<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:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
FIRST TENNESSEE NATIONAL CORPORATION
-----------------------------------------------------
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing party:
(4) Dated filed:
<PAGE> 2
FIRST
[LOGO]sm TENNESSEE
All Things Financial(R)
March 24, 2000
TO THE SHAREHOLDERS OF
FIRST TENNESSEE NATIONAL CORPORATION
Dear Shareholders:
You are cordially invited to attend First Tennessee National Corporation's
annual meeting of shareholders. We will hold the meeting on April 18, 2000, in
the Auditorium, First Tennessee Building, 165 Madison Avenue, Memphis,
Tennessee, at 10:00 a.m. We have enclosed the formal notice of the annual
meeting, our 2000 proxy statement, and a form of proxy.
At the meeting, we will ask you to elect four Class I directors, approve the
2000 Non-Employee Directors' Deferred Compensation Stock Option Plan, approve
the 2000 Employee Stock Option Plan, and ratify the appointment of Arthur
Andersen LLP as our independent auditors for 2000. The attached proxy statement
contains information about these matters.
Our annual report to shareholders, which contains detailed financial information
relating to our activities and operating performance during 1999, is being
delivered to you with our proxy statement, but it is not part of the proxy
soliciting material.
In January, we offered our registered shareholders that have access to the
Internet the opportunity to receive this and future proxy statements
electronically. If you have not already done so for this year, we encourage you
to elect this method of receiving the proxy statement next year. Not only will
you have access to the document as soon as it is available, but you will be
helping our company save expense dollars. If you vote electronically, you will
have the opportunity to give your consent at the conclusion of the voting
process.
Your vote is important. You may vote by telephone or over the Internet or by
mail, or if you attend the meeting and want to vote your shares, then prior to
the balloting you should request that your form of proxy be withheld from
voting. We request that you vote by telephone or over the Internet or return
your proxy card in the postage-paid envelope as soon as possible.
Sincerely yours,
/s/ Ralph Horn
- ----------------------------------
Ralph Horn
Chairman of the Board,
President and Chief Executive Officer
<PAGE> 3
FIRST TENNESSEE NATIONAL CORPORATION
165 Madison Avenue
Memphis, Tennessee 38103
NOTICE OF ANNUAL SHAREHOLDERS' MEETING
April 18, 2000
The annual meeting of shareholders of First Tennessee National Corporation will
be held on April 18, 2000, at 10:00 a.m., CDT, in the Auditorium, First
Tennessee Building, 165 Madison Avenue, Memphis, Tennessee.
The items of business are:
1. Election of four Class I directors to serve until the 2003 annual
meeting of shareholders, or until their successors are duly elected and
qualified.
2. Approval of 2000 Non-Employee Directors' Deferred Compensation Stock
Option Plan.
3. Approval of 2000 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 25, 2000, is the record date
for the meeting. All shareholders of record at that time are entitled to vote at
the meeting.
Management requests that you vote by telephone or over the Internet (following
the instructions on the enclosed form of proxy) or that you sign and return the
form of proxy promptly, so that if you are unable to attend the meeting your
shares can nevertheless be voted. You may revoke a proxy at any time before it
is exercised at the annual meeting in the manner described on page 1 of the
proxy statement.
/s/ Lenore S. Creson
- ----------------------------
Lenore S. Creson
Corporate Secretary
Memphis, Tennessee
March 24, 2000
- --------------------------------------------------------------------------------
IMPORTANT NOTICE
PLEASE (1) VOTE BY TELEPHONE OR (2) VOTE OVER THE INTERNET OR (3) MARK, DATE,
SIGN AND PROMPTLY MAIL THE ENCLOSED FORM OF PROXY IN THE ENCLOSED ENVELOPE SO
THAT YOUR SHARES WILL BE REPRESENTED AT THE MEETING.
- --------------------------------------------------------------------------------
<PAGE> 4
PROXY STATEMENT
FIRST TENNESSEE NATIONAL CORPORATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
GENERAL MATTERS................................................................1
STOCK OWNERSHIP INFORMATION AND TABLE..........................................2
VOTE ITEM NO. 1 - ELECTION OF DIRECTORS........................................3
Nominees...................................................................3
Continuing Directors.......................................................4
The Board of Directors and its Committees..................................5
VOTE ITEM NO. 2 - APPROVAL OF 2000 NON-EMPLOYEE DIRECTORS'
DEFERRED COMPENSATION PLAN..................................................6
VOTE ITEM NO. 3 - APPROVAL OF 2000 EMPLOYEE STOCK OPTION PLAN..................8
VOTE ITEM NO. 4 - RATIFICATION OF APPOINTMENT OF AUDITORS.....................10
OTHER MATTERS.................................................................11
SHAREHOLDER PROPOSAL DEADLINES................................................11
EXECUTIVE COMPENSATION........................................................11
Summary Compensation Table................................................12
Option/SAR Grants in Last Fiscal Year Table...............................14
Aggregated Option/SAR Exercises in Last Fiscal Year and
Fiscal Year-End Option/SAR Values Table..............................15
Pension Plan Table........................................................16
Employment Contracts and Termination of Employment and
Change-in-Control Arrangements.......................................17
Compensation Committee Interlocks and Insider Participation...............18
Certain Relationships and Related Transactions............................18
Board Compensation Committee Report on Executive Compensation.............18
Total Shareholder Return Performance Graph................................24
Compensation of Directors.................................................25
Section 16(a) Beneficial Ownership Reporting Compliance...................25
AVAILABILITY OF ANNUAL REPORT ON FORM 10-K....................................26
EXHIBIT A - 2000 Non-Employee Directors' Deferred Compensation
Stock Option Plan ..................................................A-1
EXHIBIT B - 2000 Employee Stock Option Plan..................................B-1
</TABLE>
<PAGE> 5
PROXY STATEMENT
FIRST TENNESSEE NATIONAL CORPORATION
165 Madison Avenue
Memphis, Tennessee 38103
GENERAL MATTERS
The following proxy statement is being mailed to shareholders beginning on or
about March 24, 2000. The Board of Directors is soliciting proxies to be used at
our annual meeting of the shareholders to be held on April 18, 2000, at 10:00
a.m., CDT, 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 you will be unable
to attend in person. You may revoke your proxy at any time before it is
exercised by writing to the Corporate Secretary, by timely delivering a properly
executed, later-dated proxy (including a telephone or Internet vote) or by
voting by ballot at the meeting. 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 I directors to serve until the 2003 annual
meeting of shareholders or until their successors are duly elected
and qualified.
2. Approval of 2000 Non-Employee Directors' Deferred Compensation
Stock Option Plan.
3. Approval of 2000 Employee Stock Option Plan.
4. Ratification of appointment of auditors.
We will bear the entire cost of soliciting the proxies. In following up the
original solicitation of the proxies by mail, we 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, we may also use
several of our 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. We have
retained Innisfree M & A Incorporated to aid in the solicitation of proxies for
a fee of $9,500 plus out-of-pocket expenses.
Our common stock is the only class of voting securities. There were 129,901,800
shares of common stock outstanding and entitled to vote as of February 25, 2000,
the record date for the annual shareholders' meeting. Each share is entitled to
one vote. A quorum of the shares must be represented at the meeting to take
action on any matter at the meeting. A majority of the votes entitled to be cast
constitutes a quorum for purposes of the annual meeting. A plurality of the
votes cast is required to elect the nominees as directors. A majority of the
votes cast is required to approve each of the stock option plans and to ratify
the appointment of auditors. Both "abstentions" and broker "non-votes" will be
considered present for quorum purposes, but will not otherwise have any effect
on any of the vote items.
<PAGE> 6
STOCK OWNERSHIP INFORMATION AND TABLE
We know of no person who owned beneficially, as that term is defined by Rule
13d-3 of the Securities Exchange Act of 1934, more than five (5) percent of our
common stock on December 31, 1999.
The following table sets forth certain information as of December 31, 1999,
concerning beneficial ownership of our common stock by each director and
nominee, each executive officer named in the Summary Compensation Table, and
directors and executive officers as a group:
<TABLE>
<CAPTION>
Name of Shares Beneficially Stock Units in Deferral Total and Percent
Beneficial Owner Owned (1) Accounts (2) of Class (3)
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Susan Schmidt Bies 269,855 (5) 17,522 287,377
Robert C. Blattberg 57,283 (4) -- 57,283
Carlos H. Cantu 33,370 (4) -- 33,370
George E. Cates 46,565 (4) -- 46,565
J. Kenneth Glass 333,955 (5) 57,459 391,414
James A. Haslam, III 42,623 (4) -- 42,623
Ralph Horn 1,069,964 (5) 74,229 1,144,193
John C. Kelley, Jr. 291,725 (5) 77,501 369,226
George P. Lewis (6) 372,896 (5) -- 372,896
R. Brad Martin 50,340 (4) -- 50,340
Joseph Orgill, III 245,031 (4) -- 245,031
Vicki R. Palmer 56,941 (4) -- 56,941
Michael D. Rose 55,527 (4) -- 55,527
William B. Sansom 71,705 (4) -- 71,705
Elbert L. Thomas, Jr. 238,304 (5) 14,451 252,755
Directors and Executive Officers as
a Group (19 persons) (6) 3,771,689 (5) 297,105 4,068,794
3.1%
------------------------------------------------------------------------------------------------------------
</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 (4)
and note (5). Amounts in the second column do not include stock units in
the third column.
(2) Our stock option program permits participants to defer receipt of shares
upon the exercise of options and our restricted stock incentive plan
permits participants to defer receipt of shares prior to the lapsing of
restrictions imposed on restricted stock awards. Amounts in the third
column reflect the number of shares deferred that a participant has the
right to receive on a future date. These shares are not currently issued
and are not considered to be beneficially owned for purposes of Rule
13d-3, but are reflected in a deferral account on our books as phantom
stock units or restricted stock units.
(3) No individual director or executive officer beneficially owns one (1)
percent or more of our common stock that is outstanding. The percentage of
class owned by the director and executive officer group (3.1 percent)
includes stock units. The percentage would be 2.9 percent with stock units
excluded.
(4) Includes the following shares of restricted stock with respect to which
the nonemployee director possesses sole voting power, but no investment
power: Dr. Blattberg - 1,800; Mr. Cantu - 4,200; Mr. Cates - 4,200; Mr.
Haslam - 4,200; Mr. Martin - 3,000; Mr. Orgill - 1,800; Mrs. Palmer -
3,000; Mr. Rose - 1,800; and Mr. Sansom - 1,800. Includes the following
shares as to which the named nonemployee directors have the right to
acquire beneficial ownership through the exercise of stock options granted
under our director plan, all of which are 100 percent vested: Dr.
Blattberg - 50,923; Mr. Cantu - 27,308; Mr. Cates - 33,503; Mr. Haslam -
26,561; Mr. Martin -22,820; Mr. Orgill - 55,101; Mrs. Palmer - 50,833;
Mr. Rose - 46,367; and Mr. Sansom - 63,664.
2
<PAGE> 7
(5) Includes the following shares of restricted stock with respect to which
the named person or group has sole voting power but no investment power:
Mr. Glass - 31,408; Mr. Horn - 59,901; Mr. Kelley - 41,598; Mr. Thomas
- 17,836; Mr. Lewis - 0; Ms. Bies - 20,242; and the director and executive
officer group - 236,038. Includes the following shares as to which the
named person or group has the right to acquire beneficial ownership within
60 days through the exercise of stock options granted under our stock
option plans: Mr. Glass - 138,294; Mr. Horn - 520,079; Mr. Kelley -
132,706; Mr. Thomas - 177,626; Mr. Lewis - 41,234; Ms. Bies - 67,682; and
the director and executive officer group - 1,669,726. Also includes shares
held at December 31, 1999 for 401(k) Savings Plan accounts.
(6) Totals include amounts for Mr. Lewis, who retired October 22, 1999.
VOTE ITEM NO. 1 - ELECTION OF DIRECTORS
The Board of Directors is divided into three Classes. The term of office of each
Class expires in successive years. The term of Class I directors expires at this
annual meeting. The terms of Class II and Class III directors expire at the 2001
and 2002 annual meetings, respectively. The Board of Directors proposes the
election of four Class I directors. Each director elected at the meeting will
hold office until the specified annual meeting of shareholders and until his or
her successor is elected and qualified.
If any nominee proposed by the Board of Directors is 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 decides to reduce the number of
directors pursuant to the Bylaws.
We have provided below 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 our Board). All of our
directors are also directors of First Tennessee Bank National Association (the
Bank or FTB). The Bank is our principal operating subsidiary.
NOMINEES FOR DIRECTOR
Class I
For a Three-Year Term Expiring at 2003 Annual Meeting
R. BRAD MARTIN (48) is Chairman of the Board and Chief Executive Officer of Saks
Incorporated, Birmingham, Alabama, a retail merchandising company. Mr. Martin is
a director of two other public companies, Saks Incorporated and Harrah's
Entertainment, Inc. He has been a director since 1994 and is a member of the
Human Resources Committee.
JOSEPH ORGILL, III (62) is Chairman of the Board of Orgill, Inc., Memphis,
Tennessee, wholesale hardware distributors. Prior to January 1996, Orgill, Inc.,
was a subsidiary of Rock Island Corporation (formerly West Union Corporation),
Memphis, Tennessee, of which Mr. Orgill remains Chairman of the Board. Mr.
Orgill has been a director since 1969.
VICKI R. PALMER (46) is Corporate Senior Vice President, Treasurer, and Special
Assistant to the CEO of Coca-Cola Enterprises Inc., Atlanta, Georgia, a bottler
of soft drink products. Prior to December 1999, Mrs. Palmer was Corporate Vice
President and Treasurer of Coca-Cola Enterprises, Inc. Mrs. Palmer has been a
director since 1993 and is Chairperson of the Human Resources Committee.
3
<PAGE> 8
WILLIAM B. SANSOM (58) 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. He is a director of two other public companies, Martin Marietta
Materials, Inc. and Astec Industries, Inc. Mr. Sansom has been a director since
1984.
CONTINUING DIRECTORS
Class II
Term Expiring at 2001 Annual Meeting
ROBERT C. BLATTBERG (57) is the Polk Brothers Distinguished Professor of
Retailing, J. L. Kellogg Graduate School of Management, Northwestern University,
Evanston, Illinois. Dr. Blattberg is a director of one other public company,
Factory Card Outlet Corp. Dr. Blattberg has been a director since 1984 and is
Chairman of the Audit Committee.
J. KENNETH GLASS (53) is President of Retail Financial Services of the Bank and
Executive Vice President of First Tennessee. Mr. Glass has been President-Retail
Financial Services since April 1999 and Executive Vice President of First
Tennessee since 1995. Prior to April 1999, he was President-Tennessee Banking
Group of the Bank. Mr. Glass has been a director since 1996.
JOHN C. KELLEY, JR. (56) is President-Business Financial Services/Memphis
Financial Services of the Bank and Executive Vice President of First Tennessee.
Mr. Kelley has been President-Business Financial Services/Memphis Financial
Services since April 1999 and Executive Vice President of First Tennessee since
1995. Prior to April 1999, he was President-Memphis Banking Group of the Bank.
Mr. Kelley has been a director since 1996.
MICHAEL D. ROSE (58) is a private investor. Prior to December 19, 1997, he was
Chairman of the Board of Promus Hotel Corporation, Memphis, Tennessee, a
franchiser and operator of hotel brands. Prior to January 1997, Mr. Rose was
also Chairman of the Board of Harrah's Entertainment, Inc. Prior to June 30,
1995, Mr. Rose was Chairman of The Promus Companies Incorporated. Mr. Rose is a
director of seven other public companies, Ashland, Inc., Darden Restaurants,
Inc., FelCor Lodging Trust, Inc., General Mills, Inc., Nextera Enterprises,
Inc., ResortQuest International, Inc., and Stein Mart, Inc. Mr. Rose has been a
director since 1984, and is a member of the Human Resources Committee.
Class III
Term Expiring at 2002 Annual Meeting
CARLOS H. CANTU (66) is Senior Chairman of The ServiceMaster Company, Downers
Grove, Illinois, a company that provides consumer services and supportive
management services. Prior to December 1999, he was President and Chief
Executive Officer of The Service Master Company. Mr. Cantu is a director of two
other public companies, The ServiceMaster Company and Unicom Corporation. Mr.
Cantu has been a director since 1996 and is a member of the Human Resources
Committee.
GEORGE E. CATES (62) is Chairman of the Board and Chief Executive Officer of
Mid-America Apartment Communities, Inc., ("Mid-America") Memphis, Tennessee, a
real estate investment trust. Mr. Cates is a director of two other public
companies, Mid-America Apartment Communities, Inc. and SCB Computer Technology,
Inc. Mr. Cates has been a director of the Corporation since 1996 and is a member
of the Audit Committee.
4
<PAGE> 9
JAMES A. HASLAM, III (45) is Chief Executive Officer of Pilot Corporation,
Knoxville, Tennessee, a national retail operator of convenience stores and
travel centers. Mr. Haslam is a director of one other public company, Ruby
Tuesday, Inc. Mr. Haslam has been a director since 1996 and is a member of the
Audit Committee.
RALPH HORN (58) is Chairman of the Board, President, and Chief Executive Officer
of First Tennessee and the Bank. Mr. Horn has served as President of First
Tennessee since 1991, Chief Executive Officer since 1994, and Chairman of the
Board since 1996. Mr. Horn is a director of two other public companies, Harrah's
Entertainment, Inc. and Mid-America Apartment Communities, Inc. Mr. Horn has
been a director since 1991.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
During 1999, the Board of Directors held five meetings. The average attendance
at Board and committee meetings exceeded 92 percent. No director attended fewer
than 75 percent of the meetings of the Board and the committees of the Board on
which he or she served, except for Mr. Cantu and Mr. Martin.
The Board has several standing committees, including the Audit Committee and the
Human Resources Committee. The Human Resources 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 First
Tennessee employees. Currently, Messrs. Blattberg, Cates and Haslam serve on the
Audit Committee and Messrs. Cantu, Martin, Rose, and Mrs. Palmer serve on the
Human Resources Committee.
The Audit Committee is responsible for causing corporate audits and examinations
to be made by independent auditors and supervising our internal audit program.
The Committee approves, subject to shareholder ratification, the engagement of
our independent auditors and reviews the scope and results of their examination.
Other committee functions include review of our internal controls and our annual
report to the SEC and proxy materials. During 1999 the Audit Committee held five
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 reappointment, reviews succession plans, and
between annual meetings has authority to appoint persons to offices except the
offices of Chairman, CEO, President, Auditor and any office in which the
incumbent has been designated by the Board as an Executive Officer. As a
compensation committee, the Human Resources Committee's primary functions
include recommending to the Board major policies concerning compensation,
periodically reviewing corporate compensation and management of 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 1999 the Human Resources
Committee held four meetings.
It is our practice 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.
5
<PAGE> 10
VOTE ITEM NO. 2 - APPROVAL OF 2000 NON-EMPLOYEE DIRECTORS' DEFERRED COMPENSATION
STOCK OPTION PLAN
At its October 1999 meeting, our Board of Directors adopted the 2000
Non-Employee Directors' Deferred Compensation Stock Option Plan (the Director
Plan), subject to shareholder approval, to replace a plan which expired on
December 31, 1999. In 1995, the shareholders approved the earlier plan to
encourage non-employee members of our Board to increase their ownership interest
in our stock. Under the earlier plan, options for 454,286 shares had been
granted, and at termination of the plan, 445,714 shares, which were available
for grant, were returned to authorized but unissued and unreserved status. Under
the Director Plan, up to 400,000 shares of our common stock may be issued,
subject to equitable adjustments in the event of stock splits, stock dividends
and other changes in capitalization. The shares to be issued under the Director
Plan will be provided from shares that we have purchased in the open market or
privately, or by our issuance of authorized but previously unissued shares. The
purpose of the Director Plan is to advance the interest of our shareholders by
continuing to encourage non-employee members of our Board to increase their
ownership of our common stock. The following paragraphs are a summary of the
provisions of the Director Plan. The summary is qualified in its entirety by
reference to the full text of the Director Plan, which is attached as Exhibit A
to this proxy statement.
A non-employee director who elects to participate in the Director 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 semi-annually on the first business day of July of each year and the
first business day of January of the following year based on compensation
foregone by the director since the prior grant. Existing directors were required
to make a one-time irrevocable election to participate in the Director Plan by
December 31, 1999, and directors who are newly appointed or elected after
October 20, 1999, must make an election to participate no later than thirty days
following commencement of board service. All options are 100 percent 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 20 percent of the
fair market value of one share of our stock on the grant date. The exercise
price equals 80 percent of such fair market value. These options are generally
referred to as "deferred compensation" or "discounted" stock options; however,
the price paid by the director upon exercise plus the foregone compensation
always equals 100 percent of the fair market value of our stock on the grant
date. If a director uses shares of our common stock to pay the exercise price
and there is at least one year remaining in the term of the option, then a
"reload option" will be granted to the director at the time of exercise. The
reload option will be for the number of shares required to pay the exercise
price, will have an exercise price per share equal to the fair market value of
one share of our stock on the exercise date, and will have a term that ends on
the same day that the option that was exercised ends.
The Director Plan is intended to be 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, if any
questions of interpretation arise, they will be resolved by the Human Resources
Committee of our Board (or any other committee that the 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 the first business day in January
of 2005, unless the Board terminates the plan early. Our shares of common stock
trade on the New York Stock Exchange, and the last sale price on March 1, 2000,
was $17.56. All options are non-transferable other than by will or the laws of
descent and distribution and, to the extent permitted by SEC rules, by gift or
other transfer to a director's "family members" as defined by SEC rules. If a
director ceases to be a director for any reason or becomes an employee of First
6
<PAGE> 11
Tennessee prior to the grant date of an option, then no option will be granted
to him or her, and any compensation earned will be paid to the director 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 for any reason other
than death or disability, options will terminate one year after the director's
termination. "Early retirement" is defined as a retirement after age 55 with at
least 120 full months of board service. If a director terminates Board service
due to death, disability or normal or early retirement, director's options will
terminate five years after the director's termination or, if earlier, the end of
the term of the option. If a director dies, then not withstanding the prior
limitations, options held by the director at the time of death expire on the
later of the date specified above or one year following the director's death.
The Board may terminate, suspend, or amend the Director Plan at any time unless
the amendment would cause the Director Plan not to comply with the short-swing
profits rule or cause a participant not to be deemed a "non-employee director"
for purposes of SEC rules or adversely affect a director's rights under the
Director Plan unless the director consents. If the shareholders do not approve
the Director Plan by June 30, 2000, then the Director Plan will be nullified and
all elections to receive options will be rescinded. Directors will receive cash
in an amount equal to all retainer and attendance fees that were earned but not
paid.
The consideration to be received by us for granting options consist solely of
foregone compensation. Proceeds that we receive when a director exercises an
option will be used for general corporate purposes.
The grant of a non-qualified stock option does not result in any taxable income
to the director or a tax deduction to us at the time of grant. Upon exercise of
the 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
director is taxable to the director as compensation income and is generally
deductible by us, subject to ordinary rules relating to reasonableness of
compensation. The director's tax basis for the shares is market value on the tax
date.
No awards have been made under the Director Plan. All nine non-employee
directors have, however, elected to participate in the Director Plan. If
shareholder approval is not obtained, amounts deferred will be paid to the
directors in cash. Because options are based upon attendance fees, retainer and
the stock price on future grant dates, we can not determine or state the
benefits that will be received by directors under the Director Plan at this
time. If a director had been a participant in the Director Plan during 1999,
then for every $1,000 of compensation deferred during the first six months of
1999, a director would have received an option for 129 shares, with an exercise
price of $31.02 per share on July 1, 1999, and for every $1,000 deferred during
the second six months of 1999, a director would have received an option for 180
shares, with an exercise price of $22.33 per share, on January 3, 2000. 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
First Tennessee and our shareholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE IN
FAVOR OF ITEM NO. 2.
7
<PAGE> 12
VOTE ITEM NO. 3 - APPROVAL OF 2000 EMPLOYEE STOCK OPTION PLAN
Since 1972 we have had a stock option program in place to attract and retain
outstanding management personnel and enable them to obtain a proprietary
interest in First Tennessee and thus to share in our future success. Since 1995
we have extended our stock option program essentially to all employees. Our
Board of Directors has adopted and the shareholders have approved stock option
plans in 1972, 1981, 1984, 1990 and 1995. As of the date of the annual meeting,
all of these plans except the 1995 plan will have terminated, and no shares
remain available for grant under the 1995 plan. Unexercised options for
approximately 6.9 million shares were outstanding at December 31, 1999. In
addition, our Board of Directors adopted a stock option plan in 1997 under which
grants are made to all employees except those executive officers whose
compensation is expected to be subject to deductibility limits under section
162(m) of the tax code. Under the 1997 plan, approximately 6.6 million shares
remained available for grant at December 31, 1999, and unexercised options for
approximately 9.5 million shares were outstanding. It is necessary to obtain
shareholder approval of a new stock option plan for compensation received under
the plan by these section 162(m) officers to be fully deductible by us. Thus, at
its October 1999 meeting our Board adopted the 2000 Employee Stock Option Plan
(the "Employee Plan"), subject to approval by the shareholders at the annual
meeting. The following summary of the Employee Plan is qualified in its entirety
by reference to the full text of the Employee Plan, which is attached as Exhibit
B to this proxy statement.
Under the Employee Plan, up to 1,500,000 shares of our common stock may be
issued, subject to equitable adjustments in the event of stock splits, stock
dividends and other changes in capitalization. The shares to be issued under the
Employee Plan will be provided from shares we have purchased in the open market
or privately, or by our issuance of authorized but previously unissued shares.
The purpose of the Employee Plan is to attract and retain outstanding personnel
and promote a closer identity of interest between employees and shareholders by
enabling employees to obtain a proprietary interest in First Tennessee. Awards
under the Employee Plan may take the form of non-qualified stock options or
incentive stock options. It is not our intention, however, to grant incentive
stock options under the Employee Plan at this time.
Participation is limited to those of our employees and the employees of our
subsidiaries who are selected by the Human Resources Committee (the Committee)
of our Board of Directors. The Committee will administer and interpret the
Employee Plan and determine the persons to whom options will be granted and the
number of shares, terms, expiration date, quotas and date of grant of options.
No individual may, however, receive the grant of an option or options covering
an aggregate of more than 1,000,000 shares under the Employee Plan, subject to
equitable adjustments to prevent dilution in the event of a stock split or
similar transaction.
The Employee Plan will become effective on the date it is approved by the
shareholders. It will remain in effect through the date in the year 2010 that
corresponds to the day before the date the plan becomes effective, unless the
Board terminates the plan early. Our shares of common stock trade on the New
York Stock Exchange, and the last sale price on March 1, 2000, was $17.56.
Options may be granted at any time prior to the date the Employee Plan
terminates and the term of an option may extend beyond the date the Employee
Plan terminates. No incentive stock options may be granted which are exercisable
after ten years after the date of grant. Non-employee directors are not eligible
to receive awards under the Employee Plan, and members of the Committee are
required to be "non-employee directors" for purposes of the short swing profits
rule of the Securities and Exchange Commission. Generally, the exercise price of
an option must be at least 100 percent of the fair market value of the shares at
the time the option is granted. The option price may, however, be less than 100
percent if the grantee of the option has entered into an agreement with us
pursuant to which the grant of the option will be in lieu of the payment of
8
<PAGE> 13
compensation, and the amount of such compensation when added to the cash
exercise price of the option equals at least 100 percent. Options will become
exercisable in full upon a change in control as that term is defined in the
subsection entitled "Employment Contracts and Termination of Employment and
Change-in-Control Arrangements." The Committee has the discretion to accept
shares of our stock in payment of the exercise price of an option. "Reload
options," defined in Vote Item No. 2, are permitted under the Employee Plan in
the discretion of the Committee, and the Committee has adopted resolutions
authorizing reload options, subject to shareholder approval of the Employee
Plan.
All options are nontransferable other than by will or the laws of descent and
distribution. When a participant voluntarily resigns, options not previously
exercised terminate immediately. In addition, if a participant voluntarily
terminates, an amount equal to the spread realized at the time an option is
exercised within six months prior to a voluntary termination must be paid back
to us if the participant, within the following six months, engages directly or
indirectly in any activity determined by the Committee to be competitive. If a
participant is involuntarily terminated, an option must be exercised within
three months, or such shorter period as is determined by the Committee in its
discretion, after the date of termination or, if earlier, at the end of the term
of the option. Upon a retirement or disability, a participant has five years or
such shorter period as is determined by the Committee in its discretion, to
exercise options or, if earlier, at the end of the term of the option. Upon a
participant's death, the successor has five years or such shorter period as is
determined by the Committee in its discretion, to exercise any options or, if
earlier, at the end of the term of the option. The Committee may, in its
discretion, 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).
The Board may terminate, suspend, or amend the Employee Plan at any time as long
as any amendment is not in violation of law. If the shareholders do not approve
the Employee Plan, then the Employee Plan will be nullified and any option
grants and any elections to receive options in lieu of compensation will be
rescinded. Any compensation in lieu of which an option has been or will be
granted will be paid to the employee.
The consideration to be received by us for granting options consists solely of
services rendered by participants and, if applicable, foregone compensation.
Proceeds that we receive when a participant exercises an option will be used for
general corporate purposes.
The grant of a non-qualified stock option does not result in any taxable income
to the employee or a tax deduction to us at the time of the grant. Upon the
exercise of such option (or if the acquired stock is subject to a 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 employee is taxable to the employee as compensation income and is generally
deductible by us, subject to ordinary rules relating to reasonableness of
compensation. The employee's tax basis for the shares is market value on the tax
date.
The Committee may, in its discretion, allow participants to transfer shares of
our stock or have us withhold shares of our stock otherwise issuable on the
exercise of an option to satisfy income tax withholding that is due in
connection with the exercise.
Neither the grant nor the exercise of an incentive stock option results in any
federal income tax consequences to the employee or us. At the time the employee
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
9
<PAGE> 14
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 the sales price, will be taxed as compensation income and we 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 termination of employment due to retirement,
the participant 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.
The only awards that have been made by the Committee pursuant to the Employee
Plan, all of which are subject to shareholder approval of the plan, are as
follows: Mr. Horn - options for 230,312 shares and Mr. Kelley - options for
99,850 shares. Each option was granted on March 1, 2000, has an exercise price
per share of $17.97, expires on February 28, 2010, and has the same terms as
described in the second, third and fourth sentences to note (1) to the
Option/SAR Grants in Last Fiscal Year Table. The options vest 50 percent after
four years from the date of grant and 100 percent after five years, with
accelerated vesting if certain performance criteria (our stock price equals or
exceeds $24.58 on 3-1-03 or on five consecutive days before 3-2-03) are met. The
approximate number of persons in the class of eligible participants is 10,800.
It is not possible to determine or state the benefits which will be received
under the Employee Plan by the individuals specified in the Summary Compensation
Table (except for Mr. Lewis, who has retired and will not receive any grants
under the Employee Plan), by all current executive officers, or by all employees
as a group. Non-employee directors are ineligible to participate in the Employee
Plan. For certain awards made under our existing stock option plans during 1999,
see the Option/SAR Grants in Last Fiscal Year Table.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE IN
FAVOR OF ITEM NO. 3.
VOTE 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 our auditors for the year 2000. 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.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE IN
FAVOR OF ITEM NO. 4.
10
<PAGE> 15
OTHER MATTERS
The Board of Directors, at the time of the preparation and printing of this
proxy statement, knew of no other business to be brought before the meeting
other than the matters described in this proxy statement. If any other business
properly comes before the meeting, the persons named in the enclosed proxy will
have discretionary authority to vote all proxies in accordance with their best
judgment.
SHAREHOLDER PROPOSAL DEADLINES
If you intend to present a shareholder proposal at the 2001 annual meeting, it
must be received by the Corporate Secretary, First Tennessee National
Corporation, P. O. Box 84, Memphis, Tennessee, 38101, not later than November
24, 2000, for inclusion in the proxy statement and form of proxy relating to
that meeting.
In addition, Sections 2.8 and 3.6 of our 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 whether or not the
matter is included in our proxy statement. These procedures require written
notification to us, generally not less than 90 nor more than 120 days prior to
the date of the shareholder meeting. If, however, we give fewer than 100 days
notice or public disclosure of the shareholder meeting date to shareholders,
then we must receive the shareholder notification not later than 10 days after
the earlier date of 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. Section 2.4 of our Bylaws provides that the date and
time of the annual meeting will be the third Tuesday in April (or, if that day
is a legal holiday, on the next succeeding business day that is not a legal
holiday) at 10:00 a.m. Memphis time or such other date and/or such other time as
our Board may fix by resolution. The meeting date for 2001, determined according
to the Bylaws, is April 17, 2001. Thus, shareholder proposals submitted outside
the process that permits them to be included in our proxy statement must be
submitted to the Corporate Secretary between December 18, 2000, and January 17,
2001, or the proposals will be considered untimely. Untimely proposals may be
excluded by the Chairman or our proxies may exercise their discretion and vote
on these matters in a manner they determine to be appropriate.
EXECUTIVE COMPENSATION
The Summary Compensation Table provides information for the last three years
about the Chief Executive Officer (CEO), our other four most highly compensated
executive officers at year end 1999, and another executive officer, who retired
during 1999. The amounts include all compensation earned during each year,
including amounts deferred, by the named officers for all services rendered in
all capacities to us and our 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 1999, 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.
11
<PAGE> 16
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term Compensation
Annual Compensation Awards (3) Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Number of
Other Securities
Annual Restricted Underlying All Other
Compen- Stock Options/ LTIP Compen-
Name and Salary Bonus sation (7) Awards (1) SARs (2) Payouts sation (9)
Principal Position Year ($) ($) ($) ($) (#) ($) ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ralph Horn 1999 $771,154 $467,461(5) $11,544 $1,162,551 137,331(5) $ -- $347,211
Chairman, President 1998 683,654 412,741(5) 10,806 -- 65,536(5) -- 149,231
& CEO 1997 423,077(4) 313,846 10,806 -- 113,872(4) -- 138,930
FTNC and FTB
J. Kenneth Glass 1999 455,212(6) 232,947(5) 7,068 749,995 74,471(5)(6) -- 184,392
President-Retail 1998 357,634(4) 232,580 6,720 -- 21,911(4) -- 106,042
Financial Services 1997 313,577(4) 186,549 6,720 -- 55,632(4) -- 96,426
FTB
John C. Kelley, Jr. 1999 446,923 234,351 7,068 674,996 44,841 -- 204,435
President-Business 1998 381,923 226,862 6,720 -- 16,169 -- 129,012
Financial Services/ 1997 338,077 181,294 6,720 -- 48,068 -- 116,175
Memphis Financial
Services-FTB
Elbert L. Thomas, Jr. 1999 206,787(6) -- (5) -- 412,556 114,839(5)(6) -- 27,620
Exec. Vice President 1998 146,983(4) -- (5) -- -- 41,206(4)(5) -- 18,064
& CFO 1997 142,277(4) -- (5) -- -- 45,764(4)(5) -- 17,621
FTNC and FTB
George P. Lewis 1999 215,659 200,994 -- 137,519 8,566 -- 19,995
EVP, Manager 1998 239,066 119,533 -- -- 6,681 -- 27,951
Money Mgmt. Group 1997 215,795 104,661 -- -- 10,310 -- 27,117
FTB (8)
Susan Schmidt Bies 1999 222,321 150,740 -- 337,556 7,008 -- 62,877
EVP, Risk 1998 213,669 91,584 -- -- 5,951 -- 47,183
Management and 1997 196,239 86,100 -- -- 8,322 -- 48,065
Auditor
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Restricted stock awards are valued on the basis of the fair market
value of a share of stock on the date of the award: $38.88 (2-23-99),
adjusted for stock splits. On 12-31-99, the named officers held the
following shares of restricted stock (including RSU's described in the
following sentence) with market values as indicated: Mr. Horn - 89,901
shares ($2,590,048); Mr. Glass - 43,527 shares ($1,254,013); Mr. Kelley
- 41,598 shares ($1,198,438); Mr. Thomas - 25,061 shares ($722,007);
Mr. Lewis - 0 shares ($0); and Ms. Bies - 20,242 shares ($583,172). The
number of shares disclosed in the preceding sentence includes
restricted stock units ("RSU's"), described in note (2) to the Stock
Ownership Table, with respect to which restrictions had not lapsed at
12-31-99, as follows: Mr. Horn - 30,000 RSU's; Mr. Glass - 12,119
RSU's; Mr. Kelley - 0 RSU's; Mr. Thomas - 7,225 RSU's; Mr. Lewis - 0
RSU's; and Ms. Bies - 0 RSU's. Dividends are paid on restricted stock
(and dividend equivalents are paid on RSU's) at the same rate as all
other shares of our common stock. Dividend equivalents on RSU's accrue
interest at a 10-year Treasury rate and are settled only in cash. On
2-23-99, Mr. Lewis was awarded 3,537 shares of restricted stock, which
was scheduled to vest 4-21-02 if performance criteria were met. On
10-19-99, the Human Resources Committee approved the early vesting of
these shares to coincide with Mr. Lewis' retirement on 10-22-99.
(2) All amounts represent shares subject to option. No stock appreciation
rights (SAR's) were awarded.
(3) All share amounts and share values have been revised to reflect the
two-for-one stock split distributed 2-20-98.
12
<PAGE> 17
(4) In 1996 Mr. Horn elected to receive a deferred compensation stock
option in lieu of $100,000 of salary earned for the following year. The
amount in column (c) does not include this amount, in lieu of which
options for 27,700 shares (included in the amount in column (g)) were
granted on 7-1-97. In 1997 and 1996 Mr. Glass elected to receive a
deferred compensation stock option in lieu of $30,000 of salary earned
for the following year. The amounts in column (c) do not include this
amount, in lieu of which options for 2,758 shares, 2,984 shares, 3,018
shares and 4,156 shares (included in the amounts in column (g)) were
granted on 1-4-99, 7-1-98, 1-2-98 and 7-1-97, respectively. In 1997 and
1996, Mr. Thomas elected to receive a deferred compensation stock
option in lieu of $80,000 of 1998 salary and $60,000 of 1997 salary.
The amount in column (c) does not include these amounts, in lieu of
which options for 7,355 shares, 7,958 shares, 6,036 shares, and 8,310
shares (included in the amount in column (g)) were granted on 1-4-99,
7-1-98,1-2-98, and 7-1-97.
(5) In 1998 and 1997 Mr. Horn elected to receive a deferred compensation
stock option in lieu of $100,000 of his annual bonus for the following
year. The amount in column (d) for 1999 and 1998 does not include this
amount, in lieu of which options for 37,037 shares and 17,153 shares
(included in the amounts in column (g)) were granted on 3-1-00 and
2-23-99, respectively. In 1998 Mr. Glass elected to receive a deferred
compensation stock option in lieu of $50,000 of his annual bonus for
the following year. The amount in column (d) for 1999 does not include
this amount, in lieu of which an option for 18,519 shares (included in
the amount in column (g)) was granted on 3-1-00. In 1998, 1997 and
1996, Mr. Thomas elected to receive a deferred compensation stock
option in lieu of his annual bonus for the following year. The amount
in column (d) for 1999 does not include a bonus of $248,645 and for
1998 does not include a bonus of $113,492 and for 1997 does not
include a bonus of $101,139, in lieu of which options for 92,091
shares, 19,467 shares and 21,704 shares (included in the amounts in
column (g)) were granted on 3-1-00, 2-23-99 and 2-19-98, respectively.
(6) In 1998 Mr. Glass elected to receive a deferred compensation stock
option in lieu of $40,000 of his 1999 salary. The amount in column (c)
does not include this amount, in lieu of which options for 3,172 shares
and 5,140 shares (included in the amount in column (g)) were granted on
7-1-99 and 1-3-00, respectively. In 1998 Mr. Thomas elected to receive
a deferred compensation stock option in lieu of $60,000 of his 1999
salary. The amount in column (c) does not include this amount, in lieu
of which options for 4,758 shares and 7,711 shares (included in the
amount in column (g)) were granted on 7-1-99 and 1-3-00, respectively.
(7) The amounts in column (e) for all years represent automobile allowance
tax gross-up payments.
(8) Mr. Lewis retired October 22, 1999.
(9) Elements of "All Other Compensation" for 1999 consist of the following:
<TABLE>
<CAPTION>
Mr. Horn Mr. Glass Mr. Kelley Mr. Thomas Mr. Lewis Ms. Bies
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Above Market Rate $ 81,841 $ 74,322 $ 86,165 $ -- $ 3,460 $ 37,457
Survivor Benefits/SERP 239,200 89,400 97,600 17,100 7,000 14,900
Flex $ 5,720 5,720 5,720 5,720 4,735 5,720
401(k) Match 4,800 4,800 4,800 4,800 4,800 4,800
Auto Allowance 15,650 10,150 10,150 -- -- --
- -------------------------------------------------------------------------------------------------------------------
Total $ 347,211 $ 184,392 $ 204,435 $ 27,620 $ 19,995 $ 62,877
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
"Above Market Rate" represents above-market interest accrued on deferred
compensation.
"Survivor Benefits/SERP" represents insurance premiums with respect to our
supplemental life insurance and excess pension plans. Under our 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 $" represents First Tennessee's contribution to the Flexible Benefits
Plan, based on salary, service and corporate performance.
"401(k) Match" represents First Tennessee's 50 percent matching contribution
to the 401(k) Savings Plan, which is based on the amount contributed by the
participant to the First Tennessee stock fund, up to 6 percent of
compensation.
13
<PAGE> 18
The following table provides information about stock options granted during 1999
to the officers named in the Summary Compensation Table. No stock appreciation
rights (SAR's) were granted during 1999.
Option/SAR Grants in Last Fiscal Year Table
<TABLE>
<CAPTION>
Individual Grants
------------------------------------------------------------------------
(a) (b) (c) (d) (e) (h)
Number of Percentage
Securities of Total Alternatives to
Underlying Options/SARs Exercise or Base (f) and (g): Grant
Options/SARs Granted to Price (1) Date Value. Grant
Granted (1) Employees in Per Share Expiration Date Present Value (5)
Name (#) Fiscal Year ($ Per Share) Date ($)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Mr. Horn 17,153 (2) .28% $ 33.05 2-23-19 $ 218,769
38,624 .64 40.13 4-20-09 378,505
37,930 (4) .62 28.63 10-19-09 342,721
Mr. Glass 2,758 (2) .05 31.99 1-4-19 32,786
18,689 .31 40.13 4-20-09 183,147
3,172 (3) .05 32.96 7-1-19 42,970
17,464 (4) .29 28.63 10-19-09 157,798
Mr. Kelley 16,820 .28 40.13 4-20-09 164,832
17,683 (4) .29 28.63 10-19-09 159,777
Mr. Thomas 7,355 (2) .12 31.99 1-4-19 87,432
19,467 (2) .32 33.05 2-23-19 248,282
10,279 .17 40.13 4-20-09 100,732
4,758 (3) .08 32.96 7-1-19 64,455
Mr. Lewis 8,566 .14 40.13 4-20-09 83,945
Ms. Bies 7,008 .12 40.13 4-20-09 68,677
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) All options except those marked with footnote (2), (3) or (4) were
granted 4-20-99 and vest 50 percent after four years from the date of
grant and 100 percent after five years, with accelerated vesting if
certain performance criteria (our stock price equals or exceeds $ 54.88
on 4-19-02 or on 5 consecutive days before 4-21-02) are met. No SAR's
were granted. The exercise price per share equals the fair market value
of one share of our common stock on the date of grant. Under the terms
of all options, including those marked with footnotes (2), (3) and (4),
participants are permitted to pay the exercise price of the options
with our stock; participants are permitted to defer receipt of shares
upon an exercise and thereby defer gain; options exercised more than
one year prior to the end of their term are eligible for a reload
option grant when the exercise price is paid with our stock, with the
reload option grant for the number of shares surrendered and having an
exercise price equal to fair market value at the time of the first
exercise and a term equal to the remainder of the first option's term;
the option plan provides for tax withholding rights upon approval of
the plan committee; and 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.
(2) Options indicated by footnote (2) that were granted during 1999 were
granted in lieu of compensation earned during 1998. Mr. Glass's and Mr.
Thomas's options were granted on 1-4-99 in lieu of $15,556 of Mr.
Glass's 1998 salary and $41,481 of Mr. Thomas's 1998 salary and vest
100 percent at the time of grant. No SAR's were granted. The exercise
price per share equals 85 percent of the fair market value (FMV) of
$37.63 of one share of Corporation common stock on the grant date. Mr.
Thomas's other option was granted 2-23-99 in lieu of his bonus of
$113,492 for 1998 and Mr. Horn's option was granted on 2-23-99 in lieu
of $100,000 of his 1998 bonus. These options contain the same terms as
described for the options granted in lieu of salary. FMV on the grant
date was $38.88.
14
<PAGE> 19
(3) Options indicated by footnote (3) were granted in lieu of compensation
earned during 1999 and contain the same terms as described generally in
footnote (2). Mr. Glass's and Mr. Thomas's options were granted on
7-1-99 in lieu of $18,462 of Mr. Glass's 1999 salary and $27,692 of Mr.
Thomas's 1999 salary. FMV on the grant date was $38.78.
(4) Options indicated by footnote (4) were granted 10-19-99 and vested 100
percent on 3-3-00. No SAR's were granted. The options contain the same
terms as specified in the third and fourth sentences of footnote (1).
(5) 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 granted 1-4-99, 2-23-99, 4-20-99,
7-1-99, and 10-19-99, respectively: an exercise price of $31.99,
$33.05, $40.13, $32.96 and $28.63; an option term of 20 years, 20
years, 10 years, 20 years, and 10 years; an interest rate of 4.72%,
5.00%, 5.18%, 5.79% and 6.11%; volatility of 28.44%, 29.06%, 29.48%,
30.36%, and 31.52%; a dividend yield of 2.02%, 1.95%, 1.89%, 1.96%, and
2.65%; a reduction of 0%, 0%, 24.18%, 0%, and 1.60% to reflect the
probability of forfeiture due to termination prior to vesting; and
reduction of 14.79%, 15.34%, 12.46%, 15.22% and 14.46% to reflect the
probability of a shortened option term due to termination prior to the
option expiration date. The actual value, if any, realized by a
participant upon the exercise of an option may differ and will depend
on the future market value of our common stock.
The following table provides information about stock options and SAR's held at
December 31, 1999, and exercises during 1999 by the officers named in the
Summary Compensation Table. The values in column (e) reflect the spread between
the market value at December 31, 1999, of the shares underlying the option and
the exercise price of the option.
Aggregated Option/SAR Exercises in Last Fiscal Year and
Fiscal Year-End Option/SAR Values Table
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Number of
Securities Underlying Value of Unexercised
Unexercised Options/ In-the-Money
Number of SARs at FY-End (1) Options/SARs FY-End (1)
Shares Acquired Value ----------------------------- ------------------------------
On Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
Name (#) ($) (#) (#) ($) ($)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Horn -- $ -- 520,079 124,937 $ 8,669,149 $ 6,922
Mr. Glass -- -- 138,294 52,322 1,767,492 3,187
Mr. Kelley -- -- 132,706 50,672 1,986,138 3,227
Mr. Thomas -- -- 177,626 16,705 1,578,946 --
Mr. Lewis 10,172 250,664 41,234 15,247 600,295 --
Ms. Bies -- -- 67,682 12,959 1,003,725 --
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) No SAR's are attached to any of the options in the table. Option values
are based on $28.81 per share, the average of the high and low sales
price on 12-31-99.
15
<PAGE> 20
The following table provides information about estimated combined benefits under
both our Pension Plan and our Pension Restoration Plan.
Pension Plan Table
<TABLE>
<CAPTION>
Covered Years of Service*
Compensation 15 Yrs 20 Yrs 25 Yrs 30 Yrs 35 Yrs 40 Yrs
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 100,000 $ 43,032 $ 51,887 $ 60,740 $ 64,653 $ 68,571 $ 72,489
150,000 57,834 71,625 85,412 91,790 98,175 104,560
200,000 72,636 91,363 110,085 118,927 127,779 136,631
250,000 87,438 111,101 134,757 146,064 157,383 168,702
300,000 102,240 130,839 159,430 173,201 186,987 200,773
350,000 117,042 150,577 184,102 200,338 216,591 232,844
400,000 131,844 170,315 208,775 227,475 246,195 264,915
450,000 146,646 190,053 233,447 254,612 275,799 296,986
500,000 161,448 209,791 258,120 281,749 305,403 329,057
550,000 176,250 229,529 282,792 308,886 335,007 361,128
600,000 191,052 249,267 307,465 336,023 364,611 393,199
650,000 205,854 269,005 332,137 363,160 394,215 425,270
700,000 220,656 288,743 356,810 390,297 423,819 457,341
750,000 235,458 308,481 381,482 417,434 453,423 489,412
- ---------------------------------------------------------------------------------------------------------------------------
</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 $130,000 for 1999 or 100 percent 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.
Our 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
percent 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. Our Pension Restoration Plan is an unfunded plan
covering employees in the highest salary grades, including Messrs. Horn, Glass
and Kelley, whose benefits under the Pension Plan have been limited under Tax
Code Section 415, as described in the note to the Pension Table, and Tax Code
Section 401(a)(17), which limits compensation to $160,000 for purposes of
certain benefit calculations. "Compensation" is defined in the same manner as it
is for purposes of the Pension Plan. Under the Pension Restoration 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.
Horn, 36 ($566,598); Mr. Glass, 26 ($341,100); Mr. Kelley, 30 ($343,615); Mr.
Thomas, 10 ($153,407); Mr. Lewis, 39 ($214,355); and Ms. Bies, 20 ($182,945).
16
<PAGE> 21
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
We have contracts with 52 officers, including each of the named executive
officers, which may be terminated upon three years' prior notice. These
contracts provide generally for a payment (which, for the named executive
officers, is equal to three times annual base salary plus annual target bonus)
in the event of a termination of the officer's employment by us other than "for
cause" or by the employee for "good reason" (as such terms are defined in the
contracts) within 36 months after a "Change-in-Control" or the officer's
termination of employment for any reason (other than "cause") during the 30-day
period commencing one year after a Change-in-Control. The contracts provide
generally for an excise tax gross-up with respect to any taxes incurred under
Internal Revenue Code Section 4999 following a Change-in-Control and for three
years continued welfare benefits. The term "Change-in-Control" is defined to
include:
- a merger or other business combination, unless (i) more than
50 percent of the voting power of the corporation resulting
from the business combination is represented by our voting
securities outstanding immediately prior thereto, (ii) no
person or other entity beneficially owns 20 percent or more of
the resulting corporation, and (iii) at least a majority of
the members of the board of directors of the resulting
corporation were our directors at the time of board approval
of the business combination (solely for purposes of the
severance contracts, but not for purposes of their 30-day
termination period, the "50 percent" test in clause (i) is
changed to "60 percent", and the "majority of the board" test
in clause (iii) is changed to "two-thirds of the board"),
- the acquisition by a person or other entity of 20 percent or
more of our outstanding voting stock,
- a change in a majority of the Board of Directors, or
- shareholder approval of a plan of complete liquidation or a
sale of substantially all of our assets.
A Change-in-Control has the following effect on certain benefit plans in which
the named executive officers participate:
- Target annual bonuses are prorated through the date of the
Change-in-Control and paid.
- Restricted stock, restricted stock units, phantom stock units
and unvested stock options vest.
- Under our Pension Restoration Plan, a lump sum payout is made
to participants of the present value, using a discount rate of
4.2 percent, of the participant's scheduled projected
benefits, assuming periodic distributions of the participant's
accrued benefit in the normal form under the plan, actuarially
adjusted according to a formula for the participant's age at
the time of the Change-in-Control.
- Excess funding in the Pension Plan is allocated, according to
a formula, to participants and retirees.
- Deferred compensation under individual deferral agreements
which accrue interest based on the 10-year Treasury rate and
certain other benefits are paid over to previously established
rabbi trusts. Funds in such trusts will remain available for
the benefit of our general creditors prior to distribution.
17
<PAGE> 22
- Our Survivor Benefits Plan generally cannot be amended to
reduce benefits.
- Under the Directors and Executives Deferred Compensation Plan,
a lump sum payout is made to participating employees and
certain terminated employees of the present value, using a
discount rate of 4.2 percent, of the participant's scheduled
projected distributions, assuming employment through normal
retirement date and continued interest accruals at
above-market rates, described in the "Compensation of
Directors" section below.
The Human Resources Committee approved the following for Mr. Lewis, an
executive officer who retired in October of 1999 after 38 years of service: an
early retirement supplement of approximately $94,000 annually for four years,
an excise tax gross-up in the event of a change-in-control to the extent Mr.
Lewis incurs an excise tax, and as permitted by the plans for early retirees,
continued accrual of interest at the above-market rate under the Directors and
Executive Deferred Compensation Plan, early vesting of restricted stock, and a
survivor income benefit of two times salary under the Survivor Benefits Plan.
Mr. Lewis entered into a covenant not to compete in connection with these
benefits.
Compensation Committee Interlocks and Insider Participation
Messrs. Cantu, Martin, Rose, and Sansom and Mrs. Palmer, all of whom are
non-employee directors, served as members of the Board of Directors Human
Resources Committee ("Committee"), which is our compensation committee, during
all or a portion of 1999. No interlocking relationships existed with respect to
any of the members of the Committee. Mr. Horn, Chairman, President and CEO of
First Tennessee, was, however, during 1999, Chairman of the compensation
committee of Mid-America Apartment Communities, Inc., of which Mr. Cates, a
director of First Tennessee, is Chairman and CEO.
Certain Relationships and Related Transactions
Our banking subsidiaries have had banking transactions in the ordinary course of
business with our executive officers, directors, nominees, and their associates
which are reported in a note to our financial statements, and they expect to
have such transactions in the future. Such transactions, which at December 31,
1999, amounted to 5.5 percent of our shareholders' equity, have been on
substantially the same terms, including interest rates 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.
Notwithstanding anything to the contrary set forth in any of our 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
Our Bylaws require the Board of Directors or a Board committee to determine the
compensation of executive officers. The Board has designated the Human Resources
Committee (Committee) to perform this function. The Committee is composed
entirely of independent, nonemployee directors who have no interlocking
relationships with us. The Committee has set forth below its report on the
18
<PAGE> 23
compensation policies applicable to executive officers and the bases for the
compensation of the Chief Executive Officer (CEO) during 1999.
Our executive compensation programs are designed to align the interests of the
executive officers with our performance and the interests of our shareholders.
Approximately 70 to 85 percent of the executive officers' annual compensation
potential is at risk based on corporate performance and total shareholder return
(defined below). Compensation programs have been designed to reward executive
officers in both cash and our stock 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
executive officers. 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
- 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.
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 our practice to "reprice" stock options or
to price them at less than fair market value on the date of grant. Although
deferred compensation options have an exercise price of 85 percent (80 percent
for options granted for the year 2000) of fair market value on the grant date,
to receive the option the participant must forego the right to receive cash
compensation. Under our option plans, the amount of the foregone cash
compensation plus the option exercise price must equal or exceed 100 percent of
fair market value. We have offered deferred compensation at above-market rates
and deferrals through the use of stock options with deferrals since 1995 limited
to stock options or a 10-year Treasury rate of interest. Executive officers may
also defer the receipt of shares upon the exercise of stock options and defer
the receipt of restricted stock prior to the lapse of restrictions.
Except for our stock fund within our 401(k) plan, other benefits provided to the
executive officers are not tied to corporate performance.
The Committee reviewed external market data provided by an independent
consulting firm from 13 of the highest-performing companies in the American
Banker Top 50, a peer group of banking organizations against which we measure
our strategic performance. We selected the highest-performing companies based
generally on the following one and five-year return measures: return on assets,
return on equity, earnings per share growth, and total shareholder return.
The purpose of the review was to determine compensation practices of these
companies. The Committee also reviewed available compensation data on the other
banking organizations in the American Banker Top 50. 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) for the 1999 peer group because compensation data on every organization
included in the TSR graph was not available. The median asset size of the
19
<PAGE> 24
compensation highest-performing peer group was $30.0 billion. The median asset
size of the American Banker Top 50 was $54.7 billion. In actual practice the
compensation of executive officers approximates the median of the compensation
highest-performing peer group. We do not, however, have a specific policy that
mandates how our compensation practices will compare to the peer group.
All compensation paid to executive officers during 1999 is fully deductible on
our corporate federal income tax return. Section 162(m) of the Tax Code
generally disallows a tax deduction to public companies, including us, for
compensation exceeding $1 million paid during the year to the CEO and the four
other highest paid executive officers at year end. Certain performance-based
compensation is not, however, subject to the deduction limit. Under Tax Code
regulations the salary and TARSAP (defined below) portions of compensation do
not meet the performance-based compensation criteria of Section 162(m). The
restricted stock plan permits deferral by participants of the receipt of
restricted stock prior to the lapse of restrictions. Any such deferral does not
represent compensation paid during the year, and thus, is not currently subject
to the Section 162(m) limitation. The Committee's practice is to continue to
consider ways to maximize the deductibility of executive compensation while
retaining the discretion deemed necessary to compensate executive officers in a
manner commensurate with performance and the competitive market of executive
talent.
(i) The CEO's Compensation
Base Salary: The Committee establishes the CEO's base salary annually based on
corporate 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 Board of Directors approves the plan, which generally
contains strategic, quality and financial goals. A salary increase of 14.8
percent for Mr. Horn was approved in February of 1999 based on achievement of
1998 corporate return on common equity (ROE) objectives, Bank return on assets
(ROA) objectives, earnings per share (EPS) growth objectives, personal plan
objectives, and competitive practices. Although no specific weight is assigned
to these factors, the Committee places greater emphasis on corporate and
personal performance than on competitive practices within the industry. Base
salary is intended to represent approximately 15 percent to 20 percent (compared
to 25 percent in 1998) of the CEO's total compensation potential.
Annual Bonus: The CEO's annual bonus is based entirely on our corporate
performance against financial objectives established by the Committee at the
beginning of each year. The financial objectives for 1999 were based on ROE and
EPS. The CEO may be awarded an annual bonus of a maximum of 125 percent
(increased in January of 1999 from 75 percent in 1998) of his salary dollars
earned during the year. The degree of our success in reaching the corporate
targets determines a payout of zero percent to 100 percent of the CEO's annual
bonus potential. Management discussed with the Committee a possible revision of
1999 earnings resulting from a change in accounting treatment of two fourth
quarter transactions related to mortgage loans held for sale at FT Mortgage
Companies. After considering the possible revision of 1999 earnings as a result
of a change in accounting treatment and the timing of these events, the
Committee determined that annual bonuses for 1999 would be paid based on 1999
performance as originally reported, as per the authority granted to the
Committee under the plan. This corporate performance resulted in a payout of
81.4 percent of the maximum (less the 25 percent reduction described in the
following sentences) to the CEO for 1999. Adjustments, if any, as a
result of revisions to 1999 earnings will be considered by the Committee in its
review of performance for the year 2000 annual bonuses. At its October 1999
meeting, the Committee amended the annual bonus plan in which executive
officers, including the CEO, participate to reduce the amount paid in cash by
approximately 25 percent for the 1999, 2000 and 2001 plan years and to grant
stock options to the executive officers in an amount that was based on a
multiple of the estimated 1999 bonus reduction. The Committee made these
changes to further align the interests of the officers with the interests of
our shareholders.
20
<PAGE> 25
Long-term Awards: The CEO's long-term incentive compensation consists of
restricted stock and stock options.
Our restricted stock program includes performance criteria as a condition to
early vesting of awards to executive officers. The objective of this time
accelerated restricted stock award plan (TARSAP) feature is to associate more
closely the long-term compensation of executive officers 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., 1997-1999, 1998-2000, 1999-2001. Performance criteria
have always been based, for all participants, including the CEO, on total
shareholder return (appreciation in the market value of our stock with dividends
reinvested-TSR) targets established at the beginning of each performance period.
Targets are based on our 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 2000, the Committee approved
vesting the TARSAP shares for the 1997-1999 performance period. The Committee's
decision was based on a TSR for the period January 1, 1997, through December 31,
1999, of 62 percent, which exceeded the target and ranked us in the top 34
percent of the peer group. The restrictions on these shares, which were
originally scheduled to lapse on April 21, 2000, were accelerated to February
25, 2000, to coincide with the date anticipated for approval of executive
officer annual bonuses. In addition to the TSR targets, the Committee adopted
alternative criteria for the accelerated vesting of TARSAP awards made in 1996
and future years based upon our percentile ranking within the 100-bank peer
group with respect to operating EPS growth rate (or exceeding a minimum
operating EPS growth rate) and average operating ROE, with the condition that
TSR must be a positive number.
In addition to performance-based restricted stock awards, the Committee
generally awards stock options to executive officers, including the CEO, as a
part of a broad-based stock option program under which awards are made to all of
our employees, both full-time and part-time. The CEO's option award (which is
disclosed in the "Option/SAR Grants in Last Fiscal Year Table") was based on an
estimated value of the option which in combination with the restricted stock
award provides the basis for a competitive long-term incentive package. Because
the value of the option to the CEO is a function of the price growth of our
stock, the amount realized by the CEO is tied directly to increases in
shareholder value. In addition, the option grant contained a performance-based,
accelerated vesting feature, which is described in part (ii) of this report.
Other Benefits: The CEO's compensation reported in the Summary Compensation
Table also includes accrual of above-market rates of interest on compensation
deferred prior to 1996 and the cost of insurance to fund a supplemental
21
<PAGE> 26
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: The CEO recommends and the Committee approves the base salary for
executive officers other than the CEO. 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 1998,
which were achieved, were the same for executive officers as the CEO: corporate
ROE, Bank ROA objectives, and EPS growth objectives. It is our policy to
maintain a competitive salary commensurate with the duties and responsibilities
of the executive officers. Salary is intended to represent approximately 25
percent (compared to 40 percent in 1998) of an executive officer's potential
annual compensation.
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
1999 were based on ROE and EPS. Although Mr. Horn has an individualized personal
plan, his annual bonus is 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 other than the CEO is between 45 percent and 100 percent
(increased for the Financial Services Presidents in January of 1999 and for the
other executive officers in February of 1999 from 45 to 60 percent in 1998) of
salary dollars during the year, based on salary grade. As stated above, the
CEO's annual bonus for 1999 was based on 81.4 percent achievement of corporate
financial objectives. Annual bonuses for the Financial Services Presidents were
based on the same financial objectives, but were adjusted downward for
individual personal plan performance. Annual bonuses for the other executive
officers, except the Chief Credit Officer, were also based on ROE and EPS, but
the financial objectives were different and resulted in 93.2 percent achievement
of corporate financial objectives, adjusted in each case downward to the extent
individual personal plan performance was less than 100 percent.
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. We do not provide a federal
income tax gross-up to executive officers at the vesting of restricted stock.
In addition to performance-based restricted stock awards, the Committee
generally awards stock options annually on our stock to executive officers,
including the CEO, as a part of the option program discussed in part (i) of this
report. The number of shares awarded to executive officers is equal to a
percentage of salary (ranging from 100 percent to 200 percent depending on
salary grade, with 200 percent used for the CEO) divided by the market value (or
for the CEO and the Financial Services Presidents, the Black-Scholes value) of
one share of our stock at the time of grant (except for the March 1, 2000, grant
discussed below). Executive officers may also be awarded shares in addition to
those calculated as a percent of salary if in the opinion of the Committee
22
<PAGE> 27
additional shares are required to ensure a competitive compensation opportunity.
The exercise price is the market value at the time of grant. Options are awarded
based on personal performance and to encourage future performance as well as for
retention purposes (with a ten-year term and vesting at 50 percent after four
years and 100 percent after five years). The April 1999 grant's exercise price
is $40.13. This grant contains a provision for accelerated vesting if the
closing market price per share equals at least $54.88 for five consecutive days
in the three years following the grant or at the end of the three year period.
Options are not granted based on prior corporate performance; except for the
March 1, 2000, grants made to the CEO and the Financial Services Presidents,
which are based in part on prior corporate performance. At its meeting on
February 25, 2000, after considering the possibility of a press release related
to the earnings outlook for 2000, the Committee determined it appropriate to
follow its normal procedure of pricing options after market absorption of
information in a press release, but determined to reduce the number of shares
subject to options granted. As a result, for the March 1st grant, the Committee
based the number of shares awarded on the February 25th market value (or for the
CEO and Financial Services Presidents, Black-Scholes value) and based the
exercise price on the March 1st market value.
As described above for executive officers and the CEO, bonus plans for all
employees above a specified salary grade were amended to reduce amounts paid in
cash by approximately 25 percent for plan years 1999, 2000, and 2001, and the
Committee awarded options to this population at its October 1999 meeting in an
amount based on a multiple of the estimated 1999 bonus reduction.
Other Benefits: We have adopted certain broad-based employee benefit plans in
which executive officers participate and certain other retirement, life and
health insurance plans and we provide customary personal benefits. Except for
our stock fund within our 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
Vicki R. Palmer, Chairperson
Carlos H. Cantu
R. Brad Martin
Michael D. Rose
23
<PAGE> 28
The following graph compares the yearly percentage change in our cumulative
total shareholder return with returns based on the Standard and Poor's 500 index
and a peer group index, which is described below and 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. Our peer group consists of the
American Banker Top 50 banking organizations (excluding First Tennessee) as
measured by market capitalization as of the end of the most recent fiscal year.
Total Shareholder Return Performance Graph
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
First Tennessee $ 100 $154 $198 $360 $419 $322
S&P 500 100 137 169 225 289 350
1999 Peer Group 100 156 214 330 358 349
- -----------------------------------------------------------------------------
</TABLE>
The graph assumes $100 is invested on December 31, 1994, and dividends are
reinvested. Returns are market-capitalization weighted.
The 1999 peer group consists of the following: AmSouth Bancorporation,
Associated Banc Corp, BankWest Corporation, Banc One Corporation, BankAmerica
Corporation, Bank of New York Co., Inc., Branch Banking and Trust Company,
Charter One Financial, Inc., Chase Manhattan Corporation, Citigroup Inc.,
Comerica Incorporated, Commerce Bancshares, Inc., Compass Bancshares, Inc.,
Fifth Third Bancorp, First Virginia Banks, Inc., Firstar Corp, First Security
Corporation [DE], First Union Corporation, First Merit Corp, Fleet Boston
Financial Corp., Hibernia Corporation, Huntington Bancshares Incorporated, J.P.
Morgan & Co., KeyCorp, M & T Bank Corporation, Marshall & Ilsley Corporation,
Mellon Financial Corporation, Mercantile Bankshares Corporation, National City
Corporation, National Commerce Bancorp, North Fork Bancorporation, Northern
Trust Corporation, Old Kent Financial Corporation, PNC Bank Corp, Popular Inc.,
Regions Financial Corp, Republic New York Corp, SouthTrust Corporation, State
Street Corporation, Summit Bancorp, SunTrust Banks, Inc., Synovus Financial
Corporation, TCF Financial Corp, UnionBanCal Corporation, Union Planters
Corporation, U.S. Bancorp [DE], Wachovia Corporation, Wells Fargo & Company, and
Zions Bancorporation.
24
<PAGE> 29
Compensation of Directors
During 1999, each nonemployee director was paid a retainer quarterly at an
annual rate of $22,000 plus a fee of $1,000 for each day of each Board and each
committee meeting attended. The chairpersons of the Audit and Human Resources
Committees were paid monthly an additional retainer at an annual rate of $3,000
each. Our practice is to hold Board and committee meetings jointly with the
Bank's Board and committees. All of our directors are also directors of the
Bank. Directors are not separately compensated for Bank Board or committee
meetings except for those infrequent meetings that do not occur jointly.
Directors who are officers are not separately compensated for their services as
directors. Under the terms of our 1992 Restricted Stock Incentive Plan, which
was approved by the shareholders, all nonemployee directors received an
automatic, nondiscretionary award of 6,000 shares (adjusted for stock splits) 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 our stock. Upon termination for any of the
four listed reasons, all shares vest. Directors may elect to defer their
retainers and fees. Under the Non-Employee Directors' Deferred Compensation
Stock Option Plan, all non-employee directors elected to receive stock options
in lieu of fees through 1999. The exercise price per share is 85 percent of fair
market value of one share of our common stock on the date of grant, and the
number of shares subject to option granted equals the amount of fees deferred
divided by 15 percent of the fair market value of one share on the date of
grant. The 2000 Non-Employee Directors' Deferred Compensation Plan (the 2000
Director Plan) has been proposed for shareholder approval to replace the
existing plan, which terminated December 31, 1999, except for options
outstanding at that time. For a description of the terms of the 2000 Director
Plan, see Vote Item No. 2. Under the Directors and Executives Deferred
Compensation Plan, not offered with respect to compensation earned since 1995,
under which up to six annual deferrals may be elected, amounts deferred accrue
interest at rates ranging from 17-22 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 percent and 100 percent 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 have deferred and may defer amounts
which generally accrue interest at a rate tied to 10-year Treasury obligations.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (Exchange Act)
requires our directors and officers to file with the SEC initial reports of
ownership and reports of changes in ownership of our common stock and to furnish
us with copies of all forms filed.
To our knowledge, based solely on a review of the copies of such reports
furnished to us and written representations that no other reports were required,
during the past fiscal year all Section 16(a) filing requirements applicable to
our officers and directors were complied with.
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AVAILABILITY OF ANNUAL REPORT ON FORM 10-K
A COPY OF OUR 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 us of the 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
/s/ Lenore S. Creson
Corporate Secretary
March 24, 2000
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Exhibit A
FIRST TENNESSEE NATIONAL CORPORATION
2000 NON-EMPLOYEE DIRECTORS' DEFERRED
COMPENSATION STOCK OPTION PLAN
(ADOPTED 10-20-99)
1. PURPOSE. The 2000 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 $0.625 per share
(appropriately adjusted for subsequent stock splits), 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
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.
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(l) "Plan" means the 2000 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 with respect to calendar year 2004,
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, 2000, 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 400,000 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
canceled shall remain available for issuance under the Plan. For
purposes of computing the maximum number of shares that may be
issued under the Plan, if shares are tendered in payment of all or
portion of the exercise price, then the number of shares issued in
connection with such exercise is the number of shares subject to
option that was exercised, net of the number tendered in payment.
(b) Any increase in the number of outstanding shares of Common Stock
occurring through stock splits or stock dividends after the
adoption of the Plan shall be reflected proportionately in an
increase in the aggregate number of shares then available for the
grant of Stock Options under the Plan, or becoming available
through the termination or forfeiture of Stock Options previously
granted but unexercised and in the number subject to Stock Options
then outstanding, and a proportionate reduction shall be made in
the per-share exercise price as to any outstanding Stock Options 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, 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 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.
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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 October 20, 1999, must make
his or her election under the Plan no later than December 31, 1999.
Such election, if any, shall be applicable to Retainer/Fees otherwise
payable to such Non-Employee Director for service from January 1,
2000 through December 31, 2004, subject to the requirements of
Section 9.
(b) Each Non-Employee Director who is newly appointed or elected to the
Board after October 20, 1999, 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 (but not before January 1, 2000) through
December 31, 2004, subject to the requirements of Section 9. The
above notwithstanding, no election under the Plan shall be permitted
after June 30, 2004.
(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, 2004.
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 October 20, 1999, for each of the calendar years such
election is in effect shall be the first business day of July of such
calendar year and the first business day of January of the following
calendar year.
(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 October 20, 1999, 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 first
business day following the last day of the second full
calendar quarter of Board service after an election
pursuant to Section 6 has been made.
(ii) For all Stock Options granted subsequent to the initial
Stock Option, for each of the calendar years such
election is in effect the first business day of each
subsequent July of such calendar year and each
subsequent January of the following calendar year.
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 80%
of the Fair Market Value on the Grant Date.
(b) Each Stock Option shall cover the number of shares represented by "A"
in the following formula:
A = B/C, where
B = Amount of Retainer/Fees Earned
C = 20% of Fair Market Value of one share of Common Stock on the
Grant Date.
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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 January 1, 2000, in
the case of an election pursuant to Section 6(a), or the date of the
election (but not before January 1, 2000) 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 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
"non-employee directors" 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, 2004, 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.
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<PAGE> 35
12. RELOAD OPTION GRANTS.
(a) Reload Grants. Automatically upon the compliance by the Participant
with the following, the Participant will receive an additional
option (a "Reload Option") at the time and subject to the terms and
conditions described in this Section 12(a):
1. The Participant must exercise a Stock Option, using the
attestation method of exercise to pay all or a portion of
the exercise price of the Stock Option. Under the
"attestation method" the Participant or other person who
holds legal title to Shares of Common Stock beneficially
owned by the Participant attests to the ownership of a
sufficient amount of shares of Common Stock to pay all or a
portion of the exercise price of the Stock Option without
actually tendering such shares, and as a result the Company
issues to the Participant (or defers delivery of) that
number of shares equal to the number of shares subject to
Stock Option or Reload Option being exercised net of the
shares attested to.
2. The Participant must not have previously received the grant
of a Reload Option in connection with the exercise of a
portion of the Stock Option.
3. The Participant must be a current Director of the
Corporation at the time of the exercise of the Stock Option.
4. There must be at least one year remaining in the term of the
Stock Option at the time of its exercise.
5. The Reload Option will be granted on and as of the time and
date of the valid exercise of the Stock Option by the
Participant.
6. The exercise price per share of the Reload Option will be
the Fair Market Value of one share of Common Stock on the
date of exercise of Stock Option.
7. The number of shares of Common Stock with respect to which
the Reload Option will be granted will be equal to the
number of shares attested to by the Participant in payment
in all or a portion of the exercise price of the Stock
Option.
8. The Reload Option will be exercisable during a term
commencing at the time of the valid exercise of the Stock
Option and ending on the same date at the same time as the
original term of the Stock Option ends.
9. No Reload Option will be granted upon the exercise of a
Reload Option.
10. A Participant who has received more than one Stock Option
and who otherwise complies with this Section 12(a) will
receive a Reload Option with respect to each such Stock
Option.
11. The sale or other transfer of certain of the shares received
upon the exercise of a Reload Option will be restricted, as
follows:
(i) No restriction will apply to the shares
received upon the exercise of a Reload Option
if the Reload Option was granted in connection
with the exercise of an option in which the
Participant elected to defer receipt of shares.
(ii) Subject to (v), the restriction will apply to
that number of shares received upon the
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<PAGE> 36
exercise of a Reload Option equal to the
product of x times y times z divided
by w, where "x" is the number of shares
received upon the exercise of the Reload
Option, "y" is .50, "z" is the difference
between the fair market value of one share
at the time of exercise minus the exercise
price of one share, and "w" is the fair
market value of one share at the time of
exercise.
(iii) The restriction period will last until the
earliest to occur of the following: five years
following the exercise of the Reload Option,
death, disability, Normal Retirement, Early
Retirement, a change in control as defined in
the Company's 1997 Employee Stock Option Plan
or termination of service as a director for any
reason.
(iv) During the restriction period the Participant
cannot sell or otherwise transfer the shares,
and the shares either will be legended
accordingly or will be held in book-entry form
by the Company's transfer agent with
appropriate limitations on transferability in
place.
(v) In the event that the Participant determines to
sell shares of Common Stock to pay the taxes
associated with the exercise of a Reload
Option, then 50% of the shares so sold to pay
the taxes may be shares that otherwise would be
restricted pursuant to the provisions hereof.
(b) General. The term "Stock Option" as used in Sections 2(k), 3 (the
last sentence), 5, 8(d), 9(b), 9(d), 10 and 12 shall be deemed to
include a "Reload Option" for all purposes of such Sections.
13. 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 any "family member" of a Non-Employee Director as the term
"family member" is defined in the instructions to Form S-8
promulgated by the Securities and Exchange Commission.
(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.
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Exhibit B
FIRST TENNESSEE NATIONAL CORPORATION
2000 EMPLOYEE STOCK OPTION PLAN
(ADOPTED 10-20-99)
1. PURPOSE. The 2000 Employee Stock Option Plan (the Plan) of First Tennessee
National Corporation and any successor thereto (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 any one of the
following events:
(i) individuals who, on January 21, 1997, constitute the Board
(the Incumbent Directors) cease for any reason to constitute
at least a majority of the Board, provided that any person
becoming a director subsequent to January 21, 1997, whose
election or nomination for election was approved by a vote of
at least three-fourths (3/4) of the Incumbent Directors then
on the Board (either by a specific vote or by approval of the
proxy statement of the Company in which such person is named
as a nominee for director, without written objection to such
nomination) shall be an Incumbent Director; provided,
however, that no individual elected or nominated as a
director of the Company initially as a result of an actual or
threatened election contest with respect to directors or as a
result of any other actual or threatened solicitation of
proxies or consents by or on behalf of any person other than
the Board shall be deemed to be an Incumbent Director;
(ii) any "Person" (as defined under Section 3(a)(9) of the
Securities Exchange Act of 1934, as amended (the Exchange
Act) and as used in Section 13(d) or Section 14(d) of the
Exchange Act) is or becomes a "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 20% or
more of the combined voting power of the Company's then
outstanding securities eligible to vote for the election of
the Board (the "Company Voting Securities"); provided,
however, that the event described in this paragraph (ii)
shall not be deemed to be a change in control by virtue of
any of the following acquisitions: (A) by the Company or any
entity in which the Company directly or indirectly
beneficially owns more than 50% of the voting securities or
interests (a "Subsidiary"), (B) by an employee stock
ownership or employee benefit plan or trust sponsored or
maintained by the Company or any Subsidiary, (C) by any
underwriter temporarily holding securities pursuant to an
offering of such securities, or (D) pursuant to a
Non-Qualifying Transaction (as defined in paragraph (iii));
(iii) the shareholders of the Company approve a merger,
consolidation, share exchange or similar form of corporate
transaction involving the Company or any of its Subsidiaries
that requires the approval of the Company's shareholders,
whether for such transaction or the issuance of securities in
the transaction (a Business Combination), unless immediately
following such Business Combination: (A) more than 50% of the
total voting power of (x) the corporation resulting from such
Business Combination (the Surviving Corporation), or (y) if
applicable, the ultimate parent corporation that directly or
indirectly has beneficial ownership of 100% of the voting
securities eligible to elect directors of the Surviving
Corporation (the Parent Corporation), is represented by
Company Voting
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<PAGE> 38
Securities that were outstanding immediately prior to the
consummation of such Business Combination (or, if applicable,
is represented by shares into which such Company Voting
Securities were converted pursuant to such Business
Combination), and such voting power among the holders thereof
is in substantially the same proportion as the voting power
of such Company Voting Securities among the holders thereof
immediately prior to the Business Combination, (B) no person
(other than any employee benefit plan sponsored or maintained
by the Surviving Corporation or the Parent Corporation), is
or becomes the beneficial owner, directly or indirectly, of
20% or more of the total voting power of the outstanding
voting securities eligible to elect directors of the Parent
Corporation (or, if there is no Parent Corporation, the
Surviving Corporation) and (C) at least a majority of the
members of the board of directors of the Parent Corporation
(or, if there is no Parent Corporation, the Surviving
Corporation) were Incumbent Directors at the time of the
Board's approval of the execution of the initial agreement
providing for such Business Combination (any Business
Combination which satisfies all of the criteria specified in
(A), (B) and (C) above shall be deemed to be a
"Non-Qualifying Transaction"); or
(iv) the shareholders of the Company approve a plan of complete
liquidation or dissolution of the Company or a sale of all or
substantially all of the Company's assets.
Computations required by paragraph (iii) 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.
Notwithstanding the foregoing, a change in control of the Company shall not be
deemed to occur solely because any person acquires beneficial ownership of more
than 20% of the Company Voting Securities as a result of the acquisition of
Company Voting Securities by the Company which reduces the number of Company
Voting Securities outstanding; provided, that if after such acquisition by the
Company such person becomes the beneficial owner of additional Company Voting
Securities that increases the percentage of outstanding Company Voting
Securities beneficially owned by such person, a change in control of the Company
shall then occur.
(b) "Committee" means the Stock Option Committee or any successor
committee designated by the Board of Directors to administer this
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 the
several periods of the term of the option (if the option is
subject to quotas), as provided in Section 8(b) hereof.
(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 may be exercised, as provided in Section 8(a) hereof.
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<PAGE> 39
(i) "Three months after cessation of employment" means 5:00 p.m.
Memphis time on the date corresponding numerically with the date
reflected in the Company's records as the effective date of
termination of employment in the third month following the month
in which the effective date of termination of employment occurs
(or in the event that such third following month does not have a
date so corresponding, then the last day of the third following
month). Also, if the last day of such period is not a business
day, then the period will end at 5:00 p.m. Memphis time on the
last business day of such period.
(j) "Five years after (an event occurring on day x)" and "five years
from (an event occurring on day x)" means 5:00 p.m. on the date in
the fifth year following the year in which day x occurred
corresponding numerically with day x (or in the event that day x
is February 29, then February 28 in the fifth following year).
Also, if the last day of such period is not a business day, then
the period will end at 5:00 p.m. Memphis time on the last business
day of such period.
(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 upon approval at a
shareholder meeting by the holders of a majority of the shares of Company
common stock present, or represented, at such meeting and entitled to vote
on the Plan. No options may be granted under the Plan after the month and
day in the year 2010 corresponding to the day before the month and day on
which the Plan becomes effective. The term of options 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.
4. SHARES SUBJECT TO THE PLAN.
(a) The Company may grant options under the Plan authorizing the
issuance of no more than 1,500,000 shares of its $0.625 par value
(adjusted for any stock splits) common stock, which will be
provided from shares purchased in the open market or privately or
by the issuance of previously authorized but unissued shares. For
purposes of computing the maximum number of shares that may be
issued under the Plan, if shares are tendered in payment of all or
a portion of the exercise price, then the number of shares issued
in connection with such exercise is the number of shares subject
to option that was exercised, net of the number tendered in
payment.
(b) Shares as to which options previously granted under this Plan
shall for any reason lapse shall be restored to the total number
available for grant of options.
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 "non-employee director"
(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 shall be granted, the number
of shares subject to each option, the terms and term of the
option, and the date on which options shall be granted.
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6. ELIGIBILITY.
(a) Options 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 whom options shall be granted shall
be conclusive.
(b) An individual may receive more than one option, subject, however,
to the following limitations: (I) 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,
and (ii) the maximum number of shares with respect to which
options are granted to an individual during the term of the Plan,
as defined in Section 3 hereof, shall not exceed 1,000,000 shares.
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 (which must be a
non-qualified option and not an incentive stock 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 New York Stock Exchange on the valuation day 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:
(a) TERM. Each option 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 was granted and ending (unless the option
shall have terminated earlier under other provisions of the Plan)
on a date to be fixed by the Committee. Notwithstanding the
foregoing, each option granted under the Plan shall become
exercisable in full immediately upon a Change in Control.
(b) QUOTAS. The Committee shall have authority to grant options
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 an option, 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 (for all purposes under the Plan, in the absence
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<PAGE> 41
of an express designation by the Committee, the Company's
Executive Vice President-Employee Services is deemed to be the
Committee's designee) the following items:
(i) A notice, in the form and by the method (which may include
use of a telephone or other means of electronic
communication) 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 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 irrevocable
instructions (which may be by the use of a telephone or other means of
electronic communication) to a broker to deliver promptly to the
Company the amount of sale or loan proceeds to pay the purchase price
(a "cashless exercise"). 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 by a method other than a cashless exercise, the Company
shall promptly deliver to the grantee (or, in the event the grantee has
executed a deferral agreement, the Company shall deliver to the grantee
at the time specified in such deferral agreement) a certificate or
certificates for the shares purchased, without charge to him or her for
issue or transfer tax.
(d) POSTPONEMENTS. The Committee may postpone any exercise of an
option 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 to recognize the
exercise of an option or to sell or issue shares during the period
of such postponement. Any such postponement shall automatically
extend the time within which the option 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 exercise period on the first day of the postponement.
Neither the Company nor any subsidiary of the Company, nor any
of their respective directors or officers shall have any
obligation or liability to the grantee of an option or to a
successor with respect to any shares as to which the option shall
lapse because of such postponement.
(e) NON-TRANSFERABILITY. All options 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 may be
exercised during the lifetime of the grantee only by him or her or
by his/her guardian or legal representative.
(f) 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, as
specified by the grantee.
(g) RESTRICTIONS. This subsection (g) 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
(except options designated by the Committee as FirstShare
options), exercises and grantees. An amount equal to the spread
realized in connection with the exercise of an option within six
months prior to a grantee's voluntary resignation shall be paid to
the Company by the grantee in the event that the grantee, within
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<PAGE> 42
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.
(h) 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 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;
(ii) to permit a grantee to tender back shares of Company common
stock issued upon the exercise of an option; or
(iii) to deliver to the Company previously owned shares of Company
common stock, having, in the case of (i), (ii), or (iii), a
fair market value equal to the amount of the federal, state,
and local withholding tax associated with the exercise of
the option.
(i) 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. 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
shall terminate three months after the cessation of employment, unless it
terminates earlier under other provisions of the Plan. Until the option
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 all applicable conditions and
restrictions provided in Section 8 hereof. If a person to whom an option
has been granted shall retire or become disabled, the option shall
terminate three years (unless the option was granted in lieu of
compensation, in which case it shall be five years) after the date of early
retirement, retirement or disability, unless it terminates earlier under
other provisions of 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 to the
extent not previously exercised shall terminate at once.
10. EXERCISE OF OPTION AFTER DEATH OF GRANTEE. If the grantee of an option
shall die while in the employ of the Company or within three months after
ceasing to be an employee, and if the option was in effect at the time
of his or her death (whether or not its term had then commenced), the
option may, until the expiration of three years (unless the option was
granted in lieu of compensation, in which case it shall be five years)
from the date of death of the grantee or until the earlier expiration of
the term of the option, 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.
B-6
<PAGE> 43
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 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 under the Plan, or becoming available
through the termination or forfeiture of options previously
granted but unexercised;
(b) in the number available to grant to any one person;
(c) in the number subject to options then outstanding; and
(d) in the quotas remaining available for exercise under outstanding
options,
and a proportionate reduction shall be made in the per-share option
price as to any outstanding options 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 may thereafter be
granted, and in the number and class of shares remaining subject to
options 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. 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 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 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.
17. GOVERNING LAW. The Plan and all determinations thereunder shall be governed
by and construed in accordance with the laws of the State of Tennessee.
B-7
<PAGE> 44
18. SUCCESSORS. This Plan shall bind any successor of the Company, its assets
or its businesses (whether direct or indirect, by purchase, merger,
consolidation or otherwise), in the same manner and to the same extent that
the Company would be obligated under this Plan if no succession had taken
place. In the case of any transaction in which a successor would not by the
foregoing provision or by operation of law be bound by this Plan, the
Company shall require such successor expressly and unconditionally to
assume and agree to perform the Company's obligations under this Plan, in
the same manner and to the same extent that the Company would be required
to perform if no such succession had taken place. The term "Company," as
used in the Plan, shall mean the Company as herein before defined and any
successor or assignee to the business or assets, which by reason hereof,
becomes bound by this Plan.
B-8
<PAGE> 45
(FIRST TENNESSEE LOGO)
FIRST TENNESSEE NATIONAL CORPORATION
ANNUAL MEETING
APRIL 18, 2000
10:00 A.M. CENTRAL DAYLIGHT TIME
FIRST TENNESSEE BUILDING
M-LEVEL AUDITORIUM
165 MADISON AVENUE
MEMPHIS, TENNESSEE 38103
If you consented to access your proxy information electronically,
you may view it by going to the following website on the Internet:
http://www.firsttennessee.com
If you would like to access the proxy materials electronically next year,
you may do so by giving your consent at the following website:
http://www.econsent.com/ftn/
FIRST TENNESSEE NATIONAL CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints James L. Boren, Jr. and Lewis R. Donelson, or 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 25, 2000, 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, 2000, at
10 a.m. CDT 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 on reverse side)
YOU CAN VOTE YOUR PROXY BY TELEPHONE, OVER THE INTERNET, OR BY SIGNING AND
RETURNING THIS CARD ON THE REVERSE SIDE.
(See voting instructions on reverse.)
<PAGE> 46
COMPANY #
--------------
CONTROL #
--------------
THERE ARE THREE WAYS TO VOTE YOUR PROXY.
YOUR TELEPHONE OR INTERNET VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR SHARES
IN THE SAME MANNER AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY CARD.
VOTE BY PHONE - TOLL FREE - 1-800-240-6326 - QUICK --- EASY --- IMMEDIATE
- - Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a week,
until 12:00 p.m. (noon) on April 17, 2000.
- - You will be prompted to enter your 3-digit Company Number and your 7-digit
Control Number which are located above.
- - Follow the simple voice mail instructions.
VOTE BY INTERNET - http://www.eproxy.com/ftn/ - QUICK --- EASY --- IMMEDIATE
- - Use the Internet to vote your proxy 24 hours a day, 7 days a week, until
12:00 p.m. (noon) on April 17, 2000.
- - You will be prompted to enter your 3-digit Company number and your 7-digit
Control Number which are located above to obtain your records and create an
electronic ballot.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope
we've provided or return it to First Tennessee National Corporation, c/o
Shareowner Services SM, P. O. Box 64873, St. Paul, MN 55164-0873.
IF YOU VOTE BY PHONE OR INTERNET, PLEASE DO NOT MAIL YOUR PROXY CARD.
- Please detach here -
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR ALL ITEMS.
1. Election of four Class I directors to serve until the 2003 Annual Meeting of
Shareholders.
Nominees: (01) R. Brad Martin (03) Vicki R. Palmer
(02) Joseph Orgill, III (04) William B. Sansom
[ ] FOR [ ] WITHHELD
all nominees from all nominees
(except as marked)
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY ----------------------------
NOMINEE(S), WRITE THE NUMBER(S) OF THE NOMINEE(S)
IN THE BOX TO THE RIGHT. ----------------------------
2. Approval of 2000 Non-Employee Directors' Deferred Compensation
Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Approval of 2000 Employee Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Ratification of appointment of Arthur Andersen LLP as auditors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The undersigned hereby acknowledges receipt of notice of said meeting and the
related proxy statement.
Address change? Mark Box [ ] Indicate changes below: Date ___________ , 2000
----------------------------
----------------------------
Signature(s) in Box
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.
<PAGE> 47
Clyde A. Billings, Jr.
Senior Vice President & Counsel
First Tennessee National Corporation March 24, 2000
P.O. Box 84
Memphis, TN 38101
(901) 523-5679
Cable FIRBANK
VIA EDGAR
Securities and Exchange Commission
450 Fifth Street, N.W.
Judiciary Plaza
Washington, DC 20549
RE: First Tennessee National Corporation
Definitive Proxy Statement
SEC File No. 000-4491
CIK No. 0000036966
Gentlemen:
In accordance with Regulation Section 240.14a-6, we are submitting, via EDGAR,
the definitive proxy statement (including an attached letter to shareholders and
a notice of annual meeting) and form of proxy (attached as an appendix at the
end thereof) of First Tennessee National Corporation with reference to the
annual meeting of shareholders scheduled for April 18, 2000.
The proxy statement contains as vote items two stock option plans, the 2000
Non-Employee Directors' Deferred Compensation Stock Option Plan and the 2000
Employee Stock Option Plan. Each of the plans is a part of the proxy statement
(Exhibit A and Exhibit B thereto) and is included in the EDGAR filing. We hereby
inform you, as supplemental information, that the shares to be issued under each
plan were registered under the Securities Act in separate Form S-8 registration
statement filings on December 6, 1999.
No fee is required with this filing. Definitive copies of the proxy statement
and form of proxy are intended to be released to shareholders on or about March
24, 2000.
Sincerely,
/s/ Clyde A. Billings, Jr.
----------------------------------------
Clyde A. Billings, Jr.
Enclosures
