<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[X] Preliminary proxy statement
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
FIRST TENNESSEE NATIONAL CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
FIRST TENNESSEE NATIONAL CORPORATION
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[x] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2).
[ ] $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 transactions applies:
-----------------------------------------------------------------------
(3) Per unit price of other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:1
-----------------------------------------
(4) Proposed maximum aggregate value of transaction:
--------------------
- ----------------
[ ] 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) Dated filed:
--------------------------------------------------------
- ----------------------------
1 Set forth the amount on which the filing fee is calculated and state how
it was determined.
<PAGE> 2
March 15, 1995
TO THE SHAREHOLDERS OF
FIRST TENNESSEE NATIONAL CORPORATION
In connection with the annual meeting of shareholders of your Corporation
to be held on April 18, 1995, we enclose a notice of annual shareholders'
meeting, a proxy statement, and a form of proxy.
At the meeting, you will be asked to elect four Class II directors to
serve until the 1998 annual meeting of shareholders and one Class I director to
serve until the 1997 annual meeting, or until their successors are duly elected
and qualified, approve the Non-Employee Directors' Deferred Compensation Stock
Option Plan, approve the 1995 Employee Stock Option Plan, and ratify the
appointment of Arthur Andersen LLP as the Corporation's independent auditors
for 1995. Information about these matters is contained in the attached proxy
statement.
Detailed information relating to the Corporation's activities and
operating performance during 1994 is contained in the Annual Report to
Shareholders of the Corporation, which is being mailed to you with this proxy
statement, but is not a part of the proxy soliciting material. If you do not
receive or have access to the 1994 Annual Report, please notify the Treasurer,
First Tennessee National Corporation, P. O. Box 84, Memphis, Tennessee 38101,
(901) 523-5630.
You are cordially invited to attend the annual meeting of shareholders in
person. We would appreciate your completing the enclosed form of proxy so that
your shares can be voted in the event that you are unable to attend the
meeting. If you are present at the meeting and desire to vote your shares
personally, your form of proxy will be withheld from voting upon your request
prior to the balloting. We urge you to return your proxy card to us in the
postage-paid envelope as soon as possible.
Sincerely yours,
Ronald Terry
Chairman of the Board
<PAGE> 3
FIRST TENNESSEE NATIONAL CORPORATION
165 Madison Avenue
Memphis, Tennessee 38103
NOTICE OF ANNUAL SHAREHOLDERS' MEETING
April 18, 1995
The annual meeting of shareholders of First Tennessee National Corporation
will be held on April 18, 1995, at 10:00 a.m., local time, in the Auditorium,
First Tennessee Building, 165 Madison Avenue, Memphis, Tennessee. The items of
business are:
1. Election of four Class II directors to serve until the 1998 annual
meeting of shareholders and one Class I director to serve until the
1997 annual meeting of shareholders, or until their successors are
duly elected and qualified.
2. Approval of the Non-Employee Directors' Deferred Compensation Stock
Option Plan.
3. Approval of the 1995 Employee Stock Option Plan.
4. Ratification of appointment of auditors.
These items are described more fully in the following pages, which are
made a part of this notice. The close of business February 23, 1995, is the
record date for the meeting. All shareholders of record at that time are
entitled to vote at the meeting.
Management would appreciate your signing and returning the accompanying
form of proxy promptly, so that if you are unable to attend the meeting your
shares can nevertheless be voted.
Lenore S. Creson
Secretary
Memphis, Tennessee
March 15, 1995
IMPORTANT NOTICE
TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE MEETING, PLEASE PROMPTLY
MARK, DATE, SIGN AND MAIL THE ENCLOSED FORM OF PROXY IN THE ENCLOSED ENVELOPE.
<PAGE> 4
PROXY STATEMENT
FIRST TENNESSEE NATIONAL CORPORATION
165 Madison Avenue
Memphis, Tennessee 38103
GENERAL
The following statement, first mailed to shareholders on or about March
15, 1995, is furnished in connection with the solicitation by the Board of
Directors of First Tennessee National Corporation (the "Corporation" or "FTNC")
of proxies to be used at the annual meeting of the shareholders of the
Corporation to be held on April 18, 1995, at 10:00 a.m. local time in the
Auditorium, First Tennessee Building, 165 Madison Avenue, Memphis, Tennessee,
and at any adjournment or adjournments thereof.
The accompanying form of proxy is for use at the meeting if a shareholder
will be unable to attend in person. The proxy may be revoked by the
shareholder at any time before it is exercised. All shares represented by
valid proxies received pursuant to this solicitation, and not revoked before
they are exercised, will be voted in the manner specified therein. If no
specification is made, the proxies will be voted in favor of:
1. Election of four Class II directors to serve until the 1998 annual
meeting of shareholders and one Class I director to serve until the
1997 annual meeting of shareholders, or until their successors are
duly elected and qualified.
2. Approval of the Non-Employee Directors' Deferred Compensation Stock
Option Plan.
3. Approval of 1995 Employee Stock Option Plan.
4. Ratification of appointment of auditors.
The entire cost of soliciting these proxies will be borne by the
Corporation. In following up the original solicitation of the proxies by mail,
the Corporation may request brokers and others to send proxies and proxy
material to the beneficial owners of the shares and may reimburse them for
their expenses in so doing. If necessary, the Corporation may also use several
of its regular employees to solicit proxies from the shareholders, either
personally or by telephone or by special letter, for which they will receive no
compensation in addition to their normal compensation.
The common stock of the Corporation is its only class of voting
securities. There were 3_,___,___ shares of common stock outstanding and
entitled to vote as of February 23, 1995, the record date for the annual
shareholders' meeting. Each share is entitled to one vote. A majority of the
votes entitled to be cast at the annual meeting constitutes a quorum for
purposes of the
<PAGE> 5
meeting. With respect to the election of directors, a plurality of the votes
cast is required to elect the nominees as directors. With respect to each of
the stock option plans, a majority of the shares present, or represented, at
the meeting is required to approve each plan. With respect to the ratification
of the appointment of auditors, to approve the item the votes cast in favor of
the item must exceed the votes cast in opposition to it. An "abstention" will
be considered present for quorum purposes, will have the effect of a "No" vote
as to each of the options plans, but will not otherwise have any effect on the
other vote items. Broker "non-votes" will not be considered present for quorum
purposes but will not otherwise have any effect on any of the vote items.
On December 31, 1994, only one person was known by management of the
Corporation to own beneficially, as that term is defined by Rule 13d-3 of the
Securities Exchange Act of 1934, more than five percent (5%) of the
Corporation's common stock. According to its public filings, Pioneering
Management Corporation, 60 State Street, Boston, MA 02109-1820, an investment
adviser, owned beneficially 1,760,500 shares, equal to approximately 5.5% of
the common stock. It had sole voting power with respect to all of such shares
and sole and shared dispositive power with respect to 125,500 and 1,635,000
shares, respectively.
The following table sets forth certain information as of December 31,
1994, concerning beneficial ownership of the Corporation's common stock by each
director and nominee, each executive officer named in the Summary Compensation
Table, and directors and executive officers as a group.
2
<PAGE> 6
Stock Ownership Table
---------------------
<TABLE>
<CAPTION>
Amount and Nature
Name of of Beneficial Ownership Percent
Beneficial Owner (Number of Shares)(1) of Class
<S> <C> <C>
Jack A. Belz 22,825 (2) 0.07
Susan Schmidt Bies 67,092 (3)(4) 0.21
Robert C. Blattberg 1,590 (2) (less than) 0.01
J. Kenneth Glass 55,980 (3)(4) 0.18
Ralph Horn 218,853 (3)(4) 0.69
J. R. Hyde, III 33,216 (2) 0.10
John C. Kelley, Jr. 54,909 (3)(4) 0.17
George P. Lewis 93,544 (3)(4) 0.29
R. Brad Martin 3,752 (2) 0.01
Joseph Orgill, III 67,739 (2) 0.21
Richard E. Ray 3,495 (2) 0.01
Vicki G. Roman 1,527 (2) (less than) 0.01
Michael D. Rose 10,815 (2) 0.03
William B. Sansom 1,792 (2) 0.01
Gordon P. Street, Jr. 1,725 (2) 0.01
Ronald Terry 169,034 (3)(4) 0.53
Directors and Executive
Officers as a Group
(20 persons) 934,043 (3)(4) 2.93
</TABLE>
(1) The respective directors and officers have sole voting and investment
powers with respect to all of such shares except as specified in note (2)
and note (4).
(2) Includes 1,200 shares of restricted stock (1,500 shares as to Mr. Martin
and 1,350 shares as to Ms. Roman), with respect to which each nonemployee
director possesses sole voting power, but no investment power.
(3) Includes 24,504, 17,960, 58,940, 17,372, 8,438 and 173,412 shares as to
which Ms. Bies and Messrs. Glass, Horn, Kelley and Lewis and the directors
and executive officers group, respectively, have the right to acquire
beneficial ownership within 60 days through the exercise of Corporation
stock options. Also includes shares held at September 30, 1994, for
Savings Plan accounts.
(4) Includes 10,536, 13,517, 60,000, 13,517, 10,967, 11,111, and ________
shares of restricted stock with respect to which Ms. Bies and Messrs.
Glass, Horn, Kelley, Lewis, Terry and the director and executive officer
group, respectively, have sole voting power but no investment power.
ITEM NO. 1 - ELECTION OF DIRECTORS
The Board of Directors is divided into three Classes with the term of
office of each Class expiring in successive years. The term of Class II
directors expires at this annual meeting. The terms of Class I and Class III
directors expire as stated below. The Board of Directors proposes the election
of four Class II directors and one Class I director. The Class I director was
elected by the board in October of 1994, and pursuant to the
3
<PAGE> 7
requirements of state law, he has been nominated for election by the
shareholders at the annual meeting. Each director elected at the meeting will
hold office until the specified annual meeting of shareholders and until his or
her successor shall be elected and qualified.
Should any of the nominees proposed by the Board of Directors be unable to
accept election, which the Board of Directors has no reason to anticipate, the
persons named in the enclosed form of proxy will vote for the election of such
other persons as management may recommend, unless the Board should determine to
reduce the number of directors pursuant to the Bylaws.
Certain information about the nominees and directors (including age,
current principal occupation which has continued for at least five years unless
otherwise indicated, name and principal business of the organization in which
his or her occupation is carried on, directorships in other reporting
companies, and year first elected to the Corporation's Board) is provided as
follows:
NOMINEES FOR DIRECTOR
Class II
For a Three-Year Term Expiring at 1998 Annual Meeting
ROBERT C. BLATTBERG (52) is the Polk Brothers Distinguished Professor of
Retailing, J. L. Kellogg Graduate School of Management, Northwestern
University, Evanston, Illinois. Prior to September 1991, he was Professor of
Marketing at the University of Chicago. Dr. Blattberg has been a director
since 1984 and is a member of the Audit Committee.
J. R. HYDE, III (52) is Chairman of the Board and Chief Executive Officer of
AutoZone, Inc., Memphis, Tennessee, retail auto parts. Mr. Hyde is a director
of one other public company, Federal Express Corporation. Mr. Hyde has been a
director since 1972 and is a member of the Human Resources Committee.
MICHAEL D. ROSE (53) is Chairman of the Board of The Promus Companies
Incorporated, Memphis, Tennessee, a hospitality company with interests in
casinos, hotels and restaurants. Mr. Rose was also Promus' Chief Executive
Officer prior to April 1994. He held the same positions with Holiday
Corporation prior to the consummation of the Bass PLC merger transaction on
February 7, 1990. Mr. Rose is a director of two other public companies,
General Mills, Inc. and Ashland Oil, Inc. Mr. Rose has been a director since
1984 and is a member of the Human Resources Committee.
GORDON P. STREET, JR. (56) is Chairman of the Board, Chief Executive Officer,
and President of North American Royalties, Inc., Chattanooga, Tennessee, a
manufacturer of gray iron castings and producer of oil and natural gas. He has
been a director since 1980
4
<PAGE> 8
and is a member of the Audit Committee.
Class I
For a Two-Year Term Expiring at the 1997 Annual Meeting
R. BRAD MARTIN (43) is Chairman of the Board, President and Chief
Executive Office of Proffitt's, Inc., Knoxville, Tennessee, a retail
merchandising company. Mr. Martin is a director of one other public company,
Sports and Recreation, Inc. He has been a director since October 18, 1994 and
is a member of the Human Resources Committee.
CONTINUING DIRECTORS
Class III
Term Expiring at 1996 Annual Meeting
JACK A. BELZ (67) is Chairman and Chief Executive Officer of Belz Investment
Company, Inc., and affiliates, Memphis, Tennessee, a real estate development
and hotel organization with diversified operating interests. Mr. Belz has been
a director since 1984.
RALPH HORN (53) is President, Chief Executive Officer (effective April 19,
1994), and a Director of the Corporation and First Tennessee Bank National
Association. Mr. Horn has been a director since August 1, 1991. Prior to
August 1991, Mr. Horn was Manager of the Bank's Bond Division.
RICHARD E. RAY (64) is President, RER and Associates, Knoxville, Tennessee,
management consultants. Prior to June 1992, he was Manager of the Tennessee
operations of Aluminum Company of America. Mr. Ray has been a director since
1984 and is Chairman of the Audit Committee.
RONALD TERRY (64) is Chairman of the Board of the Corporation and First
Tennessee Bank National Association. Mr. Terry is a director of two other
public companies, The Promus Companies Incorporated and BellSouth Corporation.
He has been a director since 1971. Prior to April 19, 1994, Mr. Terry was CEO
of the Corporation and the Bank.
Class I
Term Expiring at 1997 Annual Meeting
JOSEPH ORGILL, III (57) is Chairman of the Board of West Union Corporation,
Memphis, Tennessee, wholesale distributors of hardware and manufacturers of
products primarily for the construction industry. Mr. Orgill has been a
director since 1969.
VICKI G. ROMAN (41) is Corporate Vice President and Treasurer of Coca-Cola
Enterprises Inc., Atlanta, Georgia, bottler of soft drink products. Prior to
February, 1992 she was Assistant Treasurer. Ms. Roman has been a director
since December 21, 1993 and is a member of the Audit Committee.
5
<PAGE> 9
WILLIAM B. SANSOM (53) is Chairman of the Board and Chief Executive Officer of
The H.T. Hackney Co., Knoxville, Tennessee, a diversified wholesale
distribution firm serving the food, gas, oil and industrial markets in the
Southeast. Mr. Sansom has been a director since 1984 and is a Chairman of the
Human Resources Committee.
The Board of Directors and its Committees
During 1994, the Board of Directors of the Corporation held 10 meetings.
The average attendance Board and committee meetings exceeded 91%. Messrs.
Blattberg and Hyde were the only incumbent directors who attended fewer than 75
percent of the meetings of the Board and the committees of the Board on which
they served. Their absences were primarily due to their inability to attend
special board meetings, which are generally called on short notice.
The Board has several standing committees, two of which are the Audit
Committee and the Human Resources Committee. The latter committee serves as
both a nominating committee and a compensation committee. The Audit Committee
and the Human Resources Committee are each composed of directors who are not
employees of the Corporation. Directors currently serving on each of these
committees are identified in the description of the nominees and directors
continuing in office beginning on page 4.
The Audit Committee is responsible for causing audits and examinations of
the Corporation to be made by independent auditors and supervising the
Corporation's internal audit program. The Committee approves, subject to
shareholder ratification, the engagement of the Corporation's independent
auditors and reviews the scope and results of their examination. Other
committee functions include review of the Corporation's internal controls and
the Corporation's annual report to the SEC and proxy materials. During 1994
the Audit Committee held 5 meetings.
As a nominating committee, the Human Resources Committee primarily
considers recommendations for nominees to the Board of Directors, reviews the
performance of incumbent directors and senior officers in determining whether
to recommend them to the Board of Directors for reelection, reviews succession
plans, and between annual meetings elects persons to offices except the
Chairman, CEO and President. As a compensation committee, the Human Resources
Committee's primary functions include recommending to the Board major policies
concerning compensation, reviewing periodically the Corporation's compensation
and management of its human resources, fixing the compensation of executive
officers, reviewing remuneration structures for non-executive officers, and
making recommendations to the Board concerning compensation arrangements for
directors and adoption or amendment of employee benefit and management
compensation plans. During 1994 the Human Resources Committee held 6 meetings.
Dr. Blattberg served as
6
<PAGE> 10
Chairman of the Human Resources Committee until April 19, 1994 at which time
committee assignments changed.
It is the practice of the Corporation to encourage communication between
management and shareholders. Management in turn communicates appropriate
information to the Board. The Human Resources Committee, as a committee of the
Board, follows this procedure in considering nominations for directorships and
does not receive nominations directly from shareholders.
Section 7 of Article III and Section 11 of Article II of the Corporation's
Bylaws provide that a shareholder who wishes to nominate a person for election
to the Board or submit a proposal at a shareholder meeting must comply with
certain procedures, which require written notification to the Corporation,
generally not less than 30 nor more than 60 days prior to the date of the
shareholder meeting; provided that if fewer than 40 days' notice or public
disclosure of the shareholder meeting date has been given to shareholders, then
the shareholder notification must be received by the Corporation not less than
10 days after the earlier of the date notice of the shareholder meeting was
mailed or publicly disclosed. The shareholder must disclose certain
information about the nominee or item proposed, the shareholder and any other
shareholders known to support the nominee or proposal.
All of the directors of the Corporation are also directors of First
Tennessee Bank National Association (the "Bank" or "FTB"), the Corporation's
principal operating subsidiary.
EXECUTIVE COMPENSATION
The Summary Compensation Table provides information for the years
indicated about the Chief Executive Officer ("CEO") and the other four most
highly compensated executive officers of the Corporation. Mr. Horn succeeded
Mr. Terry as CEO of the Corporation on April 19, 1994. The amounts include all
compensation earned during each year, including amounts deferred, by the named
officers for all services rendered in all capacities to the Corporation and its
subsidiaries. Information is provided for each entire year in which an
individual served during any portion of the year as an executive officer.
Additional information is provided in tabular form below about option grants
and exercises in 1994, year-end option values, and pension benefits, along with
a report of the Board's Human Resources Committee on executive compensation and
certain other information concerning compensation of executive officers and
directors.
7
<PAGE> 11
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
Awards (4) Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Name Other Restricted
and Annual Stock Options/ LTIP All Other
Principal Salary Bonus Compensation Award(s) SARs Payouts Compensation
Position Year ($) ($) (1) ($) (1) ($) (2) (#) (3) $ ($) (6)
--------- ---- ------ ------- ------------ ---------- -------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ronald Terry 1994 $509,286 $ 7,470 0 0 $ 0 $385,572
Chairman 1993 472,357 236,1792 383,850 424,996 0 0 322,309
FTNC & FTB (5) 1992 442,986 21,493 407,619 0 0 0 239,411
Ralph Horn 1994 421,854 6,646 1,715,625 10,758 0 240,091
President & CEO 1993 370,192 185,096 5,733 0 0 0 248,294
FTNC and FTB 1992 335,577 167,789 3,882 0 10,206 0 164,023
Susan Schmidt Bies 1994 174,456 0 0 2,047 0 48,798
Executive Vice 1993 166,870 61,200 0 240,019 0 0 42,243
President FTNC & FTB 1992 156,221 70,299 0 0 2,332 0 35,449
J. Kenneth Glass 1994 221,558 8,196 0 2,559 0 87,375
President-Tennessee 1993 203,581 85,199 5,999 299,995 0 0 73,993
Banking Grp.-FTB 1992 184,529 78,886 0 0 2,916 0 39,951
John C. Kelley, Jr. 1994 216,154 8,196 0 2,559 0 89,661
President-Memphis 1993 198,558 84,884 5,999 299,995 0 0 44,703
Banking Grp.-FTB 1992 179,287 64,140 0 0 2,916 0 17,687
George P. Lewis 1994 186,087 0 0 2,047 0 36,139
Exec. Vice Pres., 1993 175,554 67,939 0 240,019 0 0 38,662
Manager Money Mgmt. 1992 166,202 65,367 0 0 2,332 0 40,189
Grp.-FTB
</TABLE>
(1) Other annual compensation for 1994 represent tax gross-up payments for
executive automobiles. Amounts for 1993 and 1992 for Mr. Terry consist
principally of tax gross-up payments, authorized at the time of the
original awards, made on the vesting of restricted stock.
(2) The restricted stock award to Mr. Horn is valued at the fair market value
of the stock ($38.13) on the date of the award, 1/18/94. The 1994 award
vests 1/18/2004; however, vesting may be accelerated if performance
criteria established by the Human Resources Committee are met. On
December 31, 1994, the named officers held the following shares of
restricted stock with market values as indicated: Mr. Terry - 11,111
shares ($452,773); Mr. Horn - 60,000 shares ($2,445,000); Ms. Bies -
10,536 shares ($429,342); Mr. Glass - 13,517 shares ($550,818); Mr.
Kelley - 13,517 shares ($550,818); Mr. Lewis - 10,967 shares ($446,905).
Dividends are paid on restricted stock at the same rate as all other
shares of the common stock of the Corporation.
(3) All amounts represent shares subject to option. No stock appreciation
rights (SAR's) were awarded.
(4) All share amounts and share prices have been revised to reflect the
3-for-2 stock split (effected in the form of a 50% stock dividend), which
was paid on May 22, 1992.
(5) Mr. Terry served as CEO in 1994 until Mr. Horn's election which was
effective April 19, 1994.
(6) Elements of "All Other Compensation" for 1994 consist of the following:
8
<PAGE> 12
<TABLE>
<CAPTION>
Mr. Terry Mr. Horn Ms. Bies Mr. Glass Mr. Kelley Mr. Lewis
<S> <C> <C> <C> <C> <C> <C>
Above $304,303 $163,521 $38,540 $51,179 $39,199 $10,749
MktRate:
SurBen/ 58,372 53,732 1,107 17,397 32,022 14,524
SERP:
Flex $ 8,147 8,147 5,165 5,179 5,075 6,218
401(k) 4,000 4,324 3,986 4,320 4,215 4,620
Match:
Physical 0 150 0 150 0 28
Exam:
Auto 10,750 10,217 0 9,150 9,150 0
Allowance
Total: $385,572 $240,091 $48,798 $87,375 $89,661 $36,139
</TABLE>
"Above MKT Rate" represents above-market interest accrued on deferred
compensation.
"SUR BEN/SERP" represents insurance premiums with respect to the
Corporation's supplemental life insurance and excess pension plans. Under the
Survivor Benefits Plan a benefit of 2 1/2 times final annual base salary is
paid upon the participant's death prior to retirement (or 2 times final salary
upon death after retirement).
"Flex $" represents the Corporation's contribution to the Flexible
Benefits Plan, based on salary, service and corporate performance.
The following table provides information about stock options granted to
the officers named in the Summary Compensation Table during 1994. No SAR's
were granted during 1994.
Option/SAR Grants Table
-----------------------
Individual Grants
<TABLE>
<CAPTION>
(a) Name (b)Options/SARs (c) % of Total (d) Exercise or (e) Expiration Date Alternatives to
---- ------------ ---------- ----------- --------------- ---------------
Granted (#) (1) Options/SARs Granted Base Price ($/sh) (f) and (g):
--------------- -------------------- ----------------- ------------
to Employees in Grant Date
--------------- ----------
Fiscal Year Value (h) Grant
----------- ---------------
Date Present
------------
Value ($)(2)
------------
<S> <C> <C> <C> <C> <C>
Mr. Terry 0 N/A N/A N/A N/A
Mr. Horn 10,758 1.98% $40.25 4-21-04 $79,502
Ms. Bies 2,047 0.38 40.25 4-21-04 15,127
Mr. Glass 2,559 0.47 40.25 4-21-04 18,911
Mr. Kelley 2,559 0.47 40.25 4-21-04 18,911
Mr. Lewis 2,047 0.38 40.25 4-21-04 15,127
</TABLE>
(1) All options were granted April 19, 1994 and vest at the rate of 20%
per year starting one year from the date of grant. No SAR's were
granted. The exercise price per share equals the fair market value of
one share of Corporation common stock on the grant date. Participants
are permitted to pay the exercise price of the options with Corporation
stock. The option plan provides for tax withholding rights upon approval
of the plan committee. Upon a Change in Control (as defined in the
subsection entitled "Employment Contracts and Termination of Employment
and Change-in-Control Arrangements), all options vest.
9
<PAGE> 13
(2) A variation of the Black-Scholes option pricing model has been used.
The following assumptions were made for purposes of calculating the Grant
Date Value of the options: an exercise price of $40.25; an option term of
10 years; an interest rate of 6.97%; volatility of 22.176%; a dividend
yield of 4.17% ; a 14% reduction to reflect the probability of forfeiture
due to termination prior to vesting; and a 13% reduction to reflect the
probability of a shortened option term due to termination prior to the
option expiration date. The actual value, if any, realized by a
participant upon the exercise of an option may differ and will depend on
the future market value of the Corporation's common stock.
The following table provides information about stock options and SAR's
held at December 31, 1994, and exercises during 1994 by the officers named in
the Summary Compensation Table. The values in column (e) reflect the spread
between the market value at December 31, 1994 of the shares underlying the
option and the exercise price of the option.
Aggregate Option/SAR Exercises and
Fiscal Year-End Option/SAR Value Table
--------------------------------------
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Number of Value of
Securities Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
FY-End (#) FY-End ($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable(1)(2) Unexercisable
---- --------------- ------------ ------------------- -------------
<S> <C> <C> <C> <C>
Mr. Terry 0 N/A 0/0 N/A
Mr. Horn 3,572 $102,159 58,940/17,739 $1,076,332/$65,594
Ms. Bies N/A N/A 24,504/13,225 $538,147/$246,277
Mr. Glass N/A N/A 17,960/14,346 $399,220/$255,013
Mr. Kelley, Jr. 1,498 $41,345 17,372/14,346 $387,754/$255,013
Mr. Lewis N/A N/A 8,438/4,303 $187,055/$30,715
</TABLE>
(1) Options with respect to 2,353, 1,176, 1,470, 1,176 and 0 shares granted
to Ms. Bies and Messrs. Horn, Glass, Kelley and Lewis, respectively, have
tandem SAR's attached, all of which were exercisable. SAR's are subject
to identical terms as the tandem option and may be exercised in cash or
stock. An exercise reduces, share for share, the number of option shares
exercisable. Option values are based on a 12/31/94 price of $40.75 per
share.
(2) All share amounts and prices reflect the 3-for-2 stock split (effected as
a dividend) that was paid May 22, 1992.
10
<PAGE> 14
The following table provides information about estimated combined
benefits under both the Corporation's Pension Plan and Pension Restoration
Plan.
Pension Plan Table
------------------
<TABLE>
<CAPTION>
Covered
Compensation Years of Service*
15 Yrs. 20 Yrs. 25 Yrs. 30 Yrs. 35 Yrs. 40 Yrs.
<S> <C> <C> <C> <C> <C> <C>
$100,000 $ 40,821 $ 49,844 $ 58,864 $ 62,945 $ 67,030 $ 71,115
150,000 55,623 69,582 83,537 90,082 96,634 103,186
200,000 70,425 89,320 108,209 117,219 126,238 135,257
250,000 85,227 109,058 132,882 144,356 155,842 167,328
300,000 100,029 128,796 157,554 171,493 185,446 199,399
350,000 114,831 148,534 182,227 198,630 215,050 231,470
400,000 129,633 168,272 206,899 225,767 244,654 263,541
450,000 144,435 188,010 231,572 252,904 274,258 295,612
500,000 159,237 207,748 256,244 280,041 303,862 327,683
550,000 174,039 227,486 280,917 307,178 333,466 359,754
</TABLE>
*Benefit shown is subject to limitations fixed by the Secretary of the
Treasury pursuant to Section 415 of the Internal Revenue Code of 1986, as
amended. The limitation is 118,800 for 1994 or 100% of the employee's
average income in his three highest paid years, whichever is less.
However, a benefit as high as $136,425 could be accrued prior to 1983 and
such higher benefit may be paid to the employee who attained that level
prior to 1983.
The Pension Plan is integrated with social security under an "offset"
formula, applicable to all participants. Retirement benefits are based upon a
participant's average base salary for the highest 60 consecutive months of the
last 120 months of service ("Covered Compensation"), service, and social
security benefits. Benefits are normally payable in monthly installments after
age 65. The normal form of benefit payment for a married participant is a
qualified joint and survivor annuity with the surviving spouse receiving for
life 50% of the monthly amount the participant received. The normal form of
benefit payment for an unmarried participant is an annuity payable for life and
10 years certain. For purposes of the plan "compensation" is defined as the
total cash remuneration reportable on the employee's IRS form W-2, plus pre-tax
contributions under the Savings Plan and employee contributions under the
Flexible Benefits Plan, excluding bonuses, commissions, and incentive and
contingent compensation. The Corporation's Pension Restoration Plan is an
unfunded plan covering employees in the highest salary grades, including
Messrs. Terry, Horn, Glass, and Kelley, whose benefits under the Pension Plan
have been limited under the Tax Code as described in the note to the Pension
Table. The amount of compensation covered by the plan is computed based on
"salary," as reported in the Summary Compensation Table. Under that plan
participants receive the difference between the monthly pension payable if tax
code limitations did not apply and the actual pension payable. The estimated
credited years of service and the compensation covered by the plans for each of
the individuals named in the Summary Compensation Table are as follows: Mr.
Terry, 37 ($443,445); Mr. Horn, 31 ($285,226); Ms. Bies, 15 ($156,952); Mr.
Glass, 20 ($156,628); Mr. Kelley, 25 ($153,197); Mr. Lewis, 33 ($245,919).
11
<PAGE> 15
Employment Contracts and Termination of Employment
and Change-in-Control Arrangements
--------------------------------------------------
The Corporation has entered into a contract with each of the named
executive officers which provides generally for a payment equal to one times
annual base salary in the event of a termination of the officer's employment by
the Corporation other than "for cause" or by the employee for "good reason"
within 36 months after a "Change-in-Control" and provides generally for an
excise tax gross-up with respect to any taxes incurred under Internal Revenue
Code Section 4999 following a Change-in-Control. The term "Change-in-Control"
is defined to include (1) shareholder approval of a merger or other business
combination, sale of substantially all of the Corporation's assets, or
liquidation in which the shareholders of the Corporation prior to the
transaction do not continue to represent 50 percent of the shareholders of the
Corporation or its successor after the transaction, (2) the acquisition by a
person or other entity of 20 percent of the Corporation's outstanding voting
stock, or (3) a change in a majority of the Board of Directors.
A Change-in-Control has the following effect on certain benefit plans in
which the named executive officers participate: annual bonuses are prorated
through the date of the Change-in-Control and paid. Restricted stock and stock
options vest. Excess funding in the pension plan is allocated, according to a
formula, to participants and retirees. Deferred compensation and certain other
benefits are paid over to previously established rabbi trusts. Funds in such
trusts will remain available for the benefit of the Corporation's general
creditors prior to distribution. The Corporation's Pension Restoration and
Survivor Benefits Plan generally cannot be amended to reduce benefits, and
interest accrued through the date of the Change-in-Control under the Directors
and Executives Deferred Compensation Plan vests.
----------------------------------------
Notwithstanding anything to the contrary set forth in any of the
Corporation's previous filings under the Securities Act of 1933, as amended, or
the Securities Exchange Act of 1934, as amended, that might incorporate future
filings by reference, including this proxy statement, in whole or in part, the
following Board Compensation Committee Report on Executive Compensation and the
Total Shareholder Return Performance Graph shall not be incorporated by
reference into any such filings.
Board Compensation Committee Report on Executive Compensation
The Corporation's Bylaws require the Board of Directors or a committee of
the Board of Directors to determine executive compensation. The Board of
Directors has designated the Human Resources Committee ("Committee") to perform
this function in addition to its other duties listed above in the section
entitled "The Board of Directors and its Committees". The Committee is
composed entirely of nonemployee directors who are "disinterested persons"
under SEC regulations and who have no "interlocking" relationship with the
Corporation. Acting pursuant to SEC rules, the Committee has set forth below
its report on the Corporation's compensation policies applicable to executive
12
<PAGE> 16
officers and the bases for the compensation of Mr. Terry and Mr. Horn, the two
individuals who held the position of the Corporation's Chief Executive Officer
("CEO"), during 1994.
The Corporation's executive compensation programs are designed to align
the interests of the executives with the performance of the Corporation and
interests of the shareholders. Approximately 60 percent of the executive
officers' compensation potential which may be received annually is at risk
based on corporate performance and total shareholder return (defined below).
Compensation programs have been designed to reward executives in both cash and
stock of the Corporation based on performance that also rewards shareholders.
When corporate performance does not meet criteria established by the Committee,
incentive compensation is reduced accordingly. In addition, the executive
compensation program has been designed to attract and retain qualified
executives. Executive compensation consists generally of the following
components: base salary, annual incentive bonus, long-term incentive awards,
deferral of compensation at above-market rates or through stock option grants,
and customary employee and other benefits typically offered to similarly
situated executives. Base salary and annual bonus are based on an evaluation
of the individual's position and responsibilities based on independent criteria
and external market data and personal and corporate performance. The Committee
does not assign a specific weight to any of the factors but places greater
emphasis on corporate and personal performance in the overall mix. External
market data was provided by an independent consulting firm and was based on a
peer group of banking organizations representative of the Corporation's asset
size and against which the Corporation measures its strategic performance,
ranging in asset size from $5 billion to $20 billion, or one half to twice the
Corporation's asset size. The peer group asset size maximum was increased from
$15 billion used in 1993 and prior years to $20 billion because of the growth
in the Corporation's total assets and the total assets of a number of the
members of the peer group. The median size was $10.14 billion, and the total
asset size range was the same as the peer group used to compare shareholder
returns. The compensation peer group used by the independent consulting firm
did not include all of the banking organizations listed in the Total
Shareholder Return Performance Graph ("TSR graph"), however, because
compensation data on every organization included in the TSR graph was not
available. The median asset size of the compensation peer group was $10.4
billion. In actual practice the compensation of executive officers
approximates the median of the compensation peer group; however, the
Corporation does not have a specific policy that mandates how its compensation
practices will compare to the peer group. Long-term incentive awards consist
of restricted stock awards containing provisions for acceleration of vesting
upon achievement of corporate performance criteria and stock options. It is
not the practice of the Corporation to "reprice" stock options or to price them
at less than fair market value on the date of grant. The Corporation offers
deferred compensation at above-market rates and deferrals through the use of
stock options. Except for the Corporation's stock fund within its 401(k) plan,
other benefits provided to the executive officers are not tied to corporate
performance.
13
<PAGE> 17
All compensation paid to executive officers during 1994 is fully
deductible by the Corporation for federal income tax purposes. Section 162(m)
generally disallows a tax deduction to public companies such as the Corporation
for compensation exceeding $1 million paid during the tax year to the CEO and
the four other highest paid executive officers at year end. Proposed
regulations contain certain transition rules, and certain performance-based
compensation is not subject to the deduction limit. The Corporation currently
intends to structure the performance-based portion of its future compensation
plans in a manner that complies with Section 162(m).
(i) The CEO's Compensation
---------------------------
Mr. Terry was Chairman and CEO until Mr. Horn's election as CEO,
effective April 19, 1994, after which Mr. Terry retained the office of Chairman
and Mr. Horn retained the office of President. References herein to the CEO
apply to both individuals.
Base Salary: The CEO's base salary is established annually by the
Committee based on the Corporation's performance, achievement of objectives in
his individualized written personal plan, and competitive practices within the
industry. The CEO develops his personal plan and submits it to the Committee
for review and recommendation. The plan is approved by the Board of Directors
and generally contains strategic, quality and financial goals. Salary
increases of 8 and 15.5 percent for Mr. Terry and Mr. Horn, respectively, were
approved in March of 1994 based on achievement of 1993 corporate return on
equity objectives, Bank return on assets objectives, and personal plan
objectives and Mr. Horn's promotion to the CEO position. Although no specific
weight is assigned by the Committee to these factors, greater emphasis is
placed on corporate and personal performance. The adjustment to Mr. Horn's
salary places him at a competitive level within the industry. Base salary is
intended to represent approximately 30 percent of the CEO's total compensation
potential.
Annual Bonus: The CEO's annual bonus is based entirely on the
Corporation's performance against financial objectives established by the
Committee at the beginning of each year. The financial objectives for 1994
were based on return on equity (ROE) and earnings per share (EPS). The
Corporation's degree of success in reaching these targets determines a payout
of zero percent to 100 percent of the annual bonus potential. The CEO may be
awarded an annual bonus of a maximum of 50 percent of his salary dollars earned
during the year. During 1994, the financial objectives set by the Committee
were exceeded, resulting in a maximum payout.
Long-term Awards: The restricted stock program was amended in 1990 to
add performance criteria as a condition to early vesting of future awards to
executive officers and of a portion of previous awards made to Mr. Terry. The
objective of this time accelerated restricted stock award plan ("TARSAP")
feature was to associate more closely the long-term compensation of executives
with shareholder interests. Under the TARSAP feature restricted stock is
granted with accelerated vesting if performance criteria established by the
Committee are met with respect to specified performance periods. Performance
periods are for three years and overlap; e.g. 1991-1993, 1992-94,
14
<PAGE> 18
1993-95. Performance criteria since inception have been based, for all
participants, including the CEO, on total shareholder return (appreciation in
the market value of the Corporation's common stock with dividends
reinvested-"TSR") targets established at the beginning of each performance
period. Targets are based on the corporation's percentile ranking in a peer
group (the "100-bank peer group") of approximately the 100 largest banking
organizations by asset size traded on U.S. exchanges, including the Nasdaq
Stock Market's National Market System, with the condition that TSR must be a
positive number. The 100-bank peer group is different from the peer group used
to compare shareholder returns. The 100-bank peer group was originally
selected in 1990, prior to the adoption of SEC rules requiring disclosure of a
shareholder return performance graph, because the Committee believed that it
was an appropriate index with which to associate more closely long-term
compensation of executives with shareholder interests. The restricted stock
program which contains the 100-bank peer group has produced the desired
results, and thus, the Committee has continued to use it for the restricted
stock program. In January of 1995, the Committee approved vesting the TARSAP
shares for the 1992-1994 performance period. The Committee's decision was
based on a TSR for the period January 1, 1992 through December 31, 1994 of
64.99 percent, which exceeded the target and ranked the Corporation at the
69th percentile of the peer group. The restrictions on these shares which
were originally scheduled to vest on April 21, 1995, were accelerated to
March 3, 1995, to coincide with the anticipated payment date for executive
officer annual bonuses.
Mr. Horn's restricted stock award of 45,000 shares in January of 1994 was
made in consideration of his promotion to CEO and to facilitate his
participation in the long-term TARSAP plan.
Other Benefits: The CEO's compensation reported in the Summary
Compensation Table also includes accrual of above-market rates of interest on
deferred compensation and the cost of insurance to fund a supplemental
retirement plan and life insurance benefit, which are not directly based on
corporate performance. Above-market rates are accrued for deferred
compensation of the CEO and other named executive officers to retain key
officers. Generally, the plan under which this benefit is offered requires
that the amount deferred be automatically recalculated at market rates if
termination occurs prior to retirement.
(ii) Other Executive Officer Compensation
------------------------------------------
Base Salary: Base salary for executive officers other than the CEO and
the Chairman is recommended by the CEO and approved by the Committee.
Recommendations are generally based on corporate performance (as measured by
financial, quality and strategic objectives), individual overall performance
during the prior year and competitiveness in the market place. Corporate
performance objectives for 1993, which were achieved, were the same for
executive officers as the CEO-corporate return on equity and Bank return on
assets objectives. It is the Corporation's policy to maintain a competitive
salary commensurate with the duties and responsibilities of the executive
officers. Salary is intended to represent approximately 40 percent of an
executive's potential annual compensation.
15
<PAGE> 19
Annual Bonus: Executive officers' annual bonus is based on achievement
of corporate financial objectives and performance against personal objectives
for the year, which are recorded in individualized written personal plans.
Individual objectives must include financial, quality and strategic goals. The
degree of completion of goals determines the award. Financial objectives for
1994 were based on ROE and EPS. Although both Mr. Terry and Mr. Horn have an
individualized personal plan, their annual bonuses are based entirely on
corporate financial performance as described above for the CEO, and the Chief
Credit Officer's annual bonus is based solely on his individualized personal
plan. The maximum annual bonus of executive officers is between 30 percent and
50 percent of salary dollars during the year, based on salary grade.
Long-term Awards: The executive officers named in the Summary
Compensation Table and all but one of the other executive officers participate
in the TARSAP program described above with respect to the CEO. The performance
criteria are identical. The number of shares awarded for a three-year
performance period is generally 50 percent of the participant's salary grade
mid-point, based on market value of the shares at the time of the award.
Except for Mr. Horn's award, no restricted stock was awarded to executive
officers in 1994. No federal income tax gross-up is provided to executive
officers at the vesting of restricted stock.
In addition to performance-based restricted stock awards, the Committee
generally awards stock options on the Corporation's common stock biennially,
the amount of which is a function of salary grade and stock price. The number
of shares awarded is generally equal to approximately 50 percent of salary
divided by the market value of one share of stock at the time of the award.
The exercise price is the market value at the time of the grant. Options are
awarded as an incentive to future performance and for retention purposes (with
a term of ten years and vesting over the first five years) and are not granted
based on prior performance of the individual or the Corporation.
Other Benefits: The Corporation has adopted certain broad-based employee
benefit plans in which executive officers participate and certain other
retirement, life and health insurance plans and provides customary personal
benefits. Except for the Corporation's stock fund within its 401(k) plan, the
benefits under these plans are not tied to corporate performance. The
executive officers named in the Summary Compensation Table participate in the
other benefits described above with respect to the CEO.
Human Resources Committee
-------------------------
J. R. Hyde, III
R. Brad Martin
Michael D. Rose
William B. Sansom, Chairman
16
<PAGE> 20
The following graph compares the yearly percentage change in the
Corporation's cumulative total shareholder return with returns based on the
Standard and Poor's 500 index and a peer group index, which is described in a
footnote to the graph. It should be noted that the "total shareholder return"
reflected in the graph is not comparable to the "total shareholder return"
described in the Compensation Committee Report because the former has a
different measurement period and it has been adjusted and weighted for the
market capitalization of the companies in the peer group, as required by SEC
regulations. Because consolidated total assets of the Corporation and of a
number of the members in the peer group have increased, the Corporation
determined to increase the asset size range of its peer group from $5 to $15
billion to $5 to $20 billion. Also, the Corporation determined to exclude from
the peer group one bank whose operations are principally in Puerto Rico and one
bank whose operations are principally limited to credit card activities. For
these reasons the performance of each peer group is included in the graph.
17
<PAGE> 21
Total Shareholder Return Performance Graph
------------------------------------------
[GRAPH]
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C> <C>
First Tennessee $100 $98 $189 $260 $283 $312
S&P 500 $100 $97 $126 $136 $150 $152
1994 Peer Group $100 $74 $132 $184 $191 $184
1993 Peer Group $100 $72 $126 $178 $190 $187
</TABLE>
The graph assumes $100 is invested on December 31, 1989, and dividends
are reinvested. Returns are market-capitalization weighted. The 1994 peer
group is composed of banking organizations whose assets ranged from $5 to $20
billion at the end of the most recent fiscal year. As discussed above, the
peer group criteria changed from the criteria used for fiscal year 1993.
The following banks fell between $15 billion and $20 billion in asset
size and are in the 1994 Peer Group, but not the 1993 Peer Group: Huntington
Bancshares, Northern Trust and State Street. Banponce Corp. and MBNA Corp.
were removed from the 1994 Peer Group due to the location or nature of their
operations. Regions Financial Corp. was formerly known as First Alabama
Bancshares, Inc. State Street remains in the Peer Group although its assets
moved over $20 billion at December 31, 1994.
The 1994 peer group consisted of the following:
<TABLE>
<S> <C> <C>
1. AmSouth Bancorporation 14. First Empire State Corp. 28. Northern Trust
2. BB & T Financial Corp. 15. First Hawaiian, Inc. 29. Old Kent Financial Corp.
3. Bancorp Hawaii, Inc. 16. First Security Corp - Utah 30. Regions Financial Corp.
4. Bank South Corp. 17. First Virginia Banks, Inc. 31. Signet Banking Corp.
5. Baybanks, Inc. 18. Firstar Corp. 32. Southern National Corp.
6. Central Fidelity Banks, Inc. 19. Fourth Financial Corp. 33. Southtrust Corp.
7. Commerce Bancshares, Inc. 20. Huntington Bancshares 34. Star Banc Corp.
8. Compass Bancshares Inc. 21. Integra Financial Corp. 35. State Street
9. Crestar Financial Corp. 22. Marshall & Ilsley, Corp. 36. Synovus Financial Corp.
10. Fifth Third Bancorp. 23. Mercantile Bancorporation 37. UJB Financial Corp.
11. First American Corp. - Tennessee 24. Mercantile Bankshares Corp. 38. Union Planters Corp.
12. First Citizens Bancshares 25. Meridian Bancorp, Inc. 39. United Missouri Bancshares
13. First Commerce Corp. 26. Michigan National Corp. 40. West One Bancorp
27. Midlantic Corp.
</TABLE>
18
<PAGE> 22
Compensation of Directors
-------------------------
During 1994, each nonemployee director was paid a retainer quarterly at
an annual rate of $20,000, plus a fee of $1,000 for each Board and each
committee meeting attended. The chairmen of the Audit and Human Resources
Committees were paid monthly an additional retainer at an annual rate of $2,400
each. Directors who are officers of the Corporation are not separately
compensated for their services as directors. Under the terms of the
Corporation's 1992 Restricted Stock Incentive Plan, which was approved by the
shareholders, all nonemployee directors received an automatic, nondiscretionary
award of 1,500 shares of restricted stock on May 1, 1992, and all new
nonemployee directors will receive such award upon election to the Board.
Restrictions lapse at the rate of 10 percent annually. Such shares are
forfeited if the director terminates for any reason other than death,
disability, retirement, or the acquisition by a person of 20 percent of the
voting power of the Corporation. Upon termination for any of the four listed
reasons, all shares vest. Directors may elect to defer their retainers and
fees. Under one plan, under which up to six annual deferrals may be elected,
amounts deferred accrue interest at rates between 17 percent and 22 percent
annually, based on age at the time of deferral, with a reduction to a
guaranteed rate based on 10-year Treasury obligations if a participant
terminates prior to a change-in-control for a reason other than death,
disability or retirement. Interim distributions in an amount between 85% and
100% of the amount originally deferred are made in the eighth through the
eleventh years following the year of deferral, with the amount remaining in a
participant's account and accrued interest generally paid monthly over the 15
years following retirement at age 65. Certain restrictions and limitations
apply on payments and distributions. Under other deferral agreements,
nonemployee directors may defer amounts which generally accrue interest at a
rate tied to 10-year Treasury obligations. For a description of the proposed
Non-Employee Directors' Deferred Compensation Stock Option Plan, see vote Item
No. 2 below.
Certain Relationships and Related Transactions
----------------------------------------------
The Corporation's banking subsidiaries have had banking transactions in
the ordinary course of business with executive officers and directors of the
Corporation and their associates which are reported in a note to the
Corporation's financial statements, and they expect to have such transactions
in the future. Such transactions, which at December 31, 1994, amounted to ____
percent of the Corporation's shareholders' equity, have been on substantially
the same terms, including interest rates, except for one individual as
described below, and collateral on loans, as those prevailing at the same time
for comparable transactions with others and have not involved more than normal
risk of collectibility or presented other unfavorable features. Two loans were
made to a person not individually named in the Summary Compensation Table
aggregating an amount less than $40,000 under an employee program which
provided a below market interest rate at a time prior to that person becoming
an executive officer.
19
<PAGE> 23
Compliance with Section 16(a) of the Exchange Act
-------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934, as amended
("Exchange Act") requires the Corporation's directors and officers to file with
the SEC initial reports of ownership and reports of changes in ownership of
Corporation common stock and to furnish the Corporation with copies of all
forms filed.
To the Corporation's knowledge, based solely on review of the copies of
such reports furnished to the Corporation and written representations that no
other reports were required, during the past fiscal year all Section 16(a)
filing requirements applicable to its officers and directors were complied with
except that Joseph Orgill, III and George P. Lewis each filed one report
covering one transaction late. Neither transaction was subject to short-swing
profit liability under Section 16(b).
ITEM NO. 2 - APPROVAL OF NON-EMPLOYEE DIRECTORS' DEFERRED COMPENSATION STOCK
OPTION PLAN
To advance the interests of the shareholders of the Corporation by
encouraging non-employee members of the Corporation's board of directors to
increase their proprietary interests in the Corporation and thus to share in
its continued success, the Board of Directors has adopted the Non-Employee
Directors' Deferred Compensation Stock Option Plan of First Tennessee National
Corporation (the "Direct Plan"), subject to approval by the shareholders at the
annual meeting. The Director Plan authorizes the issuance of up to 225,000
shares of Corporation common stock, subject to equitable adjustments as the
board deems appropriate to preserve participant's benefits and to meet the
intent of the plan in the event of stock dividends, stock splits, mergers, and
other changes in capitalization affecting the Corporation's common stock. The
shares to be issued upon option exercises may be provided from authorized but
previously unissued shares or shares purchased in the open market or privately.
The following summary description of the Director Plan is qualified in its
entirety by reference of the full text of the Director Plan, which is attached
as Exhibit A hereto.
A non-employee director who elects to participate in the plan will be
granted non-qualified stock options in lieu of the percentage of retainer and
board and committee attendance fees specified by the director. Options will be
granted semiannually on June 30th and December 31st of each year based on
compensation foregone since the prior grant. If required by SEC rules the
initial option grant date for new directors will be the last day of the second
full calendar quarter of board service after the date of the new director's
election to participate. Elections to participate for directors are one-time
irrevocable elections that had to be made by January 31, 1995 with respect to
incumbent directors and that must be made within 30 days following election to
the board with respect to new directors. All options are 100% vested on the
grant date and have a 20-year term. The number of shares subject to option
granted equals the amount of foregone compensation divided by 15% of the fair
market value of one share of the Corporation's
20
<PAGE> 24
common stock on the grant date with an exercise price equal to 85% of such fair
market value. Such options are generally referred to as "deferred" or
"discounted" stock options; however, the price paid on exercise plus the
foregone compensation always equals 100% of the fair market value of the shares
on the grant date.
The Director Plan is intended to meet the requirements of a "formula
plan" for purposes of the short-swing profits rule promulgated under the
Securities Exchange Act of 1934 and accordingly is intended to be
self-governing. The Director Plan is expected to require no discretionary
action by any administrative body; however, should any questions of
interpretation arise, they will be resolved by the Human Resources Committee of
the board (or other committee as a board may from time to time designate).
The Director Plan will become effective on the date it is approved by the
shareholders and will remain in effect through December 31, 1999, unless the
plan is terminated earlier by the board. Shares of the Corporation's common
stock trade in the over- the-counter market on the Nasdaq Stock Market's
National Market and the last sale price on March __, 1995, was $_____. All
options are non-transferable other than by will of or the laws of descent and
distribution and, to the extent permitted by SEC rules, by gift or other
transfer to any trust or estate in which the grantee or the grantee's spouse or
other immediate relative has a substantial beneficial interest or to a spouse
or other immediate relative, provided that such transfer will continue to
require the options to be disclosed by the grantee pursuant to SEC rules. If a
director ceases to be a director for any reason (or becomes an employee of the
Corporation) prior to a grant date, then no future options will be granted to
him or her and any compensation earned will be paid in cash. If a director
terminates board service with less than 120 full months of board service or
prior to normal retirement or early retirement (retirement after age 55 with at
least 120 full months of board service) for any reason other than death or
disability, options will terminate one year after such person's termination.
If a director terminates board service due to death, disability or normal or
early retirement, options held by the director will terminate five years after
the director's termination or, if earlier, the end of the term of the option.
Notwithstanding the prior limitations, any options held by a director at the
time of death will expire on the later of the date specified above or one year
following the date of death.
The board may terminate, suspend or amend the Director Plan at any time,
except that the plan may not be amended in a manner which knowingly would cause
the plan not to comply with SEC rules or cause participants not to be deemed to
"disinterested persons" under SEC rules or adversely affect a director's rights
under the plan without the director's consent.
The consideration to be received by the Corporation for granting options
consist solely of foregone compensation. Proceeds received by the Corporation
upon the exercise of options will be used for general corporate purposes.
The grant of a non-qualified stock option does not result in any taxable
income to the participant or on any tax deduction to the Corporation at the
21
<PAGE> 25
time of the grant. Upon the exercise of such option, or if the acquired stock
is subject to substantial risk of forfeiture upon the date that there is no
longer such risk (the "tax date"), the excess of the market value of the shares
acquired over their costs to the participant (i) is taxable to the participant
as compensation income, and (ii) is generally deductible by the Corporation,
subject to ordinary rules relating to the reasonableness of compensation. The
participant's tax basis for the shares is market value thereof on the tax
date.
No awards have been made pursuant to the Director Plan. Of the ten
non-employee directors currently on the board of directors, 8 have elected to
participate in the plan. If shareholder approval is not obtained, amounts
deferred shall be paid to the directors in cash. Because the option is based
upon attendance fees, retainer and stock price on the grant date, it is not
possible to determine or state the benefits which will be received under the
Director Plan by any one participant or by the non- employee directors as a
group. If a director had been a participant in this plan during 1994 then, for
every $1,000 of compensation deferred by June 30, 1994 a director would have
received an option for 153 shares, with an exercise price of $6.51 per share on
June 30, 1994, and for every $1,000 deferred from July 1, 1994 through December
31, 1994, a director would have received an option for 162 shares, with an
exercise price of $6.15 per share, on December 31, 1994.
Although non-employee directors have an interest in the director plan,
the board of directors believes that the director plan is fair and in the best
interest of the Corporation and shareholders.
THEREFORE, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS VOTE FOR ITEM NO. 2.
ITEM NO. 3 - APPROVAL OF 1995 EMPLOYEE STOCK OPTION PLAN
To attract and retain outstanding personnel and to enable employees to
obtain a proprietary interest in the Corporation and thus to share in its
future success, the Board of Directors has adopted the 1995 Employee Stock
Option Plan of First Tennessee National Corporation (the "1995 Plan"), subject
to approval by the shareholders at the annual meeting. In furtherance of
similar objectives the shareholders have previously approved the 1972, 1981,
1984, and 1990 Stock Option Plans. The 1972, 1981 and 1984 Plans have
terminated, except for outstanding grants under the 1984 Plan. As of December
31, 1994, options for 68% of the 1.5 million shares authorized under the 1990
Plan had been granted. The 1995 Plan is needed to enable the Corporation to
meet its stated objective.
The following summary description of the 1995 Plan is qualified in its
entirety by reference to the full text of the 1995 Plan, which is attached as
Exhibit B hereto. The 1995 Plan provides for the issuance of up to 1,500,000
shares, subject to adjustment for specified changes in capitalization,
including stock dividends, of the Corporation's $2.50 par value common stock
from authorized but unissued shares or shares purchased in the open market or
privately to satisfy awards under the 1995 Plan. Awards may take the form of
non-qualified stock options, incentive stock options, or stock appreciation
rights ("SAR's"). A SAR, which may be granted only in tandem with an option
22
<PAGE> 26
and the exercise of which reduces, share for share, the number of shares
available for exercise pursuant to the option, permits a participant to receive
the economic appreciation of the stock option in the form of cash, stock or a
combination thereof without having to pay the exercise price of the option.
Gain upon exercise of a SAR, however, is limited to 200% percent of the option
exercise price.
Participation is limited to employees of the Corporation and its
subsidiaries who are selected by the Human Resources Committee, a committee of
the Corporation's Board of Directors, which will administer and interpret the
1995 Plan and determine the persons to whom options and related SAR's shall be
granted, the number of shares, term, quotas and date of grant. Options and
related SAR's may not be granted after April 17, 2005. The term of options and
SAR's granted on or before that date may, however, extend beyond that date, but
no incentive stock options may be granted which are exercisable after the
expiration of ten years after the date of grant. Non-employee directors are
ineligible to receive awards under the 1995 Plan, and members of the Committee
are required to be directors who are "disinterested" under Securities and
Exchange Commission rules. Options granted may be incentive stock options or
non-qualified options. Generally, the exercise price of the option must be at
least 100% of the fair market value of the shares at the time the option is
granted. The option price may, however, be less than 100% of the fair market
value of the shares at the time the option is granted if the grantee of the
option has entered into an agreement with the Corporation pursuant to which the
grant of the option is in lieu of the payment of compensation and the amount of
such compensation when added to the cash exercise price of the option equals at
least 100% of the fair market value (at the time the option is granted) of the
shares subject to option. It is anticipated that the Corporation's
compensation deferral program may include a provision, consistent with the
terms of the 1995 Plan, authorizing the crediting of an additional amount (not
to exceed 20% of compensation) to the compensation a participant otherwise may
be entitled to receive if the participant agrees to receive stock options in
lieu of a designated portion of compensation for future services. Generally,
options cannot be exercised for one year after the date of the grant, but the
Committee has the discretion to fix an exercise period which commences earlier
or later than such one year period, and the option term extends until the date
fixed by the Committee. Also, options and SAR's will become exercisable in
full upon a Change in Control. (See page 12 above for the definition of
"Change in Control.") The Committee, may in its discretion, accept Corporation
shares in payment or partial payment of the exercise price of the option.
The 1995 Plan will become effective on the date it is approved by the
shareholders. See Vote Item No. 2 for a recent sale price for the
Corporation's common stock.
All options and SAR's are non-transferable. Upon voluntary resignation
of a participant, his options and SAR's not previously exercised terminate at
once, and an amount equal to the spread realized in connection with the
exercise of option or SAR's within six months prior to such voluntary
resignation must be paid to the Corporation in the event that the participant,
within the following six months, engages directly or indirectly
23
<PAGE> 27
in any activity determined by the Committee to be competitive with an activity
of the Corporation. If the participant is discharged, he has three months from
the date of discharge, or such shorter period as is determined by the Committee
in its discretion, to exercise options and SAR's existing as of the date of
discharge. Upon retirement or disability, the participant has five years or
such shorter period as is determined by the Committee in its discretion, to
exercise any option and SAR's existing as of the date of exercise. Upon the
death of a participant, his successor has five years, or such shorter period as
is determined by the Committee in its discretion, to exercise any options and
SAR's existing as of the date of exercise.
The Committee has sole discretion to consent to the election of those
participants who are subject to the reporting and short- swing profits
provisions of Section 16 of the Securities Exchange Act of 1934 to receive cash
in full or partial settlement of a SAR, and the 1995 Plan places other
securities regulation limitations on such participants, including a requirement
that the grant of options in lieu of compensation must occur at least six
months after such participant enters an agreement to receive such options. The
Committee may, in its discretion, from time to time permit the method of
exercising options known as pyramiding (which is defined as the automatic
application of shares received upon the exercise of a portion of a stock option
to satisfy the exercise price for additional portions of the option).
Generally accepted accounting principles require that the difference
between the exercise price of the SAR and the fair market value of the
Corporation's stock at the end of the fiscal year be reflected as a charge or
credit as applicable, against Corporation earnings. This will be adjusted
from year to year as the market price of the Corporation's stock fluctuates.
The Board of Directors may amend, suspend, or terminate the 1995 Plan but may
not amend it in violation of law and may not, without shareholder approval,
amend it to increase the number of shares that may be issued under the 1995
Plan except for antidilution adjustments for changes in capitalization, extend
the duration of the 1995 Plan, or modify the class of employees eligible to
receive options and related SAR's.
The consideration to be received by the Corporation for granting options
and related SAR's consists solely of services rendered by the participants.
Proceeds received by the Corporation from the sale of its shares under the 1995
Plan will be used for general corporate purposes.
The grant of a non-qualified stock option does not result in any taxable
income to the participant or any tax deduction to the Corporation at the time
of the grant. Upon the exercise of such option, or if the acquired stock is
subject to substantial risk of forfeiture upon the date that there is no longer
such risk (the "tax date"), the excess of the market value of the shares
acquired over their cost to the participant (i) is taxable to the participant
as compensation income, and (ii) is generally deductible by the Corporation,
subject to ordinary rules relating to the reasonableness of compensation. The
participant's tax basis for the shares is the market value thereof on the tax
date.
The grant of the SAR has no tax consequences to the participant or the
24
<PAGE> 28
Corporation. Exercise of an SAR results in recognition by the participant of
ordinary income in an amount equal to the fair market value of the stock or
cash received, with a corresponding deduction to the Corporation.
The Committee may, in its discretion, allow participants to transfer
Corporation stock or have the Corporation withhold stock otherwise issuable on
exercise to satisfy income tax withholding due in connection with an exercise.
Neither the grant nor the exercise of an option designated as an
incentive stock option results in any Federal income tax consequences to either
the participant or the Corporation. At the time the participant sells shares
acquired pursuant to the exercise of an incentive stock option, the excess of
the sale price over the exercise price will qualify as long-term capital gain,
provided the applicable holding period is satisfied. If the participant
disposes of such shares within two years of the date of grant or within one
year of the date of exercise, an amount equal to the lesser of (i) the
difference between the fair market value of the shares on the date of exercise
and the exercise price, or (ii) the difference between the exercise price and
sale price will be taxed as compensation income and the Corporation will be
entitled to a deduction for such amount at the time. The excess, if any, of
the sale price over the sum of the exercise price and the amount taxed as
ordinary income will qualify as long-term or short-term capital gain depending
on the holding period of the stock. If the participant exercises an incentive
stock option more than three months after his termination of employment due to
retirement, he will be deemed to have exercised a non-qualified stock option
and will recognize compensation income at the time in an amount equal to the
excess of the market value of such shares over their exercise price.
No awards have been made by the Committee pursuant to the 1995 Plan.
The approximate number of persons in the class of eligible participants is
8,000. It is not possible to determine or state the benefits which will be
received under the 1995 Plan by the individuals specified in the Summary
Compensation Table, by all current executive officers, or by all employees as a
group. Non-employee directors are ineligible to participate in the 1995 Plan.
For certain awards made under the Corporation's existing stock option plans
during 1994, see Option/SAR Grants Table.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE
FOR ITEM NO. 3.
ITEM NO. 4 - RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors has appointed, subject to ratification by the
shareholders at the annual meeting, the firm of Arthur Andersen LLP,
independent accountants, to be the Corporation's auditors for the year 1995.
Representatives of Arthur Andersen LLP are expected to be present at the annual
meeting of shareholders with the opportunity to make a statement and to respond
to appropriate questions.
25
<PAGE> 29
SHAREHOLDER PROPOSALS
Shareholders' proposals intended to be presented at the 1996 annual
meeting of the Corporation must be received by the Corporate Secretary, First
Tennessee National Corporation, P. O. Box 84, Memphis, Tennessee, 38101, not
later than November 16, 1995, for inclusion in the proxy statement and form of
proxy relating to that meeting.
OTHER MATTERS
The Board of Directors, at the time of the preparation of this proxy
statement, knows of no business to come before the meeting other than that
referred to herein. If any other business should come before the meeting, the
persons named in the enclosed proxy will have discretionary authority to vote
all proxies in accordance with their best judgment.
AVAILABILITY OF ANNUAL REPORT ON FORM 10-K
A copy of the Corporation's Annual Report on Form 10-K, including the
financial statements and schedules thereto, which is filed with the Securities
and Exchange Commission, is available free of charge to each shareholder of
record upon written request to the Treasurer, First Tennessee National
Corporation, P. O. Box 84, Memphis, Tennessee, 38101. Each such written
request must set forth a good faith representation that as of the record date
specified in the notice of annual shareholders' meeting the person making the
request was a beneficial owner of a security entitled to vote at the annual
meeting of shareholders.
The exhibits to the Annual Report on Form 10-K will also be supplied upon
written request to the Treasurer and payment to the Corporation of its cost of
furnishing the requested exhibit or exhibits. A document containing a list of
each exhibit to Form 10-K, as well as a brief description and the cost of
furnishing each such exhibit, will accompany the Annual Report on Form 10-K.
BY ORDER OF THE
BOARD OF DIRECTORS
Secretary
March 15, 1995
26
<PAGE> 30
FIRST TENNESSEE NATIONAL CORPORATION Exhibit A
NON-EMPLOYEE DIRECTORS' DEFERRED
COMPENSATION STOCK OPTION PLAN
1. PURPOSE. The Non-Employee Directors' Deferred Compensation Stock
Option Plan of the First Tennessee National Corporation has been
adopted to advance the interests of shareholders by encouraging
non-employee members of the Board of Directors to acquire proprietary
interests in the Company in the form of Stock Options granted in lieu
of Retainer/Fees that otherwise would have been paid in cash for
serving on the Board of Directors or any committee thereof.
2. DEFINITIONS. As used in the Plan, the following terms shall have the
respective meanings set forth below:
(a) "Board" means the Board of Directors of the Company.
(b) "Common Stock" means the common stock, par value $2.50 per
share, of the Company.
(c) "Company" means the First Tennessee National Corporation, a
corporation established under the laws of the State of
Tennessee.
(d) "Deferred Compensation Stock Option" or "Stock Option" means a
right granted at the election of a Non-Employee Director
pursuant to Section 6.
(e) "Disability" means total and permanent disability, which if
the Participant were an employee of the Company, would be
treated as a total and permanent disability under the terms of
the Company's long-term disability plan for employees, as may
be in effect from time to time.
(f) "Early Retirement" means retirement from Board service after
the age of 55 with 120 or more full months of aggregate Board
service.
(g) "Fair Market Value" means the average of the high and low
sales prices at which shares of Common Stock are traded, as
publicly reported by the Wall Street Journal, on the
applicable date or, if there were no sales of Common Stock
reported for such date, the last prior date for which a sale
is reported.
(h) "Grant Date" means the applicable date, as specified in
Section 7, on which a Stock Option is granted to a Non-
Employee Director by reason of an election made pursuant to
Section 6.
(i) "Non-Employee Director" means a member of the Board who is not
an employee of the Company or any subsidiary or affiliate of
the Company at the time such person elects to receive
Retainer/Fees in the form of Stock Options.
(j) "Normal Retirement" means the date at which any Non-Employee
Director is no longer qualified to serve on the Board based on
the then-current retirement age policy contained in the
Company's
<PAGE> 31
by-laws or, if not in the by-laws, as adopted by the Board.
(k) "Participant" means a person who has received one or more
Stock Options or the legal representative, heir or estate of
such person.
(l) "Plan" means the Non-Employee Directors' Deferred Compensation
Stock Option Plan.
(m) "Retainer/Fees" means the retainer and meeting attendance fees
payable to a Non-Employee Director for service as member of
the Board and/or member of any committee of the Board.
(n) "1934 Act" means the Securities Exchange Act of 1934, as
amended from time to time.
3. EFFECTIVE DATE. The Plan shall be effective on the date it is
approved by the shareholders of the Company and shall remain in effect
through the last Grant Date occurring in calendar year 1999, unless
the Plan is terminated by the Board earlier than such date subject to
the provisions of Section 11. If shareholder approval is not obtained
by June 30, 1995, the Plan shall be nullified and all elections to
receive Stock Options shall be rescinded and all Non-Employee
Directors shall receive cash equal to all Retainer/Fees that had been
the subject of an election hereunder. Upon termination of the Plan,
the applicable terms of the Plan shall continue to apply to all Stock
Options which are outstanding on the date the Plan is terminated and
to any Stock Options which are granted subsequent to such date
pursuant to Section 11.
4. PLAN OPERATION. The Plan is intended to meet the requirements of a
"formula" plan" for purposes of Rule 16b-3 under the 1934 Act as
currently applicable to the Plan and accordingly is intended to be
self-governing. To this end the Plan is expected to require no
discretionary action by any administrative body except as contemplated
by Section 5(b). However, should any questions of interpretation
arise, they shall be resolved by the Human Resources Committee of the
Board or such other Committee as the Board may from time to time
designate. The Plan shall be interpreted to comply with Rule 16b-3
under the 1934 Act, as then applicable to the Company's employee
benefit plans, and any action under this Plan that would be
inconsistent with the requirements of Rule 16b-3 as then applicable
shall be null and void.
5. COMMON STOCK AVAILABLE FOR STOCK OPTIONS.
(a) A maximum of 225,000 shares of Common Stock may be issued upon
the exercise of Stock Options granted under the Plan. Shares
of Common Stock shall not be deemed issued until the
applicable Stock Option has been exercised and, accordingly,
any shares of Common Stock represented by Stock Options which
expire unexercised or which are cancelled shall remain
available for issuance under the Plan.
A-2
<PAGE> 32
(b) The Board, as it deems appropriate to preserve Participant's
benefits and to meet the intent of the Plan, may make
equitable adjustments to the number of shares available under
the Plan and covered by outstanding Stock Options and to the
exercise prices of outstanding Stock Options in the event of
any change in capitalization or similar action affecting
Common Stock. Such actions may include, but are not limited
to, any stock dividend, stock split, combination or exchange
of shares, merger, consolidation, recapitalization, spin-off
or other distribution (other than normal cash dividends) of
Company assets to shareholders, or any other change affecting
the Common Stock.
6. ELECTIONS TO RECEIVE STOCK OPTIONS. Each Non-Employee may make a
one-time irrevocable election to receive Stock Options under the Plan,
provided that such election conforms to the following:
(a) Each Non-Employee Director serving as of January 1, 1995, must
make his or her election under the Plan no later than January
31, 1995. Such election, if any, shall be applicable to
Retainer/Fees otherwise payable to such Non- Employee Director
for service from February 1, 1995 through December 31, 1999,
subject to the requirements of Section 9.
(b) Each Non-Employee Director who is newly appointed or elected
to the Board after January 1, 1995, must make his or her
election, if any, under the Plan no later than 30 days
following the commencement of such person's Board service.
Such election, if any, shall be applicable to Retainer/Fees
earned by such Non-Employee Director from the date of such
election through December 31, 1999, subject to the
requirements of Section 9. The above notwithstanding, no
election under the Plan shall be permitted after June 30,
1999.
(c) In making an irrevocable election to receive Retainer/Fees in
the form of Stock Options, the Non-Employee Director must
designate that the election is for all or a specified portion
of the Retainer/Fees payable to him or her through December
31, 1999.
7. EFFECTIVE GRANT DATES.
(a) The Grant Dates for Stock Options granted pursuant to an
election covered by Section 6(a) made by a Non-Employee
Director serving on the Board as of January 1, 1995 shall be
June 30 and December 31 for each of the calendar years such
election is in effect.
(b) The Grant Dates for Stock Options granted pursuant to an
election covered by Section 6(b) made by a Non-Employee
Director elected or appointed to the Board after January 1,
1995, shall be:
(i) For the initial Stock Option granted, the earliest
calendar date specified by Section 7(a) to occur
after such election, or, if then required by Rule
16b-3 under the 1934 Act as then applicable to the
Plan, the last day of the second full calendar
quarter of Board service after an election pursuant
A-3
<PAGE> 33
to Section 6 has been made.
(ii) For all Stock Options granted subsequent to the
initial Stock Option, each subsequent June 30 and
December 31 for each of the calendar years such
election is in effect.
8. STOCK OPTION GRANTS. Stock Options granted under the Plan shall have
the following terms and conditions:
(a) Each Stock Option shall have a per share exercise price equal
to 85% of the Fair Market Value on the Grant Date.
(b) Each Stock Option shall cover the number of shares determined
by the following formula:
Amount of Retainer/Fees Earned
______________________________
Fair Market Value - 85% x Fair Market Value
= Number of Common Shares
If the number of Common Shares resulting from this calculation
is not a whole number, the amount will be rounded up to the
next whole number. The "Amount of Retainer/Fees Earned" for
purposes of this calculation shall be such amount as was
payable to the Participant since the prior applicable Grant
Date or since February 1, 1995, in the case of an election
pursuant to Section 6(a), or the date of the election in the
case of an election pursuant to Section 6(b).
(c) Each Stock Option shall expire on the twentieth anniversary of
its Grant Date, subject to earlier or later expiration in
accordance with Section 9.
(d) Each Stock Option shall be immediately exercisable upon grant,
except, however, that the Board may postpone the exercise of a
Stock Option during such period of time that is deemed
reasonably necessary to prevent any acts or omissions that the
Board reasonably believes could result in the violation of any
state or federal law.
9. TERMINATION OF BOARD SERVICE.
(a) If a Non-Employee Director terminates Board service for any
reason (or becomes an employee of the Company) prior to a
Grant Date upon which he or she would otherwise receive a
Stock Option under the Plan, no future Stock Options shall be
granted to him or her and any Retainer/Fees that have been
earned, but which were to be paid in the form of a Stock
Option will be paid in cash instead.
(b) If a Participant terminates Board service with less than 120
full months of aggregate Board service or prior to Normal or
Early Retirement for any reason other than death or
Disability, all outstanding Stock Options held by such
Participant shall expire
A-4
<PAGE> 34
on the first anniversary of such person's termination of Board
service.
(c) If a Participant terminates Board service due to death,
Disability or because of Normal or Early Retirement, each
outstanding Stock Option held by such Participant shall
terminate at the earlier of the fifth anniversary of such
Participant's termination of Board service or the end of the
term of the Stock Option.
(d) The above notwithstanding, any Stock Option held by a
Participant at the time of the Participant's death shall
expire on the later of the date provided for by Section 9(b)
or 9(c), or the first anniversary of the Participant's death.
10. EXERCISE PAYMENT. A Stock Option, or portion thereof, may be
exercised by written notice of the exercise delivered to the Human
Resources Committee of the Board, or its designee, accompanied by
payment of the exercise price. Such payment may be made by cash,
personal check or Common Stock already owned by the Participant,
valued at the Fair Market Value on the date of exercise, or a
combination of such payment methods. As soon as practicable after
notice of exercise and receipt of full payment for shares of Common
Stock being acquired, the Company shall deliver a certificate to the
Participant representing the Common Stock purchased through the Stock
Option.
11. TERMINATION, SUSPENSION AND AMENDMENT OF THE PLAN. The Board may at
any time terminate, suspend or amend the Plan, except that the Plan
may not be amended in any manner which knowingly would: (a) cause the
Plan not to comply with Rule 16b-3 under the 1934 Act as then
applicable to the Company's employee benefit plans; (b) cause
Participants not to be deemed "disinterested persons" for purposes of
Rule 16b-3 under the 1934 Act as then applicable to the Company's
employee benefits plans; or (c) adversely affect a Participant's
rights under the Plan, without the consent of the Participant. If the
Plan is terminated or suspended prior to December 31, 1999, any
Retainer/Fees which have been earned but not paid as of the effective
date of termination of the Plan and which are the subject of an
election pursuant to Section 6, will be delivered in the form of Stock
Options on the appropriate Grant Date, notwithstanding that such date
is subsequent to the date the Plan has otherwise been terminated or
suspended.
12. GENERAL PROVISIONS.
(a) Stock Options shall not be transferable or assignable other
than by (a) will or the laws of descent and distribution, or
(b) to the extent permitted by Rule 16b-3 under the 1934 Act
as then applicable to the Company's employee benefits plans,
by gift or other transfer to either (i) any trust or estate in
which the original award recipient or such person's spouse or
other immediate relative has a substantial beneficial interest
or (ii) a spouse or other immediate relative, provided that
such a
A-5
<PAGE> 35
transfer will continue to require such Stock Options to be
disclosed pursuant to Item 403 of Regulation S-K under the
Securities Act of 1933, as amended from time to time.
(b) Stock Options shall be evidenced by written agreements or such
other appropriate documentation prescribed by the Human
Resources Committee of the Board or its designee.
(c) Neither the Plan nor the granting of Stock Options nor any
other action taken pursuant to the Plan, shall constitute or
be evidence of any agreement or understanding, express or
implied, that the Company shall retain the services of a
Participant for any period of time or at any particular rate
of compensation as a member of the Board. Nothing in the Plan
shall in any way limit or affect the right of the Board or the
shareholders of the Company to remove any Participant from the
Board or otherwise terminate his or her service as a member of
the Board.
(d) The validity, construction and effect of the plan and any such
actions taken under or relating to the Plan shall be
determined in accordance with the laws of the State of
Tennessee and applicable federal law.
A-6
<PAGE> 36
Exhibit B
FIRST TENNESSEE NATIONAL CORPORATION
1995 EMPLOYEE STOCK OPTION PLAN
1. Purpose. The 1995 Employee Stock Option Plan (the "Plan") of First
Tennessee National Corporation (the "Company") is designed to enable employees
of the Company and its subsidiaries to obtain a proprietary interest in the
Company, and thus to share in the future success of the Company's business.
Accordingly, the Plan is intended as a further means not only of attracting and
retaining outstanding personnel, but also of promoting a closer identity of
interest between employees and shareholders.
2. DEFINITIONS. As used in the Plan, the following terms shall have the
respective meanings set forth below:
(a) "Change in Control" means the occurrence of (and shall be
deemed to have occurred on the date of the earliest to occur of) any
of the following events:
(i) The shareholders of the Company approve a definitive agreement
or plan to merge, reorganize, exchange shares or consolidate (a
"Business Combination") or the issuance of voting securities of the
Company pursuant to a Business Combination, other than a Business
Combination which will result in the voting securities of the Company
outstanding immediately prior to such Business Combination continuing
to represent (either by remaining outstanding or by being converted
into voting securities of the surviving or acquiring entity) more than
50 percent of the voting power of the voting securities of the Company
or such surviving or acquiring entity outstanding immediately after
such Business Combination; or
(ii) The shareholders of the Company approve a definitive agreement
or plan to dissolve and/or liquidate the Company or to sell, lease,
exchange, or otherwise dispose of, all or substantially of the
Company's property and assets (a "transaction") to any other
corporation or any other legal person, other than a transaction which
will result in the voting securities of the Company outstanding
immediately prior to such transaction continuing to represent more
than 50 percent of the voting power of the voting securities of such
other corporation or other legal person outstanding immediately after
such transaction; or
(iii) A report is filed or required to be filed on Schedule 13D or
Schedule 14D-1 (or any successor schedule, form or report), each as
promulgated pursuant to the Securities Exchange Act of 1934, as
amended ("1934 Act"), disclosing that any person (as such term is
used in Section 13(d) or Section 14(d) of the 1934 Act) ("Person"),
other than the Company, an entity in which the Company directly or
indirectly beneficially own more than 50
<PAGE> 37
percent of the voting securities (a "majority-owned subsidiary"), or
any employee stock ownership or other employee benefit plans sponsored
by the Company or a majority-owned subsidiary, is or has become the
beneficial owner (as such term is defined in Rule 13d-3 promulgated
under the 1934 Act, or any successor rule or regulation) of securities
representing 20 percent or more of the voting power of the then
outstanding voting securities of the Company: or
(iv) Individuals who are Continuing Directors (as defined below) of
the Company cease for any reason to constitute at least a majority of
the Board of Directors of the Company.
Computations required by subsections (i) and (ii) shall be made on and
as of the date of shareholder approval and shall be based on
reasonable assumptions that will result in the lowest percentage
obtainable. Computations required by subsection (iii) shall be made
on and as of the earlier of the date a report is filed or is required
to be filed and shall be based on reasonable assumptions that will
result in the highest percentage obtainable. For purposes of
determining voting power pursuant to subsections (i), (ii), and (iii),
all voting securities of a corporation (whether the Company or another
entity) shall be considered as a single class. For purposes of
subsection (iv), a "Continuing Director" means (a) any director of the
Company who was a director of the Company on December 15, 1992 and (b)
any other director of the Company whose nomination for election or
election as a director was approved by a vote of at least a majority
of the directors of the Company who at the time of such vote were
Continuing Directors pursuant to clause (a) or (b) hereof.
Notwithstanding the prior sentence, there shall be excluded from the
definition of "Continuing Director" any director whose initial
nomination for election or election occurs as a result of an actual or
threatened election contest with respect to the election or removal of
directors of the Company or an other actual or threatened solicitation
of proxies or consents by or on behalf of a Person other than the
Continuing Directors, and a threatened election contest or
solicitation shall be conclusively presumed to have existed if the
Continuing Directors have made such a determination by the time of
such director's election.
(b) "Committee" means the Stock Option Committee or any successor
committee designate by the Board of Directors to administer
the Stock Option Plan, as provided in Section 5(a) hereof.
(c) "Early Retirement" means termination of employment after an
employee has fulfilled all service requirements for an early
pension, and before his or her Normal Retirement Date, under
the terms of the First Tennessee National Corporation Pension
Plan, as amended from time to time.
(d) "Quota" means the portion of the total number of shares
subject to an option which the grantee of the option may
purchase during
B-2
<PAGE> 38
several periods of the term of the option (if the option is
subject to quotas), as provided in Section 8(b) hereof. SAR's
are granted, if at all, at the time of granting a stock
option. If a stock option is subject to quotas, the related
SAR is subject to the same quotas.
(e) "Retirement" means termination of employment after an employee
has fulfilled all service requirements for a pension under the
terms of the First Tennessee National Corporation Pension
Plan, as amended from time to time.
(f) "Subsidiary" means a subsidiary corporation as defined in
Section 425 of the Internal Revenue Code.
(g) "Successor" means the legal representative of the estate of a
deceased grantee or the person or persons who shall acquire
the right to exercise an option or related SAR by bequest or
inheritance or by reason of the death of the grantee, as
provided in Section 10 hereof.
(h) "Term of the Option" means the period during which a
particular option or related SAR may be exercised in Section
8(a) hereof.
(i) "Three months after cessation of employment" means a period of
time beginning at 12:01 A.M. on the day following the date
notice of termination of employment was given and ending at
11:59 P.M. on the date in the third following month
corresponding numerically with the date notice of termination
of employment was given (or in the event that the third
following month does not have a date so corresponding, then
the last day of the third following month).
(j) "Five years after (an event occurring on day x)" and "five
years from (an event occurring on day x)" means a period of
time beginning at 12:01 A.M. on the day following day x and
ending at 11:59 P.M. on the date in the fifth following year
corresponding numerically with day x (or in the event that the
fifth following year does not have a date so corresponding,
then the last day of the sixtieth following month).
(k) "Voluntary Resignation" means any termination of employment
that is not involuntary and that is not the result of the
employee's death, disability, early retirement or retirement.
3. EFFECTIVE DATE OF PLAN. The Plan shall become effective when approved
at a shareholder's meeting by the holders of a majority of the shares of
Company common stock present or represented at the meeting and entitled to vote
on the Plan. No options or related SAR's may be granted under the Plan after
the month and day in the year 2005 corresponding to the day before the month
and day on which the Plan becomes effective. The term of option granted on or
before such date may, however, extend beyond that date, but no incentive stock
options may be granted which are exercisable after the expiration of ten (10)
years after the date of the grant.
B-3
<PAGE> 39
4. SHARES SUBJECT TO THE PLAN.
(a) The Company may grant options and related SAR's under the Plan
authorizing the issuance of no more than 1,500,000 shares of
its $2.50 par value common stock, which will be provided from
shares purchased in the open market or privately (that became
authorized but unissued shares under state corporation law) or
by the issuance of previously authorized but unissued shares.
(b) When an option is granted under the Plan, the Committee in its
sole discretion may include the grant of a SAR permitting the
grantee to elect to receive stock or cash or a combination
thereof in exchange for the surrender the unexercised related
option or portion thereof. Solely with respect to grantees
subject to the reporting and short- swing profits provisions
of Section 16 of the Securities Exchange Act of 1934 ("Section
16 grantees"), the Committee shall have the sole discretion to
consent to or disapprove the election of the grantee to
receive cash in full or partial settlement of the SAR. With
respect to all other grantees, the election is final without
any action by the Committee.
(c) Shares as to which options and related SAR's previously
granted under this Plan shall for any reason lapse shall be
restored to the total number available for grant of options.
Shares subject to options surrendered in exchange for the
exercise of a SAR shall not be restored to the total number
available for the grant of options or related SAR's.
5. PLAN ADMINISTRATION.
(a) The Plan shall be administered by a Stock Option Committee
(the "Committee") whose members shall be appointed from time
to time by, and shall serve at the pleasure of, the Board of
Directors of the Company. In addition, all members shall be
directors and shall meet the definitional requirements for
"disinterested person" (with any exceptions therein permitted)
contained in the then current SEC Rule 16b-3 or any successor
provision.
(b) The Committee shall adopt such rules of procedure as it may
deem proper.
(c) The powers of the Committee shall include plenary authority to
interpret the Plan, and subject to the provisions hereof, to
determine the persons to whom options and related SAR's shall
be granted, the number of shares subject to each option and
related SAR, the term of option and related SAR, and the date
on which options and related SAR's shall be granted.
6. ELIGIBILITY.
(a) Options and related SAR's may be granted under the Plan to
employees of the Company or any subsidiary selected by the
Committee. Determination by the Committee of the employees to
B-4
<PAGE> 40
whom options and related SAR's shall be granted shall be
conclusive.
(b) An individual may receive more than one option and related
SAR, subject, however, to the following limitations: in the
case of an incentive stock option (as described in Section
422A of the Internal Revenue Code of 1986), the aggregate fair
market value (determined at the time the options are granted)
of the Company's common stock with respect to which incentive
stock options are exercisable for the first time during any
calendar year by any individual employee (under this Plan and
all other similar plans of the Company and its subsidiaries)
shall not exceed $100,000. Incentive stock options granted
hereunder shall be clearly identified as such at the time of
grant.
7. OPTION PRICE. The option price per share to be paid by the grantee to
the Company upon exercise of the option shall be determined by the Committee,
but shall not be less than 100% of the fair market value of the share at the
time the option is granted, nor shall the price per share be less than the par
value of the share. Notwithstanding the prior sentence, the option price per
share may be less than 100% of the fair market value of the share at the time
the option is granted if:
(a) The grantee of the option has entered into an agreement with
the Company pursuant to which the grant of the option is in
lieu of the payment of compensation; and
(b) The amount of such compensation when added to the cash
exercise price of the option equals at least 100% of the fair
market value (at the time the option is granted) of the shares
subject to option.
"Fair market value" for purposes of the Plan shall be the mean between the high
and low sales prices at which shares of the Company were sold on the valuation
day as quoted by the Nasdaq Stock Market or, if there were no sales on that
day, then on the last day prior to the valuation day during which there were
sales. In the event that this method of valuation is not practicable, then the
Committee, in its discretion, shall establish the method by which fair market
value shall be determined.
8. TERMS OR QUOTAS OF OPTIONS AND RELATED SAR'S:
(a) TERM. Each option and related SAR granted under the Plan
shall be exercisable only during a term (the "Term of the
Option") commencing one year, or such other period of time
(which may be less than or more than one year) as is
determined to be appropriate by the Committee, after the date
when the option or related SAR was granted and ending (unless
the option and related SAR shall have terminated earlier under
other provisions of the Plan) on a date to be fixed by the
Committee. Notwithstanding the foregoing, each option and
related SAR granted under the Plan shall become exercisable in
full immediately upon a Change in Control.
B-5
<PAGE> 41
(b) QUOTAS. The Committee shall have authority to grant options
and related SAR's exercisable in full at any time during their
term, or exercisable in quotas. Quotas or portions thereof
not purchased in earlier periods shall be cumulated and be
available for purchase in later periods. In exercising his or
her option or related SAR, the grantee may purchase less than
the full quota available to him or her.
(c) EXERCISE OF STOCK OPTIONS. Stock options shall be exercised
by delivering, mailing, or transmitting to the Committee or
its designee the following items:
(i) A notice, in the form, by the method, and at times
prescribed by the Committee, specifying the number of shares
to be purchased; and
(ii) A check or money order payable to the Company for the
full option price.
In addition, the Committee in its sole discretion may
determine that it is an appropriate method of payment for
grantees to pay, or make partial payment of, the option price
with shares of Company common stock, $2.50 par value, in lieu
of cash. In addition, in its sole discretion the Committee
may determine that it is an appropriate method of payment for
grantees to pay for any shares subject to an option by
delivering a properly executed exercise notice together with a
copy of irrevocable instructions to a broker to deliver
promptly to the Company the amount of sale or loan proceeds to
pay the purchase price. To facilitate the foregoing, the
Company may enter into agreements for coordinated procedures
with one or more brokerage firms. The value of Company common
stock surrendered in payment of the exercise price shall be
its fair market value, determined pursuant to Section 7, on
the date of exercise. Upon receipt of such notice of exercise
of a stock option and upon payment of the option price, the
Company shall promptly deliver to the grantee a certificate or
certificates for the shares purchased, without charge to him
or her for issue or transfer tax.
(d) EXERCISE OF SAR'S. Except as required by subsection 8(e), a
SAR shall be exercised by delivering, mailing, or transmitting
to the Committee or its designee a notice in the form, by the
method, and at times prescribed by the Committee, specifying
the grantee's election, in accordance with Subsection 4(b), to
receive cash, stock, or a combination thereof in full or
partial settlement of the SAR, or a portion thereof.
(e) CASH SETTLEMENTS OF SAR'S BY SECTION 16 GRANTEES.
Notwithstanding subsection 8(d), solely with respect to
Section 16 grantees, an election to receive cash in full or
partial settlement of a SAR or a portion thereof and the
actual exercise of such SAR shall be made by delivering,
mailing, or transmitting, to the Committee or its designee
during the period beginning on the third business day
following the release for
B-6
<PAGE> 42
publication of the Company's quarterly or annual sales and
earnings and ending on the twelfth business day following such
date a notice, in the form and by the method prescribed by the
Committee, specifying the grantee's election to receive cash in
full or partial settlement of the SAR, or a portion thereof.
Such notice shall constitute both the grantee's election to
receive cash and the actual exercise of the SAR for a cash
settlement.
(f) SAR PAYMENTS. Upon the exercise of a SAR in accordance with
subsection 8(d), the Company shall promptly deliver to the
grantee stock or cash or a combination thereof, in such
proportion as has been elected by the grantee pursuant to
subsection 8(d), equal to:
(i) The fair market value, as determined in Section 7, of one
share of Company common stock on the date of exercise of the
SAR: minus
(ii) The option price of the related option; multiplied by
(iii) The number of shares subject to option which are being
surrendered in exercise of the SAR, or portion thereof.
Provided, however, solely for the purpose of exercising an
SAR, the per share gain to the grantee as measured by the
difference between the fair market value, as described in (i),
and the option price, as described in (ii), shall not exceed
200% of the option price. For example, if the option price is
$12 per share, the gain may not exceed $24 per share or, in
this example, be based on a fair market value at the time of
exercise in excess of $36.
(g) SAR PAYMENTS TO SECTION 16 GRANTEES. Upon the exercise of a
SAR in accordance with subsection 9(e), the Company shall
promptly deliver to the grantee cash or the combination of
stock and cash, in such proportion as has been elected by the
grantee and consented to by the Committee pursuant to
subsections 4(b) and 8(e), equal to:
(i) The highest fair market value, as determined in Section
7, of one share of Company common stock occurring during ten
business day period specified in subsection 8(e) during which
the grantee makes his election and exercises the SAR; minus
(ii) The option price of the related option; multiplied by
(iii) The number of shares subject to option which are being
surrendered in exercise of the SAR, or portion thereof.
Provided, however, solely for the purpose of exercising an
SAR, the per share gain to the grantee as measured by the
difference between the fair market value, as described in (i),
and the option price, as described in (ii), shall not exceed
200% of the option price. For example, if the option price is
$12 per share, the gain may not exceed $24 per share or, in
this example, be
B-7
<PAGE> 43
based on a fair market value at the time of exercise in excess
of $36.
(h) POSTPONEMENTS. The Committee may postpone any exercise of an
option or related SAR for such period of time as the Committee
in its discretion reasonably believes necessary to prevent any
acts or omissions that the Committee reasonably believes will
be or will result in the violation of any state or federal
law; and the Company shall not be obligated by virtue of any
provision of the Plan or the terms of any prior grant of an
option or related SAR to recognize the exercise of an option
or related SAR or to sell or issue shares during the period of
such postponement. Any such postponement shall automatically
extend the time within which the option or related SAR may be
exercised, as follows: The exercise period shall be extended
for a period of time equal to the number of days of the
postponement, but in no event shall the exercise period be
extended beyond the last day of the postponement for more days
than there were remaining in the option or related SAR's
exercise period on the first day of the postponement. Neither
the Company, nor its directors of officers, shall have any
obligation or liability to the grantee of an option or related
SAR or to a successor with respect to any shares as to which
the option or related SAR shall lapse because of such
postponement.
(i) NON-TRANSFERABILITY. All options and related SAR's granted
under the Plan shall be non-transferable other than by will or
by the laws of descent and distribution, subject to Section 10
hereof, and an option or related SAR may be exercised during
the lifetime of the grantee only by him or her or by his/her
guardian or legal representative. Also, if required by the
then current Rule 16b-3, or any successor provision, and
solely with respect to Section 16 grantees, common stock
acquired upon the exercise of an option or related SAR may not
be sold for at least six months after acquisition, except in
the case of such grantee's death or disability. Also, if
required by the then current Rule 16b-3, or any successor
provision, and solely with respect to Section 16 grantees,
then notwithstanding anything hereunto the contrary, options
and SAR's are not exercisable for at least six months after
grant except in the case of death or disability.
(j) CERTIFICATES. The stock certificate or certificates to be
delivered under this Plan may, at the request of the grantee,
be issued in his or her name or, with the consent of the
Company, the name of another person as specified by the
grantee.
(k) RESTRICTIONS. This subsection (k) shall be void and of no
legal effect in the event of a Change of Control.
Notwithstanding anything in any other section or subsection
herein to the contrary, the following provisions shall apply
to all options and related SAR's, exercises and grantees. An
amount equal to the spread realized in connection with the
exercise of an option or SAR within six months prior to a
grantee's voluntary resignation shall be paid to the Company
by the grantee in the event that the
B-8
<PAGE> 44
grantee, within six months following voluntary resignation,
engages, directly or indirectly, in any activity determined by
the Committee to be competitive with any activity of the
Company or any of its subsidiaries.
(l) TAXES. The Company shall be entitled to withhold the amount
of any tax attributable to amounts payable or shares
deliverable under the Plan, and the Company may defer making
payment or delivery of any benefits under the Plan if any tax
is payable until indemnified to its satisfaction. The
Committee may, in its discretion and subject to such rules
which it may adopt, permit a grantee to satisfy, in whole or
in part, any federal, state and local withholding tax
obligation which may arise in connection with the exercise of
a stock option or SAR, by electing either:
(i) To have the Company withhold shares of Company common
stock from the shares to be issued upon the exercise of the
option or SAR;
(ii) To permit a grantee to tender back shares of Company
common stock issued upon the exercise of an option or SAR; or
(iii) To deliver to the Company previously owned shares of
Company common stock having a fair market value equal to the
amount of the federal, state, and local withholding tax
associated with the exercise of the option or SAR.
(m) ADDITIONAL PROVISIONS APPLICABLE TO OPTION AGREEMENTS IN LIEU
OF COMPENSATION. If the Committee, in its discretion permits
participants to enter into agreements as contemplated by
Section 7 herein, then such agreements must be irrevocable and
cannot be changed by the participant once made, and such
agreements must be made at least prior to the performance of
any services with respect to which an option may be granted.
Also, solely with respect to Section 16 grantees, the date of
the grant of any option pursuant to an agreement contemplated
by Section 7 herein must be at least six months after the date
on which a participant enters into such agreement, and the
exercise price must be determined by reference to the fair
market value of the Company's shares on the date of grant. If
any participant who enters into such an agreement terminates
employment prior to the grant of the option, then the option
will not be granted and all compensation which would have been
covered by the option will be paid to the participant in cash.
9. EXERCISE OF OPTION BY GRANTEE ON CESSATION OF EMPLOYMENT. If a person
to whom an option has been granted shall cease, for a reason other than his or
her death, disability, early retirement, retirement, or voluntary resignation,
to be employed by the Company or a subsidiary, the option and related SAR shall
terminate three months after the cessation of employment, unless it terminates
earlier under other provisions of the Plan. Until the option or related SAR
terminates, it may be exercised by the grantee for all or a portion of the
shares as to which the right to purchase had accrued under the Plan at the time
of cessation of employment, subject to
B-9
<PAGE> 45
all applicable conditions and restrictions provided in Section 8 hereof. If a
person to whom an option or related SAR has been granted shall retire or become
disabled, the option and related SAR shall terminate five years after the date
of early retirement, retirement or disability, unless it terminates earlier
under the Plan. Although such exercise by a retiree or disabled grantee is not
limited to the exercise rights which had accrued at the date of early
retirement, retirement or disability, such exercise shall be subject to all
applicable conditions and restrictions prescribed in Section 8 hereof. If a
person shall voluntarily resign, his option and related SAR to the extent not
previously exercised shall terminate at once.
10. EXERCISE OF OPTION OR RELATED SAR AFTER DEATH OF GRANTEE. If the
grantee of an option and related SAR shall die while in the employ of the
Company or within three months after ceasing to be an employee, and if the
option and related SAR was in effect at the time of his or her death (whether
or not its term had then commenced), the option and related SAR may, until the
expiration of five years from the date of death of the grantee or until the
earlier expiration of the term of the option and related SAR, be exercised by
the successor of the deceased grantee. Although such exercise is not limited
to the exercise rights which had accrued at the date of death of the grantee,
such exercise shall be subject to all applicable conditions and restrictions
prescribed in Section 8 hereof.
11. PYRAMIDING OF OPTIONS. The Committee in its sole discretion may from
time to time permit the method of exercising options known as pyramiding (the
automatic application of shares received upon the exercise of a portion of a
stock option to satisfy the exercise price for additional portions of the
option).
12. SHAREHOLDER RIGHTS. No person shall have any rights of a shareholder
by virtue of a stock option and related SAR except with respect to shares
actually issued to him or her, and issuance of shares shall confer no
retroactive right to dividends.
13. ADJUSTMENT FOR CHANGES IN CAPITALIZATION. Any increase in the number
of outstanding shares of common stock of the Company occurring through stock
splits or stock dividends after the adoption of the Plan shall be reflected
proportionately:
(a) In an increase in the aggregate number of shares then
available for the grant of options and related SAR's under the
Plan, or becoming available through the termination of options
and related SAR's previously granted but unexercised;
(b) In the number available to grant to any one person;
(c) In the number subject to options and related SAR's then
outstanding; and
(d) In the quotas remaining available for exercise under
outstanding options and related SAR's,
and a proportionate reduction shall be made in the per-share option price
B-10
<PAGE> 46
as to any outstanding options and related SAR's or portions thereof not yet
exercised. Any fractional shares resulting from such adjustments shall be
eliminated. If changes in capitalization other than those considered above
shall occur, the Board of Directors shall make such adjustments in the number
and class of shares for which options and related SAR's may thereafter be
granted, and in the number and class of shares remaining subject to options and
related SAR's previously granted and in the per-share option price as the Board
in its discretion may consider appropriate, and all such adjustments shall be
conclusive; provided, however, that the Board shall not make any adjustments
with respect to the number of shares subject to previously granted incentive
stock options or available for grant as options if such adjustment would
constitute the adoption of a new plan requiring shareholder approval before
further incentive stock options could be granted.
14. TERMINATION, SUSPENSION, OR MODIFICATION OF PLAN. The Board of
Directors may at any time terminate, suspend, or modify the Plan, except that
the Board of Directors shall not amend the Plan in violation of law and shall
not, without shareholder approval, make any amendment to the Plan (other than
amendments pursuant to Section 13 herein) that would:
(a) Increase the number of shares specified in Section 4(a);
(b) Extend the duration of the Plan specified in Section 3; or
(c) Modify the class of employees eligible to receive options and
related SAR's under the Plan.
No termination, suspension, or modification of the Plan shall adversely affect
any right acquired by any grantee, or by any successor of a grantee (as
provided in Section 10 hereof), under the terms of an option and related SAR's
granted before the date of such termination, suspension, or modification,
unless such grantee or successor shall consent, but it shall be conclusively
presumed that any adjustment for changes in capitalization as provided in
Section 13 does not adversely affect any such right.
15. APPLICATION OF PROCEEDS. The proceeds received by the Company from
the sale of its shares under the Plan will be used for general corporate
purposes.
16. NO RIGHT TO EMPLOYMENT. Neither the adoption of the Plan nor the
granting of any stock option or SAR shall confer upon the grantee any right to
continue in the employ of the Company or any of its subsidiaries or interfere
in any way with the right of the Company or the subsidiary to terminate such
employment at any time.
B-11
<PAGE> 47
[FRONT]
PROXY
FIRST TENNESSEE NATIONAL CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints James L. Boren, Jr., Edward Lawler, and Lewis
R. Donelson, and any one or more of them with full power of substitution, as
Proxy or Proxies, to represent and vote all shares of stock standing in my name
on the books of the Corporation at the close of business on February 23, 1995,
which I would be entitled to vote if personally present at the Annual Meeting
of Shareholders of First Tennessee National Corporation to be held in the
Auditorium, First Tennessee Building, 165 Madison Avenue, Memphis, Tennessee,
April 18, 1995, at 10 a.m. or any adjournments thereof, upon the matters set
forth in the notice of said meeting as stated on the reverse side. The Proxies
are further authorized to vote in their discretion as to any other matters
which may come before the meeting. The Board of Directors, at the time of
preparation of the Proxy Statement, knows of no business to come before the
meeting other than that referred to in the Proxy Statement.
THE SHARES COVERED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
INSTRUCTIONS GIVEN ON THE REVERSE SIDE AND WHEN NO INSTRUCTIONS ARE GIVEN WILL
BE VOTED FOR THE PROPOSALS DESCRIBED IN THE ACCOMPANYING NOTICE OF ANNUAL
MEETING AND PROXY STATEMENT AND ON THE REVERSE SIDE OF THIS PROXY.
(Continued, and to be signed and dated on reverse side)
<PAGE> 48
[BACK]
[x] Please mark votes as in this example.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR ALL ITEMS.
1. Election of four Class II Directors to serve until the 1998 Annual
Meeting of Shareholders.
Nominees: Robert C. Blattberg, J.R. Hyde, III, Michael D. Rose
and Gordon P. Street, Jr.
Election of one Class I Director to serve until the 1997 Annual
Meeting of Shareholders.
Nominee: R. Brad Martin
[ ] FOR [ ] WITHHELD
all nominees from all nominees
For, except vote withheld from the following nominee(s):
[ ]
--------------------------------------------------------------
2. Approval of Non-Employee Directors' Deferred Compensation Stock
Option Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Approval of 1995 Employee Stock Option Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. Ratification of appointment of Arthur Andersen LLP as auditors.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Mark here for address change and note at left [ ]
The undersigned hereby acknowledges receipt of notice of said meeting
and the related proxy statement.
Shareholder sign here exactly as shown on the imprint on this card. When
signing as Attorney, Executor, Administrator, Trustee or Guardian, please give
full name. If more than one Trustee, all should sign. All Joint Owners should
sign.
Signature Date
----------------------------- ---------------------
Signature Date
----------------------------- ---------------------
