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EXHIBIT 10.4(a)
NOTICE OF
2003 LONG-TERM INCENTIVE PLAN AWARD ("2003 LTIP AWARD")
UNDER 2003 EQUITY COMPENSATION PLAN
1.0 OBJECTIVE:
The purpose of
the Long-Term Incentive Plan Award ("LTIP") pursuant to
Section 8 of
First Horizon National Corporation's 2003 Equity Compensation
Plan (the
"Plan") is to provide motivation for key executives to achieve
the Company's
strategic objectives and ensure incentive rewards and
performance are
linked to shareholder value.
2.0 LTIP PERFORMANCE PERIOD:
The LTIP
performance period will be the Company's fiscal years beginning
January 1, 2003
and ending December 31, 2005.
3.0 ELIGIBILITY:
o
Eligibility for executive officers who are subject to Section
16
(as defined in the Plan) or who are Covered Officers (as
defined
in the Plan) is approved annually by the Compensation Committee
("Committee").
o
Eligibility for all other executives is approved annually by
the
CEO.
4.0 FUNDING OF THE INCENTIVE POOL:
o As soon as possible
following the end of the Performance Period, the
Committee shall
determine the 2003 LTIP Award earned by each Participant in
the manner
described in Sections 4.0 and 5.0 of this Notice (the "Earned
Award").
o The amount by which
the Company will fund the incentive pool from which all
of the
Participants' 2003 LTIP Awards will be paid will be determined
based
on the higher of
the following two criteria established by the Compensation
Committee: (1)
the Company's price/earnings ratio ("P/E Ratio") relative to
the Peer Group
(as defined below) as of the Measurement Date or (2) the
compound annual
growth rate ("CAGR") in the Company's stock price.
o The Company's relative
P/E Ratio measurement criterion is as follows:
o If the Company's P/E Ratio equals
the ____th percentile of the
P/E Ratio of the Peer Group, an incentive pool will be funded
equal to 20% of the maximum aggregate potential 2003 LTIP Award
of all the Participants. The "Peer Group" shall be the "Top 50
Banks" as identified by American Banker at the beginning of the
Performance Period.
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o If the
Company's P/E Ratio equals the ____th percentile of the
P/E Ratio of the Peer Group, an incentive pool will be funded
equal to 100% of the maximum aggregate potential 2003 LTIP
Award
of all the Participants.
o Straight
line interpolation will be used to fund the incentive
pool when performance is between the ____th and ____th
percentile
of the Peer Group.
o
Regardless of Company's relative performance, no incentives
will
be funded or paid unless the Company's P/E Ratio increases
during
the Performance Period.
o The P/E
Ratio at the beginning of the Performance Period is 12.3.
o The
initial Performance Period covers 3 years (2003 - 2005), and
the Measurement Date for the initial Performance Period will be
January 31, 2006.
o The
numerator of the P/E Ratio will be based on the
60-trading-day average closing price for the period ending
January 31, as reported by The Wall Street Journal, unless the
Committee selects another period (e.g., due to market
volatility
or rumors of potential transactions).
o The
denominator of the P/E Ratio will be the Company's actual
earnings for the year ended 12/31/05, unless the Committee
approves a different period.
o If, at
the end of the Performance Period, the Committee
determines
that the Company's P/E Ratio is distorted (positively
or negatively) by market volatility (e.g., due to speculation
about potential business combinations), then the Committee may
adjust the incentive pool. Alternatively, the Committee may
direct the Company to calculate its relative P/E Ratio over a
longer or shorter period of time (i.e., 90 days rather than 60
days) or otherwise determine a normalized P/E Ratio for
comparison to the Peer Group.
o The stock price CAGR
measurement criterion is as follows:
o Target
based on 2003-2005 strategic plan as presented to the
board in October, 2002.
o 100% payout earned only if
stock price CAGR represents
significant return to shareholders as indicated in the
following
grid:
<TABLE>
<CAPTION>
CAGR =>
Payout %
----
--------
<S>
<C>
___%
100%
___
75
___
50
___
25
___
-0-
</TABLE>
o The amount of the
incentive pool funded may be reduced by the
Committee in order to more accurately reflect the Company's
total
performance. In determining the amount, if any, by which the
incentive
pool will be reduced, the Committee may consider measures such as
the
following:
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<TABLE>
<CAPTION>
--------------------------------------
Factor
Guideline
--------------------------------------
<S>
<C>
Rating Agencies
[guideline
redacted]
--------------------------------------
Regulatory
[guideline redacted]
--------------------------------------
Capitalization
[guideline
redacted]
--------------------------------------
Governance
[guideline redacted]
--------------------------------------
</TABLE>
Failure to meet
the guideline for any one of the above factors may in the
Committee's
discretion result in a 20% reduction, up to a total reduction
of 80%, of the
incentive pool.
5.0 DETERMINATION OF INDIVIDUAL
PARTICIPANT'S MAXIMUM EARNED AWARD AND PAYMENT
OF AWARD:
The objective of
the LTIP is to deliver a total annual award up to 75% of
the maximum
bonus potential for each individual Participant under his/her
respective
annual bonus plan for the Performance Period (MIP or
FirstPower). The
incentive pool available will be determined based on the
applicable
performance criteria outlined in Section 4.0 above. Each
Participant's
maximum Earned Award will be calculated as follows:
[Standard version formula:]
o Annual LTIP Value = Eligible Base Salary times Annual Bonus Plan
Target Percentage times 0.75
[Formula applicable to executives whose
bonuses are based on a measure of
business unit earnings:]
o Annual LTIP Value =
Eligible Base Salary times 0.75
The Annual LTIP
Value will be determined for each calendar year during
the
Performance
Period. At the end of the Performance Period, the maximum
Earned Award
will be determined as follows:
o Earned Award = (2003
Annual LTIP Value + 2004 Annual LTIP Value + 2005
Annual LTIP Value)
times (percentage of incentive pool funded as
described in Section 4.0 above).
o Notwithstanding
anything to the
contrary herein, the Committee may in
its discretion choose to award a Participant less than his/her
maximum
Earned Award as calculated above, taking into account such factors
as
it may deem relevant,
including but not limited to the Participant's
achievement of his/her
bonus objectives under his/her applicable
annual bonus plan.
o Notwithstanding
anything to the
contrary herein,
the Committee may
delay the payment
of any Earned Award for a period of up to a
year
after the Measurement Date.
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6.0 TERMINATION OF EMPLOYMENT AND
FORFEITURE OF AWARD:
Except as may
otherwise be determined by the Committee, in the event that
the
Participant's employment with the Company (including its
subsidiaries)
terminates for
any reason prior to the end of the Performance Period, the
2003 LTIP Award
shall be forfeited, and neither the Participant, nor any
successor, heir,
assign or personal representative of the Participant,
shall have any
further right to or interest in the 2003 LTIP Award.
Notwithstanding
anything herein to the contrary, if a Change in Control (as
defined in
Section 7) occurs and if, prior to the date on which the Change
in Control
occurs, the Participant's employment with the Company is
terminated or
the Participant is reassigned to a position which in the
opinion of the
Committee reduces the Participant's ability to make an
impact upon the
profitability of the Company through his/her decisions,
actions and
counsel and if it is reasonably demonstrated by the Participant
that such
termination of employment or reassignment of position (i) was
at
the request of a
third party who has taken steps reasonably calculated to
effect a Change
in Control or (ii) otherwise arose in connection with or in
anticipation of
a Change in Control, then for all purposes of this Notice
the 2003 LTIP
Award shall not be forfeited by the Participant to the
Company upon
such termination or reassignment, and the amount of the 2003
LTIP Award shall
be determined by the Committee as described in Section 7.0
below and shall
vest and be payable immediately upon the Change in Control.
7.0 CHANGE IN CONTROL:
Notwithstanding
anything herein to the contrary, upon a Change in Control,
the Committee
shall determine the amount of the 2003 LTIP Award in the
manner set forth
in this Section 7.0 (the "CIC LTIP Award"). The CIC LTIP
Award shall
equal the maximum potential 2003 LTIP Award, prorated to
reflect the
percentage of the Performance Period that has elapsed between
the beginning of
the Performance Period and the date of the Change in
Control. The CIC
LTIP Award shall vest and be immediately payable upon a
Change in
Control. 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
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or on behalf of any person other than the Board shall be deemed to
be
an Incumbent Director;
(ii) any
"Person" (for purposes of this definition only, 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 interest (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 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
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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 have
occurred solely
because any Person acquires beneficial ownership of more
than twenty
percent (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.
8.0 EFFECT ON EMPLOYMENT:
Nothing
contained in the LTIP shall confer upon the Participant the
right
to continue in
the employment of the Company (including its subsidiaries)
or affect any
right that the Company (including its subsidiaries) may have
to terminate the
employment of the Participant.
9.0 AMENDMENT:
The 2003 LTIP
Awards may not be amended except with the consent of the
Committee.
10.0 WITHHOLDING:
Whenever
payments hereunder are to be made in cash, the Company shall
have
the right to
withhold from sums due to the Participant (or to require the
Participant to
remit to the Compan
