PRE 14A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities
Exchange Act of 1934 (Amendment No.
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Filed by the Registrant
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Filed by a Party other than the Registrant
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Check the appropriate box:
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þ Preliminary
Proxy Statement |
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o Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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o Definitive
Proxy Statement
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o Definitive
Additional Materials
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o Soliciting
Material Pursuant to §240.14a-12
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Pinnacle Financial Partners, Inc.
(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):
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No fee required.
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Fee computed on table below per Exchange Act
Rules 14a-6(i)(4) and 0-11.
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Title of each class of securities to which
transaction applies:
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Aggregate number of securities to which
transaction applies:
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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):
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Proposed maximum aggregate value of transaction:
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Fee paid previously with preliminary materials.
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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.
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Amount Previously Paid:
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Form, Schedule or Registration Statement No.:
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TABLE OF CONTENTS
PINNACLE FINANCIAL PARTNERS, INC.
211 Commerce Street, Suite 300
Nashville, Tennessee 37201
(615) 744-3700
March 11, 2009
Dear Shareholder:
You are cordially invited to attend our annual meeting of shareholders, which will be held at
Pinnacle Financial Partners main office located at 211 Commerce Street, Nashville, Tennessee
37201, on Tuesday, April 21, 2009, at 11:00 a.m., CDT. I sincerely hope that you will be able to
attend the meeting, and I look forward to seeing you.
The attached notice of the annual meeting and proxy statement describes the formal business to
be transacted at the meeting. We will also report on our operations for the year ended December 31,
2008 and the first quarter of 2009, as well as our plans for the future. Your attention is
directed to the proxy statement accompanying this notice for a more complete statement regarding
the matters proposed to be acted upon at the meeting.
A copy of our annual report, which contains information on our operations and financial
performance as well as our audited financial statements, is also included with this proxy
statement.
Please take this opportunity to become involved in the affairs of Pinnacle Financial Partners,
Inc. Whether or not you expect to be present at the meeting, please mark, date, and sign the
enclosed proxy card, and return it to us in the envelope provided as soon as possible. This will
not prevent you from voting in person, but will help to secure a quorum and avoid added
solicitation costs. If you decide later to attend the meeting, you may withdraw your proxy at any
time and vote your shares in person.
Sincerely,
M. Terry Turner
President and Chief Executive Officer
PINNACLE FINANCIAL PARTNERS, INC.
211 Commerce Street, Suite 300
Nashville, Tennessee 37201
(615) 744-3700
NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 21, 2009
The annual meeting of shareholders of Pinnacle Financial Partners, Inc. (the Company) will
be held on Tuesday, April 21, 2009, at 11:00 a.m., CDT at our main office located at 211 Commerce
Street, Nashville, Tennessee 37201 for the following purposes:
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To elect five persons to serve as Class III directors for a three-year term; |
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To consider and act upon a proposal to amend the Companys 2004 Equity Incentive
Plan to increase the number of shares of Pinnacle common stock reserved for issuance
under the plan by 750,000 shares; |
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To consider and act upon a proposal to ratify use of the performance measures in
the Companys 2004 Equity Incentive Plan; |
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To ratify the appointment of KPMG LLP as the Companys independent registered
public accounting firm for the fiscal year ending December 31, 2009; |
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To approve the Companys executive compensation programs and procedures in
accordance with recently enacted say on pay regulations of the American Recovery and
Reinvestment Act of 2009; and |
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To transact any other business as may properly come before the meeting or any
adjournments of the meeting. |
The Board of Directors has set the close of business on February 27, 2009, as the record date
for determining the shareholders who are entitled to notice of, and to vote at, the meeting.
We hope that you will be able to attend the meeting. We ask, however, whether or not you plan
to attend the meeting, that you mark, date, sign, and return the enclosed proxy card as soon as
possible. Promptly returning your proxy card will help ensure the greatest number of shareholders
are present whether in person or by proxy.
If you attend the meeting in person, you may revoke your proxy at the meeting and vote your
shares in person. You may revoke your proxy at any time before the proxy is exercised. Should you
desire to revoke your proxy, you may do so as provided in the accompanying proxy statement.
By Order of the Board of Directors,
Hugh M. Queener Corporate Secretary
Nashville, Tennessee
March 11, 2009
NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS
Important Notice Regarding the Availability of Proxy Materials for the
Annual Stockholder Meeting to be Held on April 21, 2009
Pursuant to rules promulgated by the Securities and Exchange Commission, we have provided
access to these proxy statement materials (which includes this proxy statement, a proxy card and
our 2008 Annual Report) both by sending you this full set of proxy statement materials, including a
proxy card, and by notifying you of the availability of such materials on the Internet.
This proxy statement, the Companys 2008 Annual Report and a proxy card are available at
http://www.[pnfp.com].
The Annual Meeting of Shareholders will be held April 21, 2009 at 11:00 a.m. local time at
Pinnacle Financial Partners main office located at 211 Commerce Street, Nashville, Tennessee
37201. In order to obtain directions to attend the Annual Meeting of Shareholders, please call Hugh
Queener, our Chief Administrative Officer, at (615) 744-3700.
The Proposals to be voted upon at the Annual Meeting of Shareholders, all of which are more
completely set forth in this proxy statement, are as follows:
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To elect five persons to serve as Class III directors for a three-year term. |
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To consider and act upon a proposal to amend the Companys 2004 Equity Incentive
Plan; |
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To consider and act upon a proposal to ratify use of the performance measures in
the Companys 2004 Equity Incentive Plan; |
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To ratify the appointment of KPMG LLP as the Companys independent registered
public accounting firm for the fiscal year ending December 31, 2009; |
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To approve the Companys executive compensation programs and procedures in
accordance with recently enacted say on pay regulations of the American Recovery and
Reinvestment Act of 2009; and |
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To transact any other business as may properly come before the meeting or any
adjournments of the meeting. |
Our Board of Directors recommends that you vote FOR the approval of all of the Proposals.
For information on how to vote in person at the Annual Meeting of Stockholders, please see the
section entitled Important Meeting and Voting Information below.
PINNACLE FINANCIAL PARTNERS, INC.
211 Commerce Street, Suite 300
Nashville, Tennessee 37201
(615) 744-3700
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PROXY STATEMENT FOR 2009 ANNUAL MEETING
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The Board of Directors (the Board) of Pinnacle Financial Partners, Inc. (the Company) is
furnishing this proxy statement in connection with its solicitation of proxies for use at the 2009
Annual Meeting of Shareholders (the Meeting) to be held at 11:00 a.m. CDT on Tuesday, April 21,
2009 at our main office located at 211 Commerce Street, Nashville, Tennessee 37201, and at any
adjournments of the meeting. The enclosed proxy is solicited by the Board of Directors of the
Company.
The purposes of the Meeting are to elect five Class III directors, to amend the Companys 2004
Equity Incentive Plan to increase the number of shares of Pinnacle common stock for issuance under
the plan by 750,000 shares, to ratify use of the performance measures in the Companys 2004 Equity
Incentive Plan, to ratify the appointment of the Companys independent registered public accounting
firm, to approve the Companys executive compensation programs and procedures in accordance with
recently enacted say on pay regulations of the American Recovery and Reinvestment Act of 2009,
and to transact such other business as may properly be brought before the Meeting or any
adjournment thereof.
The close of business on February 27, 2009 is the record date for the determination of
shareholders entitled to notice of, and to vote at, the Meeting. We first mailed this proxy
statement and the accompanying proxy card to shareholders on March 11, 2009.
As of the close of business on the record date, the Company had 90,000,000 shares of Common
Stock, $1.00 par value per share (the Common Stock), authorized, of which 24,000,021 shares were
issued and outstanding and 10,000,000 shares of preferred stock, no par value (the Preferred
Stock), authorized, of which 95,000 shares of Fixed Rate Cumulative Perpetual Preferred Stock,
Series A (Series A Preferred Stock) were issued and outstanding. Each issued and outstanding
share of Common Stock is entitled to one vote on all matters presented at the meeting. Pursuant to
the Companys Amended and Restated Charter, none of the issued and outstanding shares of the Series
A Preferred Stock entitle a holder thereof to a vote upon any of the matters to be presented at the
Meeting.
IMPORTANT MEETING AND VOTING INFORMATION
Proxy Voting Procedures
If you properly sign, return and do not revoke your proxy, the persons appointed as proxies
will vote your shares according to the instructions you have specified on the proxy card. If you
sign and return your proxy card but do not specify how the persons appointed as proxies are to vote
your shares, your proxy will be voted as follows:
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FOR the election of the director nominees; |
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Pinnacle Financial Partners, Inc.
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FOR the amendment to the Companys 2004 Equity Incentive Plan to increase the
number of shares of the Companys Common Stock reserved for issuance under the plan
by 750,000 shares; |
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FOR the ratification of the performance measures in Pinnacles 2004 Equity
Incentive Plan; |
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FOR the ratification of KPMG LLP as the Companys independent registered public
accounting firm for the fiscal year ending December 31, 2009; |
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FOR the approval of the Companys executive compensation programs and procedures
in accordance with recently enacted say on pay regulations of the American
Recovery and Reinvestment Act of 2009 and |
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In the best judgment of the persons appointed as proxies as to all other matters
properly brought before the Meeting. |
If any nominee for election to the Board of Directors named in this proxy statement becomes
unavailable for election for any reason, the proxy will be voted FOR a substitute nominee selected
by the Board of Directors.
You may also vote in person by attending the meeting to be held at 11:00 a.m. CDT on Tuesday,
April 21, 2009 at our main office located at 211 Commerce Street, Nashville, Tennessee 37201.
Internet Availability of Proxy Materials
This proxy statement, proxy card and accompanying proxy materials are available on our website
at www.[pnfp.com].
Revocability of Proxies
You can revoke your proxy at any time before it is voted by delivering to Mr. Hugh M. Queener,
Corporate Secretary, Pinnacle Financial Partners, Inc., 211 Commerce Street, Suite 300, Nashville,
Tennessee 37201, either a written revocation of the proxy or a duly executed proxy bearing a later
date. You may also revoke your proxy by attending the Meeting and voting in person.
Shareholder Approval Requirements
A quorum will be present at the meeting if at least 12,000,011 shares of Common Stock are
represented in person or by valid proxy at the Meeting, which is a majority of the Companys
outstanding shares of Common Stock as of the record date. According to Tennessee law and the
Companys Amended and Restated Charter and Bylaws, the aggregate number of votes entitled to be
cast by all shareholders present in person or represented by proxy at the Meeting, whether those
shareholders vote for, against or abstain from voting, together with all broker non-votes
will be counted for purposes of determining whether a quorum is present.
Broker Proxies. Proxies that are returned to us where brokers have received
instructions to vote on one or more proposals but do not vote on other proposal(s) are referred to
as broker non-votes with respect to the proposal(s) not voted upon. Broker non-votes are included
in determining the presence of a quorum.
Vote Required to Elect Directors. The affirmative vote of a plurality of the votes
cast by the shareholders entitled to vote at the Meeting is required for the election of directors.
A properly executed proxy marked
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Pinnacle Financial Partners, Inc.
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WITHHOLD AUTHORITY with respect to the election of one or more directors will not be voted
with respect to the director or directors indicated, although it will be counted in determining
whether there is a quorum. Therefore, so long as a quorum is present, withholding authority will
have no effect on whether one or more directors is elected.
The Companys Board of Directors has adopted Corporate Governance Guidelines, as described in
more detail below, which provide that, should an incumbent director receive more Withhold
Authority votes than For votes, that director shall tender his or her resignation to the
Chairman of the Board following the shareholder vote. Subsequently, the Companys Nominating and
Corporate Governance Committee shall consider the relevant facts and circumstances, including the
factors that may have given rise to the resulting shareholder vote and the service and
qualifications of the impacted director(s), and recommend to the Board within ninety days of the
shareholder vote as to whether to accept or reject the resignation of the impacted director(s).
The Board shall also consider the relevant facts and circumstances as to whether to accept or
reject the Nominating and Corporate Governance Committees recommendation. Subsequently, the
Company shall describe a full explanation of the above process and the decisions reached in a Form
8-K filing with the Securities and Exchange Commission. Any director who tenders his resignation
pursuant to this provision shall not participate in any discussion or recommendation related to the
above process.
Vote Required to Amend the Companys 2004 Equity Incentive Plan, Ratify Performance
Measures in the Companys 2004 Equity Incentive Plan, Approve the Companys Executive Compensation
Programs and Procedures in accordance with recently enacted say on pay regulations of the
American Recovery and Reinvestment Act of 2009, and Ratify the Appointment of KPMG LLP. The
amendment to the Companys 2004 Equity Incentive Plan, ratification of the performance measures
under the Companys 2004 Equity Incentive Plan, approval of the Companys executive compensation
programs and procedures in accordance with recently enacted say on pay regulations of the
American Recovery and Reinvestment Act of 2009 and ratification of the appointment of KPMG LLP as
the Companys independent registered public accounting firm for the 2009 fiscal year and any matter
other than that enumerated above that properly comes before the Meeting will also be approved if
the number of shares of Common Stock voted in favor of the proposal exceeds the number of shares of
Common Stock voted against it. A properly executed proxy marked ABSTAIN with respect to a
proposal will not be voted on that proposal, although it will be counted in determining whether
there is a quorum. Therefore, abstaining from voting on the amendment of the Companys 2004 Equity
Incentive Plan, ratification of the use of the performance measures under the 2004 Equity Incentive
Plan, approval of the Companys executive compensation programs
and procedures or ratification of the appointment of KPMG LLP as the Companys independent registered public
accounting firm and any other proposal that properly comes before the Meeting will have no effect
on whether the proposal is approved so long as a quorum is present.
Proxy Solicitation
The
Company intends to engage a proxy solicitation firm to assist it in
the solicitation of proxies in connection with the Meeting. The
Company will pay the fees and expenses of this firm, which the Company
currently expects to be between $10,000 and $15,000. Our directors,
officers and employees also may, without
additional compensation, solicit proxies by personal interview, telephone, fax, or otherwise. We
will direct brokerage firms or other custodians, nominees or fiduciaries to forward our proxy
solicitation material to the beneficial owners of Common Stock held of record by these institutions
and will reimburse them for the reasonable out-of-pocket expenses they incur in connection with
this process.
Shareholder Proposals for Next Years Meeting
In order for shareholder proposals for the 2010 Annual Meeting of Shareholders to be eligible
for inclusion in the Companys 2010 Proxy Statement, all such proposals must be mailed to Hugh M.
Queener, Corporate Secretary, Pinnacle Financial Partners, Inc., 211 Commerce Street, Suite 300,
Nashville, Tennessee 37201, and must be received no later than the close of business on November
11, 2009. After this date, a shareholder who
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Pinnacle Financial Partners, Inc.
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intends to raise a proposal to be acted upon at the 2010 Annual Meeting of Shareholders, but
who does not desire to include the proposal in the Companys 2010 Proxy Statement, must inform the
Company in writing no later than January 25, 2010. If notice is not provided by that date, such
notice will be considered untimely and the Board may exclude such proposals from being acted upon
at the 2010 Annual Meeting of Shareholders. Further, if the Board elects not to exclude the
proposal from consideration at the meeting (although not included in the Proxy Statement), the
persons named as proxies in the Companys proxy for the 2010 Annual Meeting of Shareholders may
exercise their discretionary authority to act upon any such proposal.
CORPORATE GOVERNANCE
The Company has developed sound corporate governance principles which it believes are
essential to running the Companys business efficiently and to maintaining the Companys integrity
in the marketplace.
Corporate Governance Guidelines
The Companys Board has established a set of Corporate Governance Guidelines which address
such matters as director qualifications, director nominations, board composition, director
meetings, board committees and other matters. The Board believes such guidelines to be appropriate
for the Company in its effort to maintain best practices as to corporate governance. You may
access a copy of the Companys Corporate Governance Guidelines on the Corporate Governance
section of the Companys website at www.pnfp.com.
Director Independence
The Board has determined that each of the following directors is an independent director
within the meaning of NASDAQ Marketplace Rule 4200(a)(15) :
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Harold Gordon Bone;
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Reese L. Smith, III. |
Colleen Conway-Welch;
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Gregory L. Burns; |
William H. Huddleston, IV;
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James C. Cope; |
Hal N. Pennington;
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Clay T. Jackson; |
Dr. Wayne J. Riley;
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Dale W. Polley. |
The Board determined that Ms. Sue G. Atkinson did not meet the definition of an independent
director within the meaning of NASDAQ Marketplace Rule 4200(a)(15) due to the relationship the
Company has with her public relations firm and the services her firm provides the Company on an
ongoing basis.
When considering the independence of Mr. Jackson, the Nominating and Corporate Governance
Committee of the Board considered those transactions described below under Certain Relationships
and Related Transactions. When considering the independence of Mr. Cope, the Nominating and
Corporate Governance Committee and the Board considered the services provided to the Company by the
law firm of which Mr. Cope is a partner. When considering the independence of Mr. Huddleston, the
Nominating and Corporate Governance Committee and the Board of Directors considered the engineering
work performed for the Company by the engineering firm of which Mr. Huddleston is the President.
In January and June of 2008, the independent directors held two meetings at which only
independent directors were present. For the January meeting, the independent directors elected Hal
N. Pennington to be the chairperson and for the June meeting, former director, James L. Shaub II,
was elected chairperson. For 2009, the independent directors have determined that the chairman of
the Companys Nominating and Corporate Governance Committee, Hal N. Pennington, will serve as lead
independent director and preside as chairman at such meetings.
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Director Qualifications
The Companys Corporate Governance Guidelines contain certain criteria that apply to nominees
for a position on the Companys Board. The Companys Board and its Nominating and Corporate
Governance Committee have also adopted procedures for the evaluation of director candidates (the
Nominee Procedures) that contain certain minimum qualifications for candidates, including those
identified by the Companys shareholders. The Companys Corporate Governance Guidelines provide
that the Nominating and Corporate Governance Committee will annually review with the Board the
composition of the Board as a whole and will consider with the Board the current composition of the
Board in an effort to ensure that the members of the Board have a diversity of age, skills and
experience in the context of the needs of the Board.
The Nominee Procedures provide that the Nominating and Corporate Governance Committee may
consider whatever factors it deems appropriate in its assessment of a candidate for board
membership and that candidates nominated to serve as directors will, at a minimum, in the
Committees judgment:
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be able to represent the interests of the Company and all of its shareholders and not be
disposed by affiliation or interest to favor any individual, group or class of shareholders
or other constituency; |
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meet the minimum qualifications for directors set forth in the Corporate Governance
Guidelines and fulfill the needs of the Board at that time in terms of age, diversity,
experience and expertise; and |
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possess the background and demonstrated ability to contribute to the performance by the
Board of its collective responsibilities, through senior executive management experience,
relevant professional or academic distinction, and/or a record of relevant civic and
community leadership. |
In addition to these minimum qualifications, the Nominating and Corporate Governance Committee
may also consider whether the candidate:
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is of the highest ethical character and shares the core values of the Company as
reflected in the Companys Corporate Governance Guidelines and the Companys Code of
Conduct; |
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has a reputation, both personal and professional, consistent with the image and
reputation of the Company; |
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is highly accomplished in the candidates field; |
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has expertise and experience that would complement the expertise and experience of other
members of the Board; |
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has the ability to exercise sound business judgment; and |
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is independent as such term is defined by the NASDAQ Marketplace rules and the
applicable provisions of the Securities Exchange Act of 1934, as amended (the Exchange
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Service Limitations for other Public Company Boards of Directors
The Companys Corporate Governance Guidelines limit the number of public company boards of
directors on which the Companys directors may serve. Generally, non-employee directors may serve
on the Companys board of directors and no more than three other public company boards, unless the
non-employee director is the chief executive officer of a public company, in which case the
limitation is reduced to two other public company
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Pinnacle Financial Partners, Inc.
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boards. Employee directors are limited to the Companys board of directors plus two other
public company boards.
Stock Ownership Guidelines
All of the Companys directors are encouraged to maintain a meaningful personal ownership of
Common Stock in excess of minimum guidelines established by the Nominating and Corporate Governance
Committee. Generally, the guidelines require that directors own shares with a value of
approximately three times the average annual compensation paid a board member, provided that until
such level is reached, the minimum level may be satisfied by the retention of ownership of all
restricted shares granted that have vested, if any. All of the Companys directors are in
compliance with the minimum guidelines.
Process for Identifying Candidates
The Nominating and Corporate Governance Committee seeks to identify potential candidates for
membership on the Companys Board through conversations with members of the Board, senior
management and other members of the communities served by the Company.
The Nominating and Corporate Governance Committee also considers nominees proposed by the
Companys shareholders in accordance with the provisions contained in the Companys Bylaws. The
Nominating and Corporate Governance Committee considers candidates recommended by the Companys
shareholders within the context of the criteria and procedures described in the Nominee Procedures
and under the Director Qualifications and Evaluation of Candidate sections of this proxy
statement. Under the Companys Bylaws, any shareholder may nominate a person for election to the
Companys Board at the Meeting, provided that the nomination is received by the Secretary of the
Company no later than March 22, 2009. Each nomination submitted in this manner shall include the
name and address of the nominee(s) and all other information with respect to the nominee as
required to be disclosed in the proxy statement for the election of directors under applicable
rules of the Securities and Exchange Commission, including the nominees consent to being named as
a nominee and to serving as a director, if elected. Additionally, the nominating shareholder must
provide his or her name and address as it appears in the stock records of the Company and the
number of shares of Common Stock beneficially owned by the shareholder.
Evaluation of Candidates
The Nominating and Corporate Governance Committee will consider all candidates nominated
through the processes described above. The chair of the Nominating and Corporate Governance
Committee will preliminarily assess a candidates qualifications and suitability, working with
staff support and seeking input from the Board, and report such assessment as promptly as
practicable to the Nominating and Corporate Governance Committee members. When feasible, the chair
of the Nominating and Corporate Governance Committee will interview candidates whom the chair
believes are likely to meet the criteria for board membership as part of the preliminary assessment
process. The report may be made to the Nominating and Corporate Governance Committee at a meeting
of the committee or informally to each committee member between meetings.
If it is the consensus of the Nominating and Corporate Governance Committee that a candidate
is likely to meet the criteria for Board membership, the chair of the Nominating and Corporate
Governance Committee will advise the candidate of the committees preliminary interest and, if the
candidate expresses sufficient interest, with the assistance of the Companys corporate secretarys
office, will arrange interviews of the candidate with one or more members of the Nominating and
Corporate Governance Committee and senior management of the Company, and request such additional
information from the candidate as the committee deems appropriate. The Nominating and Corporate
Governance Committee of the Company will consider the candidates qualifications,
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Pinnacle Financial Partners, Inc.
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including the individuals background, skills and abilities, and whether such characteristics
are consistent with the Companys Corporate Governance Guidelines and the qualifications set forth
in the Nominee Procedures and whether the candidates qualifications and characteristics fulfill
the needs of the Board at that time. The Nominating and Corporate Governance Committee will then
confer and reach a collective assessment as to the qualifications and suitability of the candidate
for membership on the Companys Board. On the basis of its assessment, the Nominating and
Corporate Governance Committee will formally consider whether to recommend the candidates
nomination for election to the Board.
Code of Conduct
The Company has a code of conduct that applies to the Companys associates and directors. The
purpose of the code of conduct is to, among other things, provide written standards that are
reasonably designed to deter wrongdoing and to promote honest and ethical conduct; full, fair,
accurate, timely and understandable disclosure in reports and documents that the Company files with
the Securities and Exchange Commission and other public communications by the Company; compliance
with applicable governmental laws, rules and regulations; prompt internal reporting of violations
of the code of conduct; and accountability for adherence to the code of conduct. Each director and
associate is required to read and certify annually that he or she has read, understands and will
comply with the code of conduct.
Under the Sarbanes-Oxley Act of 2002 and the Securities and Exchange Commissions related
rules, the Company is required to disclose whether it has adopted a code of ethics that applies to
the Companys principal executive officer, principal financial officer, principal accounting
officer or controller or persons performing similar functions. The Companys chief executive
officer and senior financial officers are bound by the Companys code of conduct which contains
provisions consistent with the Securities and Exchange Commissions description of a code of
ethics.
A copy of the Companys code of conduct can be obtained from the Corporate Governance
section of the Companys website at www.pnfp.com. The Company intends to disclose any
legally required amendments to, or waivers from, the code of conduct with respect to its directors
and officers in accordance with the rules and regulations of the Securities and Exchange Commission
and the NASDAQ Stock Market. If such disclosure is made on the Companys website it will be
located in the Investor Relations section of the Companys website at www.pnfp.com.
Communications with Members of the Board
The Companys Board has established procedures for the Companys shareholders to communicate
with members of the Board. Shareholders may communicate with any of the Companys directors,
including the chairperson of any of the committees of the Board, by writing to a director c/o
Pinnacle Financial Partners, Inc., 211 Commerce Street, Suite 300, Nashville, Tennessee 37201.
Board Member Attendance at Annual Meeting
The Company encourages each member of the Board to attend the Annual Meeting of Shareholders.
All of the Companys directors who served on the Board at that time attended the 2008 Annual
Meeting of Shareholders except Mr. Bone.
PROPOSAL #1: ELECTION OF DIRECTORS
The Companys Bylaws provide that the Board shall consist of not less than five (5) nor more
than twenty-five (25) directors, and shall be divided into three classes. Effective November 18,
2008, James L. Shaub, II, a Class III director, resigned from the Board. Tennessee law and the
Companys Bylaws require that each class of
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director be as nearly equal in number as possible. Accordingly, following Mr. Shaubs
resignation and by resolution of the Board, Colleen Conway-Welch, formerly a Class I director,
became a Class III director.
The terms for five (5) of the Companys incumbent Class III directors including Ms.
Conway-Welch expire at the 2009 Annual Meeting. These directors are Colleen Conway-Welch, Ed C.
Loughry, Jr., Dale W. Polley, Reese L. Smith, III, and M. Terry Turner. The nomination of
directors Loughry, Conway-Welch, Polley, Smith, and Turner for their re-election to another
three-year term has been recommended by the Nominating and Corporate Governance Committee and
approved by the Board. The Nominating and Corporate Governance Committee has determined that
Messrs. Polley and Smith and Ms. Conway-Welch qualify as independent under the NASDAQ Marketplace
rules requiring that a majority of the Board meet required independence criteria. There are five
(5) directors whose terms expire at the 2010 annual meeting and six (6) other directors whose terms
expire at the 2011 annual meeting. In each case, directors are elected until their respective
successors are duly elected and qualified. At each annual meeting, one class of directors is
elected for a three-year term.
Unless a proxy specifies otherwise, the persons named in the proxy will vote the shares
covered thereby FOR the nominees as listed. Each nominee has consented to be a candidate and to
serve, if elected. While the Board has no reason to believe that any nominee will be unavailable,
if such an event should occur, it is intended that such shares will be voted for substitute
nominee(s) as selected by the Board.
All of the Companys directors also currently serve as directors of the Companys wholly-owned
subsidiary, Pinnacle National Bank (the Bank), Nashville, Tennessee.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE PROPOSED DIRECTOR NOMINEES.
Nominees for Election to the Board
Class III Directors:
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Colleen Conway-Welch (64)
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Director since February 28, 2000 |
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Term to expire 2009 |
Dr. Conway-Welch is the dean and holds responsibilities as the chief executive officer of
the Vanderbilt University School of Nursing, Nashville, Tennessee, a position she has held
since 1984. Because of her international stature as a voice for the nursing profession, Dr.
Conway-Welch has been previously called on to serve on President Reagans 1988 Commission on
HIV and the 1998 Congressional National Bipartisan Commission on the Future of Medicare, the
2002 Advisory Council to Secretary Thompson on Public Health Preparedness and the DHHS
Center for Medicare and Medicaids Advisory Committee for Medicare Coverage, is an elected
member of the Institute of Medicine of the National Academy of Science, and in 2007, was
appointed by President Bush to the Board of Regents of the Uniformed Services University of
the Health Sciences.
Her professional activities include serving as a member of the board of directors of the
following registered public companies; Ardent Health Systems and RehabCare Group. Formerly,
she served on the board of directors of First Union Bank of Tennessee.
In her community role, she has served on and chaired the Board of Directors for the
Nashville Symphony, chaired the Report Card Committee on Nashville Schools for the
Nashville Area Chamber of Commerce and is a member of the Nashville Downtown Rotary. She
also chaired the Middle Tennessee United Way annual campaign in 1999.
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Ed C. Loughry, Jr. (66)
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Director since March 15, 2006 |
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Term to expire 2009 |
Mr. Loughry served as Vice-Chairman of the Company until his retirement on December 31,
2007, a position he had held since March 15, 2006, following the merger between the Company
and Cavalry Bancorp, Inc. (Cavalry). Mr. Loughry joined Cavalry Banking in 1968 and
served as President and Chief Executive Officer of Cavalry Banking from 1982 until its
merger with Pinnacle National Bank in March 2006. He also served as President and Chief
Executive Officer of Cavalry from its inception in 1998 until its merger with the Company in
March 2006. Mr. Loughry has served on the boards of directors of the Rutherford County
Chamber of Commerce, United Way, Heart Fund, Federal Home Loan Bank of Cincinnati, the
Nashville branch of the Federal Reserve Bank of Atlanta board, the American Bankers
Association board and the ABA Bank Pac board. He is past Chairman of the Tennessee Bankers
Association. He has received the Leader in Banking Excellence award from the Tennessee
Bankers Association. He is also currently serving on the Middle Tennessee Medical Center
board and the Christy-Houston Foundation. He was selected Business Person of the Year in
1993 and Business Legend in 2000 by the Rutherford County Chamber of Commerce.
Mr. Loughry served as a director of Cavalry Banking from 1982 to 2006 and Cavalry from 1998
to 2006. He was the Chairman of Cavalrys Board from 1999 to 2006.
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Dale W. Polley (59)
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Director since February 28, 2000 |
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Term to expire 2009 |
Mr. Polley retired as a vice chairman and member of the board of directors of First American
Corporation and First American National Bank in 2000. In the nine years preceding these
positions, Mr. Polley served in various executive management positions at First American,
which included serving as its president from 1997 to 1999. Before joining First American in
1991, Mr. Polley was group executive vice president and treasurer for C&S/Sovran
Corporation, and held various executive positions within Sovran before its merger with C&S.
Mr. Polley joined Sovran from Commerce Union Bank of Nashville where he was its executive
vice president and chief financial officer.
Mr. Polley serves on the board of directors of OCharleys Inc. and HealthStream, Inc.,
registered public companies, headquartered in Nashville, Tennessee.
Mr. Polley also serves on the boards of the Nashville Sports Council, Gaylord Hotels Music
City Bowl, St. Thomas Health Services Foundation (currently Treasurer) and Vanderbilt-Ingram
Cancer Center. Additionally, he has formerly served on the boards of directors of the
Federal Reserve Bank of Atlanta (Nashville branch), Nashville Area Chamber of Commerce, T.J.
Martel Foundation, the American Cancer Society, the American Heart Association, the Pencil
Foundation, YMCA, and the United Way, where he served as chairman of the board and chairman
of the communitys 1995 fundraising campaign. Mr. Polley has also served as president of the
Nashville Club for the University of Kentucky Alumni Association. In 2006, Mr. Polley served
as the chairman of the steering committee for the Nashville Sports Councils hosting of the
2006 SEC Mens Basketball Tournament, a position he also held in 2001. Mr. Polley is a
member of Leadership Nashville, Tennessee Society of Certified Public Accountants and the
Financial Executives Institute.
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Reese L. Smith, III (60)
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Director since February 28, 2000 |
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Pinnacle Financial Partners, Inc.
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Mr. Smith is president of Haury & Smith Contractors, Inc., a real estate development and
home building firm. He is a native Tennessean, and has operated this business in the
Nashville area since his graduation from the University of Tennessee at Martin in 1970. From
1996 to 1999, Mr. Smith served as a board member of First Union National Bank of Nashville,
and was a founder and director of Brentwood National Bank from its inception in 1991 to
1996. Mr. Smith serves on the Tennessee State Board for Licensing Contractors. He
previously served as a trustee of Brentwood Academy. Currently, Mr. Smith serves as a senior
life national director of the National Association of Home Builders and is a trustee of
Martin Methodist College and Battle Ground Academy.
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M. Terry Turner (53)
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Director since February 28, 2000 |
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Term to expire 2009 |
Mr. Turner is president and chief executive officer of the Company and the Bank, positions
he has held since the Companys and the Banks organization. Mr. Turner is a graduate of
the Georgia Institute of Technology where he received his bachelors degree in Industrial
Management in 1976. Following his graduation, Mr. Turner worked for Arthur Andersen &
Company as a consultant in Atlanta, Georgia, and joined one of his clients, Park National
Bank, Knoxville, Tennessee in 1979 where he held various management positions, including
senior vice president of that banks commercial division. In 1985, Mr. Turner joined First
American National Bank, Nashville, Tennessee, as a result of its acquisition of Park
National Bank. Mr. Turner served from January 1994 until November 1998 as President of the
Retail Bank of First American National Bank. From November 1998 until October 1999, he
served as President of the Investment Services Group of First American Corporation. Mr.
Turners banking career at First American in Nashville covered 14 years, and entailed
executive level responsibilities for almost all aspects of its banking and investment
operations.
During Mr. Turners tenure in Nashville, he has served as chairman of the board of the
Nashville Sports Council, chairman of the board of trustees for Brentwood Academy, advisory
board chairman for the Salvation Army, vice chairman for the Southern Baptist Foundation,
member of the board of trustees of Belmont University, member of the Nashville branch of the
Federal Reserve Bank of Atlanta, member of the executive committee of the Nashville Credit
Bureau and a member of the board of governors of the Nashville Chamber of Commerce. Mr.
Turner continues to serve on the board of Belmont University, the Nashville Sports Council
and the board of the Gaylord Hotels Music City Bowl, is an active member in the World
Presidents Organization and is also a member of numerous local clubs and organizations
including Leadership Nashville.
The following directors serve as Class I and Class II directors and, accordingly, their terms
will expire at the 2010 and 2011 Annual Meeting of Shareholders, respectively, and when their
successors are duly elected and qualified.
Continuing Directors Until 2010 Meeting
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Pinnacle Financial Partners, Inc.
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Class I Directors:
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Sue G. Atkinson (68)
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Director since February 28, 2000 |
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Term to expire 2010 |
Ms. Atkinson has been chairman of Atkinson Public Relations of Nashville, Tennessee since
1986. Ms. Atkinson was raised in Tennessee and educated at Vanderbilt University,
Nashville, Tennessee, where she received a bachelors degree. She began her professional
career as director of development for Nashville Public Television in 1971, serving until
1979. In 1979, she joined Holder Kennedy Public Relations of Nashville, and was president of
that firm until founding her own public relations firm in 1986. In the area of public
relations, Ms. Atkinson worked with First American Corporation from 1991 until 2000 (the
year the Company was founded), and with Commerce Union/Sovran Bank/C&S Sovran from 1986 to
1991. Ms. Atkinson currently serves on the Board of Directors of the PENCIL Foundation, the
Gaylord Hotels Music City Bowl, is chairman of the Centennial Medical Center Board and a
member of the Tennessee Higher Education Commission. Ms. Atkinson formerly served on the
Board of Directors of the Nashville Area Chamber of Commerce, the Metropolitan Nashville
Convention Commission, the Nashville Symphony Association, Childrens Hospital of Vanderbilt
University and Leadership Nashville. She has also served on the board of trustees of the
Alumni Association of Vanderbilt University.
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Harold Gordon Bone (67)
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Director since November 30, 2007 |
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Term to expire 2010 |
Mr. Bone is a graduate of Cumberland University and the University of Tennessee. He also
graduated from the University of Virginias consumer banking school. Since 1977, Mr. Bone
has been a partner and licensed general contractor of B&B Enterprise and is also involved in
numerous other business ventures. Mr. Bone served as a director of First Bank and Trust in
Mt. Juliet, Tennessee until its 2000 merger with a large regional bank holding company.
Since 1984, Mr. Bone has served on the board of Middle Tennessee Electric Cooperative where
he currently serves as chairman. Mr. Bone is also a vice-president of Community Progress
Committee, Inc., a not for profit entity focusing on healthcare and education issues. A
lifetime member of the First Presbyterian Church in Lebanon, Tennessee, Mr. Bone has served
as elder, deacon and trustee. Mr. Bone also serves on the Board of the Lebanon, Tennessee
Breakfast Rotary Club, and as a Director of the Crohns and Colitis Foundation of America
Tennessee Chapter.
Prior to our acquisition of Mid-America Bancshares, Inc. (Mid-America) on November 30,
2007, Mr. Bone served as a director of Mid-Americas subsidiary, Bank of the South, from
2001 and as a director of Mid-America from 2006.
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Gregory L. Burns (53)
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Director since June 17, 2001 |
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Term to expire 2010 |
Mr. Burns is a retired businessman. Prior to his retirement on February 12, 2009, Mr. Burns
served as chairman of the board and chief executive officer for OCharleys Inc., a
registered public company, headquartered in Nashville, Tennessee. Mr. Burns joined
OCharleys in 1983 as controller, and later held the positions of executive vice president,
chief financial officer and president before becoming chief executive officer in February,
1994. Prior to joining OCharleys, he served as chief financial officer for the Nashville
Banner Publishing Company and a senior accountant for Price Waterhouse. Mr. Burns recently
served as chairman of the board of directors for
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Pinnacle Financial Partners, Inc.
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Page 11 |
Nashville Sports Council and is a board member for Vanderbilt Ingram Cancer Center, Second
Harvest Food Bank, Boy Scouts of America of the Middle Tennessee Council, the University of
Kentucky Business Partnership Foundation and the Nashville Alliance for Public Education.
Other civic activities have included serving as chair and board member of the American
Cancer Society, as a board member of the Nashville Ballet, the Gaylord Hotels Music City
Bowl, and the Nashville Symphony, as well as serving as a member of the Mayor of Nashvilles
Tourism Working Group as a part of his involvement with the Chamber of Commerce. Mr. Burns
was also inducted into the University of Kentucky Gatton College of Business and Economics
Alumni Hall of Fame in 2000.
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Clay T. Jackson (54)
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Director since February 28, 2000 |
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Term to expire 2010 |
Mr. Jackson is Senior Vice President, Regional Agency Manager, Tennessee for BB&T Cooper,
Love, Jackson, Thornton & Howell. Mr. Jackson is a native of Nashville and began his
insurance career with Cooper, Love and Jackson in 1976. Prior to the 2003 merger with BB&T,
he was the president and a principal of Cooper, Love & Jackson, Inc. and had served in this
capacity since 1989. Currently, Mr. Jackson serves on the Board of Governors of the
Nashville Area Chamber of Commerce, Montgomery Bell Academy, the Agents and Brokers
Roundtable Committee for Independent Insurance Agents and Brokers of America, and the
Nashville Symphony. He is also active with the Rotary Club, is Chairman of the Cultural and
Natural Resources Committee for the City of Forest Hills, and a member of the Forest Hills
Planning Committee, is Chairman of the Forest Hills Large Parcel Committee, and is a member
of the Forest Hills Green Committee. He served in various leadership roles with Insurors of
Tennessee. He served as past chairman of USF&Gs National Agency Council, a member of
USF&Gs Board of Directors and the Alumni Board of Washington & Lee University.
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Gary L. Scott (62)
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Director since November 30, 2007 |
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Term to expire 2010 |
Mr. Scott began his banking career in 1971 eventually serving as Chairman and CEO of
Cheatham State Bank and CSB Corporation until 1998. He served several terms on the Board of
the Tennessee Bankers Association and on the ABAs Community Bankers Council. He is a past
President of the Cheatham County Chamber of Commerce and is currently a Director and
Treasurer of Leadership Middle Tennessee. He has served on the boards of numerous civic
organizations. He has received the Leader of Business Excellence award from the Tennessee
Bankers Association.
Prior to our acquisition of Mid-America on November 30, 2007, Mr. Scott served as CEO and
Chairman of the Board of Mid-Americas subsidiary, PrimeTrust Bank, from 2001 and as CEO and
Chairman of the Board of Mid-America from 2006. From November 30, 2007 until his retirement
on October 31, 2008, Mr. Scott served as Area Chairman for the Companys operations in
Dickson and Cheatham Counties.
Continuing Directors Until 2011 Meeting
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Pinnacle Financial Partners, Inc.
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Class II Directors:
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James C. Cope (59)
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Director since March 15, 2006 |
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Term to expire 2011 |
Mr. Cope is a member in the law firm of Cope, Hudson, Scarlett, Reed & McCreary PLLC in
Murfreesboro, Tennessee and has practiced law continuously in Murfreesboro, Tennessee since
1976. Mr. Cope is a graduate of the University of Tennessee and received his Doctor of
Jurisprudence degree from Vanderbilt University in 1974. Mr. Cope serves as attorney for
Rutherford County, Tennessee, the Middle Tennessee Electric Membership Corporation, the
Consolidated Utility District of Rutherford County, the Murfreesboro Housing Authority, the
Smyrna/Rutherford County Airport Authority and otherwise engages in a general practice of
civil law. He is admitted to practice before the Sixth Circuit and Eleventh Circuit Courts
of Federal Appeals and the Supreme Court of the United States of America. He is a member of
the American Bar Association and the Tennessee Bar Association. He has served as a hearing
officer appointed by the Supreme Court of the State of Tennessee for the Board of
Professional Responsibility (1988-1993).He is past President of the Middle Tennessee State
University Foundation and the Murfreesboro Rotary Club. He also served on the board and was
an initial class member of Leadership Rutherford. In addition, he also served on the board
of the YMCA of Rutherford County.
Prior to our acquisition of Cavalry on March 15, 2006, Mr. Cope served as a director of
Cavalrys subsidiary, Cavalry Banking, from 1992 and as a director of Cavalry from 1998.
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William H. Huddleston, IV (45)
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Director since March 15, 2006 |
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Term to expire 2011 |
Mr. Huddleston, a professional engineer and registered land surveyor licensed in the State
of Tennessee, has been the President of Huddleston-Steele Engineering, Inc., in
Murfreesboro, Tennessee since 1994. Mr. Huddleston currently serves on the Middle Tennessee
Medical Center Board of Directors, City of Murfreesboro Construction Board of Adjustments
and Appeals and the Webb School Board of Trustees, and was formerly a member of the First
United Methodist Church Finance and Special Gifts Committees. He is also a member of the
Middle Tennessee State University Foundation Board of Trustees.
Prior to our acquisition of Cavalry on March 15, 2006, Mr. Huddleston had served as a
director of Cavalry and Cavalry Banking since 1999.
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Robert A. McCabe, Jr. (58)
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Director since February 28, 2000 |
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Term to expire 2011 |
Mr. McCabe began his banking career with the former Park National Bank of Knoxville,
Tennessee, as an officer trainee in 1976. From 1976 to 1984, Mr. McCabe held various
positions with Park National Bank in Knoxville, including senior vice president, until the
acquisition of Park National by First American National Bank in 1985. Mr. McCabe joined
First American as an executive vice president of the retail bank of First American National
Bank of Nashville, a position he held until 1987 when First American promoted him to
president and chief operating officer of the First American Bank of Knoxville. In 1989, Mr.
McCabe was given added responsibility by being named president and chief operating officer
for First Americans east Tennessee region. Mr. McCabe continued in that position until
1991, when First American selected him as president of First Americans Corporate Banking
division, and shortly thereafter, as president of its General Banking
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Pinnacle Financial Partners, Inc.
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division. In 1994, First American appointed Mr. McCabe as a vice chairman of First American
Corporation. In March 1999, Mr. McCabe was appointed by First American to manage all
banking and non-banking operations, a position he held until First Americans merger with
AmSouth Bancorporation in October 1999.
Mr. McCabe also serves as a director of the following registered public companies: Goldleaf
Financial Solutions, Inc. of Nashville, Tennessee, where he serves as the chairman of the
board, and National Health Investors of Murfreesboro, Tennessee. He is also a director of
SSC Services of Knoxville, Tennessee.
Mr. McCabe has been active in various civic organizations within his community, including
Leadership Knoxville, Leadership Nashville. He is a member of the World Presidents
Organization, Chief Executives Organization, serves as Chairman of The Ensworth School and
is past chairman of Cheekwood Botanical Gardens and Museum of Art. He is also a member of
the Middle Tennessee Boy Scout Council, The Nashville Symphony and the Nashville Downtown
Partnership.
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David Major (60)
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Director since November 30, 2007 |
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Term to expire 2011 |
Mr. Major began his banking career as a bank regulator in 1971 and has since served in
numerous positions, including Chief Executive Officer and director of numerous banks and
bank holding companies. He previously served on the board of the Tennessee Bankers
Association and was chairman of the TBAs for-profit subsidiary, Financial Products and
Services, Inc. He is past-President of the West Wilson County Chamber of Commerce and
Chairman of Prospect, Inc. He has served on the boards of numerous civic organizations. He
recently received the Leader in Banking Excellence award from the Tennessee Bankers
Association and the Paul Bauman Excellence award from the West Wilson County Chamber of
Commerce.
Prior to our acquisition of Mid-America on November 30, 2007, Mr. Major served as CEO and
Chairman of the Board of Mid-Americas subsidiary, Bank of the South, from 2001 and as
President and director of Mid-America from 2006. From November 30, 2007 until his
retirement on October 31, 2008 Mr. Major served as the Companys Area Chairman for Wilson
County.
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Hal N. Pennington (71)
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Director since February 22, 2006 |
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Term to expire 2011 |
Mr. Pennington is the chairman of Genesco, Inc. Genesco, a Nashville-based specialty
retailer, sells footwear, headwear and accessories in more than 2,000 retail stores in the
United States and Canada. Genesco, Inc. is a registered public company whose stock trades
on the New York Stock Exchange. Mr. Pennington became a member of Genescos board in
November 1999, when he was named executive vice president and chief operating officer. He
became president of Genesco in 2000, was named chief executive officer in April 2002 and
chairman in 2004, positions he held until August 1, 2008.
Mr. Pennington received his Bachelor of Science degree in industrial management from Auburn
University.
Actively involved in the community, he currently serves on the Nashville Symphony
Association Board of Directors, Cheekwood Board of Trustees, the Executive Committee and
Board for the Footwear Distributors and Retailers Association (FDRA) and as a director of
the Two/Ten
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Foundation. In addition, he has served in a variety of leadership roles with nonprofit
organizations, including Leadership Nashville and the Boy Scouts of America, among others.
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Dr. Wayne J. Riley (49)
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Director since December 18, 2007 |
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Term to expire 2011 |
Dr. Riley is the President and CEO of Meharry Medical College in Nashville, Tennessee. Dr.
Riley became Meharrys 10th president in January 2007. Prior to his appointment at Meharry,
he was vice president and vice dean for health affairs and governmental relations and
associate professor of medicine at Baylor College of Medicine and an adjunct professor of
management at Rice Universitys Jesse H. Jones Graduate School of Management, both in
Houston. At Houstons Ben Taub General Hospital, Baylors primary public hospital teaching
affiliate, he was assistant chief of medicine and a practicing academic general internist.
Dr. Riley holds a bachelors degree from Yale University, the Master of Public Health
(M.P.H.) degree in health systems management from Tulane University and the Doctor of
Medicine (M.D.) degree from the Morehouse School of Medicine in Atlanta. In May 2002, he
earned a masters degree from Rice Universitys Jesse H. Jones Graduate School of
Managements (JGSM) MBA for Executives program.
Meetings and Committees of the Board
During the fiscal year ended December 31, 2008, the Board of Directors of the Company held ten
meetings. The Companys governance guidelines require all incumbent directors to attend at least
75% of the total number of meetings of the Companys Board and committees of the Board on which he
or she serves in the year prior to their election in order for the Nomination and Corporate
Governance Committee to renominate them to their Board seat. All incumbent directors attended at
least 75% of the total number of meetings of the Companys Board and committees of the Board on
which he or she served during the time period when the director was a member of the Board in 2008.
In accordance with the Companys Corporate Governance Guidelines, the Companys Board has
established the committees described below. The members of each committee are the same for the
Company and the Bank and are as identified below.
EXECUTIVE COMMITTEE. The members of the Executive Committee are M. Terry Turner, Robert A.
McCabe, Jr., Gregory L. Burns, Dale W. Polley, Clay T. Jackson; Hal N. Pennington and
Ed C. Loughry, Jr. Under the Companys Bylaws, the Executive Committee may exercise
all authority of the Board in the intervals between Board meetings, except for certain
matters. The Executive Committee recommends to the Board all major policies and
procedures pertaining to loan policy. Additionally, the Executive Committee has
overall responsibility for asset liability management strategy of the Company and the
Bank. The Executive Committee held twelve meetings in 2008.
AUDIT COMMITTEE. The Company has a separately-designated standing audit committee
established in accordance with Section 3(a)(58)(A) of the Exchange Act. The members of
the Audit Committee are Dale W. Polley, William H. Huddleston, IV, Clay T. Jackson, and
Dr. Wayne J. Riley. The Audit Committees responsibilities are set forth in a written
charter that has been adopted by the Board, a copy of which is available on the
Corporate Governance section of the Companys website at www.pnfp.com. The
Audit Committees charter provides that the Audit Committee shall consist of at least
three members, all of whom shall be
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independent. Members of the Audit Committee shall be considered independent so
long as they meet the applicable requirements for independence set forth under the
NASDAQ Marketplace rules and as required by the rules and regulations of the Exchange
Act, including Rule 10A-3. All members of the Audit Committee are independent within
the NASDAQ Marketplace rules including, Rule 10A-3 promulgated under the Exchange
Act. The Audit Committee charter also provides that the members of the Audit
Committee shall be able to read and understand fundamental financial statements,
including the Companys balance sheet, income statement and statement of cash flows.
The Company believes that the members of the Audit Committee meet these requirements.
Additionally, the rules and the regulations of the SEC require the Company to
disclose whether it has an audit committee financial expert as defined in Item
407(d)(5) of Regulation S-K promulgated by the SEC. The Companys Board has
determined that Dale W. Polley is an audit committee financial expert as that term
is defined in Item 407(d)(5) of Regulation S-K promulgated by the SEC and that he is
independent as defined by the rules and regulations of the SEC. The primary
functions of the Audit Committee consist of:
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Ensuring that the affairs of the Company are subject to effective internal
and external independent audits and control procedures; |
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Approving the selection of internal and external independent auditors
annually; |
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Reviewing all Forms 10-K and Forms 10-Q, prior to their filing with the
Securities and Exchange Commission, and reviewing the corresponding Chief
Executive Officer and Chief Financial Officer certifications of these
reports; and |
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Preparing an audit committee report for inclusion in the Companys proxy
statement disclosing that the Committee has discussed the annual audited
financial statements with management and the Companys independent registered
public accountants and, based on these discussions, recommended whether such
financial statements should be included in the Companys annual report filed
with the SEC. |
Company management, internal and external auditors, independent loan reviewers,
compliance consultants and the Companys outside counsel may attend each meeting or
portions thereof as required by the Audit Committee. The Audit Committee held nine
meetings in 2008.
COMMUNITY AFFAIRS COMMITTEE. The members of the Community Affairs Committee are Sue G.
Atkinson, Colleen Conway-Welch, William H. Huddleston, IV, Clay T. Jackson, Ed C.
Loughry, Jr., Robert A. McCabe, Jr., and Gary L. Scott. The Community Affairs
Committee evaluates overall community relations including public affairs and
advertising. The Community Affairs Committee establishes the Banks community
development program, and assesses and works to ensure compliance with the Community
Reinvestment Act, fair lending laws, and the Home Mortgage Disclosure Act.
Additionally, this committee oversees the Banks corporate contribution program. The
Community Affairs Committee held four meetings in 2008.
HUMAN RESOURCES AND COMPENSATION COMMITTEE. The members of the Human Resources and
Compensation Committee are Gregory L. Burns, James C. Cope, Harold Gordon Bone, and
Reese L. Smith, III. The Human Resources and Compensation Committees responsibilities
are set forth in a written charter which has been approved by the
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Board. A copy of this charter is available on the Corporate Governance section of
the Companys website at www.pnfp.com.
The Human Resources and Compensation Committees charter provides that the Human
Resources and Compensation Committee shall consist of at least three members, all of
whom shall be independent. Members of the Human Resources and Compensation
Committee shall be considered independent so long as they are not associates or
employees of the Company, do not have any other relationship to the Company that, in
the opinion of the Board, would interfere with the exercise of independent judgment
and otherwise meet the applicable requirements for independence set forth under the
NASDAQ Marketplace rules. All members of the Human Resources and Compensation
Committee are independent in accordance with the Human Resources and Compensation
Committee Charter.
The Human Resources and Compensation Committee establishes or approves all
policies and procedures related to the human resources function of the Company and
the Bank including employee compensation, incentive programs, the Companys 401(k)
plan and employee stock incentive plans. Additionally, this committee evaluates and
establishes the compensation of the Companys five most highly compensated executive
officers, including the Chief Executive Officer and Chief Financial Officer (the
Named Executive Officers). The Human Resources and Compensation Committee also
reviews the compensation of the other members of the Companys Leadership Team and
establishes the compensation for the directors. The Human Resources and Compensation
Committee receives recommendations from the Chief Executive Officer and the senior
human resources officer in connection with the determination concerning executive
compensation. Additionally and with respect to the Named Executive Officers (as
defined below), the Human Resources and Compensation Committee has also engaged
Mercer (US) Inc. (Mercer) to provide additional assistance in these matters,
including peer group analysis, compensation structure and other assistance. The
Human Resources and Compensation Committee also approves the Companys annual
compensation discussion and analysis included in this proxy statement. The Human
Resources and Compensation Committee held six meetings in 2008.
Additionally, because the Company is participating in the Capital Purchase Program
established by the U.S. Department of Treasury under the Emergency Economic
Stabilization Act of 2008, the Human Resources and Compensation Committee has
additional responsibilities under the EESA as amended by the America Recovery and
Reinvestment Act of 2009 (the ARRA). Those additional responsibilities include the
following:
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reviewing the Companys employee compensation plans |
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identifying the features of the Companys Named Executive
Officer incentive compensation arrangements that could lead the Named
Executive Officers to take unnecessary and excessive risks that could
threaten the value of the Company; |
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|
reviewing with the Companys senior risk officers
incentive compensation arrangements with the Named Executive Officers to
ensure that the Named Executive Officers are not encouraged to take
unnecessary and excessive risks; |
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|
meeting at least semi annually to discuss and evaluate
employee compensation plans in light of any risk to the Company from its
employee compensation plans and at least annually with the Companys senior
risk officers to discuss and review the |
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Pinnacle Financial Partners, Inc.
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Page 17 |
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relationship between the Companys risk management policies and practices and
the Named Executive Officers incentive compensation arrangements; and |
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certifying that the Human Resources and Compensation
Committee has completed its review of the Named Executive Officers
incentive compensation arrangements as set forth above. |
Compensation decisions for the Companys Named Executive Officers are made by the
Human Resources and Compensation Committee. Since 2006, the Human Resources and
Compensation Committee has retained Mercer to provide information, analyses, and
advice regarding executive and director compensation. The Mercer consultant who
performs these services reports directly to the Human Resources and Compensation
Committee chair. The Human Resources and Compensation Committee has established
procedures that it considers adequate to ensure that Mercers advice to the Human
Resources and Compensation Committee remains objective and is not influenced by the
Companys management. These procedures include: a direct reporting relationship of
the Mercer consultant to the Human Resources and Compensation Committee; provisions
in the Human Resources and Compensation Committees engagement letter with Mercer
specifying the information, data, and recommendations that can and cannot be shared
with management; an annual update to the Human Resources and Compensation Committee
on Mercers financial relationship with the Company, including a summary of the work
performed for the Human Resources and Compensation Committee during the preceding 12
months; and written assurances from Mercer that, within the Mercer organization, the
Mercer consultant who performs services for the Human Resources and Compensation
Committee has a reporting relationship and compensation determined separately from
any other Mercer line of business. Mercer also assists the Human Resources and
Compensation Committee in establishing compensation for the independent directors of
the Board.
The agenda for meetings of the Human Resources and Compensation Committee is
determined by its Chairman with the assistance of the Companys Chief Executive
Officer, Chief Financial Officer and Chief Human Resources Officer. Human Resources
and Compensation Committee meetings are regularly attended by the Chief Executive
Officer, the Chief Financial Officer and the Chief Human Resources Officer. At
certain meetings in 2008, the Human Resources and Compensation Committee met in
executive session. The Human Resources and Compensation Committees Chairman reports
the Committees recommendations on executive compensation to the Board of Directors.
Independent advisors and the Companys human resources department support the Human
Resources and Compensation Committee in its duties and, along with the Chief
Executive Officer, may be delegated authority to fulfill certain administrative
duties regarding the compensation programs. The Human Resources and Compensation
Committee has authority under the Human Resources and Compensation Committee Charter
to retain, approve fees for and terminate advisors, consultants and agents as it
deems necessary to assist in the fulfillment of its responsibilities. The Human
Resources and Compensation Committee reviews the total fees paid to outside
compensation consultants by the Company to ensure that the consultant maintains its
objectivity and independence when rendering advice to the committee.
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE: The members of the Nominating and Corporate
Governance Committee are Hal N. Pennington, Harold Gordon Bone, Colleen Conway-Welch,
James C. Cope and Dr. Wayne J. Riley. The Nominating and Corporate Governance
Committees responsibilities are set forth in a written charter which
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Pinnacle Financial Partners, Inc.
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Page 18 |
has been approved by the Board. A copy of this charter is available on the
Corporate Governance section of the Companys website at www.pnfp.com.
The Nominating and Corporate Governance Committees charter provides that the
Nominating and Corporate Governance Committee shall consist of at least three
members, all of whom shall be independent. Members of the Nominating and Corporate
Governance Committee shall be considered independent so long as they are not
associates or employees of the Company, do not have any other relationship to the
Company that, in the opinion of the Board, would interfere with the exercise of
independent judgment and otherwise meet the applicable requirements for independence
set forth under the NASDAQ Marketplace rules. All members of the Nominating and
Corporate Governance Committee are independent in accordance with the Nominating and
Corporate Governance Committee Charter.
The Nominating and Corporate Governance Committee is also responsible for
recommending individuals to the Board for nomination to fill expired or otherwise
vacant seats on the Board. As discussed above, the Nominating and Corporate
Governance Committee and the Board have established the Nominee Procedures the
committee shall follow in evaluating director candidates, including candidates
submitted by the Companys shareholders. The Nominating and Corporate Governance
Committee recommends nominees to the Board for approval and election for inclusion in
the proxy statement. The Nominating and Corporate Governance Committee held three
meetings in 2008.
Director Compensation
For 2008, non-employee directors received a $10,000 annual cash retainer which was paid in
quarterly installments and $1,500 for each board and committee meeting attended. In addition, each
committee chairperson will received a quarterly fee as follows: Audit Committee $2,500 per
quarter; Community Affairs Committee $1,250 per quarter; Nominating and Corporate Governance
Committee $1,500 per quarter; and Human Resources and Compensation Committee $1,875 per
quarter. Additionally, each non-employee director received as a retainer a restricted stock
award of 751 shares of Company Common Stock with a value of approximately $20,000 as of the date of
the award. The restrictions on these shares lapsed on the one year anniversary date of the award
as all directors to whom awards were granted attended at least 75% of their assigned board and
committee meetings in 2008.
For 2009, the Board adopted the same compensation schedule for all non-employee directors as
was adopted for 2008. The restricted stock award of Company Common Stock for 2009 was based on the
February 27, 2009 closing price of $19.84. As a result each non-employee director has the
opportunity to earn 1,008 shares of Company Common Stock should the restrictions lapse on these
awards. The restrictions on these shares will lapse on February 28, 2010 should the director
attend at least 75% of their assigned board and committee meetings between March 1, 2009 and
February 28, 2010. Should the director attend at least 50% of the assigned meetings but less than
75%, the restrictions will lapse on 504 shares with the remaining share awards cancelled. Should
the director attend less than 50% of the assigned meetings, no restrictions will lapse and all
share awards will be cancelled.
Directors of the Company who are employees of the Company and/or the Bank receive no
additional compensation for being a director of the Company or the Bank or for serving on a
committee of the Board. Additionally, directors do not receive separate compensation for serving
on the Banks Board.
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Pinnacle Financial Partners, Inc.
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Page 19 |
The following table sets forth the compensation of the Companys directors for services
rendered during 2008:
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(a) |
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(b) |
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(c) |
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(d) |
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(e) |
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(f) |
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(g) |
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(k) |
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Change in |
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Pension Value |
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and |
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Fees |
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Nonqualified |
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Earned or |
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Stock |
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Non-Equity |
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Deferred |
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Paid in |
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Awards (2) |
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Option |
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Incentive Plan |
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Compensation |
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All Other |
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Name |
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|
Cash (1) |
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(3) |
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Awards (4) |
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Compensation |
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Earnings |
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Compensation |
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Total |
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Sue G. Atkinson |
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$ |
32,000 |
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$ |
19,992 |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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$ |
51,992 |
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Harold Gordon Bone |
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|
$ |
31,475 |
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|
|
$ |
19,992 |
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|
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|
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|
|
|
|
|
|
|
|
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|
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|
|
|
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$ |
51,467 |
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Gregory L. Burns |
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|
$ |
46,625 |
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|
|
$ |
19,992 |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
66,617 |
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Colleen Conway-Welch |
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|
$ |
23,525 |
|
|
|
$ |
19,992 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
43,517 |
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James C. Cope |
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|
$ |
27,500 |
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|
$ |
19,992 |
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$ |
47,492 |
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William H. Huddleston, IV |
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$ |
36,950 |
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$ |
19,992 |
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$ |
56,942 |
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Clay T. Jackson |
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$ |
56,575 |
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$ |
19,992 |
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$ |
76,567 |
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Ed C. Loughry, Jr. (5) |
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$ |
54,700 |
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$ |
19,992 |
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$ |
74,692 |
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David Major |
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$ |
1,500 |
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$ |
1,500 |
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Robert A. McCabe, Jr. |
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Hal N. Pennington |
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$ |
40,800 |
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$ |
19,992 |
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$ |
60,792 |
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Dale W. Polley |
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$ |
60,000 |
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$ |
19,992 |
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$ |
79,992 |
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Wayne J. Riley |
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$ |
34,600 |
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|
|
$ |
19,992 |
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$ |
54,592 |
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Gary L. Scott |
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|
$ |
1,500 |
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|
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$ |
1,500 |
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James L. Shaub, II (6) |
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|
$ |
36,500 |
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$ |
36,500 |
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Reese L. Smith, III |
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|
$ |
27,350 |
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|
|
$ |
19,992 |
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|
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$ |
47,342 |
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M. Terry Turner |
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(1) |
|
Messrs. McCabe, and Turner, were employees of the Company and, thus, did not receive
any compensation for serving as a director in 2008. On October 31, 2008, Mr. Major retired
as an employee of the Company and was compensated as a director beginning on December 2,
2008. On October 31, 2008, Mr. Scott retired as an employee of the Company and was
compensated as a director beginning on December 2, 2008. |
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(2) |
|
All non-employee directors were awarded a restricted share award in 2008 of 751 shares
of Company Common Stock. The restrictions on these shares lapsed based on meeting minimum
meeting attendance requirements for each director. At December 31, 2008, the Companys
directors denoted in the table below held the following restricted shares of the Companys
Common Stock. During 2008, each of the following directors met the attendance
requirements and all restrictions lapsed on these shares on February 27, 2009. |
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Number of Restricted |
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Name |
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Shares |
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|
|
|
|
|
|
|
|
Sue G. Atkinson |
|
|
|
751 |
|
|
|
Harold Gordon Bone |
|
|
|
751 |
|
|
|
Gregory L. Burns |
|
|
|
751 |
|
|
|
Colleen Conway-Welch |
|
|
|
751 |
|
|
|
James C. Cope |
|
|
|
751 |
|
|
|
William H. Huddleston, IV |
|
|
|
751 |
|
|
|
Clay T. Jackson |
|
|
|
751 |
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|
|
Ed C. Loughry, Jr. |
|
|
|
751 |
|
|
|
Hal N. Pennington |
|
|
|
751 |
|
|
|
Dale W. Polley |
|
|
|
751 |
|
|
|
Wayne J. Riley |
|
|
|
751 |
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|
|
Reese L. Smith, III |
|
|
|
751 |
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|
|
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(3) |
|
The amounts in the column captioned Stock Awards reflects the dollar amount
recognized for financial statement reporting purposes for the fiscal year ended December
31, 2008, in accordance with FAS 123(R) of awards pursuant to the Companys equity
incentive plans and thus may include amounts from awards granted in and prior to 2008. For
a |
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Pinnacle Financial Partners, Inc.
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Page 20 |
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description of the assumptions used by the Company in valuing these awards for the fiscal
year ended December 31, 2008 please see Note 15. Stock Option Plan and Restricted Shares
to the Companys consolidated financial statements included in the Companys Annual Report
on Form 10-K for the fiscal year ended December 31, 2008 filed with the Securities and
Exchange Commission on February 19, 2009. |
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(4) |
|
At December 31, 2008, except for Mr. Loughry, who retired as employee of the Company in
2007, none of the Companys non-employee directors held any options to purchase any shares
of the Companys Common Stock. |
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(5) |
|
On January 18, 2008, the Human Resources and Compensation Committee approved an
amendment to option grants made to Mr. Loughry on March 15, 2006 and January 19, 2007.
These amendments extend the time within which Mr. Loughry must exercise his options
following his December 31, 2007 retirement as an employee and allow for the continued
vesting of these options until such time as he ceases to serve as a director of the
Company. |
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(6) |
|
Mr. Shaub resigned from the Board effective November 18, 2008. The Company filed a
Form 8-K with the Securities and Exchange Commission on November 19, 2008 concerning this
matter. |
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR
THE PROPOSED DIRECTOR NOMINEES
* * * * *
PROPOSAL # 2: AMENDMENT TO PINNACLE FINANCIAL PARTNERS, INC.
2004 EQUITY INCENTIVE PLAN TO INCREASE THE NUMBER OF SHARES OF PINNACLE
COMMON STOCK RESERVED FOR ISSUANCE UNDER THE PLAN BY 750,000 SHARES
The Companys 2004 Equity Incentive Plan, as amended on March 14, 2005, April 14, 2006, and
September 19, 2006 (the Equity Incentive Plan), was adopted by the Companys shareholders on
April 20, 2004.
Based in part upon the recommendation of the Human Resources and Compensation Committee, the
Board believes that amending the Equity Incentive Plan to increase the number of shares available
for awards under the Equity Incentive Plan is necessary to provide the Board with the flexibility
to continue the Companys historical practice of awarding equity incentives to a broad based group
of the Companys associates.
Equity-based compensation advances the interests of the Company by encouraging, and providing
for, the acquisition of equity interest in the Company by all of the Companys associates, thereby
providing substantial motivation for superior performance and aligning their interest with
shareholders of the Company. In order to provide the Company with greater flexibility to adapt to
changing economic and competitive conditions, and to continue its practice of attracting and
retaining experienced client-contact associates, the Board proposes the adoption, subject to
shareholder approval, of an amendment of the Equity Incentive Plan to increase the number of shares
of Common Stock authorized for issuance thereunder by 750,000 shares. The Board believes that the
approval of this amendment is essential to further the long-term stability and financial success of
the Company by attracting, motivating and retaining qualified associates at all levels of the
Company through the use of stock incentives.
The proposed amendment increases the number of shares of Common Stock which may be issued
under the Equity Incentive Plan by 750,000 shares or 3.13% of the 24,000,021 shares of Common Stock
outstanding on February 27, 2009. When these additional shares are added to the 245,533 shares of
Common Stock reserved, but not yet issued, under the Equity Incentive Plan and the 92,318 shares of
Common Stock reserved, but not yet issued, under the Mid-America Bancshares, Inc. 2006 Equity
Incentive Plan (which shares may only be issued to employees of the Company or its affiliates that
were employees of Mid-America or its affiliates at the time of the Companys and Mid-Americas
merger) the total number of shares available for new awards under the Equity Incentive Plan and the
Mid-America plan as of February 27, 2009 totaled
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Pinnacle Financial Partners, Inc.
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Page 21 |
1,087,851, or 4.53% of the Companys total outstanding shares of Common Stock as of that date.
As of February 27, 2009, there were 2,600,034 shares of Common Stock issuable upon exercise of
options, stock appreciation rights or subject to forfeiture in the case of restricted shares under
the Equity Incentive Plan, the Companys 2000 Stock Incentive Plan (the 2000 Plan) and the
various plans that the Company has assumed in connection with its acquisitions of Cavalry and
Mid-America (the Assumed Plans). Since inception (or in the case of the Assumed Plans , since
March 15, 2000, in the case of Cavalry and November 30, 2007, in the case of Mid-America) and
through February 27, 2009, 558,476 shares (adjusted for subsequent stock splits) have been acquired
by employees under the Equity Incentive Plan, the 2000 Plan and the Assumed Plans. Additionally,
510,690 shares have been issued as restricted stock to associates, executive officers and
directors.
Two measurements that are considered meaningful by some shareholders in consideration of
proposals to increase the number of shares available for issuance under an equity incentive plan
are overhang ratios and equity award burn rates. The overhang ratio is the ratio of all common
stock of a company that is reserved for issuance pursuant to an equity based plan to total
outstanding common stock plus the impact of the issued equity based awards. The Companys overhang
ratio has ranged between 10.5 % and 19.8% since inception. Should the proposed amendment be
approved by the Companys shareholders, the overhang ratio would approximate 12.5% which is
consistent with prior periods. The following is an analysis of the Companys overhang ratio as of
the following selected dates:
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|
|
December 31, 2000 |
|
|
19.8 |
% |
December 31, 2001 |
|
|
17.1 |
% |
December 31, 2002 |
|
|
11.8 |
% |
December 31, 2003 |
|
|
11.8 |
% |
December 31, 2004 |
|
|
16.7 |
% |
December 31, 2005 |
|
|
16.3 |
% |
December 31, 2006 |
|
|
12.9 |
% |
December 31, 2007 |
|
|
12.6 |
% |
December 31, 2008 |
|
|
10.5 |
% |
|
|
|
|
|
After giving effect of the amendment to increase the
shares reserved under the 2004 Equity
Incentive Plan (*) |
|
|
12.5% |
|
|
|
|
|
|
(*) Includes impact of additional allocation of 750,000 shares as contemplated by this
proposal. |
A companys burn rate is computed by dividing the number of stock option grants plus an
additional component for the impact of restricted share awards during any particular period by the
number of outstanding shares of common stock at the end of the period. Thus a higher burn rate
would be indicative of an increased number of equity awards being granted to employees and/or
directors. The result is usually compared to industry data, particularly data furnished by various
shareholder services groups. For restricted share awards, companies typically multiply the number
of restricted share awards by a factor greater than one so that the restricted share awards can be
aggregated with any stock option grants so that the end result is increased for the implied
increased value of the restricted share award. Accordingly, the Company has multiplied the number
of restricted share award in years prior to 2008 by a factor of two, such that every one restricted
share award would equal two stock option grants for purposes of calculating the Companys burn rate
for those periods prior to 2008. Based on information from a leading shareholder services group,
the Company increased the restricted share factor to 2.5 (based on the volatility of the Companys
share price during the year ended December 31, 2008 for awards granted in 2008). As a result, the
Companys burn rate for the year ended December 31, 2008, was 2.7%. The Company believes that its
burn rate for 2009 will be consistent with its burn rate for 2008.
|
|
|
|
|
Pinnacle Financial Partners, Inc.
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Page 22 |
The following is an analysis of Pinnacles burn rate for each of the years ended:
|
|
|
|
|
December 31, 2000 |
|
|
9.8 |
% |
December 31, 2001 |
|
|
2.3 |
% |
December 31, 2002 |
|
|
3.3 |
% |
December 31, 2003 |
|
|
2.5 |
% |
December 31, 2004 |
|
|
2.3 |
% |
December 31, 2005 |
|
|
2.9 |
% |
December 31, 2006 |
|
|
2.7 |
% |
December 31, 2007 |
|
|
2.1 |
% |
December 31, 2008 |
|
|
2.7 |
% |
A copy of the proposed Equity Incentive Plan, as amended, is attached hereto as Appendix
A. If approved by the shareholders, the amendment will become effective as of April 21, 2009.
Summary of Material Provisions of the Equity Incentive Plan
The purpose of the Equity Incentive Plan is to promote the interests of the Company and its
shareholders by, among other things:
(i) Attracting and retaining associates through the utilization of
broad-based incentive plans such as the Equity Incentive Plan;
(ii) Motivating such individuals by means of performance-related incentives
to achieve long-range performance goals;
(iii) Enabling such individuals to participate in the long-term growth and
financial success of the Company;
(iv) Encouraging ownership of stock in the Company by such individuals; and
(v) Linking their compensation to the long-term interests of the Company
and its shareholders.
Because awards under the Equity Incentive Plan are at the discretion of the Human Resources
and Compensation Committee, the benefits that will be awarded under the Equity Incentive Plan to
the Companys Named Executive Officers (as identified below) or the Companys other executive
officers cannot be determined at this time.
To date, the Company has awarded stock options pursuant to the Equity Incentive Plan under a
broad-based framework whereby all employees have received stock option awards. The Company wishes
to continue these broad-based awards and the Human Resources and Compensation Committee believes
the structure of the Equity Incentive Plan is appropriate for that purpose. The Human Resources and
Compensation Committee has also issued shares of restricted stock to the Companys directors and
members of executive management as well as substantially all other associates. The proposed Equity
Incentive Plan provides a flexible solution to the Human Resources and Compensation Committee for
long-term incentives to employees including stock options, stock appreciation rights, restricted
shares and units, performance shares and performance units.
As
described in more detail below, the Equity Incentive Plan contains the following
provisions:
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|
Pinnacle Financial Partners, Inc.
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Page 23 |
|
|
|
The Equity Incentive Plan prohibits the Human Resources and Compensation
Committee from amending the terms of previously granted options to reduce the exercise
price or canceling a previously granted option and substituting another option with a
lower exercise price. The Company has never repriced any of its options. |
|
|
|
|
The Equity Incentive Plan provides that any options granted under the Equity
Incentive Plan, other than Substitute Awards (as defined herein), may not be granted
at less than the fair market value of the Common Stock on the date of grant. |
|
|
|
|
The Equity Incentive Plan limits to 50,000 the maximum number of shares with
respect to which all performance awards may be granted to a Covered Officer (as
defined in the Equity Incentive Plan) in each year of the performance period and to
five times the Covered Officers annual salary the maximum amount of any award to such
an employee that may be settled in cash in each year of the performance period |
The following is a brief summary of the principal features of the Equity Incentive Plan, which
is qualified in its entirety by reference to the Equity Incentive Plan itself, a copy of which is
attached as Appendix A hereto.
Shares Available for Awards under the Plan
Under the Equity Incentive Plan, awards may be made in Common Stock. Subject to adjustment as
provided by the terms of the Equity Incentive Plan, the maximum number of shares of Common Stock
with respect to which awards may be granted under the Equity Incentive Plan if the amendment
described herein is approved by the Companys shareholders is 2,529,510 (which includes 558,476
shares subject to awards outstanding as of the date hereof).
Shares of Common Stock subject to an award under the Equity Incentive Plan or the Companys
2000 Stock Incentive Plan that are cancelled, expire unexercised, forfeited, settled in cash or
otherwise terminated without a delivery of shares of Common Stock to the participant, including,
with respect to the Equity Incentive Plan, shares of Common Stock withheld or surrendered in
payment of any exercise or purchase price of an award or taxes relating to an award, remain
available for awards under the Equity Incentive Plan. Shares of Common Stock issued under the
Equity Incentive Plan may be either newly issued shares or shares which have been reacquired by the
Company. Shares issued by the Company as substitute awards granted solely in assumption of
outstanding awards previously granted by a company acquired by the Company or with which the
Company combines (Substitute Awards) do not reduce the number of shares available for awards
under the Equity Incentive Plan.
In addition, the Equity Incentive Plan imposes individual limitations on the amount of certain
awards in order to comply with Section 162(m) of the Internal Revenue Code of 1986, as amended (the
Code). Under these limitations, no single participant may receive options or SARs in any calendar
year that relate to more than 50,000 shares of Common Stock, subject to adjustment in certain
circumstances.
With certain limitations, awards made under the Equity Incentive Plan may be adjusted by the Human
Resources and Compensation Committee in an equitable and proportionate manner to prevent dilution
or enlargement of benefits or potential benefits intended to be made available under the Equity
Incentive Plan in the event of any stock dividend, reorganization, recapitalization, stock split,
combination, merger, consolidation, change in laws, regulations or accounting principles or other
relevant unusual or nonrecurring event affecting the Company.
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|
Pinnacle Financial Partners, Inc.
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Page 24 |
Eligibility and Administration
Associates and directors of the Company or its subsidiaries or affiliates are eligible to be
granted awards under the Equity Incentive Plan. The Human Resources and Compensation Committee
administers the Equity Incentive Plan and is to be composed of not less than two non-employee
directors, each of whom is a non-employee director for purposes of Section 16 of the Exchange Act
and Rule 16b-3 thereunder and an outside director within the meaning of Section 162(m) and the
regulations promulgated under the Code. Subject to the terms of the Equity Incentive Plan, the
Human Resources and Compensation Committee is authorized to select participants, determine the type
and number of awards to be granted, determine and later amend (subject to certain limitations) the
terms and conditions of any award, interpret and specify the rules and regulations relating to the
Equity Incentive Plan, and make all other determinations which may be necessary or desirable for
the administration of the Equity Incentive Plan.
Stock Options and Stock Appreciation Rights
The Human Resources and Compensation Committee is authorized to grant stock options, including
both incentive stock options, which can result in potentially favorable tax treatment to the
participant, and non-qualified stock options. The Human Resources and Compensation Committee may
specify the terms of such grants subject to the terms of the Equity Incentive Plan. The Human
Resources and Compensation Committee is also authorized to grant stock appreciation rights, or
SARs, either with or without a related option, which SARs may be settled in cash or Common Stock,
as the Human Resources and Compensation Committee may determine. The exercise price per share
subject to an option is determined by the Human Resources and Compensation Committee, but may not
be less than the fair market value of a share of Common Stock on the date of the grant, except in
the case of Substitute Awards. The maximum term of each option or SAR, the times at which each
option or SAR will be exercisable, and the provisions requiring forfeiture of unexercised options
at or following termination of employment generally are fixed by the Human Resources and
Compensation Committee, except that no option or tandem SAR relating to an option may have a term
exceeding ten years. Incentive stock options or tandem SARs related thereto that are granted to
holders of more than ten percent of the Companys voting securities are subject to certain
additional restrictions, including a five-year maximum term and a minimum exercise price of 110% of
fair market value.
Restricted Shares and Restricted Share Units
The Human Resources and Compensation Committee is authorized to grant restricted shares of
Common Stock and restricted share units. Restricted shares are shares of Common Stock subject to
transfer restrictions as well as forfeiture upon certain terminations of employment prior to the
end of a restricted period or other conditions specified by the Human Resources and Compensation
Committee in the award agreement. A participant granted restricted shares of Common Stock generally
has most of the rights of a shareholder of the Company with respect to the restricted shares,
including the right to receive dividends, if any, and the right to vote such shares. Except as
provided in the Equity Incentive Plan, none of the restricted shares may be transferred, encumbered
or disposed of during the restricted period or until after fulfillment of the restrictive
conditions.
Each restricted share unit has a value equal to the fair market value of a share of Common Stock on
the date of grant. The Human Resources and Compensation Committee determines, in its sole
discretion, the restrictions applicable to the restricted share units. A participant will be
credited with dividend equivalents on any vested restricted share units at the time of any payment
of dividends to shareholders on shares of Common Stock. Except as determined otherwise by the Human
Resources and Compensation Committee, restricted share units may not be transferred, encumbered or
disposed of, and such units shall terminate, without further obligation on the part of the Company,
unless the participant remains in continuous
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|
|
|
|
Pinnacle Financial Partners, Inc.
|
|
Page 25 |
employment of the Company for the restricted period and any other restrictive conditions relating
to the restricted share units are met.
Performance Share and Performance Unit Awards
A performance share award consists of a right to receive shares of Common Stock upon the
achievement of certain performance goals during certain performance periods as established by the
Human Resources and Compensation Committee, and payable at such time as the Human Resources and
Compensation Committee shall determine. Performance share awards may be paid in a lump sum or in
installments following the close of a performance period or on a deferred basis, as determined by
the Human Resources and Compensation Committee. Absent a determination by the Human Resources and
Compensation Committee to the contrary, a participants rights to any performance share award may
not be transferred, encumbered or disposed of in any manner, except by will or the laws of descent
and distribution.
A performance unit award consists of a right that is (1) denominated in cash, (2) valued, as
determined by the Human Resources and Compensation Committee, in accordance with the achievement of
such performance goals during such performance periods as the Human Resources and Compensation
Committee shall establish, and (3) payable at such time and in such form as the Human Resources and
Compensation Committee shall determine. Performance unit awards may be paid in a lump sum or in
installments following the close of a performance period or on a deferred basis, as determined by
the Human Resources and Compensation Committee. Absent a determination by the Human Resources and
Compensation Committee to the contrary, a participants rights to any performance unit award may
not be transferred, encumbered or disposed of in any manner, except by will or the laws of descent
and distribution.
Performance share and performance unit awards are subject to certain specific terms and
conditions under the Equity Incentive Plan. Performance goals will be limited to one or more of the
following financial performance measures relating to the Company or any of its subsidiaries,
operating units or divisions:
earnings or book value per share;
net income;
return on equity, assets, capital, capital employed or investments;
earnings before interest, taxes, depreciation and/or amortization;
operating income or profit;
operating efficiencies;
the ratio of criticized/classified loans to capital;
allowance for loan losses;
the ratio of non-performing loans to total loans;
the ratio of past due loans greater than 90 days and non-accruals to total loans;
the ratio of net charge-offs to average loans;
after tax operating income;
|
|
|
|
|
Pinnacle Financial Partners, Inc.
|
|
Page 26 |
cash flows;
total revenues or revenues per employee;
stock price or total shareholder return;
growth in deposits;
dividends;
strategic business objectives, consisting of one or more objectives based on
meeting specified cost targets, business expansion goals and goals relating to
acquisitions or divestitures; or
any combination thereof.
Each goal may be expressed on an absolute and/or relative basis, may be based on or otherwise
employ comparisons based on internal targets, the past performance of the Company or any
subsidiary, operating unit or division of the Company and/or the past or current performance of
other companies, and in the case of earnings-based measures, may use or employ comparisons relating
to capital, shareholders equity and/or shares outstanding, or to assets or net assets.
To the extent necessary to comply with Section 162(m), with respect to grants of performance
share, performance unit and other performance awards, no later than 90 days following the
commencement of each performance period (or such other time as may be required or permitted by
Section 162(m)), the Human Resources and Compensation Committee will, in writing, (1) select the
performance goal or goals applicable to the performance period, (2) establish the various targets
and bonus amounts which may be earned for such performance period, and (3) specify the relationship
between performance goals and targets and the amounts to be earned by each covered officer for such
performance period. Following the completion of each performance period, the Human Resources and
Compensation Committee will certify in writing whether the applicable performance targets have been
achieved and the amounts, if any, payable to covered officers for such performance period. In
determining the amount earned by a covered officer for a given performance period, subject to any
applicable award agreement, the Human Resources and Compensation Committee shall have the right to
reduce (but not increase) the amount payable at a given level of performance to take into account
additional factors that the Human Resources and Compensation Committee may deem relevant to the
assessment of individual or corporate performance for the performance period. With respect to any
covered officer, the maximum number of shares in respect of which all performance awards may be
granted under the Equity Incentive Plan in each year of the performance period is 50,000 and the
maximum amount of any award settled in cash is $1,000,000 in each year of the performance period.
Other Stock-Based Awards
The Human Resources and Compensation Committee is authorized to grant any other type of awards
that are denominated or payable in, valued by reference to, or otherwise based on or related to
shares of the Company Common Stock. The Human Resources and Compensation Committee will determine
the terms and conditions of these awards, consistent with the terms of the Equity Incentive Plan.
Termination of Employment
The Human Resources and Compensation Committee will determine the terms and conditions that
apply to any award upon a Termination of Service (as defined in the Equity Incentive Plan) with the
Company, its
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|
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|
|
Pinnacle Financial Partners, Inc.
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Page 27 |
subsidiaries and affiliates, and provide these terms in the applicable award agreement or in
its rules or regulations.
Change in Control
All outstanding awards vest, become immediately exercisable or payable or have all
restrictions lifted immediately upon a Change in Control (as defined in the Equity Incentive Plan)
but only if, and to the extent, determined by the Human Resources and Compensation Committee.
Amendment and Termination
The Companys Board may amend, alter, suspend, discontinue or terminate the Equity Incentive
Plan or any portion of the Equity Incentive Plan at any time, except that shareholder approval must
be obtained for any of these actions if the approval is necessary to comply with any tax or
regulatory requirement with which the board deems it desirable or necessary to comply. The Human
Resources and Compensation Committee may waive any conditions or rights under, amend any terms of,
or alter, suspend, discontinue, cancel or terminate any award, either prospectively or
retroactively. The Human Resources and Compensation Committee does not have the power, however, to
amend the terms of previously granted options to reduce the exercise price per share subject to an
option or to cancel any options and grant substitute options with a lower exercise price per share
than the cancelled options. The Human Resources and Compensation Committee also may not adversely
affect the rights of any award holder without the award holders consent.
Other Terms of Awards
The Company may take action, including the withholding of amounts from any award made under
the Equity Incentive Plan, to satisfy withholding and other tax obligations. The Human Resources
and Compensation Committee may provide for additional cash payments to participants to defray any
tax arising from the grant, vesting, exercise or payment of any award. Awards granted under the
Equity Incentive Plan generally may not be pledged or otherwise encumbered or transferred except
(1) by will or by the laws of descent and distribution; (2) to a member of the participants
immediate family or a trust for the benefit of an immediate family member; (3) to a partnership of
which the only partners are members of the participants immediate family; or (4) as permitted by
the Human Resources and Compensation Committee in its discretion. Incentive stock options may not
be pledged or otherwise encumbered or transferred except by will or by the laws of descent and
distribution.
Certain Federal Income Tax Consequences
The following is a brief description of the current federal income tax consequences generally
arising with respect to awards under the Equity Incentive Plan.
Tax consequences to the Company and to participants receiving awards will vary with the type
of award. Generally, a participant will not recognize income, and the Company is not entitled to
take a deduction, upon the grant of an incentive stock option, a nonqualified option, a reload
option, a SAR, a restricted share award, a performance share award or a performance unit award. A
participant will not have taxable income upon exercising an incentive stock option (except that the
alternative minimum tax may apply). Upon exercising an option other than an incentive stock option,
the participant must generally recognize ordinary income equal to the difference between the
exercise price and fair market value of the freely transferable and non-forfeitable shares of
Common Stock acquired on the date of exercise.
If a participant sells shares of Common Stock acquired upon exercise of an incentive stock
option before the end of two years from the date of grant and one year from the date of exercise,
the participant must
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|
Pinnacle Financial Partners, Inc.
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|
Page 28 |
generally recognize ordinary income equal to the difference between (i) the fair market value
of the shares of Common Stock at the date of exercise of the incentive stock option (or, if less,
the amount realized upon the disposition of the incentive stock option shares of Common Stock), and
(ii) the exercise price. Otherwise, a participants disposition of shares of Common Stock acquired
upon the exercise of an option (including an incentive stock option for which the incentive stock
option holding period is met) generally will result in short-term or long-term capital gain or loss
measured by the difference between the sale price and the participants tax basis in such shares of
Common Stock (the tax basis generally being the exercise price plus any amount previously
recognized as ordinary income in connection with the exercise of the option).
The Company generally will be entitled to a tax deduction equal to the amount recognized as
ordinary income by the participant in connection with an option. The Company generally is not
entitled to a tax deduction relating to amounts that represent a capital gain to a participant.
Accordingly, the Company will not be entitled to any tax deduction with respect to an incentive
stock option if the participant holds the shares of Common Stock for the incentive stock option
holding periods prior to disposition of the shares.
Similarly, the exercise of a SAR will result in ordinary income on the value of the stock
appreciation right to the individual at the time of exercise. The Company will be allowed a
deduction for the amount of ordinary income recognized by a participant with respect to a SAR. Upon
a grant of restricted stock or performance shares, the participant will recognize ordinary income
on the fair market value of the Common Stock at the time such shares of become vested as a result
of the restrictions lapsing with respect to restricted shares or the achievement of the performance
goals with respect to performance shares unless a participant makes an election under Section 83(b)
of the Code to be taxed at the time of grant. The participant also is subject to capital gains
treatment on the subsequent sale of any Common Stock acquired through the exercise of a SAR or
restricted share award. For this purpose, the participants basis in the Common Stock is its fair
market value at the time the SAR is exercised or the restricted share becomes vested (or is
granted, if an election under Section 83(b) is made).
Payments made under performance awards settled in cash are taxable as ordinary income at the
time an individual attains the performance goals and the payments are made available to the
participant.
Compensation that qualifies as performance-based compensation is excluded from the $1
million deductibility cap of Code Section 162(m), and therefore remains deductible by the company
that pays it. Under the Incentive Plan, options granted with an exercise price at least equal to
100% of fair market value of the underlying shares at the date of grant will be, and awards which
are conditioned upon achievement of performance goals may be, intended to qualify as such
performance-based compensation. A number of requirements must be met, however, in order for
particular compensation to so qualify. Accordingly, there can be no assurance that such
compensation under the Incentive Plan will be fully deductible under all circumstances.
As a result of the Companys participation in the United States Treasury Departments capital
purchase program, the Section 162(m) deduction limit applicable to the Company has been reduced
from $1,000,000 to $500,000 during the time that the Treasury holds debt or equity securities
issued by the Company in connection with the capital purchase program. In addition to this
reduction in the deduction limit, performance based compensation is no longer excluded from the
deduction limit during the period that the Treasury holds debt or equity securities issued by the
Company in connection with the capital purchase program. As such, the compensation expense for
performance awards granted under the Equity Incentive Plan prior to the Companys sale of preferred
stock to the Treasury on December 12, 2008 that had not yet vested as of that date and performance
awards issued after that date will not excluded from the $500,000 deduction limit for so long as
the Treasury owns debt or equity securities issued by the Company. Notwithstanding the fact that
compensation expense associated with these performance awards will not be excluded from the
deduction limit during the period that Treasury holds debt or equity securities issued by the
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Pinnacle Financial Partners, Inc.
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Page 29 |
Company, the Company intends to continue to seek to qualify these awards as performance-based
compensation under Section 162(m) such that the compensation expense associated with these awards
will be excluded from the deduction limit after Treasury no longer holds any debt or equity
securities issued by the Company in the capital purchase program.
The foregoing discussion is general in nature and is not intended to be a complete description
of the federal income tax consequences of the Equity Incentive Plan. This discussion does not
address the effects of other federal taxes or taxes imposed under state, local or foreign tax laws.
Participants in the Equity Incentive Plan are urged to consult a tax advisor as to the tax
consequences of participation.
The Equity Incentive Plan is not intended to be a qualified plan under Section 401(a) of the
Code.
The following table summarizes information concerning Pinnacles equity compensation plans at
December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities |
|
|
Number of |
|
Weighted |
|
Remaining Available |
|
|
Securities to be |
|
Average |
|
for Future Issuance |
|
|
Issued upon |
|
Exercise Price |
|
Under Equity |
|
|
Exercise of |
|
of Outstanding |
|
Compensation Plans |
|
|
Outstanding |
|
Options, |
|
(Excluding Securities |
|
|
Options, Warrants |
|
Warrants and |
|
Reflected in First |
Plan Category |
|
and Rights |
|
Rights |
|
Column) |
Equity compensation plans approved by shareholders: |
|
|
|
|
|
|
|
|
|
|
|
|
2000 Stock Incentive Plan |
|
|
782,693 |
|
|
$ |
6.09 |
|
|
|
- |
|
2004 Equity Incentive Plan |
|
|
1,080,145 |
|
|
$ |
26.81 |
|
|
|
440,016 |
|
1999 Cavalry Bancorp, Inc. Stock Option Plan |
|
|
71,590 |
|
|
$ |
10.74 |
|
|
|
- |
|
Bank of the South 2001 Stock Option Plan |
|
|
56,038 |
|
|
$ |
16.87 |
|
|
|
- |
|
PrimeTrust Bank 2001 Statutory-Non-Statutory Stock
Option Plan |
|
|
28,408 |
|
|
$ |
7.52 |
|
|
|
- |
|
PrimeTrust Bank 2005 Statutory-Non-Statutory Stock
Option Plan |
|
|
58,241 |
|
|
$ |
12.89 |
|
|
|
- |
|
Mid-America Bancshares, Inc. 2006 Omnibus Equity
Incentive Plan |
|
|
144,805 |
|
|
$ |
15.66 |
|
|
|
92,318 |
|
Equity compensation plans not approved by shareholders |
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
|
Total |
|
|
2,221,920 |
|
|
$ |
17.41 |
|
|
|
532,334 |
|
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE AMENDMENT TO THE PINNACLE FINANCIAL
PARTNERS, INC. 2004 EQUITY INCENTIVE PLAN.
* * * * *
PROPOSAL # 3: TO RATIFY USE OF THE PERFORMANCE MEASURES
Reason for Shareholder Approval of this Proposal
In 2004, the Companys shareholders approved the material terms of the performance measures of
the Equity Incentive Plan. You are being asked to re-approve these terms in order for the Company
to preserve, subject to the limitations on deductibility described above as a result of the
Companys participation in the Treasurys capital purchase program, the Companys federal income
tax deduction for performance-based payments under the Equity Incentive Plan to certain executive
officers named in the Summary Compensation Table, or the Covered Officers. There has been no
change to the terms of the performance measures. Under
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|
Pinnacle Financial Partners, Inc.
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|
Page 30 |
Section 162(m) of the Code, we must seek you approval at five-year intervals to preserve the
federal income tax deduction.
The following description of the material terms of the performance measures under the Equity
Incentive Plan is qualified in its entirety by the provisions of the Equity Incentive Plan, a copy
of which is attached as Appendix A to this Proxy Statement.
The performance measures are limited to one or more of the following financial performance
measures relating to the Comp any or any of its subsidiaries, operating units or divisions:
earnings or book value per share;
net income;
return on equity, assets, capital, capital employed or investments;
earnings before interest, taxes, depreciation and/or amortization;
operating income or profit;
operating efficiencies;
the ratio of criticized/classified loans to capital;
allowance for loan losses;
the ratio of non-performing loans to total loans;
the ratio of past due loans greater than 90 days and non-accruals to total loans;
the ratio of net charge-offs to average loans;
after tax operating income;
cash flows;
total revenues or revenues per employee;
stock price or total shareholder return;
growth in deposits;
dividends;
strategic business objectives, consisting of one or more objectives based on
meeting specified cost targets, business expansion goals and goals relating to
acquisitions or divestitures; or
any combination thereof.
|
|
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|
Pinnacle Financial Partners, Inc.
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|
Page 31 |
To the extent necessary to comply with Section 162(m), with respect to grants of performance
share, performance unit and other performance awards, no later than 90 days following the
commencement of each performance period (or such other time as may be required or permitted by
Section 162(m)), the Human Resources and Compensation Committee will, in writing, (1) select the
performance goal or goals applicable to the performance period, (2) establish the various targets
and bonus amounts which may be earned for such performance period, and (3) specify the relationship
between performance goals and targets and the amounts to be earned by each Covered Officer for such
performance period. Following the completion of each performance period, the Human Resources and
Compensation Committee will certify in writing whether the applicable performance targets have been
achieved and the amounts, if any, payable to Covered Officers for such performance period. In
determining the amount earned by a Covered Officer for a given performance period, subject to any
applicable award agreement, the Human Resources and Compensation Committee shall have the right to
reduce (but not increase) the amount payable at a given level of performance to take into account
additional factors that the Human Resources and Compensation Committee may deem relevant to the
assessment of individual or corporate performance for the performance period. With respect to any
Covered Officer, the maximum number of shares in respect of which all performance awards may be
granted under the Equity Incentive Plan in each year of the performance period is 50,000 and the
maximum amount of any award settled in cash is $1,000,000 in each year of the performance period.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE RATIFICATION OF THE PERFORMANCE
MEASURES IN PINNACLES 2004 EQUITY INCENTIVE PLAN.
* * * * *
PROPOSAL #4: RATIFICATION OF THE APPOINTMENT OF THE
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors of the Company, as recommended and approved by the Audit Committee, is
recommending to the shareholders the ratification of the appointment of the accounting firm of KPMG
LLP to serve as the Companys independent registered public accounting firm for the fiscal year
ending December 31, 2009. The firm of KPMG LLP has served as the Companys auditors since 2002. A
representative of the firm is expected to be present at the meeting and will be given the
opportunity to make a statement if he or she desires to do so and will be available to respond to
appropriate questions from shareholders. For a discussion of the fees paid KPMG LLP for the 2008
and 2007 fiscal years, see Independent Registered Public Accounting Firm below.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE RATIFICATION OF THE APPOINTMENT OF
KPMG LLP AS THE COMPANYS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.
* * * * *
PROPOSAL # 5: ADVISORY VOTE ON EXECUTIVE COMPENSATION PROGRAM AND
PROCEDURES
On February 17, 2009, President Barack Obama signed the ARRA into law, which requires
companies that have received funds under the United States Treasury Departments Capital Purchase
Program (the CPP), as established under the Troubled Asset Relief Program (TARP), to permit
non-binding shareholder votes on executive compensation. Because we have participated in the CPP,
we are asking shareholders to approve our executive compensation programs and procedures. We are
committed to achieving a high level of total return for our shareholders. Additionally, we also
believe that both the Company and the shareholders benefit from constructive and consistent
dialogue and therefore welcome and
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Pinnacle Financial Partners, Inc.
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look forward to our shareholders response to the Say on Pay proposal. We believe that our
compensation policies and procedures, as described in the compensation discussion and analysis
below, are centered on a pay-for-performance culture and are strongly aligned with the long-term
interests of our shareholders.
We also believe that the extensive disclosure of compensation information provided in
this Proxy Statement provides our shareholders the information they need to make an informed
decision as they weigh the pay of our executive officers in relation to the Companys performance.
This Say-on-Pay proposal gives you as a shareholder the opportunity to endorse or not endorse our
executive pay program and policies through the following resolution:
Resolved, that the shareholders approve the overall executive compensation programs and procedures
employed by the Company, as described in the Compensation Discussion and Analysis and the tabular
disclosure regarding named executive officer compensation (together with the accompanying narrative
disclosure) in this Proxy Statement.
Because your vote is advisory, it will not be binding upon the Board. However, the Human
Resources and Compensation Committee will take into account the outcome of the vote when
considering future executive compensation arrangements.
THE
BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THIS PROPOSAL.
* * * * *
EXECUTIVE MANAGEMENT INFORMATION
The following table shows the name, age, term of service and position of each executive
officer of the Company:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Officer |
|
Officer |
Name |
|
Age |
|
Since |
|
Position with Company and Bank |
|
|
|
|
|
|
|
|
|
|
|
M. Terry Turner
|
|
|
53 |
|
|
|
2000 |
|
|
President and Chief Executive |
Robert A. McCabe, Jr.
|
|
|
58 |
|
|
|
2000 |
|
|
Chairman of the Board |
Hugh M. Queener
|
|
|
53 |
|
|
|
2000 |
|
|
EVP and Chief Administrative Officer |
Harold R. Carpenter,
Jr.
|
|
|
49 |
|
|
|
2000 |
|
|
EVP and Chief Financial Officer |
Charles B. McMahan
|
|
|
62 |
|
|
|
2003 |
|
|
EVP and Senior Credit Officer |
Mr. Turner was employed by First American National Bank serving in various capacities from
1979 to 1999. Mr. Turner served from January 1994 until November 1998 as President of the Retail
Bank of First American National Bank. From November 1998 until October 1999, he served as
President of the Investment Services Group of First American Corporation.
Mr. McCabe was employed by First American National Bank serving in various capacities from
1976 to 1999, including being appointed vice chairman of First American Corporation from 1994 to
1999.
Mr. Queener was employed by AmSouth Bancorporation from 1999 to 2000 serving as an Executive
Vice President in the consumer banking group in Nashville. Prior to the merger with AmSouth, Mr.
Queener was employed by First American National Bank from 1987 to 1999 serving most recently as
executive vice president in charge of retail lending from 1987 to 1999. Prior to his employment at
First American, Mr. Queener was employed with The Kirchman Corporation from 1986 to 1987 and served
as senior vice president for client service, installations and software development and support.
Mr. Carpenter was employed by AmSouth Bancorporation from 1999 to 2000 as a senior vice
president in the finance group in Nashville, Tennessee. Prior to the merger with AmSouth, Mr.
Carpenter was employed
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Pinnacle Financial Partners, Inc.
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by First American Corporation as senior vice president from 1994 to 1999 serving most recently
as the financial manager for the Tennessee, Mississippi and Louisiana areas. Mr. Carpenter is a
certified public accountant, a member of the American Institute of Certified Public Accountants,
and was employed by the national accounting firm, KPMG LLP, from 1982 to 1994.
Mr. McMahan was employed by AmSouth Bancorporation from 1999 to 2002 as Senior Vice President
State Senior Credit Officer for Tennessee and Louisiana based in Nashville, Tennessee. Prior to
the merger with AmSouth, Mr. McMahan was employed in a variety of roles from 1974 to 1999 at First
American National Bank in the commercial and consumer lending areas and, ultimately, was promoted
to Executive Vice President Credit Administration. Mr. McMahan is also a certified public
accountant.
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
The duties and responsibilities of the Human Resources and Compensation Committee (the
Committee) include, among other things, overseeing the Companys overall executive compensation
philosophy; measuring performance with respect to established goals and objectives; designing the
components for all executive compensation; and establishing compensation for the Chief Executive
Officer and the other Named Executive Officers. The Committee is currently composed of four
independent directors.
Throughout this proxy statement, the individuals who served as the Companys Chief Executive
Officer and the Chief Financial Officer during fiscal 2008, as well as the other individuals
included in the Summary Compensation Table, are referred to as the Named Executive Officers.
These individuals are considered the Companys executive officers for purposes of the applicable
rules of the SEC. Additionally, the Company has established a Leadership Team which is composed of
the Named Executive Officers and other members of senior management of the Company.
Compensation Philosophy - The attraction and retention of experienced and
high-achieving senior executives that can enhance the Companys performance and shareholder returns
is an essential element of the Companys long term strategy. This strategy has resulted in the
Companys growth from a start up institution to the second largest banking organization
headquartered in Tennessee in less than nine years, despite intensifying competition for
experienced bankers in the Companys markets. The Committee believes that consistent with the
Companys need to continue to retain executives who can drive high performance by the organization,
it should provide significantly above peer overall compensation if the Companys performance is
significantly above that of peer financial institutions. Thus, the Companys compensation system
is designed to reward executive officers for superior performance. Conversely, overall compensation
levels should be reduced if high performance financial and strategic objectives as compared to peer
financial institutions are not met. The Companys ability to compensate its executives in a manner
that provides for significantly above peer compensation for significantly better performance
against peer financial institutions may be limited by the provisions of the ARRA described in more
detail below, which are applicable to the Company because of its participation in the United States
CPP established under the TARP.
The Committee makes all compensation decisions for the Named Executive Officers, including
establishing the framework on how these executives are compensated, and approves recommendations
regarding equity awards to all associates, not just the executives, of the Company. The Committee
receives recommendations concerning these decisions from the Chief Executive Officer for all
associates other than the Chief Executive Officer.
Decisions regarding the non-equity compensation of members of the Leadership Team who are not
Named Executive Officers are made by the Chief Executive Officer in consultation with each
Leadership
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Pinnacle Financial Partners, Inc.
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Team members supervisor. For these officers, the Chief Executive Officer is responsible for
establishing the framework on how these individuals are compensated. These decisions, including
salary adjustments and annual equity and non-equity incentive plan award amounts, are ultimately
presented to the Committee for review and approval. As is the case with the Named Executive
Officers, the Committee can exercise its discretion in modifying any recommended adjustments or
awards to these individuals.
Components of Executive Compensation - The Committee has determined that it can
accomplish its executive compensation objectives by utilizing three primary elements of executive
compensation:
|
|
|
Base Salary |
|
|
|
Annual Cash Incentive; and |
|
|
|
Long-term Equity Compensation. |
Base Salary - Base salary is designed to provide appropriate levels of compensation to the
executive. Salaries for the Companys executive officers are reviewed annually and are based on:
|
|
|
Job scope and responsibilities; |
|
|
|
Competitive salaries for similar positions at peer institutions; and |
|
|
|
Other factors, including corporate and individual performance. |
Annual Cash Incentive Plan - The Committee is responsible for administering the Companys
annual cash incentive plans. All non-commissioned associates of the Company are eligible for
participation in the Companys annual cash incentive plans which provide targeted cash incentive
plan payments to the participants at various levels. For the Named Executive Officers and certain
other Leadership Team members, the targeted annual cash award typically ranges from 30% to 100% of
the officers base salary. Awards are based on achievement of performance goals established by the
Committee, with all participants typically receiving the same percentage of their targeted cash
award based on the Companys actual results when compared to the performance goals. The Company
believes that a single plan with the same performance goals for both executives and all other
associates promotes a strong sense of teamwork within the firm. Furthermore, the annual cash
incentive plan utilizes a combination of performance goals which the Committee believes creates
sufficient balance in the plan such that future performance is not sacrificed for the benefit of
current period results.
The annual cash incentive plan is approved annually in the first quarter of a fiscal year and
is structured such that the Committee may increase payouts if the Companys actual performance for
the calendar year exceeds pre-established performance targets or decrease or eliminate payouts if
performance was less than the pre-established performance targets. Additionally, all participants
must meet their individual goals and objectives in their annual performance reviews to receive any
payouts under the annual cash incentive plan. The Chief Executive Officer of the Company also has
discretionary authority to increase or decrease any participants award, other than a Named
Executive Officer, by specified percentages.
Under the ARRA, the Company may be prohibited from paying or accruing bonuses, retention
awards or incentive compensation to the Companys top five most highly compensated employees,
except for long-term restricted stock that does not fully vest until after the Company has repaid
the Treasury the amounts invested under the CPP, is less than one third of the executives annual
compensation and that complies with other requirements imposed by the Treasury. These restrictions
do not apply to bonuses required to be paid pursuant to employment agreements in place prior to
February 11, 2009. Although regulations under the ARRA have not yet been promulgated, these
provisions may significantly limit the Companys ability to pay cash incentive payments to the
Companys Named Executive Officers under the Companys annual cash
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Pinnacle Financial Partners, Inc.
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incentive plan and may result in the Committee deciding to increase the Named Executive
Officers base salaries until the Treasury has been repaid.
Long-term Equity Compensation Incentive Plans. In 2004, the Companys Board adopted, and the
Companys shareholders approved, the Companys 2004 Equity Incentive Plan, as amended on April 19,
2005, May 17, 2006 and November 27, 2007 (the 2004 Plan). Under the terms of the 2004 Plan, the
Companys associates are eligible to receive equity-based incentive awards including stock options,
stock appreciation awards, restricted shares of the Companys common stock, restricted stock units,
performance shares or units and performance-based cash compensation.
The Committee believes that equity-based, long-term compensation programs link the interests
of senior management, both individually and as a team, to the long-term interests of the Companys
stockholders. In 2008, the Committee granted awards to the Companys Named Executive Officers and
other Leadership Team members, as follows:
|
|
|
Stock Options. Named Executive Officers and other Leadership Team members
received stock option awards during 2008. All such stock options have a ten year term
and vest ratably over the five-year period after grant and have value only to the
extent that the Companys common stock price is above the grant price during the
exercise period after vesting. This compensation element is totally at-risk in the
event that the stock price falls below the grant price over the exercise period.
Conversely, the more the stock price increases, the greater the compensation to the
executives. Stock options were granted at the Committees meeting in January 2008 when
the overall annual compensation for the Named Executive Officers is determined and
shortly after the public announcement of the Companys fourth quarter and prior year
annual financial results. Options are usually granted to new employees at the
Committee meeting following the date that employment begins. |
|
|
|
|
Restricted Stock. Consistent with previous periods, the Committee also
granted shares of restricted stock to the Named Executive Officers and other Leadership
Team members in 2008. For 2008, one half of the restricted stock awards were
time-vested awards that vest ratably over a ten-year period for each Named Executive
Officer other than Mr. McCabe and Mr. McMahan whose awards vest ratably over the period
from grant until the executives 65th birthday. The other half of the
restricted share awards were performance-based. The forfeiture restrictions of these shares awarded in January 2008 were tied to the achievement of the soundness and
profitability performance goals for the Companys 2008 Annual Cash Incentive Plan and
the performance goals for 2009 and 2010 as set forth in the Companys three-year
strategic plan which was approved by the Companys Board of Directors in July of 2008. |
Measuring Performance - The Board has established a strategic framework consisting of
20 financial and other measures in the critically important areas of soundness, profitability,
growth and market effectiveness. The Board has established long-term targets and annual targets
for the current and next two years for each of these performance measures. These measurements
primarily include categories which are widely known in the banking industry as well as several
internally developed benchmarks as follows:
|
|
|
Soundness |
|
|
Criticized/classified assets to capital
|
|
Tangible equity ratio |
Nonperforming loans to total loans
|
|
Past due loans > 30 days |
Net charged-off loans to average loans
|
|
Tier 1 leverage ratio |
Total risk based capital ratio
|
|
Net noncore funding dependency |
|
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Pinnacle Financial Partners, Inc.
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Page 36 |
|
|
|
Profitability |
|
|
Return on average assets
|
|
Return on average equity |
Fully-diluted earnings per share
|
|
Efficiency ratio |
Total noninterest income to total revenues
|
|
Net interest margin |
|
|
|
Growth |
|
|
Growth in earnings per share year over year
|
|
Growth in deposits year over year |
|
|
|
Market Effectiveness |
|
|
Deposit market share
|
|
Associate retention rates |
Internal operational quality index
|
|
Internal service quality measurements |
The key performance measures noted above are integral parts of the Companys strategic
planning efforts. Annually, these measurements are reviewed and, in some cases, the measures or
targets are modified by the Board. Two of these measures criticized / classified asset to
capital and fully diluted earnings per share are utilized by the Committee in establishing
performance goals for all Company associates under the Companys annual cash incentive plan and are
also used in connection with performance based restricted share awards to Named Executive Officers
and the other Leadership Team members.
The performance targets for the 2008 Annual Cash Incentive Plan adopted by the Committee in
January 2008 consisted of a soundness threshold - criticized/classified assets to Tier 1 capital -
which had to be achieved in order for any awards to be payable, and earnings per share amounts
which if achieved would result in payment of varying percentages (ranging from 25% to 129%) of
individual target cash incentives. Under the soundness threshold, in order for any incentive
payments to be made, criticized and classified assets (those which have been risk rated as 7 or
higher pursuant to the Companys internal risk rating system) at December 31, 2008, should not
exceed 25% of Tier 1 capital at that date. The minimum earnings per share amount for payment of
100% of target incentives was $1.62, excluding the impact of merger expenses incurred in connection
with the acquisition of Mid-America Bancshares, Inc., with lower amounts for payments of 75%, 50%
and 25% of individual target incentives. The Committee also has the discretion to amend performance
goals after adoption to reflect exceptional circumstances.
Review of Committees 2008 Executive Compensation Process
The Committees process for determining the compensation of M. Terry Turner, the Companys
CEO, and the Companys other Named Executive Officers, involved several steps and included such
items as the establishment of an appropriate basis for benchmarking; benchmarking bank performance
relative to peers on key measures including those that are highly correlated to share price
performance; making qualitative and quantitative judgments regarding the market equity of the
Named Executive Officers versus benchmark ranges; profiling targeted compensation and developing a
change plan to implement the results of the process, if necessary. Since 2005, the Committee has
elected to engage an outside consultant, Mercer Human Resource Consulting LLC (Mercer), to assist
in the process and review the Named Executive Officers compensation.
In order to establish the Named Executive Officers compensation in 2008, the Company used a
peer group established by Mercer as the basis for determining executive compensation. The
Committee believes that Mercer produced relevant and reliable information in order to assess the
competitive landscape for bank executives with comparable job scope. The 2008 Mercer study was
presented to the Committee in November 2007.
For 2008 executive compensation, the Committee determined, based on discussions with Mercer,
that compensation for a select peer group of banking organizations with assets of $2.1 billion to
$6.2 billion was
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Pinnacle Financial Partners, Inc.
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an appropriate benchmark for the Company. The peer group was comprised of the following 19
organizations:
|
|
|
Sterling Bancshares
|
|
Houston, TX |
PrivateBancorp, Inc.
|
|
Chicago, IL |
Western Alliance Bancorp.
|
|
Las Vegas, NV |
Prosperity Bancshares, Inc.
|
|
Houston, TX |
Texas Capital Bancshares
|
|
Dallas, TX |
Bank of the Ozarks, Inc.
|
|
Little Rock, AR |
Southwest Bancorp, Inc.
|
|
Stillwater, OK |
Seacoast Banking Corporation
|
|
Stuart, FL |
Cobiz Financial Inc.
|
|
Denver, CO |
Virginia Commerce Bancorp, Inc.
|
|
Arlington, VA |
CVB Financial Corp.
|
|
Ontario, CA |
Boston Private Financial Holdings
|
|
Boston, MA |
Amcore Financial Inc.
|
|
Rockford, IL |
1ST Source Corporation
|
|
South Bend, IL |
First State Bancorporation
|
|
Albuquerque, NM |
Taylor Capital Group
|
|
Rosemont, IL |
Midwest Banc Holdings
|
|
Melrose Park, IL |
Green Bancshares, Inc.
|
|
Greeneville, TN |
Vineyard National Bancorp, Inc.
|
|
Corona, CA |
Mercer provided the Committee with comparisons of the Companys results to the peer groups
results for 2007 and the three years prior to 2007, for the following measurements:
|
|
|
Fully diluted EPS growth
|
|
Net income growth |
Return on average equity
|
|
Return on average assets |
Revenue per share growth
|
|
Asset growth |
Net charge-off ratios
|
|
Nonperforming asset ratios |
Total shareholder return
|
|
Market value to book value ratio |
Book value per share growth |
|
|
Mercer noted that the Companys performance for the above measures on an unweighted basis
resulted in the Company performing at the 75th percentile for the one-year performance
period and the 76th percentile over the three-year performance period. The Company
performed in the top quartile for the profitability; growth and total shareholder return
measurements. In its November 2007 study, Mercer also noted that the Companys 2007 total
executive compensation ranged between the 50th and 75th percentile of the
peer group and that base salary compensation approximated the 50th percentile.
In developing its peer comparisons, Mercer compared the Companys Named Executive Officers
compensation to those of comparable associates in firms within the peer group. Mercer also
surveyed a broader group of companies utilizing Mercers 2007 Americas Executive Remuneration
Database and Wyatts 2007 Report on Top Management Compensation with both of these surveys
including over 150 financial services companies. The following details how the Companys positions
were matched to those of the peer group and the compensation survey:
|
|
|
|
|
|
|
Named Executive |
|
|
|
November 2007 Peer |
|
Mercer Compensation |
Officer |
|
Position |
|
Study Match |
|
Survey Match |
|
|
|
|
|
|
|
|
M. Terry Turner
|
|
President and CEO
|
|
CEO
|
|
President and CEO |
Robert McCabe, Jr.
|
|
Chairman
|
|
2nd highest paid executive
|
|
Non CEO Chairman |
Hugh M. Queener
|
|
Chief Admin. Officer
|
|
3rd highest paid executive
|
|
Chief Admin. Officer (*) |
Harold R. Carpenter
|
|
Chief Financial Officer
|
|
CFO
|
|
CFO |
Charles B. McMahan
|
|
Chief Credit Officer
|
|
5th highest paid executive
|
|
Blend of top lending
and credit executive (*) |
|
|
|
|
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Pinnacle Financial Partners, Inc.
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Page 38 |
(*) A 10% premium was included in the compensation of the CAO and Chief Credit Officer based
on job responsibilities.
Mercer provided several recommendations and observations to the Committee as follows:
|
|
|
Base salary adjustments in 2007 provided for more competitive base
salaries; thus in future periods modest increases in compensation should be
sufficient to maintain the current level of competitiveness. |
|
|
|
The Company should maintain the current target bonus levels and
continue to grant competitive long-term incentives. |
The Committee recognized that because of the Companys relatively high growth rate, each year
Mercers peer group for executive compensation includes larger companies which generally pay higher
base salaries and total compensation than those compared in earlier years. As a result peer group
base salary and total executive compensation may increase at a greater rate than it would in the
absence of such growth in assets. In addition to the Mercer November 2007 study, the Committee
considered other relevant matters such as competitor efforts to hire Company executives, the degree
of difficulty in attaining the annual and long-range performance targets, affordability and other
matters the Committee deemed important. The Chief Executive Officer provided input on these
matters to the Committee and advised that he concurred with Mercers recommendations. In
establishing the Named Executive Officers compensation, the Committee noted that based on
comparisons to peer financial institutions the executives had led the Company to outstanding levels
of performance in soundness, profitability, and growth on both an annual and long-term basis, and
that shareholders had directly benefited from their leadership.
Target Compensation for the Named Executive Officers for 2008 - As a result, the
Committee established benchmarks for compensation of the Companys Named Executive Officers in
2008. The Committee reviewed the Chief Executive Officers recommendations for Named Executive
Officer compensation for 2008 and concurred with the Chief Executive Officers recommendations
which generally established that base salary for the Named Executive Officers should be set at the
60th percentile of the Mercer November 2007 peer group while total compensation
opportunity should be set at the 75th percentile. The Committee noted that due to Mr.
McCabes significant role and responsibilities, his compensation should remain at approximately 95%
of Mr. Turners compensation. Cash incentive target awards were consistent with those for 2007 and
consistent with Mercers recommendation to better correlate total cash compensation with the
Companys significant historical EPS growth. Equity compensation was calculated based on the
difference between total targeted compensation and targeted cash compensation. The following is a
summary of the significant elements of Named Executive Officer compensation for 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Incentive |
|
|
|
|
|
|
|
|
|
|
Target Award |
|
|
|
|
Named Executive |
|
Base |
|
as a Percentage |
|
Equity |
|
Total Target |
Officer |
|
Salary |
|
of Base Salary |
|
Compensation |
|
Compensation |
|
|
M. Terry Turner |
|
$ |
643,000 |
|
|
|
100 |
% |
|
$ |
440,000 |
|
|
$ |
1,726,000 |
|
Robert McCabe, Jr. |
|
|
610,000 |
|
|
|
100 |
% |
|
|
418,000 |
|
|
|
1,638,000 |
|
Hugh M. Queener |
|
|
300,000 |
|
|
|
85 |
% |
|
|
300,000 |
|
|
|
855,000 |
|
Harold R. Carpenter |
|
|
300,000 |
|
|
|
70 |
% |
|
|
250,000 |
|
|
|
760,000 |
|
Charles B. McMahan |
|
|
200,000 |
|
|
|
70 |
% |
|
|
120,000 |
|
|
|
460,000 |
|
For the above equity compensation awards, the Committee determined that 50% of the award
should be in the form of restricted shares with one half of the restricted share awards vesting
over a ten-year period or
|
|
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Pinnacle Financial Partners, Inc.
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ratably annually from the grant date to the executives 65th birthday, if shorter
than ten years from grant and the remaining half of the restricted share awards being
performance-based awards vesting in equal increments over the next three years provided that the
Company achieves certain soundness and profitability targets. The remaining 50% of total equity
compensation was in the form of nonqualified stock options that vest in 20% increments for the five
years following the grant date. The performance goals for the restricted shares were calculated in
the same fashion described above for other members of the Leadership Team. The number of stock
option grants and restricted shares awarded was determined on the same basis as the Company uses to
determine equity compensation expense in its consolidated financial statements pursuant to SFAS 123
(revised) Share Based Payment. On January 19, 2008 (the date the Committee approved the Named
Executive Officers 2008 compensation), the Companys common stock closed at $21.51 per share on
the NASDAQ Global Select Market; thus the restricted share awards were valued at $21.51 per share
while the nonqualified stock options were valued at $7.07 per option grant pursuant to the
Black-Scholes valuation model.
In establishing the components for the CEOs 2008 compensation, the Committee believed that a
significant portion of the compensation should be at risk and based on the achievement of
soundness and performance targets. The Committee determined that if soundness and performance
targets were met, then compensation would be enhanced for meeting those goals and objectives. If
soundness and performance targets were not met, compensation would be negatively impacted. The
Committee also determined that outstanding results as compared to peer financial institutions
should provide for significantly enhanced compensation.
The Committee concluded that approximately 63% of the CEOs compensation for 2008 (compared to
64% in 2007) was considered at risk with approximately 37% in the form of base salary. This mix of
fixed versus at-risk compensation was considered appropriate by the Committee. Furthermore, the
Committee concluded that approximately 59% of the CEOs at-risk compensation for 2008 was in the
form of cash incentives and 41% was in the form of equity compensation incentives. As to the other
Named Executive Officers, Mr. McCabes compensation was also approximately 63% at risk, while Mr.
Queeners was 65% at risk; Mr. Carpenters was 61% at risk and Mr. McMahans was 57% at risk.
The Committee concluded that such a mix of at risk compensation was consistent with the Mercer
recommendations noted above and appropriate given each Named Executive Officers role and
responsibilities.
Additionally, although other peer banking organizations use additional forms of compensation,
particularly pensions and deferred compensation, it is the view of the Committee and management
that total compensation and wealth accumulation for the Companys CEO and the other Named Executive
Officers should be largely comprised of 1) direct cash compensation (salary and cash incentive) and
2) equity-based compensation including performance based awards consisting of stock options and
restricted shares which reward achievement of the firms goals and objectives and the creation of
long-term shareholder value. However, in setting the annual compensation of Messrs. Turner, McCabe,
Queener and Carpenter, the Committee considers the impact of the amounts payable to these
executives upon death, disability and termination of employment, both before and after a change in
control, under their employment agreements with the Company, the terms of which are described in
more detail below.
On January 18, 2008, the Committee approved the 2008 Special Cash Incentive Plan. Pursuant to
this plan, approximately 25 key employees of the Company that were involved in integrating the
operations of Mid-America with the Companys operations (including the Named Executive Officers)
were eligible to receive cash awards. Under the terms of this plan, participants were entitled to
receive cash incentive payments as specified goals established by the Committee and related to the
integration of the Company and Mid-America were achieved, including achievement of initiatives
related to published synergy targets and limiting the aggregate integration and other merger costs
within amounts previously disclosed. Awards earned under this plan were paid on April 15, 2008. The
awards for the Companys Named Executive Officers were
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Mr. Turner - $200,000; Mr. McCabe - $190,000; Mr. Queener - $100,000; Mr. Carpenter - $80,000
and Mr. McMahan - $60,000. The Company filed a Form 8-K describing the terms of this plan on
January 25, 2008.
Status of 2008 At Risk Compensation as of February 27 , 2009. As to cash
incentives, on January 20, 2009, the Committee determined that the Company did not meet its
soundness threshold or its earnings per share targets for the 2008 Annual Cash Incentive Plan even
though earnings growth for the Company was very favorable in comparison to the Companys peer
group. The soundness threshold of the 2008 Annual Cash Incentive Plan required that criticized and
classified assets be less than 25% of Tier 1 capital at December 31, 2008. At December 31, 2008,
this ratio was slightly more than the 25% threshold at 25.9%. The annual earnings per share target
for 2008 which would have resulted in a 100% target payout was $1.62 per fully diluted share,
excluding the impact of merger expenses incurred in connection with the acquisition of Mid-America.
For 2008, the Companys fully-diluted earnings per share amounted to $1.45 per share excluding the
impact of merger-related charges, or $1.27 per share including the impact of merger-related
charges. The 2008 Annual Cash Incentive Plan provided for incentive payments at 25% of the
targeted award should the Company achieve its soundness threshold of less than 25% criticized
classified assets to Tier 1 capital ratio and fully diluted earnings per share excluding merger
related charges of less than $1.49 per share but more than $1.39 per share. On January 19, 2008,
the Committee, exercising discretion permitted under the terms of the 2008 Annual Cash Incentive
Plan, approved the payment of cash incentive awards of 25% of the targeted award under the
Companys 2008 Annual Cash Incentive Plan to qualifying associates including the Named Executive
Officers, notwithstanding the failure to satisfy the soundness threshold performance criteria. The
Committee sited numerous reasons and considered several matters in its discretion to approve the
incentive payments, including:
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A. |
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The Company continues to exhibit top quartile performance when compared to peers in
numerous categories but most notably in soundness and earnings performance. Compared to
the 2007 Mercer peer group utilized by the Committee, which was the Mercer 2007 peer group,
through September 30, 2008 the Companys non-performing asset ratio and net charge off
ratios were in the top quartile for both the nine months and three year periods ended
September 30, 2008. |
|
B. |
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The ratio of the Companys criticized and classified assets to Tier 1 capital exceeded
the 25% threshold by only 0.9%, to some extent the overage reflected modifications made
during the year in the criteria for criticized assets. |
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C. |
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The fact that, for Named Executive Officers, the exercise of discretion would not
result in a material loss of federal income tax deductibility of compensation under Section
162(m) of the Internal Revenue Code of 1986, as amended (the Code). |
|
D. |
|
Payment of incentives under the circumstances would not encourage Named Executive
Officers to take unnecessary or excessive risks that would threaten the value of the
Company. |
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E. |
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The exercise of discretion to waive the soundness threshold should be limited to
exceptional circumstances, which the Committee believed existed. |
The Committee also considered that the Companys overall accomplishments in 2008 merited some
level of incentive payments to associates, including the Named Executive Officers. These
accomplishments included the following:
|
A. |
|
The market price of the Companys common stock increased approximately 17% between
December 31, 2007 and December 31, 2008. |
|
B. |
|
The Companys growth in net income and fully diluted net income per share was the
highest of the companies in the 2007 Mercer peer group, which was the Mercer 2007 peer
group, through September 30, 2008. |
|
C. |
|
The Companys loan growth approximated $601 million, or 22%, in 2008.
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D. |
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The Companys associate retention rates averaged approximately 90% during 2008. |
The Committee considered that under these circumstances, payment of incentive compensation at
25% of target award to all associates, including the Named Executive Officers, under the 2008
Annual Cash Incentive Plan was appropriate.
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As to equity compensation, on January 18, 2008, Mr. Turner was awarded 31,171 nonqualified
stock options (valued at $220,379); Mr. McCabe was awarded 29,612 options (valued at $209,357); Mr.
Queener was awarded 21,253 options (valued at $150,259); Mr. Carpenter was awarded 17,711 options
(valued at $125,217) and Mr. McMahan was awarded 8,501 options (valued at $60,102). These
nonqualified stock option grants approximated 50% of the Named Executive Officers total long-term
equity compensation for 2008. The exercise price was $21.51 per share with a Black-Scholes
valuation of $7.07 per share as of January 18, 2008. On February 27, 2009, the closing market
price of the Companys Common Stock was $19.84 per share. The Black-Scholes valuation on that date
was $8.74 per share resulting in an aggregate fair value for these
options as of February 27, 2009 of
$272,435, $258,809, $185,751, $154,794 and $74,299, respectively.
The Committee also determined on January 18, 2008 that the remaining 50% of the Named
Executive Officers long-term equity compensation for 2008 should be in the form of restricted
share awards with 50% of these awards being in the form of time-vested restricted share awards and
50% in the form of performance-based awards. On January 18, 2008, the Committee established the
performance criteria for the first year of the performance-based restricted share award as the same
criteria as that in the 2008 Annual Cash Incentive Plan (criticized and classified assets of less
than 25% of Tier 1 capital and an earnings target of $1.62 per fully-diluted share, excluding the
impact of merger expenses incurred in connection with the Mid-America acquisition). In accordance
with the January 18, 2008 approval, the vesting criteria for the second and third years of the
performance period were set at the Committees meeting following the full boards approval of the
2008 strategic plan in July. The performance targets for the 2009 and 2010 tranches were based upon
soundness thresholds and earnings per share targets for fiscal years 2009 and 2010 adopted at the
July meeting. The restrictions associated with the restricted shares awarded to the Named
Executive Officers and other Leadership Team members in 2008 lapse in 33.3% increments upon the
achievement of the performance targets for each fiscal year in the three-year performance period or
for the entire three-year period in the event the one year targets are not met but the targets
established for the three-year period are met on a cumulative basis. Therefore, the incentive is
earned if senior management effectively manages the Company to achieve sustained longer-term
performance within certain earnings per share and soundness thresholds.
As to performance-based restricted share awards, on January 18, 2008, Mr. Turner was awarded
5,114 shares (valued at $110,002); Mr. McCabe was awarded 4,858 shares (valued at $104,496); Mr.
Queener was awarded 3,487 shares (valued at $75,005); Mr. Carpenter was awarded 2,906 shares
(valued at $62,508) and Mr. McMahan was awarded 1,395 shares (valued at $30,006). These
performance-based restricted share awards approximated 25% of the long-term equity compensation of
the Named Executive Officers total long-term equity compensation for 2008. The closing market
price of the Companys common stock was $21.51 per share on January 18, 2008.
As a result of the 2008 restricted share award and similar awards from previous years, the
Named Executive Officers and the other Leadership Team members will have during each fiscal year an
opportunity to vest performance-based restricted share awards should the Companys performance meet
the soundness and earnings per share performance thresholds established for that fiscal year and
the previous two fiscal years or the Committee exercises discretion to waive or modify any such
requirements because of exceptional circumstances. The following is a discussion of the status of
the 2008 performance (i.e., soundness threshold and fully diluted earnings per share) targets for
restricted share awards issued over the last three years:
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§ |
|
2008 Award - The soundness threshold of less than 25% criticized and classified
assets in relation to Tier 1 capital was not achieved, nor was the 2008 earnings target
of $1.62 per fully diluted share, excluding merger related expenses. Accordingly, the
restrictions associated with the 2008 traunche of the 2008 award have not been
released. |
|
§ |
|
2007 Award - The soundness threshold of less than 25% criticized and classified
assets in relation to Tier 1 capital was not achieved, nor was the 2008 earnings target
associated with the |
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2007 award of $1.75 per fully diluted share, excluding merger related expenses.
Accordingly, the restrictions associated with the 2008 traunche of the 2007 award have
also not been released. |
|
§ |
|
2006 Award - The soundness threshold of less than 25% criticized and classified
assets in relation to Tier 1 capital was not achieved, nor was the 2008 earnings target
associated with the 2006 award of $1.91 per fully diluted share excluding merger
related expenses. In February 2008, the Committee adjusted the three-year cumulative
fully diluted earnings per share target of $4.71 associated with the 2006 award to
exclude the impact of the Companys Knoxville expansion so that the adjusted three-year
cumulative target was $4.62 per fully diluted share, excluding the impact of merger
related expenses. On January 20, 2009, the Committee determined that the Companys
cumulative earnings per diluted share for the three year period, as adjusted for the
merger related expenses totaled $4.05. Thus, the three-year cumulative target for the
three year period ended December 31, 2008 was not met. The 2007 traunche of the 2006
award did not meet either its single year or cumulative profitability target. Since
both the single year and three year targets associated with the 2008 and 2007 traunches
of the 2006 award have not been met, the Named Executive Officers have forfeited these shares and, in accordance with the 2004 Equity Incentive Plan provisions, 11,499 shares
have been returned to the 2004 Equity Incentive Plan and are available for future
issuance to the Companys associates and directors. |
Additionally, on January 18, 2008, the Committee also awarded time-vested restricted shares to
the Named Executive Officers and the other members of the Companys leadership team. In
conjunction with these awards, Mr. Turner was awarded 5,114 shares (valued at $110,002); Mr. McCabe
was awarded 4,858 shares (valued at $104,496); Mr. Queener was awarded 3,487 shares (valued at
$75,005); Mr. Carpenter was awarded 2,906 shares (valued at $62,508) and Mr. McMahan was awarded
1,395 shares (valued at $30,006). These time-vested restricted share awards approximated 25% of
the long-term equity compensation of the Named Executive Officers total long-term equity
compensation for 2008. The closing market price of the Companys common stock was $21.51 per share
on January 18, 2008. These shares vest in equal amounts over 10 years, with the exception of Mr.
McCabes and Mr. McMahans awards which vest in equal amounts over 7 years and 3 years,
respectively, which represents the period from grant until Mr. McCabes and Mr. McMahans
65th birthdays, respectively.
The result of the Companys 2008 performance resulted in total compensation for the Named
Executive Officers that was substantially less than the total target compensation approved by the
Committee in January, 2008. This is caused primarily by the fact that these executives received
only 25% of their targeted cash incentive award pursuant to the 2008 Annual Cash Incentive Plan and
the restrictions associated with the 2008 traunches of the performance-based restricted shares
awards awarded during the past three years did not lapse due to the Company not meeting its
predetermined performance targets. These matters were offset somewhat by the special bonuses
awarded in April of 2008 and the increases in value of stock options granted in 2008.
Certain Payments to Named Executive Officers upon Termination of Employment
The employment agreements that the Company has entered into with each of Messrs. Turner,
McCabe, Queener and Carpenter, which are described in more detail on page 54 of this proxy
statement, provide for the payment of certain benefits to the Named Executive Officers if their
employment is terminated under certain scenarios. The amount of the payment in relation to the
executives base salary and the length of time that an executive officer would continue to receive
payments under his employment agreement is the same for each individual. In establishing the amount
of the payments and the length of time that the payments will be made pursuant to these agreements
the Committee took into account the need for these payments to be at competitive levels so that the
Company is able to retain existing executive officers and to recruit experienced executives who may
have concerns about giving up job security with their current employer. Pursuant to the terms of
these agreements, if the executive becomes permanently disabled he is entitled to receive his base
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salary for a maximum of six months. If the executive is terminated by the Company without
cause, as defined in the employment agreement, before a change of control, he is entitled to
receive his base salary for three years following his termination. If the executive terminates his
employment voluntarily for cause, as defined in the agreement, prior to a change of control he is
entitled to receive his base salary for a maximum of twelve months following his termination.
In addition to the benefits payable upon a termination of the executives employment described
in the previous paragraph, these employment agreements also provide for a payment to the Named
Executive Officer if he terminates his employment following a change of control, as defined in the
agreement, with cause or his employment is terminated by the Company within such twelve-month
period without cause. The change of control component of these employment agreements is a
double-trigger feature, meaning that the employee is not paid his award solely upon consummation
of a change of control, but rather his employment must be terminated within twelve months following
the change of control in order to receive his payment. Under the terms of the employment
agreements, the executive officer is entitled to receive an amount equal to three times his base
salary and target bonus, plus continuation of certain health benefits for him and his family for
three years, if he terminates his employment with cause, or his employment is terminated by the
Company without cause, in each case within twelve months of a change of control. In addition, the
employment agreements provide for the payment to the Named Executive Officer of an amount necessary
to reimburse the executive on an after-tax basis for any excise tax payable under Section 4999 of
the Code in connection with the change of control.
In establishing the multiples of base salary and bonus that a terminated Named Executive
Officer would be entitled to receive following his or her termination, either before or after a
change of control, the Committee considered the need to be able to competitively recruit and retain
talented executive officers who often times seek protection against the possibility that they might
be terminated without cause or be forced to resign without cause, particularly following a change
of control. When establishing the multiples, the Committee also sought to provide benefits at a
level that it believed would provide appropriate compensation for the Named Executive Officer in
the event of consummating a transaction that, although possibly detrimental to the individuals
employment prospects with the resulting company, would be beneficial to the Companys shareholders.
The Committee believes that the protections afforded in employment agreements are reasonable
and are an important element in retaining the Companys Named Executive Officers and certain other
members of senior management.
Federal Income Tax Deductibility Limitations
The Committee has traditionally believed it appropriate to take into account the $1,000,000
limit on the deductibility of executive compensation for federal income tax purposes pursuant to
Section 162(m) of the Code, and to seek to qualify the Companys performance-based cash and
equity-based compensation for exclusions from Section 162(m) so such compensation will qualify as a
tax deductible expense. However, the regulations issued under Section 162(m) were amended on
October 20, 2008 after the adoption of the Emergency Economic Stabilization Act of 2008 (EESA) so
as to impose additional restrictions on financial institutions participating in the CPP. These new
regulations, which were applicable to institutions which participated in the CPP, eliminated most
of the exclusions from Section 162(m) and lowered the limit for deductibility to $500,000. The
effect of the regulation as applied to the Companys 2008 compensation was to limit the
compensation previously deductible from the time the Company issued preferred stock under the CPP,
and the Companys Board of Directors took the loss of deductibility into account in determining to
participate in the CPP. While the Committee continues to consider the impact of Section 162(m)
limitations on the deductibility of its executive compensation above $500,000, the Committee
believes the elimination of
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the exclusions will cause reduced consideration of the former criteria for such exclusion at
least during the period that the Company is subject to the revised regulations.
2009 Compensation Update
The previous discussion primarily addressed our compensation philosophies, processes and
results for the fiscal year ended December 31, 2008. The Committee continued similar processes for
2009 such that in setting compensation for the Named Executive Officers, the Committee again
utilized the services of Mercer with Mercer recommending (in November 2008) a slightly modified
peer group than that of the one used in the previous year. The Mercer 2009 peer group included two
new entities (Umpqua Holdings and First Midwest Bancorp) and excluded one entity from the previous
year (Vineyard National Bancorp.). Additionally, the range of asset sizes within the peer group
was $2.2 billion to $8.3 billion. The 20 members of the Mercer 2009 peer group are as follows:
|
|
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Prosperity Bancshares, Inc.
|
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Houston, TX |
CVB Financial Corp.
|
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Ontario, CA |
Boston Private Financial Holdings
|
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Boston, MA |
Amcore Financial, Inc.
|
|
Rockford, IL |
Western Alliance Bancorp
|
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Las Vegas, NV |
1st Source Corporation
|
|
South Bend, IN |
PrivateBancorp, Inc.
|
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Chicago, IL |
Sterling Bancshares
|
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Houston, TX |
Texas Capital Bancshares
|
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Dallas, TX |
First State Bancorporation
|
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Albuquerque, NM |
Taylor Capital Group, Inc.
|
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Rosemont, IL |
Midwest Banc Holdings, Inc.
|
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Melrose Park, IL |
Green Bankshares, Inc.
|
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Greeneville, TN |
Bank of the Ozarks, Inc.
|
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Little Rock, AR |
Cobiz Financial Inc.
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Denver, CO |
Seacoast Banking Corporation
|
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Stuart, FL |
Southwest Bancorp, Inc.
|
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Stillwater, OK |
Virginia Commerce Bancorp, Inc.
|
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Arlington, VA |
Umpqua Holdings Corp.
|
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Portland, OR |
First Midwest Bancorp, Inc.
|
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Itasca, IL |
After reviewing the information provided by Mercer and recommendations submitted by the Chief
Executive Officer, the Committee concluded to modify the compensation strategy for the Named
Executive Officers. For the last two years, the Committee had targeted total compensation for the
Named Executive Officers at the 75th percentile of the peer group and base salary at the
60th percentile, thus placing more emphasis on performance when compared to other market
data. Mercer noted in their November 2008 study that market data suggested that base salaries
approximated 52% of total compensation with variable incentive compensation approximating 48%. As
to the Company, its ratio of fixed compensation to total compensation for the Named Executive
Officers approximated 38%, thus placing more emphasis on variable incentive compensation when
compared to the market data. The Committee concluded, that given the current economic environment
and the relative short-term and longer-term performance of the Company when compared to these
peers, the Named Executive Officers should continue to be compensated at the 75th
percentile of the newly established peer group and that the Company should place less emphasis on
variable incentive based compensation by reducing the level of long-term incentive compensation in
relation to total compensation. Additionally, the Committee noted that for two of the Named
Executive Officers (the CAO and the CFO) that the Mercer peer group indicated that the
75th percentile would require a reduction in total compensation from the previous year.
As a result, the Committee concluded that the total compensation for the CAO and CFO for 2009 would
not increase or decrease and the target total compensation would be the same as the previous
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year. Consistent with 2008 and based on information provided by Mercer, the compensation of
the Chairman of the Board remains at 95% of that for the President and CEO in 2009.
The Committee modified the equity compensation component slightly in 2009 from 2008. In 2008,
the equity compensation award for the Named Executive Officers was segmented such that 50% was in
the form of nonqualified stock options and 50% was in the form of performance-based and time-based
restricted share awards. In 2009, the equity compensation component for all the Named Executive
Officers and the remaining members of the Leadership Team was segmented such that 100% of equity
compensation was in the form of restricted share awards with 25% being in the form of
performance-based restricted share awards and 75% in the form of time-based restricted shares
awards. The performance-based awards vest in a manner consistent with previously issued
performance-based restricted share awards upon the achievement of certain soundness (criticized and
classified assets plus other real estate owned to total risked based capital) and earnings per
share diluted thresholds over a three year performance period. The other half of the restricted
share awards will vest 10% each year over a 10 year period provided the Company is profitable in
the immediately preceding year. Mr. McCabes and Mr. McMahans vesting periods for this restricted
share award was modified such that they vest equally over a period of time such that so long as
they are employed by the Company, the shares will be fully vested at age 65.
Primarily as a result of a modified peer group, total target compensation for 2009 for the
Named Executive Officers increased in comparison to 2008 total target compensation. Mr. Turners
total compensation has increased by 8%; Mr. McCabes increased by 8%; and Mr. McMahans increased
by 8%. Total target compensation for Mr. Queener and Mr. Carpenter will be the same in 2009 as it
was in 2008.
As a result of the Companys participation in the CPP, the Company is required to comply with
certain limits and restrictions concerning executive compensation throughout the time that the U.S.
Treasury holds any equity or debt securities acquired from the Company pursuant to the CPP,
including a requirement that any bonus or incentive compensation paid to the Companys executive
officers during the period that the U.S. Treasury holds any equity or debt securities issued by the
Company in the CPP be subject to clawback or recovery if the payment was based on materially
inaccurate financial statements or other materially inaccurate performance metrics and a
prohibition on making any golden parachute payment (as originally defined in Section 111(b)(2)(c)
of the EESA) during that same period to any Named Executive Officer. As described in more detail
below, the prohibition on golden parachute payments has been expanded under the ARRA to prohibit
any payment to a senior executive officer for departure from a company for any reason, except for
payments for services performed or benefits accrued, although the U.S. Treasury has yet to issue
regulations regarding this expansion of the prohibition of making golden parachute payments.
In connection with our sale of preferred stock to the U.S. Treasury in connection with the CPP,
each of our Named Executive Officers executed letter agreements with the Company on December 12,
2008 in which each officer agreed that (i) the Company is prohibited from paying any golden
parachute payment (as originally defined in Section 111(b)(2)(c) of the EESA) to the officer
during any period that the executive is a senior executive officer of the Company and the U.S.
Treasury holds any equity or debt securities of the Company issued in the CPP; (ii) any bonus or
incentive compensation paid to the Named Executive Officer during any period that the officer is a
senior executive officer of the Company and the U.S. Treasury holds any equity or debt securities
of the Company issued in the CPP is subject to recovery or clawback by the Company if the
payments were based on materially inaccurate financial statements or performance metric criteria;
and (iii) each of the Companys benefit plans were amended with respect to the Named Executive
Officer to the extent necessary to give effect to the limitations described above in this
paragraph. As described in the following paragraph, the ARRA includes certain additional
restrictions and limits concerning executive compensation of companies that participated in the CPP
and any regulations or guidance proposed by the U.S. Treasury may require the Company to seek
additional modifications to the agreements that it has entered into with its Named Executive
Officers.
On February 17, 2009, President Barack Obama signed into law the ARRA which amended the
executive compensation provisions of EESA to require the Secretary of the Treasury to adopt
regulations which must include significant additional restrictions on executive compensation of
recipients of TARP funds, including the Company. The statutory restrictions generally would be
applicable during the period any obligation arising under TARP remains outstanding. However, ARRA
also provides that, subject to the Treasurys consultation with the recipients appropriate
regulatory agency, TARP recipients may repurchase the preferred stock issued under the CPP prior to
December 12, 2011 without the need to have previously raised new Tier 1 capital. As of February 27,
2009, it is unclear how these executive compensation standards will relate to the similar standards
announced by the Department of the Treasury in its guidelines on February 4, 2009, or whether the
standards will be considered effective immediately or only after implementing regulations are
issued by the Department of the Treasury. The new standards include (but are not limited to) (i)
prohibitions on bonuses, retention awards and other incentive compensation, other than restricted
stock grants which do not fully vest during the TARP period and which do not exceed one-third of an
employees total annual compensation, (ii) prohibitions on any payments to senior executives (other
than payments for services performed or benefits accrued) for departure for any reason from a
company, (iii) an expanded clawback of bonuses, retention awards, and incentive compensation if
payment is based on materially inaccurate statements of earnings, revenues, gains or other
criteria, (iv) prohibition on compensation plans that encourage manipulation of reported earnings,
(v) retroactive review of bonuses, retention awards and other compensation previously provided by
TARP recipients if found by the Treasury to be inconsistent with the purposes of TARP or otherwise
contrary to public interest, (vi) required establishment of a company-wide policy regarding
excessive or luxury expenditures, and (vii) inclusion in a participants proxy statements for
annual shareholder meetings of a nonbinding Say on Pay shareholder vote on the compensation of
executives. The Company is reviewing these legislative and regulatory matters to determine what
impact they will have on the Companys executive compensation program for 2009 and beyond. After
regulations are proposed or adopted by the Department of the Treasury, the Committee may determine
to revise certain elements of 2009 compensation to its executive officers, including the Named
Executive Officers, and/or make other changes to its executive compensation programs, and the
Company may take other actions,
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including repurchasing the preferred stock issued under the CPP in response to these
legislative and regulatory matters.
Human Resources and Compensation Committee Report
The Human Resources and Compensation Committee of the Company has reviewed and discussed the
Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and,
based on such review and discussions, the Compensation Committee recommended to the Board that the
Compensation Discussion and Analysis be included in this Proxy Statement.
The Human Resources and Compensation Committee has met with the Companys senior risk officers
to ensure that the Companys compensation arrangements do not encourage the Named Executive
Officers to take unnecessary risks that threaten the Company.
Gregory L. Burns, Chairman
James C. Cope, Member
Harold Gordon Bone, Member
Reese L. Smith, III, Member
Named Executive Officer Compensation
The table below summarizes the compensation paid or accrued by the Company during the fiscal
year ended December 31, 2008 for (i) the Companys Chief Executive Officer; (ii) the Companys
Chief Financial Officer; and (iii) the three highest paid executive officers of the Company whose
total compensation exceeded $100,000 for fiscal 2008 (collectively, the Named Executive
Officers). When setting total compensation for each of the Named Executive Officers, the
Compensation Committee reviews tally sheets which show the executives current compensation,
including equity and non-equity based compensation. Each of the Named Executive Officers, other
than Mr. McMahan, has entered into an employment agreement with the Company, the terms of which are
described below.
The Named Executive Officers were not entitled to receive payments which would be
characterized as Bonus payments for the fiscal years ended December 31, 2006, 2007 and 2008.
Bonuses for purposes of the table below consist of discretionary amounts not associated with an
approved incentive plan, such as a relocation bonus. Amounts listed under the column title
Non-Equity Incentive Plan Compensation, for the 2008 fiscal year were determined by the Human
Resources and Compensation Committee at its January 2009 meeting in the case of awards under the
Companys 2008 Cash Incentive Plan and its April, 2008 meeting in the case of the Companys 2008
Special Cash Incentive Plan and were, in each case, paid out shortly thereafter.
Based on the fair value of equity awards granted to Named Executive Officers in fiscal year
2008 and fiscal year 2007 and the base salaries of the Named Executive Officers in both years,
total aggregate compensation for the Named Executive Officers increased by $1.2 million or 49%
between 2008 and 2007. This was primarily due to the Named Executive Officers receiving cash
incentives for 2008 pursuant to the Companys 2008 Annual Cash Incentive Plan plus special cash
incentives in 2008 pursuant to the Companys 2008 Special Cash Incentive Plan for the successful
integration of Mid-America as compared to 2007 when the Named Executive Offices did not receive any
cash incentive payment. For 2008, 2007 and 2006, respectively, Salary accounted for
approximately 47.0%, 70.9% and 50.8%, respectively, of the total compensation of the Named
Executive Officers, Non-equity incentive plan compensation accounted for approximately 29.4%, 0%
and 27.1%, respectively, of the total compensation of the Named Executive
|
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|
Pinnacle Financial Partners, Inc.
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|
Page 47 |
Officers, stock and
option awards accounted for approximately 12.9%, 25.1% and 18.0%, respectively, of the total
compensation and all other compensation accounted for approximately 4.1% in all three years of the
total compensation of the Named Executive Officers.
SUMMARY COMPENSATION TABLE
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|
|
|
|
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|
Change in Pension |
|
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|
|
|
|
|
|
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|
|
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|
|
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|
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Value and |
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|
|
|
|
|
|
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|
|
|
|
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|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity |
|
|
|
Nonqualified |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock |
|
|
|
|
|
|
|
|
Incentive Plan |
|
|
|
Deferred |
|
|
|
All Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bonus |
|
|
|
Awards |
|
|
|
Option |
|
|
|
Compensation |
|
|
|
Compensation |
|
|
|
Compensation |
|
|
|
|
|
Name and Principal Position |
|
|
Year |
|
|
|
Salary ($) |
|
|
|
($) |
|
|
|
($) (1) |
|
|
|
Awards ($)(2) |
|
|
|
($)(3) |
|
|
|
Earnings ($) |
|
|
|
($)(4) |
|
|
|
Total ($) |
|
(a) |
|
|
(b) |
|
|
|
(c) |
|
|
|
(d) |
|
|
|
(e) |
|
|
|
(f) |
|
|
|
(g) |
|
|
|
(h) |
|
|
|
(i) |
|
|
|
(j) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
M. Terry Turner |
|
|
|
2008 |
|
|
|
$ |
643,000 |
|
|
|
$ |
|
|
|
|
$ |
(33,523 |
) |
|
|
|
$194,639 |
|
|
|
$ |
360,750 |
|
|
|
$ |
|
|
|
|
$ |
28,221 |
|
|
|
$ |
1,193,088 |
|
President and Chief |
|
|
|
2007 |
|
|
|
$ |
532,000 |
|
|
|
$ |
|
|
|
|
$ |
51,065 |
|
|
|
|
$170,292 |
|
|
|
$ |
|
|
|
|
$ |
|
|
|
|
$ |
27,859 |
|
|
|
$ |
781,216 |
|
Executive Officer |
|
|
|
2006 |
|
|
|
$ |
410,000 |
|
|
|
$ |
|
|
|
|
$ |
38,534 |
|
|
|
|
$114,966 |
|
|
|
$ |
246,000 |
|
|
|
$ |
|
|
|
|
$ |
35,302 |
|
|
|
$ |
844,802 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert A. McCabe, Jr. |
|
|
|
2008 |
|
|
|
$ |
610,000 |
|
|
|
$ |
|
|
|
|
$ |
(31,840 |
) |
|
|
|
$158,978 |
|
|
|
$ |
342,500 |
|
|
|
$ |
|
|
|
|
$ |
29,488 |
|
|
|
$ |
1,109,126 |
|
Chairman of the Board |
|
|
|
2007 |
|
|
|
$ |
505,400 |
|
|
|
$ |
|
|
|
|
$ |
48,662 |
|
|
|
|
$137,050 |
|
|
|
$ |
|
|
|
|
$ |
|
|
|
|
$ |
29,086 |
|
|
|
$ |
720,198 |
|
|
|
|
|
2006 |
|
|
|
$ |
389,500 |
|
|
|
$ |
|
|
|
|
$ |
36,236 |
|
|
|
|
$107,775 |
|
|
|
$ |
233,700 |
|
|
|
$ |
|
|
|
|
$ |
35,618 |
|
|
|
$ |
802,827 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hugh M. Queener |
|
|
|
2008 |
|
|
|
$ |
300,000 |
|
|
|
$ |
|
|
|
|
$ |
(14,437 |
) |
|
|
|
$107,903 |
|
|
|
$ |
163,750 |
|
|
|
$ |
|
|
|
|
$ |
25,750 |
|
|
|
$ |
582,966 |
|
Chief Administrative
Officer |
|
|
|
2007 |
|
|
|
$ |
280,000 |
|
|
|
$ |
|
|
|
|
$ |
26,682 |
|
|
|
|
$89,336 |
|
|
|
$ |
|
|
|
|
$ |
|
|
|
|
$ |
25,454 |
|
|
|
$ |
421,472 |
|
|
|
|
|
2006 |
|
|
|
$ |
234,000 |
|
|
|
$ |
|
|
|
|
$ |
26,084 |
|
|
|
|
$74,421 |
|
|
|
$ |
113,320 |
|
|
|
$ |
|
|
|
|
$ |
26,081 |
|
|
|
$ |
472,906 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Harold R. Carpenter |
|
|
|
2008 |
|
|
|
$ |
300,000 |
|
|
|
$ |
|
|
|
|
$ |
(10,105 |
) |
|
|
|
$65,947 |
|
|
|
$ |
132,500 |
|
|
|
$ |
|
|
|
|
$ |
11,044 |
|
|
|
$ |
499,386 |
|
Chief Financial Officer |
|
|
|
2007 |
|
|
|
$ |
275,000 |
|
|
|
$ |
|
|
|
|
$ |
19,712 |
|
|
|
|
$44,868 |
|
|
|
$ |
|
|
|
|
$ |
|
|
|
|
$ |
10,800 |
|
|
|
$ |
350,380 |
|
|
|
|
|
2006 |
|
|
|
$ |
175,000 |
|
|
|
$ |
|
|
|
|
$ |
17,233 |
|
|
|
|
$33,347 |
|
|
|
$ |
84,000 |
|
|
|
$ |
|
|
|
|
$ |
8,670 |
|
|
|
$ |
318,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles B. McMahan |
|
|
|
2008 |
|
|
|
$ |
200,000 |
|
|
|
$ |
|
|
|
|
$ |
(2,996 |
) |
|
|
|
$45,642 |
|
|
|
$ |
95,000 |
|
|
|
$ |
|
|
|
|
$ |
8,075 |
|
|
|
$ |
345,721 |
|
Chief Credit Officer |
|
|
|
2007 |
|
|
|
$ |
186,000 |
|
|
|
$ |
|
|
|
|
$ |
7,400 |
|
|
|
|
$34,038 |
|
|
|
$ |
|
|
|
|
$ |
|
|
|
|
$ |
8,377 |
|
|
|
$ |
235,815 |
|
|
|
|
|
2006 |
|
|
|
$ |
175,000 |
|
|
|
$ |
|
|
|
|
$ |
12,155 |
|
|
|
|
$28,738 |
|
|
|
$ |
63,000 |
|
|
|
$ |
|
|
|
|
$ |
7,994 |
|
|
|
$ |
286,886 |
|
|
(1) |
|
Stock Awards Since 2004, the Company has awarded restricted shares to certain
executive officers, including the Named Executive Officers. Prior to 2008, these awards
were all performance-based awards with the restrictions lapsing in 33.3% annual increments
should the Company achieve certain soundness and earnings per share diluted thresholds for
the fiscal year in which the award is granted and the next two fiscal years thereafter. In
2008, similar performance-based awards were issued but the Company also issued time-based
restricted share awards as well which vested ratably over ten years, or if shorter, ratably
over the period from grant date to the recipients 65th birthday. Each of the
performance-based awards granted in the 2006, 2007 and 2008 fiscal years had the same
soundness threshold of criticized and classified assets being less than 0.25% of Tier 1
capital, but the earnings per share thresholds associated with the 2008 fiscal year were
different for each of the 2006, 2007 and 2008 awards. For the award granted in 2006, the
2008 earnings per share |
|
|
|
|
Pinnacle Financial Partners, Inc.
|
|
Page 48 |
|
|
|
diluted target was $1.91. For the 2007 award, the 2008 earnings
per share diluted target was $1.75 (or $1.64 per share diluted after adjustment for the
expenses incurred in connection with the Companys merger with Mid-America) and for the
2008 award, the 2008 earnings per share diluted target was $1.62. In addition to these
annual earnings per share diluted targets, the awards allow for the forfeiture restrictions
associated with the award for a particular year to lapse even if an annual earnings per
share diluted target is not achieved, if a cumulative three-year earnings per share diluted
target is achieved. For purposes of determining whether the traunche of restricted shares
awarded in 2006, 2007 and 2008 with earnings per share diluted targets associated with the
2008 fiscal year were achieved, the earnings per share diluted targets as adjusted were
compared to actual results for 2008. The Companys fully diluted earnings per share for
2008 was $1.34. The adjusted earnings per share diluted target for the 2008 traunche as
adjusted for merger-related expense was $1.45 per fully diluted share. As a result, the
fully-diluted earnings per share targets for the 2008 traunche of the 2006, 2007 and 2008
restricted share awards were not achieved. Additionally, in 2008, the ratio of the
Companys criticized and classified assets to Tier 1 capital was more than 0.25% and thus,
this threshold was not achieved. As a result, the restrictions associated with the 2006,
2007 and 2008 restricted share awards for the 2008 traunche did not lapse. In January
2009, due to the three-year cumulative performance targets for the 2006 restricted share
award not being achieved, the named executive officers forfeited the 2007 and 2008
traunches of the 2006 restricted share award and these shares were forfeited by the
executive. Furthermore, the Company has ceased recording expense associated with the 2007
and 2008 awards as the Company has determined that the performance targets for those awards
are not likely to be achieved in future periods and has reversed $137,000 of expense that
the Company had previously accrued in 2008 related to the 2007 and 2008 awards for the
Named Executive Officers. As noted previously, the Named Executive Officers also received
time-based restricted share awards in 2008. The restrictions for
these awards vest in equal annual amounts so long as the Company is profitable over the
lesser of 10 years or the number of years from grant until the Named Executive Officers
65th birthday. The first vesting traunche of the time-vested restricted share
awards vested in January 2009. The Company recognized $44,000 of expense associated with the
Named Executive Officers for these time-based awards. Both the performance-based and
time-based awards were issued pursuant to the terms of the 2004 Equity Incentive Plan. The
amount in column (e) reflects the dollar amount recognized for financial statement purposes
for each of the three years ended December 31, 2008, in accordance with SFAS 123(R) of awards
pursuant to the 2004 Equity Incentive Plan and thus includes amounts from awards granted in
and prior to 2008, 2007 and 2006, as applicable. Assumptions used in the calculations of
these amounts are included in footnote 15 to the Companys audited financial statements for
the fiscal year ended December 31, 2008 included in the Companys Annual Report of Form 10-K
filed with the Securities and Exchange Commission on February 19, 2009. Assumptions used in
the calculations of these amounts are included in footnote 15 to the Companys audited
financial statements for the fiscal year ended December 31, 2007 included in the Companys
Annual Report of Form 10-K filed with the Securities and Exchange Commission on March 7,
2008. For the 2006 awards, assumptions used in the calculations of these amounts are
included in footnote 14 to the Companys audited financial statements for the fiscal year
ended December 31, 2006 included in the Companys Annual Report of Form 10-K filed with the
Securities and Exchange Commission on February 28, 2007. |
|
(2) |
|
Option Awards All options are granted at an exercise price that equals the closing
price of the Companys common stock on the date of grant. All awards expire ten years from
date of issuance and vest in 20% increments on the anniversary date of the grant. The
awards prior to 2006 were issued as incentive stock options while awards issued in 2006 and
afterward are classified as nonstatutory stock options. All awards were issued pursuant to
the terms of the Pinnacle Financial Partners, Inc. 2000 Stock Incentive Plan (the 2000
Plan) or the 2004 Equity Incentive Plan. The amount in column (f) reflects the dollar
amount recognized for financial statement purposes for each of the fiscal years ended
December 31, 2008, 2007 and 2006, in accordance with SFAS 123(R) of awards pursuant to the
2000 Plan and the 2004 Equity Incentive Plan and thus includes amounts from awards granted
in and prior to 2008, 2007 and 2006, as applicable. Assumptions used in the calculations
of these amounts are included in footnote 15 to the Companys audited consolidated
financial statements for the fiscal year ended December 31, 2008 included in the Companys
Annual Report on Form 10-K filed with the Securities and Exchange Commission on February
19, 2009. Assumptions used in the calculations of these amounts are included in footnote
15 to the Companys audited consolidated financial statements for the fiscal year ended
December 31, 2007 included in the Companys Annual Report on Form 10-K filed with the
Securities and Exchange Commission on March 7, 2008. For 2006, assumptions used in the
calculations of these amounts are included in footnote 14 to the Companys audited
consolidated financial statements for the fiscal year ended December 31, 2006 included in
the Companys Annual Report on Form 10-K filed with the Securities and Exchange Commission
on February 28, 2007. There were not any forfeited stock option grants for the Named
Executive Officers in any of the three years ended December 31, 2008. |
|
|
(3) |
|
Non-Equity Incentive Plan Compensation Reflects compensation attributable to the
Companys annual cash incentive plans in which all non-commissioned based associates
participate and in 2008, the Companys 2008 Special Cash Incentive Plan in which
approximately 25 associates participated. Actual and target payouts are expressed as a
percentage of base salary. Payout of incentive compensation occurs upon achievement of
certain soundness and performance thresholds as determined by the Committee. For the 2008
Annual Cash Incentive Plan, in January 2009, the Human Resources and Compensation Committee
approved the payment of cash incentive awards under the Plan at a percentage that was
generally higher than that otherwise payable under the terms of the plan. The Company did
not meet the performance or soundness threshold during 2008, however, the Human Resources
and Compensation Committee determined that it was in the best interests of the shareholders
to award a 25% of target award to all participants in the 2008 Annual Cash Incentive Plan,
including the Named Executive Officers. Additionally, in April 2008, certain officers,
including the Named Executive Officers received a one-time special cash incentive payment
following the integration of the Mid-American bank subsidiaries with the Company banks
subsidiary. As to the 2007 Annual Cash Incentive Plan, and in accordance with the Named
Executive Officer request, the Named Executive Officers did not receive any cash incentive
payments under the |
|
|
|
|
|
Pinnacle Financial Partners, Inc.
|
|
Page 49 |
|
|
|
2007 Cash Incentive Plan. For the 2007 Annual Cash Incentive Plan, the
Human Resources and Compensation Committee approved the payment of cash incentive awards
under the Plan at a percentage that was generally higher than that otherwise payable under
the terms of the plan, except for the Named Executive Officers. For the 2006 Annual Cash
Incentive Plan and pursuant to the Plans provision, the payout for 2006 was at 120% of
target for all associates, including each Named Executive Officer. |
|
|
|
|
|
|
|
|
|
|
|
|
|
Turner |
|
McCabe |
|
Queener |
|
Carpenter |
|
McMahan |
2008 Annual Cash Incentive Plan |
|
|
|
|
|
|
|
|
|
|
2008 % Target |
|
100% |
|
100% |
|
85% |
|
70% |
|
70% |
2008 % Payment |
|
25% |
|
25% |
|
21.25% |
|
17.5% |
|
17.5% |
2008 Payment |
|
$160,750 |
|
$152,500 |
|
$63,750 |
|
$52,500 |
|
$35,000 |
|
|
|
|
|
|
|
|
|
|
|
2008 Special
Incentive Plan |
|
$200,000 |
|
$190,000 |
|
$100,000 |
|
$80,000 |
|
$60,000 |
|
|
|
|
|
|
|
|
|
|
|
2007 Annual Cash Incentive Plan |
|
|
|
|
|
|
|
|
|
|
2007 % Target |
|
100% |
|
100% |
|
85% |
|
70% |
|
70% |
2007 % Payment |
|
0% |
|
0% |
|
0% |
|
0% |
|
0% |
2007 Payment |
|
$ - |
|
$ - |
|
$ - |
|
$ - |
|
$ - |
|
|
|
|
|
|
|
|
|
|
|
2006 Annual Cash Incentive Plan |
|
|
|
|
|
|
|
|
|
|
2006 % Target |
|
50% |
|
50% |
|
40% |
|
40% |
|
30% |
2006 % Payment |
|
60% |
|
60% |
|
48% |
|
48% |
|
36% |
2006 Payment |
|
$246,000 |
|
$233,700 |
|
$112,320 |
|
$84,000 |
|
$63,000 |
|
(4) |
|
Other Compensation The Company provides the Named Executive Officers with other
forms of compensation. The following is a listing of various types of other compensation
that the Company has not used in the past but may consider in the future to award its
executives. We believe that including a listing of forms of compensation that we currently
do not use is beneficial to investors as they compare our compensation elements to those of
other organizations. |
|
|
|
|
|
|
|
|
|
|
|
|
|
Turner |
|
McCabe |
|
Queener |
|
Carpenter |
|
McMahan |
Stock appreciation rights granted
|
|
None
|
|
None
|
|
None
|
|
None
|
|
None |
Stock performance units granted
|
|
None
|
|
None
|
|
None
|
|
None
|
|
None |
Supplemental retirement plans
|
|
NA
|
|
NA
|
|
NA
|
|
NA
|
|
NA |
Pension plan
|
|
NA
|
|
NA
|
|
NA
|
|
NA
|
|
NA |
Deferred compensation
|
|
NA
|
|
NA
|
|
NA
|
|
NA
|
|
NA |
Board fees
|
|
No
|
|
No
|
|
NA
|
|
NA
|
|
NA |
|
|
|
Group benefit package All Company associates, including the Named Executive
Officers, participate in the Companys group benefit package which includes customary
medical and dental benefits, group life, group disability, healthcare and dependent care
reimbursement plans, 401k plan, etc. The Named Executive Officers receive no
incremental employee benefits that are not offered to other Company associates, other
than an enhanced long-term disability policy that provides incremental coverage over the
group policy maximums. The following is a summary of the expense the Company incurred
during 2008, 2007 and 2006 to provide a 401k plan match to our Named Executive Officers
and the cost of the enhanced long term disability policy. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Turner |
|
McCabe |
|
Queener |
|
Carpenter |
|
McMahan |
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
401k match |
|
|
$9,200 |
|
|
|
$9,200 |
|
|
|
$9,200 |
|
|
|
$9,200 |
|
|
|
$7,081 |
|
Long term
disability policy |
|
|
$5,821 |
|
|
|
$7,088 |
|
|
|
$3,350 |
|
|
|
$1,844 |
|
|
|
$994 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
401k match |
|
|
$9,000 |
|
|
|
$9,000 |
|
|
|
$9,000 |
|
|
|
$9,000 |
|
|
|
$7,383 |
|
Long term
disability policy |
|
|
$5,659 |
|
|
|
$6,886 |
|
|
|
$3,254 |
|
|
|
$1,800 |
|
|
|
$994 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
401k match |
|
|
$16,927 |
|
|
|
$16,109 |
|
|
|
$9,888 |
|
|
|
$7,000 |
|
|
|
$7,000 |
|
Long term
disability policy |
|
|
$5,175 |
|
|
|
$6,309 |
|
|
|
$2,993 |
|
|
|
$1,670 |
|
|
|
$994 |
|
|
|
|
Paid time off Each Named Executive Officer receives an allotment of 25 days for
paid time off each year (excluding holidays). The Company does not provide sick leave
for any associate, including the Named Executive Officers. Additionally, associates,
including the Named Executive Officers, are not permitted to carryover unused paid time
off into a subsequent fiscal year. |
|
|
|
|
|
Pinnacle Financial Partners, Inc.
|
|
Page 50 |
|
|
|
Other Executive perquisites The Company provided the following perquisites to the
Named Executive Officers in 2008, 2007 and 2006: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Turner |
|
McCabe |
|
Queener |
|
Carpenter |
|
McMahan |
Company provided vehicles |
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
Automobile allowance |
|
$13,200 / year |
|
$13,200 / year |
|
$13,200 / year |
|
No |
|
No |
Parking allowances |
|
No |
|
No |
|
No |
|
No |
|
No |
Personal tax return fees paid |
|
$650 |
|
$2,500 |
|
$- |
|
$- |
|
No |
Health club membership |
|
No |
|
No |
|
No |
|
No |
|
No |
Country club membership |
|
No |
|
No |
|
No |
|
No |
|
No |
Corporate aircraft |
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
The following table summarizes certain information regarding grants of plan-based awards to
the Named Executive Officers in 2008:
GRANTS OF PLAN-BASED AWARDS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts Under |
|
|
|
Estimated Future Payouts Under |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity Incentive Plan |
|
|
|
Equity Incentive Plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards (1) |
|
|
|
Awards (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
|
(b) |
|
|
|
(c) |
|
|
(d) |
|
|
(e) |
|
|
|
(f) |
|
|
(g) |
|
|
(h) |
|
|
|
(i) |
|
|
|
(j) |
|
|
|
(k) |
|
|
|
(l) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other |
|
|
|
All Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock |
|
|
|
Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards: |
|
|
|
Awards: |
|
|
|
Exercise |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number |
|
|
|
Number of |
|
|
|
or Base |
|
|
|
Grant Date |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of Shares |
|
|
|
Securities |
|
|
|
Price of |
|
|
|
Fair Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of Stock |
|
|
|
Underlying |
|
|
|
Option |
|
|
|
of Stock and |
|
Name and Principal |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
or Units |
|
|
|
Options |
|
|
|
Awards |
|
|
|
Option |
|
Position |
|
|
Grant date |
|
|
|
Threshold |
|
|
Target |
|
|
Maximum |
|
|
|
Threshold |
|
|
Target |
|
|
Maximum |
|
|
|
(#) |
|
|
|
(#) |
|
|
|
($/share) |
|
|
|
Awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
M. Terry Turner
President and Chief |
|
|
|
1/18/08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,171 |
|
|
|
|
$21.51 |
|
|
|
|
$241,887 |
|
|
|
|
|
1/18/08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,228 |
|
|
|
10,228 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$220,004 |
|
Executive Officer |
|
|
|
N/A |
|
|
|
|
$0.00 |
|
|
|
$643,000 |
|
|
|
$830,370 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert A. McCabe, Jr.
Chairman of the
Board |
|
|
|
1/18/08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,612 |
|
|
|
|
$21.51 |
|
|
|
|
$229,789 |
|
|
|
|
|
1/18/08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,716 |
|
|
|
9,716 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$208,991 |
|
|
|
|
|
N/A |
|
|
|
|
$0.00 |
|
|
|
$610,000 |
|
|
|
$787,754 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hugh M. Queener
Chief Admin. Officer |
|
|
|
1/18/08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,253 |
|
|
|
|
$21.51 |
|
|
|
|
$164,923 |
|
|
|
|
|
1/18/08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,974 |
|
|
|
6,974 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$150,011 |
|
|
|
|
|
N/A |
|
|
|
|
$0.00 |
|
|
|
$255,000 |
|
|
|
$329,307 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Harold R. Carpenter Chief Financial Officer |
|
|
|
1/18/08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,711 |
|
|
|
|
$21.51 |
|
|
|
|
$137,437 |
|
|
|
|
|
1/18/08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,812 |
|
|
|
5,812 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$125,016 |
|
|
|
|
|
N/A |
|
|
|
|
$0.00 |
|
|
|
$210,000 |
|
|
|
$271,194 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles B. McMahan
Chief Credit Officer |
|
|
|
1/18/08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,501 |
|
|
|
|
$21.51 |
|
|
|
|
$65,968 |
|
|
|
|
|
1/18/08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,790 |
|
|
|
2,790 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$60,013 |
|
|
|
|
|
N/A |
|
|
|
|
$0.00 |
|
|
|
$140,000 |
|
|
|
$180,796 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A |
|
|
(1) |
|
The amounts shown in column (c) reflect the minimum payment level under the Companys
2008 Annual Cash Incentive Plan which is 0% of the target amount shown in column (d). The
amount shown in column (e) is 129.1% of such target amount. These amounts are based on the
individuals current salary and position. |
|
|
(2) |
|
Reflects awards of restricted shares under the 2004 Equity Incentive Plan. The amounts
shown in column (g) reflect the restricted share award targeted number of shares that can
be earned over either a three-year performance-based vesting period or a time-based vesting
period. This is also the maximum number of shares that can be earned by the Named
Executive Officer over these periods thus it is the same number in column (h). All
performance-based awards in column (g) and (h) could be forfeited should the Company not
meet the performance and soundness targets for these awards. All time-based restricted
share awards in column (g) and (h) could be forfeited should the Named Executive Officer
not be employed on the annual vesting dates for these awards. The restrictions on the
performance-based restricted shares lapse in 33.3% annual increments upon the achievement
of certain soundness and earnings per share diluted thresholds for the fiscal years ending
December 31, 2008, 2009 and 2010 or soundness and cumulative performance thresholds for the
three year period |
|
|
|
|
|
|
|
|
Pinnacle Financial Partners, Inc.
|
|
Page 51 |
|
|
|
ended December 31, 2010. The restrictions on the time-based restricted
shares lapse in equal annual increments over the lesser of the time between January, 2008
and the Named Executive Officers 65th birthday or 10 years. The Named
Executive Officer is entitled to vote these restricted shares (but not the options) and
receive any dividends payable with respect to the restricted shares (but not the options),
if any, prior to the lapsing of the forfeiture restrictions thereon. Based on the lack of
achievement of the soundness and the earnings per diluted share thresholds for the fiscal
year ended December 31, 2008, the restrictions on the 2006, 2007 and 2008 traunche of the
awards did not lapse. Additionally, since the Company did not achieve the cumulative
three-year fully diluted earnings per share threshold for the 2006 performance-based
restricted share awards, 6,960 shares previously awarded to the Named Executive Officers in
2006 were forfeited. Additionally, in January 2009, the restrictions associated with 2,310
time-based restricted share awards which are also included in columns (g) and (h) above
lapsed. |
|
|
(3) |
|
The amounts shown in column (j) reflect the number of nonstatutory stock options
granted pursuant to the 2004 Equity Incentive Plan during 2008. All options are granted
at an exercise price that equals the closing price of the Companys common stock at the
date of grant. All of the reflected awards expire ten years from the date of issuance and
vest in 20% increments on the anniversary date of the grant. All awards were issued
pursuant to the terms of the 2004 Equity Incentive Plan. The amount in column (l) reflects
the dollar amount to be recognized for financial statement purposes in accordance with SFAS
123(R) over the vesting period. Assumptions used in the calculations of these amounts are
included in footnote 15 to the Companys audited financial statements for the fiscal year
ended December 31, 2008 included in the Companys Annual Report of Form 10-K filed with the
Securities and Exchange Commission on February 19, 2009. The following are the number of
options to acquire common stock granted to each Named Executive Officer during 2008: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Turner |
|
McCabe |
|
Queener |
|
Carpenter |
|
McMahan |
Grant date |
|
Jan. 18, 2008 |
|
Jan. 18, 2008 |
|
Jan. 18, 2008 |
|
Jan. 18, 2008 |
|
Jan. 18, 2008 |
No. of option awards |
|
31,171 |
|
29,612 |
|
21,153 |
|
17,711 |
|
8,501 |
Exercise price |
|
$21.51 |
|
$21.51 |
|
$21.51 |
|
$21.51 |
|
$21.51 |
Grant date fair value
of each option award |
|
$7.76 |
|
$7.76 |
|
$7.76 |
|
$7.76 |
|
$7.76 |
Aggregate value of award |
|
$241,887 |
|
$229,789 |
|
$164,923 |
|
$137,437 |
|
$65,968 |
|
|
|
|
|
Pinnacle Financial Partners, Inc.
|
|
Page 52 |
The following table sets forth certain information with respect to outstanding equity awards
at December 31, 2008:
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards (1) |
|
|
|
Stock Awards (2) |
|
|
|
(a) |
|
|
(b) |
|
|
(c) |
|
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(d) |
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(e) |
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(f) |
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(g) |
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(h) |
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(i) |
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(j) |
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Equity |
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Equity |
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Equity |
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Incentive Plan |
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Incentive |
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Incentive Plan |
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Awards: |
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Plan |
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Market |
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Awards: |
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Market or |
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Awards: |
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Value of |
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Number of |
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Payout Value |
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Number of |
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Number of |
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Number of |
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Number of |
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Shares or |
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Unearned |
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|
of Unearned |
|
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|
|
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Securities |
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Securities |
|
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Securities |
|
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Shares or |
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Units of |
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Shares, Units |
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Shares, Units |
|
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|
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Underlying |
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Underlying |
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Underlying |
|
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|
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|
|
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Units of |
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Stock |
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or Other |
|
|
or Other |
|
|
|
|
|
|
Unexercised |
|
|
Unexercised |
|
|
Unexercised |
|
|
Option |
|
|
Option |
|
|
|
Stock That |
|
|
That Have |
|
|
Rights That |
|
|
Rights That |
|
|
|
|
|
|
Options (#) |
|
|
Options (#) |
|
|
Unearned |
|
|
Exercise |
|
|
Expiration |
|
|
|
Have Not |
|
|
Not |
|
|
Have Not |
|
|
Have Not |
|
|
|
Name |
|
|
Excercisable |
|
|
Unexcercisable |
|
|
Options (#) |
|
|
Price ($) |
|
|
Date |
|
|
|
Vested (#) |
|
|
Vested ($) |
|
|
Vested (#) |
|
|
Vested (3) (#) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
M. Terry Turner |
|
|
|
|
|
|
|
31,171 |
|
|
|
|
|
|
$ |
21.51 |
|
|
|
1/18/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
16,642 |
|
|
$ |
496,088 |
|
|
|
|
|
|
|
|
|
|
|
23,412 |
|
|
|
|
|
|
$ |
31.25 |
|
|
|
1/19/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,773 |
|
|
|
19,093 |
|
|
|
|
|
|
$ |
27.11 |
|
|
|
3/17/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,844 |
|
|
|
13,267 |
|
|
|
|
|
|
$ |
23.88 |
|
|
|
1/19/2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,084 |
|
|
|
6,056 |
|
|
|
|
|
|
$ |
14.78 |
|
|
|
4/26/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000 |
|
|
|
8,000 |
|
|
|
|
|
|
$ |
6.65 |
|
|
|
2/26/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,000 |
|
|
|
|
|
|
|
|
|
|
$ |
4.96 |
|
|
|
2/1/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000 |
|
|
|
|
|
|
|
|
|
|
$ |
3.82 |
|
|
|
3/1/2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90,000 |
|
|
|
|
|
|
|
|
|
|
$ |
5.00 |
|
|
|
12/19/2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert A. McCabe, Jr. |
|
|
|
|
|
|
|
29,612 |
|
|
|
|
|
|
$ |
21.51 |
|
|
|
1/18/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
15,743 |
|
|
$ |
469,293 |
|
|
|
|
|
|
|
|
|
|
|
22,242 |
|
|
|
|
|
|
$ |
31.25 |
|
|
|
1/19/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,535 |
|
|
|
18,138 |
|
|
|
|
|
|
$ |
27.11 |
|
|
|
3/17/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,886 |
|
|
|
11,829 |
|
|
|
|
|
|
$ |
23.88 |
|
|
|
1/19/2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,100 |
|
|
|
5,400 |
|
|
|
|
|
|
$ |
14.78 |
|
|
|
4/26/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,600 |
|
|
|
4,400 |
|
|
|
|
|
|
$ |
6.65 |
|
|
|
2/26/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,000 |
|
|
|
|
|
|
|
|
|
|
$ |
4.96 |
|
|
|
2/1/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000 |
|
|
|
|
|
|
|
|
|
|
$ |
3.82 |
|
|
|
3/1/2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76,700 |
|
|
|
|
|
|
|
|
|
|
$ |
5.00 |
|
|
|
12/19/2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hugh M. Queener |
|
|
|
|
|
|
|
21,253 |
|
|
|
|
|
|
$ |
21.51 |
|
|
|
1/18/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
10,353 |
|
|
$ |
104,707 |
|
|
|
|
|
|
|
|
|
|
|
11,706 |
|
|
|
|
|
|
$ |
31.25 |
|
|
|
1/19/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,387 |
|
|
|
9,546 |
|
|
|
|
|
|
$ |
27.11 |
|
|
|
3/17/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,922 |
|
|
|
10,384 |
|
|
|
|
|
|
$ |
23.88 |
|
|
|
1/19/2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,110 |
|
|
|
4,740 |
|
|
|
|
|
|
$ |
14.78 |
|
|
|
4/26/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,200 |
|
|
|
3,800 |
|
|
|
|
|
|
$ |
6.65 |
|
|
|
2/26/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,000 |
|
|
|
|
|
|
|
|
|
|
$ |
4.96 |
|
|
|
2/1/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,000 |
|
|
|
|
|
|
|
|
|
|
$ |
3.82 |
|
|
|
3/1/2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,000 |
|
|
|
|
|
|
|
|
|
|
$ |
5.00 |
|
|
|
12/19/2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Harold R. Carpenter |
|
|
|
|
|
|
|
17,711 |
|
|
|
|
|
|
$ |
21.51 |
|
|
|
1/18/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
8,274 |
|
|
$ |
246,657 |
|
|
|
|
|
|
|
|
|
|
|
8,780 |
|
|
|
|
|
|
$ |
31.25 |
|
|
|
1/19/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,838 |
|
|
|
7,351 |
|
|
|
|
|
|
$ |
27.11 |
|
|
|
3/17/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,160 |
|
|
|
3,240 |
|
|
|
|
|
|
$ |
23.88 |
|
|
|
1/19/2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,300 |
|
|
|
2,200 |
|
|
|
|
|
|
$ |
14.78 |
|
|
|
1/12/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,000 |
|
|
|
|
|
|
|
|
|
|
|
$4.96 |
|
|
|
2/1/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,000 |
|
|
|
|
|
|
|
|
|
|
|
$3.82 |
|
|
|
3/1/2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,000 |
|
|
|
|
|
|
|
|
|
|
|
$5.00 |
|
|
|
12/19/2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles B. McMahan |
|
|
|
|
|
|
|
8,501 |
|
|
|
|
|
|
$ |
21.51 |
|
|
|
1/18/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
4,153 |
|
|
$ |
123,815 |
|
|
|
|
|
|
|
|
|
|
|
3,278 |
|
|
|
|
|
|
$ |
31.25 |
|
|
|
1/19/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,671 |
|
|
|
6,682 |
|
|
|
|
|
|
$ |
27.11 |
|
|
|
3/17/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,200 |
|
|
|
4,800 |
|
|
|
|
|
|
$ |
23.88 |
|
|
|
1/19/2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,690 |
|
|
|
2,460 |
|
|
|
|
|
|
$ |
14.78 |
|
|
|
1/12/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000 |
|
|
|
|
|
|
|
|
|
|
|
$6.46 |
|
|
|
12/31/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prinnacle Financial Partners, Inc.
|
|
Page 53 |
|
(1) |
|
All option awards vest in 20% increments annually over the 10-year option term. |
|
|
(2) |
|
Unearned restricted share awards as of December 31, 2008 are for those
performance-based restricted share awards which have vesting criteria tied to 2008 thru
2010 earnings per diluted share and soundness targets. Also included are time-based
restricted share awards that vest in equal annual increments over the shorter of the period
from January 2008 to the Named Executive Officers 65th birthday or 10 years.
The 2006 restricted share award is 66.7% unearned at December 31, 2008 as 33.3% of the
award has restrictions that tied to 2007 earnings per diluted share and soundness targets
which were not met and 33.3% that are based on 2008 earnings per diluted share and
soundness targets which were also not met. Additionally, the Companys cumulative
performance threshold target for the three year period ended December 31, 2008 was also not
met and these restricted share awards were forfeited by the Named Executive Officers in
January 2009. The 2007 restricted share award is 100.0% unearned because, for the 2007
traunche, even though the 2007 soundness threshold was met, the 2007 fully diluted earnings
threshold was not met and, for the 2008 traunche, both the 2008 soundness and earnings per
share diluted targets were not met. The 2008 restricted share award is 100.0% unearned
because, for the 2008 traunche, the 2008 soundness and earnings per share diluted targets
were not met. Although the 2008 performance thresholds for the 2007 and 2008 awards were
not met, the portion of the 2007 and 2008 restricted share awards with vesting conditions
tied to that year may still be earned if the Companys cumulative performance for the
three-year periods ending December 31, 2010 and 2011 exceed the threshold target
established in the award agreement. |
|
|
(3) |
|
Market value is determined by multiplying the closing market price of the Companys
common stock on December 31, 2008 by the number of shares. |
The following table details the number of options exercised during 2008, the value realized
from those exercises as of the date of exercise, the number of restricted shares that vested during
2008 and the value realized on those shares as of the vesting date for the Named Executive
Officers:
OPTION EXERCISES AND STOCK VESTED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards |
|
|
Stock Awards |
(a) |
|
|
(b) |
|
(c) |
|
|
(d) |
|
(e) |
|
|
|
Number of Shares |
|
|
|
|
Number of Shares |
|
|
|
|
|
Acquired On |
|
Value Realized on |
|
|
Acquired On |
|
Value Realized on |
Name |
|
|
Exercise (#) |
|
Exercise ($) |
|
|
Vesting (#) |
|
Vesting ($) (1) |
|
|
|
|
|
|
|
M. Terry Turner |
|
|
|
|
|
|
|
|
|
$ - |
|
|
|
|
|
|
|
|
|
|
|
Robert A. McCabe, Jr. |
|
|
7,000 |
|
$133,490 |
|
|
|
|
$ - |
|
|
|
|
|
|
|
|
|
|
|
Hugh M. Queener |
|
|
|
|
|
|
|
|
|
$ - |
|
|
|
|
|
|
|
|
|
|
|
Harold R. Carpenter |
|
|
|
|
|
|
|
|
|
$ - |
|
|
|
|
|
|
|
|
|
|
|
Charles B. McMahan |
|
|
|
|
|
|
|
|
|
$ - |
|
(1) |
|
No restricted share stock awards vested during 2008, as all restrictions for
shares eligible for vesting in 2008 did not lapse as the Company did not achieve its
performance thresholds for those shares. |
Employment Agreements
The Company entered into a three-year employment contract with M. Terry Turner, President and
Chief Executive Officer, on August 1, 2000. This agreement was amended on January 1, 2008. This
amendment eliminated the automatically three year renewable clause in the agreement as well as
incorporated the impact
Prinnacle Financial Partners, Inc.
|
|
Page 54 |
of IRS Code Section 409A into the agreement. There were no other
significant changes to the terms and conditions of the original agreement as a result of the
amendment. The amended agreement automatically renews annually, unless any of the parties to the
agreement gives notice of intent not to renew the agreement.
Pursuant to this agreement with Mr. Turner, the Company will be obligated to pay Mr. Turner
his base salary for the following terminating events:
|
|
|
Payment Obligation Terminating Event |
|
In relation to Base Salary |
Mr. Turner becomes permanently disabled
|
|
Maximum of six months |
The Company terminates Mr. Turners
employment without cause, as defined in
the agreement
|
|
Three years annually
|
Mr. Turner terminates his employment for
cause, as defined in the agreement
|
|
Maximum of twelve months |
Mr. Turner terminates his employment
within twelve months after a change of
control, as defined in the agreement
|
|
Three times base salary and
target bonus, plus benefits |
The Company entered into a three-year employment contract with Robert A. McCabe, Jr., Chairman
of the Board on August 1, 2000, which was amended January 1, 2008 to, among other things, provide
that it was thereafter annually renewable and to include certain changes related to Section 409A of
the Code. Pursuant to this agreement with Mr. McCabe, the Company will be obligated to pay Mr.
McCabe his base salary under the same terms and conditions as described above under Mr. Turners
agreement for certain terminating events.
The Company entered into a three-year employment contract with Hugh M. Queener, Chief
Administrative Officer, on December 4, 2000, which was amended January 1, 2008 to, among other
things, provide that it was thereafter annually
renewable and to include certain changes related to Section 409A of the Code. Pursuant to
this agreement with Mr. Queener, the Company will be obligated to pay Mr. Queener his base salary
under the same terms and conditions as described above under Mr. Turners agreement for certain
terminating events.
The Company entered into a three-year employment contract with Harold R. Carpenter, Chief
Financial Officer, on March 14, 2006, which was amended January 1, 2008, to, among other things,
provide that it was thereafter annually renewable and to include certain changes related to Section
409A of the Code. Pursuant to this agreement with Mr. Carpenter, the Company will be obligated to
pay Mr. Carpenter his base salary under the same terms and conditions as described above under Mr.
Turners agreement for certain terminating events.
The employment agreements set forth above for Messrs. Turner, McCabe, Queener and Carpenter,
contain provisions that if the executive terminates his employment with the Company for cause
within a year following a change of control, the executive shall be entitled to a lump sum
severance payment equal to three times the executives then current salary and target bonus, plus
certain retirement benefits plus tax payments. Generally, this change of control provision is
typically referred to as a double trigger such that (a) a change of control has to occur as
defined in the employment agreements and (b) the executive has to terminate his employment for
cause, again as defined in the employment agreement, as follows:
|
(a) |
|
A change of control generally means the acquisition by a person or
group of 40% or more of the voting securities of the Company or the Bank; a change
in the majority of the Board over a twelve-month period (unless the new directors
were approved by a two-thirds majority of prior directors); a merger, consolidation
or reorganization in which the Companys shareholders before the merger own 50% or
less of the voting power after the merger; or the sale, transfer or assignment of
all or substantially all of the assets of the Company and its subsidiaries to any
third party. |
Prinnacle Financial Partners, Inc.
|
|
Page 55 |
|
(b) |
|
Termination for cause generally means that immediately following the
change of control, the executive no longer reports to the same supervisor he
reported to prior to the change of control, a change in supervisory authority has
occurred such that the associates that reported to the executive prior to the change
of control no longer report to the executive, a material modification in the
executives job title or scope of responsibility has occurred, a change in office
location of more than 25 miles from the executives current office location or a
material change in salary, bonus opportunity or other benefit has occurred. |
Also and in the event of a change of control, the executive will receive three years of
Company-provided health plan benefits subsequent to his termination. In addition, the executive
will be indemnified by the Company for any excise tax due under Section 4999 of the Code of an
amount sufficient to place the executive in the same after-tax position as the executive would have
been had no excise tax been imposed upon or incurred or paid by the executive. The executive is
also entitled to receive assistance from a qualified accounting firm of his choice not to exceed
$2,500 per year for three years.
Furthermore, in the event of a change of control, any unvested restricted share awards,
pursuant to the restricted share agreements with the executives noted above, would immediately
vest. All unvested stock option grants would only vest pursuant to a change of control with the
approval of the Human Resources and Compensation Committee.
Prinnacle Financial Partners, Inc.
|
|
Page 56 |
The following is a tabular presentation of the amounts that would be owed the Named Executive
Officers pursuant to the various events detailed above assuming the event occurred on December 31,
2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pinnacle terminates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pinnacle terminates |
|
|
|
Employee without |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
employee for cause |
|
|
|
cause or Employee |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
or Employee |
|
|
|
terminates for |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pinnacle |
|
|
|
|
|
|
|
|
terminates |
|
|
|
cause, in each case |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
terminates |
|
|
|
|
|
|
|
|
employment without |
|
|
|
within twelve |
|
|
|
|
Employee |
|
|
|
Employee |
|
|
|
employment |
|
|
|
Employee terminates |
|
|
|
cause or Employee |
|
|
|
months of a change |
|
|
|
|
disability (4) |
|
|
|
death (4) |
|
|
|
without cause |
|
|
|
employment for cause |
|
|
|
retires |
|
|
|
of control |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
M. Terry Turner |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 base salary |
|
|
$ |
643,000 |
|
|
|
$ |
- |
|
|
|
$ |
643,000 |
|
|
|
$ |
643,000 |
|
|
|
$ |
- |
|
|
|
$ |
643,000 |
|
2008 targeted cash incentive payment |
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
643,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
643,000 |
|
|
|
|
- |
|
|
|
|
643,000 |
|
|
|
|
643,000 |
|
|
|
|
- |
|
|
|
|
1,286,000 |
|
Multiplier (in terms of years) |
|
|
|
x .5 |
|
|
|
|
x 0 |
|
|
|
|
x 3 |
|
|
|
|
x 1 |
|
|
|
|
x 0 |
|
|
|
|
x 3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate cash payment |
|
|
|
321,500 |
|
|
|
|
- |
|
|
|
|
1,929,000 |
|
|
|
|
643,000 |
|
|
|
|
- |
|
|
|
|
3,858,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health insurance - $800 per month |
|
|
|
- |
|
|
|
|
- |
|
|
|
|
9,600 |
|
|
|
|
2,400 |
|
|
|
|
- |
|
|
|
|
28,800 |
|
Tax assistance |
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
7,500 |
|
Intrinsic value of unvested stock options that
immediately vest (1) |
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
591,247 |
|
Value of unearned restricted shares that immediately vest |
|
|
|
496,088 |
|
|
|
|
496,088 |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
496,088 |
|
Payment for excise tax and gross up (2) |
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
1,562,511 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
817,588 |
|
|
|
$ |
496,088 |
|
|
|
$ |
1,938,600 |
|
|
|
$ |
645,400 |
|
|
|
$ |
- |
|
|
|
$ |
6,544,147 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert A. McCabe, Jr. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 base salary |
|
|
$ |
610,000 |
|
|
|
$ |
- |
|
|
|
$ |
610,000 |
|
|
|
$ |
610,000 |
|
|
|
$ |
- |
|
|
|
$ |
610,000 |
|
2008 targeted cash incentive payment |
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
610,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
610,000 |
|
|
|
|
- |
|
|
|
|
610,000 |
|
|
|
|
610,000 |
|
|
|
|
- |
|
|
|
|
1,220,000 |
|
Multiplier (in terms of years) |
|
|
|
x .5 |
|
|
|
|
x 0 |
|
|
|
|
x 3 |
|
|
|
|
x 1 |
|
|
|
|
x 0 |
|
|
|
|
x 3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate cash payment |
|
|
|
305,000 |
|
|
|
|
- |
|
|
|
|
1,830,000 |
|
|
|
|
610,000 |
|
|
|
|
- |
|
|
|
|
3,660,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health insurance - $800 per month |
|
|
|
- |
|
|
|
|
- |
|
|
|
|
9,600 |
|
|
|
|
2,400 |
|
|
|
|
- |
|
|
|
|
28,800 |
|
Tax assistance |
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
7,500 |
|
Intrinsic value of unvested stock options that
immediately vest (1) |
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
555,516 |
|
Value of unearned restricted shares that immediately vest |
|
|
|
469,293 |
|
|
|
|
469,293 |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
469,293 |
|
Payment for excise tax and gross up (2) |
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
1,477,710 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
774,293 |
|
|
|
$ |
469,293 |
|
|
|
$ |
1,839,600 |
|
|
|
$ |
612,400 |
|
|
|
$ |
- |
|
|
|
$ |
6,198,820 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hugh M. Queener |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 base salary |
|
|
$ |
300,000 |
|
|
|
$ |
- |
|
|
|
$ |
300,000 |
|
|
|
$ |
300,000 |
|
|
|
$ |
- |
|
|
|
$ |
300,000 |
|
2008 targeted cash incentive payment |
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
255,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
300,000 |
|
|
|
|
- |
|
|
|
|
300,000 |
|
|
|
|
300,000 |
|
|
|
|
- |
|
|
|
|
555,000 |
|
Multiplier (in terms of years) |
|
|
|
x .5 |
|
|
|
|
x 0 |
|
|
|
|
x 3 |
|
|
|
|
x 1 |
|
|
|
|
x 0 |
|
|
|
|
x 3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate cash payment |
|
|
|
150,000 |
|
|
|
|
- |
|
|
|
|
900,000 |
|
|
|
|
300,000 |
|
|
|
|
- |
|
|
|
|
1,665,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health insurance - $800 per month |
|
|
|
- |
|
|
|
|
- |
|
|
|
|
9,600 |
|
|
|
|
2,400 |
|
|
|
|
- |
|
|
|
|
28,800 |
|
Tax assistance |
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
7,500 |
|
Intrinsic value of unvested stock options that
immediately vest (1) |
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
385,070 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of unearned restricted shares that immediately vest |
|
|
|
308,609 |
|
|
|
|
308,609 |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
308,609 |
|
Payment for excise tax and gross up (2) |
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
725,258 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
458,609 |
|
|
|
$ |
308,609 |
|
|
|
$ |
909,600 |
|
|
|
$ |
302,400 |
|
|
|
$ |
- |
|
|
|
$ |
3,120,237 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Harold R. Carpenter |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 base salary |
|
|
$ |
300,000 |
|
|
|
$ |
- |
|
|
|
$ |
300,000 |
|
|
|
$ |
300,000 |
|
|
|
$ |
- |
|
|
|
$ |
300,000 |
|
2008 targeted cash incentive payment |
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
210,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
300,000 |
|
|
|
|
- |
|
|
|
|
300,000 |
|
|
|
|
300,000 |
|
|
|
|
- |
|
|
|
|
510,000 |
|
Multiplier (in terms of years) |
|
|
|
x .5 |
|
|
|
|
x 0 |
|
|
|
|
x 3 |
|
|
|
|
x 1 |
|
|
|
|
x 0 |
|
|
|
|
x 3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate cash payment |
|
|
|
150,000 |
|
|
|
|
- |
|
|
|
|
900,000 |
|
|
|
|
300,000 |
|
|
|
|
- |
|
|
|
|
1,530,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health insurance - $800 per month |
|
|
|
- |
|
|
|
|
- |
|
|
|
|
9,600 |
|
|
|
|
2,400 |
|
|
|
|
- |
|
|
|
|
28,800 |
|
Tax assistance |
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
7,500 |
|
Intrinsic value of unvested stock options that
immediately vest (1) |
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
279,920 |
|
Value of unearned restricted shares that immediately vest |
|
|
|
246,657 |
|
|
|
|
246,657 |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
246,657 |
|
Payment for excise tax and gross up (2) |
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
645,108 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
396,657 |
|
|
|
$ |
246,657 |
|
|
|
$ |
909,600 |
|
|
|
$ |
302,400 |
|
|
|
$ |
- |
|
|
|
$ |
2,737,984 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pinnacle Financial Partners, Inc.
|
|
Page 57 |
|
|
|
(1) |
|
Vesting of stock option awards pursuant to a change of control may only occur upon the
consent of the Human Resources and Compensation Committee. |
|
(2) |
|
In determining the anticipated payment due the executive for excise tax and gross up pursuant
to a termination by the Company of the employee without cause or a termination by the employee
for cause in each case, within twelve months following a change in control, the Company has
included in the calculation the anticipated value of the immediate vesting of previously
unvested restricted share awards and stock option grants in addition to the cash payments and
healthcare benefits noted above. As a result, the Company has computed the 20% excise tax
obligation owed by Messrs. Turner, McCabe, Queener and Carpenter in the event of a change of
control to be $1,563,000, $1,478,000, $725,000 and $645,000, respectively. As a result, the
Company has assumed a personal income tax rate of 45% for each executive and has included the
additional gross up amount in the table
above. The Company has not anticipated such excise tax or gross up payments for other
terminating events as payments for such matters would be extended over a period of time such
that the executives compensation would likely not be subject to section 280(G) of the Code. |
|
(3) |
|
Mr. McMahan does not have an employment agreement with the Company. |
|
(4) |
|
The above amounts do not include benefits owed the Named Executive Officers or their estates
pursuant to the Companys broad based group disability insurance policies or group life
insurance policy. These benefits would be paid pursuant to these group polices which are
provided to all employees of the Company. Additionally, and also not included in the above
amounts, the Named Executive Officers and certain other Leadership Team members also
participate in a supplemental group disability policy which provides incremental coverage
(i.e., gap coverage) for these individuals over the broad-based group disability coverage
maximums. |
Ownership Guidelines
The Committee also requires the CEO and all other Named Executive Officers to maintain a
meaningful personal ownership in the Company in the form of Common Stock. Periodically, the
Committee may establish minimum Common Stock beneficial ownership levels for the CEO and the other
Named Executive Officers. In 2006, the Committee established Common Stock beneficial ownership
levels for the CEO and the Chairman of the Board of 50,000 shares of Company Common Stock.
Additionally, the Committee established stock beneficial ownership levels of 25,000 shares for the
Chief Administrative Officer and 10,000 shares for both the Chief Financial Officer and the Chief
Credit Officer. All Named Executive Officers currently exceed the applicable minimum level of
beneficial ownership.
* * * *
|
|
|
|
|
Pinnacle Financial Partners, Inc.
|
|
Page 58 |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table lists, as of February 27, 2009, the number of shares of Common Stock
beneficially owned by (a) any person known to the Company who owns in excess of 5% of the
outstanding shares of Common Stock, (b) each current director of the Company, (c) each Named
Executive Officer listed in the Summary Compensation Table, and (d) all directors and executive
officers, as a group. The information shown below is based upon information furnished to the
Company by the named persons and the percentages are calculated based on shares outstanding as of
February 27, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares Beneficially Owned |
|
|
|
|
|
|
|
Aggregate Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Grants and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable within |
|
|
|
|
|
|
|
|
|
|
Common Shares |
|
|
60 days of Record |
|
|
|
|
|
|
Percent of All |
|
|
|
Beneficially |
|
|
Date of February |
|
|
|
|
|
|
Shares |
|
Name |
|
Owned |
|
|
27, 2009 |
|
|
Total |
|
|
Owned |
|
|
Board of Directors (1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sue G. Atkinson |
|
|
42,674 |
|
|
|
- |
|
|
|
42,674 |
|
|
|
0.18 |
% |
H. Gordon Bone |
|
|
42,314 |
|
|
|
1,862 |
|
|
|
44,176 |
|
|
|
0.18 |
% |
Gregory L. Burns |
|
|
7,030 |
|
|
|
- |
|
|
|
7,030 |
|
|
|
0.03 |
% |
Colleen Conway-Welch |
|
|
21,474 |
|
|
|
10,000 |
|
|
|
31,474 |
|
|
|
0.13 |
% |
James C.
Cope (2) |
|
|
81,633 |
|
|
|
- |
|
|
|
81,633 |
|
|
|
0.34 |
% |
William H. Huddleston, IV |
|
|
67,084 |
|
|
|
- |
|
|
|
67,084 |
|
|
|
0.28 |
% |
Clay T. Jackson (2) |
|
|
186,007 |
|
|
|
25,000 |
|
|
|
211,007 |
|
|
|
0.88 |
% |
Ed C. Loughry, Jr. |
|
|
137,779 |
|
|
|
5,500 |
|
|
|
143,279 |
|
|
|
0.60 |
% |
David Major |
|
|
64,526 |
|
|
|
- |
|
|
|
64,526 |
|
|
|
0.27 |
% |
Robert A.
McCabe, Jr. (2) |
|
|
368,772 |
|
|
|
258,807 |
|
|
|
627,579 |
|
|
|
2.59 |
% |
Hal N. Pennington |
|
|
4,474 |
|
|
|
- |
|
|
|
4,474 |
|
|
|
0.02 |
% |
Dale W.
Polley (2) |
|
|
79,341 |
|
|
|
- |
|
|
|
79,341 |
|
|
|
0.33 |
% |
Dr. Wayne J. Riley |
|
|
751 |
|
|
|
- |
|
|
|
751 |
|
|
|
- |
|
Gary L. Scott |
|
|
58,429 |
|
|
|
- |
|
|
|
58,429 |
|
|
|
0.24 |
% |
Reese L. Smith, III |
|
|
46,691 |
|
|
|
30,000 |
|
|
|
76,691 |
|
|
|
0.32 |
% |
M. Terry Turner (2) |
|
|
197,315 |
|
|
|
312,748 |
|
|
|
510,063 |
|
|
|
2.10 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Named Executive Officers (1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hugh M. Queener (2) |
|
|
126,386 |
|
|
|
191,788 |
|
|
|
318,174 |
|
|
|
1.32 |
% |
Harold R. Carpenter (2) |
|
|
44,650 |
|
|
|
44,387 |
|
|
|
89,037 |
|
|
|
0.37 |
% |
Charles B. McMahan |
|
|
12,556 |
|
|
|
25,573 |
|
|
|
38,129 |
|
|
|
0.16 |
% |
|
|
|
|
All Directors and Named Executive
Officers a as Group (19 persons) |
|
|
1,589,886 |
|
|
|
905,665 |
|
|
|
2,495,551 |
|
|
|
10.02 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Persons known to Company who own
more than 5% of outstanding
shares of Company Common Stock
(3): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
T. Rowe Price Associates, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100 E. Pratt Street |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Baltimore, Maryland 21202 |
|
|
2,360,700 |
|
|
|
- |
|
|
|
2,360,700 |
|
|
|
9.84 |
% |
|
|
|
|
|
|
(1) |
|
Each person is the record owner of and has sole voting and investment power with respect to
his or her shares. Additionally, the address for each person listed is 211 Commerce Street
Suite 300, Nashville, Tennessee 37201. |
|
(2) |
|
As of February 27, 2009, the following individuals have pledged the following amounts of
their common shares beneficially owned to secure lines of credit or other indebtedness: Mr.
Jackson - 185,856 shares; Mr. Turner - 80,000 shares; Mr. Queener - 42,750 shares; Mr. Cope -
8,500 shares; Mr. McCabe - 138,356; Mr. Polley - 42,990; and Mr. Carpenter - 7,400 shares. |
|
(3) |
|
The beneficial ownership information is derived from a Schedule 13G filed by the reporting
person with the Securities and Exchange Commission on February 12, 2009. These securities are
owned by various individuals and institutional investors including the T. Rowe Price |
|
|
|
|
|
Pinnacle Financial Partners, Inc.
|
|
Page 59 |
|
|
|
|
|
Small-Cap
Stock Fund, Inc. (which owns 1,282,000 shares, representing 5.3% of the shares outstanding),
which T. Rowe Price
Associates, Inc. (Price Associates) serves as investment adviser with
power to direct investments and/or sole power to vote the securities. For purposes of the
reporting requirements of the Securities Exchange Act of 1934, Price Associates is deemed to
be a beneficial owners of such securities; however, Price Associates expressly disclaims that
it is, in fact, the beneficial owner of such securities. |
Section 16(A) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Companys directors and
executive officers and persons who own beneficially more than 10% of the Companys outstanding
Common Stock to file with the Securities and Exchange Commission initial reports of ownership and
reports of changes in their ownership of the Company Common Stock. Directors, executive officers
and greater than 10% shareholders are required to furnish the Company with copies of the forms they
file. To our knowledge, based solely on a review of the copies of these reports furnished to the
Company during the year ended December 31, 2008, or on written representations from certain
reporting persons that no Forms 5 were required for those persons, all of person who were directors
or executive officers of the Company during 2008, complied with all applicable Section 16(a) filing
requirements, except that Ed C. Loughry, Jr. filed a Form 4 late on November 28, 2008 which
reflected the inclusion of shares that had been inadvertently omitted from his filings after
January 12, 2007 which were held indirectly through his ESOP and 401(k) plan accounts and David
Major filed a late Form 4 on December 18, 2008, to report a series of transactions that took place
on October 31, 2008 which he inadvertently failed to report.
Certain Relationships and Related Transactions
The Company and the Bank have banking and other business transactions in the ordinary course
of business with directors and officers of the Company and the Bank and their affiliates, including
members of their families, corporations, partnerships or other organizations in which the directors
and officers have a controlling interest. These transactions are on substantially the same terms
(including price, interest rate and collateral) as those prevailing at the same time for comparable
transactions with unrelated parties. In the opinion of management, these transactions do not
involve more than the normal risk of collectability or present other unfavorable features to the
Company or the Bank.
Atkinson Public Relations, of which Ms. Atkinson is chairman, provides various services for
the Company subject to an agreement which was approved by the Board of the Company. For the year
ended December 31, 2008, the Company incurred approximately $309,000 in expenses for services
rendered by this public relations company. Also, Mr. Jackson is an officer in an insurance firm
that serves as an agent in securing insurance in such areas as Pinnacle Financials employee bond
and other insurance policies. The amount this agency receives in commissions or fees on such
insurance services is immaterial.
Pursuant to the Audit Committee Charter, the Audit Committee of the Board of Directors is
responsible for reviewing and approving any transaction required to be described in this Proxy
Statement pursuant to the rules and regulations of the Securities and Exchange Commission. The
Audit Committee has ratified the approval of the above-described transactions in which Ms. Atkinson
and Mr. Jackson had an interest, which transactions had
previously been approved by the full Board.
Human Resources and Compensation Committee Interlocks and Insider Participation
During 2008, the Human Resources and Compensation Committee of the Board of Directors
consisted of Gregory L. Burns, Harold Gordon Bone, James C. Cope, James L. Shaub, II and Reese L.
Smith, III, none of whom has ever been an officer or employee of the Company, Mid-America or their
subsidiaries.
Effective
|
|
|
|
|
Pinnacle Financial Partners, Inc.
|
|
Page 60 |
November 18, 2008, Mr. Shaub resigned from the Board of Directors and
related committees. No interlocking relationship existed during 2008 between any officer, member
of our Board of Directors or the Human Resources and Compensation Committee and any officer, member
of the Board of Directors or compensation committee (or committee performing similar functions) of
any other company.
REPORT OF THE AUDIT COMMITTEE
The following is the Report of the Audit Committee regarding the Companys audited financial
statements to be included in the Companys Annual Report on Form 10-K:
We have reviewed and discussed with management the Companys audited financial
statements as of December 31, 2008 and 2007 and for each of the years in the three-year
period ended December 31, 2008.
We have discussed with the Companys independent registered public accounting firm the
matters required to be discussed by Statement on Auditing Standards No. 61, as amended
(AICPA Professional Standards, Vol. 1. AU section 380), as adopted by the Public Company
Accounting Oversight Board in Rule 3200T.
We have received the written disclosures and the letter from the independent registered
public accounting firm required by applicable requirements of the Public Company Accounting
Oversight Board regarding the independent registered public accounting firms communications
with the audit committee concerning independence, and have discussed with the independent
registered public accounting firm the firms independence.
Based on the reviews and discussions referred to above, we recommended to the Board of
Directors that the audited financial statements referred to above be included in the
Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2008.
Dale W. Polley, Chairman
William H. Huddleston, Member
Clay T. Jackson, Member
Dr. Wayne J. Riley, Member
The foregoing report of the Audit Committee shall not be deemed incorporated by reference by
any general statement incorporating by reference this Proxy Statement into any filing under the
Securities Act of 1933 or the Exchange Act, except to the extent the Company specifically
incorporates this information by reference and shall not otherwise be deemed filed under such Acts.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board of the Company has approved the appointment of KPMG to serve
as the Companys independent registered public accounting firm for the Company for the year ending
December 31, 2009. The Audit Committee considered the background, expertise and experience of the
audit team assigned to the Company and various other relevant matters, including the proposed fees
for audit services. A representative of KPMG will be present at the Meeting and will be given the
opportunity to make a statement if he desires and will be available to respond to appropriate
questions from shareholders.
Audit Fees. During the years ended December 31, 2008 and 2007, the Company incurred the
following fees for services performed by the independent registered public accounting firm:
|
|
|
|
|
Pinnacle Financial Partners, Inc.
|
|
Page 61 |
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
|
Audit Fees (1) |
|
$ |
520,250 |
|
|
$ |
574,500 |
|
Audit-Related Fees (2) |
|
|
15,000 |
|
|
|
49,000 |
|
Tax Fees |
|
|
- |
|
|
|
- |
|
All Other Fees |
|
|
- |
|
|
|
- |
|
|
|
|
Total Fees |
|
$ |
535,500 |
|
|
$ |
623,500 |
|
|
|
|
|
|
|
(1) |
|
Includes fees related to the annual independent audit of
the Companys financial statements and reviews of the Companys annual
report on Form 10-K, quarterly reports on Form 10-Q, and report on
internal control over financial reporting. |
|
(2) |
|
All audit-related fees for 2008 were for services
rendered in connection with the Companys filing of a Form S-3 related
to the issuance of shares to T. Rowe Price and Associates, Inc., and
for the Capital Purchase Program. All audit related fees for 2007 were
for services rendered in connection with the Companys filing of a Form
S-4 with the Securities and Exchange Commission related to the
acquisitions of Mid-America in 2007. |
The Audit Committee also has adopted a formal policy concerning approval of audit and
non-audit services to be provided by the independent auditor to the Company. The policy requires
that all services KPMG, the Companys independent registered public accounting firm, may provide to
the Company, including audit services and permitted audit-related and non-audit services, be
pre-approved by the Committee. The Committee approved all audit and non-audit services provided by
KPMG during fiscal 2008 prior to KPMG performing such services.
OTHER MATTERS
The Board of the Company knows of no other matters that may be brought before the Meeting. If,
however, any matters other than those set forth in this proxy statement should properly come before
the meeting, votes will be cast pursuant to the proxies in accordance with the best judgment of the
proxy holders.
If you cannot be present in person, you are requested to complete, sign, date, and return the
enclosed proxy promptly. An envelope has been provided for that purpose. No postage is required if
mailed in the United States.
|
|
|
|
|
Pinnacle Financial Partners, Inc.
|
|
Page 62 |
GENERAL INFORMATION
Annual Report. The Companys 2008 Annual Report is being mailed to shareholders with this
Proxy Statement. The Annual Report is not a part of the proxy solicitation materials.
Additional Information. A copy of the Companys Annual Report on Form 10-K for the year ended
December 31, 2008, excluding certain exhibits thereto, may be obtained without charge by writing to
Pinnacle Financial Partners, Inc., Attn: Chief Financial Officer, 211 Commerce Street, Suite 300,
Nashville, Tennessee 37201. Also, the Companys Annual Report on Form 10-K and all quarterly
reports on Form 10-Q for the year ended December 31, 2008 can also be accessed via the Investor
Relations section of the Companys website located at www.pnfp.com.
|
|
|
|
|
By Order of the Board of Directors, |
|
|
|
|
|
Hugh M. Queener |
|
|
Corporate Secretary |
March 11, 2009 |
|
|
|
|
|
|
|
Pinnacle Financial Partners, Inc.
|
|
Page 63 |
Appendix A
PINNACLE FINANCIAL PARTNERS, INC.
2004 EQUITY INCENTIVE PLAN (AS PROPOSED TO BE AMENDED APRIL 21, 2009)
Section 1. PURPOSE
This plan shall be known as the Pinnacle Financial Partners, Inc. 2004 Equity Incentive Plan
(the Plan). The purpose of the Plan is to promote the interests of Pinnacle Financial Partners,
Inc., a Tennessee corporation (the Company), and its shareholders by (i) attracting and retaining
Associates and Directors of the Company and its Subsidiaries and Affiliates; (ii) motivating such
individuals by means of performance-related incentives to achieve long-range performance goals,
(iii) enabling such individuals to participate in the long-term growth and financial success of the
Company, (iv) encouraging ownership of stock in the Company by such individuals, and (v) linking
their compensation to the long-term interests of the Company and its shareholders. With respect to
any awards granted under the Plan that are intended to comply with the requirements of
performance-based compensation under Section 162(m) of the Code, the Plan shall be interpreted in
a manner consistent with such requirements.
Section 2. DEFINITIONS
As used in the Plan, the following terms shall have the meanings set forth below:
a) |
|
AFFILIATE shall mean (i) any entity that, directly or indirectly, is controlled by the
Company, (ii) any entity in which the Company has a significant equity interest, (iii) an
affiliate of the Company, as defined in Rule 12b-2 promulgated under Section 12 of the
Exchange Act, and (iv) any entity in which the Company has at least twenty percent (20%) of
the combined voting power of the entitys outstanding voting securities, in each case as
designated by the Board as being a participating employer in the Plan. |
|
b) |
|
ASSOCIATE shall mean a current or prospective officer or employee of the Company or of any
Subsidiary or Affiliate. |
|
c) |
|
AWARD shall mean any Option, Stock Appreciation Right, Restricted Share Award, Restricted
Share Unit, Performance Unit Award, Performance Share Award, Performance Award, Other
Stock-Based Award or other award granted under the Plan, whether singly, in combination or in
tandem, to a Participant by the Committee (or the Board) pursuant to such terms, conditions,
restrictions and/or limitations, if any, as the Committee (or the Board) may establish. |
|
d) |
|
BANK shall mean Pinnacle National Bank. |
|
e) |
|
AWARD AGREEMENT shall mean any written agreement, contract or other instrument or document
evidencing any Award, which may, but need not, be executed or acknowledged by a Participant. |
|
f) |
|
BOARD shall mean the board of directors of the Company. |
|
g) |
|
CAUSE shall have the same meaning as provided in the employment agreement between the
Participant and the Company or any Affiliate on the date of Termination of Service, or if no
such definition or employment agreement exists, Cause shall mean conduct amounting to (1)
fraud or dishonesty against the Company or any Affiliate; (2) the Participants willful
misconduct, repeated refusal to follow the reasonable directions of the Board or knowing
violation of law in the course of performance of the duties of Participants service with the
Company or any Affiliate; (3) repeated absences from work without a reasonable excuse; (4)
repeated intoxication with alcohol or drugs while on the Companys or any Affiliates premises
during regular business hours; (5) a conviction or plea of guilty or NOLO CONTENDERE to a
felony or a crime involving dishonesty; or (6) a breach or violation of the terms of any
agreement to which Participant and the Company or any Affiliate are party. |
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h) |
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CHANGE IN CONTROL shall mean any one of the following events which may occur after the date
the Award is granted: |
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1. |
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the acquisition by any person or persons acting in concert of the then
outstanding voting securities of either the Bank or the Company, if, after the
transaction, the acquiring person (or persons) owns, controls or holds with power to
vote forty percent (40%) or more of any class of voting securities of either the Bank
or the Company, as the case may be; |
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2. |
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within any twelve-month period the persons who were directors of either the
Bank or the Company immediately before the beginning of such twelve-month period (the
Incumbent Directors) shall cease to constitute at least a majority of such board of
directors; provided that any director who was not a director as of the beginning of
such twelve-month period shall be deemed to be an Incumbent Director if that director
was elected to such board of directors by, or on the recommendation of or with the
approval of, at least two-thirds of the directors who then qualified as Incumbent
Directors; and provided further that no director whose initial assumption of office is
in connection with an actual or threatened election contest relating to the election of
directors shall be deemed to be an Incumbent Director; |
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3. |
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a reorganization, merger or consolidation, with respect to which persons who
were the shareholders of either the Bank or the Company, as the case may be,
immediately prior to such reorganization, merger or consolidation do not, immediately
thereafter, own more than fifty percent (50%) of the combined voting power entitled to
vote in the election of directors of the reorganized, merged or consolidated companys
then outstanding voting securities; or |
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4. |
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the sale, transfer or assignment of all or substantially all of the assets of
the Company and its subsidiaries to any third party. |
i) |
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CODE shall mean the Internal Revenue Code of 1986, as amended from time to time. |
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j) |
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COMMITTEE shall mean a committee of the Board composed solely of not less than two
Non-Employee Directors, each of whom shall be a Non-Employee Director for purposes of
Exchange Act Section 16 and Rule 16b-3 thereunder and an outside director for purposes of
Section 162(m) and the regulations promulgated under the Code. |
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k) |
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COVERED OFFICER shall mean at any date (i) any individual who, with respect to the previous
taxable year of the Company, was a covered employee of the Company within the meaning of
Section 162(m); provided, however, that the term Covered Officer shall not include any such
individual who is designated by the Committee, in its discretion, at the time of any Award or
at any subsequent time, as reasonably expected not to be such a covered employee with
respect to the current taxable year of the Company and (ii) any individual who is designated
by the Committee, in its discretion, at the time of any Award or at any subsequent time, as
reasonably expected to be such a covered employee with respect to the current taxable year
of the Company or with respect to the taxable year of the Company in which any applicable
Award will be paid. |
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l) |
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DIRECTOR shall mean a member of the Board. |
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m) |
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DISABILITY shall the same meaning as provided in the long-term disability plan or policy
maintained or, if applicable, most recently maintained, by the Company or any Affiliate for
the Participant. If no long-term disability plan or policy was ever maintained on behalf of
the Participant, Disability shall mean that condition described in Code Section 22(e)(3), as
amended from time to time. In the event of a dispute, the determination of Disability shall
be made by the Board and shall be supported by advice of a physician competent in the area to
which such Disability relates. |
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n) |
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EXCHANGE ACT shall mean the Securities Exchange Act of 1934, as amended from time to time. |
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o) |
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FAIR MARKET VALUE with respect to the Shares, shall mean, for purposes of a grant of an
Award as of any date, (i) the closing sales price of the Shares on the Nasdaq Stock Markets
National Market System, or any other such exchange on which the Shares are traded, on such
date, or in the absence of reported sales on such date, the closing sales price on the
immediately preceding date on which sales were reported or (ii) in the event there is no
public market for the Shares on such date, the fair market value as determined, in good faith, |
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Appendix A Page 2 |
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by the Committee in its sole discretion, and for purposes of a sale of a Share as of any date,
the actual sales price on that date. |
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p) |
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INCENTIVE STOCK OPTION shall mean an option to purchase Shares from the Company that is
granted under Section 6 of the Plan and that is intended to meet the requirements of Section
422 of the Code or any successor provision thereto. |
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q) |
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NON-QUALIFIED STOCK OPTION shall mean an option to purchase Shares from the Company that is
granted under Sections 6 or 10 of the Plan and is not intended to be an Incentive Stock
Option. |
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r) |
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NON-EMPLOYEE DIRECTOR shall mean a member of the Board who is not an Associate of the
Company or any Subsidiary or Affiliate. |
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s) |
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OPTION shall mean an Incentive Stock Option or a Non-Qualified Stock Option. |
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t) |
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OPTION PRICE shall mean the purchase price payable to purchase one Share upon the exercise
of an Option. |
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u) |
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OTHER STOCK-BASED AWARD shall mean any Award granted under Sections 9 or 10 of the Plan. |
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v) |
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OUTSIDE DIRECTOR means, with respect to the grant of an Award, a member of the Board then
serving on the Committee. |
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w) |
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PARTICIPANT shall mean any Associate, Director or other person who receives an Award under
the Plan. |
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x) |
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PERFORMANCE AWARD shall mean any Award granted under Section 8 of the Plan. |
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y) |
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PERFORMANCE SHARE shall mean any Share granted under Section 8 of the Plan. |
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z) |
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PERFORMANCE SHARE AWARD shall mean any Award granted under Section 8 of the Plan. |
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aa) |
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PERFORMANCE UNIT shall mean a right to receive a designated dollar value which is contingent on the achievement of
certain performance goals during a specified performance period each as set forth in an Award Agreement. |
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bb) |
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PERFORMANCE UNIT AWARD shall mean any Award granted under Section 8 of the Plan. |
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cc) |
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PERSON shall mean any individual, corporation, partnership, limited liability company, associate, joint-stock company,
trust, unincorporated organization, government or political subdivision thereof or other entity. |
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dd) |
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RESTRICTED SHARE shall mean any Share granted under Sections 7 or 10 of the Plan. |
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ee) |
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RESTRICTED SHARE UNIT shall mean any unit granted under Sections 7 or 10 of the Plan. |
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ff) |
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RETIREMENT shall mean, unless otherwise defined in the applicable Award Agreement, retirement of a Participant from the
employ or service of the Company or any of its Subsidiaries or Affiliates in accordance with the terms of the applicable
Company retirement plan or, if a Participant is not covered by any such plan, retirement on or after such Participants
65th birthday. |
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gg) |
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SEC shall mean the Securities and Exchange Commission or any successor thereto. |
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hh) |
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SECTION 16 shall mean Section 16 of the Exchange Act and the rules promulgated thereunder and any successor provision
thereto as in effect from time to time. |
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ii) |
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SECTION 162(M) shall mean Section 162(m) of the Code and the regulations promulgated thereunder and any successor or
provision thereto as in effect from time to time. |
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jj) |
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SHARES shall mean shares of the Common Stock, $0.01 par value, of the Company. |
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Appendix A Page 3 |
kk) |
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STOCK APPRECIATION RIGHT OR SAR shall mean a stock appreciation right granted under Sections 6 or 10 of the Plan that
entitles the holder to receive, with respect to each Share encompassed by the exercise of such SAR, the amount, in cash or
Shares, determined by the Committee and specified in an Award Agreement. In the absence of such a determination, the
holder shall be entitled to receive, with respect to each Share encompassed by the exercise of such SAR, the excess of the
Fair Market Value on the date of exercise over the Fair Market Value on the date of grant. |
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ll) |
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SUBSIDIARY shall mean any Person (other than the Company) of which a majority of its voting power or its equity
securities or equity interest is owned directly or indirectly by the Company. |
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mm) |
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SUBSTITUTE AWARDS shall mean Awards granted solely in assumption of, or in substitution for, outstanding awards
previously granted by a company acquired by the Company or with which the Company combines. |
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nn) |
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TANDEM SAR shall mean a SAR that is granted under Sections 6 or 10 of the Plan in relation to a particular Option and
that can be exercised only upon the surrender to the Company, unexercised, of that portion of the Option to which the SAR
relates. |
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oo) |
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TERMINATION OF SERVICE shall mean the termination of the service relationship, whether employment or otherwise, between a
Participant and the Company and any Affiliates, regardless of the fact that severance or similar payments are made to the
Participant for any reason, including, but not by way of limitation, a termination by resignation, discharge, death,
Disability or Retirement. The Committee shall, in its absolute discretion, determine the effect of all matters and
questions relating to a Termination of Service, including, but not by way of limitation, the question of whether a leave of
absence constitutes a Termination of Service, or whether a Termination of Service is for Cause. |
Section 3. ADMINISTRATION
3.1 Authority of Committee. The Plan shall be administered by the Committee, which
shall be appointed by and serve at the pleasure of the Board; provided, however, with respect to
Awards to Outside Directors, all references in the Plan to the Committee shall be deemed references
to the Board. Subject to the terms of the Plan and applicable law, and in addition to other
express powers and authorizations conferred on the Committee by the Plan, the Committee shall have
full power and authority in its discretion to: (i) designate Participants; (ii) determine the type
or types of Awards to be granted to a Participant; (iii) determine the number of Shares to be
covered by, or with respect to which payments, rights or other matters are to be calculated in
connection with Awards; (iv) determine the timing, terms and conditions of any Award; (v)
accelerate the time at which all or any part of an Award may be settled or exercised; (vi)
determine whether, to what extent, and under what circumstances Awards may be settled or exercised
in cash, Shares, other securities, other Awards or other property, or canceled, forfeited or
suspended and the method or methods by which Awards may be settled, exercised, canceled, forfeited
or suspended; (vii) determine whether, to what extent and under what circumstances cash, Shares,
other securities, other Awards, other property and other amounts payable with respect to an Award
shall be deferred either automatically or at the election of the holder thereof or of the
Committee; (viii) interpret and administer the Plan and any instrument or agreement relating to, or
Award made under, the Plan; (ix) except to the extent prohibited by Section 6.2, amend or modify
the terms of any Award at or after grant with the consent of the holder of the Award; (x)
establish, amend, suspend or waive such rules and regulations and appoint such agents as it shall
deem appropriate for the proper administration of the Plan; and (xi) make any other determination
and take any other action that the Committee deems necessary or desirable for the administration of
the Plan, subject to the exclusive authority of the Board under Section 14 hereunder to amend or
terminate the Plan. Notwithstanding the provisions of Section 6.2 hereof except as permitted by
the provisions of Section 4.2 and Section 14 hereof, the Committee shall not have the power to (i)
amend the terms of previously granted Options to reduce the Option Price of such Options, or (ii)
cancel such Options and grant substitute Options with a lower Option Price than the cancelled
Options.
3.2 Committee Discretion Binding. Unless otherwise expressly provided in the Plan, all
designations, determinations, interpretations and other decisions under or with respect to the Plan
or any Award shall be within the sole discretion of the Committee, may be made at any time and
shall be final, conclusive, and binding upon all Persons, including the Company, any Subsidiary or
Affiliate, any Participant and any holder or beneficiary of any Award.
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Appendix A Page 4 |
3.3 Action by the Committee. The Committee shall select one of its members as its Chairperson
and shall hold its meetings at such times and places and in such manner as it may determine. A
majority of its members shall constitute a quorum. All determinations of the Committee shall be
made by not less than a majority of its members. Any decision or determination reduced to writing
and signed by all of the members of the Committee shall be fully effective as if it had been made
by a majority vote at a meeting duly called and held. The exercise of an Option or receipt of an
Award shall be effective only if an Award Agreement shall have been duly executed and delivered on
behalf of the Company following the grant of the Option or other Award. The Committee may appoint
a Secretary and may make such rules and regulations for the conduct of its business as it shall
deem advisable.
3.4 Delegation. Subject to the terms of the Plan and applicable law, the Committee may
delegate to one or more officers or managers of the Company or of any Subsidiary or Affiliate, or
to a committee of such officers or managers, the authority, subject to such terms and limitations
as the Committee shall determine, to grant Awards to, or to cancel, modify or waive rights with
respect to, or to alter, discontinue, suspend or terminate Awards held by Participants who are not
officers or directors of the Company for purposes of Section 16 or who are otherwise not subject to
such section.
3.5 No Liability. No member of the Board or Committee shall be liable for any action taken
or determination made in good faith with respect to the Plan or any Award granted hereunder.
Section 4. SHARES AVAILABLE FOR AWARDS
4.1 Shares Available. Subject to the provisions of Section 4.2 hereof, the stock to be
subject to Awards under the Plan shall be the Shares of the Company and the maximum number of
Shares with respect to which Awards may be granted under the Plan shall be 1,779,510, which
includes 29,510 shares with respect to awards which were authorized by not granted under the
Pinnacle Financial Partners, Inc., 2000 Stock Incentive Plan (the 2000 Plan). Notwithstanding
the foregoing and subject to adjustment as provided in Section 4.2, the maximum number of Shares
with respect to which Awards may be granted under the Plan shall be increased by the number of
Shares with respect to which Options or other Awards were granted under the 2000 Plan, as of the
effective date of this Plan, but which terminate, expire unexercised or are settled for cash,
forfeited or cancelled without the delivery of Shares under the terms of the 2000 Plan after the
effective date of this Plan.
If, after the effective date of the Plan, any Shares covered by an Award granted under this
Plan, or to which such an Award relates, are forfeited, or if such an Award is settled for cash or
otherwise terminates, expires unexercised or is canceled without the delivery of Shares, then the
Shares covered by such Award, or to which such Award relates, or the number of Shares otherwise
counted against the aggregate number of Shares with respect to which Awards may be granted, to the
extent of any such settlement, forfeiture, termination, expiration or cancellation, shall again
become Shares with respect to which Awards may be granted. In the event that any Option or other
Award granted hereunder is exercised through the delivery of Shares or in the event that
withholding tax liabilities arising from such Award are satisfied by the withholding of Shares by
the Company, the number of Shares available for Awards under the Plan shall be increased by the
number of Shares so surrendered or withheld. Notwithstanding the foregoing and subject to
adjustment as provided in Section 4.2 hereof, no Participant may receive Options or SARs under the
Plan in any calendar year that relate to more than 50,000 Shares.
4.2 Adjustments. In the event that any extraordinary dividend or other distribution (whether
in the form of cash, Shares, other securities or other property), recapitalization, stock split,
reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase or exchange of Shares or other securities of the Company, issuance of warrants or other
rights to purchase Shares or other securities of the Company, or other similar corporate
transaction or event affects the Shares then the Committee shall in an equitable and proportionate
manner (and, with respect to Incentive Stock Options, in such manner as is consistent with Section
422 of the Code and the regulations thereunder): (i) adjust (1) the aggregate number of Shares or
other securities of the Company (or number and kind of other securities or property) with respect
to which Awards may be granted under the Plan; (2) the number of Shares or other securities of the
Company (or number and kind of other securities or property) subject to outstanding Awards under
the Plan; and (3) the grant or exercise price with respect to any Award under the Plan, provided
that the number of shares subject to any Award shall always be a whole number; (ii) provide for an
equivalent award in respect of securities of the surviving entity of any merger, consolidation or
other transaction or event having a similar effect; or (iii) make provision for a cash payment to
the holder of an outstanding Award.
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Appendix A Page 5 |
4.3 Substitute Awards. Any Shares issued by the Company as Substitute Awards in connection
with the assumption or substitution of outstanding grants from any acquired corporation shall not
reduce the Shares available for Awards under the Plan.
4.4 Sources of Shares Deliverable Under Awards. Any Shares delivered pursuant to an Award
may consist, in whole or in part, of authorized and unissued Shares or of issued Shares which have
been reacquired by the Company.
Section 5. ELIGIBILITY
Any Associate or Director shall be eligible to be designated a Participant; provided, however,
that Outside Directors shall only be eligible to receive Awards granted consistent with Section
10.
Section 6. STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
6.1 Grant. Subject to the provisions of the Plan, the Committee shall have sole and complete
authority to determine the Participants to whom Options and SARs shall be granted, the number of
Shares, if any, subject to each Award, the exercise price or price at which a SAR shall be granted
(the Grant Price) and the conditions and limitations applicable to the exercise of each Option
and SAR. An Option may be granted with or without a Tandem SAR. A SAR may be granted with or
without a related Option. The Committee shall have the authority to grant Incentive Stock Options,
or to grant Non-Qualified Stock Options, or to grant both types of Options. In the case of
Incentive Stock Options or Tandem SARs related to such Options, the terms and conditions of such
grants shall be subject to and comply with such rules as may be prescribed by Section 422 of the
Code, as from time to time amended, and any regulations implementing such statute. A person who
has been granted an Option or SAR under this Plan may be granted additional Options or SARs under
the Plan if the Committee shall so determine; provided, however, that to the extent the aggregate
Fair Market Value (determined at the time the Incentive Stock Option or Tandem SAR related thereto
is granted) of the Shares with respect to which all Incentive Stock Options or Tandem SARs related
to such Option are exercisable for the first time by an Employee during any calendar year (under
all plans described in subsection (d) of Section 422 of the Code of the Employees employer
corporation and its parent and Subsidiaries) exceeds $100,000, such Options shall be treated as
Non-Qualified Stock Options.
6.2 Price. The Committee in its sole discretion shall establish the Option Price at the time
each Option is granted which price shall be set forth in an Award Agreement. Except in the case of
Substitute Awards, the Option Price of an Option may not be less than 100% of the Fair Market Value
of the Shares with respect to which the Option is granted on the date of grant of such Option. The
Committee in its sole discretion shall establish the Grant Price at the time each SAR is granted,
which price shall be set forth in an Award Agreement and may, in the Committees sole discretion,
be higher or lower than the Fair Market Value of a Share on the date of grant.
6.3 Term. Subject to the Committees authority under Section 3.1 and the provisions of
Section 6.5, each Option and SAR and all rights and obligations thereunder shall expire on the date
determined by the Committee and specified in the Award Agreement. The Committee shall be under no
duty to provide terms of like duration for Options or SARs granted under the Plan. Notwithstanding
the foregoing, no Option or Tandem SAR that relates to such Option shall be exercisable after the
expiration of ten (10) years from the date such Option or SAR was granted.
6.4 Exercise.
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a) |
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Each Option and SAR shall be exercisable at such times and subject to such
terms and conditions as the Committee may, in its sole discretion, specify in the
applicable Award Agreement or thereafter. The Committee shall have full and complete
authority to determine, subject to Section 6.5 herein, whether an Option or SAR will be
exercisable in full at any time or from time to time during the term of the Option or
SAR, or to provide for the exercise thereof in such installments, upon the occurrence
of such events and at such times during the term of the Option or SAR as the Committee
may determine. |
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b) |
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The Committee may impose such conditions with respect to the exercise of
Options or SARs, including without limitation, any relating to the application of
federal, state or foreign securities laws or the Code, as it may deem necessary or
advisable. The exercise of any Option granted hereunder |
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Appendix A Page 6 |
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shall be effective only at such time as the sale of Shares pursuant to such exercise
will not violate any state or federal securities or other laws. |
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c) |
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An Option, or SAR exercisable for Shares, may be exercised in whole or in part
at any time, with respect to whole Shares only, within the period permitted thereunder
for the exercise thereof, and shall be exercised by written notice of intent to
exercise the Option or SAR, delivered to the Company at its principal office, and
payment in full to the Company at the direction of the Committee of the amount of the
Option Price, in the case of an Option, for the number of Shares with respect to which
the Option is then being exercised. A Tandem SAR that is related to an Incentive Stock
Option may be exercised only to the extent that the related Option is exercisable and
only when the Fair Market Value exceeds the Option Price of the related Option. The
exercise of either an Option or Tandem SAR shall result in the termination of the other
to the extent of the number of Shares with respect to which either the Option or Tandem
SAR is exercised. |
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d) |
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Payment of the Option Price shall be made in cash or cash equivalents, or, at
the discretion of the Committee, (i) in whole Shares valued at the Fair Market Value of
such Shares on the date of exercise (or next succeeding trading date, if the date of
exercise is not a trading date), together with any applicable withholding taxes, or
(ii) by a combination of such cash (or cash equivalents) and such Shares; provided,
however, that the optionee shall not be entitled to tender Shares pursuant to
successive, substantially simultaneous exercises of an Option or any other stock option
of the Company. Subject to applicable securities laws, an Option may also be exercised
by delivering a notice of exercise of the Option and simultaneously selling the Shares
thereby acquired, pursuant to a brokerage or similar agreement approved in advance by
proper officers of the Company, using the proceeds of such sale as payment of the
Option Price, together with any applicable withholding taxes. Until the optionee has
been issued the Shares subject to such exercise, he or she shall possess no rights as a
shareholder with respect to such Shares. |
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e) |
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A SAR may be exercised in whole or in part at any time after such SAR has
become exercisable in accordance with the terms of the applicable Award Agreement;
provided, however, that no partial exercise of a SAR exercisable for cash shall result
in the cash payment to the Participant of less than $250. The partial exercise of a
SAR shall not cause the expiration, termination or cancellation of the remaining
portion thereof. Upon the partial exercise of a SAR, the Award Agreement evidencing
such SAR, marked with such notations as the Committee may deem appropriate to evidence
such partial exercise, shall be returned to the Participant exercising such SAR,
together with the payment described in Section 6.4(c) or 6.4(f) hereof, as the case may
be. |
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f) |
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The exercise of a SAR exercisable for cash shall entitle a Participant to a
cash payment, for each such SAR exercised, equal to an amount determined by the
Committee and as set forth in an Award Agreement. Unless otherwise determined by the
Committee and set forth in an Award Agreement, the exercise of a SAR exercisable for
cash shall entitle a Participant to a cash payment, for each such SAR exercised, equal
to an amount equal to the excess of (i) the Fair Market Value of a Share on the
exercise date over (ii) the Grant Price of the SAR as reflected in the applicable Award
Agreement. All payments under this Section 6.4(f) shall be made as soon as
practicable, but in no event later than ten (10) business days, after the effective
date of the exercise of the SAR. |
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g) |
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At the Committees discretion, and as set forth in an Award Agreement, the
amount payable as a result of the exercise of a SAR may be settled in cash, Shares or a
combination of cash and Shares. A fractional Share shall not be deliverable upon the
exercise of a SAR but a cash payment will be made in lieu thereof. |
6.5 Ten Percent Stock Rule. Notwithstanding any other provisions in the Plan, if at the time
an Option or SAR is otherwise to be granted pursuant to the Plan the optionee or rights holder owns
directly or indirectly (within the meaning of Section 424(d) of the Code) Shares of the Company
possessing more than ten percent (10%) of the total combined voting power of all classes of Stock
of the Company or its parent or Subsidiary or Affiliate corporations (within the meaning of Section
422(b)(6) of the Code), then any Incentive Stock Option or Tandem SAR to be granted to such
optionee or rights holder pursuant to the Plan shall satisfy the requirement of Section 422(c)(5)
of the Code, and the Option Price shall be not less than 110% of the Fair Market Value of the
Shares of the Company, and such Option by its terms shall not be exercisable after the expiration
of five (5) years from the date such Option is granted.
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Appendix A Page 7 |
Section 7. RESTRICTED SHARES AND RESTRICTED SHARE UNITS
7.1 Grant.
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a. |
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Subject to the provisions of the Plan, the Committee shall have sole
and complete authority to determine the Participants to whom Restricted Shares and
Restricted Share Units shall be granted, the number of Restricted Shares and/or the
number of Restricted Share Units to be granted to each Participant, the duration of
the period during which, and the conditions under which, the Restricted Shares and
Restricted Share Units may be forfeited to the Company, and the other terms and
conditions of such Awards. The Restricted Share and Restricted Share Unit Awards
shall be evidenced by Award Agreements in such form as the Committee shall from
time to time approve, which agreements shall comply with and be subject to the
terms and conditions provided hereunder and any additional terms and conditions
established by the Committee that are consistent with the terms of the Plan. |
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b. |
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Each Restricted Share and Restricted Share Unit Award made under the
Plan shall be for such number of Shares as shall be determined by the Committee and
set forth in the Award Agreement containing the terms of such Restricted Share or
Restricted Share Unit Award. Such agreement shall set forth a period of time
during which the grantee must remain in the continuous employment of the Company in
order for the forfeiture and transfer restrictions to lapse. If the Committee so
determines, the restrictions may lapse during such restricted period in
installments with respect to specified portions of the Shares covered by the
Restricted Share or Restricted Share Unit Award. The Award Agreement may also, in
the discretion of the Committee, set forth performance or other conditions,
including any of those identified in Section 11, that will subject the Shares to
forfeiture and transfer restrictions. The Committee may, at its discretion, waive
all or any part of the restrictions applicable to any or all outstanding Restricted
Share and Restricted Share Unit Awards. |
7.2 Delivery of Shares and Transfer Restrictions. At the time of a Restricted Share Award, a
certificate representing the number of Shares awarded thereunder shall be registered in the name of
the grantee. Such certificate shall be held by the Company or any custodian appointed by the
Company for the account of the grantee subject to the terms and conditions of the Plan, and shall
bear such a legend setting forth the restrictions imposed thereon as the Committee, in its
discretion, may determine. The grantee shall have all rights of a shareholder with respect to the
Restricted Shares, including the right to receive dividends and the right to vote such Shares,
subject to the following restrictions: (i) the grantee shall not be entitled to delivery of the
stock certificate until the expiration of the restricted period and the fulfillment of any other
restrictive conditions set forth in the Award Agreement with respect to such Shares; (ii) none of
the Shares may be sold, assigned, transferred, pledged, hypothecated or otherwise encumbered or
disposed of during such restricted period or until after the fulfillment of any such other
restrictive conditions; and (iii) except as otherwise determined by the Committee at or after
grant, all of the Shares shall be forfeited and all rights of the grantee to such Shares shall
terminate, without further obligation on the part of the Company, upon a Termination of Service and
unless any other restrictive conditions relating to the Restricted Share Award are met. Any
Shares, any other securities of the Company and any other property (except for cash dividends)
distributed with respect to the Shares subject to Restricted Share Awards shall be subject to the
same restrictions, terms and conditions as such restricted Shares.
7.3 Termination of Restrictions. At the end of the restricted period and provided that any
other restrictive conditions of the Restricted Share Award are met, or at such earlier time as
otherwise determined by the Committee, all restrictions set forth in the Award Agreement relating
to the Restricted Share Award or in the Plan shall lapse as to the restricted Shares subject
thereto, and a stock certificate for the appropriate number of Shares, free of the restrictions and
restricted stock legend, shall be delivered to the Participant or the Participants beneficiary or
estate, as the case may be.
7.4 Payment of Restricted Share Units. Each Restricted Share Unit shall have a value equal
to the Fair Market Value of a Share. Restricted Share Units shall be paid in cash, Shares, other
securities or other property, as determined in the sole discretion of the Committee, upon the lapse
of the restrictions applicable thereto, or otherwise in accordance with the applicable Award
Agreement. A Participant shall be credited with dividend equivalents on any vested Restricted
Share Units credited to the Participants account at the time of any payment of dividends to
shareholders on Shares. The amount of any such dividend equivalents shall equal the amount that
would have been payable to the Participant as a shareholder in respect of a number of Shares equal
to the number of vested Restricted
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Appendix A Page 8 |
Share Units then credited to the Participant. Any such dividend equivalents shall be credited
to the Participants account as of the date on which such dividend would have been payable and
shall be converted into additional Restricted Share Units (which shall be immediately vested) based
upon the Fair Market Value of a Share on the date of such crediting. No dividend equivalents shall
be paid in respect of Restricted Share Units that are not yet vested. Except as otherwise
determined by the Committee at or after grant, Restricted Share Units may not be sold, assigned,
transferred, pledged, hypothecated or otherwise encumbered or disposed of, and all Restricted Share
Units and all rights of the grantee to such Restricted Share Units shall terminate, without further
obligation on the part of the Company, upon a Termination of Service and unless any other
restrictive conditions relating to the Restricted Share Unit Award are met.
Section 8. PERFORMANCE AWARDS
8.1 Grant. The Committee shall have sole and complete authority to determine the
Participants who shall receive a Performance Award, which shall consist of a right that is (i)
denominated in cash or Shares, (ii) valued, as determined by the Committee, in accordance with the
achievement of such performance goals during such performance periods as the Committee shall
establish, and (iii) payable at such time and in such form as the Committee shall determine.
Performance Awards shall include, but are not limited to, Performance Shares and Performance Units.
All Performance Awards shall be subject to the terms and provisions of Section 11 hereof.
8.2 Terms and Conditions. Subject to the terms of the Plan and any applicable Award
Agreement, the Committee shall determine the performance goals to be achieved during any
performance period, the length of any performance period, the amount of any Performance Award and
the amount and kind of any payment or transfer to be made pursuant to any Performance Award, and
may amend specific provisions of the Performance Award; provided, however, that such amendment may
not adversely affect existing Performance Awards made within a performance period commencing prior
to implementation of the amendment.
8.3 Payment of Performance Awards. Performance Awards may be paid in a lump sum or in
installments following the close of the performance period or, in accordance with the procedures
established by the Committee, on a deferred basis. A Participants rights to any Performance Award
may not be sold, assigned, transferred, pledged, hypothecated or otherwise encumbered or disposed
of in any manner, except by will or the laws of descent and distribution, and/or except as the
Committee may determine at or after grant.
8.4 Performance Shares.
a) Associates who are in strategic leadership positions and Directors shall be eligible to
receive Performance Share Awards. Subject to the provisions of the Plan, the Committee shall have
sole and complete authority to determine the Participants to whom Performance Share Awards shall be
granted, the number of Performance Shares to be granted to each Participant, the performance
targets and goals to be satisfied, the duration of the period during which, and the conditions
under which, the Performance Shares may be forfeited to the Company, and the other terms and
conditions of such Awards. The Performance Share Awards shall be evidenced by Award Agreements in
such form as the Committee shall from time to time approve, which agreements shall comply with and
be subject to the terms and conditions provided hereunder and any additional terms and conditions
established by the Committee that are consistent with the terms of the Plan.
b) Each Performance Share Award made under the Plan shall be for such number of Shares as
shall be determined by the Committee and set forth in the Award Agreement containing the terms of
such Performance Share Award.
c) The Committee shall grant Performance Share Awards based solely upon the attainment of
performance targets related to one or more performance goals selected by the Committee from among
the goals identified in Section 11.
8.5 Performance Units.
a) Associates who are in strategic leadership positions and Directors shall be eligible to
receive Performance Unit Awards. Subject to the provisions of the Plan, the Committee shall have
sole and complete authority to determine the Participants to whom Performance Units shall be
granted. Performance Units shall consist of a right that is (i) denominated in cash, (ii) valued,
as determined by the Committee, in accordance with the achievement of such performance goals during
such performance periods as the Committee shall establish, and (iii)
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payable at such time and in such form as the Committee shall determine. Subject to the terms
of the Plan and any applicable Award Agreement, the Committee shall determine the performance goals
to be achieved during any performance period, the length of any performance period, the amount of
any Performance Unit Award and the amount and kind of any payment or transfer to be made pursuant
to any Performance Unit Award. The Performance Unit Awards shall be evidenced by Award Agreements
in such form as the Committee shall from time to time approve, which agreements shall comply with
and be subject to the terms and conditions provided hereunder and any additional terms and
conditions established by the Committee that are consistent with the terms of the Plan. The
applicable Award Agreement shall set forth (i) the dollar value of Performance Units granted to the
Participant; (ii) the performance period and performance goals with respect to each such Award; and
(iii) any other terms and conditions as the Committee determines in its sole and absolute
discretion.
b) The Committee shall grant Performance Unit Awards based solely upon the attainment of
performance targets related to one or more performance goals selected by the Committee from among
the goals identified in Section 11.
Section 9. OTHER STOCK-BASED AWARDS
The Committee shall have the authority to determine the Participants who shall receive an
Other Stock-Based Award, which shall consist of any right that is (i) not an Award described in
Sections 6, 7 and 8 above and (ii) an Award of Shares or an Award denominated or payable in, valued
in whole or in part by reference to, or otherwise based on or related to, Shares (including,
without limitation, securities convertible into Shares), as deemed by the Committee to be
consistent with the purposes of the Plan. Subject to the terms of the Plan and any applicable
Award Agreement, the Committee shall determine the terms and conditions of any such Other
Stock-Based Award.
Section 10. NON-EMPLOYEE DIRECTOR AND OUTSIDE DIRECTOR AWARDS
10.1 The Board may provide that all or a portion of a Non-Employee Directors annual retainer,
meeting fees and/or other awards or compensation as determined by the Board, be payable (either
automatically or at the election of a Non-Employee Director) in the form of Non-Qualified Stock
Options, Stock Appreciation Rights, Restricted Shares, Restricted Share Units, Performance Shares,
Performance Units and/or Other Stock-Based Awards, including unrestricted Shares. The Board shall
determine the terms and conditions of any such Awards, including the terms and conditions which
shall apply upon a termination of the Non-Employee Directors service as a member of the Board, and
shall have full power and authority in its discretion to administer such Awards, subject to the
terms of the Plan and applicable law.
10.2 The Board may also grant Awards to Outside Directors pursuant to the terms of the Plan,
including any Award described in Sections 6, 7, 8 and 9 above. With respect to such Awards, all
references in the Plan to the Committee shall be deemed to be references to the Board.
Section 11. PROVISIONS APPLICABLE TO COVERED OFFICERS AND PERFORMANCE AWARDS
11.1 Notwithstanding anything in the Plan to the contrary, Performance Awards shall be
subject to the terms and provisions of this Section 11.
11.2 The Committee may grant Performance Awards to Covered Officers based solely upon the
attainment of performance targets related to one or more performance goals selected by the
Committee from among the goals specified below. For the purposes of this Section 11, performance
goals shall be limited to one or more of the following Company, Subsidiary, Affiliate, operating
unit or division financial performance measures:
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earnings or book value per Share; |
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net income; |
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return on equity, assets, capital, capital employed or investment; |
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earnings before interest, taxes, depreciation and/or amortization; |
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operating income or profit; |
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operating efficiencies; |
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the ratio of criticized/classified loans to capital; |
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allowance for loan losses; |
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the ratio of non-performing loans to total loans; |
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the ratio of past due loans greater than 90 days and non-accruals to total
loans; |
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the ratio of net charge-offs to average loans; |
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after tax operating income; |
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m) |
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cash flow(s); |
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total revenues or revenues per employee; |
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stock price or total shareholder return; |
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growth in deposits; |
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q) |
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dividends; or |
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r) |
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strategic business objectives, consisting of one or more objectives based on
meeting specified cost targets, business expansion goals and goals relating to
acquisitions or divestitures;
or any combination thereof. Each goal may be expressed on an absolute and/or
relative basis, may be based on or otherwise employ comparisons based on internal
targets, the past performance of the Company or any Subsidiary, Affiliates operating
unit or division of the Company and/or the past or current performance of other
companies, and in the case of earnings-based measures, may use or employ comparisons
relating to capital, shareholders equity and/or Shares outstanding, or to assets or
net assets. The Committee may, at its discretion, waive all or any part of the
restrictions applicable to any or all outstanding Performance Awards, including
Performance Share Awards and Performance Unit Awards. |
11.3 With respect to any Covered Officer, the maximum number of Shares in respect of which
all Performance Awards may be granted under Section 8 of the Plan in each year of the performance
period is 50,000 Shares and the maximum amount of any Award settled in cash shall not exceed five
times the Covered Officers annual salary in each year of the performance period.
11.4 To the extent necessary to comply with Section 162(m), with respect to grants of
Performance Awards, including Performance Share Awards and Performance Unit Awards, no later than
90 days following the commencement of each performance period (or such other time as may be
required or permitted by Section 162(m) of the Code), the Committee shall, in writing, (1) select
the performance goal or goals applicable to the performance period, (2) establish the various
targets and bonus amounts which may be earned for such performance period, and (3) specify the
relationship between performance goals and targets and the amounts to be earned by each Covered
Officer for such performance period. Following the completion of each performance period, the
Committee shall certify in writing whether the applicable performance targets have been achieved
and the amounts, if any, payable to Covered Officers for such performance period. In determining
the amount earned by a Covered Officer for a given performance period, subject to any applicable
Award Agreement, the Committee shall have the right to reduce (but not increase) the amount payable
at a given level of performance to take into account additional factors that the Committee may deem
relevant to the assessment of individual or corporate performance for the performance period.
Section 12. TERMINATION OF EMPLOYMENT
The Committee shall have the full power and authority to determine the terms and conditions
that shall apply to any Award upon a Termination of Service, and may provide such terms and
conditions in the Award Agreement or in such rules and regulations as it may prescribe.
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Section 13. CHANGE IN CONTROL
Upon a Change in Control (but only if and to the extent so determined by the Committee at or
after grant (subject to any right of approval expressly reserved by the Committee at the time of
such determination)), all outstanding Awards shall vest, become immediately exercisable or payable
or have all restrictions lifted.
Section 14. AMENDMENT AND TERMINATION
14.1 Amendments to the Plan. The Board may amend, alter, suspend, discontinue or terminate
the Plan or any portion thereof at any time; provided that no such amendment, alteration,
suspension, discontinuation or termination shall be made without shareholder approval if such
approval is necessary to comply with any tax or regulatory requirement for which or with which the
Board deems it necessary or desirable to comply.
14.2 Amendments to Awards. Subject to the restrictions of Sections 3.1 and 6.2, the
Committee may waive any conditions or rights under, amend any terms of or alter, suspend,
discontinue, cancel or terminate, any Award theretofore granted, prospectively or retroactively;
provided that any such waiver, amendment, alteration, suspension, discontinuance, cancellation or
termination that would adversely affect the rights of any Participant or any holder or beneficiary
of any Award theretofore granted shall not to that extent be effective without the consent of the
affected Participant, holder or beneficiary.
14.3 Adjustments of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events.
The Committee is hereby authorized to make adjustments in the terms and conditions of, and the
criteria included in, Awards in recognition of unusual or nonrecurring events (including, without
limitation, the events described in Section 4.2 hereof) affecting the Company, any Subsidiary or
Affiliate, or the financial statements of the Company or any Subsidiary or Affiliate, or of changes
in applicable laws, regulations or accounting principles, whenever the Committee determines that
such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan.
Section 15. GENERAL PROVISIONS
15.1 Limited Transferability of Awards. Except as otherwise provided in the Plan, no Award
shall be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a
Participant, except (i) by will or the laws of descent and distribution, (ii) to a Permitted
Transferee and/or (iii) as may be provided by the Committee in its discretion, at or after grant,
in the Award Agreement; provided, however, that an Incentive Stock Option shall not be assigned,
alienated, pledged, attached, sold or otherwise transferred or encumbered by a Participant except
by will or the laws of descent and distribution. No transfer of an Award by will or by laws of
descent and distribution shall be effective to bind the Company unless the Company shall have been
furnished with written notice thereof and an authenticated copy of the will and/or such other
evidence as the Committee may deem necessary or appropriate to establish the validity of the
transfer. A Permitted Transferee may not transfer an Award other than by will or the laws of
descent and distribution. For purposes of this Plan, Permitted Transferee means the
Participants Immediate Family, a Permitted Trust or a partnership of which the only partners are
members of the Participants Immediate Family. For purposes of this Plan, Immediate Family means
the Participants children and grandchildren, including adopted children and grandchildren,
stepchildren, parents, stepparents, grandparents, spouse, siblings (including half brothers and
sisters), father-in-law, mother-in-law, daughters-in-law and sons-in-law. For purposes of this
Plan, a Permitted Trust means a trust solely for the benefit of the Participant or Participants
Immediate Family.
15.2 Dividend Equivalents. In the sole and complete discretion of the Committee, an Award
may provide the Participant with dividends or dividend equivalents, payable in cash, Shares, other
securities or other property on a current or deferred basis. All dividend or dividend equivalents
which are not paid currently may, at the Committees discretion, accrue interest, be reinvested
into additional Shares, or in the case of dividends or dividend equivalents credited in connection
with Performance Awards, be credited as additional Performance Awards and paid to the Participant
if and when, and to the extent that, payment is made pursuant to such Award. The total number of
Shares available for grant under Section 4 shall not be reduced to reflect any dividends or
dividend equivalents that are reinvested into additional Shares or credited as Performance Awards.
15.3 No Rights to Awards. No Person shall have any claim to be granted any Award, and there
is no obligation for uniformity of treatment of Participants or holders or beneficiaries of Awards.
The terms and conditions of Awards need not be the same with respect to each Participant.
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15.4 Share Certificates. All certificates for Shares or other securities of the Company or
any Subsidiary or Affiliate delivered under the Plan pursuant to any Award or the exercise thereof
shall be subject to such stop transfer orders and other restrictions as the Committee may deem
advisable under the Plan or the rules, regulations and other requirements of the SEC or any state
securities commission or regulatory authority, any stock exchange or other market upon which such
Shares or other securities are then listed, and any applicable Federal or state laws, and the
Committee may cause a legend or legends to be put on any such certificates to make appropriate
reference to such restrictions.
15.5 Withholding. A Participant may be required to pay to the Company or any Subsidiary or
Affiliate and the Company or any Subsidiary or Affiliate shall have the right and is hereby
authorized to withhold from any Award, from any payment due or transfer made under any Award or
under the Plan, or from any compensation or other amount owing to a Participant the amount (in
cash, Shares, other securities, other Awards or other property) of any applicable withholding or
other taxes in respect of an Award, its exercise, or any payment or transfer under an Award or
under the Plan and to take such other action as may be necessary in the opinion of the Company to
satisfy all obligations for the payment of such taxes. The Committee may provide for additional
cash payments to holders of Options to defray or offset any tax arising from the grant, vesting,
exercise or payment of any Award.
15.6 Award Agreements. Each Award hereunder shall be evidenced by an Award Agreement that
shall be delivered to the Participant and may specify the terms and conditions of the Award and any
rules applicable thereto. In the event of a conflict between the terms of the Plan and any Award
Agreement, the terms of the Plan shall prevail.
15.7 No Limit on Other Compensation Arrangements. Nothing contained in the Plan shall
prevent the Company or any Subsidiary or Affiliate from adopting or continuing in effect other
compensation arrangements, which may, but need not, provide for the grant of Options, SARs,
Restricted Shares, Restricted Share Units, Performance Shares, Performance Units, Other Stock-Based
Awards or other types of Awards provided for hereunder.
15.8 No Right to Employment. The grant of an Award shall not be construed as giving a
Participant the right to be retained in the employ of the Company or any Subsidiary or Affiliate.
Further, the Company or a Subsidiary or Affiliate may at any time dismiss a Participant from
employment, free from any liability or any claim under the Plan, unless otherwise expressly
provided in an Award Agreement.
15.9 No Rights as Shareholder. Subject to the provisions of the Plan and the applicable
Award Agreement, no Participant or holder or beneficiary of any Award shall have any rights as a
shareholder with respect to any Shares to be distributed under the Plan until such person has
become a holder of such Shares. Notwithstanding the foregoing, in connection with each grant of
Restricted Shares hereunder, the applicable Award Agreement shall specify if and to what extent the
Participant shall not be entitled to the rights of a shareholder in respect of such Restricted
Shares.
15.10 Governing Law. The validity, construction and effect of the Plan and any rules and
regulations relating to the Plan and any Award Agreement shall be determined in accordance with the
laws of the State of Tennessee without giving effect to conflicts of laws principles.
15.11 Severability. If any provision of the Plan or any Award is, or becomes, or is deemed
to be invalid, illegal or unenforceable in any jurisdiction or as to any Person or Award, or would
disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision
shall be construed or deemed amended to conform to the applicable laws, or if it cannot be
construed or deemed amended without, in the determination of the Committee, materially altering the
intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, Person
or Award and the remainder of the Plan and any such Award shall remain in full force and effect.
15.12 Other Laws. The Committee may refuse to issue or transfer any Shares or other
consideration under an Award if, acting in its sole discretion, it determines that the issuance or
transfer of such Shares or such other consideration might violate any applicable law or regulation
(including applicable non-U.S. laws or regulations) or entitle the Company to recover the same
under Exchange Act Section 16(b), and any payment tendered to the Company by a Participant, other
holder or beneficiary in connection with the exercise of such Award shall be promptly refunded to
the relevant Participant, holder or beneficiary.
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15.13 No Trust or Fund Created. Neither the Plan nor any Award shall create or be construed
to create a trust or separate fund of any kind or a fiduciary relationship between the Company or
any Subsidiary or Affiliate and a Participant or any other Person. To the extent that any Person
acquires a right to receive payments from the Company or any Subsidiary or Affiliate pursuant to an
Award, such right shall be no greater than the right of any unsecured general creditor of the
Company or any Subsidiary or Affiliate.
15.14 No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to
the Plan or any Award, and the Committee shall determine whether cash, other securities or other
property shall be paid or transferred in lieu of any fractional Shares or whether such fractional
Shares or any rights thereto shall be canceled, terminated or otherwise eliminated.
15.15 Headings. Headings are given to the sections and subsections of the Plan solely as a
convenience to facilitate reference. Such headings shall not be deemed in any way material or
relevant to the construction or interpretation of the Plan or any provision thereof.
Section 16. TERM OF THE PLAN
16.11 Effective Date. The Plan shall be effective as of April 20, 2004 provided it has been
approved by the Board and by the Companys shareholders.
16.12 Expiration Date. No new Awards shall be granted under the Plan after the tenth (10th)
anniversary of the Effective Date. Unless otherwise expressly provided in the Plan or in an
applicable Award Agreement, any Award granted hereunder may, and the authority of the Board or the
Committee to amend, alter, adjust, suspend, discontinue or terminate any such Award or to waive any
conditions or rights under any such Award shall, continue after the tenth (10th) anniversary of the
Effective Date.
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PINNACLE FINANCIAL PARTNERS, INC. |
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By:
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Name:
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Title:
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Appendix A Page 14 |
Appendix B
PROXY
PINNACLE FINANCIAL PARTNERS, INC.
SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 21, 2009
The undersigned hereby appoints Robert A. McCabe, Jr. or M. Terry Turner or either of them, as
Proxies, each with the power to appoint his substitute, and hereby authorizes them or either of
them to represent and to vote, as designated below, all of the Common Stock of Pinnacle Financial
Partners, Inc., which the undersigned would be entitled to vote if personally present at the annual
meeting of shareholders to be held at 211 Commerce Street Suite 100, Nashville, Tennessee 37201
and at any adjournments of the annual meeting, upon the proposals described in the accompanying
Notice of the Annual Meeting and the Proxy Statement relating to the annual meeting, receipt of
which are hereby acknowledged.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSALS.
PROPOSAL #1: To elect the five (5) persons listed below to serve as Class I Directors of Pinnacle
Financial Partners, Inc. for a three-year term:
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Ed C. Loughry, Jr.
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Dale W. Polley |
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Reese L. Smith, III
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M. Terry Turner |
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Colleen Conway-Welch |
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[ ] FOR all nominees listed above
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[ ] WITHHOLD authority to vote
on all nominees listed above
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[ ] FOR ALL EXCEPT-
See instruction below |
INSTRUCTION: To withhold authority for any individual nominee, mark For All Except above, and
write the names of the nominees for which you do NOT wish to vote FOR in the space below.
PROPOSAL #2: To approve an amendment to Pinnacles 2004 Equity Incentive Plan to increase the
number of shares of Pinnacle Common Stock reserved for issuance under the plan by 750,000 shares:
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[ ] FOR
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[ ] AGAINST
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[ ] ABSTAIN |
PROPOSAL #3: To ratify the use of the performance measures in Pinnacles 2004 Equity Incentive Plan:
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[ ] FOR
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[ ] AGAINST
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[ ] ABSTAIN |
PROPOSAL #4: To ratify the appointment of KPMG LLP as the Companys independent registered public
accounting firm for the fiscal year ending December 31, 2009:
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[ ] FOR
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[ ] AGAINST
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[ ] ABSTAIN |
PROPOSAL #5: To approve the Companys executive compensation programs and procedures in accordance
with recently enacted say on pay regulations of the American Recovery and Reinvestment Act of
2009:
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[ ] FOR
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[ ] AGAINST
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[ ] ABSTAIN |
* * * * * * * *
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED
SHAREHOLDER. IF NO DIRECTION TO THE CONTRARY IS INDICATED, IT WILL BE VOTED FOR THE PROPOSALS.
DISCRETIONARY AUTHORITY IS HEREBY CONFERRED AS TO ALL OTHER
MATTERS WHICH MAY COME BEFORE THE ANNUAL MEETING.
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Appendix B Page 1 |
If stock is held in the name of more than one person, all holders must sign. Signatures should
correspond exactly with the name or names appearing on the stock certificate(s). When signing as
attorney, executor, administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other authorized officer. If a
partnership or limited liability company, please sign in such name by authorized person.
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Signature(s) of Shareholder(s)
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Please print name of Shareholder(s)
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Date: , 2009 |
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(be sure to date your proxy) |
I WILL WILL NOT ATTEND THE ANNUAL MEETING OF SHAREHOLDERS.
PLEASE MARK, SIGN AND DATE THIS PROXY, AND RETURN IT IN THE ENCLOSED RETURN-ADDRESSED ENVELOPE AS
SOON AS POSSIBLE. NO POSTAGE NECESSARY. THANK YOU.
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Appendix B Page 2 |