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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
FIRST AMERICAN CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(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:
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[FIRST AMERICAN CORPORATION LOGO]
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March 21, 1996
Dear Shareholder:
I am pleased to invite you to First American's annual shareholders'
meeting, which will be held in the fifth floor auditorium of the First American
Center in Nashville, Tennessee on Thursday, April 18, 1996 at 10:30 a.m.,
Central Daylight Time.
Details on the items of business that will be discussed and voted upon at
this year's meeting are included in this proxy statement.
In addition to these agenda items, we will be giving you a report on our
progress in 1995 which was another excellent year for First American. Net income
for 1995 was $103.1 million, or $3.64 per share, and the Company recorded a
return on assets ("ROA") of 1.21% and a return on equity ("ROE") of 14.64%.
Excluding merger-related expenses from our fourth quarter acquisition of
Heritage Federal Bancshares, Inc. and a gain from our sale of two branches, net
income for 1995 was $108.7 million, or $3.84 per share, ROA was 1.27%, and ROE
was 15.44%. In addition, loan growth was strong during 1995. Average loans were
up 15% over 1994. Credit quality remained solid during 1995 and First American
increased dividends paid 20% compared with 1994. First American also consummated
its acquisition of Heritage Federal Bancshares, Inc. effective November 1, 1995,
and Charter Federal Savings Bank, effective December 1, 1995. Our acquisition of
First City Bancorp, Inc. was effective March 11, 1996. These and other
achievements will be discussed at the annual meeting. As in the past, we will
allot time for any questions or comments you may have.
I hope that you will be able to attend the annual meeting. However, if you
cannot attend in person, please return the enclosed proxy card as soon as
possible to ensure that your shares are represented at the annual meeting. If
your plans change and you are able to attend the meeting, you may choose to
withdraw your proxy and vote in person.
On behalf of the board of directors and employees of First American, let me
express our appreciation for your continued support and confidence.
Sincerely,
/s/ Dennis C. Bottorff
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Dennis C. Bottorff
Chairman and Chief Executive Officer
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FIRST AMERICAN CORPORATION
First American Center
Nashville, Tennessee 37237
(615) 748-2000
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of First American Corporation:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the "Annual
Meeting") of First American Corporation will be held in the fifth floor
auditorium, First American Center, Fourth and Union, Nashville, Tennessee on
April 18, 1996 at 10:30 a.m., CDT, for the following purposes:
(1) To elect one (1) director to serve until the Annual Meeting in
1997, one (1) director to serve until the Annual Meeting in 1998, and five
(5) directors to serve until the Annual Meeting in 1999; and
(2) To transact such other business as may properly come before the
Annual Meeting.
Only shareholders of record at the close of business on February 8, 1996
will be entitled to vote at the Annual Meeting or any adjournment thereof.
All shareholders are cordially invited to attend the Annual Meeting. TO
ENSURE YOUR REPRESENTATION AT THE MEETING, PLEASE COMPLETE AND PROMPTLY MAIL
YOUR PROXY IN THE RETURN ENVELOPE ENCLOSED. This will not prevent you from
voting in person, should you so desire, but will help to secure a quorum and
avoid added solicitation costs. Your proxy may be revoked at any time before it
is voted. Your attention is directed to the proxy statement accompanying this
notice for a more complete statement regarding the matters proposed to be acted
upon at the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
LOGO
/s/ Martin E. Simmons
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Martin E. Simmons
Executive Vice
President - Administration,
General Counsel, Principal Financial
Officer
and Secretary
Nashville, Tennessee
March 21, 1996
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PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the "Board") of First American Corporation
(the "Company"), which, unless otherwise indicated, includes all corporate
predecessors and subsidiaries of the Company, from holders of the Company's
shares of $5.00 par value common stock (the "Shares") to be voted at the 1996
annual meeting of the shareholders of the Company (the "Annual Meeting") to be
held in the fifth floor auditorium of the First American Center, Fourth and
Union, Nashville, Tennessee on Thursday, April 18, 1996, at 10:30 a.m. CDT, and
any adjournments or postponements thereof for the purposes set forth in the
accompanying notice. A proxy may be revoked by a shareholder at any time prior
to its use by filing with the Secretary of the Company a written revocation or a
duly executed proxy bearing a later date, or by attending the Annual Meeting and
voting in person. Any written notice revoking a proxy should be sent to: Martin
E. Simmons, Executive Vice President - Administration, General Counsel,
Principal Financial Officer and Secretary, First American Corporation, 606 First
American Center, Nashville, Tennessee 37237-0606. The Board has fixed the close
of business on February 8, 1996, as the record date (the "Record Date") for the
determination of shareholders entitled to notice of and to vote at the Annual
Meeting. This Proxy Statement and the accompanying form of proxy have been
mailed on or about March 22, 1996, to holders of the Company's Shares as of the
Record Date. The information contained herein is as of the date of the
accompanying notice unless otherwise indicated.
The Company's principal executive office is located in the First American
Center, Nashville, Tennessee 37237.
OTHER MEETING AND VOTING INFORMATION
Proxies may be solicited by mail, telephone, telegraph or in person. All
costs will be borne by the Company. Further solicitation will be made in the
same manner under the direction of Corporate Investor Communications, Inc., of
Carlstadt, New Jersey, at an anticipated cost of $3,000, not including out of
pocket expenses, which are estimated at $4,000. The Company will also reimburse
brokerage firms and other nominees for their expenses in forwarding proxy
materials to beneficial owners of the Shares.
The Shares represented by such proxies will be voted in accordance with the
choices specified therein. If no choice has been specified, the Shares will be
voted FOR the election of the nominees for director named herein and in the
proxies' discretion on any other matter which may properly come before the
shareholders at the Annual Meeting.
The Board does not know of any other matters which will be presented for
action at the Annual Meeting, but the persons named in the proxy (who are
directors of the Company) intend to vote or act with respect to any other
proposal which may be presented for action according to their best judgment.
As of the Record Date, the Company had outstanding 29,628,776 Shares.
Holders of the Shares are entitled to one vote for each Share held on all
matters to come before the shareholders at the Annual Meeting. Cumulative voting
is not permitted. In order to constitute a quorum for the Annual Meeting, the
holders of 14,814,389 Shares must be present or represented by proxies.
The affirmative vote of a plurality of the votes cast is required in the
election of the nominees for director. Under Tennessee law and the Company's
Charter and By-Laws, the aggregate number of votes entitled to be cast by all
shareholders present in person or represented by proxy at the Annual Meeting,
whether those shareholders vote "for", "against" or "abstain" from voting, and
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broker non-votes will be counted for purposes of determining whether a quorum is
present. Abstentions and broker non-votes on returned proxies and ballots will
be counted as neither FOR nor AGAINST a matter or nominee.
No person is authorized to give any information or to make any
representation not contained in this Proxy Statement, and if given or made, such
information or representation should not be relied upon as having been
authorized. This Proxy Statement does not constitute the solicitation of a proxy
in any jurisdiction from any person to whom it is unlawful to make such proxy
solicitation in such jurisdiction. The delivery of this Proxy Statement shall
not, under any circumstances, imply that there has not been any change in the
information set forth herein since the date of this Proxy Statement.
SHAREHOLDER PROPOSALS
In order for appropriate proposals by shareholders to be included in the
1997 proxy materials and to be considered at the 1997 annual meeting, all such
proposals intended for presentation at the 1997 annual meeting must be mailed to
Martin E. Simmons, Executive Vice President - Administration, General Counsel,
Principal Financial Officer and Secretary, First American Corporation, 606 First
American Center, Nashville, Tennessee 37237-0606, and must be received no later
than November 21, 1996.
ELECTION OF DIRECTORS
The Company's By-Laws provide that the Board shall consist of not less than
nine nor more than twenty-seven directors and shall be divided into three
classes, each class to be as nearly equal in number as practicable. As permitted
in the By-Laws, effective as of January 18, 1996, the Board has fixed the number
of directors at twenty. The terms for eight of the Company's directors expire at
the 1996 Annual Meeting. The terms for seven of the Company's directors expire
at the 1997 annual meeting. The terms for six of the Company's directors expire
at the 1998 annual meeting. In each case, directors were elected until their
respective successors are duly elected and qualified. At each annual meeting,
one class of directors is to be elected for a three-year term.
The Company's By-Laws further provide that a vacancy on the Board occurring
during the course of the year, including a vacancy created by an increase in the
number of directors, may be filled by the remaining directors, though less than
a quorum, and that a newly elected director shall serve for the unexpired term
of his predecessor or, if there is no predecessor, until the next annual
meeting. Acting upon this authority, Sam H. Anderson, Jr. was elected effective
November 1, 1995 to serve until the 1996 Annual Meeting.
At the 1996 Annual Meeting, one director will be elected to hold office
until the 1997 annual meeting and until his successor has been elected and
qualified, one director will be elected to hold office until the 1998 annual
meeting and until his successor has been elected and qualified, and five
directors will be elected to hold office until the 1999 annual meeting and until
their successors have been elected and qualified. As a result, the division of
the Company's directors into three classes will be eight directors, seven
directors and five directors with terms expiring at the 1997, 1998 and 1999
annual meetings, respectively. The nominee for the class of 1997 is DAVID K.
WILSON, the nominee for the class of 1998 is SAM H. ANDERSON, JR., and the
nominees for the class of 1999 are EARNEST W. DEAVENPORT, JR., MARTHA R. INGRAM,
JAMES R. MARTIN, ROSCOE R. ROBINSON, AND WILLIAM S. WIRE II.
Unless a proxy shall specify otherwise, the persons named in the proxy
shall vote the Shares covered thereby FOR the nominees designated by the Board
as listed above. Each nominee has
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consented to be a candidate and to serve, if elected. While the Board has no
reason to believe that any nominee will be unavailable, if such an event should
occur, it is intended that such Shares will be voted for such substitute nominee
as may be selected by the current Board.
All of the Company's Directors also serve as directors of First American
National Bank ("FANB"), Nashville, Tennessee.
NOMINEES FOR ELECTION TO THE BOARD
DAVID K. WILSON Age -- 76
Director, Member of the Executive, Director since 1974
Human Resources and Nominating Committees Term to expire 1997
Mr. Wilson is Chairman of Cherokee Equity Corporation, a holding company. He
also serves as a member of the Vanderbilt University Board of Trusts and is a
director of Tennessee Wholesale Drug Co.
SAM H. ANDERSON, JR. Age -- 69
Director, Member of the Audit Director since
and Community Affairs Committees November 1995
Term to expire 1998
Mr. Anderson is President of Sullivan Lands, Inc., a real estate concern. From
1991 until November 1995, Mr. Anderson served as a director of Heritage Federal
Bancshares, Inc. Mr. Anderson is Chairman of the Board of Fairway Ford, Inc. and
Courtesy Chevrolet-Cadillac, Inc. and serves as President of Gate City Ford.
EARNEST W. DEAVENPORT, JR. Age -- 57
Director and Member of the Director since 1989
Development and Audit Committees Term to expire 1999
Mr. Deavenport is Chairman of the Board and Chief Executive Officer of Eastman
Chemical Company. Mr. Deavenport also serves as a director for Milliken and
Company and the National Association of Manufacturers, a member of the Policy
Committee of the Business Roundtable, and a Trustee of the Malcolm Baldridge
National Quality Award Foundation.
MARTHA R. INGRAM Age -- 60
Director and Member of the Audit, Nominating Director since 1993
and Community Affairs Committees Term to expire 1999
Since June 1995, Mrs. Ingram has served as Chairman of the Board of Directors of
Ingram Industries Inc., a diversified transportation and energy company and
distributor of consumer products. From 1979 to June 1995, Mrs. Ingram served as
the Director of Public Affairs of Ingram Industries Inc. and has served as a
member of its Board of Directors since 1981. Mrs. Ingram also serves as a member
of the Board of Directors of Baxter International, Inc. and of Weyerhauser
Company.
JAMES R. MARTIN Age -- 52
Director and Member of the Director since 1989
Community Affairs and Audit Committees Term to expire 1999
Mr. Martin is the Chairman of the Board of Directors and Chief Executive Officer
of Plasti-Line, Inc., a Knoxville-based manufacturer of indoor and outdoor sign
products and point of purchase marketing products for corporate identification
programs. From 1976 through June 1992, he served as President of Plasti-Line,
Inc. Mr. Martin also serves as a director of Signal Thread Company.
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ROSCOE R. ROBINSON Age -- 65
Director and Member of the Director since 1992
Development and Nominating Committees Term to expire 1999
Dr. Robinson has served as Vice Chancellor for Health Affairs of Vanderbilt
University and Professor of Medicine at Vanderbilt University Medical Center in
Nashville, Tennessee since 1981. Dr. Robinson also serves as President of
Vanderbilt Health Services, Inc. and as a Trustee of Duke University.
WILLIAM S. WIRE II Age -- 64
Director, Chairman of the Community Affairs Director since 1989
Committee and Member of the Executive, Term to expire 1999
Asset Policy and Nominating Committees
Mr. Wire is the former Chairman and Chief Executive Officer of Genesco, Inc., a
manufacturer and retailer of footwear and related products, and a manufacturer
of tailored clothing. He served as Chairman of Genesco, Inc. from March 1986
until his retirement in January 1994. From March 1986 to February 1993, he also
served as Chief Executive Officer of Genesco, Inc. Mr. Wire serves as a director
of Genesco, Inc. and of Dollar General Corporation.
CONTINUING DIRECTORS UNTIL 1997 MEETING
DENNIS C. BOTTORFF Age -- 51
Director, Chairman, President and Chief Executive Officer, Director since 1991
and Member of the Executive, Asset Policy and Term to expire 1997
Development Committees
Since January 1995, Mr. Bottorff has served as Chairman, President and Chief
Executive Officer of the Company and as Chairman and Chief Executive Officer of
First American National Bank. From November 1991 through 1994, he served as
President and Chief Executive Officer of the Company and as Chief Executive
Officer of First American National Bank. From November 1991 through January
1994, Mr. Bottorff also served as President of First American National Bank.
From September 1990 until November 1991, he was President and Chief Operating
Officer of C&S/Sovran Corporation. Mr. Bottorff also serves as a director of
Shoney's, Inc. and of Ingram Industries, Inc., and serves as a member of the
Vanderbilt University Board of Trusts.
T. SCOTT FILLEBROWN, JR. Age -- 69
Director and Member of the Director since 1968
Development and Audit Committees Term to expire 1997
Since March 1988, Mr. Fillebrown has been a private investor and consultant.
From July 1985 until March 1988, Mr. Fillebrown served as Chairman of First
Choice Health Plan, a health maintenance organization.
JAMES A. HASLAM II Age -- 65
Director, Chairman of the Nominating Committee Director since 1983
and Member of the Executive, Asset Policy Term to expire 1997
and Human Resources Committees
Since July 1995, Mr. Haslam has served as Chairman of Pilot Corporation, a
retail operator of travel centers and convenience stores/gasoline stations. Mr.
Haslam served as President and Chief Executive Officer of Pilot Corporation from
its founding in November 1958 to July 1995. He also serves as a member of the
University of Tennessee Board of Trustees.
Robert A. McCabe, Jr., a Director and Executive Officer of the Company, is
married to the daughter of Mrs. Haslam.
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CONTINUING DIRECTORS UNTIL 1997 MEETING -- (CONTINUED)
WALTER G. KNESTRICK Age -- 58
Director, Chairman of the Asset Policy Committee Director since 1990
and Member of the Executive and Development Committees Term to expire 1997
Mr. Knestrick founded Walter Knestrick Contractor, Inc., a commercial and
industrial building contractor and has served as its Chairman of the Board since
1969.
ROBERT A. MCCABE, JR. Age -- 45
Director, Vice Chairman, and President - First American Enterprises,
Inc. Director since 1994
Term to expire 1997
Since January 1994, Mr. McCabe has served as Vice Chairman of the Company and
First American National Bank and President - First American Enterprises. From
December 1991 to January 1994, he served as President, General Bank, First
American National Bank and served as President, Corporate Bank, First American
National Bank from April 1991 to December 1991. Mr. McCabe also serves as a
member of the Board of Directors of Sirrom Capital Corporation.
WILLIAM O. MCCOY Age -- 62
Director, Chairman of the Human Resources Committee Director since 1979
and Member of the Executive, Term to expire 1997
Development and Nominating Committees
Since January 1995, Mr. McCoy has served as Vice President and Chief Financial
Officer of the University of North Carolina System. From January 1986 until
December 1994, Mr. McCoy was President and Chief Executive Officer of BellSouth
Enterprises, Inc. From January 1984 until December 1994, Mr. McCoy was Vice
Chairman of BellSouth Corporation, a telephone utility holding company. Mr.
McCoy also serves as a director of The Liberty Corporation and of Weeks Corp.
TOBY S. WILT Age -- 51
Director, Chairman of the Audit Committee, and Member Director since 1992
of the Executive and Asset Policy Committees Term to expire 1997
Mr. Wilt is the President of TSW Investment Company, a private investment
company in Nashville, Tennessee and Chairman of The Christie Cookie Company, a
gourmet baking company. Mr. Wilt also serves as a director of Volunteer Capital
Corporation, Titan Holdings, Inc., and The Christie Cookie Company.
CONTINUING DIRECTORS UNTIL 1998 MEETING
REGINALD D. DICKSON Age -- 49
Director and Member of the Nominating, Director since 1981
Human Resources and Community Affairs Committees Term to expire 1998
Mr. Dickson is President Emeritus of INROADS, Inc., a non-profit minority career
development organization and Chairman of Buford, Dickson, Harper & Sparrow,
Inc., an investment, research and counseling firm in St. Louis, Missouri. From
1983 through 1992, Mr. Dickson served as President and Chief Executive Officer
of INROADS, Inc. Mr. Dickson also serves as a director of Dollar General
Corporation.
GENE C. KOONCE Age -- 64
Director and Member of the Director since 1981
Audit Committee Term to expire 1998
Mr. Koonce is President, Chief Executive Officer and a member of the Board of
Directors of United Cities Gas Company, a natural and propane gas distribution
company.
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CONTINUING DIRECTORS UNTIL 1998 MEETING -- (CONTINUED)
DALE W. POLLEY Age -- 46
Director, Vice Chairman, Director since 1991
President of First American National Bank Term to expire 1998
and Member of the Community Affairs Committee
Since January 1994, Mr. Polley has served as Vice Chairman of the Company and as
President of First American National Bank. He also serves on the Board of
Directors of First American National Bank of Kentucky. Since December 1991, he
has served as Vice Chairman of the Company and First American National Bank.
From December 1991 to January 1994, Mr. Polley served as Chief Administrative
Officer of the Company and First American National Bank. From November 1992
through 1994, he also served as Principal Financial Officer of the Company and
First American National Bank. From 1990 until December 1991, he was Group
Executive Vice President and Treasurer of C&S/Sovran Corporation. Mr. Polley
also serves as a director of the Federal Reserve Bank of Atlanta-Nashville
Branch.
JAMES F. SMITH, JR. Age -- 66
Director, Chairman of the Director since 1983
Development and Executive Committees Term to expire 1998
and Member of the Asset Policy Committee
From 1991 through December 1994, Mr. Smith served as Chairman of the Board of
the Company and First American National Bank. From February 8, 1991 until
November 15, 1991, Mr. Smith also served as President and Chief Executive
Officer of the Company and First American National Bank. Mr. Smith also serves
as a director of Pilot Corporation, Plasti-Line, Inc., and Computational
Systems, Inc.
CAL TURNER, JR. Age -- 56
Director and Member of the Human Resources Director since 1989
and Community Affairs Committees Term to expire 1998
Since 1988, Mr. Turner has held the position of Chairman, President and Chief
Executive Officer of Dollar General Corporation, a chain of discount retail
stores. Mr. Turner also serves as a director of Thomas Nelson Publishers, Inc.
and of Shoney's, Inc.
TED H. WELCH Age -- 62
Director and Member of the Director since 1994
Asset Policy and Audit Committees Term to expire 1998
Mr. Welch has been a self-employed real estate investor and operator since 1975.
Since 1993, he has served as President and Chief Executive Officer of Eagle
Communications, Inc., a publisher of periodicals. Mr. Welch also serves as a
director of National Health Investors, Inc., Southeast Service Corporation,
American Constructors, Inc., Logan's Roadhouse Restaurant Inc., and Z-1
Corporation.
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DESCRIPTION OF THE BOARD AND COMMITTEES
During 1995, the Board held eight regular meetings and no special meetings.
The Board has seven standing committees: Executive, Asset Policy, Audit,
Community Affairs, Human Resources, Nominating and Development.
The Executive Committee consists of the Chief Executive Officer and not
less than three other directors who are elected by the Board. At present, the
Executive Committee is comprised of the Chief Executive Officer and six other
directors who are the chairmen of the other standing committees and the former
Chairman of First American Trust Company, N.A., which was merged with and into
FANB on September 30, 1995. The Committee can act on behalf of the full Board on
all matters concerning the management and conduct of the business affairs of the
Company except those matters which cannot by law be delegated by the Board. The
Executive Committee meets on the call of the Chairman of the Committee or the
Chief Executive Officer. The Executive Committee met four times in 1995.
The Asset Policy Committee consists of six directors who are not officers
or employees of the Company and the Chief Executive Officer. The Committee is
responsible for all credit related matters, including the approval of credit
policies and procedures. It monitors the loan portfolio of FANB, reviews
significant loan transactions, reviews credit examinations, and monitors
compliance with regulatory requirements and applicable laws and regulations. The
Committee also reviews regulatory examinations, as well as asset/liability
policies and procedures. The Asset Policy Committee met seven times in 1995.
The Audit Committee consists of eight directors who are not officers or
employees of the Company. During 1995, the Audit Committee was composed of
Messrs. Wilt (Chairman), Deavenport, Fillebrown, Koonce, Martin, Welch and Mrs.
Ingram. Mr. Anderson was appointed to the Audit Committee in November 1995.
Under the Federal Deposit Insurance Corporation Act of 1991 ("FDICIA"), the
Audit Committee must consist wholly of outside directors, must include at least
two members who have banking or financial management expertise and may not
include any "large customers" of FANB. The Audit Committee of the Company meets
all of these requirements. The Committee acts on behalf of the Board to ensure
that the affairs and operations of the Company and its subsidiaries are subject
to proper financial audits and internal control procedures. It approves the
selection of independent public accountants, oversees the relationship between
the Company's independent public accountants and its management, reviews the
arrangements for and scope of internal and external audits, considers comments
from internal and external auditors and management's replies, discusses areas of
concern, and monitors the adequacy of internal controls and supervises the
internal audit function. The Committee also reviews the allowance for loan and
lease losses and internal loan audits. It reports to the Board in connection
with the activities, findings and reports of both the internal and independent
auditors of the Company and its subsidiaries, provides guidance and assistance
to the auditors, and ensures that the auditors are free to exercise their
function independently of management, wherever appropriate. The Audit Committee
also reviews the various reports required to be filed with bank regulatory
agencies. The Audit Committee met five times during 1995.
The Community Affairs Committee, consisting of six directors who are not
officers or employees of the Company and the Vice Chairman and President of
FANB, advises and counsels management in matters of community activities,
contributions, government affairs and compliance with the Community Reinvestment
Act and other laws or regulations of similar purpose. In 1995, the Community
Affairs Committee met three times.
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The Human Resources Committee, consisting of six directors who are not
officers or employees of the Company, serves as the Company's compensation
committee and oversees all personnel practices and procedures of the Company and
its subsidiaries. It also oversees all benefit programs and acts with regard to
salary administration. The Committee sets the salaries of certain officers of
the Company and recommends to the full Board the salaries of officers of the
Company who are also directors. The Human Resources Committee met seven times
during 1995.
The Nominating Committee, comprised of seven directors who are not officers
or employees of the Company, establishes criteria for the evaluation of members
of the Board, evaluates the Board and recommends whether members should be
nominated for re-election. The Committee also evaluates the size and composition
of the Board, establishes criteria for director nominations and identifies and
recommends nominees for membership on the Board. The By-Laws of the Company
provide that the Nominating Committee may receive recommendations from
shareholders of the Company for membership on the Board if written notice of the
recommendation is submitted to the Chief Executive Officer of the Company within
60 days prior to the meeting of the Committee, containing the name, address, and
principal occupation of the proposed nominee, and the name, address and number
of shares owned by the notifying shareholder. During 1995, the Nominating
Committee was composed of Messrs. Haslam (Chairman), Dickson, McCoy, Robinson,
Wilson and Wire and Mrs. Ingram. The Nominating Committee met twice during 1995.
The Development Committee is comprised of seven directors who are not
officers or employees of the Company and the Chief Executive Officer. The
Committee serves as an oversight committee to advise and counsel management as
to the investigation, development and implementation of non-traditional banking
products or services offered through the Company or its affiliates. The
Committee also provides general oversight to FANB's corporate and personal trust
services, reviews preliminary reports and recommendations concerning strategic
growth through mergers and acquisitions and ensures that these activities are
undertaken and conducted in accordance with applicable laws, regulations,
corporate policy and sound financial planning, and performs such other functions
as may be assigned to it by the Board. The Development Committee met four times
in 1995.
No incumbent director attended fewer than 75% of the aggregate of (i) the
total number of meetings held during 1995 by the Board (held during the period
for which he or she has been a director), and (ii) the total number of meetings
held during 1995 by all committees of the Board of which such director was a
member (during the period that he or she served).
REPORTS OF BENEFICIAL OWNERSHIP
Under the securities laws of the United States, the Company's executive
officers and directors, and persons who own more than ten percent of the common
stock of the Company are required to report their ownership of such stock and
any changes in that ownership with the Securities and Exchange Commission
("SEC"). These persons are also required to furnish the Company with copies of
these reports.
Based solely on its review of the copies of such forms received by it, or
written representations from reporting persons, the Company believes that all of
these filing requirements were satisfied during the period ended December 31,
1995, with two exceptions. Mr. Knestrick inadvertently failed to report gifts
totaling 4,059 shares within 10 days of the end of the month in which they
occurred; however, a Form 5 was filed promptly upon discovery of the omissions.
Also, Mr. McCabe inadvertently failed to report the open market purchase of 57
shares held indirectly by his minor children; however, this oversight was also
remedied by the filing of a Form 4 promptly upon discovery.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
There are no persons who are the beneficial owners of more than 5% of the
Company's common stock, its only class of voting securities.
The following table sets forth the number of Shares held beneficially,
directly or indirectly, as of the Record Date, by all directors and nominees for
director, the Company's Chief Executive Officer and the Company's four most
highly compensated officers other than the Chief Executive Officer (these five
executive officers being hereinafter referred to as the "Named Executive
Officers") and by all directors and executive officers as a group, together with
the percentage of the outstanding Shares which such ownership represents.
SHARES
NAME OF BENEFICIALLY PERCENTAGE
BENEFICIAL OWNER OWNED OF CLASS
- ------------------------------------------- ----------------- ----------
Sam H. Anderson, Jr........................ 127,469 shares(1) .4%
Samuel E. Beall, III....................... 1,600 shares(2) *
Dennis C. Bottorff......................... 274,679 shares(3) .9%
John W. Boyle, Jr.......................... 32,457 shares(4) .1%
Earnest W. Deavenport, Jr.................. 4,588 shares(2) *
Reginald D. Dickson........................ 1,703 shares(2) *
T. Scott Fillebrown, Jr.................... 24,622 shares(5) *
James A. Haslam, II........................ 68,979 shares(6) .2%
Martha R. Ingram........................... 10,600 shares(2) *
Walter G. Knestrick........................ 363,425 shares(7) 1.2%
Gene C. Koonce............................. 4,189 shares(2) *
James R. Martin............................ 6,600 shares(8) *
Robert A. McCabe, Jr....................... 91,216 shares(9) .3%
William O. McCoy........................... 5,499 shares(2) *
Dale W. Polley............................. 84,077 shares(10) .2%
Roscoe R. Robinson......................... 1,600 shares(2) *
Martin E. Simmons.......................... 33,183 shares(11) .1%
James F. Smith, Jr......................... 152,743 shares(12) .5%
Cal Turner, Jr............................. 69,098 shares(13) .2%
Ted H. Welch............................... 1,161 shares *
David K. Wilson............................ 382,968 shares(14) 1.3%
Toby S. Wilt............................... 100,600 shares(2) .3%
William S. Wire, II........................ 11,567 shares(2) *
All Directors, Nominees for Director and
Executive Officers as a Group............ 2,119,164 shares(15) 7%(16)
- ---------------
* less than .1%
(1) Includes 17,599 shares held by Mrs. Anderson for which Mr. Anderson
disclaims beneficial ownership, 32,464 shares held by Mr. Anderson's adult
children for which he holds investment and voting power, and 15,685 shares
held by companies which Mr. Anderson owns or controls.
(2) Includes options for 600 shares of common stock issued pursuant to the
First American Corporation 1993 Non-Employee Director Stock Option Plan
(the "1993 Plan") which are currently exercisable.
(3) Includes 5,179 shares held in Mr. Bottorff's FIRST Plan accounts (the
Company's section 401(k) Plan), 34,500 shares (over which Mr. Bottorff has
voting but not investment authority) granted pursuant to a restricted stock
award under the First American Corporation 1991 Employee Stock Incentive
Plan (the "1991 Plan"), and includes options for 180,000 shares issued
pursuant to the 1991 Plan which are currently exercisable.
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(4) Includes 1,257 shares held in Mr. Boyle's FIRST Plan accounts, 5,000 shares
(over which Mr. Boyle has voting but not investment authority) granted
pursuant to a restricted stock award under the 1991 Plan, and includes
options for 10,458 shares issued pursuant to the 1991 Plan which are
currently exercisable.
(5) Includes options for 600 shares issued pursuant to the 1993 Plan which are
currently exercisable and 18,793 shares owned by Mrs. Fillebrown as to
which Mr. Fillebrown disclaims beneficial ownership.
(6) Includes options for 600 shares issued pursuant to the 1993 Plan which are
currently exercisable and 7,312 shares owned by Mrs. Haslam as to which Mr.
Haslam disclaims beneficial ownership.
(7) Includes options for 600 shares issued pursuant to the 1993 Plan which are
currently exercisable and 78,427 shares held by a trust for which Mr.
Knestrick acts as trustee.
(8) Includes options for 600 shares issued pursuant to the 1993 Plan which are
currently exercisable, 2,000 shares held by trusts for which Mr. Martin
acts as trustee and 1,000 owned by his spouse as to which he disclaims
beneficial ownership.
(9) Includes 8,735 shares held in Mr. McCabe's FIRST Plan accounts, 467 shares
owned by his children, 137 shares owned by his spouse as to which he
disclaims beneficial ownership, 12,667 shares (over which Mr. McCabe has
voting but not investment authority) granted pursuant to a restricted stock
award under the 1991 Plan, and includes options for 22,200 shares issued
pursuant to the 1991 Plan which are currently exercisable and 24,361 shares
which Mr. McCabe may acquire under stock options granted pursuant to the
Company's STAR Award Plan which are currently exercisable.
(10) Includes 3,807 shares held in Mr. Polley's FIRST Plan accounts, 12,833
shares (over which Mr. Polley has voting but not investment authority)
granted pursuant to a restricted stock award under the 1991 Plan, and
includes options for 55,200 shares issued pursuant to the 1991 Plan which
are currently exercisable.
(11) Includes 2,883 shares held in Mr. Simmons' FIRST Plan accounts, 7,500
shares (over which Mr. Simmons has voting but not investment authority)
granted pursuant to a restricted stock award under the 1991 Plan, and
includes options for 12,200 shares issued pursuant to the 1991 Plan which
are currently exercisable.
(12) Includes options for 600 shares issued pursuant to the 1993 Plan which are
currently exercisable and 20,059 shares owned by Mrs. Smith as to which Mr.
Smith disclaims beneficial ownership.
(13) Includes options for 600 shares issued pursuant to the 1993 Plan which are
currently exercisable, 1,085 shares held by a trust for which Mr. Turner
acts as trustee and 3,312 shares held by another trust for which Mr. Turner
acts as trustee and as to which he has no pecuniary interest.
(14) Includes options for 600 shares issued pursuant to the 1993 Plan which are
currently exercisable and 300,000 shares owned by a corporation
beneficially owned by Mr. Wilson.
(15) Includes 498,339 shares of common stock owned by or for spouses, children,
other relatives, trusts and firms which a director or officer controls,
where such beneficial ownership may be attributed to the director or
officer. This amount also includes 116,610 shares granted pursuant to
restricted stock awards under the 1991 Plan to executive officers over
which the officers have voting but not investment authority, 73,784 shares
which officers have the right to acquire under the STAR Award Plan which
are currently exercisable, options for 359,698 shares issued pursuant to
the 1991 Plan which are currently exercisable and 55,872 shares held in
FIRST Plan accounts.
(16) For purposes of computing this percentage, shares which may be acquired by
directors and officers under stock options which were exercisable as of the
Record Date or within 60 days thereof are deemed to be outstanding.
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes the compensation paid or accrued by the
Company to the Named Executive Officers during the three fiscal years ended
December 31, 1995.
LONG-TERM COMPENSATION
----------------------------------
AWARDS
ANNUAL COMPENSATION ------------------------ PAYOUTS
-------------------------------- RESTRICTED SECURITIES -------
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
SALARY BONUS COMPENSATION AWARDS OPTIONS/ PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) ($)(1) SARS(#) ($) ($)(2)
- ---------------------------- ------ ------- ------- ------------ ---------- ---------- ------- ---------------
Dennis C. Bottorff.......... 1995 550,000 275,000 -- -- -- -- 28,500
Chairman and Chief Executive 1994 530,625 265,000 -- 303,750 50,000 -- 30,738
Officer 1993 436,000 218,000 -- -- -- -- 14,831
Dale W. Polley.............. 1995 350,000 175,000 -- -- -- -- 20,400
Vice Chairman and President, 1994 325,625 168,610 -- 106,313 18,000 -- 22,038
First American National Bank 1993 280,000 140,000 -- -- -- -- 12,331
Robert A. McCabe, Jr........ 1995 270,000 135,000 -- 93,678(3) -- -- 15,600
Vice Chairman and President 1994 260,625 130,000 -- 106,313 18,000 -- 16,288
- -- First American 1993 220,000 118,250 -- -- -- -- 14,300
Enterprises, Inc.
John W. Boyle, Jr........... 1995 229,000 114,500 -- -- -- -- 12,420
President -- Corporate Bank 1994 220,625 110,000 -- 60,750 10,500 -- 17,555
1993 210,000 112,875 -- -- -- -- 10,821
Martin E. Simmons........... 1995 230,000 115,000 -- 29,000 -- -- 12,889
Executive Vice President -- 1994 195,625 82,875 -- 91,125 11,700 -- 13,188
Administration, General 1993 180,000 55,800 -- 41,625 4,000 -- 9,627
Counsel, Principal Financial
Officer and Secretary
- ---------------
(1) As of December 31, 1995, the total number of restricted shares and their
aggregate market value were as follows: Mr. Bottorff held 30,000 restricted
shares valued at $1,421,250; Mr. Polley held 10,167 restricted shares
valued at $481,662; Mr. McCabe held 12,167 restricted shares valued at
$576,412; Mr. Boyle held 8,000 restricted shares valued at $379,000; and
Mr. Simmons held 5,500 restricted shares valued at $260,563. The foregoing
total number of restricted shares included the following shares on which
restrictions have now lapsed as a result of the January 18, 1996 Board
approval of 1995 financial results: Mr. Bottorff -- 10,000 shares; Mr.
Polley -- 1,667 shares; Mr. McCabe -- 3,000 shares; Mr. Boyle -- 3,000
shares; Mr. Simmons -- 1,500 shares. In addition, the restrictions on 1,667
shares of time based restricted stock belonging to Mr. Polley lapsed as a
result of the January 18, 1996 approval by the Human Resources Committee of
the acceleration of these shares due to the 1993-95 performance cycle
financial results. None of the restricted awards listed in the Summary
Compensation Table or in this footnote have a vesting schedule of less than
three years. Dividends are paid on restricted stock at the same rate as all
other shares of the common stock of the Company.
(2) Amounts in this column for 1995 include Company matching contributions under
the Company's FIRST Plan (401(k)), and FIRST Plan Supplemental Executive
Retirement Plan (401(k) SERP) for the Named Executive Officers as follows:
Mr. Bottorff: 401(k) -- $8,400, 401(k) SERP -- $20,100, Mr. Polley:
401(k) -- $8,400, 401(k) SERP -- $12,000; Mr. McCabe: 401(k) -- $8,400,
401(k) SERP -- $7,200; Mr. Boyle: 401(k) -- $8,400, 401(k) SERP -- $4,020;
Mr. Simmons: 401(k) -- $8,089, 401(k) SERP -- $4,800. A portion of the
Company matching contributions was paid in cash as a corrective
distribution, pursuant to compliance with regulations under Internal
Revenue Service Code sections 401(k) and 401(m), for the Named Executive
Officers, as follows: Messrs. Bottorff, Polley, McCabe and Boyle -- $1,245
each; Mr. Simmons -- $934.
(3) Mr. McCabe received 2,667 shares of Restricted Stock issued pursuant to the
Company's executive stock ownership guidelines established by the Human
Resources Committee in 1994. These shares will vest in three years if he
maintains his ownership level.
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OPTION GRANTS
The Company granted no stock options to the Named Executive Officers in
1995. The Company granted no stock appreciation rights ("SARs") in 1995.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
Shown below is information with respect to exercises by the Named Executive
Officers during 1995 of options to purchase shares pursuant to the Company's
stock option plans and information with respect to unexercised options to
purchase shares held by the Named Executive Officers as of December 31, 1995.
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS AT OPTIONS/SARS AT
ACQUIRED DECEMBER 31, 1995(#) DECEMBER 31, 1995($)
ON VALUE ----------------------------- -----------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------- ----------- ----------- ----------- ------------- ----------- -------------
Dennis C. Bottorff.......... -- -- 170,000 80,000(1) $5,293,750 $ 1,600,000
Dale W. Polley.............. -- -- 51,600 26,400 $1,544,550 $ 485,700
Robert A. McCabe, Jr........ 2,750 $38,844 42,961 24,400 $1,031,345 $ 351,200
John W. Boyle, Jr........... 8,742 $65,565 8,358 18,400 $ 168,809 $ 306,950
Martin E. Simmons........... 1,000 $27,875 9,060 15,840 $ 192,230 $ 255,820
- ---------------
(1) Mr. Bottorff's Option Holdings reflected in this table in the 1995 Proxy
Statement contained a clerical error in that the number of unexercisable
shares held at December 31, 1994 should have been shown as 130,000 shares
instead of 80,000; the holdings were, however, correctly disclosed in the
1995 Option Grant Table as well as correctly discussed in the Human
Resources Committee Report on Executive Compensation.
Based on the closing price per share on December 31, 1995 -- $47.375. The
Company granted no stock appreciation rights ("SARs") in 1995.
The Company has entered into contracts with each of its executive officers
including the Named Executive Officers that provide generally for a payment
equal to a stated multiple of the officer's annual base salary and annual cash
bonus as well as the employee's annual cash bonus for the full year in which a
Change in Control or Potential Change in Control takes place in the event of a
termination of the officer's employment by the Company other than "for cause" or
as a result of death or disability. For Messrs. Bottorff, Polley, McCabe and
Simmons, the multiple is three times their respective annual base salary and
annual cash bonus; for Mr. Boyle, the multiple is two times. Additionally, the
contracts provide that the officers shall be paid such amounts if the officer
voluntarily terminates his employment with the Company if, after a Change in
Control or a Potential Change in Control, (i) there is a reduction in the
officer's annual base salary or annual bonus opportunity, (ii) the officer is
required by the Company, involuntarily, to relocate to an office more than 35
miles from the office where the officer was located at the time of the Change in
Control or Potential Change in Control, (iii) there is a material reduction in
the officer's responsibilities, authority, or duties, (iv) the officer's fringe
benefits are materially reduced, or (v) the Company does not honor the terms of
the contracts. These contracts generally provide for an excise tax gross-up with
respect to any taxes incurred under Internal Revenue Code Section 4999 after a
Change in Control or Potential Change in Control. Additionally, these contracts
provide for an extension of life insurance, medical insurance, and other
employment benefits upon the occurrence of a Change in Control or Potential
Change in Control. "Change in Control" and "Potential Change in Control" have
the meanings ascribed to them in the Company's 1991 Employee Stock Incentive
Plan.
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RETIREMENT PLANS
The following table shows the estimated annual retirement benefit payable
to participating employees, including officers, in the salary ranges and years
of service classifications indicated, under the combined terms of the First
American Master Retirement Plan (which covers most officers and other salaried
employees on a non-contributory basis) and Supplemental Executive Retirement
Program. Consequently, the benefit and compensation limits imposed under
Internal Revenue Code sections 415 and 401(a)(17) have not been applied. The
table assumes retirement at age 65 in 1996.
PENSION PLAN TABLE
YEARS OF SERVICE
-------------------------------------------------------------------------------------
REMUNERATION 5 YEARS 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
- ------------ ------- -------- -------- -------- -------- -------- --------
$ 175,000 $12,080 $ 24,160 $ 36,240 $ 51,208 $ 66,175 $ 81,143 $ 96,110
200,000 13,893 27,785 41,678 58,870 76,063 93,255 110,448
250,000 17,518 35,035 52,553 74,195 95,838 117,480 139,123
300,000 21,143 42,285 63,428 89,520 115,613 141,705 167,798
350,000 24,768 49,535 74,303 104,845 135,388 165,930 196,473
400,000 28,393 56,785 85,178 120,170 155,163 190,155 225,148
450,000 32,018 64,035 96,053 135,495 174,938 214,380 253,823
500,000 35,643 71,285 106,928 150,820 194,713 238,605 282,498
550,000 39,268 78,535 117,803 166,145 214,488 262,830 311,173
600,000 42,893 85,785 128,678 181,470 234,263 287,055 339,848
650,000 46,518 93,035 139,553 196,795 254,038 311,280 368,523
700,000 50,143 100,285 150,428 212,120 273,813 335,505 397,198
750,000 53,768 107,535 161,303 227,445 293,588 359,730 425,873
800,000 57,393 114,785 172,178 242,770 313,363 383,955 454,548
850,000 61,018 122,035 183,053 258,095 333,138 408,180 483,223
900,000 64,643 129,285 193,928 273,420 352,913 432,405 511,898
950,000 68,268 136,535 204,803 288,745 372,688 456,630 540,573
1,000,000 71,893 143,785 215,678 304,070 392,463 480,855 569,248
Covered compensation includes salary and bonus. The calculation of
retirement benefits under the plans generally is based upon average earnings for
the highest five consecutive years of the fifteen years preceding retirement.
The credited years of service for Messrs. Bottorff, Polley, McCabe, Boyle and
Simmons are 4, 4, 19, 4 and 3 respectively. Benefits are calculated on the basis
of straight life income payments and are not subject to any deduction for Social
Security or other offset amounts.
COMPENSATION OF DIRECTORS
Directors who are not officers of the Company receive an annual retainer of
$18,000 plus $1,000 for attendance of each regular or special board meeting, and
each committee meeting. The Chairmen of the Asset Policy, Community Affairs,
Development, Human Resources and Audit Committees receive additional annual
retainers of $6,000 each. Until September 30, 1995, the effective date of the
merger of First American Trust Company, N.A., ("FATC") with and into FANB,
directors of the Company who were also directors of the Company's then
wholly-owned subsidiary, FATC, received directors' and committee fees from that
entity. Non-employee directors of the Company who also serve on FANB's Knoxville
Advisory Board and AmeriStar Advisory Board receive attendance fees for those
advisory board meetings ranging from $500 to $1,250 per meeting. During 1995,
the total directors' fees paid by the Company and its subsidiaries to each of
the outside directors of the Company ranged from $0 to $50,000; the aggregate
amount paid by the Company to all outside directors in 1995 was $659,050. In
addition, under the 1993 Non-Employee
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Director Stock Option Plan, each non-employee director is annually granted the
option to purchase 1,000 shares of the Company's common stock at a purchase
price equal to market price on the day of the annual meeting of shareholders. In
1995, the purchase price was $34.6250 per share. These options vest 20% per year
over five years. Under the Company's Director's Deferred Compensation Plan, each
Director may annually elect to defer payment of all or a portion of his or her
retainer and fees until attaining the age of 65. Such deferred amounts become
payable upon the termination of the tenure of a director provided the director
has attained the age of 65.
HUMAN RESOURCES COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION.
During 1995, the Board's Human Resources Committee was composed of Messrs.
McCoy (Chairman), Beall, Dickson, Haslam, Turner and Wilson. None of these
persons has at any time been an officer or employee of the Company or any of its
subsidiaries. During 1995, none of these persons had any relationship requiring
disclosure by the Company under Item 404 of SEC regulation S-K and there existed
no relationships involving the executive officers, directors or Human Resources
Committee members and the executive officers, directors or compensation
committee members of any other entity such as to constitute an interlock for
disclosure purposes under applicable SEC regulations.
HUMAN RESOURCES COMMITTEE REPORT ON EXECUTIVE COMPENSATION
OVERALL POLICY
First American's policy is to tie a significant portion of executive
compensation to the Company's performance and to appreciation in its stock
price. The objectives of this approach are to hire and retain highly qualified
people, to motivate them to achieve the Company's performance goals, to link
management and shareholder interests and to reward individual contributions as
well as overall results.
The Committee is generally responsible for making executive compensation
decisions for the Company. We are responsible for granting stock options and
restricted stock. We are also responsible for approving salaries and bonuses for
executive officers, with the exception of those who also serve as directors
whose salaries and bonuses are approved by the non-employee members of the
Board. In 1995, the Board made no material modifications to our recommendations
with respect to those officers.
The executive compensation program, which consists of three major
components: base salaries, annual incentive compensation and long-term incentive
compensation (stock options and restricted stock grants), is reviewed annually
by the Committee which is composed solely of outside directors. Total
compensation achievable by First American executives generally ranges from the
50th to the 75th percentile when compared with similar positions in selected
comparable companies. In setting 1995 base salaries, we reviewed the Towers
Perrin 1994 Salary Survey and the data pertaining to a group of 20
"high-performing" banks (the "Peer Group") included in the 1994 Cole Survey.
Both of these surveys are conducted annually on a national basis by independent
consulting firms. Thirteen of the Peer Group banks are included in the KBW50
Index shown in the Shareholder Return Performance Graph. The KBW50 is composed
of fifty of the nation's most important banking companies, including all money
center banks, and most major regional banks, and is meant to be representative
of the price performance of the nation's large banks. The Committee believes
that compensation data for money center banks and very large regional banks
would not be appropriate for use in determining executive compensation for the
Company. The Peer Group banks are generally banks with excellent performance,
apparently similar strategies and/or operating
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characteristics, and, on average, are somewhat larger than the Company. In
determining incentive compensation, we rely on market information, including the
TPF&C Executive Banking Survey, provided by an independent compensation
consultant. Generally, executive officers have the opportunity to earn
performance-based compensation (cash bonuses) worth an estimated maximum of 80%
to 100% of base salary, and the opportunity to receive stock options and
restricted stock worth up to an estimated 45% to 60% of base salary depending
upon the executive's position.
Both annual and long-term incentive compensation are based on performance.
Appreciation in the value of the Company's stock is also a key element of the
long-term component. On an annual basis the Committee establishes performance
goals which are consistent with the Company's three-year plan. In 1995, these
goals included the achievement of specified minimum asset quality and capital
adequacy levels and the achievement of established levels earnings per share and
productivity.
In 1993, section 162(m) was added to the Internal Revenue Code pursuant to
the Omnibus Budget Reconciliation Act of 1993. This section generally limits the
corporate deduction for compensation paid to the chief executive officer and
each of the four other highest paid executive officers to $1 million per year
unless certain requirements are met. The Committee has analyzed the effect of
section 162(m) and anticipates no financial impact for 1995 or 1996. We will
periodically reevaluate this issue and recommend changes to the compensation
program where appropriate in order to maximize earnings and shareholder value.
BASE SALARIES
In determining an executive officer's starting salary, the responsibilities
of the position, the officer's experience and the competitive marketplace,
particularly the salaries of comparable positions at other financial
institutions, are considered. In 1995, the Committee continued the approach
adopted in 1994 for base salary adjustments for executive officers. A target
rate for each position, including that of chief executive officer, was
established by using the midpoint between the 50th percentile of the TPF&C
Executive Banking Survey with an asset size regression analysis and the 50th
percentile of the Peer Group. Following an annual performance evaluation, if the
executive is found to be meeting performance expectations and fully functioning,
it is the intent that base salary will be increased to the target rate. If the
salary exceeds the target rate, normally no increase will be effected until the
market rate exceeds salary. In future years, unless an executive assumes greater
responsibilities, base salary increases will generally reflect the annual market
movement of the salary range structure.
BONUSES
Executive officers are eligible for annual cash bonuses, generally varying
percentages of base salary, depending upon the officer's position and
responsibilities. The actual amount paid depends upon the degree to which
established corporate, and in some cases unit or individual, performance goals
are achieved. In 1995, the Committee established, and the Board of Directors
approved, corporate performance goals relating to soundness as a threshold for
the award of cash bonuses. These goals consisted of maximum ratios of criticized
and classified assets to capital and non-performing loans to total loans and
other real estate owned, and a minimum ratio of common equity to average total
assets (the "Soundness Threshold"). If the Soundness Threshold was not met, no
bonuses would have been paid. Once the Soundness Threshold was met, the bonuses
paid, to the extent based upon corporate performance, depended upon the
Company's earnings per share and productivity (the "Company Performance Goals"),
both of which were weighted at 50% of the corporate portion of the award. In
1995, the Company Performance Goals for soundness were consistent with the
Company's strategic framework. The performance goals for earnings per share
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and productivity were established at more stringent levels than in 1994. In
1995, the Soundness Threshold was exceeded, as were the Company Performance
Goals. In calculating bonus amounts paid, extraordinary items of income and
expense were excluded from the calculations.
RESTRICTED STOCK
Restricted stock awards are grants of shares of the Company's common stock
which are issued in the officer's name but are held by the Company and cannot be
sold or transferred during the restriction period. The lapse of the restrictions
is tied to corporate performance. These awards generally are granted annually,
and the number of shares granted is based on the importance of the executive to
achievement of the Company's long-term performance goals. The number of stock
options and shares of restricted stock held by participants is not considered in
making this determination. We use a model based on the Black/Scholes valuation
model developed with the assistance of a national independent compensation
consulting firm. In applying the model, each grant covers a three-year
performance period. Dividends are paid on these shares during this period. For
each year of the performance period, an executive may earn one, two or three
points, depending upon the achievement of the Company Performance Goals.
However, if the Company does not achieve the Soundness Threshold, two points are
deducted. If less than three points are earned over the performance period, no
restricted stock becomes vested at the end of the period. At the end of the
period, up to 100% of the restricted stock may be transferred to the executive
free of restriction, with the percentage varying (from 50% to 100%) based upon
the number of points earned. Any shares which are not transferred to the
executive remain restricted for twelve more years, and any dividends on
remaining shares are forfeited during that period. In any event, after the
passage of fifteen years the restrictions lapse if the executive is still
employed by the Company. In 1995, participants earned two points based on the
achievement of the Company Performance Goals.
STOCK OPTIONS
Annual stock option grants are designed to more closely align the interests
of management with those of shareholders, and because the full value of an
executive's compensation package cannot be realized unless stock price
appreciation occurs over a number of years, to retain key executives and to
provide an incentive for them to create long-term shareholder value. The
Committee sets guidelines for the size of these awards based on competitive
compensation data including an analysis of the TPF&C Banking Survey provided by
an independent compensation consultant, the responsibilities and experience of
the executive and the recommendation of the chief executive officer. The number
of options granted is based upon their projected value using market data and the
same model used to determine restricted stock awards as well as the level and
the salary of the executive officer. Normally options are granted at an exercise
price equal to market value on the date of grant and vest over five years at a
rate of 20% per year. In 1994, the Committee granted executive officers two
years' worth of options, half the value of which was granted at an exercise
price equal to market value with the remaining portion granted at an exercise
price of $40 per share, approximately a 30% premium over market at time of
grant. Because of that, no options were granted to executive officers in 1995.
STOCK OWNERSHIP GUIDELINES
To further align the interests of management and shareholders, the
Committee established executive stock ownership guidelines in 1994. Under the
guidelines, executive officers are encouraged to acquire and hold shares of the
Company's common stock with a value equal to or exceeding either three or two
times their annual salary depending on the level of the executive. The Chief
Executive Officer's target has been established at four times annual salary.
Executives who
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achieve the target level within three years will be granted restricted stock
equal to 10% of their holdings; those who achieve the target level within four
years, 7.5%; and those who achieve the target level within five years, 5%. If
the stock holdings are retained for three years from the date of grant, the
restrictions will lapse; if not, the shares will be forfeited. In 1995, one
executive officer achieved the ownership target.
CHIEF EXECUTIVE OFFICER COMPENSATION
In 1995, the Committee applied the methodologies described above in
determining the Chief Executive Officer's base salary, bonus and incentive
compensation. With Board approval, Mr. Bottorff's base salary was increased to
$550,000 effective January 1, 1995. His bonus was dependent upon the achievement
of the two established Company Performance Goals: earnings per share and
productivity, each of which was weighted at 50%. In 1995, the amount of bonus
achievable by Mr. Bottorff ranged from 0 to a maximum of 100% of his base
salary. The level of earnings per share and the productivity ratio attained by
the Company in 1995 resulted in a bonus paid to Mr. Bottorff of $275,000.
In addition, Mr. Bottorff is eligible to be considered for long term
incentives (stock options and restricted stock) with a projected maximum value
of 100% of his base salary. In 1995, Mr. Bottorff was not granted incentive
compensation in the form of stock options or restricted stock. In 1994, he was
granted options for 50,000 shares at an exercise price of $40.00 per share (a
30% premium over market price), which vest 20% per year over five years and
10,000 shares of restricted stock, which vest as described below.
Mr. Bottorff was granted options on 200,000 shares in 1991 (which represent
approximately the same number as would have been granted to the chief executive
over three years under the long-term plan). These options vest at the rate of
20% per year from 1992 through 1996, so long as the performance goals
established by the Committee (which for 1995 were the Soundness Threshold and a
predetermined goal for earnings per share) are met. The restrictions on 10,000
shares of Mr. Bottorff's restricted stock lapsed after determining performance
for 1993 through 1995, and the restrictions on up to 10,000 shares may lapse at
the end of 1996 if the corporate performance goals for the 1994 through 1996
period are met. Any shares which do not become unrestricted through the
attainment of performance goals remain restricted for twelve more years, and any
dividends on these remaining shares are forfeited during the twelve-year period.
In 1995, the Company surpassed the asset quality, capital adequacy and
profitability threshold levels established for the year, so that Mr. Bottorff
earned two points. In 1994, three points were earned. Therefore, since his
employment by the Company in 1991, Mr. Bottorff has earned the first and second
third of his restricted stock and five points on the last third. He has also
earned two points on the 10,000 shares granted to him in 1994 for the 1995-1997
performance cycle. The restrictions on these shares lapse upon the attainment of
at least six points at the end of and over each three-year performance period.
In 1995, he also satisfied the vesting and performance requirements on options
for 40,000 shares. Since 1991, he has satisfied the vesting and performance
requirements of 160,000 of the 200,000 stock options granted to him.
Submitted by the Human Resources Committee of the Board of Directors,
William O. McCoy (Chairman)
Samuel E. Beall, III
Reginald D. Dickson
James A. Haslam II
Cal Turner, Jr.
David K. Wilson
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SHAREHOLDER RETURN PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the return on
the Company's common stock with Standard & Poor's 500 Stock Index and the KBW 50
Index for the past five years.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG FIRST AMERICAN CORPORATION, THE S&P 500 INDEX
AND THE KEEFE BRUYETTE WOODS 50 INDEX
- ------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN
-------------------------------------------------------------
1991 1992 1993 1994 1995
----- ----- ----- ----- ------
FIRST AMERICAN CORP 100 282 435 516 445 808
S & P 500 100 130 140 155 157 215
KBW 50 100 158 202 213 202 324
- ------------------------------------------------------------------------------------------------------
(1) $100 invested on December 31, 1990 in stock or index -- including
reinvestment of dividends. Fiscal year ending December 31.
(2) The KBW 50 Index is a market-capitalization weighted bank-stock index
comprised of fifty major banking companies and is published daily by Keefe,
Bruyette & Woods, Inc.
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CERTAIN TRANSACTIONS
Some of the Company's executive officers and directors, or members of the
immediate family of any of the foregoing persons, are at present customers of
the Company's subsidiary banks and some of the Company's executive officers and
directors, or members of the immediate family of any of the foregoing persons,
are directors or officers of corporations, or members of partnerships, which are
customers of the Company's subsidiary banks. As such customers they had
transactions in the ordinary course of business with such banks, including
borrowings, all of which are on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable
transactions with other persons and do not involve more than the normal risk of
collectibility or present any other unfavorable features.
During 1993, the Company solicited competitive proposals from three vendors
for the design, fabrication, installation and maintenance of a new retail
merchandising system which was implemented in 1994 in all of the Company's
branches. Following review of the proposals submitted, Design Performance Group,
a division of American Sign and Marketing Services, Inc., a wholly owned
subsidiary of Plasti-Line, Inc. was selected as the vendor for this project. Mr.
Martin, a member of the Board of Directors of the Company, is the Chairman of
the Board of Directors and Chief Executive Officer of Plasti-Line, Inc. and has
an equity interest of approximately 50% in Plasti-Line, Inc. Mr. Smith, a member
of the Board of Directors of the Company, also serves on the Board of Directors
of Plasti-Line, Inc. In accordance with Company policy relating to business
transactions with directors and their related interests, the Board of Directors
of the Company approved the selection of Design Performance Group as the vendor
for this project with Messrs. Martin and Smith abstaining from the vote. In
1995, the amount paid to Design Performance Group was $552,678.05.
During 1994, FANB owned approximately 350 acres of foreclosed property
located in Williamson County, Tennessee which had been for sale by FANB on the
open market since 1991. In December 1994, FANB was contacted by Five Star
Investments L.P. ("Five Star") regarding the purchase of approximately 4.59
acres of this property. Five Star is a limited partnership owned by the adult
children of Walter G. Knestrick, a director of the Company. In January 1995,
FANB agreed to sell the 4.59 acres for $68,000 per acre. The total amount paid
by Five Star to FANB to complete this purchase in 1995 was $312,120.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
KPMG Peat Marwick LLP Certified Public Accountants, has been the Company's
independent auditors since 1971 and reported on the Company's consolidated
financial statements for the year ended December 31, 1995. The Audit Committee
of the Board of Directors, at its meeting on February 28, 1996, appointed KPMG
Peat Marwick LLP as independent auditors of the Company for the year ending
December 31, 1996. KPMG Peat Marwick LLP is a member of the SEC Practice Section
of the American Institute of Certified Public Accountants division for CPA
firms. Accordingly, KPMG Peat Marwick LLP has periodic "peer reviews" that
consist of a review of the quality of the firm's accounting and auditing
practices by another CPA firm. A representative of KPMG Peat Marwick LLP is
expected to attend the Annual Meeting and will be provided the opportunity to
make a statement and/or respond to appropriate questions from shareholders.
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ANNUAL REPORT ON FORM 10-K
TO OBTAIN A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR
ENDED DECEMBER 31, 1995, TOGETHER WITH FINANCIAL STATEMENTS AND SCHEDULES, AS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (AVAILABLE WITHOUT CHARGE TO
SHAREHOLDERS), PLEASE WRITE TO CARROLL E. KIMBALL, EXECUTIVE VICE PRESIDENT AND
DIRECTOR OF INVESTOR RELATIONS, FIRST AMERICAN CORPORATION, 708 FIRST AMERICAN
CENTER, NASHVILLE, TENNESSEE 37237-0708 OR CALL (615) 748-2455.
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APPENDIX A
FIRST AMERICAN CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF
SHAREHOLDERS CALLED FOR APRIL 18, 1996.
The undersigned hereby appoints Dennis C. Bottorff and Dale W. Polley, or
either of them, as proxies, with full power of substitution, to vote all shares
of the undersigned as shown on the reverse side of this proxy at the 1996 Annual
Meeting of Shareholders of FIRST AMERICAN CORPORATION and any adjournments
thereof.
The Board of Directors recommends a vote FOR the election of directors.
(1) / / FOR all of the following nominees for director, Wilson to serve until
the Annual Meeting in 1997, Anderson to serve until the Annual Meeting
in 1998, and Deavenport, Ingram, Martin, Robinson and Wire to serve
until the Annual Meeting in 1999 and until their successors have been
elected and qualified (except as indicated to the contrary below):
/ / AGAINST the following nominees (print name(s)): / / WITHHOLD AUTHORITY (ABSTAIN) to vote for the
following nominees (print name(s)):
/ / AGAINST all nominees / / WITHHOLD AUTHORITY (ABSTAIN) to vote for all
nominees
(2) / / AUTHORITY GRANTED / / AUTHORITY WITHHELD for the proxies to vote
in their discretion on
any other matter which
may come before said
Meeting or any
adjournment thereof.
Your shares will be voted in accordance with your instructions. If no choice
is specified, shares will be voted FOR the nominees in the election of directors
and by the proxies in their discretion on any other matters which may properly
come before said Meeting or any adjournment thereof.
- --------- WILL ATTEND THE ANNUAL MEETING PLEASE SIGN AND RETURN PROMPTLY
(NUMBER ATTENDING)
---------------------------------------------
---------------------------------------------
DATE , 1996
-----------------------------------
Please sign exactly as your name appears at
left. If registered in the names of two or
more persons, each must sign. Executors,
administrators, trustees, guardians,
attorneys and corporate officers must show
their full titles.
- -------------------------------------------------------------------------------------------------------------------------
If you have changed your address, please PRINT new address on the line above.