<PAGE> 1
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:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
First American Corporation
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials:
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
(FIRST AMERICAN CORPORATION LOGO)
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Dear Shareholder:
I am pleased to invite you to First American's 1999 annual shareholders
meeting. This year's meeting will be held in the fifth floor Auditorium of the
First American Center, Nashville, Tennessee on Thursday, April 15, 1999 at 10:30
am, Central Daylight Time.
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 1998, which was
a hallmark year for First American. In 1998, five financial institutions were
merged into First American, which resulted in essentially a doubling of our
asset size to $20.7 billion at December 31, 1998. Net income for 1998 was $211.4
million, or $1.84 per share. Excluding the effects of the 1998 fourth quarter
mergers, merger-related charges and a gain on the sale of a corporate trust
business, operating earnings for 1998 were $282.3 million, or $2.62 per share.
On the same basis, operating return on average assets (ROA) and operating return
on average equity (ROE) for 1998 were 1.55% and 18.07%, respectively. Average
loans, excluding the effects of securitizations, were up 5% over 1997 and credit
quality remained strong. First American increased dividends paid by over 25% in
1998 compared to 1997. Our nonbanking segment, First American Enterprises,
continued to grow in 1998, increasing net contribution by over 50%. In 1998,
First American completed the acquisitions of Deposit Guaranty Corp., Pioneer
Bancshares, Inc., The Middle Tennessee Bank, Peoples Bank and CSB Financial
Corporation. 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.
I hope that you will be able to attend the annual meeting. 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 in Nashville, 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
Chairman 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
"Meeting") of First American Corporation will be held in the First American
Auditorium, Fifth Floor, First American Center, Nashville, Tennessee on April
15, 1999 at 10:30 a.m., Central Daylight Time, for the following purposes:
(1) To elect one (1) director to serve until the Annual Meeting in
2000, two (2) directors to serve until the Annual Meeting in 2001, and
seven (7) directors to serve until the Annual Meeting in 2002; and
(2) To transact such other business as may properly come before the
Meeting.
Only shareholders of record at the close of business on February 5, 1999
are entitled to vote at the Meeting or any adjournment thereof.
All shareholders are cordially invited to attend the Meeting. TO ENSURE
YOUR REPRESENTATION AT THE MEETING, PLEASE COMPLETE AND PROMPTLY MAIL YOUR PROXY
IN THE ENCLOSED RETURN ENVELOPE. This will not prevent you from voting in
person, but will help to secure a quorum and avoid added solicitation costs. You
may revoke your proxy 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 Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ MARY NEIL PRICE
Mary Neil Price
Executive Vice President,
General Counsel and Corporate Secretary
Nashville, Tennessee
March 15, 1999
<PAGE> 4
PROXY STATEMENT
This Proxy Statement is furnished to the shareholders of First American
Corporation (the "Company") in connection with the solicitation of proxies to be
used in voting at the 1999 annual meeting of the shareholders of the Company
(the "Meeting"). The Meeting will be held in the First American Auditorium,
First American Center, Nashville, Tennessee on Thursday, April 15, 1999, at
10:30 a.m., Central Daylight Time, and any adjournments thereof for the purposes
set forth in the accompanying notice. The enclosed proxy is solicited by the
Board of Directors of the Company.
A proxy may be revoked by a shareholder at any time prior to the Meeting by
filing a written revocation or a duly executed proxy bearing a later date, or by
attending the Meeting and voting in person. Any written notice revoking a proxy
should be sent to: First Chicago Trust Company, a division of EquiServe, P.O.
Box 8355, Edison, New Jersey 08818-9188.
The Board has fixed the close of business on February 5, 1999 as the record
date (the "Record Date") for the determination of shareholders entitled to
notice of and to vote at the Meeting. This Proxy Statement and the accompanying
form of proxy have been mailed on or about March 16, 1999. 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 paid 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 $5,500, 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 shareholders.
The Shares represented by returned proxies will be voted in accordance with
the choices specified. If no choice is specified, the Shares will be voted FOR
the election of the nominees for director named in this Proxy Statement and in
the proxies' discretion on any other matter which may properly come before the
shareholders at the Meeting.
The Board does not know of any other matters to be presented for action at
the 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 116,486,187 Shares.
Shareholders are entitled to one vote for each Share held on all matters to be
presented at the Meeting. Cumulative voting is not permitted. In order to
constitute a quorum for the Meeting, the holders of 58,243,095 Shares must be
present or represented by proxies.
The election of each director nominee requires the favorable vote of a
plurality of all votes cast at the Meeting. According to Tennessee law and the
Company's charter and by-laws, the aggregate number of votes entitled to be cast
by all shareholders present in person or represented by proxy at the 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
not be counted as FOR or AGAINST a matter or nominee.
<PAGE> 5
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 shareholder proposals for the 2000 annual meeting of
shareholders to be eligible for inclusion in the Company's 2000 Proxy Statement,
all such proposals must be mailed to Mary Neil Price, Executive Vice President,
General Counsel and Corporate Secretary, First American Corporation, 721 First
American Center, Nashville, Tennessee 37237-0721, and must be received no later
than November 16, 1999. After this date, a shareholder who intends to raise a
proposal to be acted upon at the 2000 annual meeting of shareholders must inform
the Company in writing no later than January 16, 2000. If notice is not provided
by that date, the Board may exclude such proposal from being acted upon at the
2000 meeting. Further, the persons named in the Company's proxy for the 2000
annual meeting will be allowed to exercise their discretionary authority to vote
upon any such proposal without the matter having been discussed in the proxy
statement for the 2000 annual meeting.
ELECTION OF DIRECTORS
The Company's by-laws provide that the Board shall consist of not less than
nine nor more than 27 directors, and shall be divided into three classes, each
class to be as nearly equal in number as practicable. The terms for twelve
directors expire at the 1999 Meeting. The terms for six directors expire at the
2000 annual meeting. The terms for six directors expire at the 2001 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 elected for a three-year term.
On January 21, 1999, the Board fixed the number of directors at 22. At the
1999 Meeting, one director will be elected to hold office until the 2000 annual
meeting, two directors will be elected to hold office until the 2001 annual
meeting, and seven directors will be elected to hold office until the 2002
annual meeting. As a result, the division of the Company's directors into three
classes will be seven directors, eight directors and seven directors with terms
expiring at the 2000, 2001, and 2002 annual meetings, respectively. The nominees
for the class of 2002 are EARNEST W. DEAVENPORT, JR., WARREN A. HOOD, JR.,
MARTHA R. INGRAM, JAMES R. MARTIN, E. B. ROBINSON, JR., ROSCOE R. ROBINSON, and
WILLIAM S. WIRE II; the nominees for the class of 2001 are JOHN N. PALMER and
GEORGE M. CLARK, III; the nominee for the class of 2000 is J. KELLEY WILLIAMS,
SR.
Unless a proxy specifies otherwise, the persons named in the proxy will
vote the Shares covered thereby FOR the nominees 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 any nominee will be unavailable, if such an event should
occur, it is intended that such Shares will be voted for substitute nominee(s)
as selected by the Board.
All of the Company's Directors also serve as directors of First American
National Bank ("FANB"), Nashville, Tennessee.
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<PAGE> 6
NOMINEES FOR ELECTION TO THE BOARD
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GEORGE M. CLARK III Age -- 40
Director Director since 1998
Term to expire 2001
</TABLE>
Mr. Clark was Executive Vice President and director of Pioneer Bancshares, Inc.
and Pioneer Bank from January 1997 until November 20, 1998, when Pioneer
Bancshares, Inc. was merged into the Company and Pioneer Bank was merged into
FANB. From November 20, 1998 through February 28, 1999, Mr. Clark served as
Executive Vice President of FANB. From 1988 until 1997, he served as Vice
President of Pioneer Bank.
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EARNEST W. DEAVENPORT, JR. Age -- 60
Director, Chairman of the Human Resources Committee Director since 1989
and Member of the Executive and Development Committees Term to expire 2002
</TABLE>
Mr. Deavenport is Chairman of the Board and Chief Executive Officer of Eastman
Chemical Company, a position he has held since 1994. Mr. Deavenport also serves
as a director for Milliken and Company. Mr. Deavenport serves as director and
chairman of the Executive Committee of the National Association of
Manufacturers. He also serves as a director of the Chemical Manufacturers
Association, as a member of the Policy Committee of the Business Roundtable, and
as trustee and director of the Malcolm Baldridge Foundation. Mr. Deavenport is
the 1999 recipient of the International Palladium Medal Award issued by the
Societe de Chimie Industrielle-American Section.
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WARREN A. HOOD, JR. Age -- 47
Director and Director since 1998
Member of the Audit Committee and Term to expire 2002
Committee on Directors
</TABLE>
Mr. Hood serves as Chairman of the Board and Chief Executive Officer of Hood
Industries, Inc., a manufacturer of building and forest products. Mr. Hood
served as a Director of Deposit Guaranty Corp. from 1990 until its merger into
the Company on May 1, 1998. Mr. Hood serves as Chairman of Atlas Roofing
Corporation, Southern Bag Corporation LTD and Charleston Packaging Co., and as a
member of the Millsaps College Board of Trustees.
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MARTHA R. INGRAM Age -- 63
Director and Member of the Director since 1993
Community Affairs, Human Resources Term to expire 2002
and Executive Committees
and the Committee on Directors
</TABLE>
Since June 1995, Mrs. Ingram has served as Chairman of Ingram Industries Inc., a
diversified transportation and energy company, a distributor of consumer
products, and a non-standard automobile insurance company. From 1981 to June
1995, Mrs. Ingram served as the Director of Public Affairs of Ingram Industries
Inc. and has served as a member of its Board of Directors since 1981. Mrs.
Ingram also serves as a member of the Board of Directors of Baxter
International, Inc., Weyerhauser Company, and Ingram Micro Inc.
3
<PAGE> 7
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JAMES R. MARTIN Age -- 55
Director and Member of the Director since 1989
Community Affairs and Audit Committees Term to expire 2002
</TABLE>
Mr. Martin is the Chairman of the Board 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.
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JOHN N. PALMER Age -- 64
Director and Director since 1998
Member of the Executive and Audit Committees Term to expire 2001
</TABLE>
Mr. Palmer is the Chairman of SkyTel Communications, Inc., a telecommunications
company. He also serves as a director of Entergy Corporation and Eastgroup
Properties and as a member of the Millsaps College Board of Trustees. Mr. Palmer
served as a Director of Deposit Guaranty Corp. from 1987 until its merger into
the Company on May 1, 1998.
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E.B. ROBINSON, JR. Age -- 57
Director, Vice Chairman and Chief Operating Officer, Director since 1998
President, First American National Bank Term to expire 2002
and Member of the Executive and
Asset Policy Committees
</TABLE>
Mr. Robinson has served as Vice Chairman and Chief Operating Officer of the
Company and President of FANB since May 1998. From 1984 until its merger into
the Company in May 1998, Mr. Robinson served as Chairman and Chief Executive
Officer of Deposit Guaranty Corp. and its wholly owned subsidiary, Deposit
Guaranty National Bank. Mr. Robinson also serves as Chairman of the Millsaps
College Board of Trustees.
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ROSCOE R. ROBINSON Age -- 68
Director and Member of the Development and Human Director since 1992
Resources Committees and the Committee on Directors Term to expire 2002
</TABLE>
Dr. Robinson is a professor of medicine and the former vice chancellor for
Health Affairs at Vanderbilt University Medical Center in Nashville, Tennessee,
a position he held from 1981 to 1997. Dr. Robinson also serves as a director of
ClinTrials Research, Inc. and Research!America, as a Trustee of Duke University,
and as a director of the American Medical Association Foundation.
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J. KELLEY WILLIAMS, SR. Age -- 64
Director and Director since 1998
Member of the Development and Human Term to expire 2000
Resources Committees
</TABLE>
Mr. Williams has served as Chairman and Chief Executive Officer of ChemFirst,
Inc. and its predecessor First Mississippi Corporation since 1988, a producer of
electronic and other specialty chemicals. Mr. Williams served as a Director of
Deposit Guaranty Corp. from 1975 until its merger into the Company on May 1,
1998. Mr. Williams also serves as a Director of Getchell Gold Corporation.
4
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WILLIAM S. WIRE II Age -- 67
Director, Member of the Community Affairs, Director since 1989
Human Resources and Asset Policy Committees Term to expire 2002
and the Committee on Directors
</TABLE>
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, Inc. from 1986 until his
retirement in 1994. From 1986 to February 1993, he also served as Chief
Executive Officer of Genesco, Inc. Mr. Wire serves as a director of Genesco,
Inc., Dollar General Corporation, and American Endoscopy Services, Inc.
CONTINUING DIRECTORS UNTIL 2000 MEETING
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DENNIS C. BOTTORFF Age -- 54
Director, Chairman and Chief Executive Officer Director since 1991
of the Company and First American National Bank, Term to expire 2000
Member of the Executive and
Development Committees
</TABLE>
Mr. Bottorff serves as Chairman and Chief Executive Officer of the Company and
FANB. He has served as Chief Executive Officer since 1991 and Chairman since
December 1994. From 1991 until August 1997, he also served as President of the
Company and served as President of FANB from 1991 throughout 1994. Mr. Bottorff
also serves as a director of Ingram Industries, Inc., Dollar General
Corporation, IFC Holdings, Inc. and The SSI Group, Inc., and serves as a member
of the Vanderbilt University Board of Trust.
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JAMES A. HASLAM II Age -- 68
Director, Chairman of the Committee on Directors Director since 1983
and Member of the Executive and Asset Policy Committees Term to expire 2000
</TABLE>
Since July 1995, Mr. Haslam has served as Chairman of Pilot Corporation, a
retail operator of travel centers and convenience stores/gasoline stations. Mr.
Haslam served as President and Chief Executive Officer of Pilot Corporation from
its founding in November 1958 to July 1995. He also serves as 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.
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WALTER G. KNESTRICK Age -- 61
Director, Chairman of the Asset Policy Committee Director since 1990
and Member of the Executive, Development Term to expire 2000
and Human Resources Committees
</TABLE>
Mr. Knestrick founded Walter Knestrick Contractor, Inc., a commercial and
industrial building contractor, and has served as Chairman of its Board since
1969.
5
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ROBERT A. MCCABE, JR. Age -- 48
Director, Vice Chairman, and President -- Director since 1994
First American Enterprises, Inc., Term to expire 2000
Member of the Executive and Development Committees
</TABLE>
Since January 1994, Mr. McCabe has served as Vice Chairman of the Company and
First American National Bank and President -- First American Enterprises. Mr.
McCabe also serves as a member of the Board of Directors of IFC Holdings, Inc.,
The SSI Group, Inc., and Sirrom Capital Corporation.
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CELIA A. WALLACE Age -- 54
Director, Member of the Development and Director since 1996
Audit Committees Term to expire 2000
</TABLE>
Since 1986, Ms. Wallace has been Chairman of the Board and Chief Executive
Officer of Southern Medical Health Systems, Inc., a healthcare provider holding
company. Ms. Wallace also serves as Chairman of the Board of Chunchula Energy
Corporation and serves as a director of The SSI Group, Inc.
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TOBY S. WILT Age -- 54
Director, Chairman of the Audit Committee, and Member Director since 1992
of the Executive and Asset Policy Committees Term to expire 2000
</TABLE>
Mr. Wilt is the President of TSW Investment Company, a private investment
company in Nashville, Tennessee and Chairman of the Board of The Christie Cookie
Company, a gourmet baking company. Mr. Wilt also serves as a director of Outback
Steakhouse, Inc.
CONTINUING DIRECTORS UNTIL 2001 MEETING
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REGINALD D. DICKSON Age -- 52
Director, Chairman of the Community Affairs Committee Director since 1981
and Member of the Executive and Human Resources Committees Term to expire 2001
</TABLE>
Mr. Dickson is President Emeritus of INROADS, Inc., a non-profit minority career
development organization and Chairman of Buford, Dickson, Harper & Sparrow,
Inc., an investment, research and counseling firm in St. Louis, Missouri. From
1983 through 1992, Mr. Dickson served as President and Chief Executive Officer
of INROADS, Inc. Mr. Dickson also serves as a director of Dollar General
Corporation.
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GENE C. KOONCE Age -- 67
Director and Member of the Audit Director since 1981
Committee and the Committee on Directors Term to expire 2001
</TABLE>
Mr. Koonce is Vice Chairman of Atmos Energy Corporation, a natural and propane
gas distribution company. Until its acquisition on July 31, 1997, Mr. Koonce
served as Chairman, President, Chief Executive Officer and a member of the Board
of Directors of United Cities Gas Company, which now operates as a Division of
Atmos Energy Corporation. Mr. Koonce also serves as a director of Atmos Energy
Corporation.
6
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<TABLE>
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DALE W. POLLEY Age -- 49
Director, President, Director since 1991
Vice Chairman of First American National Bank Term to expire 2001
and Member of the Executive and Community
Affairs Committees
</TABLE>
Mr. Polley has served as President of the Company since July 1997 and as Vice
Chairman of FANB since May 1998. From 1994 through July 1997, Mr. Polley served
as Vice Chairman of the Company and served as President of FANB from 1994 until
May 1998. From November 1992 through 1994 and from August 1997 through August
1998, he also served as Principal Financial Officer of the Company and FANB. Mr.
Polley also serves as a Director of the Federal Reserve Bank of
Atlanta -- Nashville branch.
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JAMES F. SMITH, JR. Age -- 69
Director, Chairman of the Director since 1983
Development and Executive Committees Term to expire 2001
and Member of the Asset Policy Committee
</TABLE>
From 1991 through December 1994, Mr. Smith served as Chairman of the Board of
the Company and FANB. Mr. Smith also serves as a director of Pilot Corporation.
<TABLE>
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CAL TURNER, JR. Age -- 59
Director and Member of the Audit Director since 1989
and Community Affairs Committees Term to expire 2001
</TABLE>
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.
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TED H. WELCH Age -- 65
Director and Member of the Director since 1994
Asset Policy and Audit Committees Term to expire 2001
</TABLE>
Mr. Welch has been a self-employed real estate investor and operator since 1975.
Since 1993, he has served as President and Chief Executive Officer of Eagle
Communications, Inc., a publisher of periodicals. Mr. Welch also serves as a
director of National Health Investors, Inc., Southeast Service Corporation, and
American Constructors, Inc.
DESCRIPTION OF THE BOARD AND COMMITTEES
During 1998 the Board held eight regular meetings. The Board has seven
standing committees: Executive, Asset Policy, Audit, Community Affairs, Human
Resources, Development, and the Committee on Directors.
The Executive Committee consists of the Chief Executive Officer and not
less than three other directors. At present, the Executive Committee is
comprised of the Chief Executive Officer, the President, the Vice
Chairman/President, First American Enterprises, the Vice Chairman/Chief
Operating Officer, and nine other directors, six of whom are the chairmen of the
other standing committees. 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 1998.
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The Asset Policy Committee consists of six directors who are not officers
or employees of the Company and the Chief Operating Officer. The Committee is
responsible for all credit-related matters, including the approval of credit
policies and procedures. It monitors the loan portfolio of FANB, reviews
significant loan transactions, reviews credit examinations, and monitors
compliance with regulatory requirements and applicable laws and regulations. The
Committee also reviews regulatory examinations, as well as asset/liability
policies and procedures. The Asset Policy Committee met seven times in 1998.
The Audit Committee consists of eight directors who are not officers or
employees of the Company. During 1998, the members of the Audit Committee were
Messrs. Wilt (Chairman), Hood, Koonce, Martin, Palmer, Turner, Welch, and Mrs.
Wallace. 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 and
lease losses and internal loan audits. 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 1998.
The Community Affairs Committee, consisting of six directors who are not
officers or employees of the Company and the President, advises and counsels
management in matters of community development, contributions, image issues,
government affairs, market effectiveness and compliance with the Community
Reinvestment Act, Fair Lending and other laws or regulations of similar purpose.
In 1998, the Community Affairs Committee met three times.
The Human Resources Committee, consisting of eight 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 also 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 five times
during 1998.
The Committee on Directors is comprised of seven directors who are not
officers or employees of the Company. The Committee is responsible for
establishing criteria for the evaluation of members of the Board, evaluating the
Board and recommending whether members should be nominated for re-election. The
Committee also evaluates the size and composition of the Board and establishes
criteria for director nominations. The Committee administers the corporate
governance program of the Company adopted by the Board of Directors in 1997.
Included in this program are guidelines on corporate governance issues, a
statement of responsibility of the Board and its members, and director
evaluations of the board processes. The by-laws of the Company provide that the
Committee on Directors may receive recommendations from shareholders of the
Company for membership on the Board if written notice is submitted to the Chief
Executive Officer of the
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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 1998,
the members of the Committee on Directors were Messrs. Haslam (Chairman), Hood,
Koonce, Roscoe Robinson, Wilson and Wire and Mrs. Ingram. The Committee on
Directors met three times during 1998.
The Development Committee is comprised of six directors who are not
officers or employees of the Company, the Chief Executive Officer and the Vice
Chairman/President, First American Enterprises. The Committee serves as an
oversight committee to advise and counsel management as to the investigation,
development and implementation of nontraditional banking products or services
offered through the Company or its affiliates. The Committee also provides
general oversight of fiduciary services, reviews preliminary reports and
recommendations concerning strategic growth through mergers and acquisitions and
ensures that these activities are undertaken and conducted in accordance with
applicable laws, regulations, corporate policy and sound financial planning. The
Development Committee met three times in 1998.
No incumbent director attended fewer than 75% of the aggregate of (i) the
total number of meetings held during 1998 by the Board (during the period in
which he or she was a director), and (ii) the total number of meetings held
during 1998 by all committees of the Board of which such director was a member
(during the period that he or she served).
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under federal securities laws, 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,
1998.
9
<PAGE> 13
SECURITY OWNERSHIP OF MANAGEMENT
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, the Company's four most highly
compensated officers other than the Chief Executive Officer, and Mr. McMillan,
the former Chairman, Deposit Guaranty System (hereinafter collectively 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
BENEFICIALLY PERCENTAGE
NAME OF BENEFICIAL OWNER OWNED OF CLASS
------------------------ ------------ ----------
<S> <C> <C>
Dennis C. Bottorff.......................................... 769,795(1) .7%
George M. Clark, III........................................ 293,336(2) .3%
Earnest W. Deavenport, Jr................................... 18,585(3) *
Reginald D. Dickson......................................... 8,330(4) *
James A. Haslam, II......................................... 156,472(5) .1%
Warren A. Hood, Jr.......................................... 50,398(6) *
Martha R. Ingram............................................ 26,000(4) *
Walter G. Knestrick......................................... 487,470(7) .4%
Gene C. Koonce.............................................. 15,059(4) *
James R. Martin............................................. 16,000(8) *
Robert A. McCabe, Jr........................................ 269,157(9) .2%
Howard L. McMillan, Jr...................................... 220,332(10) .2%
John N. Palmer.............................................. 78,464 .1%
Dale W. Polley.............................................. 332,682(11) .3%
E. B. Robinson, Jr.......................................... 435,508(12) .4%
Roscoe R. Robinson.......................................... 8,000(4) *
James F. Smith, Jr.......................................... 310,884(13) .3%
Cal Turner, Jr.............................................. 156,683(4) .1%
Steven C. Walker............................................ 52,873(14) *
Celia A. Wallace............................................ 600 *
Ted H. Welch................................................ 11,088(15) *
J. Kelley Williams, Sr...................................... 14,348 *
David K. Wilson............................................. 720,336(16) .6%
Toby S. Wilt................................................ 206,000(4) .2%
William S. Wire, II......................................... 28,528(4) *
All Directors and Executive Officers as a Group............. 5,597,890(17) 4.8%(18)
</TABLE>
- ---------------
* less than .1%
(1) Includes 17,211 shares held in Mr. Bottorff's First American Corporation
401(K) Plan (as of the Record Date) and/or 401(k) SERP Plan (as of December
31, 1998) (the "FIRST Plan accounts"), 143,292 shares (over which Mr.
Bottorff has voting but not investment authority) granted pursuant to a
restricted stock award under the First American Corporation 1991 Employee
Stock Incentive Plan (the "1991 Plan"), options for 308,020 shares issued
pursuant to the 1991 Plan which are currently exercisable and 1,040 share
equivalents (as of December 31, 1998) held in Mr. Bottorff's Stock Account
maintained under his Salary Deferral Agreement with the Company.
(2) Includes 2 shares held in Mr. Clark's FIRST Plan accounts, 231 share
equivalents held in Mr. Clark's Pioneer Bancshares, Inc. 401(k) and
Employee Stock Ownership Plan; 33,820 shares held by Mr. Clark's children,
5,506 shares held by his spouse (as to which he disclaims beneficial
ownership), and 112,212 shares (20% of the total shares held) held by
trusts for which Mr. Clark is one of five beneficiaries.
10
<PAGE> 14
(3) Includes options of 6,000 shares issued pursuant to the First American
Corporation 1993 Non-Employee Director Stock Option Plan (the "1993 Plan")
which are currently exercisable and 2,198 share equivalents (as of December
31, 1998) held in Mr. Deavenport's Stock Account maintained under the First
American Corporation Director's Deferred Compensation Plan.
(4) Includes options for 6,000 shares issued pursuant to the 1993 Plan which
are currently exercisable.
(5) Includes options for 6,000 shares issued pursuant to the 1993 Plan
currently exercisable and 16,024 shares owned by Mrs. Haslam as to which
Mr. Haslam disclaims beneficial ownership.
(6) Includes 3,598 shares held by Mr. Hood's minor children.
(7) Includes options for 6,000 shares issued pursuant to the 1993 Plan which
are currently exercisable and 117,710 shares (75% of the total shares held)
in a profit sharing plan for which Mr. Knestrick is the beneficiary.
(8) Includes options for 6,000 shares issued pursuant to the 1993 Plan which
are currently exercisable, 2,000 shares held by trusts for which Mr. Martin
acts as trustee and 2,000 shares owned by his spouse as to which he
disclaims beneficial ownership.
(9) Includes 22,048 shares held in Mr. McCabe's FIRST Plan accounts, 1,032
shares held by his children, 341 shares held by his spouse (as to which he
disclaims beneficial ownership), 57,054 shares (over which Mr. McCabe has
voting but not investment authority) granted pursuant to a restricted stock
award under the 1991 Plan, and options for 110,319 shares issued pursuant
to the 1991 Plan which are currently exercisable.
(10) Includes 19,453 shares held in Mr. McMillan's 401(k) Plan held in FIRST
Plan accounts on behalf of former Deposit Guaranty employees, 44,399 shares
held by Mr. McMillan's spouse for which he disclaims beneficial ownership,
1 share he holds as custodian for a minor child, options for 30,000 shares
issued pursuant to the 1991 Plan which are currently exercisable, and
options for 45,162 shares issued pursuant to the Deposit Guaranty Corp.
Stock-Based, Long-Term Incentive Plan and/or the Deposit Guaranty Corp.
Stock-Based, Long Term Incentive Plan II (the "DGC Plans") which are
currently exercisable.
(11) Includes 12,552 shares held in Mr. Polley's FIRST Plan accounts, 78,630
shares (over which Mr. Polley has voting but not investment authority)
granted pursuant to a restricted stock award under the 1991 Plan, and
options for 191,400 shares issued pursuant to the 1991 Plan which are
currently exercisable.
(12) Includes 59,422 shares held in Mr. Robinson's 401(k) Plan held on behalf of
former Deposit Guaranty employees, 2,340 shares held by Mr. Robinson's
spouse as to which he disclaims beneficial ownership, 57,455 shares (over
which Mr. Robinson has voting but not investment authority) granted
pursuant to a restricted stock award under the 1991 Plan, and options for
174,330 shares issued pursuant to the DGC Plans that are currently
exercisable.
(13) Includes options for 6,000 shares issued pursuant to the 1993 Plan which
are currently exercisable and 40,118 shares owned by Mr. Smith's spouse as
to which he disclaims beneficial ownership.
(14) Includes 11 shares held in Mr. Walker's 401(k) Plan held in FIRST Plan
accounts on behalf of former Deposit Guaranty employees, 9 shares held in
his FIRST Plan accounts, 20,517 shares (over which Mr. Walker has voting
but not investment authority) granted pursuant to a restricted stock award
under the 1991 Plan, and options for 30,230 shares issued pursuant to the
DGC Plans that are currently exercisable.
(15) Includes options for 2,400 shares issued pursuant to the 1993 Plan which
are currently exercisable.
11
<PAGE> 15
(16) Includes options for 6,000 shares issued pursuant to the 1993 Plan which
are currently exercisable, 600,000 shares owned by a corporation
beneficially owned by Mr. Wilson, and 19,736 shares held by Mr. Wilson's
spouse to which he disclaims beneficial ownership.
(17) Includes 1,019,249 shares of First American Common Stock owned by or for
spouses, 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 645,480 shares granted pursuant to
restricted stock awards under the 1991 Plan to executive officers over
which the officers have voting but not investment authority, options for
19,484 shares which officers have the right to acquire under First
American's STAR Award Plan which are currently exercisable, options for
933,639 shares issued pursuant to the 1991 Plan which are currently
exercisable, options for 253,349 shares issued pursuant to the DGC Plans
which are currently exercisable, 80,400 shares which non-employee directors
have the right to acquire under the 1993 Plan which are currently
exercisable and 204,923 shares held in FIRST Plan accounts.
(18) For purposes of computing this percentage, shares which may be acquired by
directors and officers under stock options which were exercisable as of
February 5, 1999 or within 60 days thereafter are deemed to be outstanding.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes the compensation paid or accrued by the
Company to the Named Executive Officers during the three fiscal years ended
December 31, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
---------------------------------
AWARDS PAYOUTS
ANNUAL COMPENSATION ----------------------- -------
-------------------------------- RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
SALARY BONUS COMPENSATION AWARDS OPTIONS/ PAYOUTS COMP
NAME/POSITION YEAR ($) ($) ($) ($)(1) SARS(#) ($) ($)(2)
- ------------- ---- ------- ------- ------------ ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dennis C. Bottorff............. 1998 629,200 12,074 -- 2,329,808 40,300 -- 100,672
Chairman and Chief 1997 605,000 -- -- 1,954,985 72,400 -- 33,300
Executive Officer 1996 585,000 321,750 -- 926,751 43,000 -- 32,450
E. B. Robinson, Jr............. 1998* 600,000 441,482 -- 2,219,063 90,000 -- 157,693
Vice Chairman, Chief 1997* 399,128 285,243 -- 25,000 -- -- 89,347
Operating Officer and 1996* 395,980 349,340 -- 34,000 -- -- 70,485
President, FANB
Dale W. Polley................. 1998 426,400 8,200 -- 1,534,748 24,600 -- 68,224
President 1997 410,000 -- -- 1,318,428 35,000 -- 24,600
1996 395,000 217,250 -- 279,000 18,750 -- 23,700
Robert A. McCabe, Jr........... 1998 327,600 6,300 -- 1,178,437 18,900 -- 52,416
Vice Chairman and 1997 315,000 -- -- 907,873 26,800 -- 18,900
President, First American 1996 290,000 159,500 -- 162,750 10,500 -- 17,400
Enterprises
Steven C. Walker............... 1998* 250,000 78,408 -- 428,045 8,100 -- 1,344,112
Executive Vice President 1997* 219,956 113,189 -- 10,000 -- -- 33,779
President, Commercial and 1996* 220,093 145,920 -- 9,000 -- -- 28,135
Professional Bank
Howard L. McMillan............. 1998* 350,000 262,415 -- 739,688 30,000 -- 1,517,448
Former Chairman of the 1997* 253,935 151,232 -- 12,000 -- -- 66,190
Deposit Guaranty System 1996* 253,935 185,216 -- 10,400 -- -- 53,449
</TABLE>
- ---------------
* Messrs. Robinson, Walker and McMillan became employees of the Company
following the merger of Deposit Guaranty Corp. effective May 1, 1998. The
annual compensation amounts
12
<PAGE> 16
stated above for 1996 and 1997 and from January 1, 1998 through April 30,
1998 are for compensation received while employed by Deposit Guaranty Corp.
(1) As of December 31, 1998, the total number of restricted shares and their
aggregate market value were as follows: Mr. Bottorff held 121,392 restricted
shares valued at $5,386,770; Mr. Robinson held 45,000 restricted shares
valued at $1,996,875; Mr. Polley held 69,820 restricted shares valued at
$3,098,263; Mr. McCabe held 50,354 restricted shares valued at $2,234,459;
Mr. Walker held 8,863 restricted shares valued at $393,296; Mr. McMillan
held no restricted shares. None of the restricted awards listed in the
Summary Compensation Table or in this footnote have a vesting schedule of
less than three years. Dividends are paid on restricted stock at the same
rate as all other shares of the common stock of the Company.
(2) Amounts in this column for 1998 include Company matching contributions under
the Company's FIRST Plan ("401(k)"), and FIRST Plan Supplemental Executive
Retirement Plan ("401(k) SERP") for the Named Executive Officers as follows:
Mr. Bottorff, 401(k) -- $9,600, 401(k) SERP -- $28,152; Mr. Robinson,
Deposit Guaranty Retirement Savings Plan 401(k) -- $7,800, 401(k)
SERP -- $0; Mr. Polley, 401(k) -- $9,600, 401(k) SERP -- $15,984; Mr.
McCabe, 401(k) -- $9,600, 401(k) SERP -- $10,056; Mr. Walker, Deposit
Guaranty Corp. Retirement Savings Plan 401(k) -- $8,916, 401(k) SERP -- $0;
Mr. McMillan, Deposit Guaranty Corp. Retirement Savings Plan
401(k) -- $7,200, 401(k) SERP -- $0. This column also reflects Merger
Recognition Bonus awards as follows: Mr. Bottorff, $62,900; Mr. Robinson,
$60,000; Mr. Polley, $42,640; Mr. McCabe, $32,760; Mr. Walker, $25,000.
Additionally, this column includes the following: Mr. Robinson, Deposit
Guaranty National Bank Deferred Compensation Plan -- $89,893; Mr. Walker,
Deposit Guaranty Corp. Change in Control Agreement provisions -- $1,135,122,
FANB Relocation Policy payment -- $125,000, Deposit Guaranty National Bank
Deferred Compensation Plan -- $50,074; Mr. McMillan, wage continuation
payout per Employment Agreement with the Company -- $1,510,248.
OPTION GRANTS
Shown below is information concerning stock options granted to the Named
Executive Officers during 1998 pursuant to the Company's 1991 Employee Stock
Incentive Plan. Options were granted on January 15, 1998 to Messrs. Bottorff,
Polley and McCabe; on May 1, 1998 to Messrs. Robinson and McMillan; and on July
16, 1998 to Mr. Walker. All options granted vest 20% per year on the anniversary
date of grant over five years. The Company granted no stock appreciation rights
("SARs") in 1998.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------ POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
NUMBER OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS/SARS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION -----------------------
NAME GRANTED(#) FISCAL YEAR 1998 ($/SH) DATE 5%($) 10%($)
---- ------------ ---------------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Dennis C. Bottorff..................... 40,300 5.2% $45.8750 01/15/08 $1,162,677 $2,946,451
E. B. Robinson, Jr..................... 90,000 11.6% $49.5625 05/01/08 $2,805,263 $7,109,087
Dale W. Polley......................... 24,600 3.2% $45.8750 01/15/08 $ 709,723 $1,798,578
Robert A. McCabe, Jr................... 18,900 2.4% $45.8750 01/15/08 $ 545,275 $1,381,834
Steven C. Walker....................... 8,100 1.0% $49.2500 07/16/08 $ 250,882 $ 635,784
Howard L. McMillan..................... 30,000 3.9% $49.5625 05/01/08 $ 935,088 $2,369,696
</TABLE>
13
<PAGE> 17
Actual realizable values, if any, on stock option exercises are dependent
on the future performance of the Company's common stock and overall stock market
conditions. There can be no assurance that the amounts reflected will be
achieved.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
Shown below is information with respect to exercises by the Named Executive
Officers during 1998 of options to purchase shares pursuant to the Company's
stock option plans and information with respect to unexercised options to
purchase shares held by the Named Executive Officers as of December 31, 1998.
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS AT OPTIONS/SARS AT
ACQUIRED DECEMBER 31, 1998(#) DECEMBER 31, 1998($)
ON VALUE ---------------------------- ----------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Dennis C. Bottorff.......... 0 $ 0 248,880 169,820 $7,331,185 $2,435,490
E.B. Robinson, Jr........... 0 $ 0 174,330 90,000 $4,901,732 $ 0
Dale W. Polley.............. 0 $ 0 150,800 82,300 $4,772,562 $1,065,562
Robert A. McCabe, Jr........ 10,558 $ 380,616 89,779 60,140 $2,514,120 $ 759,255
Steven C. Walker............ 0 $ 0 70,200 8,100 $1,891,375 $ 0
Howard L. McMillan.......... 0 $ 0 75,162 0 $1,098,488 $ 0
</TABLE>
Based on the closing price per share on December 31, 1998 of $44.375. The
Company granted no stock appreciation rights ("SARs") in 1998.
The Company has entered into contracts with certain of its executive
officers, including the Named Executive Officers with the exception of Mr.
Robinson and Mr. McMillan, that provide generally for a payment equal to a
stated multiple of the officer's annual base salary and annual cash bonus as
well as the employee's annual cash bonus for the full year in which a Change in
Control or Potential Change in Control takes place in the event of a termination
of the officer's employment by the Company other than "for cause" or as a result
of death or disability. For Messrs. Bottorff, Polley and McCabe, the multiple is
three times their respective annual base salary and annual cash bonus; for Mr.
Walker, the multiple is two times. Additionally, the contracts provide that the
officers shall be paid such amounts if the officer voluntarily terminates his
employment with the Company if, after a Change in Control or a Potential Change
in Control, (i) there is a reduction in the officer's annual base salary or
annual bonus opportunity, (ii) the officer is required by the Company,
involuntarily, to relocate to an office more than 35 miles from the office where
the officer was located at the time of the Change in Control or Potential Change
in Control, (iii) there is a material reduction in the officer's
responsibilities, authority, or duties, (iv) the officer's benefits are
materially reduced, or (v) the Company does not honor the terms of the
contracts. These contracts generally provide for an excise tax gross-up with
respect to any taxes incurred under Internal Revenue Code ("Code") Section 4999
after a Change in Control or Potential Change in Control. Additionally, these
contracts provide for an extension of life insurance, medical insurance, and
other employment benefits upon the occurrence of a Change in Control or
Potential Change in Control. "Change in Control" and "Potential Change in
Control" have the meanings ascribed to them in the Company's 1991 Employee Stock
Incentive Plan.
In connection with the execution of the Merger Agreement between the
Company and Deposit Guaranty Corp., E.B. Robinson, Jr. entered into an
employment agreement with the Company. Pursuant to the employment agreement, Mr.
Robinson is employed by the Company as Vice
14
<PAGE> 18
Chairman and Chief Operating Officer, President of FANB, and as a member of the
Company's Policy Team. Mr. Robinson also serves on the Company's Board and the
Executive Committee during the term of the employment agreement. The term of the
employment agreement commenced on May 1, 1998 and continues until September 30,
2003. Mr. Robinson's salary will be no less than $600,000 per year during the
term of the employment agreement or, if greater, 80% of the base salary paid to
the chief executive officer of the Company. Mr. Robinson will also be eligible
to receive an annual incentive bonus, targeted at 50% of his base salary, with a
maximum potential bonus award equal to 100% of base salary. In no event will the
base salary and bonus paid to Mr. Robinson be less than 80% of the sum of the
annual base salary and bonus paid to the chief executive officer of the Company
with respect to the same year. Mr. Robinson will receive an annual stock
incentive grant during the term of the employment agreement with a value equal
to 166% of his base salary. The employment agreement also provides that Mr.
Robinson is entitled to participate in the employee benefit plans, practices and
policies which are applicable to peer executives of the Company. Mr. Robinson
will also be paid an annual retirement benefit commencing at age 62, which
benefit will be equal to 60% of Mr. Robinson's final average pay (as defined in
the agreement), less benefits payable under certain other retirement plans and
arrangements of Deposit Guaranty. The employment agreement also provides for a
retirement benefit to be paid to Mr. Robinson's spouse, should she survive him.
Mr. Robinson's agreement was subsequently amended to add a change in control
provision. Under this provision, upon the occurrence of a "Change in Control" or
"Potential Change in Control", and a subsequent termination of Mr. Robinson
within two years of the date of such event, he would receive the Termination
Benefits and Termination Payment, as those terms are defined below. However, in
the event that the Change in Control or Potential Change in Control occurs on or
after September 14, 2000, Mr. Robinson would receive a lump sum payment equal to
the product of three and the sum of Mr. Robinson's existing base salary and
highest bonus earned in the three years prior to May 1, 1998, in lieu of payment
of the Termination Payment. In addition, Mr. Robinson would receive all of the
Termination Benefits, except that he would receive medical and welfare benefits
for three years after the date of termination. Mr. Robinson would not be
entitled to any other payments or benefits pursuant to any of the Company's
severance plans or policies.
The employment agreement further provides that, upon any termination of Mr.
Robinson's employment with the Company other than for cause or by reason of
death or disability, or if Mr. Robinson terminates his employment for good
reason (as defined in the employment agreement) he is generally entitled to
payment of any unpaid salary, a pro rata bonus, immediate vesting of the option
and restricted stock granted pursuant to the employment agreement, continuation
of medical and welfare benefits through the date on which the term of the
employment agreement otherwise would have ended, and additional service credit
for purposes of the calculation of retirement benefits ("Termination Benefits").
In addition, Mr. Robinson will be entitled to a lump sum payment equal to the
product of (i) the number of months from the date of termination until the end
of September 2003, divided by 12, and (ii) the sum of Mr. Robinson's existing
base salary and highest bonus earned in the three years prior to May 1, 1998
("Termination Payment"). If payments received by Mr. Robinson are subject to an
excise tax under Section 4999 of the Code, Mr. Robinson will be entitled to
receive an additional amount necessary to make him whole with respect to such
excise tax, unless such payments (excluding additional amounts payable due to
the excise tax) do not exceed 110% of the greatest amount which could be paid
without giving rise to the excise tax, in which case no additional payments will
be made without giving rise to the excise tax, and the payments otherwise due
Mr. Robinson will be reduced in an amount necessary to prevent the application
of the excise tax.
15
<PAGE> 19
In connection with the execution of the Merger Agreement between the
Company and Deposit Guaranty, Howard L. McMillan, Jr. also entered into an
employment agreement with the Company. Pursuant to the employment agreement, as
amended, Mr. McMillan was to be employed by the Company as Chairman of Deposit
Guaranty's operations within First American. The term of the employment
agreement commenced on May 1, 1998 and was to continue until May 1, 2001. Mr.
McMillan's salary was to be no less than $350,000 per year during the term of
the agreement. Mr. McMillan was also eligible to receive an annual incentive
bonus, targeted at 50% of his base salary, with a maximum potential bonus award
equal to 100% of base salary. Mr. McMillan was to receive an annual stock
incentive grant during the term of the employment agreement with a value equal
to 100% of his base salary. The employment agreement also provided that Mr.
McMillan would be entitled to participate in the employee benefit plans,
practices and policies which are applicable to peer executives of First
American. Mr. McMillan would also be paid an annual retirement benefit
commencing at age 62, which benefit was to be equal to 50% of Mr. McMillan's
final average pay (as defined in the employment agreement), less benefits
payable under certain other retirement plans and arrangements of Deposit
Guaranty. The employment agreement also provided for a retirement benefit to be
paid to Mr. McMillan's spouse, should she survive him. Mr. McMillan's agreement
was subsequently amended to add a change in control provision. Under this
provision, upon the occurrence of a "Change in Control" or "Potential Change in
Control" and a subsequent termination of Mr. McMillan within two years of the
date of such event, he would have received the Termination Benefits and
Termination Payment, as those terms are defined below. However, in the event
that the Change in Control or Potential Change in Control occurs on or after May
1, 1999, Mr. McMillan would have received a lump sum payment equal to the
product of two and the sum of Mr. McMillan's existing base salary and highest
bonus earned in the three years prior to May 1, 1998, in lieu of payment of the
Termination Payment. In addition, Mr. McMillan would have received all of the
Termination Benefits, except that he would have received medical and welfare
benefits for two years after the date of termination. Mr. McMillan would not
have been entitled to any other payments or benefits pursuant to any of the
Company's severance plans or policies.
The employment agreement further provided that upon any termination of Mr.
McMillan's employment with the Company other than for cause or by reason of
death or disability, or if Mr. McMillan terminated his employment for good
reason (as defined in the employment agreement) he would have generally been
entitled to a lump sum payment of any unpaid salary, a pro rata bonus, immediate
vesting of the option and restricted stock granted pursuant to the agreement,
continuation of medical and welfare benefits through the date on which the term
of the agreement otherwise would have ended, and additional service credits for
purposes of the calculation of retirement benefits ("Termination Benefits"). In
addition, Mr. McMillan would have been entitled to a payment equal to the
product of (i) the number of months from the date of termination until the end
of the term divided by 12, and (ii) the sum of Mr. McMillan's existing base
salary and highest bonus earned in the three years prior to the Effective Time
("Termination Payment"). If payments received by Mr. McMillan were subject to an
excise tax under Section 4999 of the Code, Mr. McMillan would have been entitled
to receive an additional amount necessary to make him whole with respect to such
excise tax, unless such payments (excluding additional amounts payable due to
the excise tax) did not exceed 110% of the greatest amount which could have been
paid without giving rise to the excise tax, in which case no additional payments
would be made with respect to the excise tax, and the payments otherwise due to
Mr. McMillan would have been reduced in an amount necessary to prevent the
application of the excise tax.
Mr. McMillan terminated his employment agreement with the Company effective
October 14, 1998 and thereafter received the payment due to him under the
employment agreement as a result
16
<PAGE> 20
of such termination. Mr. McMillan resigned as a director of the Company
effective February 15, 1999.
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 1999.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
--------------------------------------------------------------------------
REMUNERATION 5 YEARS 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
- ------------ -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 175,000.... $ 11,945 $ 23,890 $ 35,835 $ 50,668 $ 65,500 $ 80,333 $ 95,165
200,000.... 13,758 27,515 41,273 58,330 75,388 92,445 109,503
250,000.... 17,383 34,765 52,148 73,655 95,163 116,670 138,178
300,000.... 21,008 42,015 63,023 88,980 114,938 140,895 166,853
350,000.... 24,633 49,265 73,898 104,305 134,713 165,120 195,528
400,000.... 28,258 56,515 84,773 119,630 154,488 189,345 224,203
450,000.... 31,883 63,765 95,648 134,955 174,263 213,570 252,878
500,000.... 35,508 71,015 106,523 150,280 194,038 237,795 281,553
550,000.... 39,133 78,265 117,398 165,605 213,813 262,020 310,228
600,000.... 42,758 85,515 128,273 180,930 233,588 286,245 338,903
650,000.... 46,383 92,765 139,148 196,255 253,363 310,470 367,578
700,000.... 50,008 100,015 150,023 211,580 273,138 334,695 396,253
750,000.... 53,633 107,265 160,898 226,905 292,913 358,920 424,928
800,000.... 57,258 114,515 171,773 242,230 312,688 383,145 453,603
850,000.... 60,883 121,765 182,648 257,555 332,463 407,370 482,278
900,000.... 64,508 129,015 193,523 272,880 352,238 431,595 510,953
950,000.... 68,133 136,265 204,398 288,205 372,013 455,820 539,628
1,000,000.... 71,758 143,515 215,273 303,530 391,788 480,045 568,303
1,100,000.... 79,008 158,015 237,023 334,180 431,338 528,495 625,653
1,200,000.... 86,258 172,515 258,773 364,830 470,888 576,945 683,003
1,300,000.... 93,508 187,015 280,523 395,480 510,438 625,395 740,353
1,400,000.... 100,758 201,515 302,273 426,130 549,988 673,845 797,703
1,500,000.... 108,008 216,015 324,023 456,780 589,538 722,295 855,053
</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, E.B.
Robinson, McMillan and Walker are 7, 7, 22, 31, 38 and 12 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
$20,000 plus $1,000 for attendance at each regular or special board meeting, and
each committee meeting. The Chairmen of the Asset Policy, Community Affairs,
Development, Human Resources and Audit
17
<PAGE> 21
Committees receive additional annual retainers of $6,000 each. Non-employee
directors of the Company who also serve on FANB's Knoxville Advisory Board and
ISG Advisory Board receive attendance fees for those advisory board meetings of
$500 and $1,250 per meeting, respectively. During 1998, the total directors'
fees paid by the Company and its subsidiaries to each of the outside directors
of the Company ranged from $31,800 to $54,500; the aggregate amount paid by the
Company to all outside directors in 1998 was $762,500. In addition, under the
1993 Non-Employee Director Stock Option Plan, each non-employee director is
annually granted the option to purchase 2,000 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 1998, the purchase price was $51.4375 per share. These
options vest 20% per year over five years. Beginning in 1999, these options will
vest over three years in one-third increments. 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.
HUMAN RESOURCES COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION.
During 1998, the members of the Board's Human Resources Committee were
Messrs. Deavenport (Chairman), Dickson, Knestrick, Roscoe Robinson, Williams,
Wilson, Wire and Mrs. Ingram. None of these persons has at any time been an
officer or employee of the Company or any of its subsidiaries. During 1998, no
member of the Human Resources Committee had any relationship requiring
disclosure by the Company under Item 404 of SEC Regulation S-K. Mr. Bottorff,
the Chairman and Chief Executive Officer of the Company, is a member of the
Board of Directors of Ingram Industries Inc., and Mrs. Ingram, who serves as
Chairman of Ingram Industries, Inc., is a member of the Company's Human
Resources Committee. Mr. Bottorff also serves as a member of the Compensation
Committee of Dollar General Corporation, for which Mr. Turner serves as Chairman
of the Board.
HUMAN RESOURCES COMMITTEE REPORT ON EXECUTIVE COMPENSATION
OVERALL POLICY
First American's policy is to tie a significant portion of executive
compensation to the Company's performance and to appreciation in its stock
price. First American's objectives are to hire and retain highly qualified
people, to motivate them to achieve the Company's performance goals, to link
management and shareholder interests and to reward individual contribution as
well as overall results.
The Human Resources Committee is generally responsible for making executive
compensation decisions for the Company. The Committee is responsible for
granting stock options and restricted stock, and for approving salaries and
bonuses for executive officers, with the exception of those who also serve as
directors whose salaries and bonuses are approved by the non-employee members of
the Board. In 1998 the Board made no modifications to our recommendations with
respect to those officers.
The executive compensation program consists of three components: base
salary, annual incentive compensation and long-term incentive stock options and
restricted stock grants. The Committee reviews the program annually. Under the
program, total achievable compensation generally ranges from the 50th to the
75th percentile when compared with similar positions in selected comparable
companies. In setting 1998 base salaries, we reviewed the Towers Perrin
Consulting 1997 Salary Survey and the data pertaining to a group of 16
"high-performing" banks (the "Peer Group") included in the 1997 Wyatt Financial
Survey. Both of these surveys are
18
<PAGE> 22
conducted annually on a national basis by independent consulting firms. Eleven
of the Peer Group banks are included in the KBW50 Index shown in the Shareholder
Return Performance Graph. The KBW50 is composed of fifty of the nation's major
banking companies, including all money center banks and most major regional
banks, and is meant to be representative of the price performance of the
nation's large banks. The Committee has not used compensation data for money
center banks and large regional banks in determining First American executive
compensation. Instead, the Committee uses data from the selected Peer Group
comprised generally of bank holding companies with excellent performance and
similar strategies or operating characteristics and Towers Perrin Consulting
1997 Salary Survey data of similarly-sized companies. In determining annual and
long term incentive compensation, the Committee relies on market information,
including the TPF&C Executive Banking Survey. Generally, executive officers have
the opportunity to earn a maximum performance-based bonus equal in value to 80%
to 100% of base salary, and to receive stock options and restricted stock
ranging from 50% to 165% of base salary. Consistent with 1997 market data for
similar positions at comparable companies, the Chief Executive Officer has an
opportunity to receive stock options and restricted stock equal in value to 0%
to 185% of his base salary.
Both annual and long-term incentive compensation are based on performance.
Appreciation in the value of the Company's stock is also a key element of the
compensation program. On an annual basis, the Committee establishes performance
goals which are consistent with the Company's strategic plan. In 1998 these
goals were comprised of a soundness threshold and performance goals. The
soundness threshold consisted of maximum ratios of criticized and classified
assets to capital and non-performing loans to total loans and other real estate
owned, and a minimum ratio of common equity to average total assets (the
"Soundness Threshold"). The performance goals consisted of (1) an earnings per
share target; (2) a return on equity target; and (3) a specified level of
productivity (the "Performance Goals").
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 chief executive officer and
each of the four other highest paid executive officers to $1 million per year.
However, certain performance-based compensation, as defined in the IRS
regulations, is exempt from the limitations on deductibility. In 1997, the Human
Resources Committee adopted terms for the annual and long-term incentive
programs in order for compensation payable under these programs to qualify as
"performance-based" for purposes of section 162(m). These terms were approved by
the shareholders of the Company in 1997.
BASE SALARIES
In determining an executive officer's starting salary, the responsibilities
of the position, the officer's experience and the competitive marketplace,
particularly the salaries of comparable positions at other financial
institutions, are considered. In 1994, the Committee adopted an approach for
base salary adjustments for executive officers under which a target rate for
each position, including that of chief executive officer, was established by
using the midpoint between the 50th percentile of the TPF&C Executive Banking
Survey with an asset size regression analysis and the 50th percentile of the
Peer Group. Following an annual performance evaluation, if the executive is
found to be meeting performance expectations and fully functioning, it is the
intent that base salary will be increased to the target rate. In future years,
unless an executive assumes greater responsibilities, base salary increases will
generally reflect the annual market movement of the salary range structure. In
1995, the data was reviewed for several positions, and the Committee decided to
raise the 1994 market data by 3% (the estimated market increase) rather than
conduct a position-by-position analysis. In 1996 and 1997, a full market
analysis was performed. In 1997, two changes were made to the methodology. In
order to more appropriately evaluate the positions of the most senior
19
<PAGE> 23
executive management other than the Chief Executive Officer, base salaries for
these executives were benchmarked against the Chief Executive Officer, using
industry-relational percentages to chief executive officer compensation for
positions which are traditionally second or third within an organization. Data
used for this analysis was also provided by Towers Perrin Consulting. In
addition, for executive positions outside of the most senior executive
management, broad salary bands were assigned and salary increases were
determined using the same merit guidelines established for all Company
employees. These merit increases are performance driven and a function of
position in range and performance.
ANNUAL INCENTIVE COMPENSATION
Executive officers are eligible to receive annual incentive compensation,
generally of varying percentages of base salary, depending upon the officer's
position and responsibilities. The value of the incentive compensation received
depends upon the degree to which established corporate, and in some cases unit
or individual, performance goals are achieved. In 1998, the Committee
established, and the Board of Directors approved, the Soundness Threshold
relating to corporate performance goals for the award of annual incentive
compensation. If the Soundness Threshold was not met, no annual incentive
compensation would have been paid. Once the Soundness Threshold was met, to the
extent the annual incentive compensation award was based on corporate as opposed
to individual or unit performance, annual incentive compensation earned was
based on the achievement of the Performance Goals, which were weighted equally
for the corporate portion of the award.
In addition to the Soundness Threshold and Performance Goals, in 1997 the
Committee also approved a program under which those employees participating in
the annual incentive compensation program could choose to receive a portion or
all of their potential annual incentive compensation in the form of restricted
Company common stock. The objectives of this program are to (1) focus management
on achieving performance equivalent to high performing peers; (2) improve
alignment between management and shareholder interests; (3) reduce short term
compensation expense in order to allow the Company to invest in other critical
areas; and (4) to motivate and retain senior managers.
Under the program, executive officers could elect to receive their annual
incentive compensation in cash or in restricted stock of the Company or in a
combination of the two for a four-year performance cycle. The cash portion of
the incentive award is earned and paid on an annual basis. To the extent that an
executive elected to receive restricted stock instead of cash, that portion of
the incentive award was eligible for a 100% match by the Company, also paid in
restricted stock. The matching portion was granted in 1998, the second year of
the performance cycle. The restricted stock portion of the award was granted in
1997, the first year of the performance cycle. Provided the target performance
criteria are attained, 25% of the restricted stock portion of the award is
earned each year of the performance cycle. If the performance criteria are not
attained in any year of the performance cycle, the restrictions on those shares
will lapse ten years from the date of grant.
For purposes of vesting the Company-matched portion of the restricted stock
grant, the performance criteria was established by the Committee as the
achievement of median market-to-book valuation (or such other performance
criteria as the Committee may deem appropriate) of a high performing bank peer
group. The peer group and the performance criteria will be determined by the
Committee on an annual basis in conjunction with the analysis of the Company's
investment bankers. Once the performance criteria are achieved, vesting of the
Company-matched portion occurs over a four year period, provided the performance
criteria are attained prior to January, 2001. If the performance criteria are
not attained by this time, the restrictions on the Company-matched portion of
the restricted shares will lapse ten years from the date of grant. In 1998, this
peer group
20
<PAGE> 24
was composed of Bank of New York, Fifth Third Bancorp, First Bank System, Inc.,
First Tennessee National Corp., Huntington Bancshares, Inc., Marshall & Ilsley
Corporation, Mellon Bank Corp., National Commerce Bancorporation, Norwest
Corporation, Provident Bancorp, Inc., StarBanc Corporation, Synovus Financial
Corp., Valley National Bancorp, Wells Fargo & Co, Wilmington Trust Corp. and
Zions Bancorporation. Eleven of the peer group banks are included in the KBW50
Index shown in the Shareholder Return Performance Graph. Under the program the
Committee may revise the performance criteria and/or the constituency of the
high performing peer group as appropriate.
LONG TERM INCENTIVE COMPENSATION
The Company's long term incentive compensation program has two components:
restricted stock awards and annual stock option grants.
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. The lapse of the restrictions
is tied to corporate performance. These awards generally are granted annually,
and the number of shares granted is based on the importance of the executive to
achievement of the Company's long-term performance goals, the market data and a
valuation model developed by Towers Perrin Consulting. In applying the model,
each grant covers a three-year performance period. Dividends are paid 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 the Performance Goals. However,
if the Company does not achieve the Soundness Threshold, two points are
deducted. If less than three points are earned over the performance period, no
restricted stock becomes vested at the end of the period. At the end of the
period, up to 100% of the restricted stock may be vested in the executive free
of restriction, with the percentage varying (from 50% to 100%) based upon the
number of points earned. Any shares which are not vested remain restricted for
seven more years, and dividends on such shares are forfeited during the
seven-year period. In any event, after the passage of ten years the restrictions
lapse if the executive is still employed by the Company. In 1998, participants
earned two points based on the achievement of the Performance Goals.
Annual stock option grants are designed to align the interests of executive
officers with those of shareholders. Because the full value of an executive's
compensation is not realized absent appreciation in the stock price over time,
stock options also help to retain key executives and to provide an incentive for
them to create long-term shareholder value. The Committee sets guidelines for
the size of these awards based on competitive compensation data including an
analysis of the TPF&C Banking Survey, the responsibilities and experience of the
executive and the recommendation of the chief executive officer. The number of
options granted is based upon their projected value using market data and the
Black-Scholes valuation model developed with the assistance of a national
independent compensation consulting firm. The Black-Scholes model considers
stock price, as well as price volatility and dividends over an historical period
to estimate an expected value of a share. Normally options 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. Beginning in 1999, these options will vest over
three years in one-third increments.
STOCK OWNERSHIP POLICY
To further align the interests of management and shareholders, the
Committee has established an executive stock ownership policy. Under the policy,
executive officers are encouraged to acquire and hold shares of the Company's
common stock with a value equal to or exceeding either three or
21
<PAGE> 25
two times their annual salary depending on the executive's job grade. The Chief
Executive Officer's target was established at four times annual salary.
Executives who achieve the target level within three years are granted
restricted stock equal to 10% of their holdings; those who achieve the target
level within four years, 7.5%; and those who achieve the target level within
five years, 5%. If the stock holdings are retained for three years from the date
of grant, the restrictions lapse; if not, the shares are forfeited. Since
inception of the policy, the Chief Executive Officer and 26 other executive
officers have achieved the ownership target.
CHIEF EXECUTIVE OFFICER COMPENSATION
In 1998 the Committee applied the methodologies described above in
determining the Chief Executive Officer's base salary, annual and long-term
incentive compensation. With Board approval, Mr. Bottorff's base salary was
increased to $629,200 effective January 1, 1998. His annual incentive
compensation was dependent upon the achievement of the three Performance Goals,
each of which was weighted equally.
In 1997, in accordance with the annual incentive program, Mr. Bottorff
elected to receive 100% of his annual incentive compensation in restricted stock
of the Company. This election remains in effect for the four-year period of 1997
through 2000. Pursuant to this election, 36,086 restricted shares were granted
to Mr. Bottorff in 1997. This incentive compensation was eligible for a 100%
match by the Company, also paid in restricted stock. In January 1998, the
Committee granted an additional 36,086 restricted shares of Company stock in
accordance with the Company match guideline. For 1998, the Soundness Threshold
and target Performance Goals were attained; therefore, the restrictions on 4,510
shares of the restricted stock lapsed and were released to Mr. Bottorff. Based
on the market value as of January 21, 1999, the lapsed shares were worth
$186,319 or 29.6% of Mr. Bottorff's base salary. The shares of Company-matched
restricted stock granted to Mr. Bottorff in 1998 will vest 25% per year over a
4-year period commencing on the date that performance criteria established by
the Committee are achieved by the Company, provided that such performance
criteria are achieved prior to January 2001.
Also in 1998, Mr. Bottorff was granted long-term incentive compensation in
the form of 40,300 stock options and 14,700 shares of restricted stock. The
stock options will vest 20% per year over a 5-year period; the restricted stock
vests in 3 to 10 years based on achievement of the performance goals.
In 1998, since the Company met or surpassed the Performance Goals
established for the year, Mr. Bottorff earned two points toward the final third
of 29,000 shares of restricted stock granted to him in 1996 for the 1996-98
performance cycle, two points toward the second third of 25,200 shares of
restricted stock granted in 1997 for the 1997-99 performance cycle; and two
points toward the first third of 14,700 shares of restricted stock granted in
1998 for the 1998-2000 performance cycle. The restrictions on these shares lapse
upon the attainment of at least six points at the end of and over each
three-year performance period. Any shares which do not become unrestricted
through the attainment of performance goals remain restricted for seven more
years, and any dividends on these remaining shares are forfeited during the
seven-year period.
Since 1991 Mr. Bottorff has satisfied the vesting and performance
requirements on a total of 517,500 stock options and 94,700 shares of restricted
stock granted to him since his employment with the Company.
22
<PAGE> 26
Submitted by the Human Resources Committee of the Board of Directors,
Earnest W. Deavenport, Jr. (Chairman)
Reginald D. Dickson
Martha R. Ingram
Walter G. Knestrick
Roscoe R. Robinson
J. Kelley Williams, Sr.
David K. Wilson
William S. Wire, II
23
<PAGE> 27
SHAREHOLDER RETURN PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the return on
the Company's common stock with Standard & Poor's 500 Stock Index and the KBW 50
Index for the past five years.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
AMONG FIRST AMERICAN CORPORATION, THE S & P 500 INDEX
AND THE KBW 50 INDEX
(COMPARISION CHART)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN
------------------------------------------------------------
<CAPTION>
12/93 12/94 12/95 12/96 12/97 12/98
--- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
FIRST AMERICAN CORPORATION 100 86 157 196 345 314
S & P 500 100 101 139 171 229 294
KBW 50 100 95 152 215 314 340
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) $100 invested on December 31, 1993 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.
24
<PAGE> 28
CERTAIN TRANSACTIONS
Some of the Company's executive officers and directors, or their immediate
family members, are customers of the Company's subsidiary banks and some of the
Company's executive officers and directors, or their immediate family members,
are directors or officers of corporations, or members of partnerships, which are
customers of the Company's subsidiary banks. As customers they had transactions
in the ordinary course of business, 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.
In August 1996, FANB entered into an agreement with Pilot Corporation, a
retail operator of convenience stores/gasoline stations, so as to permit FANB to
install, operate and maintain automated cash dispensers ("ATMs") at 38 Pilot Oil
stores. Mr. Haslam, a member of the Board of Directors of the Company, is a
director of Pilot Corporation, of which he and his family own 100%. Mr. Smith, a
member of the Board of Directors of the Company, also serves on the Board of
Directors of Pilot Corporation. In 1998, FANB paid Pilot a total of $144,816.50
based upon the number of cash withdrawal transactions effected through these
ATMs. FANB anticipates that in the future, payments to Pilot under this
agreement will be approximately $180,000 per year.
In April 1996, FANB acquired 49% of The SSI Group, Inc. ("SSI"), a
healthcare claims processing company headquartered in Mobile, Alabama. At that
time, the remaining shares of SSI were owned 49% by Southern Medical Health
Systems, Inc. ("SMHS") and 2% by Celia A. Wallace individually. Ms. Wallace owns
100% of SMHS. In conjunction with that transaction, FANB acquired the option to
purchase an additional 215,067 shares of SSI from SMHS upon the occurrence of
certain events. SSI's January 1, 1997 acquisition of CareWare Systems, Inc., a
medical management computer software company for SSI stock, triggered FANB's
ability to exercise a portion of its option, and FANB purchased 15,569 shares of
SSI common stock from SMHS for $228,024 in conjunction with the CareWare
acquisition. SSI's November 6, 1998 asset purchase of Health Management
Technologies, Inc. ("HMT"), a corporation headquartered in Lafayette, California
for SSI stock, triggered FANB's ability to exercise a portion of its option, and
FANB purchased 63,994 shares of SSI Common Stock from SMHS for $937,256 in
connection with the HMT acquisition. FANB currently owns 49% of SSI and has the
option to purchase the remaining 135,504 shares from SMHS which, if exercised in
total, would increase FANB's ownership to 58.5%.
In connection with the Company's acquisition of Pioneer Bancshares, Inc. on
November 20, 1998, George M. Clark, III, formerly a member of the Pioneer Board,
entered into a consulting agreement with FANB. Pursuant to the terms of this
agreement, which was effective March 1, 1999, Mr. Clark serves as an Advisory
Director on FANB's Chattanooga Advisory Board and renders consulting services to
FANB. Mr. Clark's consulting fees are $83,051 per year, plus reimbursement of
reasonable out-of-pocket travel and business expenses in accordance with FANB's
policies for a term scheduled to end December 2000, and a one-time signing bonus
of $2,000. Mr. Clark's consulting agreement also contains confidentiality
provisions and restricts competition by Mr. Clark during its term and for one
year thereafter.
25
<PAGE> 29
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
KPMG LLP, Certified Public Accountants, have been the Company's independent
auditors since 1971 and reported on the Company's consolidated financial
statements for the year ended December 31, 1998. On February 26, 1999, the Audit
Committee appointed KPMG LLP as the Company's independent auditors for the year
ending December 31, 1999. A representative of KPMG LLP is expected to attend the
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, 1998, TOGETHER WITH FINANCIAL STATEMENTS AND SCHEDULES, AS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (AVAILABLE WITHOUT CHARGE TO
SHAREHOLDERS), PLEASE WRITE TO JOE J. POWELL, EXECUTIVE VICE PRESIDENT AND
DIRECTOR OF BANK INVESTMENTS AND INVESTOR RELATIONS, FIRST AMERICAN CORPORATION,
FIRST AMERICAN CENTER, 300 UNION STREET, NASHVILLE, TENNESSEE 37237 OR CALL
(615) 748-2455.
26
<PAGE> 30
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK IN THE ENCLOSED ENVELOPE AS SOON AS POSSIBLE.
ANNUAL MEETING OF SHAREHOLDERS
OF
FIRST AMERICAN CORPORATION
APRIL 15, 1999
<PAGE> 31
Appendix A
PROXY
FIRST AMERICAN CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF
SHAREHOLDERS CALLED FOR APRIL 15, 1999.
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 1999 Annual
Meeting of Shareholders of FIRST AMERICAN CORPORATION and any adjournments
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 and by the proxies in their discretion on any other matters which may
properly come before said Meeting or any adjournment thereof.
SEE REVERSE SIDE
X
PLEASE MARK YOUR
VOTE AS IN THIS
EXAMPLE.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE LISTED
PROPOSALS, THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR
ITEMS ONE AND TWO.
1. Election of
Directors.
[ ] FOR ALL NOMINEES EXCEPT [ ] WITHHELD FROM
AS NOTED ON THE LINE BELOW ALL NOMINEES
NOMINEES:
Earnest W. Deavenport, Jr., Warren A. Hood, Jr., Martha R. Ingram, James R.
Martin, E. B. Robinson, Jr., Roscoe R. Robinson, and William S. Wire II to serve
until the Annual Meeting in 2002; John N. Palmer and George M. Clark III to
serve until the Annual Meeting in 2001, and J. Kelley Williams, Sr. to serve
until the Annual Meeting in 2000 and until their successors have been elected
and qualified.
(Instruction: To withhold authority to vote for any individual nominee(s), write
that nominee's name(s) on the line above:)
- -----------------------------------------------------------------------------
2. For the proxies to vote in their discretion on any other matter which may
come before said Meeting or any adjournment thereof.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
This proxy will revoke all prior proxies signed by you.
Please check this box if you plan to attend the Annual Meeting
Please sign exactly as 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.
----------------------------------- -----------------------
SIGNATURE(S) DATE
FOLD AND DETACH HERE
