of the Board of Directors, at its meeting on February 24, 1994, appointed KPMG
Peat Marwick as independent auditors of the Company for the year ending December
31, 1994. KPMG Peat Marwick is a member of the SEC Practice Section of the
American Institute of Certified Public Accountants division for CPA firms.
Accordingly, KPMG Peat Marwick has periodic "peer reviews" that consist of a
review of the quality of the firm's accounting and auditing practices by another
CPA firm. A representative of KPMG Peat Marwick is expected to attend the Annual
Meeting and will be provided the opportunity to make a statement and/or respond
to appropriate questions from shareholders.
ANNUAL REPORT ON FORM 10-K
TO OBTAIN A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR
ENDED DECEMBER 31, 1993, TOGETHER WITH FINANCIAL STATEMENTS AND SCHEDULES, AS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (AVAILABLE WITHOUT CHARGE TO
SHAREHOLDERS), PLEASE WRITE TO CARROLL E. KIMBALL, SENIOR VICE PRESIDENT AND
DIRECTOR OF INVESTOR RELATIONS, FIRST AMERICAN CORPORATION, 708 FIRST AMERICAN
CENTER, NASHVILLE, TENNESSEE 37237-0708 OR CALL (615) 748-2455.
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<TABLE>
<S> <C>
FIRST AMERICAN CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF SHAREHOLDERS CALLED FOR APRIL 21, 1994.
The undersigned hereby appoints Dennis C. Bottorff and Dale W. Polley, or either of them, as proxies, with full power of
substitution, to vote all shares of the undersigned as shown on the reverse side of this proxy at the 1994 Annual Meeting of
Shareholders of FIRST AMERICAN CORPORATION and any adjournments thereof.
The Board of Directors recommends a vote FOR the election of directors and FOR the approval of the Amendment to the First
American Corporation 1991 Employee Stock Incentive Plan.
(1) / / FOR all of the following nominees for director, Wilson to serve until the Annual Meeting in 1995 and Bottorff, Haslam,
Knestrick, McCabe, McCoy and Wilt to serve until the Annual Meeting in 1997 and until their successors have been elected
and qualified (except as indicated to the contrary below):
/ / AGAINST the following nominees (print name(s)): / / WITHHOLD AUTHORITY (ABSTAIN) to vote for the following
nominees (print name(s)):
________________________________________________ ___________________________________________________________
/ / AGAINST all nominees / / WITHHOLD AUTHORITY (ABSTAIN) to vote for all nominees
FOR AGAINST ABSTAIN The approval of the Amendment to the First American Corporation 1991 Employee Stock Incentive
(2) / / / / / / Plan increasing the shares of common stock reserved thereunder by 1,250,000 shares.
(3) / / AUTHORITY GRANTED / / AUTHORITY WITHHELD for the proxies to vote in their discretion on any other matter which may
come before said Meeting or any adjournment thereof.
Your shares will be voted in accordance with your instructions. If no choice is specified, shares will be voted FOR the
nominees in the election of directors, FOR the approval of the Amendment to the First American Corporation 1991 Employee Incentive
Stock Option Plan and by the proxies in their discretion on any other matters which may properly come before said Meeting or any
adjournment thereof.
______________WILL ATTEND THE ANNUAL MEETING PLEASE SIGN AND RETURN PROMPTLY
(NUMBER ATTENDING) _____________________________________________
_____________________________________________
DATE __________________________________, 1994
Please sign exactly as your name appears at
left. If registered in the names of two or
more persons, each must sign. Executors,
administrators, trustees, guardians,
attorneys and corporate officers must show
their full titles.
_________________________________________________________________________________________________________________________
If you have changed your address, please PRINT new address on the line above.
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