SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Sec. 14(a) of the Securities Exchange Act of 1934.
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2)
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
FIRST NATIONAL CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)and 0-11.
1)
Title of each class of securities to which transaction applies:
-----------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
-----------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:-----------------
5) Total fee paid:--------------------------------------------------
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:-----------------------------------------
2) Form, Schedule or Registration Statement No.:-------------------
3) Filing Party:---------------------------------------------------
4) Date Filed:-----------------------------------------------------
<PAGE>
FIRST NATIONAL CORPORATION
950 John C. Calhoun Drive, S.E.
Orangeburg, South Carolina 29115
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held April 22, 1997
TO THE SHAREHOLDERS:
Notice is hereby given that the Annual Meeting of the Shareholders (the
"Annual Meeting") of First National Corporation, a South Carolina corporation
(the "Company"), will be held at the Main Banking Center of First National Bank,
950 John C. Calhoun Drive, S.E., Orangeburg, South Carolina at 2:00 p.m., on
April 22, 1997, for the following purposes:
(1) To elect six directors of the Company to serve three-year terms and two
directors of the Company to serve two-year terms;
(2) To adopt an amendment to the Company's Articles of Incorporation
increasing from 5,000,000 to 20,000,000 the number of authorized shares of
the Company's common stock;
(3) To ratify the appointment of J.W. Hunt and Company, LLP, as independent
auditors for the Company for the fiscal year ending December 31, 1997; and
(4) To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
Only record holders of Common Stock of the Company at the close of business
on March 7, 1997, are entitled to notice of and to vote at the Annual Meeting or
any adjournment thereof.
The Company's Proxy, Proxy Statement (providing important shareholder
information for the Annual Meeting), and its 1996 Annual Report to Shareholders
are enclosed with this Notice.
You are cordially invited and urged to attend the Annual Meeting in person.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE
REQUESTED TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE
ENCLOSED, SELF- ADDRESSED, STAMPED ENVELOPE. IF YOU NEED ASSISTANCE IN
COMPLETING YOUR PROXY, PLEASE CALL THE COMPANY AT TELEPHONE NUMBER (803)
534-2175. IF YOU ARE A RECORD SHAREHOLDER AND ATTEND THE ANNUAL MEETING AND
DESIRE TO REVOKE YOUR PROXY AND VOTE IN PERSON YOU MAY DO SO. IN ANY EVENT, A
PROXY MAY BE REVOKED BY A RECORD HOLDER AT ANY TIME BEFORE IT IS EXERCISED.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL
OF ALL THE PROPOSALS PRESENTED.
By Order of the Board of Directors
James C. Hunter, Jr.
Secretary
Orangeburg, South Carolina
April 1, 1997
<PAGE>
FIRST NATIONAL CORPORATION
950 John C. Calhoun Drive, S.E.
Orangeburg, South Carolina 29115
PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS
to be Held April 22, 1997
-------------------------------------------------
This Proxy Statement is furnished to shareholders of First National
Corporation, a South Carolina corporation (herein, unless the context otherwise
requires, together with its subsidiaries, the "Company"), in connection with the
solicitation of proxies by the Company's Board of Directors for use at the
Annual Meeting of Shareholders to be held at the Main Banking Center of First
National Bank, 950 John C. Calhoun Drive, S.E., Orangeburg, South Carolina at
2:00 p.m., on April 22, 1997 or any adjournment thereof (the "Annual Meeting"),
for the purposes set forth in the accompanying Notice of Annual Meeting of
Shareholders.
Solicitation of proxies may be made in person or by mail, telephone,
telegraph or other electronic means by directors, officers and regular employees
of the Company. The Company may also request banking institutions, brokerage
firms, custodians, nominees and fiduciaries to forward solicitation materials to
the beneficial owners of Common Stock of the Company held of record by such
persons, and the Company will reimburse the reasonable forwarding expenses. The
cost of solicitation of proxies will be paid by the Company. This Proxy
Statement was first mailed to shareholders on or about April 1, 1997.
The Company has its principal executive offices at 950 John C. Calhoun
Drive, S.E., Orangeburg, South Carolina 29115. The Company's telephone number is
(803) 534-2175.
ANNUAL REPORT
The Annual Report to Shareholders covering the Company's fiscal year ended
December 31, 1996, including financial statements, is enclosed herewith. Such
Annual Report to Shareholders does not form any part of the material for the
solicitation of proxies.
REVOCATION OF PROXY
Any record shareholder returning the accompanying proxy may revoke such
proxy at any time prior to its exercise (a) by giving written notice to the
Company of such revocation, (b) by voting in person at the meeting, or (c) by
executing and delivering to the Company a later dated proxy. Attendance at the
Annual Meeting will not in itself constitute revocation of a proxy. Any written
notice or proxy revoking a proxy should be sent to First National Corporation,
950 John C. Calhoun Drive, S.E., Orangeburg, South Carolina 29115, Attention: W.
Louis Griffith. Written notice of revocation or delivery of a later dated proxy
will be effective upon receipt thereof by the Company.
QUORUM AND VOTING
The Company's only voting security is its $5.00 par value Common Stock
("Common Stock"), each share of which entitles the holder thereof to one vote on
each matter to come before the Annual Meeting. At the close of business on March
7, 1997 (the "Record Date"), the Company had issued and outstanding 2,551,091
shares of Common Stock, which were held of record by approximately 1,950
persons. Only shareholders of record at the close of business on the Record Date
are entitled to notice of and to vote on matters that come before the Annual
Meeting. Notwithstanding the Record Date specified above, the Company's stock
transfer books will not be closed and shares of the Common Stock may be
transferred subsequent to the Record Date. However, all votes must be cast in
the names of holders of record on the Record Date.
The presence in person or by proxy of the holders of a majority of the
outstanding shares of Common Stock entitled to vote at the Annual Meeting is
necessary to constitute a quorum at the Annual Meeting. If a share is
represented for any purpose at the Annual Meeting by the presence of the
registered owner or a person holding a valid proxy for the registered owner, it
is deemed to be present for the purposes of establishing a quorum. Therefore,
<PAGE>
valid proxies which are marked "Abstain" or "Withhold" or as to which no vote is
marked, including proxies submitted by brokers that are the record owners of
shares (so-called "broker non-votes"), will be included in determining the
number of votes present or represented at the Annual Meeting. If a quorum is not
present or represented at the meeting, the shareholders entitled to vote,
present in person or represented by proxy, have the power to adjourn the meeting
from time to time until a quorum is present or represented. If any such
adjournment is for a period of less than 30 days, no notice other than an
announcement at the meeting, will be given of the adjournment. If the
adjournment is for 30 days or more, notice of the adjourned meeting will be
given in accordance with the Bylaws. Directors, officers and regular employees
of the Company may solicit proxies for the reconvened meeting in person or by
mail, telephone, telegraph or other electronic means. At any such reconvened
meeting at which a quorum is present or represented, any business may be
transacted that might have been transacted at the meeting as originally noticed.
Once a quorum has been established, it will not be destroyed by the departure of
shares prior to the adjournment of the meeting.
Adoption of the proposed amendment to the Company's Articles of
Incorporation requires the affirmative vote of two-thirds of the outstanding
shares of Common Stock. Votes that are withheld or shares that are not voted on
the amendment will have the effect of votes against the amendment.
Provided a quorum is established at the meeting, directors will be elected
by a plurality of the votes cast at the Annual Meeting. Votes that are withheld
or shares that are not voted in the election of directors will have no effect on
the outcome of election of directors. Cumulative voting will not be permitted.
All other matters which may be considered and acted upon at the Annual
Meeting, including ratification of J. W. Hunt and Company, LLP as independent
auditors, require that the number of shares of Common Stock voted in favor of
the matter exceed the number of shares of Common Stock voted against the matter,
provided a quorum has been established. Votes that are withheld or shares that
are not voted will have no effect on the outcome of such matters.
ACTIONS TO BE TAKEN BY THE PROXIES
Each proxy, unless the shareholder otherwise specifies therein, will be
voted "FOR" the election of the persons named in this Proxy Statement as the
Board of Directors' nominees for election to the Board of Directors; "FOR"
adoption of the proposed amendment to the Company's Articles of Incorporation;
and "FOR" the ratification of the appointment of J. W. Hunt and Company, LLP as
accountants for the fiscal year ending December 31, 1997. In each case where the
shareholder has appropriately specified how the proxy is to be voted, it will be
voted in accordance with his specifications. As to any other matter of business
which may be brought before the Annual Meeting, a vote may be cast pursuant to
the accompanying proxy in accordance with the best judgment of the persons
voting the same, but the Board of Directors does not know of any such other
business.
STOCKHOLDER PROPOSALS
Any shareholder of the Company desiring to present a proposal for action
at the 1998 Annual Meeting of Shareholders must deliver the proposal to the
executive offices of the Company no later than December 4, 1997. Only proper
proposals that are timely received will be included in the Company's Proxy
Statement and Proxy.
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of March 7, 1997, the number and
percentage of outstanding shares beneficially owned by (i) each director and
nominee for director of the Company, (ii) each person named in the Summary
Compensation Table, and (iii) all executive officers and directors of the
Company as a group. No person is known by the Company to own more than 5% of the
outstanding Common Stock.
2
<PAGE>
<TABLE>
<CAPTION>
Year First Number of Shares % of Common Stock
Name Elected Director Beneficially Owned Ownership
- ---- ---------------- ------------------ ----------------------
<S> <C> <C> <C>
E. Everett Gasque, Jr. 1993 21,104(1) *
John L. Gramling, Jr. 1974+ 3,170(2) *
Robert R. Horger 1991 10,221(3) *
Harry M. Mims, Jr. 1988 12,879 *
Dick G. McTeer 1994 339 *
James W. Roquemore 1994 5,247(4) *
Johnny E. Ward 1991 20,490(5) *
Ralph W. Norman 1996 2,720(6) *
Walter L. Tobin ** 210(7) *
Charles W. Clark 1993 24,763 1.0%
C. John Hipp, III 1994 30,177(8) 1.2%
Dwight W. Frierson ** 2,023(9) *
Edward V. Mirmow, Jr. 1983+ 43,049(10) 1.7%
Larry D. Westbury 1986 10,467(11) *
William B. Cox 1979+ 114,491(12) 4.5%
C. Parker Dempsey 1983+ 3,901 *
J. Carlisle McAlhany 1969+ 43,424 1.7%
Anne H. Oswald 1991 307 *
Robert R. Hill, Jr. 1996 2,228(13) *
A. Dewall Waters 1987 9,602(14) *
All directors and 371,716(15) 14.6%
Executive Officers as a
Group (22 persons)
</TABLE>
- -----------------------------
*Less than 1% of outstanding FNC Common Stock.
**Messrs. Tobin and Frierson are nominees who are not currently directors of the
Company.
+ Includes service as a director of First National Bank prior to formation of
the Company in 1985.
(1) Includes 1,244 shares owned by Mr. Gasque's spouse.
(2) Includes 624 shares owned by Mr. Gramling's spouse.
(3) Includes 2,835 shares held in an IRA; and 315 shares held as custodian for
Mr. Horger's daughter.
(4) Includes 422 shares in an IRA; 1,222 shares owned by Mr. Roquemore's spouse
in an IRA; and 1,260 shares held by Mr. Roquemore as custodian for his
three children.
(5) Includes 8,587 shares held in an IRA; 105 shares held by Mr. Ward as
custodian for his grandchild; and 2,100 shares held by a partnership in
which Mr. Ward is a partner.
(6) Includes 776 shares held by Mr. Norman's spouse as custodian for their
children.
(7) Jointly owned with Mr. Tobin's spouse.
(8) Includes 407 shares in an IRA; 167 shares owned by Mr. Hipp's spouse in an
IRA; 18,419 shares owned by a general partnership in which Mr. Hipp owns a
1/7 interest, of which Mr. Hipp disclaims beneficial ownership of all but
2,631 shares; 3,176 shares subject to currently exercisable options; and
6,064 shares of restricted stock which Mr. Hipp presently has the right to
vote.
(9) Includes 1,296 shares jointly owned with Mr. Frierson's spouse; and 727
shares held as custodian for Mr. Frierson's children.
(10) Includes 1,050 shares owned by Mr. Mirmow's spouse.
(11) Includes 6,962 shares subject to currently exercisable options.
(12) Includes 52,780 shares owned by Mr. Cox's spouse, as to which Mr. Cox
disclaims beneficial ownership; 7,952 shares held by Mr. Cox in an IRA; and
242 shares held by Mr. Cox's spouse in an IRA.
(13) Includes 450 shares held in an IRA.
(14) Includes 5,004 shares held in an IRA.
(15) Includes 17,475 shares subject to currently exercisable options.
3
<PAGE>
ELECTION OF DIRECTORS
The Articles of Incorporation provide for a maximum of 20 directors, to be
divided into three classes each serving three-year terms, with the classes as
equal in number as possible. After the 1996 Annual Meeting, the Board of
Directors of the Company elected Robert R. Hill, Jr. and Ralph W. Norman, the
President and Chairman of the Board of Directors, respectively, of the National
Bank of York County, as directors of the Company. Messrs. Hill and Norman have
now been nominated for election by the shareholders at the Annual Meeting. The
Board of Directors of the Company has also nominated Dwight W. Frierson and
Walter L. Tobin, who are not currently directors of the Company, for election by
the shareholders at the Annual Meeting to fill the seats of two retiring
directors. Charles W. Clark, C. John Hipp, III, Edward V. Mirmow, Jr. and Larry
D. Westbury, all of whom are currently directors of the Company and whose terms
expire at the Annual Meeting, have also been nominated by the Board of Directors
for reelection by the shareholders. Each of Messrs. Clark, Hipp, Mirmow and
Westbury has been nominated for election to serve a three-year term, or until
their respective successors have been elected and qualified to serve. To keep
the number of directors in each class as nearly equal as possible, two of the
directors who have not previously been elected by the shareholders have been
nominated to serve two-year terms and two have been nominated to serve
three-year terms, or until their successors have been elected and qualified to
serve. The Company's bylaws provide that no person is eligible to be a nominee
for election as a director of the Company unless the person shall have been
nominated by a record shareholder of the Company in writing delivered to the
secretary of the Company not less than 45 days prior to the meeting at which
directors are to be elected. No other persons have qualified to be nominees.
The table below sets forth the name, address, expiration of term as a
director and business experience for the past five years for each of the
directors of the Company.
<TABLE>
<CAPTION>
Name, Age and Address Position in FNC Business Experience for the Past Five Years
--------------------- --------------- -------------------------------------------
Director Nominees for Terms to Expire in 2000
<S> <C> <C>
Walter L. Tobin Nominee Superintendent, Orangeburg School District Five
Orangeburg, SC (55)
Charles W. Clark Director President, Santee Shores, Inc. - Real Estate
Santee, SC (47) Development and Management.
C. John Hipp, III President and Chief 1994 - present, President and Chief Executive Officer,
Orangeburg, SC (45) Executive Officer First National Bank and First National Corporation;
1991 to 1994, President, Rock Hill National Bank and
Rock Hill National Bank Corporation; 1990 to 1991,
Executive Vice President, Rock Hill National Bank.
Dwight W. Frierson Nominee Vice President and General Manager Orangeburg Coca
Orangeburg, SC (40) Cola Bottling Company; Owner/Operator, TCBY,
Orangeburg; Partner, TCBY, Lexington.
Edward V. Mirmow, Jr. Director Retired Attorney (since 1991).
Orangeburg, SC (66)
Larry D. Westbury Chairman of Chairman of the Board, First National Bank and First
Orangeburg, SC (64) the Board National Corporation since 1994; Retired in 1994 as
President and Chief Executive Officer First National
Corporation and First National Bank.
<CAPTION>
Director Nominees for Terms to Expire in 1999
<S> <C> <C>
Robert R. Hill, Jr. Director President of the National Bank of York County since
Rock Hill, SC (30) July, 1996; organizer of the National Bank of York
County from October, 1995 to July, 1996; team leader
for NationsBank northern region of South Carolina from
March, 1995 to October, 1995; Vice President of
Commercial Lending, Rock Hill National Bank from
October, 1990 to March, 1995.
4
<PAGE>
Ralph W. Norman Director President, Warren Norman Co., Inc. - Real estate
Rock Hill, SC (43) brokerage firm; Chairman of the Board, the National
Bank of York County.
<CAPTION>
Current Directors Whose Terms Expire in 1999
<S> <C> <C>
William B. Cox Director Chairman of the Board, Cox Wood Preserving Co., Inc.
Orangeburg, SC (71) - Wood preserving and processing.
C. Parker Dempsey Director Secretary, Dempsey Wood Products, Inc., (since 1990) -
Orangeburg, SC (68) Lumber Manufacturer; Executive Vice President, Stone
Forest Industries (prior to 1990) - Forestry services.
J. Carlisle McAlhany Director Retired Merchant.
Reevesville, SC (81)
Anne H. Oswald Director Partner, Oswald and White Realty - Real estate
Walterboro, SC (49) brokerage agency.
A. Dewall Waters Director Partner, Main Waters Enterprises Partnership -
Orangeburg, SC (52) Owner/Operator, McDonald's Restaurants.
<CAPTION>
Current Directors Whose Terms Expire in 1998
<S> <C> <C>
E. Everett Gasque, Jr. Director President, E. E. Gasque & Son, Inc. - Farming Supplies
Elloree, SC (66) and Products.
John L. Gramling, Jr. Director Farmer.
Orangeburg, SC (65)
Robert R. Horger Vice Chairman Vice Chairman of the Board, First National Bank and
Orangeburg, SC (46) of the Board First National Corporation since 1994;Attorney-Horger,
Barnwell and Reid.
Harry M. Mims, Jr. Director President, J. F. Cleckley & Company - Site
Orangeburg, SC (55) development and paving.
Dick G. McTeer Director Retired Motel Owner/Operator.
Bluffton, SC (70)
James W. Roquemore Director Executive Vice President, Patten Seed Company, Inc.,
Orangeburg, SC (41) Lakeland, Georgia; General Manager of Super-
Sod/Carolina - Production and marketing of turf, grass,
sod and seed. Owner and operator of golf courses in
Georgia.
Johnny E. Ward Director President, W & W Truck & Tractor Company, Inc. -
Moncks Corner, SC (55) Logging and farming equipment, sales and service.
</TABLE>
Meetings of the Board of Directors and Committees.
During 1996, the Board of Directors of the Company held 10 regular
meetings. Each director except James W. Roquemore attended at least 75% of the
aggregate of (a) the total number of meetings of the Board of Directors of the
Company held during the period for which he or she served as a director, and (b)
the total number of meetings held by all committees of the Board of Directors of
the Company on which he or she served.
During 1996, First National Corporation Directors each received an annual
retainer of $1,200, payable quarterly, plus a fee of $250 per month. In
addition, members of the Executive Committee also received an annual retainer of
$7,800, paid at the rate of $150 per week. Members of the Audit Committee were
paid $100 per committee meeting attended. Directors who are also officers of
First National Bank or National Bank of York County do not receive any such
fees.
5
<PAGE>
The Company's Board of Directors maintains Audit, Compensation, Executive
and Policy Committees. The functions, composition and frequency of meetings for
these Committees during 1996 were as follows:
Audit Committee - The Audit Committee was composed of Edward V. Mirmow,
Jr., Chairman, E. Everett Gasque, Jr., and Johnny E. Ward. The Audit Committee
held 11 meetings in 1996. The Audit Committee recommends to the Board of
Directors the appointment of the Company's independent auditors, reviews with
the independent auditors the recommendations and results of the audit
engagement, maintains direct reporting responsibility and regular communication
with the internal audit staff of the Company, First National Bank and the
National Bank of York County, reviews the scope and the results of the audits of
the Company's internal audit department and other matters pertaining to the
Company's accounting and financial reporting functions, approves the services to
be performed by the independent auditors, considers the range of audit and
non-audit fees, and reviews the adequacy of the Company's, First National Bank's
and the National Bank of York County's systems of internal accounting controls.
Executive Committee - The Executive Committee is composed of Larry D.
Westbury, Chairman, William B. Cox, Robert R. Horger, Robert H. Jennings, III,
J. Carlisle McAlhany, Harry M. Mims, Jr. and C. John Hipp, III. The Board of
Directors of the Company may, by resolution adopted by a majority of its
members, delegate to the Executive Committee the power, with certain exceptions,
to exercise the authority of the Board of Directors in the management of the
affairs of the Company. The Executive Committee also acts as nominating
committee for the purpose of recommending to the Board of Directors nominees for
election to the Board of Directors. The Executive Committee will consider
nominees recommended by record shareholders upon compliance with the following
procedure: The nomination must be in writing and must be delivered to the
Secretary of the Company not less than 45 days prior to the meeting of
shareholders at which directors are to be elected. The written nomination must
state the name, address and number of shares owned by the nominee, and the name
and address of the shareholder making the nomination. The Executive Committee
met 49 times in 1996.
Compensation Committee - The Compensation Committee is composed of William
B. Cox, Chairman, C. Parker Dempsey, A. Dewall Waters, Larry D. Westbury and C.
John Hipp, III. The Compensation Committee met 3 times in 1996. The Compensation
Committee evaluates the performance of the executive officers of the Company and
recommends to the Board of Directors, through the Executive Committee, matters
concerning compensation, salaries, and other forms of executive compensation to
officers of First National Bank and the National Bank of York County.
Policy Committee - The Policy Committee is composed of Robert R. Horger,
Chairman, William B. Cox, C. John Hipp, III, Robert H. Jennings, III, J.
Carlisle McAlhany, Harry M. Mims, and Larry D. Westbury. The primary purpose of
the Policy Committee is to recommend new policies and review present policies of
the Company. The Policy Committee met 8 times in 1996.
EXECUTIVE COMPENSATION
The following table summarizes for the years indicated current and
long-term compensation and stock related compensation for each executive officer
of the Company and its subsidiaries whose total salary and bonus for the year
ended December 31, 1996 exceeded $100,000.
6
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Annual Compensation
Compensation(1) Awards
Executive Officer and Year Salary Bonus(2) Number of Securities All Other
Principal Position Underlying Options(3) Compensation(4)
<S> <C> <C> <C> <C> <C>
C. John Hipp, III, 1996 $157,772 $30,704 14,752 $4,172
President and Chief 1995 146,018 6,000 6,050 1,815
Executive Officer 1994(5) 97,794 6,000 5,500 -0-
James C. Hunter, Jr. 1996 $ 92,043 $15,960 10,586 $2,467
Executive Vice 1995 85,467 4,000 5,082 2,357
President 1994 82,087 4,999 4,620 2,259
Donald O. Newnham 1996 $ 86,425 $16,528 9,536 $2,296
Senior Vice President 1995 80,930 9,587 5,082 2,220
1994 75,542 4,789 4,620 2,165
</TABLE>
(1) Perquisites and personal benefits did not exceed the lesser of $50,000 or
10% of total salary plus bonus.
(2) Figures shown represent actual cash bonuses paid during the year indicated.
First National Bank maintains an incentive compensation plan known as the
Employee Incentive Compensation Plan ("Plan"). Amounts payable under the
Plan are based on the Company's performance in terms of its Return on
Equity (ROE) for any calendar year. The First National Bank Compensation
Committee sets performance goals for the Company at the beginning of any
calendar year. The Board of Directors of the Company, however, has the
discretion to change during any year the performance goals, payment amounts
and other requirements of the Plan. The Plan creates an "incentive pool"
determined by multiplying a certain percentage of First National Bank
income over a stated percentage ROE for the calendar year in question.
Amounts paid into the incentive pool are distributed to participating
employees based on the individual employee's merit and salary level.
(3) Figures shown represent the number of shares of Company stock subject to
options awarded to the named executive officer during the years indicated.
(4) Includes contributions by First National Bank through matching or
discretionary contributions to its Employee Savings Plan allocated to the
named executive officers' accounts, and term life insurance premiums paid
by First National Bank for the benefit of the named executive officers as
follows:
<TABLE>
<CAPTION>
Employee Savings Plan Life Insurance Premiums
<S> <C> <C> <C>
C. John Hipp, III 1996 $3,000 $1,172
1995 1,450 365
1994 - -
James C. Hunter, Jr. 1996 1,789 678
1995 1,709 648
1994 1,639 620
Donald O. Newnham 1996 1,666 630
1995 1,610 610
1994 1,570 595
</TABLE>
7
<PAGE>
The Employee Savings Plan is a "tax qualified" plan under Section 401(a) of
the Internal Revenue Code and covers all First National Bank employees.
(5) Mr. Hipp's employment commenced in April, 1994. Accordingly, his
compensation for 1994 covered only nine months.
Employment Agreement
In March, 1994, C. John Hipp, III, entered into an Employment Agreement
with the Company providing for his employment as President and Chief Executive
Officer of First National Bank. The term of the agreement began May 1, 1994, and
ends April 30, 1997, with provision for Mr. Hipp's continued employment at will
after April 30, 1997. The agreement provides for compensation for Mr. Hipp at
the 1994 level or a greater rate set by the Board of Directors of the Company or
by committee appointed by the Board of Directors, plus fringe benefits and
reimbursement of expenses. Under the terms of the agreement, Mr. Hipp has also
been granted options to purchase up to a total of 5,000 (before adjustments for
10% stock dividends paid on each of November 30, 1994 and November 30, 1995)
shares of the Company's common stock under the terms and conditions of First
National Corporation's Incentive Stock Option Plan of 1992. In the event of Mr.
Hipp's termination prior to April 30, 1997 without cause, Mr. Hipp will be
entitled to continued compensation at the rate then in effect until April 30,
1997. In the event that Mr. Hipp's employment is terminated for any reason by
either Mr. Hipp or the Company prior to April 30, 1997, following a sale or
merger (as defined in the agreement), Mr. Hipp will be entitled to continued
compensation at the rate then in effect until April 30, 1997. In the event of
termination of Mr. Hipp's employment because of death or disability prior to
April 30, 1997, Mr. Hipp (or his estate) will be entitled to be paid his then
current salary for a period of one year from the date of such termination. If
Mr. Hipp's employment is terminated for any reason by either Mr. Hipp or by the
Company after April 30, 1997 and prior to April 30, 2004, following a sale or
merger, Mr. Hipp will be entitled to continued compensation at the rate then in
effect for a period of three years or until April 30, 2004, whichever period is
shorter. In the event of Mr. Hipp's termination after April 30, 1997 and prior
to April 30, 2004 without cause or because of death or disability, Mr. Hipp (or
his estate) will be entitled to be paid his then current salary for a period of
one year from the date of such termination. Upon termination without cause,
after a sale or merger, or after disability, however, Mr. Hipp is under an
affirmative obligation for one year following termination to actively seek and
accept comparable alternative employment, and any compensation received by him
or earnable by him with reasonable diligence following such termination will be
deducted from amounts owed to him by the Company under the Agreement.
Restricted Stock Plan
On January 25, 1996, the Board of Directors of the Company approved the
issuance of restricted stock to C. John Hipp, III, President and Chief Executive
Officer of the Company. On March 7, 1996, the Board of Directors fixed the
number of restricted shares issuable at 5,185. The grant is conditioned upon
continued employment of Mr. Hipp as Chief Executive Officer of the Company at
each vesting date as follows: a) 25% of the shares vest free of restrictions in
1999; b) an additional 25% of the shares vest free of restrictions in 2001; and
c) the remaining 50% of the shares vest free of restrictions in 2003.
Termination of Mr. Hipp's employment as Chief Executive Officer for any reason
(except death or change in control of the Company) prior to a vesting date would
terminate any interest in non-vested shares. Prior to vesting of the shares, as
long as Mr. Hipp remains Chief Executive Officer of the Company, he will have
the right to vote such shares and to receive dividends paid with respect to such
shares. All restricted shares will fully vest in the event of change in control
of First National Bank or upon death of Mr. Hipp while serving as Chief
Executive Officer.
8
<PAGE>
INFORMATION PERTAINING TO STOCK OPTION PLANS
1992 Stock Option Plan
The Company's Incentive Stock Option Plan of 1992 was adopted by the Board
of Directors on March 12, 1992, and was duly approved by shareholders of the
Company on April 28, 1992. The Plan reserves 50,000 shares of Common Stock for
issuance pursuant to the exercise of options that may be granted under the Plan.
Options under the Plan are incentive stock options within the meaning of Section
422 of the Internal Revenue Code, and may be granted to key employees in full
time employment of the Company or its subsidiaries. The Stock Option Committee,
which is appointed by the Board of Directors of the Company, selects the
employees to receive grants under the Plan and determines the number of shares
to be covered by the options granted. Options granted under the Plan may not be
exercised in whole or in part within one year following the date of grant of the
options, and thereafter become exercisable in 25% increments over the next four
years. The exercise price of the options may not be less than fair market value
of the Common Stock on the date of grant. In the event of an acquisition or
change in control of the Company or its subsidiaries, any options already
granted will automatically become 100% vested. The options expire five years
following grant.
1996 Incentive Stock Option Plan
On February 8, 1996, the Board of Directors of the Company adopted the
1996 Incentive Stock Option Plan, which reserves 73,000 shares of Common Stock
for issuance pursuant to the exercise of options which may be granted pursuant
to the 1996 Incentive Stock Option Plan. The 1996 Incentive Stock Option Plan
became effective March 14, 1996, pursuant to stockholder approval, and will
terminate March 14, 2001, unless terminated earlier by the Board of Directors.
Options under the 1996 Incentive Stock Option Plan are "incentive stock options"
within the meaning of the Internal Revenue Code and may be granted to persons
who are employees of the Company or any subsidiary (including officers and
directors who are employees) at the time of grant and who are, or are expected
to be, primarily responsible for the management, growth or protection of some
part or all of the business of the Company or any subsidiary. The 1996 Incentive
Stock Option Plan is administered by a Committee of not fewer than three
directors of the Company appointed by the Board of Directors. All options must
have an exercise price not less than the fair market value of the Common Stock
at the date of grant, as determined by the Committee. The Committee may set
other terms for the exercise of the options but may not grant to any person more
than $100,000 of options (based on the fair market value of the optioned shares
on the date of the grant of the option) which first become exercisable in any
calendar year. The Committee also selects the employees to receive grants under
the 1996 Incentive Stock Option Plan and determines the number of shares covered
by options granted under the 1996 Incentive Stock Option Plan. Options granted
pursuant to the 1996 Incentive Stock Option Plan will not be exercisable for one
year following grant, and thereafter become exercisable in 25% increments over
the next four years. No options may be exercised after five years from the date
of grant; options may not be transferred except by will or the laws of descent
and distribution; and options may be exercised only (i) while the optionee is an
employee of the Company, (ii) within the earlier of five years from the date of
grant or three months after the date of termination of employment, (iii) within
the earlier of five years from the date of grant or two years after death, (iv)
within the earlier of five years from the date of grant or one year after
disability, or (v) in case of termination for good cause (as defined by the
plan), immediately upon termination. The number and kind of shares that are
available for issuance pursuant to the 1996 Incentive Stock Option Plan and that
are subject to any options and the option price per share shall be adjusted in
the event of any merger, consolidation, stock dividend, split-up, combination or
exchange of shares or recapitalization or change in capitalization. Upon the
occurrence of certain changes in control of the Company or its subsidiaries all
options outstanding under the 1996 Incentive Stock Option Plan will become
immediately exercisable. Furthermore, upon the proposal of an acquisition,
merger, or change of control, the Committee may, at its sole discretion, issue
all remaining options authorized under the 1996 Incentive Stock Option Plan.
9
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of
Individual Grants (1) Stock Price
Appreciation for
Option Term(2)
--------------------------------------------------------------- ----------------------
Number of % of total
Securities Options
Underlying Granted to Exercise
Options Employees Price Expiration
Name Granted(1) in 1996 per share Date 5%($) 10%($)
- ---- ---------- -------- --------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
C. John Hipp, III 8,400 17.78% $25.71 5/16/01 $59,724 $131,796
James C. Hunter, Jr. 5,250 11.11% 25.71 5/16/01 37,328 82,373
Donald O. Newnham 4,200 8.89% 25.71 5/16/01 29,862 65,898
</TABLE>
(1) Such options were granted May 16, 1996 and become exercisable in 25% annual
increments on each of May 16, 1997, 1998, 1999 and 2000.
(2) The amounts in these columns are the result of calculations based on the
assumption that the market price of the Common Stock will appreciate in
value from the date of grant to the end of the ten-year option term at the
rates of 5% and 10% per year. The 5% and 10% annual appreciation
assumptions are required by the Securities and Exchange Commission; they
are not intended to forecast possible future appreciation, if any, of the
Company's stock price.
The following table shows aggregated option exercises during 1996 and year
end 1996 option values.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES DURING 1996 AND YEAR END 1996 OPTION VALUES
Shares Number of Securities
Acquir- Underlying Unexercised Value of Unexercised In-
ed on Value Options(1) the-Money Options(2)
Executive Officer Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable
----------------- -------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
C. John Hipp, III. - - 3,176 11,576 $36,429 $55,665
James C. Hunter, Jr. - - 5,336 5,250 77,425 12,012
Donald O. Newnham - - 5,336 4,200 77,425 9,618
</TABLE>
(1) Figures shown represent the total number of shares subject to unexercised
options held by the indicated executive officers at year end 1996. The
number of shares subject to options which were exercisable and
unexercisable at year end 1996 are also shown. The number of options
granted have been adjusted to reflect 10% stock dividends paid on each of
November 30, 1994 and 1995, and 5% stock dividends paid on each of August
31, 1993 and October 31, 1996.
(2) Dollar amounts shown represent the value of stock options held by the
indicated executive officers at year end 1996. Only those shares subject to
options which are "in the money" are reported. Shares subject to an option
are considered to be "in the money" if the fair market value at year-end
1996 of such shares of the Company's Common Stock exceeds the exercise or
base price of such shares. At year end 1996, the Company's stock price
exceeded the exercise price of all shares subject to option, thus all stock
options were considered "in the money." For those options "in the money,"
value is computed based on the difference between the fair market value of
10
<PAGE>
the Company Common Stock at year end 1996 and the exercise or base price of
the shares subject to underlying option. The value of shares subject to
options exercisable and unexercisable at year end 1996 is also shown.
COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION
The Compensation Committee for the year ended December 31, 1996, was
composed of William B. Cox, Chairman, C. Parker Dempsey, A. Dewall Waters, Larry
D. Westbury and C. John Hipp, III. Mr. Hipp is currently President and Chief
Executive Officer of the Company and First National Bank, and Mr. Westbury is
currently Chairman of the Board of the Company and is a former President and
Chief Executive Officer of the Company and First National Bank. Although Mr.
Hipp specifically excluded himself from any Compensation Committee discussions
concerning his own compensation, he did participate in discussions concerning
the compensation of other executive officers.
BOARD REPORT ON EXECUTIVE OFFICER COMPENSATION
The Company's Compensation Committee is required to provide Company
shareholders a report discussing the basis for the Compensation Committee's
action in establishing compensation for the Company's and the Banks' executive
officers. The report is also required to discuss the relationship, if any,
between the Company's performance and executive officer compensation. Finally,
the report must specifically discuss the factors and criteria upon which the
compensation paid the Company's Chief Executive Officer was based.
The fundamental philosophy of the Company's compensation program is to
offer competitive compensation opportunities for executive officers of First
National Bank which are based both on the individual's contribution and on the
Company's performance. The compensation paid is designed to retain and reward
executive officers who are capable of leading the Company in achieving its
business objectives in an industry characterized by complexity, competitiveness
and change. The compensation of the Company's and the Banks' executive officers
is reviewed and approved annually by the First National Bank Compensation
Committee, which acts as the Company's Compensation Committee. Annual
compensation for the Company's Chief Executive Officer (and other executive
officers) consists of three elements.
- - A base salary that is determined by individual contribution and
performance, and which is designed to provide a base level of compensation
comparable to that provided key executives of other financial institutions
of similar size and performance.
- - A short-term cash incentive program that is directly linked to individual
performance and indirectly linked to the Company's and First National
Bank's performance.
- - A long-term incentive program that provides stock options to executive
officers. Stock option grants provide an incentive that focuses the
executive's attention on managing the Company from the perspective of a
stockholder with an equity stake in the business. The economic value of any
stock option granted is directly tied to the future performance of the
Company's stock and will provide value to the recipient only when the price
of the Company's stock increases over the option grant price.
For the Company's key executives, base salary is targeted to approximate
average salaries for individuals in similar positions with similar levels of
responsibilities who are employed by other banking organizations of similar size
and financial performance. During 1996, the Company increased the Chief
Executive Officer's base salary by 8.0%. The Compensation Committee determined
that the 8.0% increase in the Chief Executive Officer's base salary was
appropriate in light of two primary factors. The first factor was a desire of
the Company to provide the Chief Executive Officer with a base salary comparable
to that paid on average by other banking organizations of similar size and
financial performance. The Company periodically participates in local, state and
other salary/compensation surveys and has access to other published
salary/compensation data. The Compensation Committee annually reviews
11
<PAGE>
national, regional, statewide and local peer group salary data (to the extent
available) to assist it in setting appropriate levels of the Chief Executive
Officer's and other executive officers' base salaries. A second factor
considered by the Compensation Committee in setting and adjusting base salary
was the Company's 1996 performance accomplishment of a 12.85% return on equity.
This performance indicator is updated annually, where needed, to help determine
the increase in the Company's key executives' base salary and is also used to
help determine the annual cash incentive, as described below.
For the Company's key executives, the annual cash incentive during the
years 1994, 1995 and 1996 ranged from 0% to 14.5% of base salary. This means
that up to approximately 19.8% of annual compensation was variable, fluctuated
significantly from year to year, and was directly and indirectly tied to
business and individual performance. For purposes of determining the cash
incentive payable during the years 1994, 1995 and 1996, Company performance was
measured based on the Company's Return on Equity (ROE). The Compensation
Committee sets performance goals for First National Bank and Company at the
beginning of each calendar year. In addition, the Board of Directors, at its
discretion, retains the flexibility to change performance goals, bonus amounts
and requirements of the Plan during the year. An "incentive pool" is determined
by multiplying a certain percentage of First National Bank's net income above a
stated Bank ROE for the calendar year in question. Amounts paid into the
incentive pool are distributed to participating executive officers (and other
Bank officers) based on the individual officer's merit and salary level.
(Executive officers of National Bank of York County do not presently participate
in an incentive pool.)
For the Company's key executives, the long-term stock option plan awards
during the years 1994, 1995 and 1996 were designed to provide economic value to
executives directly linked to increases in shareholder value. The number of
options granted were determined in the sole discretion of the Board. The
economic value of these awards will fluctuate from year to year, based on
changes in the Company's stock price. However, the average economic value
accruing each year to Company executives during the years 1994, 1995 and 1996
has ranged from approximately 0% to 17% of base salary.
This report is provided as a summary of current Board practice with regard
to annual compensation review and authorization of executive officer
compensation and with respect to specific action taken for the Chief Executive
Officer. The $1,000,000 tax deduction limitation for executive compensation,
added by the Omnibus Budget Reconciliation Act of 1993, is not relevant to this
year's report and does not affect either the Company's or its subsidiaries'
compensation policy. Should such limitations become relevant, steps will be
taken to amend the Company's and its subsidiaries' compensation policy to assure
compliance.
William B. Cox, Chairman A. Dewall Waters C. John Hipp, III
C. Parker Dempsey Larry D. Westbury
First National Corporation Board of Directors Compensation Committee
OTHER BENEFIT PROGRAMS - DEFINED BENEFIT PENSION PLAN
First National Bank maintains a noncontributory, defined benefit pension
plan ("Pension Plan") covering its employees, including executive officers. The
Pension Plan is a "tax qualified" plan under Section 401(a) of the Internal
Revenue Code and must also comply with provisions of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA").
The pension table below shows estimated annual benefits payable upon
retirement to persons in the specified remuneration and years of service
categories as if retirement had occurred on December 31, 1996. The benefits
shown are computed on a single life only annuity basis.
12
<PAGE>
<TABLE>
<CAPTION>
ESTIMATED ANNUAL BENEFITS UNDER FIRST NATIONAL BANK'S PENSION PLAN
Years of Service
FAC* 10 20 30 40
------ ---- ---- ---- ---
<S> <C> <C> <C> <C> <C>
$ 30,000 $2,856 $5,712 $8,568 $ 9,996
40,000 4,406 8,812 13,218 15,421
50,000 5,956 11,912 17,868 20,846
60,000 7,506 15,012 22,518 26,271
70,000 9,056 18,112 27,168 31,696
80,000 10,606 21,212 31,818 37,121
90,000 12,156 24,312 36,468 42,546
100,000 13,706 27,412 41,118 47,971
110,000 15,256 30,512 46,768 53,396
120,000 16,806 33,612 50,418 58,821
</TABLE>
* FAC: Final Average Compensation, computed as the average amount of a
participant's compensation earned over the last 60 months prior to his
or her retirement date or early termination of employment.
Benefits. Upon a participant's retirement at his normal retirement date
(age 65), a monthly retirement benefit will be paid in accordance with Pension
Plan provisions. The amount of such monthly retirement benefit will equal 1/12
of the sum of (i) and (ii) as follows: (i) .90% of the Pension Plan
participant's final average compensation multiplied by his years of credited
service up to a maximum of 35 years; and (ii) .65% of the Pension Plan
participant's final average compensation in excess of his covered compensation
multiplied by his years of credited service up to a maximum of 35 years. For
purposes of the above formula, a participant's final average compensation
consists of the average amount of a participant's compensation earned over the
last 60 months prior to early or normal retirement. In addition, a participant
is credited with one year of credited service under the Pension Plan for each
year in which 1,000 or more hours are worked. Benefits under the Pension Plan
are not subject to deduction for Social Security or other offset amounts.
Compensation Under the Pension Plan. For purposes of computing a
participant's final average compensation, the Pension Plan uses the following
definition of participant compensation: W-2 earnings, including bonuses,
overtime and commissions, but excluding employer contributions to employee
benefit plans, as limited by Internal Revenue Code Section 401(a)(17).
Information as to Executive Officer Participation. For purposes of
executive officer participation in the Pension Plan, the executive officer
compensation used for purposes of computing executive officer benefits under the
Pension Plan is the same as that shown in the Summary Compensation Table. As of
December 31, 1996, the named Company and First National Bank executive officers
had accumulated the following years of credited service toward retirement: C.
John Hipp, III, 3 years of credited service; James C. Hunter, Jr., 32 years
credited service; and Donald O. Newnham, 16 years credited service.
SHAREHOLDER PERFORMANCE GRAPH
The Company is required to provide its shareholders with a line graph
comparing the Company's cumulative total shareholder return with a performance
indicator of the overall stock market and either a published industry index or a
Company-determined peer comparison. The purpose of the graph is to help
shareholders determine the reasonableness of the Compensation Committee's
decisions with respect to the setting of various levels of executive officer
compensation. Shareholder return (measured through increases in stock price and
payment of dividends) is
13
<PAGE>
often a benchmark used in assessing corporate performance and the reasonableness
of compensation paid executive officers.
However, shareholders should recognize that corporations often use a number
of other performance benchmarks (in addition to shareholder return) to set
various levels of executive officer compensation. The Company's 1996 Annual
Report to Shareholders contains a variety of relevant performance indicators
concerning the Company. Thus, Company shareholders may wish to consider other
relevant performance indicators in assessing shareholder return and the
reasonableness of Company executive officer compensation, such as growth in
earnings per share, book value per share and cash dividends per share, along
with Return on Equity (ROE) and Return on Assets (ROA) percentages. As described
in the Board Report on Executive Officer Compensation, the Company's
Compensation Committee utilizes Bank ROE in helping to determine short-term cash
incentive program awards.
The performance graph below compares the Company's cumulative total return
over the most recent 5-year period with both the NASDAQ Composite Index
(reflecting overall stock market performance) and the NASDAQ Bank Index
(reflecting changes in banking industry stocks). Returns are shown on a total
return basis, assuming the reinvestment of dividends and a beginning stock index
price of $100 per share. The value of the Company's stock as shown in the graph
is based on information known to the Company regarding transactions in the
Company's stock. Because there was no active trading market in the Company's
stock prior to listing on the American Stock Exchange in January, 1997, the
information prior to that time is based on a limited number of transactions.
<TABLE>
<CAPTION>
NASDAQ Composite First National Corporation NASDAQ Bank
<S> <C> <C> <C> <C>
1991 $100.00 $100.00 $100.00
1992 $115.45 $109.47 $152.04
1993 $132.48 $126.80 $199.25
1994 $128.24 $154.66 $198.87
1995 $177.75 $172.86 $287.98
1996 $220.77 $191.72 $363.32
</TABLE>
14
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
First National Bank and National Bank of York County have loan and deposit
relationships with some of the directors of the Company and Banks and with
companies with which the directors are associated as well as with members of the
immediate families of the directors ("Affiliated Persons"). (The term "members
of the immediate families" for purposes of this paragraph includes each person's
spouse, parents, children, siblings, mothers and fathers-in-law, sons and
daughters-in-law, and brothers and sisters-in-law.) Loans to Affiliated Persons
were made in the ordinary course of business, were made on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with other persons, and did not, at the time
they were made involve more than the normal risk of collectibility or present
other unfavorable features.
Director Robert R. Horger is a partner in the law firm of Horger, Barnwell
& Reid, which First National Bank has retained as general counsel during the
past five years. First National Bank proposes to retain the firm during the
current fiscal year.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
As required by Section 16(a) of the Securities Exchange Act of 1934, the
Company's directors, its executive officers and certain individuals are required
to report periodically their ownership of the Company's Common Stock and any
changes in ownership to the Securities and Exchange Commission. Based on a
review of Forms 3, 4 and 5 and written representations made to the Company, it
appears that all such reports for these persons were filed in a timely fashion
in 1996, except as follows. The Company failed to file on a timely basis one
Form 4 relating to a grant of restricted shares to C. John Hipp, III on March
28, 1996. The filing was made on August 7, 1996.
AMENDMENT TO THE ARTICLES OF INCORPORATION
The Board is submitting to shareholders for their approval an amendment to
Article Fifth of the Company's Articles of Incorporation to increase from
5,000,000 to 20,000,000 the number of authorized shares of the Company's common
stock ($5.00 par value).
Increasing the number of authorized shares will provide additional shares
to be used for stock dividends, potential acquisitions, raising capital and such
other general corporate purposes as the Board may from time to time determine to
be in the best interests of the Company. Although the additional authorized
shares are not needed immediately and there are no current agreements or
definite plans with respect to use of such shares, the Board of directors
believes it is prudent to have them authorized now to avoid timing problems in
the future. Authorized but unissued shares may be issued from time to time for
the purposes and consideration determined by the Board of Directors. Such
purposes could include issuance of shares in a manner intended to frustrate or
impede persons seeking to effect a merger or otherwise gain control of the
Company, but the Company has no present plans to issue additional shares in such
manner. Shareholders of the Company do not have pre-emptive rights with respect
to such shares. Accordingly, the issuance of additional shares may dilute the
interests of existing shareholders.
The Board of Directors recommends a vote FOR adoption of the foregoing
amendment to the Company's Articles of Incorporation.
INDEPENDENT ACCOUNTANTS
The Board of Directors, upon the recommendation of the Audit Committee, has
appointed J. W. Hunt and Company, LLP, independent certified public accountants,
as independent auditors for the Company and its subsidiaries for the current
fiscal year ending December 31, 1997, subject to ratification by the
shareholders. J. W. Hunt and Company, LLP has advised the Company that neither
the firm nor any of its partners has any direct or material interest in the
Company and its subsidiaries except as auditors and independent certified public
accountants of the Company and its subsidiaries.
15
<PAGE>
A representative of J. W. Hunt and Company, LLP will be present at the 1997
Annual Meeting and will be given the opportunity to make a statement on behalf
of the firm if he so desires. A representative of J. W. Hunt and Company, LLP is
also expected to respond to appropriate questions from shareholders.
AVAILABILITY OF ANNUAL REPORT ON FORM 10-K
The Company, upon request and without charge, will provide shareholders
with a copy of its Annual Report on Form 10-K for the year ended December 31,
1996 filed with the Securities and Exchange Commission. Shareholders should
direct their requests to: First National Corporation, 950 John C. Calhoun Drive,
S.E., Orangeburg, South Carolina 29115, attention: W. Louis Griffith.
OTHER BUSINESS
The Board of Directors of the Company does not know of any other business
to be presented at the Annual Meeting. If any other matters are properly brought
before the Annual Meeting, however, it is the intention of the persons named in
the accompanying proxy to vote such proxy in accordance with their best
judgment.
16
<PAGE>
APPENDIX - FORM OF PROXY
PROXY
FIRST NATIONAL CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS - TUESDAY, APRIL 22, 1997
Robert R. Horger and W. Louis Griffith, or either of them, with full power
of substitution, are hereby appointed as agent(s) of the undersigned to vote as
proxies all of the shares of Common Stock of First National Corporation held of
record by the undersigned on the Record Date at the Annual Meeting of
Shareholders to be held on April 22, 1997, and at any adjournment thereof, as
follows:
1. ELECTION OF FOR all nominees listed WITHHOLD AUTHORITY
DIRECTORS. below (except any I have to vote for all
written below) [ ] nominees listed
below [ ]
[ ] WITHHOLD AUTHORITY on the following nominees only
Nominees for three year terms: Walter L. Tobin, Charles W. Clark, C. John Hipp,
III, Dwight W. Frierson, Edward V. Mirmow, Jr.,
Larry D. Westbury
Nominees for two year terms: Robert R. Hill, Jr., Ralph W. Norman
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL(S) WRITE THE
NOMINEE'S(S') NAME(S) ON THE LINE BELOW.
2. PROPOSAL TO AMEND ARTICLE FIFTH OF THE COMPANY'S ARTICLES OF INCORPORATION
TO INCREASE FROM 5,000,000 TO 20,000,000 THE TOTAL NUMBER OF AUTHORIZED
SHARES OF THE COMPANY'S $5.00 PAR VALUE COMMON STOCK.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL TO RATIFY APPOINTMENT OF J. W. HUNT AND COMPANY, LLP, CERTIFIED
PUBLIC ACCOUNTANTS, AS THE COMPANY'S INDEPENDENT AUDITORS FOR 1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. And, in the discretion of said agents, upon such other business as may
properly come before the meeting, and matters incidental to the conduct of
the meeting. (Management at present knows of no other business to be
brought before the meeting.)
THE PROXIES WILL BE VOTED AS INSTRUCTED. IF NO CHOICE IS INDICATED WITH RESPECT
TO A MATTER WHERE A CHOICE IS PROVIDED, THIS PROXY WILL BE VOTED "FOR" SUCH
MATTER.
Please sign exactly as name appears below. When signing as attorney, executor,
administrator, trustee, or guardian, please give full title. If more than one
trustee, all should sign. All joint owners must sign.
Dated: , 1997 ___________________________
-----------------------
---------------------------
