February 20, 1997
Via the EDGAR System
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: First of America Bank Corporation; Preliminary Proxy Materials
Greetings:
First of America Bank Corporation ("First of America") transmits for
filing pursuant to Rule 14a-6(a) preliminary copies of the materials
to be sent to First of America's shareholders in connection with the
solicitation of proxies for its annual meeting of shareholders
called for April 16, 1997. The soliciting materials include the
following: (1) the Notice of the meeting; (2) the Proxy Statement;
and (3) the form of Proxy. The annual meeting and solicitation of
proxies relate the election of four directors, approval of an
amendment to First of America's Restated Articles of Incorporation
to increase the number of authorized shares of common stock,
approval of a director stock compensation plan, and ratification of
the selection of independent auditors.
Pursuant to Rule 14a-6(i)(2), no fling fee is required. First of
America intends to release definitive proxy materials to its
shareholders on approximately March 17, 1997. First of America has
authorized David E. Riggs, of Howard & Howard Attorneys, P.C.
(telephone 616-382-8771, fax 616-382-1568) to receive any comments
of the Commission's staff on the preliminary proxy materials.
Sincerely,
Jennifer D. Cox
Senior Vice President-Accounting Division
SCHEDULE 14A--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:
[X] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
FIRST OF AMERICA BANK CORPORATION
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction
applies:
...............................................................
(2) Aggregate number of securities to which transaction
applies:
...............................................................
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
(4) Proposed maximum aggregate value of transaction:
...............................................................
(5) Total fee paid:
...............................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11 (a)(2) and identify the filing for which
the offsetting fee was 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:
...............................................................
BANK CORPORATION
211 South Rose Street
Kalamazoo, Michigan 49007
(616) 376-9000
NOTICE OF ANNUAL SHAREHOLDERS MEETING
April 16, 1997
To: The Shareholders
First of America Bank Corporation
The Annual Meeting of Shareholders of First of America Bank
Corporation, a Michigan Corporation, will be held at the Fetzer
Business Development Center, Western Michigan University, Wilbur
Street and Marion Avenue, Kalamazoo, Michigan on Wednesday, April
16, 1997 at 9:00 a.m. (Kalamazoo time). A form of Proxy and Proxy
Statement for the meeting are furnished herewith. The purpose of
the meeting is to consider and vote on the following matters:
(1) Election of four Directors to serve until the 2000
Annual Meeting of Shareholders and until their
successors have been elected and qualified.
(2) Approval of an increase in the number of shares of
authorized Common Stock of First of America Bank
Corporation to 200,000,000 from 100,000,000.
(3) Approval of the First of America Bank Corporation
Director Stock Compensation Plan.
(4) Ratification of the selection of KPMG Peat Marwick
LLP, Certified Public Accountants, as independent
auditors for First of America.
(5) Such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on
February 24, 1997, as the record date for determination of common
shareholders entitled to notice of and to vote at the meeting.
IT IS IMPORTANT THAT YOUR STOCK BE REPRESENTED AT THE MEETING
REGARDLESS OF THE NUMBER OF SHARES YOU MAY HOLD. YOU ARE INVITED TO
ATTEND THE MEETING IN PERSON, BUT WHETHER OR NOT YOU PLAN TO ATTEND,
PLEASE COMPLETE, DATE, SIGN AND RETURN THE ACCOMPANYING PROXY IN THE
ENCLOSED SELF-ADDRESSED ENVELOPE. IF YOU DO ATTEND THE MEETING, YOU
MAY, IF YOU WISH, REVOKE YOUR PROXY AND VOTE YOUR SHARES IN PERSON.
By Order of the Board of Directors,
Richard V. Washburn
Senior Vice President and Secretary
Date: ______________, 1997
Kalamazoo, Michigan
FIRST OF AMERICA BANK CORPORATION
211 South Rose Street
Kalamazoo, Michigan 49007
(616) 376-9000
PROXY STATEMENT
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the
solicitation of proxies on behalf of the Board of Directors of FIRST
OF AMERICA BANK CORPORATION (hereinafter called "First of America"
or the "corporation") for use at the Annual Meeting of Shareholders
to be held on Wednesday, April 16, 1997 at 9:00 a.m. (Kalamazoo
time) at the Fetzer Business Development Center, Western Michigan
University, Kalamazoo, Michigan (the "Annual Meeting").
The cost of solicitation will be borne by First of America. In
addition to the use of the mails, proxies may be solicited by
directors and persons regularly employed by First of America in
person and by telephone. First of America has also engaged
Georgeson & Company, Inc. to assist in soliciting proxies for the
Annual Meeting. Georgeson's fees, excluding reimbursable
out-of-pocket expenses, are estimated to be $7,500 and will be paid
by First of America. Arrangements have been made with brokerage
houses and other custodians, nominees and fiduciaries for the
forwarding of solicitation material to the beneficial owners of
First of America Common Stock.
Any shareholder giving a proxy pursuant to this solicitation
has the power to revoke it at any time before it is exercised at the
Annual Meeting. This Proxy Statement and the enclosed form of Proxy
were first sent to shareholders on March ______, 1997.
Common shareholders of record at the close of business on
February 24, 1997 are entitled to notice of and to vote at the
Annual Meeting. Each common share is entitled to one vote on each
matter presented.
For shareholders participating in the Shareholders Investment
Plan, First of America's dividend reinvestment plan, First of
America Bank-Michigan, N.A., the Plan Administrator, will vote any
shares that it holds for a participant's account in accordance with
the proxy returned by the participant to First of America with
respect to the other shares of First of America which the
participant holds of record.
PRINCIPAL SHAREHOLDERS
As of the close of business on February 3, 1997, there were
59,863,058 shares of common stock of First of America, par value $10
per share ("First of America Common Stock" or "common shares"),
outstanding and entitled to vote at the Annual Meeting.
The following table sets forth as of February 20, 1997 the name and
address of every person or entity known by First of America to be
the beneficial owner of more than 5 percent of First of America's
Common Stock, the total number of shares beneficially owned and the
percent of class so owned.
Amount and
Nature of
Name and Address Beneficial Percent
Title of Class of Beneficial Owner Ownership of Class
-------------- --------------------------- ----------- ---------
Common Stock First of America Bank
Corporation, 3,481,019 * 5.8%
Trust Division,
211 South Rose
Street, Kalamazoo, Michigan
* The shares are held in various fiduciary capacities by First of
America's affiliate banks and trust companies. Messrs. Chormann and
Daniel Smith, each a director, serve on the Unified Trust Committee
of the corporation, which exercises oversight with respect to the
trust departments of First of America's affiliate banks and its
affiliate trust companies. The amount of the shares shown in which
subsidiaries with trust powers have sole voting power is 28,805
shares (0.05% of outstanding common shares), sole investment power is
x,xxx,xxx shares (x.xx% of outstanding common shares) and shared
investment power is x,xxx,xxx shares (x.xx% of outstanding common
shares). There was no shared voting power.
(1) ELECTION OF DIRECTORS
The Board of Directors is divided into three classes, with the
directors in each class being elected for a term of three years and
until successors are duly elected and qualified and with one class
standing for election each year. At the Annual Meeting, four
directors will be elected for terms ending with the annual meeting
of shareholders in 2000.
Except as otherwise specified in the proxy, proxies will be voted
for election of the four nominees named below. If a nominee becomes
unable or unwilling to serve, proxies will be voted for such other
person, if any, as shall be designated by the Board of Directors.
However, First of America's management now knows of no reason to
anticipate that this will occur. Directors are elected by a
plurality of the votes cast, whether in person or by proxy, by
holders of First of America Common Stock at the Annual Meeting,
provided a quorum (a majority of the shares entitled to be voted at
the Annual Meeting) is present or represented. Thus, the four
nominees for election as directors who receive the greatest number
of votes cast will be elected directors. Consequently, shares not
voted, whether by the withholding of authority or otherwise, have no
effect on the election of directors. Nevertheless, if a proxy is
returned for such shares or they are represented in person at the
Annual Meeting, it will be counted toward the establishment of a
quorum.
Nominees for election and other current directors are listed
below. Also shown for each nominee and each other current director
is his or her age, principal occupation for the last five or more
years and other major affiliations, Board of Directors committee
service and shares of First of America Common Stock beneficially
owned as of February 3, 1997. As of that date, none of these
persons beneficially owned one percent or more of the outstanding
shares. The information that follows is based in part on
information supplied by these persons.
NOMINEES FOR DIRECTORS FOR THREE-YEAR TERMS ENDING IN 2000
Jon E. Barfield, age 45, is Chairman and Chief Executive Officer
of Bartech, Inc., a provider of contract employment and related
staffing services, in Livonia, Michigan. He is a director of
Tecumseh Products Company, Tecumseh, Michigan. Mr. Barfield became
a director of First of America in August 1993. He serves on the
Audit and Public Policy Committees. Mr. Barfield beneficially owns
3,724 shares of First of America Common Stock. Additionally, Mr.
Barfield has an account in the First of America Bank Corporation
Director Deferred Compensation Plan (the "Deferral Plan"), the
earnings of which are determined as if deferred fees and credited
earnings were invested in First of America Common Stock. His
account, which is payable to him only in cash, includes the current
equivalent value of 963 common shares.
Richard F. Chormann, age 59. On May 1, 1996, Mr. Chormann was
named Chairman, President and Chief Executive Officer of First of
America. He has been employed by First of America and its
predecessor since 1958. Mr. Chormann became a director of First of
America in 1984 and serves on the Executive and Public Policy
Committees of the Board and on First of America's Unified Trust
Committee. He beneficially owns 107,519 shares of First of America
Common Stock, which includes 92,350 shares covered by currently
exercisable options granted under the Restated First of America Bank
Corporation 1987 Stock Option Plan ("1987 Stock Option Plan") Mrs.
Chormann owns 3,470 common shares of which Mr. Chormann disclaims
beneficial ownership. Additionally, Mr. Chormann has an account in
a salary deferral savings plan, the earnings on a portion of which
are determined as if deferred salary payments and earnings thereon
were invested in First of America Common Stock. His account, which
is payable to him only in cash, includes the current equivalent
value of 29,636 common shares.
Joel N. Goldberg, age 59, is retired President of Thomas Jewelry
Company, Inc. in Pontiac, Michigan, a retail and wholesale jewelry
company. Mr. Goldberg became a director of First of America in
1985. He serves on the Audit Committee. He beneficially owns
116,092 shares of First of America Common Stock.
James S. Ware, age 61, is retired Chairman, President and Chief
Executive Officer of Durametallic Corporation, Kalamazoo, Michigan,
a manufacturer of seals for industrial machinery. He is a director
of the Duriron Company, Inc., Dayton, Ohio. He has been a director
of First of America since 1991. He chairs the Nominating and
Compensation Committee and serves on the Executive Committee. He
beneficially owns 5,388 shares of First of America Common Stock.
DIRECTORS NOT STANDING FOR ELECTION WHOSE TERMS END IN 1998
John W. Brown, age 62, is Chairman, President and Chief Executive
Officer of Stryker Corporation, Kalamazoo, Michigan, a manufacturer
of surgical and medical products. Mr. Brown was appointed a
director of First of America in 1992. He serves on the Nominating
and Compensation Committee. Mr. Brown beneficially owns 3,500
shares of First of America Common Stock.
Clifford L. Greenwalt, age 64, is President and Chief Executive
Officer and a director of CIPSCO Incorporated, a utility holding
company. He is also President and Chief Executive Officer of
Central Illinois Public Service Company, Springfield, Illinois, a
subsidiary of CIPSCO. He is also a director of Central Illinois
Public Service Company and Electric Energy, Inc. He became a
director of First of America in 1989. He serves on the Audit,
Executive, Nominating and Compensation, and Public Policy
Committees. Mr. Greenwalt beneficially owns 13,296 shares of First
of America Common Stock jointly with Mrs. Greenwalt. Mrs. Greenwalt
owns another 4,007 common shares of which Mr. Greenwalt disclaims
beneficial ownership. Mr. Greenwalt will be ineligible under the
Bylaws to serve as a director after January 31, 1998, and will
retire by that date.
Dorothy A. Johnson, age 56, is President and Chief Executive
Officer of the Council of Michigan Foundations, Grand Haven,
Michigan, an association of foundations and corporations making
charitable contributions. Mrs. Johnson became a director of First
of America in 1985. She chairs the Public Policy Committee and
serves on the Executive and Nominating and Compensation Committees.
She beneficially owns 19,375 shares of First of America Common
Stock. Additionally, Ms. Johnson has an account in the Deferral
Plan, the earnings of which are determined as if deferred fees and
credited earnings were invested in First of America Common Stock.
Her account, which is payable to her only in cash, includes the
current equivalent value of 1,088 common shares.
Martha Mayhood Mertz, age 54, is President of Mayhood/Mertz,
Inc., a commercial real estate development and property management
company, in Okemos, Michigan. She became a director of First of
America in August 1993. Ms. Mertz serves on the Audit and the
Nominating and Compensation Committees. She beneficially owns 2,332
shares of First of America Common Stock. Additionally, Ms. Mertz
has an account in the Deferral Plan, the earnings of which are
determined as if deferred fees and credited earnings were invested
in First of America Common Stock. Her account, which is payable to
her only in cash, includes the current equivalent value of 329
common shares.
DIRECTORS NOT STANDING FOR ELECTION WHOSE TERMS END IN 1999
Joseph J. Fitzsimmons, age 62, is retired as Vice President of
Bell & Howell Company and Chairman and a director of UMI, Inc., Ann
Arbor, Michigan, a division of Bell & Howell. Mr. Fitzsimmons is a
director of Bartech, Inc. He has been a director of First of
America since 1991. He serves on the Nominating and Compensation
Committee. He beneficially owns 1,728 shares of First of America
Common Stock and 400 shares in a retirement account.
Robert L. Hetzler, age 51, is President and Chief Executive
Officer of Monitor Sugar Company, Bay City, Michigan. Mr. Hetzler
became a director of First of America in 1987. He chairs the Audit
Committee and serves on the Executive Committee. Mr. Hetzler
beneficially owns 900 shares and an additional 6,008 common shares
which are held jointly by him and Mrs. Hetzler.
Daniel R. Smith, age 62, retired as Chairman and Chief Executive
Officer of First of America on May 1, 1996. He was previously
employed by First of America and its predecessor since 1955. He
became a director of First of America in 1982. He serves on the
Executive and Public Policy Committees of the Board and on First of
America's Unified Trust Committee. Mr. Smith beneficially owns
199,428 shares of First of America Common Stock, which includes
148,950 shares covered by currently exercisable options granted
under the 1987 Stock Option Plan. Mrs. Smith owns 796 common shares
of which Mr. Smith disclaims beneficial ownership.
Ley S. Smith, age 62, is Executive Vice President of Pharmacia
and Upjohn, Inc.and President, U.S. Pharma Product Center, a
manufacturer of pharmaceutical and other products. He was also
President and Chief Operating Officer of The Upjohn Company from
April 1993 to November 1995, and previously Vice Chairman of The
Upjohn Company from January 1991 to April 1993. He is a director of
Multimedia Medical Systems. He became a director of First of
America in 1996. He serves on the Audit and the Nominating and
Compensation Committees. He beneficially owns 1,500 shares of First
of America Common Stock. Additionally, Mr. Smith has an account in
the Deferral Plan, the earnings of which are determined as if
deferred fees and credited earnings were invested in First of
America Common Stock. His account, which is payable to him only in
cash, includes the current equivalent value of 616 common shares.
As of February 3, 1997 the directors and executive officers of
First of America as a group beneficially owned 833,254 shares or
1.38 percent of the outstanding shares of First of America Common
Stock. This group had sole voting and investment power with respect
to 762,680 shares or 1.26 percent of the outstanding First of
America Common Stock which includes 489,918 common shares covered by
currently exercisable options granted under the 1987 Stock Option
Plan and shared voting and investment power with respect to 70,574
shares or 0.12 percent of the outstanding common shares. The shares
beneficially owned by William R. Cole, Thomas W. Lambert, David B.
Wirt and Donald J. Kenney, Named Executives (as defined below) who
are not directors of First of America, were 52,182, 46,373, 55,438
and 42,184, respectively, which includes 38,833, 32,117, 38,217, and
36,150 shares covered by currently exercisable options granted under
the 1987 Stock Option Plan. Additionally, certain directors and
executive officers have accounts in the Deferral Plan or in a salary
deferral savings plan, with a total current equivalent value of
45,547 common shares.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has a standing Executive Committee, a
standing Audit Committee, and a standing Nominating and Compensation
Committee. The Board also has a Public Policy Committee. Directors
serve on the committees as indicated in the preceding paragraphs.
The Executive Committee did not meet during 1996. Its principal
function is to exercise all powers and authority of the Board of
Directors in the management and affairs of First of America between
meetings of the Board of Directors including the right to declare
dividends and to authorize the issuance of stock but excluding the
power and authority to amend the Articles of Incorporation or
Bylaws, to adopt certain agreements of merger or consolidation, to
recommend to shareholders the sale of substantially all of First of
America's assets or dissolution of the corporation or to fill
vacancies on the Board of Directors.
The Audit Committee met five times during 1996. Its principal
functions are to recommend to the full Board the engagement or
discharge of the independent auditors, to direct and supervise
investigations into matters relating to audit functions, to review
with the independent auditors the plan and results of the audit
engagement and management's responses, to review the scope, adequacy
and results of First of America's internal auditing procedures and
to solicit recommendations for improvement, to provide oversight for
internal audit and loan review, to review services to be performed
by the independent auditors, to review the degree of independence of
the auditors, to review the adequacy of First of America's system of
internal accounting controls, to provide guidance for the audit
committees of affiliate banks, to review with management and the
auditors the adequacy of financial disclosures and to provide added
assurance on the integrity of the financial information, and to
report to the full Board on its actions and findings.
The Nominating and Compensation Committee met six times during
1996. Its principal function is to approve and recommend to the
Board of Directors all executive compensation and benefit programs
available to officers and employees of First of America and the
executive officers of each affiliate, and the desirability of
adopting, amending, or terminating any management compensation or
employee benefit plan or program of First of America or any
affiliate. The Nominating and Compensation Committee administers
First of America's management incentive programs, which include
selection of participants and establishment of goals and criteria
for awards and other matters (see "Nominating and Compensation
Committee Report on Executive Compensation"). The Nominating and
Compensation Committee is the administrator of the corporation's
stock-based compensation plans and determines the key employees to
whom stock grants will be awarded, the number of shares covered by
such stock grants, option exercise prices and other matters.
In addition, the Nominating and Compensation Committee reviews
the qualifications and determines the eligibility of and recommends
to the Board of Directors individuals who may be appointed by the
Board to fill vacancies thereon and individuals who will constitute
the nominees of the Board for election by shareholders and considers
the performance of incumbent directors in determining whether to
nominate them for reelection. It also reviews the qualifications
and determines the eligibility of persons to serve as directors of
First of America's affiliate banks. In addition, this Committee
evaluates the performance of top management officers of First of
America for purposes of developing and periodically reviewing
management succession plans for recommendation to the full Board.
The Nominating and Compensation Committee will consider persons
recommended by shareholders. Such shareholder recommendations must
be in writing setting forth the name, address, principal occupation
and qualifications of the proposed nominee and must be delivered or
mailed to the chairman or secretary of First of America not later
than the close of business on December 31 of any year preceding the
year for which nomination is proposed if written proxy solicitation
on behalf of the Board of Directors is sought.
The Public Policy Committee met four times in 1996. Its
principal function is to oversee compliance by First of America and
its affiliate organizations with the federal Community Reinvestment
Act, federal affirmative action requirements and comparable state
laws. It also oversees charitable giving by First of America and
its affiliate organizations and makes recommendations to the Board
with respect to these functions and related matters.
The Board of Directors met eight times in 1996. All incumbent
Directors attended 75 percent or more of the aggregate total number
of meetings of the Board of Directors and the total number of
meetings held by all committees of the Board on which they served.
EXECUTIVE COMPENSATION
The following information about First of America's method of
compensating its executive officers is intended to both comply with
the disclosure rules of the Securities and Exchange Commission
("SEC") and provide shareholders with a better understanding of the
corporation's objectives, policies and arrangements for executive
compensation. The SEC's rules prescribe the format and scope of
this summary, but the corporation has endeavored to make it
understandable and helpful to shareholders.
Summary Compensation Table
The following table presents, for the fiscal years shown, the
annual and long-term cash and other compensation paid to, or accrued
for, each of First of America's five most highly compensated
executive officers, including the two persons serving as chief
executive officer during 1996 (the "Named Executives").
SUMMARY COMPENSATION TABLE
Long-Term Compensation
Annual Compensation Awards Payouts
Restricted Securities
Other Annual Stock Underlying LTIP All Other
Name and Salary Bonus Compensation Award(s) Options Payouts Compensation
Principal Position Year ($)(1) ($) ($)(2) ($)(3) (#) ($) ($)(4)
----------------------- ---- ------- ------- ------------ ---------- ---------- ------- ------------
Richard F. Chormann(5) 1996 565,400 221,638 -0- -0- 150,000 -0- -0-
Chairman, President and 1995 453,600 44,453 -0- -0- 20,600 69,758 -0-
ChiefExecutive Officer 1994 453,600 87,318 -0- -0- 14,000 -0- -0-
Daniel R. Smith(6) 1996 241,442 156,800 -0- -0- -0- -0- 249,369 (7)
Chairman and Chief 1995 675,000 75,600 -0- -0- 38,350 121,107 -0-
Executive Officer 1994 675,000 148,000 -0- -0- 25,000 -0- -0-
William R. Cole 1996 317,000 93,199 -0- -0- 50,000 -0- -0-
Chairman and Chief 1995 305,000 25,620 -0- -0- 10,400 36,452 -0-
Executive Officer, First 1994 274,235 76,924 -0- -0- 7,900 -0- -0-
of America Bank -
Michigan, N.A.
Thomas W. Lambert 1996 275,000 80,851 -0- -0- 50,000 -0- -0-
Executive Vice President 1995 265,000 22,260 -0- -0- 9,050 34,261 -0-
and Chief Financial 1994 265,000 43,725 -0- -0- 6,900 -0- -0-
Officer
David B. Wirt 1996 275,000 80,851 -0- -0- 50,000 -0- -0-
Executive Vice President 1995 265,000 22,260 -0- -0- 9,050 34,261 -0-
1994 265,000 43,725 -0- -0- 6,900 -0- -0-
Donald J. Kenney 1996 266,500 78,352 -0- -0- 50,000 -0- -0-
Executive Vice President 1995 260,000 21,840 -0- -0- 8,850 31,253 -0-
1994 236,925 39,093 -0- -0- 6,750 -0- -0-
(1) Deferred compensation is included.
(2) There were no other significant compensation items required to
be disclosed as other annual compensation for the years shown.
(3) As described more fully under the caption "Long-Term
Compensation Plan Awards in Last Fiscal Year," as of December
31, 1996, each of the Named Executives other than Mr. Smith
held Performance Share Rights to receive an equivalent number
of shares of restricted stock upon the corporation's
attainment of certain return on equity and efficiency ratio
goals. The number of Rights and the value of the related
restricted stock (based on the closing price on the New York
Stock Exchange as of December 31, 1996) are as follows: Mr.
Chormann, 20,000 Rights valued at $1,202,500; Mr. Cole, 6,000
Rights valued at $360,750; Mr. Lambert, 6,000 Rights valued at
$360,750; Mr. Wirt, 6,000 Rights valued at $360,750; and Mr.
Kenney, 6,000 Rights valued at $360,750.
(4) Except as described for Mr. Smith, the corporation does not
provide any other forms of executive compensation.
(5) Mr. Chormann became Chairman, President and Chief Executive
Officer on May 1, 1996, prior to which he was President and
Chief Operating Officer.
(6) Mr. Smith retired as Chairman and Chief Executive Officer on
May 1, 1996. He remains a director of the corporation and two
of its subsidiaries.
(7) The amount shown is comprised of (i) $218,269 awarded to Mr.
Smith in connection with his retirement, (ii) $14,000 in
corporate and affiliate non-employee director's retainer fees,
and (iii) $17,100 paid in corporate and affiliate board and
committee meeting fees.
Option Grants in Last Fiscal Year
The following table presents information concerning the stock
options granted to the Named Executives under the First of America
Bank Corporation Stock Compensation Plan (the "Employee Stock
Compensation Plan") during 1996 and the potential realizable value
for the stock options granted based on future market appreciation
assumptions.
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable Value at
Assumed Annual Rates of Stock
Price Appreciation for Option
Individual Grants Term (1)
--------------------------------------------------- -------------------------------
Number of
Securities % of Total
Underlying Options Exercise or
Options Granted to Base Price
Granted Employees in ($/Sh) Expiration
Name (#)(2) Fiscal Year (3) Date 0% ($) 5% ($) 10% ($)
----------------------- ---------- ------------ ----------- ---------- ------ ------ -------
Richard F. Chormann(4) 150,000 30% $54.44 10/28/2006 -0- 5,136,000 13,014,000
Chairman, President and
Chief Executive Officer
Daniel R. Smith(5) -0- -0- -- -- -- -- --
Chairman and Chief
Executive Officer
William R. Cole 50,000 10 54.44 10/28/2006 -0- 1,712,000 4,338,000
Chairman and Chief
Executive Officer, First
of America Bank -
Michigan, N.A.
Thomas W. Lambert 50,000 10 54.44 10/28/2006 -0- 1,712,000 4,338,000
Executive Vice President
and Chief Financial
Officer
David B. Wirt 50,000 10 54.44 10/28/2006 -0- 1,712,000 4,338,000
Executive Vice President
Donald J. Kenney 50,000 10 54.44 10/28/2006 -0- 1,712,000 4,338,000
Executive Vice President
All Shareholders 2,049,711,000 5,193,719,000
(1) The potential realizable value is reported net of the option
price, but before income taxes associated with exercise. The
estimated amounts presented represent assumed annual compounded
rates of appreciation from the date of grant through the
expiration of the options. Actual gains on exercise, if any,
are dependent on the future performance of the corporation's
common shares. The 5% and 10% rates of appreciation would
result in per share prices of $88.68 and $141.20, respectively.
The amounts shown for "All Shareholders" are based on
59,863,058 shares (number of shares outstanding as of February
3, 1997). This presentation is not intended to forecast
possible future appreciation of the corporation's common
shares.
(2) Vesting is based on achievement of the stock price targets of
$62.50, $75.50 and $85.00. One-third of the stock options vest
at each stock price target. All unvested stock options will
become vested on October 29, 2003, provided the option holder
remains employed on such date. The vested stock options may be
exercised at any time after October 29, 1997.
(3) The exercise price shown represents the average of the high and
low prices on the New York Stock Exchange on the grant date.
(4) Mr. Chormann became Chairman, President and Chief Executive
Officer on May 1, 1996, prior to which he was President and
Chief Operating Officer.
(5) Mr. Smith retired as Chairman and Chief Executive Officer on
May 1, 1996. He remains a director of the corporation.
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Values
The following table presents information about the exercise
during 1996, by the Named Executives, of stock options previously
granted under the 1987 Stock Option Plan. Also shown are the number
of shares covered by and the estimated value of unexercised options
under both the 1987 Stock Option Plan and the Employee Stock
Compensation Plan at December 31, 1996.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money Options at
Options at FY-End (#) FY-End ($)
------------------------- -------------------------
Shares Acquired Value Realized Exercisable/Unexercisable
Name on Exercise (#) ($) Exercisable/Unexercisable (1)
----------------------- --------------- -------------- ------------------------- -------------------------
S> <C
Richard F. Chormann (2) -0- -0- 92,350 / 168,400 3,082,610 / 1,211,083
Chairman, President and
Chief Executive Officer
Daniel R. Smith(3) 14,000 495,250 176,150 / -0- 5,247,206 / -0-
Chairman and Chief
Executive Officer
William R. Cole -0- -0- 38,833 / 59,567 1,241,433 / 472,679
Chairman and Chief
Executive Officer, First
of America Bank -
Michigan, N.A.
Thomas W. Lambert 3,200 69,002 32,117 / 58,333 986,256 / 448,450
Executive Vice President
and Chief Financial Officer
David B. Wirt -0- -0- 38,217 / 58,333 1,225,444 / 448,450
Executive Vice President
Donald J. Kenney -0- -0- 36,150 / 58,150 1,197,481 / 444,844
Executive Vice President
(1) The estimated value of the unexercised option shares was based
on the closing price on the New York Stock Exchange on Tuesday,
December 31, 1996 of $60.125.
(2) Mr. Chormann became Chairman, President and Chief Executive
Officer on May 1, 1996, prior to which he was President and
Chief Operating Officer.
(3) Mr. Smith retired as Chairman and Chief Executive Officer on
May 1, 1996. He remains a director of the corporation.
Long-Term Compensation Plan Awards in Last Fiscal Year
The following table reflects: (1) estimated future cash payments
under First of America's Long-Term Incentive Compensation Plan based
on the Named Executive's target award and the minimum threshold and
maximum amounts for the three-year performance cycle beginning
January 1, 1996; and (2) performance share rights under the Employee
Stock Compensation Plan held by the Named Executive and the
threshold and maximum amounts for the performance period between
January 1, 1997 and June 30, 1998. Estimated cash payments under
the Long-Term Incentive Compensation Plan, reported as the first
line for each Named Executive, are contingent upon attaining the
corporation's earnings per share performance goals during the
performance cycle shown. Restricted stock awards pursuant to
performance share rights under the Employee Stock Compensation Plan,
reported as the second line for each Named Executive, are contingent
upon attaining return on equity and efficiency ratio performance
goals during the performance period shown. Both First of America's
Long-Term Incentive Compensation Plan and Employee Stock
Compensation Plan are more fully described in the Nominating and
Compensation Committee Report on Executive Compensation under the
captions "Long-Term Incentive Compensation" and "Stock-Based
Compensation".
LONG-TERM INCENTIVE PLAN - AWARDS IN LAST FISCAL YEAR
Estimated Future Payouts
Under Non-Stock Price-Based Plan (1)(2)
Number of Performance
Units or or Other Period Until Threshold Target Maximum
Name Other Rights Maturation or Payout ($) or (#) ($) or (#) ($) or (#)
----------------------- ------------ --------------------- ----------- ---------- ----------
Richard F. Chormann(3) None 1/1/96 - 12/31/98 $ 52,500 136,080 176,904
Chairman, President and 20,000 1/1/97 - 6/30/98 6,667 shares 20,000 20,000
Chief Executive Officer
Daniel R. Smith(4) None 1/1/96 - 12/31/98 $ 3,889 15,555 20,222
Chairman and Chief None -- -- -- --
Executive Officer
William R. Cole None 1/1/96 - 12/31/98 $ 19,813 79,250 103,025
Chairman and Chief 6,000 1/1/97 - 6/30/98 2,000 shares 6,000 6,000
Executive Officer
First of America Bank -
Michigan, N.A.
Thomas W. Lambert None 1/1/96 - 12/31/98 $ 17,188 68,750 89,375
Executive Vice President 6,000 1/1/97 - 6/30/98 2,000 shares 6,000 6,000
and Chief Financial Officer
David B. Wirt None 1/1/96 - 12/31/98 $ 17,188 68,750 89,375
Executive Vice President 6,000 1/1/97 - 6/30/98 2,000 shares 6,000 6,000
Donald J. Kenney None 1/1/96 - 12/31/98 $ 16,656 66,625 86,613
Executive Vice President 6,000 1/1/97 - 6/30/98 2,000 shares 6,000 6,000
(1) In the first line for each Named Executive, the minimum
incentive award shown under the column titled "Threshold"
represents the estimated payment that would be awarded if 85%
achievement of the corporation's internal earnings per share
goal is attained for the performance cycle. The "Target" and
"Maximum" estimated payments will be awarded if 100% and 120%
achievement of the corporation's earnings per share goals are
attained for the performance cycle. The estimated future
payouts under the threshold, target and maximum award columns
were computed based on the Named Executive's 1996 Base salary.
Actual incentive payments made, if any, will be determined
using the Named Executive's average base salary over the three-
year performance cycle.
(2) In the second line for each Named Executive, amounts shown
under the column titled "Number of Units or Other Rights" are
the number of Performance Share Rights granted under the
Employee Stock Compensation Plan. Based on the particular
number of such Rights, the number of shares shown under the
column titled "Threshold" represents the restricted stock award
that would be made if achievement of the corporation's minimum
return on equity and efficiency ratio goals (specified for
purposes of the performance share rights held) are attained
during the last quarter of the performance cycle. The "Target"
(which is also the "Maximum") restricted stock award will be
made if achievement of the corporation's targeted return on
equity and efficiency ratio goals (specified for purposes of
the performance share rights held) are attained for two
consecutive quarters, or during the last quarter, of the
performance cycle. The estimated Employee Stock Compensation
Plan future restricted stock payouts under the threshold,
target and maximum award columns were computed based on the
number of Rights to receive restricted stock awards granted to
the Named Executive in 1996.
(3) Mr. Chormann became Chairman, President and Chief Executive
Officer on May 1, 1996, prior to which he was President and
Chief Operating Officer.
(4) Mr. Smith retired as Chairman and Chief Executive Officer on
May 1, 1996. He remains a director of the corporation.
Retirement Program
The benefits shown in the table below are the estimated
combined annual benefits payable at the normal retirement age of 65
to a participant in the First of America Bank Corporation Employees'
Retirement Plan ("Retirement Plan"), a qualified non-contributory
defined benefit plan, and First of America's two supplemental
retirement plans ("Supplemental Plans"), unfunded non-qualified
plans, on a straight life annuity basis before reduction for social
security benefits, as further described below.
PENSION PLAN TABLE
Years of Service
Remuneration (1) 15 20 25 30 35
---------------- ------- ------- ------- ------- -------
$ 200,000 60,000 80,000 100,000 120,000 140,000
$ 300,000 90,000 120,000 150,000 180,000 210,000
$ 400,000 120,000 160,000 200,000 240,000 280,000
$ 500,000 150,000 200,000 250,000 300,000 350,000
$ 600,000 180,000 240,000 300,000 360,000 420,000
$ 700,000 210,000 280,000 350,000 420,000 490,000
$ 800,000 240,000 320,000 400,000 480,000 560,000
$ 900,000 270,000 360,000 450,000 540,000 630,000
$1,000,000 300,000 400,000 500,000 600,000 700,000
$1,100,000 330,000 440,000 550,000 660,000 770,000
$1,200,000 360,000 480,000 600,000 720,000 840,000
(1) Average annual compensation as provided by the Retirement
Plan and the Supplemental Plans.
The retirement benefit formula for the Retirement Plan is based
on a participant's final average compensation and years of service
with the corporation or subsidiary. The Retirement Plan benefit
formula is 70 percent of the participant's final average
compensation minus 50 percent of the primary social security
benefit, prorated for service of less than 35 years. Compensation,
for determination under the Retirement Plan, includes base salary
and incentive payments made under the Annual Incentive Plan and is
reduced by any portion of base salary or Annual Plan incentive
payment deferred under a deferred compensation arrangement. Income
derived from stock compensation is not included in compensation for
Retirement Plan or Supplemental Plan determinations. Employees who
were employed before January 1, 1985 will be entitled to receive on
retirement, the higher of the benefits computed under the Retirement
Plan now in effect or under the Retirement Plan in effect before
January 1, 1985, which provided for a benefit equal to two percent
of the final average monthly earnings times years of credited
service, but not exceeding 50 percent of final average monthly
earnings. The Supplemental Plans provide participants with a
benefit in addition to that provided by the Retirement Plan so that
the combined retirement benefit equals the benefit which the
participant would have received from the Retirement Plan but for
certain limitations under the Internal Revenue Code and the deferral
of salary under a deferred compensation arrangement.
The current average annual compensation and years of credited
service for the Named Executives are as follows: Mr. Chormann --
$587,085, 37 years; Mr. Cole -- $338,604, 35 years; Mr. Lambert --
$320,303, 33 years; Mr. Wirt -- $320,303, 31 years; and Mr. Kenney -
- $289,789, 10 years. Mr. Smith retired effective May 1, 1996 after
40 years of service and on June 1, 1996 began receiving his annual
retirement benefit of $573,327 which was computed in accordance with
the retirement plans described above.
Management Continuity Agreements
First of America has entered into Management Continuity
Agreements with the Named Executives and other senior corporate and
affiliate officers. The Management Continuity Agreements for
executive officers, including the Named Executives, were amended and
restated effective November 20, 1996 to provide that in the event of
a change in control of First of America before November 20, 2001,
the employment of the officer covered by the Agreement may not be
terminated except for cause during the two-year and three-month
period commencing three months before the date of a change in
control and ending two years following the change in control (the
"Change in Control Period").
The Agreement generally defines change in control as follows:
(1) five days before expiration of a tender or exchange offer that
would have the effect of giving a person, entity or group beneficial
ownership of 25 percent or more of First of America's voting stock;
(2) consummation of a merger, consolidation or sale of substantially
all assets of First of America approved by its shareholders; (3) the
acquisition of beneficial ownership of 25 percent or more of First
of America's voting stock by a person, entity or group; or (4) a
change in composition of a majority of the Board of Directors in any
period of two consecutive years without prior approval of or
participation by the Board in such change.
During the Change in Control Period, First of America or its
successor may not, without the officer's consent, reduce the
officer's compensation or change the officer's title or scope of
responsibility or relocate his or her principal office of
employment. During the thirteenth month following a change in
control, the executive may resign for any reason and receive the
payments specified in the Agreement. In the event an executive
officer is terminated or resigns following adverse action by First
of America or its successor (in accordance with the terms of the
Agreement) or the executive resigns for any reason during the
thirteenth month following a change in control, the officer is
entitled to regular salary payments, target incentive award payments
under the Annual Incentive Plan, and continuation in employee
benefit plan coverages for a three-year period following the
termination, as well as payment of Long-Term Incentive Plan target
award for a one year period.
All or a portion of the payments under the Management
Continuity Agreements following a change in control may constitute
excess parachute payments under Internal Revenue Code, Section 2806.
Excess parachute payments are subject to excise tax payable by the
recipient and are not deductible by the corporation. The Agreements
provide that in the event an excess parachute payment is payable to
an executive officer, First of America, or its successor, shall make
an additional payment to the executive so that the executive
retains, after taxes, an amount equal to the excise tax on the
excess parachute payment.
Before or after a change in control, following the officer's
death, the surviving spouse will continue to receive the regular
salary payments for one year. In the event the officer becomes
permanently disabled, the regular salary payments will be continued
through the six-month period beginning on the date salary
continuation payments under First of America's short term disability
policy cease, less any payments received during that period under
First of America's Long-Term Disability Plan. In addition, the
officer will receive benefits under the corporate dental and health
plans for one year from the date of the officer's permanent
disability.
The amount of any compensation payable under the Management
Continuity Agreement in the event of a change in control will be
dependent on future salary levels, annual target incentive award
levels, and other factors and events in the future. First of
America has established a trust which will fund benefits accruing
under the Agreements and other benefit plans in the event of a
change in control of First of America.
First of America's purpose in entering into the Agreements with
the officers selected is to provide financial security to those
officers following a change in control and to provide an additional
inducement for them to remain employed by First of America through
the initial transition period. With continuation of these officers'
employment reasonably assured, First of America and its shareholders
should be more assured that these officers will act, with respect to
a possible change in control, for the benefit of First of America
and its shareholders and without concern for their own financial
security.
Director Compensation
Directors receive an annual retainer of $19,000 plus $1,100 for
each Board and committee meeting attended. The chair of each
committee also receives an additional annual retainer of $3,000 per
year. Directors who are employees of First of America do not
receive additional compensation for service as directors. The Board
annual retainer fee has been increased to $26,000 annually effective
January 1, 1997, to reflect average competitive board compensation
for comparable peer U.S. bank holding companies. Of the annual
retainer, $13,000 will be payable in equity compensation under the
proposed Director Stock Compensation Plan (see "(3) Approval of
Director Stock Compensation Plan"). The Board and committee meeting
fees were retained at $1,100 per meeting.
Effective April 1, 1996, the Board of Directors adopted the
First of America Bank Corporation Director Deferred Compensation
Plan (the "Deferral Plan") under which directors of the corporation
and its affiliate banks may defer their retainer and meeting fees on
a pre-tax basis. The Deferral Plan is a non-qualified, unfunded
plan providing for director elections to defer 100 percent of their
retainer fees and/or meeting fees, with deferred amounts accruing
earnings as though they were invested in First of America Common
Stock. Currently, distributions of deferral accounts will only be
made in cash, either in one lump sum payment or in installment
payments following the directors' retirement or other termination.
Subject to shareholder approval, the Deferral Plan has been amended,
restated and renamed the Director Stock Compensation Plan, which
generally allows directors and other specified committee members to
receive their fees in various forms of equity compensation. (see
"(3) Approval of Director Stock Compensation Plan").
Director Stock Ownership Policy
The Board has adopted a Director stock ownership policy
effective January 1, 1997, which applies to all current and future
Directors of the corporation. This Director stock ownership policy
complements the stock ownership guidelines implemented for
management employees (see Management Stock Ownership Policy section)
and further aligns the interests of the Directors with other
shareholders. The policy requires that each Director acquire a
minimum of 2,500 shares of First of America common stock or share
equivalents within five years of the effective date of the policy or
five years from the date of election or appointment to the Board.
The ownership requirement will be adjusted to reflect certain
changes in the corporation's capital structure, such as a stock
dividend or split. Besides direct or personal ownership, certain
forms of indirect ownership will also be included. In addition,
share equivalents or phantom stock credited under the Deferral Plan
or the proposed Director Stock Compensation Plan will be counted.
The share holdings and interests for most of the current Board
members currently exceed the required number of shares under this
ownership policy.
Director Stock Compensation
In addition to adopting the Director stock ownership policy,
the Board also modified the director compensation program for
members of the boards of First of America and its affiliates and
non-board members of certain committees designated by the Nominating
and Compensation Committee. Under the Director Stock Compensation
Plan (which is the amended and restated Deferral Plan; see "(3)
Approval of Director Stock Compensation Plan") the Nominating and
Compensation Committee (the "Committee") may, once each year,
specify a portion of annual retainer fees, meeting fees, committee
fees or any other fees for service on boards or designated
committees, which is required to be paid in a form of equity-based
compensation. In every year, at least 50 percent of Board retainer
fees will be paid in equity-based compensation. In addition, unless
the Committee determines otherwise, all board members may elect to
receive their remaining fees in equity-based compensation. It is
expected that equity-based compensation will increase the share
holdings of current directors, assist new directors in achieving the
required stock ownership levels, and serve the long-term best
interests of all shareholders. The equity-based compensation will
be paid beginning in the second quarter of 1997, provided the
Director Stock Compensation Plan is approved by shareholders at the
Annual Meeting.
Under the Director Stock Compensation Plan, once the Committee
has specified the required levels of equity-based compensation, it
will also determine the forms of equity-based compensation in which
each director may be paid. The alternatives may include common
stock, stock options and deferred stock equivalents known as phantom
stock, and, in the case of required equity-based compensation only,
restricted stock. The applicable provisions and tax consequences
relating to each of these equity-based compensation alternatives
varies. All equity compensation payments will be based on the
market price of First of America Common Stock at the time the
applicable fees are earned. This new director compensation program
offers directors the flexibility to select the type of equity-based
compensation which best suits their individual circumstances, while
providing shareholders with the assurance that a substantial portion
of director fees is paid in equity-based compensation.
NOMINATING AND COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
Overview
Objectives. First of America's executive compensation program
is intended to attract, retain, motivate and reward highly qualified
executive officers to achieve the corporation's business objectives.
This executive compensation program is integrated with First of
America's annual and long-term business plans in order to establish
a strong link between executive compensation and corporate
performance. The Nominating and Compensation Committee of First of
America's Board of Directors (the "Committee") believes that a
significant and direct relationship between executive compensation
and corporate performance as well as its strategic objectives will
enhance long-term performance and increase shareholder value. The
Committee also believes that stock ownership by executive officers
and stock-based compensation arrangements which align the executive
officer's interests with those of First of America shareholders are
beneficial in enhancing shareholder value. Based on these premises,
under the direction and oversight of the Committee, First of America
has implemented an executive compensation program that encourages
and facilitates stock ownership by executive management and under
which, over the longer-term, more than half of the compensation of
First of America's executive officers is variable and directly
dependent upon corporate financial performance. To motivate
improved performance and more closely align the relationship between
the executive compensation program and shareholder value, the
Committee approved a new long-term stock compensation program for
executive officers effective in 1996 and modification of the Annual
Incentive Compensation Plan for 1997 and also approved a stock
ownership policy for all stock plan participants. The revisions to
the executive compensation programs are described in detail within
the Stock-Based Compensation and Annual Incentive Compensation
sections of this report.
The Committee recognizes that Section 162(m) of the Internal
Revenue Code imposes a $1 million annual limitation on the tax
deduction available to the corporation for compensation paid to any
executive under certain nonperformance based compensation plans. It
is generally the corporation's intention to pay compensation which
is tax deductible. The Committee recognizes, however, that certain
payments following a change in control pursuant to the Management
Continuity Agreements may result in compensation in excess of the $1
million annual limitation under Section 162(m).
Components of Compensation. The major components of First of
America's executive compensation program consist of a formal base
salary program, the Annual Incentive Compensation Plan ("Annual
Plan"), the Long-Term Incentive Compensation Plan through December
31, 1998 ("Long-Term Plan"), the 1987 Stock Option Plan and the
Employee Stock Compensation Plan (the latter two plans collectively,
the "Stock Plans"). The program also includes participation by
executive officers in various indirect compensation plans and
arrangements, most of which are available on the same terms to all
employees of First of America and its affiliates. These plans and
arrangements include a pension plan, supplemental retirement plans,
401(k) and supplemental savings plans, term life and long-term
disability insurance, and medical and dental care plans. Indirect
compensation of executive officers through these plans and
arrangements is considered by the Committee to be part of the
executive officer's total compensation. The primary components of
First of America's executive compensation program are described
below in combination with a discussion of the relationship of the
compensation program to First of America's performance (see
"Relationship of Executive Compensation to Corporate Performance").
Management Stock Ownership Policy
The Board of Directors adopted stock ownership guidelines
effective in October, 1996 for all current participants of the
Employee Stock Compensation Plan. The guidelines are intended to
encourage increased ownership of First of America Common Stock by
executive and management staff, motivate management to increase
shareholder value, and more closely align management and shareholder
interests. These guidelines apply to over 175 management employees
and establish ownership targets which vary by position and
responsibility level. The ownership targets are expressed as a
specified number of shares for each position and range from 50,000
shares for the Chairman, President and Chief Executive Officer
("CEO") (10,000 - 15,000 shares for other executive officers) to
1,000 shares for Stock Compensation Plan participants at lower
management levels. These targets will be adjusted for certain
changes in the corporation's capital structure such as a stock
dividend or split.
It is expected that the ownership targets will be achieved
within the five-year interval following the later of the effective
date of this policy or the initial date of participation under the
Stock Compensation Plan. Future stock option grant levels may be
adversely impacted by failure to achieve the ownership targets.
Direct and certain forms of indirect stock ownership will be counted
toward achieving these targets. Shares held under the Reserve Plus
401(k) plan and share equivalents credited under the non-qualified
Supplemental Savings Plan will also be counted for this purpose.
However, unexercised stock options under the 1987 Stock Option Plan
and the Employee Stock Compensation Plan will not be credited for
ownership purposes. The Committee intends to monitor management's
progress toward achievement of these ownership guidelines on an
annual basis over the next five years and report the results in the
annual proxy statement.
Nominating and Compensation Committee Responsibility
General. The Committee is responsible for the establishment
and administration of all significant compensation programs,
including those covering executive officers. Under First of
America's executive compensation program, the Committee, with
assistance from First of America's management, reviews, and when
appropriate, approves or recommends to the Board of Directors
adoption of new executive compensation programs and changes to
existing components of the executive compensation program based on
their relationship to corporate performance and the competitive
market for recruitment, remuneration and retention of executive
personnel. In administering the compensation program, the Committee
also reviews the performance of First of America's executive
officers, including the Named Executives, and their contributions to
the corporation's performance results to determine their
compensation levels under the various components of the program,
including base salaries, incentive payments under the Annual and
Long-Term Plans, and stock grants under the corporation's Stock
Plans.
Peer Comparisons. The Committee is also responsible for
selecting the peer groups to which its executive compensation and
corporate performance, for purposes of its executive compensation,
are compared. The peer groups consist of comparably sized U.S. bank
holding companies within established asset range parameters and, as
a result, the bank holding companies which comprise the peer groups
will vary from year to year. First of America targets its executive
compensation levels, including the base salaries and target
incentive award opportunities at the median or average competitive
levels of the applicable peer universe. The defined peer group for
each of the executive compensation plans differs from the
composition of bank holding companies included in the KBW 50 Index
referenced under the Performance Graph appearing later in this
document. The KBW 50 Index consists of fifty of the largest U.S.
bank holding companies, including the money center banks, many of
which are substantially larger than First of America. First of
America limits its peer groups for compensation comparisons to
smaller select groups of comparably sized U.S. bank holding
companies, substantially all of which are also included under the
KBW 50 Index.
The Committee considers that these peer groups represent the
primary competitors in the banking industry for financial
performance measurement reasons as well as employee recruitment,
remuneration and retention. The composition of the peer groups used
for determining external performance goals are established by the
Committee at the beginning of the particular year for the Annual
Plan and at the beginning of each three year performance period for
the Long-Term Plan. The peer group for measurement of peer
financial performance results under the Annual Plan in 1996
consisted of similarly situated U.S. bank holding companies with
assets of $12 to $50 billion. The Long-Term Plan peer group for
measurement of peer EPS performance results during the 1994-1996
performance period consisted of similarly situated U.S. bank holding
companies with assets of $10 to $40 billion at the beginning of that
performance period. The 1996 peer group for base salary and other
compensation comparisons consisted of a narrower range of fourteen
comparably sized U.S. bank holding companies with assets of $15 to
$45 billion, selected such that First of America's asset level is
positioned at the median of the asset range. The narrower asset
range for the peer group of bank holding companies utilized for base
salary comparisons more accurately reflects the prevailing
competitive market for qualified executives at other comparably
sized bank holding companies with similar responsibilities than
would a peer group such as the KBW 50 Index with its broader asset
range.
Relationship of Executive Compensation to Corporate Performance
Salary. First of America's executive officers' salaries,
including the Named Executives, are determined in accordance with a
formal base salary program, which is approved and periodically
reviewed by the Committee. This program provides formalized salary
adjustment guidelines and base salary range parameters to guide the
Committee's decision making concerning executive base salary levels.
The base salary ranges are mainly determined by the employee's
internal position responsibility and external market comparisons
with the prevailing base salary levels of similar positions with
comparable responsibilities in other comparably-sized bank holding
companies, with equal consideration being given to both factors.
The midpoints of the salary ranges are targeted at the median or
average competitive levels of the peer group, and executives are
expected to achieve the midpoint of their salary range over a
reasonable time interval. Current base salaries for the executive
officer group as a whole are slightly below the midpoints of their
applicable salary ranges. Base salary comparisons are made to the
median or average competitive levels of the peer group without
regard to the fact that First of America does not provide such
company-paid perquisites as personal automobiles or club memberships
as is the practice for many of the peer organizations.
The base salary program is performance-based, with executive
base salary increases and progression within the assigned salary
ranges entirely dependent upon individual performance. Management
performance plans with individually defined objectives are
established annually for the executive officers, and base salary
decisions are principally based on the assessment of the executive's
actual performance results relative to the objectives defined in the
performance plan. These objectives consist of both personal
objectives unique to the individual executive and common corporate
profit plan or business plan goals, many of which are shared by the
executive officers as a group.
The base salaries of executive officers for 1996 were
determined by the Committee in February 1996 based on 1995
performance considerations. In reviewing the base salary
recommendations for the executive officers, the Committee first
considered the salary increase guidelines in effect for 1996 and
then the individual performance of the executive officers relative
to their personal objectives as well as general consideration of
common corporate performance factors, as deemed appropriate. The
common corporate performance factors included, on an equal basis,
1995's return on common equity ("ROE") of 13.89 percent and fully
diluted earnings per share ("EPS") of $3.73. These common corporate
performance factors were considered in conjunction with the
individual performance assessment of the executive officers.
Annual Incentive Compensation. The Annual Plan is intended to
reward a broad range of First of America's and its affiliates'
management employees, including the Named Executives, for
achievement of specific ROE goals. Annual bonuses paid to First of
America's executive officers, including the Named Executives, are
determined in accordance with the corporation's Annual Plan. The
Committee is responsible for reviewing and approving incentive
payments under the Annual Plan. Target incentive awards for a given
year are set based on a percentage of the participant's current base
salary. Incentive payments for 1996 were based on a comparison of
First of America's ROE achievement with the corporation's internal
annual profit plan ROE goal and with an external ROE goal which was
determined by the median ROE of a selected peer group of comparably
sized U.S. bank holding companies. The internal and external ROE
goals were weighted equally for purposes of determining awards for
participants under the Annual Plan. The target amounts were paid if
both the internal and external ROE goals were fully (100 percent)
achieved. No incentive payments were made to participants unless
First of America's ROE was at least 80 percent of the internal goal
or at least 90 percent of the external goal.
During 1996, First of America's reported earnings were reduced
by an unplanned non-recurring after-tax expense of $13.9 million
associated with the required one-time Savings Association Insurance
Fund (SAIF) assessment. As contemplated by the Annual Plan, the
Committee adjusted the corporation's 1996 ROE to exclude this
unplanned non-recurring expense for purposes of determining the 1996
incentive awards. The Committee made this adjustment because of the
relatively broad based participation under the Annual Plan and the
fact that this expense was not included under the 1996 profit plan.
By adjusting the ROE results, the Committee believes that the
incentive awards more accurately reflect the participants'
contributions toward core earnings performance for the year.
The corporation's adjusted ROE of 15.14 percent was 107.8
percent of the internal ROE goal which resulted in award payments of
132.0 percent of the participant's annual target award level for
this component of the Plan. The Committee also adjusted both the
corporation's ROE and the ROE results of the peer bank group to
determine incentive compensation results under the external peer
group ROE goal. Adjusted ROE results, excluding the SAIF assessment
expense, were determined for the peer banks to provide comparable
performance results to the corporation's adjusted ROE for
performance measurement under the peer group ROE goal. The
corporation's adjusted ROE performance was 91.0 percent of the
adjusted external peer group goal of 16.63 percent which resulted in
award payments of 64.0 percent of the participant's annual target
award for this component of the Plan.
Based on the foregoing, the corporation's consolidated
performance was 99.4 percent of the composite of the internal and
external ROE goals. This resulted in annual incentive award
payments of 98.0 percent of each participant's, including the Named
Executives, annual target award opportunity for 1996. Based on peer
group data available for 1995 and estimates for 1996, these
incentive awards, including the CEO's award, were below the median
level of similar compensation paid by a selected group of comparably
sized U.S. bank holding companies.
The Committee has approved the amendment of the Annual
Incentive Plan for 1997 to place added emphasis on the importance of
achieving the corporation's annual earnings objectives while
providing higher target incentive opportunities for the achievement
of these objectives. The performance measures are being revised to
focus exclusively on improved corporate earnings to enhance
shareholder value. For 1997, corporate performance results will
only be measured under the corporate ROE goal rather than the
combination of the internal corporate ROE and external peer group
ROE goals previously in effect. To complement this change as well
as to support the corporate restructuring scheduled to occur during
1997, line of business performance measures are being introduced for
most participants to facilitate the achievement of the corporation's
1997 profit plan objectives. Specific performance goals will be
established under the business unit measures for every participant
based on their position responsibilities. This reinforces the
importance of achieving the performance expectations at the business
unit level. A significant portion of the participant's incentive
award will be determined by their performance results under these
business unit measures. Concurrent with this change, the target
incentive opportunities are also being increased to competitive
levels to ensure that the incentive compensation provided under the
Annual Plan is commensurate with the position responsibilities and
higher performance expectations as well as to provide a competitive
compensation structure to attract, reward, and retain qualified
management.
Further Annual Plan changes are also intended to motivate
improved corporate performance results. The minimum performance
threshold level for the corporate ROE component will be increased
from the present minimum achievement level of 80 percent to 85
percent effective in 1997 to raise the overall performance standards
under the Annual Plan. No incentive awards will be payable to any
Annual Plan participant if the corporation does not achieve at least
85 percent of its 1997 ROE goal. Annual Plan participants will also
be required to achieve a minimum composite performance level of at
least 90 percent of their business unit goals to receive any payment
under the corporate ROE component. To recognize and reward superior
performance results in 1997, the maximum incentive opportunity is
also being increased from 160 percent of participants' target award
levels at a 120 percent achievement level to 200 percent of the
target award level at a 130 percent achievement relative to the Plan
goals. All of these changes are intended to establish higher
performance standards and to motivate higher performance achievement
by Annual Plan participants.
Long-Term Incentive Compensation. First of America's Long-Term
Plan is designed to motivate and reward its executive officers for
achievement of specific EPS goals over a three year performance
cycle. The Committee is responsible for overseeing the
administration of the Long-Term Plan which includes the review and
approval of incentive awards payable under the Plan. The Long-Term
Plan target award levels and actual incentive payments are based on
a percentage of the executive officer's average base salary payable
over rolling three year performance cycles.
The Long-Term Plan includes both an internal EPS goal, based on
the corporation's EPS growth objectives, and an external EPS growth
goal which measures the corporation's EPS growth relative to the EPS
growth of a peer group of comparably sized bank holding companies.
The internal and external EPS goals are weighted equally for
purposes of determining incentive payments under the Long-Term Plan.
Long-term incentive payments are based on a comparison of First of
America's actual EPS achievement for the three year performance
cycle, compared to the corporation's internal EPS goal for the
period as well as the external EPS growth goal which is 110 percent
of the median compounded annual EPS growth rate for a peer group of
comparably sized U.S. bank holding companies over the same
performance cycle.
The internal EPS goal is established at the beginning of each
three-year performance period, while the external EPS growth goal is
determined following the close of every three-year performance
period based on the median EPS growth results of the applicable peer
group during that period. Incentive awards under the internal and
external EPS goals are computed and paid independently of one
another. No incentive payments will be made for the three year
performance cycles ending December 31, 1997 and December 31, 1998,
unless First of America's EPS growth achievement is at least 85
percent of the internal EPS goal for the period, or at least 90
percent of the external peer group EPS growth goal for the same
performance cycle. The maximum long-term incentive payments are
limited to 130 percent of the executive officer's target award level
for corporate EPS growth results which equal or exceed 120 percent
of both the internal and external EPS growth goals. The highest
target award opportunity of 35 percent of average base salary during
the performance period is provided for the Chairman, President and
CEO of the corporation, which limits his maximum potential incentive
award opportunity to 45.5 percent of his average base salary for the
given period.
The Long-Term Plan results for the three-year performance
period ending December 31, 1996 were determined under both the
internal and external EPS goals. No incentive award was payable
under the Long-Term Plan for this period because the Corporation did
not achieve the minimum EPS performance threshold of $5.10 under the
internal EPS goal or the minimum threshold of 10.86 percent
compounded annual EPS growth under the external peer group goal as
of the end of the performance period.
The Long-Term Plan will be discontinued at the close of the
1996-1998 performance period ending December 31, 1998 to place
greater focus on equity based long-term compensation programs. The
new equity based compensation program is discussed under the Stock-
Based Compensation section. Future performance results and any
applicable incentive awards will continue to be determined and
payable to Long-Term Plan participants under the existing terms and
conditions of the Plan for the final two performance periods ending
December 31, 1997 and December 31, 1998.
Stock-Based Compensation. The corporation's stock compensation
programs are intended to align the long-term interests of its
executive officers and management staff with those of its
shareholders and to motivate achievement of enhanced long-term
shareholder value. The long-term compensation strategy for
executive officers, including the Named Executives, was revised in
1996 to place greater focus on long-term performance-based stock
compensation programs to provide a closer correlation between
executive compensation and both the corporation's future financial
and stock price performance. The changes in the long-term
compensation structure described below should result in increased
emphasis on enhancing future shareholder value.
Stock option grants in years prior to 1996 were made under the
1987 Stock Option Plan. No further stock options will be granted
under the 1987 Stock Option Plan. Beginning in 1996, the Employee
Stock Compensation Plan approved by shareholders at the 1996 Annual
Meeting was implemented. Stock options exercised by the
corporation's executive officers in 1996, including the Named
Executives shown in the Summary Compensation and the Aggregated
Option Exercises in Last Fiscal Year Tables, were granted in
previous years under the 1987 Stock Option Plan.
Stock options previously granted under the 1987 Stock Option
Plan have a ten-year term and will remain in effect until the
options are either exercised or the ten-year term expires.
Nonstatutory stock options to purchase shares of First of America
common stock were granted to a broad range of management level
employees of the corporation and its subsidiaries at option prices
not less than fair market value as of the grant dates under the
prior 1987 Stock Option Plan. Options granted under the 1987 Stock
Option Plan vest and become exercisable over a three-year period
such that one-third of the option shares may be exercised one year
after the grant date, two-thirds after two years, and all shares
after three years.
Beginning in 1996, stock-based compensation was provided under
the Employee Stock Compensation Plan adopted earlier in the year.
Under this Employee Stock Compensation Plan, the Committee may
approve stock options or restricted stock grants which may be
contingent on achievement of specific performance-based criteria as
defined under the Plan. The option price for stock options and the
value of restricted stock awards granted under this Plan are based
on the fair market value as of the date of the grant. The Committee
determines the participants to whom restricted stock or option
grants are made, the number of shares or options to be awarded, and
the vesting terms of the grant, including any performance criteria
and objectives related to the award, which are not specifically
defined by the Plan. In addition, the Committee also determines any
other terms or conditions for such grants, including the timing and
expiration date of the awards, which are not specifically defined by
the Plan.
The new long-term stock compensation program adopted by the
Committee for the Corporation's executive officers consists of
performance-based stock options ("Performance Stock Options") and
performance-based rights ("Performance Share Rights") to receive
shares of restricted stock ("Shares"). These forms of equity-based
compensation are designed to provide additional incentives that will
motivate executive management toward achieving aggressive corporate
financial performance objectives and stock price targets which, in
turn, should enhance long-term shareholder value and more closely
align the long-term compensation for executive officers with
shareholder interests. This compensation program is also intended
to increase the stock ownership levels of executive officers.
Vesting under the Performance Stock Options is contingent on
achievement of predetermined stock price targets. The performance
vesting feature is designed to motivate executives to improve
corporate earnings which should result in future stock price
appreciation. Performance Stock Options will be granted to the
executive officers every two years and replace the prior stock
option grant practices with service based vesting. The option price
for Performance Stock Options is determined by the fair market value
of First of America Common Stock at the grant date. For the initial
Performance Stock Option granted on October 29, 1996 as defined
under the "Option Grants in the Last Fiscal Year Table," the option
price amounted to $54.44 per share.
Until October 29, 2003, the Performance Stock Options will vest
upon achievement of the predetermined stock price targets of $62.50,
$72.50, and $85.00 per share. One-third of the option shares
granted to the executive officers on October 29, 1996 will vest
when each of these stock price targets are achieved. The market
price of First of America Common Stock must be maintained at or
above these stock price targets for a minimum of 15 days out of 25
consecutive trading days before the option grants become vested.
The vested options may be exercised on or after October 29, 1997.
After seven years following the grant date, any options that have
not previously vested will vest and may be exercised for the
remainder of the option term. The Performance Stock Options granted
on October 29, 1996 have a ten-year term. In the event of a change
in control of the corporation prior to October 29, 2003, Performance
Stock Options, which have not yet vested by achieving the stock
price targets, will expire without compensation to the option
holder. The Performance Stock Options also expire upon termination
of employment except where termination is due to retirement,
disability or death.
Awards of Shares to be made pursuant to the Performance Share
Rights are contingent upon the corporation achieving aggressive ROE
and efficiency ratio goals during the 18-month performance period
commencing on January 1, 1997 and ending June 30, 1998. These goals
were established by the Committee in October, 1996. Shares will be
awarded to the executives only if the specified performance goals
are achieved within this designated period. As with the Performance
Stock Options, the Committee intends to grant in every other year
Performance Share Rights subject to achievement of defined financial
performance objectives.
The full number of Shares will be awarded if the ROE goal as
well as the efficiency ratio goal are attained at the end of the 18-
month performance period. The Shares may be granted prior to the
end of this period if both the ROE and efficiency ratio goals are
achieved for two consecutive quarters before the close of the
period. None of the Shares will be granted if the corporation does
not achieve the minimum ROE threshold and a minimum efficiency ratio
by the end of the performance period. The Committee has determined
that the specific ROE and efficiency ratio goals are confidential
and relate to the Corporation's business strategy and, as a result,
are not disclosed herein. A portion of the Shares will be granted
if the corporate ROE and efficiency ratio results exceed the minimum
performance thresholds but are below the goal attainment. If the
performance objectives are achieved and the Shares are awarded,
these Shares are then subject to a three-year restriction period
following the grant date and shall be forfeited upon any termination
of the executive during that period for reasons other than death,
disability or retirement. In the event of a change in control of
the corporation before the performance objectives are achieved, the
Performance Share Rights will be canceled and no Shares will be
granted under the program. If a change in control occurs after the
Shares have been granted but before they have vested and if the
executive's employment terminates so as to result in payments under
a Management Continuity Agreement, then vesting of the Shares will
be accelerated to the date of termination.
The Committee had previously established a practice of granting
annual stock option awards to all stock plan participants in October
each year. However, the normal annual stock option award which
would have been made in October 1996 was deferred to 1997 so that
the participants' work performance and contributions to the 1996
performance results could be taken into consideration in the grant
allocation process.
Stock options under the 1987 Stock Option Plan and the Employee
Stock Compensation Plan have option prices equal to the market price
of the underlying shares on the grant date. The value to be
realized from the options, if any, is dependent on appreciation in
the market price for First of America Common Stock above the option
price. The date of exercise, and, thus the time frame within which
value may be realized and the relationship of that value to the
corporation's performance, will be determined by the individual
option holder. The Stock Plans do not permit the adjustment of the
option price, except to recognize changes in capitalization, such as
stock splits and dividends, following the option grant.
Other Compensation Arrangements. First of America maintains
certain broad-based employee benefit plans, such as the 401(k) plan,
in which the corporation's executive officers may participate on the
same terms as other employees who meet the applicable eligibility
criteria, subject to legal limitations on the amounts that may be
contributed or the benefits that may be payable under the plans.
The corporation maintains companion supplemental savings and
supplemental retirement plans to restore benefits limited by the
Internal Revenue Service's maximum benefit or contribution
limitations on the executive officer's participation under the
tax-qualified plans. There are no matching contributions for
executive officers under the 401(k) and supplemental savings plans,
because of plan exclusions for participants in the Long-Term Plan.
Also, no company paid automobiles, club memberships or any other
major perquisites are provided by the corporation to the Named
Executives. Benefits under these arrangements are not directly
related to First of America's corporate performance.
Compensation of the Chief Executive Officer
The Committee reviews the performance and base salary of the
Chief Executive Officer ("CEO") annually and determines his base
salary based on this performance review. The base salary of the CEO
is determined by the Committee within a defined salary range which
is established by the Committee in advance of formulating any base
salary increase recommendations. The salary range is based on
prevailing competitive market levels for chief executive officer
positions in other comparably sized multifaceted independent banking
institutions. Specifically, the midpoint of this salary range is
targeted at the average competitive market level for comparable CEO
positions in peer U.S. bank holding companies as described earlier
in the report.
Daniel R. Smith. Mr. Daniel R. Smith retired as Chairman and
Chief Executive Officer effective May 1, 1996 after a successful
career of over 40 years with the corporation. He continues his
service with the corporation as a Director and member of the
Executive and Public Policy Committees of the Board and the Unified
Trust Committee. Mr. Smith's 1995 base salary was retained at
$675,000 for 1996. However, in recognition and appreciation of his
past contributions to the growth and success of the corporation and
its positive assessment of his tenure as Chairman and CEO, the
Committee awarded Mr. Smith $218,269, in connection with his
retirement. Mr. Smith began receiving his monthly retirement
benefits under the Corporation's retirement plans effective June 1,
1996.
Mr. Smith received a prorated incentive award of $156,800 under
the Annual Incentive Plan for 1996. His Annual Plan award was
determined in accordance with the terms and conditions of the Plan
and the performance results described earlier in this report, except
that the payment made in connection with Mr. Smith's retirement was
taken into consideration with his base salary in determining the
amount of his incentive award.
Mr. Smith did not receive any Long-Term Plan award for the
three-year performance period ending December 31, 1996 because the
corporation did not achieve the minimum performance level under
either the internal or external EPS goals and no incentive award was
payable under the Long-Term Plan.
Mr. Smith did not receive any stock compensation or stock
option grants prior to his retirement in 1996.
Richard F. Chormann. Mr. Richard F. Chormann assumed the
office of Chairman, President and Chief Executive Officer of the
corporation on May 1, 1996. The Committee increased Mr. Chormann's
1996 base salary from $453,600 to $500,000 effective January 1,
1996, based on his performance and contributions during the prior
year as President and Chief Operating Officer of the corporation.
Upon his promotion to the Chairman, President and CEO position,
Mr. Chormann received a promotional increase in his annual base
salary from $500,000 to $600,000 to recognize his expanded role and
responsibility as well as his contributions to the transition of the
corporation's leadership. This base salary level also reflects
competitive market practices for chief executive officer positions
at other comparable peer bank holding companies.
Mr. Chormann's 1996 annual incentive award was determined under
the Annual Plan formulas and performance results described earlier
in this report. His Annual Plan award of $221,638 was computed
using the actual base salary paid during 1996. It is based on the
adjusted corporate ROE performance of 15.14 percent relative to the
internal ROE profit plan goal of 14.04 percent and 15.14 percent
relative to the external peer group ROE goal of 16.63 percent. The
composite performance results of 99.4 percent between these measures
resulted in an Annual Plan award of 39.2 percent of his 1996 base
salary.
No Long-Term Plan award was paid to Mr. Chormann for the three-
year performance period ending December 31, 1996 because the
corporation did not achieve the minimum performance level under
either the internal or external EPS goals.
As previously discussed in the Stock-Based Compensation section
of this report, a new equity-based long-term compensation program
was adopted for executive officers effective October 29, 1996. This
program replaces the Long-Term Plan and the previous annual stock
option grant practices under the prior 1987 Stock Option Plan. The
new long-term stock compensation program consists of the combination
of performance vested stock options (Performance Stock Options)and
performance-based rights (Performance Share Rights) to receive
restricted stock awards which are intended to motivate achievement
of aggressive corporate financial objectives, enhance long-term
shareholder value, and increase stock ownership levels among the
executive officers. Under this new program, the grants to executive
officers will be made every other year under the Employee Stock
Compensation Plan approved by shareholders at the previous Annual
Meeting, and the first such grant was made on October 29, 1996.
Under the Employee Stock Compensation Plan, Mr. Chormann
received a grant of 150,000 Performance Stock Options with an
exercise price of $54.44 per share which will vest in increments of
50,000 shares upon either the corporation's achievement of
predetermined stock price targets or as of October 29, 2003. In no
event will the Performance Stock Options become exercisable until
October 29, 1997. Mr. Chormann was also awarded 20,000 Performance
Share Rights to receive restricted stock contingent on achievement
of designated ROE and efficiency ratio goals within the eighteen
month period ending June 30, 1998. If the minimum designated ROE
and efficiency ratio goals are not achieved, then the restricted
stock will not be granted. If these goals are achieved and
restricted stock is awarded, the shares will then be subject to a
three-year restriction period following the grant.
Submitted by the Nominating & Compensation Committee of the
Board of Directors.
James S. Ware, Chairman Dorothy A. Johnson
John W. Brown Martha M. Mertz
Joseph J. Fitzsimmons Ley S. Smith
Clifford L. Greenwalt
PERFORMANCE GRAPH
The following performance graph compares the cumulative total
shareholder return for First of America Common Stock, based on its
market price and assuming reinvestment of dividends, with the KBW 50
Total Return Index, a published industry index prepared by Keefe,
Bruyette & Woods, Inc., banking industry specialists, and the
Standard & Poor's 500 Total Return Stock Index. The KBW 50 Index is
a market capitalization-weighted bank total return stock index that
includes all money-center and most major regional banks. The KBW 50
was chosen for comparison purposes because it encompasses virtually
all of the comparably sized bank holding companies in the peer
groups used by the Nominating and Compensation Committee for
determining compensation paid to First of America's executive
officers.
1991 1992 1993 1994 1995 1996
------ ------ ------ ------ ------ ------
FOA 100.00 133.96 144.22 115.39 178.49 250.12
KBW 50 100.00 127.42 134.48 127.62 204.41 289.15
S&P 500 100.00 107.61 118.48 120.02 165.12 203.03
INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS
Various of the directors and executive officers of First of
America and members of their families and organizations of which
they are executive officers or partners or in which they
beneficially own 10 percent or more of the stock and trusts in which
they have a substantial beneficial interest or serve as trustee, are
at present, as in the past, customers of the subsidiaries of First
of America. As customers they were at various times during 1996
indebted to the financial subsidiaries of First of America. All
such indebtedness is pursuant to loans which were made in the
ordinary course of business and 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
involve more than the normal risk of collectibility or present other
unfavorable features.
(2) AMENDMENT OF ARTICLES OF INCORPORATION TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF COMMON STOCK TO 200,000,000
First of America's Restated Articles of Incorporation provide
that the authorized number of shares of First of America Common
Stock is 100,000,000. As of February 3, 1997 there were 59,863,058
common shares outstanding and 1,714,093 common shares, 3,000,000
common shares, and 100,000 common shares reserved for issuance under
the 1987 Stock Option Plan, the Employee Stock Compensation Plan,
and the Director Stock Compensation Plan (subject to Shareholder
approval of Proposal (3)), respectively.
The Board of Directors considers it advisable to increase the
authorized number of shares of First of America Common Stock to
200,000,000. The additional authorized common shares will be
available for any purpose for which shares of common stock may be
issued under the Michigan Business Corporation Act. For example,
this could include, among other things, possible issuance from time
to time pursuant to employee benefit plans, dividend reinvestment
plans, exercise of stock options, acquisitions, private placements
(including sales which could have the effect of making more
difficult certain attempts to obtain control of the corporation),
public offerings for cash, stock dividends or stock splits and the
issuance of shares upon exercise of conversion rights associated
with preferred stock or other convertible securities which may be
issued from time to time. There are no preemptive rights with
respect to the authorization or issuance of the additional
authorized common shares and those common shares may be issued
without further action by shareholders, except where such approval
would be required by rules of the New York Stock Exchange. Any
issuance of First of America Common Stock must be for proper
business purposes and for proper consideration from the recipient.
The financial statements of First of America, supplementary
financial information and management's discussion and analysis of
financial condition and results of operations are set forth in
Appendix B attached to this Proxy Statement.
This Proposal (2) will be voted on by the holders of First of
America Common Stock entitled to vote at the Annual Meeting, and the
affirmative vote of a majority of the outstanding shares of First of
America's Common Stock is required for its approval.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR
INCREASING THE NUMBER OF AUTHORIZED COMMON SHARES.
(3) APPROVAL OF DIRECTOR STOCK COMPENSATION PLAN
Background
The Board of Directors of First of America (the "Board" or
"Board of Directors") unanimously recommends that shareholders
approve amendments to and the restatement of the First of America
Bank Corporation Director Deferred Compensation Plan (the "Existing
Plan"). The Existing Plan currently permits any director who is not
an employee of First of America or its subsidiaries and who serves
on a First of America board to defer his or her retainer fees,
meeting fees, committee fees and/or chairperson fees until he or she
no longer serves on any First of America boards (his or her
"Separation from Service"). The Existing Plan was approved by the
Board of Directors on February 21, 1996 and became effective April
1, 1996.
As more fully discussed below, the Board of Directors amended
and restated the Existing Plan, effective February 19, 1997, subject
to shareholder approval, and renamed it the First of America Bank
Corporation Director Stock Compensation Plan (the "Restated Plan").
The Restated Plan establishes a comprehensive new equity-based
compensation structure for outside directors and other individuals
receiving fees for serving on certain policy-making committees or
advisory boards designated by First of America's Nominating and
Compensation Committee (collectively, "Participating Directors").
The Restated Plan will provide for payment of retainer fees, meeting
fees, committee fees, chairperson fees or any other fees payable for
service as a Participating Director (collectively, "Director's
Fees") in First of America Common Stock ("Common Stock"), Common
Stock subject to a substantial risk of forfeiture based on continued
service ("Restricted Stock"), rights to purchase shares of Common
Stock at a specified price ("Stock Options") and deferral of
Director's Fees through the crediting of phantom stock, the value of
which is based on Common Stock ("Phantom Stock"). Because most of
these features involve shares of Common Stock, shareholder approval
of the Restated Plan is required by the listing rules of the New
York Stock Exchange. Approval of the Existing Plan by shareholders
was not required. Common Stock, Restricted Stock, Stock Options
and/or Phantom Stock may be granted under the Restated Plan on and
after the effective date, provided that the shareholders approve the
Restated Plan. If the Plan is not approved by the shareholders, any
Common Stock, Stock Options or Restricted Stock granted under the
Restated Plan will be rescinded and void. Deferrals made previously
under the Existing Plan, as well as Phantom Stock credits made under
the Restated Plan, will, however, continue to be valid in such
event. The discussion which follows is qualified in its entirety by
reference to the Restated Plan, a copy of which is attached to the
Proxy Statement as Appendix A.
The Existing Plan
Under the Existing Plan, directors may currently elect to defer
100 percent of any or all types of Director's Fees. For directors
who participate in the Existing Plan ("Deferring Directors"), once
such fees are earned, credits are made to a bookkeeping account
established for each director (a "Deferral Account") as if the
earned fees were being invested in Common Stock. The value of the
Deferral Account is determined based on the value of Common Stock
and additional credits are made to the Deferral Account as
additional fees are earned and as dividends are paid on actual
Common Stock. For example, if a meeting fee of $1,100 becomes
payable to a Deferring Director, and, on the day on which credits
are made to such director's Deferral Account, Common Stock is worth
$60 per share, his or her Deferral Account will be credited as if
18.33 shares ($1,100 divided by $60) of Common Stock were purchased
on his or her behalf. If First of America were to subsequently
declare a $0.47 per share dividend, the Deferral Account would be
credited with a fractional share valued at $8.62 (18.33 shares x
$0.47) as soon as practicable after the day of the actual dividend
payment. Under the Restated Plan, as further explained below, with
some slight modifications, this deferral feature and related
Deferral Account valuation is retained through elections to receive
Phantom Stock. For all Deferring Directors, as of the effective
date of the Restated Plan, Deferral Account balances will be valued
in terms of Phantom Stock units without affecting actual dollar
values of the Deferral Accounts. In addition, as of such date,
Phantom Stock credits will be made in accordance with previous
elections made under the Existing Plan.
Under both the Existing Plan and the Restated Plan, credits to
a Deferral Account continue until the value of the Deferral Account
is distributed to the Participating Director or his or her
designated beneficiary after Separation from Service. Distributions
will either be in a single lump sum payment as soon as practicable
after Separation from Service, a single lump sum payment on the
fifth or tenth anniversary of Separation from Service or in five or
ten annual installments beginning after the first anniversary of
Separation from Service. Under the Existing Plan, Deferring
Directors must elect the desired method of distribution prior to
beginning deferrals, and may only change such election with a
penalty applied after Separation from Service. The Restated Plan
permits Participating Directors to change these elections as long as
such change is made at least three months prior to Separation from
Service and in the calendar year preceding Separation from Service.
Pursuant to the terms of the Restated Plan, in addition to Deferral
Account distributions in cash as permitted under the Existing Plan,
distributions may be made in Common Stock or any combination of
Common Stock and cash. Furthermore, the Restated Plan redefines
"Separation from Service" to occur when the Participating Director
ceases to serve on any First of America board, designated committee
or designated advisory board. Both changes will apply to Deferral
Accounts created under the Existing Plan.
The Restated Plan
Under the Restated Plan, each year the Nominating and
Compensation Committee (the "Committee") may establish "Designated
Equity Compensation," that is, the percentage or portion of each
type of Director's Fees which will be payable in a form of equity-
based compensation. At a minimum, 50 percent of Board retainer fees
will be Designated Equity Compensation. For all Designated Equity
Compensation, the Committee may authorize one or more of the
following forms of equity-based compensation: Common Stock,
Restricted Stock, Stock Options and Phantom Stock. If more than one
form is authorized, Participating Directors must select from the
available choices. The remaining portion of Director's Fees is
defined as "Optional Equity Compensation," which may, at the
election of the participating Director, unless otherwise specified
by the Committee be paid in, (i) Common Stock; (ii) Phantom Stock;
and/or (iii) Stock Options.
Description of the Restated Plan. The aggregate number of
shares of Common Stock that may be issued and outstanding pursuant
to granting of Common Stock or Restricted Stock or the exercise of
Stock Options under the Restated Plan (the "Stock Pool") will not
exceed 100,000 shares. The total number of shares of Common Stock
that may be granted to a Participating Director under the Restated
Plan will not exceed 10,000 shares. Shares of Common Stock which
would have been issued pursuant to the exercise of a Stock Option,
but are withheld as payment of the Stock Option price and/or tax
withholding liability may be added back into the Stock Pool and
reissued. Similarly, shares of Restricted Stock which are forfeited
may be added back into the Stock Pool and reissued. In the event of
any change in the outstanding common shares of First of America as a
result of a stock split, reverse stock split, stock dividend,
recapitalization, combination or reclassification, appropriate
proportionate adjustments will be made to both the terms of the
Restated Plan and any awards granted under the Restated Plan which
are determined on a per share basis, including, but not limited to,
the amount of common shares in the Stock Pool, the Stock Option
price and number of common shares associated with any outstanding
Stock Options and the number of Phantom Stock units credited to any
Deferral Account. No such adjustments will be required by reason of
the issuance or sale by First of America of additional shares of
Common Stock or securities convertible into or exchangeable for
shares of Common Stock. On ____________, 1997, the closing sales
price of Common Stock as reported on the New York Stock Exchange was
$_________ per share.
Purpose and Eligibility. The Restated Plan has the dual
purpose of (1) helping First of America attract and retain the
services of the highly qualified Participating Directors, upon whose
judgment, initiative and efforts the corporation is substantially
dependent and providing those persons with equity-based compensation
to more closely align their interests with those of First of America
and its shareholders, and (2) providing a means for Participating
Directors to accumulate savings through deferral of the payment of
their Director's Fees and to defer taxation on such fees.
Consistent with the first objective, the Restated Plan requires
payment of a portion of Director's Fees in equity-based
compensation. In order to achieve the second objective, the
Restated Plan gives the Committee discretion to allow Participating
Directors to defer up to 100 percent of all Director's Fees through
elections to receive Phantom Stock.
In general, the Committee may specify all or any portion of
Director's Fees as Designated Equity Compensation to be paid in a
form of equity-based compensation. All Participating Directors will
be required to receive equity-based compensation for that portion of
Director's Fees authorized as Designated Equity Compensation and may
be eligible to receive Optional Equity Compensation for the
remainder of their Director's Fees. Directors on First of America's
Board will, however, be required to receive at least 50 percent of
Board retainer fees in Designated Equity Compensation. All
Participating Directors may be eligible to receive Optional Equity
Compensation. As of the date of this Proxy Statement, there are 62
Participating Directors who are paid some type of Director's Fees.
Designated Equity Compensation and Optional Equity
Compensation. Once each year the Committee may establish the
Designated Equity Compensation for any and all Director's Fees paid
by First of America or its subsidiaries and the forms of equity-
based compensation which may be elected by Participating Directors
for payment of such Designated Equity Compensation. The Designated
Equity Compensation for the Board, however, shall be established
each year at no less than 50 percent of Board retainer fees. The
Designated Equity Compensation determinations and forms of available
equity-based compensation approved by the Committee in previous
years shall remain in effect unless changed in accordance with the
Restated Plan. If authorized by the Committee, Participating
Directors will choose the desired form or forms of available
Designated Equity Compensation payable. If a Participating Director
fails to make such a choice with respect to all or a portion of his
or her Designated Equity Compensation, payment of such amount will
be made in Common Stock or an alternative form of payment determined
by the Committee. If the Committee does not establish Designated
Equity Compensation for a type of Director's Fees, the Designated
Equity Compensation for such fees will be zero, except in the case
of Director's Fees for the Board where the Designated Equity
Compensation will be 50 percent of Board retainer fees.
Unless otherwise specified by the Committee, Participating
Directors may elect to receive the portion of Director's Fees
specified as Optional Equity Compensation in cash, Common Stock,
Stock Options, Phantom Stock or any combination of the four. If any
form or forms of equity-based compensation are made available to a
Participating Director as Optional Equity Compensation, failure to
make an election with respect to the desired form or forms will
result in payment of Optional Equity Compensation in cash. The
Committee presently intends to limit the forms of Optional Equity
Compensation for directors serving on boards of First of America
subsidiaries to cash or Phantom Stock. Any previous year's
limitations on the forms of available Optional Equity Compensation
remain in effect unless changed in accordance with the Restated
Plan.
Common Stock. If a Participating Director receives or elects
to receive Common Stock as Designated Equity Compensation or
Optional Equity Compensation, the appropriate number of shares of
Common Stock with a fair market value equal to the amount of
applicable Director's Fees payable in Common Stock will be delivered
to the Participating Director as soon as practicable after such fees
are earned. For purposes of determining amounts of equity-based
compensation payable, the fair market value shall mean the average
of the high and low prices reported for the market in which the
common shares are traded on the date of the grant or, if no trading
occurred on that date, on the latest trading date prior to such
date.
Restricted Stock. If a Participating Director receives or
elects to receive Restricted Stock as Designated Equity
Compensation, First of America will issue to the Participating
Director, as fees are earned, the appropriate number of shares of
Restricted Stock equal to the number of shares of Common Stock with
a fair market value equal to the applicable Director's Fees payable
in Restricted Stock. Such shares will be held in escrow by First of
America until they vest. The vesting conditions based upon
continued service, as determined by the Committee, shall be stated
in the agreement for the Restricted Stock award. In no event shall
the period for full vesting exceed ten years from the date of the
award. Once Restricted Stock vests, the common shares held in
escrow shall be transferred to the Participating Director as soon as
practicable thereafter. Any Restricted Stock which has not vested
as of a restricted stockholder's Separation from Service shall be
forfeited, except in the case of a change in control. See "Change
in Control" below.
Stock Options. If a Participating Director receives or elects
to receive Stock Options as Designated Equity Compensation or
Optional Equity Compensation, First of America will issue to the
Participating Director, as fees are earned, the appropriate number
of Stock Options (exercisable for one share each) equal to the
number of shares of Common Stock with a fair market value equal to
the amount of applicable Director's Fees payable in Stock Options
times a multiplier which will not exceed 10. The multiplier will be
established by the Board based on a reasonable option valuation
method such that the value of the Stock Options granted reasonably
approximates the value of Director's Fees payable in Stock Options.
The price that a Stock Option holder must pay in order to exercise a
Stock Option may be stated in terms of a fixed dollar amount, a
percentage (not less than 100 percent) of fair market value of
Common Stock at the time of the grant or such other method as
determined by the Committee in its discretion. In no event shall
the Stock Option price be less than the fair market value per share
of Common Stock on the date of the Stock Option grant. The
Committee, in its discretion, may permit a Stock Option holder to
pay all or a portion of the Stock Option price, and/or the tax
withholding liability, if applicable, by withholding common shares
to be issued under the Stock Option being exercised.
The period during which a Stock Option may be exercised shall
be determined by the Committee at the time of the Stock Option grant
and may not extend beyond ten years from the date of the grant.
Stock options issued as Designated Equity Compensation under the
Restated Plan may vest and become exercisable after a specified
period of time, as determined by the Committee at the time of grant.
All Stock Options issued as Optional Equity Compensation, however,
will be fully vested and immediately exercisable as of the date of
their grant. To the extent not previously exercised, each Stock
Option will terminate upon the expiration of the Stock Option period
specified in the Stock Option agreement provided, however that,
subject to the discretion of the Committee, each Stock Option will
terminate, if earlier: (i) six months after the Stock Option
holder's Separation from Service for any reason other than death,
disability, or retirement; or (ii) five years after the date of the
Stock Option holder's Separation from Service by reason of death,
disability or retirement.
Phantom Stock. If a Participating Director receives or elects
to receive Phantom Stock as Designated Equity Compensation or
Optional Equity Compensation, First of America will credit to the
Participating Director's Deferral Account, as fees are earned, the
appropriate number of Phantom Stock units equal to the number of
shares of Common Stock with a fair market value equal to the amount
of Director's Fees payable in Phantom Stock. In addition, as actual
dividends are paid on Common Stock, the Participating Director's
Deferral Account will be credited with additional Phantom Stock as
if the same dividends were paid on Phantom Stock and immediately
reinvested in Phantom Stock. Dividend credits will be made based on
the number of Phantom Stock units credited to a Deferral Account as
of the Common Stock dividend record date.
Administration. The Restated Plan shall generally be
administered by the Nominating and Compensation Committee (the
"Committee"), although the Committee may delegate its powers or
duties to employees of First of America or any of its subsidiaries,
provided that such delegation is consistent with maintaining an
exemption from the short-swing profit liability provisions of
Section 16 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Under the terms of the Restated Plan, the
Committee has full power and authority: (1) to interpret the
Restated Plan, resolve ambiguities that arise under the Restated
Plan and make equitable adjustments for any mistakes or errors made
in the administration of the Restated Plan; (2) to determine all
questions arising in the administration of the Restated Plan,
including the power to determine the rights of Participating
Directors and their beneficiaries; (3) to adopt such rules and
regulations as it may deem reasonably necessary for the proper and
efficient administration of the Restated Plan consistent with its
purposes; (4) to enforce the Restated Plan in accordance with its
terms and any rules and regulations adopted by the Committee; (5) to
determine the period or periods of time during which Stock Options
may be exercised or become exercisable, the option price and the
duration of such Stock Options, and other matters to be determined
by the Committee in connection with specific Stock Option grants and
Stock Option agreements as specified under the Restated Plan; (6) to
determine the period or periods of time during which the Restricted
Stock may vest, and other matters to be determined by the Committee
in connection with specific issuances of Restricted Stock and
Restricted Stock agreements as provided in the Restated Plan; and
(7) to do all other acts which in its judgment are necessary or
desirable for the proper and effective administration of the
Restated Plan. Operation of the Restated Plan is intended to avoid
giving rise to any potential short-swing profit liability under
Section 16 of the Exchange Act.
Amendment and Termination. The Board may amend the Restated
Plan at any time in its sole discretion, provided that: (1) any such
amendment will be effective at such date as the Board may determine;
(2) no amendment shall reduce the value of a Participating
Director's Deferral Accounts as of the date the Board adopts the
amendment, but an amendment may change the manner in which
distributions or earnings or losses on Deferral Accounts are
determined; (3) no such action may, without the approval of the
shareholders of the corporation, materially increase (other than by
reason of a capital stock adjustment) the aggregate number of shares
of Common Stock, Option Stock and Restricted Stock in the Stock Pool
that may be granted pursuant to the Restated Plan; and (4) no action
of the Board or Committee shall alter or impair any Stock Option or
Restricted Stock previously granted or awarded under the Restated
Plan without the consent of such affected optionee or restricted
stockholder. The Board may terminate the Restated Plan at any time;
however, no termination shall alter or impair any Stock Option or
Restricted Stock previously granted or awarded under the Restated
Plan without the consent of such affected optionee or restricted
stockholder, nor shall any termination reduce the value of the
Participating Director's Deferral Accounts as of the date the Board
terminates the Restated Plan.
Nontransferability; Dividend and Voting Rights; Withholding.
Shares of Common Stock issuable under the Restated Plan are freely
transferable. Phantom Stock is only transferable by will or the
laws of descent and distribution. Stock Options granted may only be
transferred by will, the laws of descent and distribution, or, at
the discretion of the Committee, by direct gift to a family member,
or gift to a family trust or family partnership. The transfer of
Restricted Stock is prohibited, except as required by law, until the
shares vest. Any prohibited transfer of Restricted Stock will be
void and of no effect. Notwithstanding the restrictions on
transferability, a beneficiary or beneficiaries may be designated
under the Restated Plan to receive all or part of a Participating
Director's Deferral Account distribution, any unexercised Stock
Options and/or any unvested shares of Restricted Stock held in
escrow upon the Participating Director's death.
Holders of Stock Options shall have no dividend rights or
voting rights until the Stock Options have been exercised.
Participating Directors with Phantom Stock balances in Deferral
Accounts have no voting rights and no formal dividend rights, but
will receive Deferral Account credits in amounts equal to dividend
payments as dividends are paid on Common Stock. Holders of Common
Stock and Restricted Stock shall have all associated dividend rights
and voting rights immediately following their grants.
The Restated Plan provides that upon the exercise of Stock
Options, the option holder shall pay to First of America its tax
withholding liability, if any, in cash, by withholding shares being
issued pursuant to exercise of the Stock Options or in such other
form acceptable to the Committee. The Restated Plan makes no
provision for payment of tax withholding liability for Common Stock,
Restricted Stock or Phantom Stock. Currently, First of America is
not required to withhold any amounts for any compensation or
payments under the Restated Plan.
Change in Control. Unless otherwise approved by the Committee
and specified in the Stock Option agreement, in the event of a
change in control of the corporation or a liquidation or dissolution
of the corporation, on the effective date of such change in control,
all Stock Options shall be cancelled and in lieu of further rights
under the Stock Options, Stock Option holders shall receive from
First of America, in cash, the difference between the fair market
value of a share of Common Stock and the Stock Option price. This
right is referred to in the Restated Plan as a limited stock
appreciation right. For the purposes of this provision only, the
fair market value shall mean the average between the highest and
lowest quoted price per share for sales made and reported on the New
York Stock Exchange, or on a sales or quotation system maintained by
the National Association of Securities Dealers, or such other
national stock exchange on which the common shares of First of
America may then be listed and which constitutes the principal
market for such common shares on the latest trading date for which
sales or quotations are reported prior to such effective date or, if
greater, the price or value received by shareholders for a share of
Common Stock with respect to the largest number of common shares,
the ownership of which is transferred in conjunction with such
change in control, liquidation or dissolution of First of America.
Notwithstanding the foregoing, upon a change in control, the Board
is required to receive an opinion from the independent auditors of
the surviving company that the rights granted by this provision will
not prevent the transaction from being accounted for as a pooling of
interests. If the Board does not receive the required opinion, it
may nullify the provision. In such case, upon the change in
control, all previously vested Stock Options would continue to be
exercisable and all unvested Stock Options would become immediately
and fully exercisable until their expiration.
With respect to Restricted Stock, unless otherwise approved by
the Committee and specified in the Restricted Stock agreement, all
outstanding shares of Restricted Stock shall become immediately and
fully vested upon a change in control of the corporation. In the
case of Phantom Stock, the Committee is obligated to make
appropriate arrangements with the corporation's successor to ensure
distribution of all Deferral Accounts in accordance with the
Restated Plan. Participating Directors may, however, subject to
approval by the Committee, make an election prior to a change in
control requesting an alternative distribution schedule in the event
of a change in control, including, but not limited to, payment in
cash of all Deferral Account balances as of the date of the change
in control.
For purposes of the Restated Plan, a change in control of First
of America shall have occurred:
(i) on the fifth day preceding the scheduled expiration
date of a tender offer by, or exchange offer by any
corporation, person, other entity or group (other
than First of America or any of its wholly-owned
subsidiaries), to acquire voting stock of First of
America if:
(1) after giving effect to such offer such
corporation, person, or other entity or group
would own 25 percent or more of the voting stock
of First of America;
(2) there shall have been filed documents with
the Securities and Exchange Commission in
connection therewith (or, if no such filing is
required, public evidence that the offer has
already commenced); and
(3) such corporation, person, or other entity
or group has secured all required regulatory
approvals to own or control 25 percent or more of
the voting stock of First of America;
(ii) if the shareholders of First of America approve a
definitive agreement to merge or consolidate First
of America with or into another corporation in a
transaction in which neither First of America nor
any of its wholly-owned subsidiaries will be the
surviving corporation, or to sell or otherwise
dispose of all or substantially all of First of
America's assets to any corporation, person, other
entity or group (other than First of America or any
of its wholly-owned subsidiaries), and such
definitive agreement is consummated;
(iii) if any corporation, person, or other entity or group
(other than First of America or any of its wholly-
owned subsidiaries) becomes the beneficial owner (as
defined in First of America's Articles of
Incorporation) of stock representing 25 percent or
more of the voting stock of First of America; or
(iv) if during any period of two consecutive years
continuing directors cease to comprise a majority of
First of America's Board of Directors.
Certain Federal Income Tax Consequences
The following summary generally describes the principal federal
(but not state and local) income tax consequences of compensation
under the Restated Plan. The summary is general in nature and is
not intended to cover all tax consequences that may apply to a
particular individual or to First of America. The provisions of the
Internal Revenue Code of 1986, as amended (the "Code") and
regulations thereunder relating to these matters are complicated and
their impact in any one case may depend upon the particular
circumstances.
THE DISCUSSION OF FEDERAL INCOME TAX CONSEQUENCES SET FORTH
BELOW IS INCLUDED FOR INFORMATIONAL PURPOSES ONLY. THE DISCUSSION
IS BASED ON CURRENTLY EXISTING PROVISIONS OF THE CODE, EXISTING OR
PROPOSED TREASURY REGULATIONS THEREUNDER AND CURRENT ADMINISTRATIVE
RULINGS AND COURT DECISIONS. ALL OF THE FOREGOING ARE SUBJECT TO
CHANGE, AND ANY SUCH CHANGE COULD AFFECT THE CONTINUING VALIDITY OF
THIS DISCUSSION. EACH DIRECTOR IN THE RESTATED PLAN SHOULD CONSULT
HIS OR HER TAX ADVISOR REGARDING SPECIFIC TAX CONSEQUENCES INCLUDING
THE APPLICATION AND EFFECT OF STATE AND LOCAL TAX LAWS.
Common Stock. Payment of Director's Fees in Common Stock will
constitute taxable ordinary income to the Participating Director at
the time it is earned. In the same year it is earned, First of
America will be entitled to a deduction in an amount equal to the
income taxable to the Participating Director.
Restricted Stock. Unless otherwise elected by the
Participating Director pursuant to Section 83(b) of the Code,
Restricted Stock awards will not result in taxable income to the
Participating Director or a tax deduction to First of America for
federal income tax purposes at the time of grant. Once Restricted
Stock vests, as described above, the fair market value of the Common
Stock on the date earned will be included in the recipient's
ordinary income as compensation, except where the recipient
previously elected to include in his or her ordinary income as
compensation, the fair market value of the Common Stock at the time
the Restricted Stock was awarded. First of America will be entitled
to a corresponding income tax deduction at the time it becomes
taxable to the Participating Director.
Dividends paid on unvested Restricted Stock will generally be
treated as compensation income by the Participating Director and
deductible by First of America. Where a Participating Director has
elected to include in gross income the fair market value of the
Restricted Stock at the time of grant pursuant to Section 83(b) of
the Code, however, dividends paid on unvested Restricted Stock will
be treated as dividend income, rather than compensation income, and
will not be deductible by First of America.
Stock Options. For Stock Options, the difference between the
market value of Common Stock on the date of exercise and the Stock
Option price will constitute taxable ordinary income to the Stock
Option holder on the date of exercise. First of America will be
entitled to a deduction in the same year in an amount equal to the
income taxable to the Stock Option holder. The Stock Option
holder's basis will equal the market value of Common Stock on the
date of exercise. The gain or loss on any subsequent disposition of
such Common Stock by the Stock Option holder will be taxed as a
capital gain or loss to the Stock Option holder, and will be long-
term capital gain or loss if the Stock Option holder has held such
Common Stock for more than one year at the time of sale.
Phantom Stock. Phantom Stock Deferral Account credits made
pursuant to the Restated Plan are intended to be treated as deferred
compensation subject to deferred taxation. As such, any Phantom
Stock or other deferred compensation payable under the Restated Plan
shall not be deemed compensation and shall not be included in a
Participating Director's taxable income nor deductible by First of
America under federal or state law until actually received by the
Participating Director. In order to ensure that Phantom Stock or
other deferred compensation payable under the Restated Plan is not
deemed received until it is distributed, the Committee may restrict
the timing of Participating Directors' elections to receive Phantom
Stock beyond that generally provided under the Restated Plan. Any
other rights, powers, privileges or duties in connection with the
establishment and administration of Deferral Accounts under the
Restated Plan shall not be effective if and to the extent that the
same, if effective, would result in the compensation deferred under
the Restated Plan being subject to taxation before actual receipt by
the Participating Director. Accordingly, all provisions of the
Restated Plan relating to the Deferral Accounts shall be subordinate
to this requirement and any interpretations to be given to the
Restated Plan shall be made in such a manner as to carry out this
intention.
Limited Stock Appreciation Rights. A Stock Option holder who
receives a limited stock appreciation right related to a Stock
Option will not recognize income and First of America will not be
allowed a deduction at the time the Stock Options, including such
limited stock appreciation rights, are granted. The amount of cash
received upon payment of stock appreciation in the event of a change
in control of the corporation will be ordinary income to the Stock
Option holder and will be deductible by First of America for federal
income tax purposes.
Withholding. Each Participating Director is compensated as a
self-employed individual, rather than an employee of First of
America. First of America is not currently required by federal law
to withhold any amounts from compensation that is paid to self-
employed individuals.
Other Change in Control Taxation Issues. Upon a change in
control, the Restated Plan provides that vesting of Restricted Stock
and Stock Options shall be accelerated, and allows for the
accelerated payment of Phantom Stock Deferral Accounts. Pursuant to
Section 280G of the Code, a portion of such Restricted Stock, Stock
Options and Phantom Stock Deferral Accounts may be classified as a
parachute payment. If parachute payments exceed 299 percent of a
Participating Director's base amount which is generally the
Participating Director's average total taxable compensation paid by
the corporation in the preceding five calendar years, then the
amount by which such portion exceeds the base amount is considered
an excess parachute payment. Excess parachute payments are not
deductible by the corporation and are subject to a 20 percent excise
tax on the Participating Director.
This Proposal (3) will be voted on by the holders of First of
America Common Stock entitled to vote at the Annual Meeting, and the
affirmative vote of a majority of the outstanding shares of First of
America's Common Stock is required for its approval.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF
THE PLAN.
(4) SELECTION OF AUDITORS
Upon the recommendation of the Audit Committee (which consisted
of the following outside Directors: Mr. Hetzler, Chairman, Messrs.
Barfield, Goldberg, Greenwalt, Smith, Wolpin, and Ms. Mertz), the
Board of Directors has selected the accounting firm of KPMG Peat
Marwick LLP as the principal independent auditors for First of
America for the current fiscal year. This selection is subject to
ratification by the vote of a majority of the common shares voting
at the Annual Meeting. Ratification of the selection of auditors is
being submitted to the shareholders of First of America because the
Board of Directors believes it is an important corporate decision in
which shareholders should participate. KPMG Peat Marwick LLP is a
well-known firm of independent auditors and has been auditing and
certifying financial statements of banks and bank holding companies
for many years. KPMG Peat Marwick LLP has been performing services
of an accounting and auditing nature for First of America since its
organization in 1971. First of America has been informed that
neither the firm nor any of its partners has any financial interest,
direct or indirect, in First of America or in the securities of
First of America or its affiliated banks or companies, and that no
partner of the firm was connected with First of America or its
affiliates as promoter, underwriter, voting trustee, director,
officer or employee. If the selection is rejected, or if KPMG Peat
Marwick LLP shall decline to act, resign or otherwise become
incapable of acting, or if their employment is otherwise
discontinued, the Board of Directors will select other auditors for
the period remaining until the 1998 Annual Meeting of Shareholders
when selection of auditors shall again be subject to ratification by
the shareholders.
Representatives of KPMG Peat Marwick LLP are expected to be
present at the Annual Meeting and will have the opportunity to make
a statement and respond to appropriate questions.
OTHER MATTERS
Management does not know of any matters to be presented at the
Annual Meeting other than those described above. However, if any
other matters properly come before the meeting or any adjournment
thereof, the holders of the proxies are authorized to vote thereon
at their discretion.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires
First of America's directors and certain officers, and persons who
own more than ten percent of a registered class of First of
America's equity securities, to file with the SEC and the New York
Stock Exchange initial reports of ownership and reports of changes
in ownership of First of America Common Stock and other equity
securities of First of America. These officers, directors and
greater than ten-percent shareholders are required by SEC regulation
to furnish First of America with copies of these reports.
To First of America's knowledge, based solely on review of the
copies of such reports furnished to First of America and written
representations that no other reports were required, during the
fiscal year ended December 31, 1996 all Section 16(a) filing
requirements applicable to its officers, directors and greater than
ten-percent beneficial owners were complied with, except that one
report relating to one transaction was not timely filed on behalf of
Ms. Mertz and one report relating to one transaction was not timely
filed on behalf of Mr. Walter Wolpin. These inadvertent
discrepancies were corrected promptly upon being brought to their
attention.
ADDITIONAL INFORMATION
First of America files an annual report with the SEC on Form
10-K. A copy of the Form 10-K report for the year ended December
31, 1996 is available without charge on written request of any
person, including any beneficial owner, to whom this Proxy Statement
is addressed from Richard V. Washburn, Secretary, First of America
Bank Corporation, 211 South Rose Street, Kalamazoo, Michigan 49007.
SHAREHOLDER PROPOSALS
Shareholder proposals must be received by First of America no
later than November __, 1997, for possible inclusion in the proxy
materials relating to the next annual meeting.
By Order of the Board of Directors,
Richard V. Washburn
Senior Vice President and Secretary