FIRST PULASKI NATIONAL CORPORATION
PULASKI, TENNESSEE
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO THE HOLDERS OF COMMON STOCK:
Notice is hereby given that pursuant to call of its Directors, the
regular annual meeting of the shareholders of First Pulaski National
Corporation of Pulaski, Tennessee, will be held in the Cox and Curry
Center of the First National Bank at 206 South First Street, Pulaski,
Tennessee on Thursday, April 17, 1997, at 1:00 P.M. CDT for the purpose
of considering and voting on the following matters:
(1) The election as Directors of the twenty-five (25)
persons named in the accompanying Proxy Statement dated March
27, 1997.
(2) Approval of the First Pulaski National Corporation 1997
Stock Option Plan.
(3) Ratification of the selection of the Certified Public
Accounting Firm of Putman and Hancock, Certified Public
Accountants, for professional services for the current year,
and
(4) Any other business that properly may be brought before
the meeting or any adjournment or adjournments thereof.
Only those shareholders of record at the close of business on
March 15, 1997, shall be entitled to Notice of Meeting and to vote at
the annual meeting or any adjournment thereof.
By order of the Board of Directors
/s/ Parmenas Cox /s/ William R. Horne
Senior Chairman of President
the Board
/s/ Robert M. Curry
Chairman of the Board
and Chief Executive Officer
<PAGE>
FIRST PULASKI NATIONAL CORPORATION
PROXY STATEMENT
This proxy statement is furnished in connection with the
solicitation of proxies by the Board of Directors of the First Pulaski
National Corporation (the "Corporation") to be voted at the annual
meeting of the shareholders of the Corporation or any adjournment or
adjournments thereof, to be held on April 17, 1997, at the time and
place and for the purposes set forth in the accompanying notice. A
proxy may be revoked by the shareholder at any time prior to its use by
filing with the Secretary of the Corporation a written revocation or
duly executed proxy bearing a later date. This proxy statement and the
accompanying form of proxy have been mailed on or about March 27, 1997,
to holders of the Corporation's common stock as of March 15, 1997.
The Corporation's principal executive office is located in the
First National Bank Building at 206 South First Street, Pulaski,
Tennessee, 38478.
Proxies may be solicited by mail. All costs will be borne by the
Corporation. The Corporation does not anticipate paying any
compensation to any party other than its regular employees (and then
only regular salaries plus expenses) for the solicitation of proxies.
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 named herein
as directors; to adopt the First Pulaski National Corporation 1997
Stock Option Plan; and for the ratification of the selection of Putman
and Hancock, Certified Public Accountants of Fayetteville, Tennessee,
as the Corporation's independent auditors for the current year. The
Board of Directors of the Corporation does not know of any other
matters which will be presented for action at the meeting, but the
persons named in the proxy (who are directors of the Corporation)
intend to vote or act with respect to any other proposal which may be
properly presented for action, according to their best judgment unless
the proxy provides otherwise for the withholding of discretionary
authority.
As of March 15, 1997, the Corporation had outstanding 1,532,290
shares of its $1 par value common stock, held by 1,196 shareholders of
record. Holders of the common stock are entitled to one vote for each
share of common stock held on all matters to come before the meeting.
Only shareholders of record at the close of business on March 15, 1997
are entitled to vote at the meeting or any adjournment thereof.
The affirmative vote of a plurality of the votes cast is required
for the election of the nominees as directors. The affirmative vote of
a majority of the shares represented at the meeting is required for (i)
the adoption of the First Pulaski National Corporation 1997 Stock
<PAGE>
Option Plan; and (ii) ratification of the selection of the independent
auditors.
"Abstentions" and "Non Votes" are counted as "present" in
determining whether a quorum is present. A non vote occurs when a
nominee holding shares for a beneficial owner votes on one proposal but
does not vote on another proposal because the nominee does not have
discretionary voting power and has not received instructions from the
beneficial owner.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information concerning (i) persons
who are the beneficial owners of more than 5% of the Corporation's
common stock (its only class of voting securities), (ii) the named
executive officers, and (iii) the beneficial ownership of the
Corporation's common stock by all directors and Executive Officers of
the Corporation as a group (26 persons). Information concerning
beneficial ownership of the Corporation's directors and nominees and
executive officers of the Corporation is set forth in the table under
the section of this Proxy Statement entitled "Election of Directors"
(the "Directors' Table"). The information shown below and in the
Directors' Table is as of March 15, 1997, and is based on the
Corporation's stock records or the ownership data filed with the Secu-
rities and Exchange Commission.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
TITLE OF NAME OF AMOUNT AND NATURE PERCENT
CLASS BENEFICIAL OF BENEFICIAL OF CLASS
OWNER OWNERSHIP
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common stock First National Bank 93,558 (1) 6.11
of Pulaski, Tennessee
Profit Sharing Plan
Common stock Robert M. Curry, 40,410 2.64
Chairman of the Board
and CEO
Common stock William R. Horne 30,830 2.01
President
Common stock All Directors and
Executive Officers
(26 persons) 421,115 27.48
(1) The First National Bank of Pulaski, Tennessee Profit Sharing Plan
owns 93,558 shares of common stock. First Farmers and Merchants
National Bank of Columbia, Tennessee acts as the Trustee for the Profit
Sharing Plan and in such capacity has the authority to vote these
shares of common stock.
</TABLE>
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The By-Laws of the Corporation currently state that the Board of
Directors shall consist of not less than five (5) nor more than thirty-
five (35) members.
The persons herein named will be elected to hold office until the
next annual meeting of shareholders and until their successors have
been elected and qualified. Unless otherwise directed, it is the
intention of the persons named in the proxy to vote the shares covered
thereby for the nominees designated by the Board of Directors as listed
below.
The following table sets forth certain information concerning each
person nominated for election as a director. Management of the
Corporation believes that each of the individuals named below intends
to vote their shares of common stock in favor of election of the
nominees for director; adoption of the First Pulaski National
Corporation 1997 Stock Option Plan; and ratification of the selection
of Putman and Hancock, Certified Public Accountants as the
Corporation's auditors. Except as otherwise indicated, management of
the Corporation believes that each such person holds sole voting and
investment power with respect to the number of shares of common stock
indicated.
<TABLE>
<CAPTION>
NOMINEES AGE SERVED SHARES OF % OF PRINCIPAL
AS COMMON STOCK CLASS OCCUPATION
DIRECTOR BENEFICIALLY OWNED OR EMPLOYMENT
SINCE OWNED AS FOR LAST FIVE
OF 3/15/97 (5) YEARS
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
David E. 43 4/22/93 3,950 (1) 0.26 President,
Bagley Bagley & Bagley
Ins., Inc.
Johnny 61 10/19/81 20,130 (2)* 1.31 Owner, Davis
Bevill & Eslick Market
James K. 54 4/07/83 8,480 (3)* 0.55 Owner, Lairdland
Blackburn,IV Farm and Real
Estate Broker
Wade Boggs 33 4/20/95 910 (4) 0.06 Owner, Wash Master
Car Wash and Boggs'
Properties
James H. 50 4/05/84 4,661 (5) 0.30 Real Estate
Butler Agent, Butler
Realty
Thomas L. 65 10/19/81 23,065 (6)* 1.51 President,
Cardin Cardin
Distributing Co.
Joyce F. 65 4/01/82 6,000 (7) 0.39 Retired
Chaffin Vice-President,
First National Bank
<PAGE>
Parmenas 85 10/19/81 16,295 * 1.06 Senior Chairman
Cox of the Board,
First National Bank
Robert M. 47 10/19/81 40,410 (8)* 2.64 Chairman of the
Curry Board & CEO,
First National Bank
Gregory G. 47 4/22/93 4,580 (9) 0.30 Dentist
Dugger
Joe 73 10/19/81 9,640 (10) 0.63 Farmer, Dunavant &
Dunavant Dunavant
Charles D. 42 4/22/93 14,850 (11) 0.97 Physician
Haney
W. Gary 46 4/02/87 23,275 (12)* 1.52 Vice-President,
Harrison First National Bank
R.M. 93 10/19/81 15,180 (13) 0.99 Vice-President,
Harwell Harwell Enterprises,
Inc.
Morris Ed 66 4/07/83 12,840 (14)* 0.84 President,
Harwell Harwell Enterprises,
Inc.
James Rand 60 4/07/83 10,850 (15) 0.71 Owner,
Hayes Hayes Properties
William R. 49 10/19/81 30,830 (16)* 2.01 President,
Horne First National Bank
Glen Lamar 50 10/19/81 28,420 (17)* 1.85 Senior Vice-President
& Cashier,
First National Bank
D. Clayton 72 10/19/81 51,500 (18) 3.36 Retired, Attorney
Lee at Law
Kenneth R. 67 10/19/81 11,840 (19) 0.77 Retired, Superintendent
Lowry of Genesco
Pulaski, TN
Beatrice 10/19/81 16,705 (20) 1.09 Real Estate
McElroy Investments
William A. 64 4/04/91 500 (21) 0.03 Owner, McNairy's
McNairy Flowerama & Gifts
Farmer
W. Harwell 62 10/19/81 37,684 (22)* 2.46 Physician
Murrey
Stephen F. 51 10/19/81 23,680 (23)* 1.55 Attorney, Partner
Speer in Law Firm of Henry,
Henry, Stack, Garner
& Speer, P.C. and County
Attorney for Giles County
Bill Yancey 52 4/04/91 3,750 (24)* 0.24 Farmer
<PAGE>
(1) Includes 500 shares held by Ameritrade, Inc. for benefit of David Bagley and
wife, 200 shares held by Ameritrade, Inc. for benefit of David Bagley as
trustee for two children, 500 shares held by Prudential Bank and Trust as
trustee for David Bagley, and 2,750 shares held by Prudential Securities, Inc.
for benefit of David Bagley.
(2) Includes 10,065 shares held by wife.
(3) Includes 1,730 shares held by wife.
(4) Includes 490 shares held with wife and 420 shares held with father.
(5) Includes 4,211 shares held jointly with wife and 450 shares held jointly with
three children.
(6) Includes 10,865 shares held by Ameritrade, Inc. for benefit of Thomas L. Cardin
IRA, 2,500 shares held by James Clarence Cardin Testamentary Trust, and 2,345
shares held by wife.
(7) Includes 2,625 shares held by husband.
(8) Includes 7,780 shares held jointly with wife, 6,180 shares held jointly with
two brothers as equal partners, and 630 shares held jointly with wife as
Trustee for four children.
(9) Includes 100 shares held jointly with wife as Trustee for child and 1,665
shares held by Ameritrade, Inc. for benefit of Gregory G. Dugger IRA.
(10) Includes 1,070 shares held jointly with wife.
(11) Includes 4,240 shares held jointly with wife, 300 shares held jointly with wife
as Trustee for three children, and 10,310 shares held in trust for employees of
Physicians and Surgeons, Inc.
(12) Includes 90 shares held by wife as Trustee for child, and 22,935 shares held
jointly with wife.
(13) Includes 650 shares held by wife and does not include shares held by his son,
Morris Ed Harwell.
(14) Includes 100 shares held by wife and does not include shares held by his
father, R. M. Harwell.
(15) Includes 10,100 shares held jointly with wife.
(16) Includes 5,260 shares held jointly with wife.
(17) Includes 23,190 shares held jointly with wife and 940 shares held as custodian
for two children.
(18) Includes 28,090 shares held by wife.
(19) Includes 3,700 shares held jointly with wife.
(20) Includes 540 shares held by husband, 1,051 shares held jointly with husband,
11,414 shares held jointly with two children and 2,640 shares held as Trustee
for two children.
(21) Held jointly with wife.
(22) Includes 10,310 shares held in trust for employees of Physicians & Surgeons,
Inc., and 17,475 shares held by wife.
<PAGE>
(23) Includes 360 shares held by Henry, Henry, Stack, Garner & Speer, P.C.
Retirement Plan.
(24) Held jointly with wife.
* Serves on the Board of Directors of First National Bank of Pulaski, Tennessee.
</TABLE>
The By-Laws of the Corporation restrict nomination of persons to
serve as directors as follows:
Any stockholder who intends to nominate or cause to be nominated
any candidate for election to the Board of Directors, other than those
made by or at the direction of the Board of Directors, shall make such
intention known by timely notice in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice shall be delivered
to or mailed and received at the principal executive offices of the
Corporation within the time periods set forth in Rule 14a-8(a)(3)
enacted pursuant to the Securities Exchange Act of 1934, as amended.
Such stockholder's notice shall set forth (a) as to each person whom
the stockholder proposes to nominate for election or re-election as a
Director, (i) the name, age, business and residence address of such
person, (ii) the principal occupation or employment of such person,
(iii) the class and number of shares of the Corporation which are
beneficially owned by such person and (iv) any other information
relating to such person that is required to be disclosed in
solicitations of proxies for election of Directors, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended (including without limitation such
persons' written consent to being named in the proxy statement as a
nominee and to serving as a Director if elected); and (b) as to the
stockholder giving the notice (i) the name and address, as they appear
on the Corporation's books, of such stockholder and (ii) the class and
number of shares of the Corporation which are beneficially owned by
such stockholder. Any nominations for directors not in accordance with
this requirement may be disregarded by the Chairman of the meeting, and
upon instruction by the Chairman, votes cast for each such nominee
shall be disregarded.
Unless directed otherwise by the shareholders, the enclosed proxy
will be voted for the election of the nominees for Directors listed.
Management of the Corporation has no reason to believe at this time
that the persons so nominated will be unable or will decline to serve
if elected. As set forth in the By-Laws of the Corporation, the
President is authorized to vote shares held by the Corporation in other
corporations and in said capacity the President of the Corporation will
elect the Board of Directors of First National Bank, the Corporation's
wholly owned subsidiary.
<PAGE>
DESCRIPTION OF THE BOARD & COMMITTEES
The Corporation does not have a standing audit, nominating or
compensation committee. Because the Corporation is a one-bank holding
company, decisions regarding audit, nomination of executive officers
and the compensation of executive officers are made by the Audit or
Compensation and Nominations Committees of the Board of Directors of
First National Bank of Pulaski, as appropriate, subject to the approval
of the Board of Directors of the Bank and of the Board of Directors of
the Corporation as a whole. The Board of Directors of the Corporation
holds regular meetings every quarter and special meetings as called.
During the fiscal year ended December 31, 1996 the Board of Directors
held four (4) regular meetings as well as an organizational meeting
held after the annual shareholders meeting. The Board of Directors has
three (3) standing committees, (1) one which administers the First
Pulaski National Corporation 1987 Stock Option Plan, (2) one which
administers First Pulaski National Corporation 1994 Employee Stock
Purchase Plan, and (3) a committee to administer the First Pulaski
National Corporation 1994 Stock Option Plan for outside directors.
Kenneth R. Lowry and Stephen F. Speer each missed two of the five
meetings held by the Board of Directors during 1996. No other
incumbent director attended fewer than 75% of the total number of
meetings of the Board of Directors. All of the Directors who serve on
the Board of Directors of the Corporation's subsidiary, First National
Bank of Pulaski, also serve on the Corporation's Board of Directors.
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid or accrued by
the Corporation during the fiscal years 1996, 1995 and 1994 for (i) the
Chief Executive Officer of the Corporation and (ii) the President of
the Corporation (collectively, the "Named Executive Officers"):
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
NAME AND FISCAL ------------------- ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1)
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robert M. Curry 1996 $105,786 $ 6,904 $ 18,307
Chief Executive 1995 $102,708 $ 0 $ 16,749
Officer of the 1994 $102,708 $ 3,989 $ 17,186
Corporation
William R. Horne 1996 $105,786 $ 6,927 $ 18,278
President of the 1995 $102,708 $ 0 $ 16,755
Corporation 1994 $102,708 $ 3,996 $ 17,338
<PAGE>
__________________________
1 Represents (i) Corporation contributions to a defined contribution plan in the
amount of $16,597, $15,110 and $15,682 for Mr. Curry in fiscal 1996, 1995 and 1994,
respectively, and $16,683, $15,181 and $15,753 for Mr. Horne in fiscal 1996, 1995 and
1994, respectively; (ii) premiums paid by the Corporation with respect to life
insurance policies on the life of the Named Executive Officers payable to
beneficiaries designated by the Named Executive Officers of $1,431, $1,410 and $1,406
in fiscal 1996, 1995 and 1994, respectively, for Mr. Curry and $1,595, $1,574 and
$1,570 in fiscal 1996, 1995 and 1994, respectively, for Mr. Horne; and (iii) interest
paid by the Bank (for which the Named Executive Officers serve as Executive Officers)
on loans to the Named Executive Officers arranged by the Bank, the proceeds of which
were used to purchase Common Stock of the Corporation, in the amount of $279, $229
and $98 in fiscal 1996, 1995 and 1994, respectively for Mr. Curry and $0, $0 and $15
in fiscal 1996, 1995 and 1994, respectively for Mr. Horne.
</TABLE>
BOARD COMPENSATION COMMITTEE
The Corporation does not have a compensation committee. Because
the President and the Chairman and Chief Executive Officer of the
Corporation are also employees of the subsidiary, First National Bank
of Pulaski, matters of executive compensation, including bonuses, are
determined by the Compensation and Nominations Committee of the Board
of Directors of the Bank, subject to the approval of the Board of
Directors of the Bank and of the Board of Directors of the Corporation.
The Compensation and Nominations Committee of the Bank routinely
reviews compensation surveys conducted by Sheshunoff Information
Services and by other providers of peer group data. Decisions
regarding the compensation of the Bank's executive officers are made in
view of these sources of information, with the intention to compensate
the Corporation's executives, including the Chief Executive Officer, in
an amount that is comparable to other financial institutions of similar
size that are located in similar markets. In making compensation
decisions, the Committee will also consider the financial performance
of the Corporation.
The Board of Directors of First Pulaski National Corporation
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
During fiscal 1996, the Nominations and Compensation Committee of
the Bank was comprised of Messrs. Bevill, Cardin and Murrey. None of
these persons has at any time been an officer or employee of the
Corporation or its subsidiary. In addition, there are no relationships
among the Corporation's executive officers, members of the Nominations
and Compensation Committee of the Bank or entities whose executives
serve on the Board of Directors or the Nominations and Compensation
Committee of the Bank that require disclosure under applicable SEC
regulations.
<PAGE>
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
Set forth below is a graph comparing the annual change in the
cumulative total shareholder return on the Corporation's common stock
against the cumulative total return of the S & P Composite-500 Stock
Index and The Carson Medlin Company's Independent Bank Index for the
period of five years beginning December 31, 1991 and ending December
31, 1996.
A line graph displaying the contents of the table below will be
included in the proxy statement which is mailed to our stockholders.
<PAGE>
The cumulative total return reflected in the graph assumes that
the value of the investment in the Corporation's common stock and each
index was $100 on December 31, 1991 and that all dividends were
reinvested. The actual cumulative total return values are shown below.
<TABLE>
<CAPTION>
VALUE OF $100 INVESTED ON DECEMBER 31, 1991 AT:
1991 1992 1993 1994 1995 1996
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
First Pulaski National Corporation 100 139 186 195 221 252
Independent Bank Index 100 130 163 197 268 313
S & P 500 Index 100 108 118 120 165 203
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
Some of the Corporation's officers and directors are at present,
as in the past, customers of the Bank, and some of the Corporation's
officers and directors are directors and officers of corporations or
members of partnerships that are customers of the Bank. As such
customers, they had transactions in the ordinary course of business in
1996 with the Bank, including borrowings, all of which were 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 normal risk of collectability or
present any other unfavorable features.
Director Stephen F. Speer and other members of the law firm of
Henry, Henry, Stack, Garner & Speer, P.C. rendered legal services to
the Corporation and its subsidiaries during the year 1996 and received
aggregate compensation of less than $27,000.00.
DIRECTOR COMPENSATION
The directors of the Corporation are compensated at the rate of
$300.00, for each Directors meeting attended. Those directors of the
Corporation who serve on the Board of Directors of the First National
Bank of Pulaski, Tennessee also serve on the Executive and Loan
Committee for the Bank and are compensated at the rate of $300.00 per
directors meeting and Executive and Loan Committee meeting.
Additionally, directors who serve on the Audit Committee of First
National Bank of Pulaski receive $100.00 per meeting. All other
directors who serve on other committees for the Bank receive $50.00 per
meeting. Inside directors (Bank employees) only receive director fees
for regular Board of Director meetings and Executive and Loan Committee
meetings.
<PAGE>
PROPOSAL NO. 2
TO APPROVE THE FIRST PULASKI NATIONAL CORPORATION
1997 STOCK OPTION PLAN
The 1997 Stock Option Plan (the "1997 Plan") is being submitted
for approval by the stockholders of First Pulaski National Corporation
(the "Corporation") to replace the 1987 Stock Option Plan (the "1987
Plan"), which was adopted by the Board of Directors of the Corporation
on March 3, 1987, subject to shareholder approval, which was obtained
on April 2, 1987. The 1987 Plan terminated on March 3, 1997. Like the
1987 Plan, the 1997 Plan is designed to attract, retain and reward key
employees of the Corporation and its subsidiaries and affiliates and
will be administered by a committee of the Board of Directors (the
"Committee") which will be authorized to select the employees entitled
to participate in the 1997 Plan, as well as the actual terms of the
options granted. The number of employees that may participate in the
1997 Plan is not determinable at this time. A summary of the 1997 Plan
follows, but this summary is qualified in its entirety by reference to
the full text of the 1997 Plan, which is attached as Exhibit 1 to this
Proxy Statement. Terms used but not defined herein have the meanings
given to them in the 1997 Plan.
Options: The 1997 Plan authorizes the granting of options to
purchase up to 100,000 shares of common stock of the Corporation, par
value $1.00 per share (the "Common Stock"). The number of shares of
Common Stock authorized under the 1997 Plan will be subject to
adjustment upon the occurrence of certain events (including merger,
reorganization, stock dividend and the like) to prevent dilution or
enlargement of option rights. The types of options that may be granted
under the 1997 Plan include Incentive Stock Options (as defined in
Section 422 of the Internal Revenue Code of 1986, as amended) and Non-
Qualified Stock Options (those options that are not entitled to the
advantages under federal income tax laws that are afforded to Incentive
Stock Options).
Option Price: The option price will be determined by the
Committee at the time of grant, but will be at least 100% (or, for
employees owning, at the time the option is granted, stock possessing
over 10% of the total voting power of all classes of stock of the
Corporation or any subsidiary, at least 110%) of the fair market value
of the Common Stock at grant, in the case of Incentive Stock Options,
and at least 50% of the fair market value of the Common Stock at grant,
in the case of Non-Qualified Stock Options. There is no active trading
market in the Common Stock of the Corporation; however, the Board of
Directors believes that on September 30, 1996, the fair market value
was $30.00 per share. In certain cases, the option price may be paid
in the form of unrestricted shares of Common Stock already owned by the
optionee (valued at the fair market value of the Common Stock on the
date the option is exercised, as determined by the Committee). To the
extent, however, that the option price is paid with shares of Common
Stock, the Committee may award a new stock option to the employee to
replace the Common Stock that was surrendered.
<PAGE>
Duration and Exercisability: The term of each option will be
fixed by the Committee, but no Incentive Stock Option will be
exercisable for more than ten years (or, with respect to options
granted to employees owning, at the time the option is granted, stock
possessing over 10% of the total voting power of all classes of stock
of the Corporation or any subsidiary, more than five years) after the
date of grant. Generally, no option will be exercisable before the
first anniversary of the date of grant.
Change in Control Provision: In the event of a Change in Control
or Potential Change in Control of the Corporation, any option awarded
under the 1997 Plan but not previously exercisable and vested will
become fully exercisable and vested, and all outstanding options will
be cashed out. The cash-out price for Non-Qualified Stock Options will
generally be based on the highest price per share paid in any Nasdaq-
reported trade or any bona fide transaction related to the Change in
Control or Potential Change in Control during the 60 days prior to the
Change in Control or Potential Change in Control, in each case as
determined by the Committee. The cash-out price of Incentive Stock
Options will be based on transactions reported for the date on which
the optionee exercises such option.
A "Change in Control" generally will arise (i) when a person or
entity becomes the beneficial owner of securities possessing 35% or
more of the voting power of the Corporation's outstanding securities,
(ii) when, as the result of a cash tender or exchange offer, less than
a majority of the voting power of the Corporation's outstanding
securities is held by persons who held such securities immediately
prior to the cash tender of exchange offer, or (iii) during any period
of two consecutive years, directors who at the beginning of such period
constituted the Board no longer constitute at least a majority thereof,
unless the new directors were approved by at least two-thirds of the
directors of the Company then in office. A "Potential Change in
Control" generally means (i) the approval by shareholders of any
agreement, the consummation of which would result in a Change in
Control or (ii) the acquisition of beneficial ownership of securities
of the Company representing 5% or more of the voting power of the
Corporation's outstanding securities and the adoption of a resolution
by the Committee to the effect that a Potential Change in Control has
occurred.
Federal Income Tax Consequences: Under the 1997 Plan, the
Corporation may grant both Incentive Stock Options intended to qualify
as such under Section 422 of the Code and Non-Qualified Stock Options.
No income is recognized by the optionee at the time of grant of an
option under the 1997 Plan. In addition, there are no federal income
tax consequences to the Company upon the grant of an option to an
optionee.
Incentive Stock Options. An optionee who exercises an Incentive
Stock Option is not taxed at the time he exercises such option.
Instead, when an optionee sells Common Stock purchased pursuant to an
Incentive Stock Option, he is taxed on the difference between the
exercise price and the amount for which he sells the Common Stock. The
<PAGE>
character of the income recognized by the optionee (e.g., capital gain
or ordinary income) depends upon the amount of time the Incentive Stock
Option is held prior to the sale. If the Common Stock is not sold
prior to the later of two years from the date the option is granted or
one year from the date it is exercised, the entire gain is taxed as a
capital gain (the Corporation may not take a corresponding compensation
expense deduction). If the Common Stock is sold prior to such time,
the difference between the exercise price and the lesser of (a) the
fair market value of the Common Stock on the date of exercise or (b)
the amount for which it is sold, is taxed as ordinary income (and the
Corporation is entitled to a corresponding deduction). If the Common
Stock is sold for an amount in excess of its fair market value on the
date of exercise, the excess is taxed as capital gain.
Non-Qualified Stock Options. Upon the exercise of a Non-Qualified
Stock Option, the amount by which the fair market value of the Common
Stock on the exercise date exceeds the exercise price will generally be
taxable to the optionee as ordinary income, and that amount will be
included in the optionee's Form W-2 and, accordingly, will be reported
to the Internal Revenue Service and any appropriate state tax
authorities as additional income earned by the optionee. (The
Corporation will generally be entitled to a compensation expense
deduction upon the exercise of such an option in an amount equal to the
compensation received by the optionee as ordinary income; the deduction
is allowed to the Corporation in the same taxable year in which the
income is included by the optionee.)
The sale of shares acquired upon the exercise of a Non-Qualified
Stock Option may result in capital gain or loss, as the case may be, in
an amount equal to the difference between the amount realized upon such
sale and the optionee's tax basis in the shares. If payment of the
option exercise price is made by cash or check, the tax basis of the
shares of Common Stock will be equal to the fair market value on the
date of exercise, but not less than the option exercise price. The
holding period for determining long or short term capital gain for the
Common Stock will begin on the day after the shares are acquired
pursuant to the exercise of the option.
Cash Bonus. In the case of a Non-Qualified Stock Option or
certain Incentive Stock Options, the Committee may award the optionee
the right to receive a cash bonus calculated to pay federal and state
income tax incurred by the optionee upon exercise thereof.
PROPOSAL NO. 3
RATIFICATION OF SELECTION OF AUDITORS
The Corporation has appointed, subject to the ratification of the
shareholders, the firm of Putman and Hancock, Certified Public
Accountants, of Fayetteville, Tennessee, as the independent audit firm
of the Corporation for the year ending December 31, 1997. James M.
Putman and his associates, have been the Corporation's auditors since
<PAGE>
1981 and the Board of Directors considers the firm of Putman and
Hancock to be well qualified. A representative of Putman and Hancock
is expected to attend the shareholder's meeting and to have the
opportunity to make a statement and/or respond to appropriate questions
from shareholders.
Putman and Hancock in 1996 provided the following audit services:
examination of financial statements of the Corporation, its
subsidiaries and related entities, including those in the Annual Report
to Shareholders and in reports filed with the Securities and Exchange
Commission and others and limited reviews of the Corporation's interim
financial statements.
The management of the Corporation recommends a vote FOR
ratification of the selection of Putman and Hancock, Certified Public
Accountants, as the Corporation's independent audit firm. Proxies
solicited by management will be so voted unless shareholders specify a
contrary choice in their proxies.
SHAREHOLDERS' PROPOSALS
In order for any proposals by shareholders to be included in the
1997 proxy materials and to be considered at the 1998 annual meeting,
all such proposals intended for presentation at the 1998 annual meeting
must be mailed to Glen Lamar, Corporate Secretary, First Pulaski
National Corporation, 206 South First Street, Pulaski, Tennessee
38478, and must be received no later than November 29, 1997.
ANNUAL REPORT AND FORM 10-K
The annual report of the Corporation to its shareholders for the
calendar year 1996 is being delivered with this proxy statement.
Copies of the Corporation's Annual Report to the Securities and
Exchange Commission (Form 10-K) will be mailed to Shareholders without
charge, upon written request made to: Glen Lamar, First Pulaski
National Corporation, 206 South First Street, Pulaski, Tennessee,
38478.
By the order of the Board of Directors
This the 27th day of March, 1997.
[S] Parmenas Cox [S] Robert M. Curry
- ---------------------------- ---------------------------
Parmenas Cox Robert M. Curry
Senior Chairman of the Board Chairman of the Board & CEO
[S] William R. Horne
- ----------------------------
William R. Horne
President
<PAGE>
FIRST PULASKI NATIONAL CORPORATION
PULASKI, TENNESSEE
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS ON APRIL 17, 1997
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE CORPORATION
PLEASE SIGN AND RETURN
Know all men by these presents that I, the undersigned
shareholder of the First Pulaski National Corporation, do hereby
nominate, constitute and appoint Stephen F. Speer and D. Clayton
Lee, or any one of them (with full power to act alone), my true
and lawful attorney(s) with full power of substitution for me and
in my name, place and stead to vote all the Common Stock of said
Corporation standing in my name on its books on March 15, 1997,
at the annual meeting of its shareholders to be held at the First
National Bank Building, 206 South First Street, Pulaski,
Tennessee 38478, on Thursday, April 17, 1997, at 1:00 P.M., CDT
or any adjournment or adjournments thereof, with all power the
undersigned would possess if personally present as follows:
(1) Election as Directors of the twenty-five (25) persons
listed below:
FOR [ ] AGAINST [ ]
all nominees listed except as marked all nominees listed below
to the contrary below. No mark
through will be indicated as a
vote for the named individual.
David E. Bagley Gregory G. Dugger D. Clayton Lee
Johnny Bevill Joe Dunavant Kenneth R. Lowry
James K. Blackburn, IV Charles D. Haney Beatrice J. McElroy
Wade Boggs W. Gary Harrison William A. McNairy
James H. Butler R. M. Harwell W. Harwell Murrey
Thomas L. Cardin Morris Ed Harwell Stephen F. Speer
Joyce F. Chaffin James Rand Hayes Bill Yancey
Parmenas Cox William R. Horne
Robert M. Curry Glen Lamar
IF YOU DESIRE TO VOTE AGAINST ANY ONE OR ALL OF THE INDIVIDUALS
LISTED ABOVE, SIMPLY STRIKE THROUGH HIS OR HER NAME.
(2) To approve the First Pulaski National Corporation 1997
Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) Ratification of the selection of Putman and Hancock,
Certified Public Accountants, for professional services for the
current year:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(4) Whatever other business may be brought before the
meeting or any adjournment or adjournments thereof. Management
at present knows of no other business to be presented at the
meeting.
THIS PROXY CONFERS AUTHORITY TO VOTE "FOR" EACH PROPOSITION
LISTED ABOVE UNLESS "AGAINST" OR "ABSTAIN" IS INDICATED. IF ANY
OTHER BUSINESS IS PRESENTED AT SAID MEETING, THIS PROXY SHALL BE
VOTED IN ACCORDANCE WITH THE RECOMMENDATION OF MANAGEMENT UNLESS
OTHERWISE INDICATED BELOW.
TO WITHHOLD DISCRETIONARY AUTHORITY TO VOTE ON OTHER MATTERS
AT ANNUAL MEETING. CHECK BLOCK. [ ]
The management recommends a vote of "FOR" each of the listed
propositions. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS OF THE CORPORATION AND MAY BE REVOKED PRIOR TO ITS
EXERCISE.
IN WITNESS WHEREOF, I have hereunto set my hand this the
_____ day of ________________________, 1997.
Number of shares:________
___________________________________
___________________________________
Signature of Shareholder(s), including
title when signing as attorney, executor
administrator, trustee, guardian or
corporate officer. All co-owners must
sign.
<PAGE>
EXHIBIT 1
FIRST PULASKI NATIONAL CORPORATION
1997 STOCK OPTION PLAN
SECTION 1. Purpose; Definitions.
The purpose of the First Pulaski National Corporation 1997 Stock Option
Plan (the "Plan") is to enable First Pulaski National Corporation (the
"Corporation") to attract, retain and reward key employees of the Corporation
and its Subsidiaries and Affiliates by awarding such key employees performance-
based stock options. The creation of the Plan shall not diminish or prejudice
other compensation programs approved from time to time by the Board.
For purposes of the Plan, the following terms shall be defined as set
forth below:
A. "Affiliate" means any entity other than the Corporation and its
Subsidiaries that is designated by the Board as a participating employer under
the Plan, provided that the Corporation directly or indirectly owns at least
20% of the combined voting power of all classes of stock of such entity or at
least 20% of the ownership interests in such entity.
B. "Board" means the Board of Directors of the Corporation.
C. "Cause" has the meaning provided in Section 6 of the Plan.
D. "Change in Control" has the meaning provided in Section 6 of the Plan.
E. "Change in Control Price" has the meaning provided in Section 6(d) of
the Plan.
F. "Common Stock" means the Corporation's Common Stock, par value $1.00
per share.
G. "Code" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor thereto.
H. "Committee" means the Committee referred to in Section 2 of the Plan.
I. "Corporation" means First Pulaski National Corporation, a corporation
organized under the laws of the State of Tennessee or any successor corporation.
J. "Disability" means disability as determined under the Corporation's
<PAGE>
subsidiary's Group Long Term Disability Insurance Plan.
K. "Early Retirement" means retirement, for purposes of this Plan with the
express consent of the Corporation at or before the time of such retirement,
from active employment with the Corporation and any Subsidiary or Affiliate
prior to age 65, in accordance with any applicable early retirement policy of
the Corporation then in effect or as may be approved by the Committee.
L. "Effective Date" has the meaning provided in Section 10 of the Plan.
M. "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor thereto.
N. "Fair Market Value" means with respect to the Common Stock, as of any
given date or dates, unless otherwise determined by the Committee in good
faith, the reported closing price of a share of Common Stock on the Nasdaq
Stock Market or, if no such price is available, the average of the closing bid
and asked prices quoted (by electronic bulletin board, "pink sheets" or other
recognized quotation) in the over-the-counter market for the Common Stock, or,
if no such price is available on such date, the fair market value of a share of
Common Stock as determined by the Committee in good faith.
O. "Immediate Family" means any child, stepchild, grandchild, parent,
stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-
law, daughter-in-law, brother-in-law, or sister-in-law, and shall include
adoptive relationships.
P. "Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
Q. "Normal Retirement" means retirement from active employment with the
Corporation and any Subsidiary or Affiliate on or after age 65.
R. "Plan" means this First Pulaski National Corporation 1997 Stock Option
Plan, as amended from time to time.
S. "Retirement" means Normal or Early Retirement.
T. "Section 162(m) Maximum" has the meaning provided in Section 3(a)
hereof.
U. "Stock Option" or "Option" means any option to purchase shares of Common
Stock granted pursuant to Section 5 below.
V. "Subsidiary" means any corporation (other than the Corporation) in an
<PAGE>
unbroken chain of corporations beginning with the Corporation if each of the
corporations (other than the last corporation in the unbroken chain) owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in the chain.
SECTION 2. Administration.
The Plan shall be administered by a Committee of not less than two
Directors, who shall be appointed by the Board and who shall serve at the
pleasure of the Board. The functions of the Committee specified in the Plan
may be exercised by an existing Committee of the Board. The initial Committee
shall be the Salary and Compensation Committee of the Board. In the event that
administration of the Plan is not delegated to a Committee of the Board, the
Plan shall be administered by the Board and all references herein to the
Committee shall refer to the Board.
The Committee shall have authority to grant Stock Options, pursuant to the
terms of the Plan, to officers and other key employees.
In particular, the Committee, or the Board, as the case may be, shall have
the authority, consistent with the terms of the Plan:
(a) to select the officers and key employees to whom Stock Options
may from time to time be granted hereunder;
(b) to determine whether and to what extent Incentive Stock Options
or Non-Qualified Stock Options, or any combination thereof, are to be
granted hereunder to one or more eligible persons;
(c) to determine the number of shares to be covered by each such
award granted hereunder;
(d) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any award granted hereunder (including, but not
limited to, the share price and any restriction or limitation, or any
vesting acceleration or waiver of forfeiture restrictions regarding any
Stock Option or other award and/or the shares of Common Stock relating
thereto, based in each case on such factors as the Committee shall
determine, in its sole discretion); and to amend or waive any such terms
and conditions to the extent permitted by Section 7 hereof;
(e) to determine whether and under what circumstances a Stock Option
may be settled in cash under Section 5(1), instead of Common Stock;
<PAGE>
(f) to determine whether to require payment withholding requirements
in shares of Common Stock; and
(g) to impose any holding period required to satisfy Section 16 under
the Exchange Act.
The Committee shall have the authority to adopt, alter, and repeal such
rules, guidelines, and practices governing the Plan as it shall, from time to
time, deem advisable; to interpret the terms and provisions of the Plan and any
award issued under the Plan (and any agreements relating thereto); and to
otherwise supervise the administration of the Plan.
All decisions made by the Committee pursuant to the provisions of the Plan
shall be made in the Committee's sole discretion and shall be final and binding
on all persons, including the Corporation and Plan participants.
SECTION 3. Shares of Common Stock Subject to Plan.
(a) As of the Effective Date, the aggregate number of shares of Common
Stock that may be issued under the Plan shall be 100,000 shares. The shares
of Common Stock issuable under the Plan may consist, in whole or in part, of
authorized and unissued shares or treasury shares. [No officer of the
Corporation or other person whose compensation may be subject to the
limitations on deductibility under Section 162(m) of the Code shall be eligible
to receive awards pursuant to this Plan relating to in excess of 100,000 shares
of Common Stock in any fiscal year (the "Section 162(m) Maximum").]
(b) If any shares of Common Stock that have been optioned cease to be
subject to a Stock Option, with respect to such shares of Common Stock, or any
such award otherwise terminates without a payment being made to the participant
in the form of Common Stock, such shares shall again be available for distribu-
tion in connection with future awards under the Plan.
(c) In the event of any merger, reorganization, consolidation, recapital-
ization, extraordinary cash dividend, stock dividend, stock split or other
change in corporate structure affecting the Common Stock, an appropriate
substitution or adjustment shall be made in the maximum number of shares that
may be awarded under the Plan, in the number and option price of shares subject
to outstanding Options granted under the Plan, the Section 162(m) Maximum and
in the number of shares subject to other outstanding awards granted under the
Plan as may be determined to be appropriate by the Committee, in its sole
discretion, provided that the number of shares subject to any award shall
always be a whole number.
<PAGE>
SECTION 4. Eligibility.
Officers and other key employees who are responsible for or contribute to
the management, growth and/or profitability of the business of the Corporation
and/or its Subsidiaries and Affiliates are eligible to be granted awards under
the Plan.
SECTION 5. Stock Options.
Stock Options may be granted alone, in addition to, or in tandem with
other awards granted under the Plan and/or cash awards made outside of the
Plan. Any Stock Option granted under the Plan shall be in such form as the
Committee may from time to time approve.
Stock Options granted under the Plan may be of two types: (i) Incentive
Stock Options and (ii) Non-Qualified Stock Options.
The Committee shall have the authority to grant any optionee Incentive
Stock Options, Non-Qualified Stock Options, or both types of Stock Options.
Options granted to officers and key employees under the Plan shall be
subject to the following terms and conditions and shall contain such additional
terms and conditions, not inconsistent with the terms of the Plan, as the
Committee shall deem desirable.
(a) Option Price. The option price per share of Common Stock
purchasable under a Stock Option shall be determined by the Committee at the
time of grant but shall be not less than 100% (or, in the case of any employee
who owns stock possessing more than 10% of the total combined voting power of
all classes of stock of the Corporation or of any of its Subsidiaries, not less
than 110%) of the Fair Market Value of the Common Stock at grant, in the case
of Incentive Stock Options, and not less than 50% of the Fair Market Value of
the Common Stock at grant, in the case of Non-Qualified Stock Options.
(b) Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Incentive Stock Option shall be exercisable more than
ten years (or, in the case of an employee who owns stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Corporation or any of its Subsidiaries or parent corporations, more than
five years) after the date the Option is granted.
(c) Exercisability. Stock Options shall be exercisable at such time
or times and subject to such terms and conditions as shall be determined
by the Committee at or after grant; provided, however, that except as
provided in Section 5(g) and (h) and Section 6, unless otherwise deter-
mined by the Committee at or after grant, no Stock Option shall be
exercisable prior to the first anniversary date of the granting of the
<PAGE>
Option. The Committee may provide that a Stock Option shall vest over a
period of future service at a rate specified at the time of grant, or that
the Stock Option is exercisable only in installments. If the Committee
provides, in its sole discretion, that any Stock Option is exercisable
only in installments, the Committee may waive such installment exercise
provisions at any time at or after grant, in whole or in part, based on
such factors as the Committee shall determine in its sole discretion.
(d) Method of Exercise. Subject to whatever installment exercise
restrictions apply under Section 5(c), Stock Options may be exercised in
whole or in part at any time during the option period, by giving written
notice of exercise to the Corporation specifying the number of shares to
be purchased. Such notice shall be accompanied by payment in full of the
purchase price, either by check, note, or such other instrument as the
Committee may accept. As determined by the Committee, in its sole
discretion, at or (except in the case of an Incentive Stock Option) after
grant, payment in full or in part may also be made in the form of
unrestricted shares of Common Stock already owned by the optionee (valued
at the Fair Market Value of the Common Stock on the date the option is
exercised, as determined by the Committee). If payment of the exercise
price is made in part or in full with Common Stock, the Committee may
award to the employee a new Stock Option to replace the Common Stock which
was surrendered. No shares of Common Stock shall be issued until full
payment therefor has been made. An optionee shall generally have the
rights to dividends or other rights of a shareholder with respect to
shares subject to the Option when the optionee has given written notice of
exercise, has paid in full for such shares, and, if requested, has given
the representation described in Section 9(a).
(e) Transferability of Options. No Non-Qualified Stock Option shall
be transferable by the optionee without the prior written consent of the
Committee other than (i) transfers by the Optionee to a member of his or
her Immediate Family or a trust for the benefit of the Optionee to a
member of his or her Immediate Family, or (ii) transfers by will or by the
laws of descent and distribution. No Incentive Stock Option shall be
transferable by the optionee otherwise than by will or by the laws of
descent and distribution and all Incentive Stock Options shall be exercis-
able, during the optionee's lifetime, only by the optionee.
(f) Bonus for Taxes. In the case of a Non-Qualified Stock Option or
an optionee who elects to make a disqualifying disposition (as defined in
Section 422(a)(1) of the Code) of Common Stock acquired pursuant to the
exercise of an Incentive Stock Option, the Committee in its discretion may
award at the time of grant or thereafter the right to receive upon exer-
cise of such Stock Option a cash bonus calculated to pay part or all of
the federal and state, if any, income tax incurred by the optionee upon
such exercise.
<PAGE>
(g) Termination by Death. Subject to Section 5(k), if an optionee's
employment by the Corporation and any Subsidiary or (except in the case
of an Incentive Stock Option) Affiliate terminates by reason of death, any
Stock Option held by such optionee may thereafter be exercised, to the
extent such option was exercisable at the time of death or (except in the
case of an Incentive Stock Option) on such accelerated basis as the
Committee may determine at or after grant (or except in the case of an
Incentive Stock Option, as may be determined in accordance with procedures
established by the Committee) by the legal representative of the estate or
by the legatee of the optionee under the will of the optionee, for a
period of one year (or such other period as the Committee may specify at
or after grant) from the date of such death or until the expiration of the
stated term of such Stock Option, whichever period is the shorter.
(h) Termination by Reason of Disability. Subject to Section 5(k), if
an optionee's employment by the Corporation and any Subsidiary or (except
in the case of an Incentive Stock Option) Affiliate terminates by reason
of Disability, any Stock Option held by such optionee may thereafter be
exercised by the optionee, to the extent it was exercisable at the time of
termination or (except in the case of an Incentive Stock Option) on such
accelerated basis as the Committee may determine at or after grant (or,
except in the case of an Incentive Stock Option, as may be determined in
accordance with procedures established by the Committee), for a period
of (i) three years (or such other period as the Committee may specify at
or after grant) from the date of such termination of employment or until
the expiration of the stated term of such Stock Option, whichever period
is the shorter, in the case of a Non-Qualified Stock Option and (ii) one
year from the date of termination of employment or until the expiration of
the stated term of such Stock Option, whichever period is shorter, in the
case of an Incentive Stock Option; provided however, that, if the optionee
dies within the period specified in (i) above (or other such period as the
Committee shall specify at or after grant), any unexercised Non-Qualified
Stock Option held by such optionee shall thereafter be exercisable to the
extent to which it was exercisable at the time of death for a period of
twelve months from the date of such death or until the expiration of the
stated term of such Stock Option, whichever period is shorter. In the
event of termination of employment by reason of Disability, if an Incen-
tive Stock Option is exercised after the expiration of the exercise period
applicable to Incentive Stock Options, but before the expiration of any
period that would apply if such Stock Option were a Non-Qualified Stock
Option, such Stock Option will thereafter be treated as a Non-Qualified
Stock Option.
(i) Termination by Reason of Retirement. Subject to Section 5(k), if
an optionee's employment by the Corporation and any Subsidiary or (except
in the case of an Incentive Stock Option) Affiliate terminates by reason
of Normal or Early Retirement, any Stock Option held by such optionee may
thereafter be exercised by the optionee, to the extent it was exercisable
at the time of such Retirement or (except in the case of an Incentive
Stock Option) on such accelerated basis as the Committee may determine at
or after grant (or, except in the case of an Incentive Stock Option, as
<PAGE>
may be determined in accordance with procedures established by the
Committee), for a period of (i) three years (or such other period as the
Committee may specify at or after grant) from the date of such termination
of employment or the expiration of the stated term of such Stock Option,
whichever period is the shorter, in the case of a Non-Qualified Stock
Option and (ii) three months from the date of such termination of employ-
ment or the expiration of the stated term of such Stock Option, whichever
period is the shorter, in the case of an Incentive Stock Option; provided
however, that, if the optionee dies within the period specified in (i)
above (or other such period as the Committee shall specify at or after
grant), any unexercised Non-Qualified Stock Option held by such optionee
shall thereafter be exercisable to the extent to which it was exercisable
at the time of death for a period of twelve months from the date of such
death or until the expiration of the stated term of such Stock Option,
whichever period is shorter. In the event of termination of employment by
reason of Retirement, if an Incentive Stock Option is exercised after the
expiration of the exercise period applicable to Incentive Stock Options,
but before the expiration of any period that would apply if such Stock
Option were a Non-Qualified Stock Option, the option will thereafter be
treated as a Non-Qualified Stock Option.
(j) Other Termination. Subject to Section 5(k), unless otherwise
determined by the Committee (or pursuant to procedures established by the
Committee) at or (except in the case of an Incentive Stock Option) after
grant, if an optionee's employment by the Corporation and any Subsidiary
or (except in the case of an Incentive Stock Option) Affiliate is involun-
tarily terminated for any reason other than death, Disability or Normal or
Early Retirement, the Stock Option shall thereupon terminate, except that
such Stock Option may be exercised, to the extent otherwise then exercis-
able, for the lesser of three months or the balance of such Stock Option's
term if the involuntary termination is without Cause. For purposes of
this Plan, "Cause" means (i) a felony conviction of a participant or the
failure of a participant to contest prosecution for a felony, or (ii) a
participant's willful misconduct or dishonesty, which is directly and
materially harmful to the business or reputation of the Corporation or any
Subsidiary or Affiliate. If an optionee voluntarily terminates employment
with the Corporation and any Subsidiary or (except in the case of an
Incentive Stock Option) Affiliate (except for Disability, Normal or Early
Retirement), the Stock Option shall thereupon terminate; provided,
however, that the Committee at grant or (except in the case of an Incen-
tive Stock Option) thereafter may extend the exercise period in this
situation for the lesser of three months or the balance of such Stock
Option's term.
(k) Incentive Stock Options. Anything in the Plan to the contrary not-
withstanding, no term of this Plan relating to Incentive Stock Options
shall be interpreted, amended, or altered, nor shall any discretion or
authority granted under the Plan be so exercised, so as to disqualify the
Plan under Section 422 of the Code, or, without the consent of the
optionee(s) affected, disqualify any Incentive Stock Option under such
<PAGE>
Section 422. No Incentive Stock Option shall be granted to any partici-
pant under the Plan if such grant would cause the aggregate Fair Market
Value (as of the date the Incentive Stock Option is granted) of the Common
Stock with respect to which all Incentive Stock Options are exercisable
for the first time by such participant during any calendar year (under all
such plans of the Company and any Subsidiary) to exceed $100,000. To the
extent permitted under Section 422 of the Code or the applicable regula-
tions thereunder or any applicable Internal Revenue Service pronouncement:
(i) if (x) a participant's employment is terminated by reason of
death, Disability, or Retirement and (y) the portion of any Incentive
Stock Option that is otherwise exercisable during the post-termination
period specified under Section 5(g), (h), or (i), applied without regard
to the $100,000 limitation contained in Section 422(d) of the Code, is
greater than the portion of such Option that is immediately exercisable as
an "Incentive Stock Option" during such post-termination period under
Section 422, such excess shall be treated as a Non-Qualified Stock Option;
and
(ii) if the exercise of an Incentive Stock Option is accelerated by
reason of a Change in Control, any portion of such Option that is not
exercisable as an Incentive Stock Option by reason of the $100,000
limitation contained in Section 422(d) of the Code shall be treated as a
Non-Qualified Stock Option.
(l) Buyout Provisions. The Committee may at any time offer to buy out for
a payment in cash of Common Stock an Option previously granted, based on such
terms and conditions as the Committee shall establish and communicate to the
optionee at the time that such offer is made.
(m) Performance and Other Conditions. The Committee may condition the
exercise of any Option upon the attainment of specified performance goals or
other factors as the Committee may determine, in its sole discretion. Unless
specifically provided in the option agreement, any such conditional Option
shall vest immediately prior to its expiration if the conditions to exercise
have not theretofore been satisfied.
SECTION 6. Change in Control Provisions.
(a) Impact of Event. In the event of:
(1) a "Change in Control" as defined in Section 6(b); or
(2) a "Potential Change in Control" as defined in Section 6(c), but
only if and to the extent so determined by the Committee or the Board at
<PAGE>
or after grant (subject to any right or approval expressly reserved by the
Committee or the Board at the time of such determination),
(i) Subject to the limitations set forth in this Section 6(a), any
Stock Option awarded under the Plan not previously exercisable and vested
shall become fully exercisable and vested.
(ii) Subject to the limitations set forth below in this Section 6(a),
the value of all outstanding Stock Options shall, unless otherwise
determined by the Board or the Committee in its sole discretion prior to
any Change in Control, be cashed out on the basis of the "Change in
Control Price" as defined in Section 6(d) as of the date such Change in
Control or such Potential Change in Control is determined to have occurred
or such other date as the Board of Committee may determine prior to the
Change in Control.
(iii) The Board or the Committee may impose additional conditions on
the acceleration or valuation of any award in the award agreement.
(b) Definition of Change in Control. For purposes of Section 6(a), a
"Change in Control" means the happening of any of the following:
(i) any person or entity, including a "group" as defined in Section
13(d)(3) of the Exchange Act, other than the Corporation or a wholly-owned
subsidiary thereof or any employee benefit plan of the Corporation or any
of its Subsidiaries, becomes the beneficial owner of the Corporation's
securities having 35% or more of the combined voting power of the then
outstanding securities of the Corporation that may be cast for the elec-
tion of directors of the Corporation (other than as a result of an
issuance of securities initiated by the Corporation in the ordinary course
of business); or
(ii) as the result of, or in connection with, any cash tender or
exchange offer, merger or other business combination, sales of assets or
contested election, or any combination of the foregoing transactions, less
than a majority of the combined voting power of the then outstanding
securities of the Corporation or any successor corporation or entity
entitled to vote generally in the election of the directors of the
Corporation or such other corporation or entity after such transaction are
held in the aggregate by the holders of the Corporation's securities
entitled to vote generally in the election of directors of the Corporation
immediately prior to such transaction; or
(iii) during any period of two consecutive years, individuals who at
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the beginning of any such period constitute the Board cease for any reason
to constitute at least a majority thereof, unless the election, or the
nomination for election by the Corporation's shareholders, of each
director of the Corporation first elected during such period was approved
by a vote of at least two-thirds of the directors of the Corporation then
still in office who were directors of the Corporation at the beginning of
any such period.
(c) Definition of Potential Change in Control. For purposes of Section
6(a), a "Potential Change in Control" means the happening of any one of the
following:
(i) The approval by shareholders of an agreement by the Corporation,
the consummation of which would result in a Change in Control of the
Corporation as defined in Section 6(b); or
(ii) The acquisition of beneficial ownership, directly or indirectly,
by any entity, person or group (other than the Corporation or a Subsidiary
or any Corporation employee benefit plan (including any trustee of such
plan acting as such trustee)) of securities of the Corporation representing
5% or more of the combined voting power of the Corporation's outstanding
securities and the adoption by the Committee of a resolution to the effect
that a Potential Change in Control of the Corporation has occurred for
purposes of this Plan.
(d) Change in Control Price. For purposes of this Section 6, "Change in
Control Price" means the highest price per share paid in any transaction
reported on the Nasdaq stock market or such other exchange or market as is the
principal trading market for the Common Stock, or paid or offered in any bona
fide transaction related to a Potential or actual Change in Control of the
Corporation at any time during the 60 day period immediately preceding the
occurrence of the Change in Control (or, where applicable, the occurrence of the
Potential Change in Control event), in each case as determined by the Committee
except that, in the case of Incentive Stock Options such price shall be based
only on transactions reported for the date of which the optionee exercises such
Stock Options or, where applicable, the date on which a cash out occurs under
Section 6(a)(ii).
SECTION 7. Amendments and Termination.
The Board may at any time amend, alter or discontinue the Plan; provided,
however, that, without the approval of the Corporation's shareholders, no amend-
ment or alteration may be made which would (a) except as a result of the
provisions of Section 3(c) of the Plan, increase the maximum number of shares
that may be issued under the Plan or increase the Section 162(m) Maximum,
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(b) change the provisions governing Incentive Stock Options except as required
or permitted under the provisions governing incentive stock options under the
Code, or (c) make any change for which applicable law or regulatory authority
(including the regulatory authority of the "NASDAQ" or any other market or
exchange on which the Common Stock is traded) would require shareholder
approval or for which shareholder approval would be required to secure full
deductibility of compensation received under the Plan under Section 162(m) of
the Code. No amendment, alteration, or discontinuation shall be made which
would impair the rights of an optionee or participant under a Stock Option
theretofore granted, without the participant's consent.
The Committee may amend the terms of any Stock Option or other award
theretofore granted, prospectively or retroactively, but, subject to Section 3
above, no such amendment shall impair the rights of any holder without the
holder's consent. The Committee may also substitute new Stock Options for
previously granted Stock Options (on a one for one or other basis), including
previously granted Stock Options having higher option exercise prices.
SECTION 8. Unfunded Status of Plan.
The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a partici-
pant or optionee by the Corporation, nothing contained herein shall give any
such participant or optionee any rights that are greater than those of a
general creditor of the Corporation. In its sole discretion, the Committee may
authorize the creation of trusts or other arrangements to meet the obligations
created under the Plan to deliver Common Stock or payments in lieu of or with
respect to awards hereunder; provided, however, that, unless the Committee
otherwise determines with the consent of the affected participant, the
existence of such trusts or other arrangements is consistent with the
"unfunded" status of the Plan.
SECTION 9. General Provisions.
(a) The Committee may require each person purchasing shares pursuant
to a Stock Option to represent to and agree with the Corporation in
writing that the optionee or participant is acquiring the shares without a
view to distribution thereof. The certificates for such shares may
include any may include any legend which the Committee deems appropriate
to reflect any restrictions on transfer. All certificates for shares of
Common Stock or other securities delivered under the Plan shall be subject
to such stock-transfer orders and other restrictions as the Committee may
deem advisable under the rules, regulations, and other requirements of the
Commission, any stock exchange upon which the Common Stock is then listed,
and any applicable Federal or state securities law, and the Committee may
cause a legend or legends to be put on any such certificates to make
appropriate reference to such restrictions.
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(b) Nothing contained in this Plan shall prevent the Board from
adopting other or additional compensation arrangements, subject to share-
holder approval if such approval is required; and such arrangements may be
either generally applicable or applicable only in specific cases.
(c) The adoption of the Plan shall not confer upon any employee of
the Corporation or any Subsidiary or Affiliate any right to continued
employment with the Corporation or a Subsidiary or Affiliate, as the case
may be, nor shall it interfere in any way with the right of the Corpora-
tion or a Subsidiary or Affiliate to terminate the employment of any of
its employees at any time.
(d) No later than the date as of which an amount first becomes
includible in the gross income of the participant for Federal income tax
purposes with respect to any award under the Plan, the participant shall
pay to the Corporation, or make arrangements satisfactory to the Committee
regarding the payment of, any Federal, state, or local taxes of any kind
required by law to be withheld with respect to such amount. The Committee
may require withholding obligations to be settled with Common Stock,
including Common Stock that is part of the award that gives rise to the
withholding requirement. The obligations of the Corporation under the
Plan shall be conditional on such payment or arrangements and the Corpora-
tion and its Subsidiaries or Affiliates shall, to the extent permitted by
law, have the right to deduct any such taxes from any payment of any kind
otherwise due to the participant.
(e) The Plan and all awards made and actions taken hereunder shall be
governed by and construed in accordance with the laws of the State of
Tennessee.
(f) The members of the Committee and the Board shall not be liable to
any employee or other person with respect to any determination made
hereunder in a manner that is not inconsistent with their legal obligations
as members of the Board. In addition to such other rights of indemnifi-
cation as they may have as directors or as members of the Committee, the
members of the Committee shall be indemnified by the Corporation against
the reasonable expenses, including attorneys' fees actually and necessar-
ily incurred in connection with the defense of any action, suit or pro-
ceeding, or in connection with any appeal therein, to which they or any of
them may be a party by reason of any action taken or failure to act under
or in connection with the Plan or any option granted thereunder, and
against all amounts paid by them in settlement thereof (provided such
settlement is approved by independent legal counsel selected by the
Corporation) or paid by them in satisfaction of a judgment in any such
action, suit or proceeding, except in relation to matters as to which it
shall be adjudged in such action, suit or proceeding that such Committee
member is liable for negligence or misconduct in the performance of his
duties; provided that within 60 days after institution of any such action,
suit or proceeding, the Committee member shall in writing offer the
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Corporation the opportunity, at its own expense, to handle and defend the
same.
(g) In addition to any other restrictions on transfer that may be
applicable under the terms of this Plan or the applicable award agreement,
no Stock Option or other right issued under this Plan is transferable by
the participant without the prior written consent of the Committee, other
than (i) transfers by an optionee to a member of his or her Immediate
Family or a trust for the benefit of the optionee or a member of his or
her Immediate Family or (ii) transfers by will or by the laws of descent
and distribution. The designation of a beneficiary will not constitute a
transfer.
(h) The Committee may, at or after grant, condition the receipt of
any payment in respect of any award or the transfer of any shares subject
to an award on the satisfaction of a six-month holding period, if such
holding period is required for compliance with Section 16 under the
Exchange Act.
SECTION 10. Effective Date of Plan.
The Plan shall be effective on April 17, 1997, provided that it has been
approved by the Board of The Corporation and by a majority of the votes cast by
the holders of the Corporation's Common Stock at the annual shareholders'
meeting.
SECTION 11. Term of Plan.
No Stock Option shall be granted pursuant to the Plan on or after the
tenth anniversary of the Effective Date of the Plan, but awards granted prior
to such tenth anniversary may be extended beyond that date.
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