15
Community Trust Bancorp, Inc.
208 North Mayo Trail
Pikeville, Kentucky 41501
PROXY STATEMENT
Annual Meeting of Shareholders
to be held April 28, 1998
INTRODUCTION
This Proxy Statement and accompanying proxy are furnished in
connection with the solicitation of proxies by the Board of Directors of
Community Trust Bancorp, Inc. (the "Company") for use at the Annual Meeting
of Shareholders (the "Annual Meeting") to be held on Tuesday, April 28,
1998, at 5:30 p.m. (EDT), at the Pikeville High School Auditorium, North
Mayo Trail, Pikeville, Kentucky, and any adjournments thereof. A copy of
the Company's 1997 Annual Report to Shareholders and Form 10-K accompanies
this Proxy Statement.
The cost of solicitation of proxies will be borne by the Company. In
addition to the use of the mails, proxies may be solicited in person, by
telephone and other means of communication by directors, officers, and
other employees of the Company, none of whom will receive additional
compensation for such services. The Company will also request brokerage
houses, custodians and nominees to forward soliciting materials to the
beneficial owners of stock held of record by them, and will pay the
reasonable expenses of such persons for forwarding such materials. This
Proxy Statement and the accompanying proxy are first being mailed or given
to shareholders of the Company on or about March 30, 1998.
RECORD DATE AND VOTING SECURITIES
The Common Stock of the Company ("Common Stock") is the only class of
outstanding voting securities. Only holders of Common Stock of record at
the close of business on February 28, 1998 (the "Record Date") are entitled
to notice of and to vote at the Annual Meeting. At the Record Date, there
were 10,062,487 shares of Common Stock outstanding. With respect to the
election of directors, shareholders have cumulative voting rights.
Accordingly, each shareholder will have the right to cast as many votes in
the aggregate as equals the number of shares of Common Stock held by the
shareholder multiplied by the number of directors to be elected at the
Annual Meeting. Each shareholder may cast all of his or her votes for one
candidate, or distribute such votes among two or more candidates.
Shareholders will be entitled to one vote for each share of Common Stock
held of record on the Record Date with regard to any other matters that
properly come before the Annual Meeting or any adjournment thereof.
Each proxy, unless the shareholder otherwise specifies, will be voted
in favor of the election of the nine nominees for director named herein.
Where a shareholder has appropriately specified how the proxy is to be
voted, it will be voted accordingly. As to any other matter which may
properly be brought before the Annual Meeting or any adjournment thereof, a
vote may be cast pursuant to the accompanying proxy in accordance with the
judgment of the person or persons voting the proxy. A shareholder may
revoke his or her proxy at any time prior to its exercise. Revocation may
be effected by written notice to the Company, by a subsequently dated proxy
received by the Company, or by oral revocation in person at the Annual
Meeting or any adjournment thereof, or by voting in person at the Annual
Meeting or any adjournment thereof.
A majority of the outstanding shares present in person or by proxy is
required to constitute a quorum to transact business at the Annual Meeting.
Abstentions will be treated as present for purposes of determining a
quorum, but as unvoted shares for purposes of determining the approval of
any matter submitted to the shareholders for a vote. If a broker indicates
that it does not have discretionary authority as to certain shares to vote
on a particular matter, such shares will not be considered as present and
entitled to vote with respect to such matter.
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth information as to each shareholder
known by the Company to beneficially own more than five percent of the
Common Stock as of the Record Date.
Beneficial Owners Amount and Nature Percent
Name and Address of Beneficial Ownership of Class
Trust Company of Kentucky, NA 915,459 (1) 9.1%
as Fiduciary
100 East Vine St., Suite 400
Lexington, Kentucky 40507
(1) The shares indicated are held by Trust Company of Kentucky, NA. a
subsidiary of the Company, in fiduciary capacities as trustee, executor,
agent or otherwise. Of the shares indicated, Trust Company has sole voting
rights with respect to 164,046 shares, shared voting rights with respect to
26,724 shares and no voting rights with respect to 672,233 shares. Trust
Company has shared investment power with respect to 52,456 shares and sole
investment power with respect to 863,003 shares.
ELECTION OF DIRECTORS
The Company's directors are elected at each annual meeting of the
shareholders and hold office until the next election of directors or until
their successors are duly elected and qualify. The persons named below,
all of whom currently serve as directors of the Company, have been
nominated for election to serve until the 1999 Annual Meeting of
Shareholders. The following table sets forth certain information
respecting the persons nominated to be directors of the Company:
<TABLE>
<CAPTION>
Amount and
Positions Nature of
and Director Principal Beneficial Percent
Name and Age (1) Offices* Since Occupation(2) Ownership (3) of Class
<S> <C> <C> <C> <C> <C>
Charles J. Baird; 48 Director 1988 Baird, Baird, 79,706 (5) (4)
Baird & Jones,
P.S.C., Attorneys
Burlin Coleman; 68 Chairman of 1980 Chairman of Board 435,195 (6) 4.3%
Board of of Directors,
Directors, President & CEO -
President & Community Trust
CEO Bancorp, Inc.
Nick A. Cooley; 64 Director 1980 President - Unit 34,809 (4)
Coal Corporation
William A. Graham, Jr.; 61 Director 1990 Chairman of the 113,304 (7) 1.3%
Advisory Board -
Fleming County
Region - Community
Trust Bank, NA
Jean R. Hale; 51 Executive VP, 1993 President & CEO - 49,758 (8) (4)
Secretary & Community Trust
Director Bank, NA
2
<PAGE>
Brandt Mullins; 70 Vice Chairman 1980 Retired President - 48,275 (9) (4)
& Director Community Trust
Bank, NA
M. Lynn Parrish; 48 Director 1993 President - Knott 60,600 (10) (4)
Floyd Land Co., Inc.
Ernest M. Rogers; 70 Director 1980 President and 54,756 (11) (4)
General Manager
Rogers Petroleum
Services, Inc.
Porter Welch; 72 Director 1995 Chairman of the 43,178 (12) (4)
Advisory Board -
Woodford County
Region - Community
Trust Bank, NA
All directors and executive officers as a group 938,056 (13) 9.3%
(14 in number, including the above named individuals)
* Burlin Coleman is also a director of Community Trust Bank, NA,
Community Trust Bank, FSB and Trust Company of Kentucky, NA. Jean Hale is
also a director of Community Trust Bank, NA and Trust Company of Kentucky,
NA.
<fn1>
(1) The ages listed are as of February 28, 1998.
<fn2>
(2) Each of the nominees has been engaged in the principal occupation
specified above for five years or more.
<fn3>
(3) Under the rules of the Securities and Exchange Commission, a person
is deemed to beneficially own a security if the person has or shares
the power to vote or direct the voting of such security, or the power
to dispose or to direct the disposition of such security. A person
is also deemed to beneficially own any shares which that person has
the right to acquire beneficial ownership within sixty days. Shares
of Common Stock subject to options exercisable within sixty days are
deemed outstanding for computing the percentage of class of the person
holding such options but are not deemed outstanding for computing the
percentage of class for any other person. Unless otherwise indicated,
the named persons have sole voting and investment power with respect
to shares held by them.
<fn4>
(4) Less than 1 percent.
<fn5>
(5) Includes 39,706 shares in trust for W. J. Baird's grandchildren over
which Mr. Baird is trustee with the power to vote and invest such
shares.
<fn6>
(6) Includes the following shares beneficially owned by Burlin Coleman:
279,036 shares held in trust over which Mr. Coleman has sole voting
and investment power; 59,398 shares in which Mr. Coleman shares
voting power pursuant to a power of attorney; 434 shares held directly
by Mr. Coleman; and 96,327 shares held in KSOP which Mr. Coleman has
the power to vote. Excludes 9,647 shares held by Mr. Coleman's wife,
over which Mr. Coleman has no voting or investment power.
<fn7>
(7) Includes 7,499 shares that Mr. Graham may acquire pursuant to options
exercisable within sixty days of the Record Date and 1,973 shares held
in the KSOP, which Mr. Graham has the power to vote.
<fn8>
(8) Includes 14,314 shares which Mrs. Hale may acquire pursuant to options
exercisable within sixty days of the Record Date and 15,745
shares held in the KSOP, which Mrs. Hale has the power to vote.
Excludes 5,269 shares held by Mrs. Hale's husband, over which Mrs.
Hale has no voting or investment power.
<fn9>
(9) Includes 47,288 shares held in trust, which Mr. Mullins has
the power to vote. Excludes 20,153 shares held by Mr. Mullins' wife,
over which Mr. Mullins has no voting or investment power.
<fn10>
(10)Excludes 1,960 shares held by Mr. Parrish's wife as custodian for
their minor child, over which Mr. Parrish has no voting or investment
power.
3
<PAGE>
<fn11>
(11)Excludes 17,244 shares held by Mr. Rogers' wife, over which Mr. Rogers
has no voting or investment power.
<fn12>
(12)Excludes 42,480 shares held by Mr. Welch's wife, over which Mr. Welch
has no voting or investment power.
<fn13>
(13)Includes 25,735 shares which may be acquired by all directors and
executive officers as a group pursuant to options exercisable within
sixty days of the Record Date.
</FN>
</TABLE>
Unless authority to do so is withheld, it is the intention of the
persons named in the proxy to vote for the election of each of the nominees
listed above. All nominees have indicated a willingness to serve and the
Company does not anticipate that any of the above nominees will decline or
be unable to serve if elected as a director. However, in the event that
one or more of such nominees is unable, unwilling or unavailable to serve,
the persons named in the proxy shall have authority, according to their
judgment, to vote for such substitute nominees as they, after consultation
with the Company's Board of Directors, shall determine. If considered
desirable, cumulative voting will be exercised by the persons named in the
proxy to elect as many of such nominees as possible.
The following persons are executive officers of Community Trust
Bancorp, Inc. They are not nominated to serve as directors. Their
security ownership is as follows:
Amount & Nature ofPercent
Name Position Beneficial Ownership of Class
Richard M. Levy Executive Vice President, 2,267 (2) (3) (1)
Chief Financial Officer
and Treasurer
Mark Gooch Executive Vice President 3,358 (4) (1)
John Shropshire Executive Vice President 3,982 (5) (1)
Ralph Weickel Executive Vice President 5,753 (6) (1)
Ron Holt Executive Vice President 3,115 (7) (1)
(1) Less than 1 percent.
(2) Includes 1,140 shares held in KSOP, which Mr. Levy has the power to vote.
(3) Mr. Levy resigned for the offices of Chief Financial Officer, Treasurer
and Executive Vice President of the Company effective February 3, 1998.
(4) Includes 707 share which Mr. Gooch may acquire pursuant to options
exercisable within sixty days of the Record Date and 2,539 shares held
in KSOP, which Mr. Gooch has the power to vote.
(5) Includes 3,300 shares held in IRA and 572 shares held in KSOP, which
Mr. Shropshire has the power to vote.
(6) Includes 1,296 shares which Mr. Weickel may acquire pursuant to options
exercisable within sixty days of the Record Date and 2,162 shares held
in KSOP, which Mr. Weickel has the power to vote.
(7) Includes 1,316 shares which Mr. Holt may acquire pursuant to options
exercisable within sixty days of the Record Date and 1,579 shares held
in KSOP, which Mr. Holt has the power to vote.
INFORMATION CONCERNING THE BOARD OF DIRECTORS
Directors of the Company, who are not also officers of the Company,
were paid $1,000 per meeting of the Board for 1997. Directors who are also
officers of the Company did not receive additional compensation for serving
as a director.
The Board of Directors had eleven meetings during the 1997 fiscal
year. The Board has among other committees, Audit and Asset Quality,
Compensation and Directors Nominating Committees. Nick Cooley attended
less than 75% of the meetings held.
The Audit and Asset Quality Committee consists of Charles Baird, Nick
Cooley, Porter Welch, Ernest M. Rogers and William A. Graham, Jr. The
Audit and Asset Quality Committee met four times during 1997. The
committee reviews and reports to the Board with respect to various auditing
and accounting matters, including the appointment and performance of the
independent auditors, the scope of audit procedures, general auditing
policy matters and adequacy of internal controls.
The Compensation Committee consists of Brandt Mullins, Ernest M.
Rogers, Charles Baird and Nick Cooley. The Compensation Committee, which
held two meetings during 1997, reviews the compensation practices of the
Company and its subsidiaries.
4
<PAGE>
The Directors Nominating Committee consists of Burlin Coleman, Brandt
Mullins, Charles Baird and Porter Welch. This committee did not meet in
1997.
INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS
In the ordinary course of business, the Company, through its wholly-
owned subsidiary commercial banks and savings bank, has in the past and
expects to have in the future, banking transactions, including lending to
its directors, officers, principal shareholders and their associates. When
these banking transactions are credit transactions they are made in the
ordinary course of business, on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for
comparable transactions with others. In the opinion of the Company's Board
of Directors, such transactions do not involve more than the normal risk of
collectibility or present any other unfavorable features.
Mr. Charles Baird, a director of the Company, is a partner in Baird,
Baird, Baird, & Jones, P.S.C., a law firm which provided services to the
Company and its affiliates during 1997 and will be retained by the Company
and its affiliates during the current fiscal year 1998. Approximately
$495,000 in legal fees were paid to Baird, Baird, Baird, & Jones during
1997.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Act")
requires the Company's executive officers and directors and persons who own
more than ten percent (10%) of the Common Stock, to file initial reports of
ownership and changes in ownership with the Securities and Exchange
Commission ("SEC") as well as to furnish the Company with a copy of such
report (the Company is not aware of any beneficial owner of more than 10%
of its Common Stock). Additionally, SEC regulations require the Company to
identify in its Proxy Statement those individuals for whom one of the
referenced reports was not filed on a timely basis during the most recent
fiscal year. There were no late filings of SEC Form 4 (statement of
changes in beneficial ownership) during 1997.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND
CHANGE-IN-CONTROL ARRANGEMENTS
As of December 31, 1997, the Company had executed certain termination
of employment and change-in-control agreements ("Severance Agreements")
with Jean R. Hale, Richard M. Levy, Ronald M. Holt, Ralph Weickel and Mark
Gooch. The Severance Agreements with Ms. Hale, Mr. Levy, Mr. Holt and Mr.
Weickel were executed on January 23, 1996. The Severance Agreement with
Mr. Gooch was executed on January 1, 1997. The Severance Agreements were
effective for a term equal to the longer of three years or the covered
period should a change-in-control of the Company occur during such three
year period. The covered period during which the terms and conditions of
the Severance Agreements are effective is the period of time following a
change-in-control equal to (i) two years following the occurrence of the
change-in-control in the event of an involuntary termination or a voluntary
termination following a change in duties, or (ii) the thirteenth month
following the change-in-control in the event of a voluntary termination not
preceded by a change in duties.
The Severance Agreements require the payment to the applicable named
executive officer of a severance amount in the event of an involuntary or
voluntary termination of employment after a change-in-control of the
Company during the covered period. The severance amount payable under the
Severance Agreement is equal to (i) 2.99 times the named executive
officer's base annual salary in the event of involuntary termination, or
2.99 times the named executive officer's base annual salary in the event of
a voluntary termination of employment preceded by a change in duties
subsequent to a change-in-control of the Company, or (ii) 2.00 times the
named executive officer's annual base salary in the event of a voluntary
termination of employment not preceded by a change in duties subsequent to
a change-in-control of the Company.
A change-in-control has occurred when (i) any person, including a
group under Section 13(d)(3) of the Securities Exchange Act of 1934, is or
becomes the owner of 30% or more of combined voting power of the Company's
outstanding securities; (ii) as a result of, or in connection with, any
tender offer, exchange offer, merger or other combination, sale of assets
or contested election, the persons who were directors of the Company before
such transaction(s) shall cease to constitute a majority of the Board of
Directors of the Company or successor of the Company; (iii) a tender or
exchange offer is made and consummated for the ownership of 30% or more of
the combined voting power of the Company's outstanding voting securities;
(iv) the Company transfers substantially all of its assets to another
corporation that is not a wholly-owned subsidiary of the Company.
5
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the total annual compensation paid or
accrued by the Company to or for the account of the Chief Executive Officer
and each of the executive officers of the Company whose total cash
compensation for the fiscal year ended December 31, 1997 exceeded $100,000.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Long-Term
Compensation Compensation
Name and Salary Bonus (1) Options (2) All Other
Principal Position Year ($) ($) (#) Compensation (3) ($)
<S> <C> <C> <C> <C> <C>
Burlin Coleman (4) 1997 180,000 0 0 11,150
President, Chief Executive 1996 24,231 0 0 0
Officer, and Director 1995 0 0 0 0
Jean R. Hale 1997 179,231 0 10,156 8,666
Executive Vice President, 1996 170,000 68,136 29,233 10,233
Secretary, and Director 1995 170,000 24,032 1,545 12,132
Richard M. Levy (5) 1997 136,000 0 8,565 6,938
Executive Vice President 1996 129,038 45,500 27,786 6,175
Chief Financial Officer 1995 104,807 8,312 1,500 21,357
Ronald M. Holt (6) 1997 136,000 0 8,565 8,404
Executive Vice President 1996 120,769 45,500 27,786 36,009
1995 80,385 13,341 1,000 6,726
Ralph Weickel (7) 1997 103,846 0 2,122 7,206
Executive Vice President 1996 93,462 14,997 22,000 8,338
1995 84,852 3,645 1,100 7,080
Mark Gooch (8) 1997 103,654 0 24,571 13,768
Executive Vice President 1996 69,092 22,280 0 6,988
1995 61,655 0 0 4,350
John Shropshire (9) 1997 100,385 0 24,424 6,805
Executive Vice President 1996 75,000 0 0 0
1995 52,290 0 0 0
<fn1>
(1) Bonuses are paid under the senior management incentive plan, which is
open to executive officers and affiliate CEO's. Bonuses are based on
earnings per share of the Company, with modifying factors which are
different for each officer. (See report of the Compensation Committee)
<fn2>
(2) These options were granted under the 1989 Stock Option Plan (the "Option
Plan"). The Option Plan permits the grant of options to employees of
the Company and its subsidiaries whose efforts contribute, or may be
expected to contribute materially to the successful performance of the
Company .
<fn3>
(3) Amounts in this column include contributions made by the Company under
the Savings and Employee Stock Ownership Plan (the "KSOP Plan") and
relocation expenses. For 1997, all amounts listed are KSOP Plan
contributions except for Mr. Mark Gooch ($8,698 KSOP Plan, $5,070
relocation). For 1996, all amounts listed are KSOP Plan contributions
except for Mr. Ronald Holt ($6,060 KSOP Plan, $29,949 relocation).
Participation in the KSOP Plan is available to any employee of the
Company or its subsidiaries who has been employed for one year,
completed 1,000 hours of service and has attained the age of 21
("Participant"). Participants may contribute 1% to 15% of their annual
salary and the Company will contribute 50% of the Participant's first
8% of contributions. The Company also contributes a base percentage of
each Participants salary as determined annually by the Board of
Directors. For 1995, 1996 and 1997, the Company made a base
contribution of 4% of the Participant's annual salaries.
6
<PAGE>
<fn4>
(4) Burlin Coleman became Chairman, President and Chief Executive Officer
on November 1, 1996. Prior to that date, Mr. Coleman was the Chairman
of the Board. For the entire year of 1994, Mr. Coleman served as
Chairman and Chief Executive Officer.
<fn5>
(5) Richard M. Levy resigned as Executive Vice President, Chief Executive
Officer and Treasurer of the Company effective February 3, 1998.
<fn6>
(6) Ronald M. Holt was employed by the Company on April 3, 1995.
<fn7>
(7) Ralph Weickel was employed by the Company on September 13, 1993.
<fn8>
(8) Mark Gooch was employed by the Company on May 18, 1981 and served as
President and CEO of First Security Bank & Trust Co., Whitesburg, KY
prior to becoming an executive officer of the Corporation.
<fn9>
(9) John Shropshire was employed by the Company on October 2, 1995.
</FN>
</TABLE>
The following table sets forth the information regarding options granted
to the named executive officers in 1997.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
Potential Realizable
Value at Assumed
Annual Rates of Stock
Individual Grants Price Appreciation
for Option Term (2)
Number of
Securities Percent
Underlying of Total
Options/ Options/SARs Exercise
SARs Granted to or Base
Granted (1) Employees Price Expiration
Name (#) in Fiscal Year ($/SH) Date 5% ($) 10%($)
Jean R. Hale 5,500 7.41% 22.50 1/21/2007 77,826 197,226
4,656 22.27 1/21/2007 65,210 165,254
Richard M. Levy 5,500 6.25% 22.50 1/21/2007 77,826 197,226
3,065 22.27 1/21/2007 42,927 108,785
Ronald M. Holt 5,500 6.25% 22.50 1/21/2007 77,826 197,226
3,065 22.27 1/21/2007 42,927 108,785
Ralph Weickel 2,122 1.55% 22.27 1/21/2007 29,720 75,315
Mark Gooch 22,000 17.93% 22.50 1/21/2007 311,303 788,903
2,571 22.27 1/21/2007 36,008 91,252
John Shropshire22,000 17.83% 22.50 1/21/2007 311,303 788,903
2,424 22.27 1/21/2007 33,949 86,034
Burlin Coleman 0 0.00% 0.00 N/A N/A N/A
(1)Options granted under the Senior Management Incentive
Plan become exercisable in equal 25% installments beginning one
year after the date of the grant and become fully exercisable upon
a change in control of the Company. Options granted under
Management Retention become exercisable after five years and
become fully exercisable upon a change in control of the Company.
Options expire if not exercised ten years after the date of the
grant.
(2)These amounts, based on assumed appreciation rates of
5% and 10% rates prescribed by the Securities and Exchange
Commission rules, are not intended to forecast possible future
appreciation, if any, of the Common Stock price. Moreover, these
values do not take into consideration the provisions of the
options providing for nontransferability, vesting over a period of
four years or termination of the options following termination of
employment. The amounts shown are pre-tax and assume the options
will be held throughout the entire ten year term. Actual gains,
if any, are dependent upon the future performance of the Common
Stock, as well as the continued employment of the option holder
through the vesting periods.
7
<PAGE>
The following table sets forth the number and value of unexercised
options held by the named executive officers of the Company at December
31, 1997. No options or SARs were exercised by the named executive
officers during the 1997 fiscal year. No SARs were held by the named
executive officers at December 31, 1997.
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTIONS/SAR VALUES
Number of
Securities
Underlying Unexercised Value of Unexercised
Options/SARs at In-the-Money Options/SARs
Fiscal Year-End (#) at Fiscal Year-End ($) (1)
Name Exercisable Unexercisable Exercisable Unexercisable
Jean R. Hale 11,729 35,191 187,990 395,070
Richard M. Levy 412 31,803 5,342 365,427
Ronald M. Holt 275 31,390 3,561 360,085
Ralph Weickel 550 24,672 5,561 299,141
John Shropshire 0 24,424 0 211,337
Mark Gooch 0 24,571 0 212,639
(1) Based on the closing price of the Common Stock at December 31, 1997.
REPORT OF THE COMPENSATION COMMITTEE
The principal duties of the Compensation Committee are to review the
compensation of executive officers of the Company and make recommendations
to the Board for approval. Compensation for executive officers consists of
base salary, bonus and stock options under the Option Plan.
The total compensation package is set at levels the Compensation
Committee believes are sufficient to attract and retain qualified
executives. It is the goal of the Compensation Committee to hire
executives to long-term relationships which will mutually benefit the
executive and the Company. The Compensation Committee believes its total
compensation package is in line with compensation packages offered by other
companies within the Company's peer group of bank holding companies with
total consolidated assets of one to three billion dollars. This is not the
peer group used to construct the performance graph contained in this proxy
statement.
Bonuses to executive officers are computed under the senior management
incentive plan, which is open to all senior executives. The bonuses are
based on earnings per share of the Corporation adjusted for modifying
factors which are different for each senior executive. This is different
from the incentive plan available to other employees which is also based on
earnings per share, but without modifying factors.
Stock options are also computed under the senior management incentive
plan, and issued under the Option Plan. Stock options are based on
earnings per share adjusted for modifying factors which are different for
each senior executive. Stock options are not available to other employees.
Stock options may also be issued to senior executives for management
retention purposes, which must be approved by the Compensation Committee.
The salary, bonus and stock options of Terry Coleman, the Chief
Executive Officer until November 1, 1996, were computed under the senior
management incentive plan and were not tied to stock performance. The
salary of Burlin Coleman, the Chief Executive Officer from November 1, 1996
was not tied to stock performance. Burlin Coleman received no bonus or
stock options for 1997. The Compensation Committee believes the
compensation of the chief executive officer is in line with other companies
in its peer group.
8
<PAGE>
OBRA Deductibility Limitation. The Omnibus Budget Reconciliation Act
of 1994 ("OBRA") prohibits the deduction by public companies of
compensation of certain executive officers in excess of $1 million, unless
certain criteria are met. The Company has determined not to take any
action at this time with respect to its compensation plans to seek to meet
these criteria.
Ernest M. Rogers Brandt Mullins Nick Cooley
During 1997 there were no interlocking relationships between any
executive officers of the Company and any entity whose directors or
executive officers serve on the Board of Directors' Compensation
Committee. Brandt Mullins, who serves on the Compensation Committee,
was the President and Chief Operating Officer until his retirement in
1992.
9
<PAGE>
COMMON STOCK PERFORMANCE
The following graph shows the cumulative return experienced by the
Company's shareholders during the last five years compared to The NASDAQ
Stock Market's National Market and the NASDAQ Bank Index. The graph
assumes the investment of $100 on December 31, 1992 in the Company's Common
Stock and each index and the reinvestment of all dividends paid during the
five year period.
Comparison of 5 Year Cumulative Total Return
among Community Trust Bancorp, Inc., NASDAQ Stock Market (U.S.),
and NASDAQ Bank Stocks
Fiscal Year Ending December 31
1992 1993 1994 1995 1996 1997
Community Trust 100 142 130 99 130 186
Bancorp, Inc.
NASDAQ Stock 100 115 112 159 195 240
Market (U.S.)
NASDAQ Bank Stocks 100 114 114 169 224 377
10
<PAGE>
PROPOSAL TO ADOPT 1998 STOCK OPTION PLAN
The Board of Directors has adopted, and recommends that shareholders
approve, the Company's 1998 Stock Option Plan (the "Stock Option Plan").
The Stock Option Plan is similar to and is intended to succeed the
Company's 1989 Stock Option Plan (the "1989 Plan"), which expires on
December 31, 1998. The Board has determined that if the Stock Option Plan
is approved by the shareholders, no further options will be granted under
the 1989 Plan after such approval.
The Stock Option Plan became effective upon adoption by the Board of
Directors but the Stock Option Plan will be rescinded unless the Stock
Option Plan is approved by the shareholders at the Annual Meeting.
The purpose of the Stock Option Plan is to advance the interests of
the Company and its shareholders by attracting, retaining, and motivating
employees who will be responsible for the long term success and development
of the Company. The Stock Option Plan provides for the award of stock
options to the Company's employees. The principal provisions of the Stock
Option Plan are summarized below. This summary, however, does not purport
to be complete and is qualified in its entirety by reference to the
provisions of the Stock Option Plan, a copy of which is included with this
Proxy Statement as Exhibit A. Terms not defined herein shall have the same
meanings as set forth in the Stock Option Plan.
Plan Administration and Eligibility
The Stock Option Plan will be administered by a committee (the
"Committee") composed of two or more "non-employee directors." In
administering the Stock Option Plan, the Committee will determine, among
other things: (i) individuals to whom grants of options will be made; (ii)
the number of shares under any option; (iii) whether any option will be an
incentive stock option or a non-qualified option; and (iv) the terms of an
option including, but not limited to, a vesting schedule, exercise price,
and the length of any option. The Committee may also construe, interpret
and correct defects, omissions and inconsistencies in the Stock Option
Plan. The Stock Option Plan may also be administered by the entire Board
of Directors.
All full-time employees of the Company, or any subsidiary, partnership
or limited liability company in which the Company owns a majority interest,
are eligible to receive options under the Stock Option Plan when designated
by the Committee. At February 28, 1998, the Company had approximately 740
full-time employees. In selecting employees to receive options under the
Stock Option Plan, the Committee will take into consideration such factors
as it deems relevant in promoting the purposes of the Stock Option Plan,
including the duties of the employees, their present or potential
contribution to the success of the Company and their anticipated number of
years of active service as employees.
Shares Available for Issuance
The Stock Option Plan provides that 650,000 shares of Common Stock
will be available for the granting of options. The Stock Option Plan also
provides for an increase in the number of shares available for the granting
of options equal to 10% of any increase in the number of shares of Common
Stock outstanding after December 31, 1997 (other than any increase due to
the issuance of shares pursuant to the Stock Option Plan or the 1989 Plan).
The total number of shares of Common Stock with respect to which stock
options may be granted to any individual during any calendar year may not
exceed 100,000 shares. The Common Stock subject to the Stock Option Plan
will be authorized but unissued shares, which may include previously
acquired shares. Pursuant to the Stock Option Plan, the number and kind of
shares under option may be appropriately adjusted in the event of certain
changes in capitalization of the Company, including stock dividends and
splits, reclassifications, recapitalizations, reorganizations, mergers,
consolidations, spin-offs, split-ups, combinations or exchanges of shares,
and certain distributions, and repurchases of shares.
Stock Options
The Committee may grant stock options to eligible individuals in the
form of incentive stock options or non-qualified stock options. All
incentive stock options are intended to qualify under section 422 of the
Code. The exercise period for any stock option will be determined by the
Committee at the time of grant but may not exceed ten years from the date
of grant (five years in the case of an incentive stock option granted to a
"Ten-Percent Shareholder" as defined in the Stock Option Plan). The
exercise price per share of the Common Stock covered by a stock option may
not be less than 100% of the fair market value of a share of Common Stock
on the date of grant (110% in the case of an incentive stock option granted
to a Ten-Percent Shareholder). The exercise price is payable, at the
Committee's discretion, in cash, in shares of already owned Common Stock or
in any other reasonable consideration that the Committee may deem
appropriate. Stock options will be exercisable in installments as
determined by the Committee and as set forth in the employee's option
agreement. Each option may be exercised in whole, at any time, or in part,
from time to time, after the option becomes exercisable. The Committee may,
in its discretion and with appropriate restrictions, authorize any non-
qualified stock option to be transferable to the employee's spouse, lineal
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descendants, a trust or other entity exclusively for the benefit of the
employee and such persons.
If any employee's employment terminates by reason of death or
disability, any outstanding stock option will vest fully and be exercisable
at any time within one year following the date of death or disability for a
non-qualifying stock option and one year following the date of death or
disability for an incentive stock option (but in no event beyond the stated
term of the option). Upon an employee's retirement, a stock option will be
exercisable at any time prior to the end of the stated term of the stock
option or one year following the retirement date in the case of a
non-qualified stock option and 90 days after retirement in the case of an
incentive stock option, whichever is the shorter period, but only to the
extent the stock option is exercisable at retirement. Upon termination for
any reason other than for cause, any previously vested stock option will be
exercisable for the lesser of 90 days or the balance of the stock option's
stated term. In the event of termination for cause, all options, whether or
not exercisable, will terminate.
Change in Control
Generally, in the event of a Change in Control (as defined in the
Stock Option Plan) of the Company, all outstanding stock options become
fully vested and immediately exercisable in their entirety. In addition, if
provided in an employee's option agreement, the employee will be permitted
to sell the option to the Company generally for an amount equal to the
excess of (a) the fair market value of the shares subject to the option
over (b) the per share exercise price for such shares.
Amendments and Termination
The Board may at any time terminate, and from time to time, may amend
or modify, the Stock Option Plan. Any such action of the Board may be taken
without the approval of the Company's shareholders, but only to the extent
that such shareholder approval is not required by applicable tax or
regulatory law or regulation, including the By-Laws of the National
Association of Securities Dealers, Inc. The Stock Option Plan will
terminate ten years from its effective date.
Federal Income Tax Considerations
The following discussion summarizes the Federal income tax
consequences to employees who may receive options under the Stock Option
Plan. The discussion is based upon interpretations of the Code in effect as
of January 1, 1998 and regulations promulgated thereunder as of such date.
Non-Qualified Stock Options. The granting of non-qualified stock
options does not produce taxable income to the recipient or a tax deduction
to the Company. Taxable ordinary income will generally be recognized by the
optionee at the time of exercise in an amount equal to the excess of the
fair market value of the Common Stock purchased at the time of such
exercise over the aggregate exercise price. The Company will be entitled to
a corresponding Federal income tax deduction. Upon a subsequent taxable
disposition of the Common Stock, the optionee will generally recognize a
taxable capital gain or loss based upon the difference between the per
share market value at the time of exercise and the per share selling price.
To the extent an optionee pays all or part of the exercise price by
tendering shares of Common Stock (other than shares acquired pursuant to
the exercise of any incentive stock option where the holding period has not
yet been met) the tax consequences described above apply except that the
number of shares received upon such exercise which is equal to the number
of shares surrendered in payment of the exercise price will have the same
basis and tax holding period as the shares surrendered. Special rules may
apply to an optionee who is subject to Section 16(b) of the Exchange Act
("Section 16(b)").
Incentive Stock Options. In the case of an incentive stock option, an
optionee will not recognize any taxable income at the time of grant and the
Company will not be entitled to an income tax deduction. No ordinary income
will be recognized by the holder of an incentive stock option at the time
of exercise. However, the excess of the fair market value of the Common
Stock at the time of exercise over the aggregate exercise price will be an
adjustment to alternative minimum taxable income for purposes of the
Federal "alternative minimum tax" at the date of exercise.
If the optionee holds the shares acquired upon exercise of the
incentive stock option for the greater of two years after the date the
option was granted or one year after the acquisition of the Common Stock,
the difference between the aggregate exercise price and the amount realized
upon disposition of the Common Stock will constitute a long-term capital
gain or loss, as the case may be, and the Company will not be entitled to a
Federal income tax deduction. If the Common Stock is disposed of in a sale,
exchange or other "disqualifying disposition" within two years after the
date of grant or within one year after the date of exercise: (i) the
optionee would realize taxable ordinary income in an amount equal to the
excess of the fair market value of the Common Stock at the time of exercise
or the sales price, whichever is less, over the aggregate exercise price;
(ii) the Company would be entitled to a deduction for such year in the
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amount of the ordinary income so realized; and (iii) the optionee would
realize capital gain in an amount equal to the difference between (a) the
amount realized upon the sale of the Common Stock and (b) the exercise
price plus the amount of ordinary income, if any, realized upon the
disposition. Under proposed Treasury regulations, however, it would appear
that where Common Stock which is subject to a substantial risk of
forfeiture (which could include stock subject to Section 16(b)) is disposed
of in a disqualifying disposition, the relevant date for determining the
amount of ordinary income would be the date the restriction lapses, but in
no event may such amount be greater than the sales price. Because the
regulations are only in proposed form, the results remain unclear. Special
rules may apply to an optionee who is subject to Section 16(b).
Limitations on Company Deductions. Under section 162(m) of the Code,
the Company is prohibited from deducting compensation paid to the Chief
Executive Officer and the four other most highly compensated executive
officers of the Company in any year in excess of $1,000,000 per person.
However, compensation that is performance-based will be excluded for
purposes of calculating the amount of compensation subject to the
$1,000,000 limit. The Company has structured the Stock Option Plan so that
any compensation for which the Company may claim a deduction will be
"performance-based compensation" within the meaning of section 162(m) of
the Code.
Under certain circumstances, the acceleration of the exercisability of
options or the making of a cash payment in connection with a Change in
Control might be deemed to be an "excess parachute payment" for purposes of
the golden parachute tax provisions of sections 280G and 4999 of the Code.
To the extent it is so considered, the employee may be subject to a 20%
excise tax, and the Company may be denied a tax deduction.
New Plan Benefits
As described above, the selection of employees who will receive
options under the Stock Option Plan, upon approval of the Stock Option Plan
by the shareholders, and the number and type of options are generally to be
determined by the Committee in its discretion. No options have been granted
under the Stock Option Plan, nor are any such awards now determinable.
Thus, it is not possible to predict the benefits or amounts that will be
received by or allocated to particular individuals or groups of employees
in 1998.
Approval of the Stock Option Plan requires the affirmative vote of the
holders of a majority of the shares represented at the Annual Meeting, in
person or by proxy, and entitled to vote. THE BOARD OF DIRECTORS RECOMMENDS
A VOTE "FOR" APPROVAL OF THE STOCK OPTION PLAN. SHARES OF COMMON STOCK
COVERED BY PROXIES EXECUTED AND RECEIVED IN THE ACCOMPANYING FORM WILL BE
VOTED IN FAVOR OF THE STOCK OPTION PLAN, UNLESS OTHERWISE SPECIFIED ON THE
PROXY.
INDEPENDENT AUDITORS
Ernst & Young LLP ("Ernst & Young") has been selected as independent
certified public accountants for 1998 by the Audit and Asset Quality
Committee, subject to approval of the full Board of Directors .
Crowe Chizek & Company LLP of South Bend, Indiana ("Crowe Chizek")
were the independent certified public accountants for the years ended
December 31, 1995, 1994 and 1993. The services rendered to the Company by
Crowe Chizek during these years included the audit of annual financial
statements, review of the Annual Report and reports filed with the
Securities & Exchange Commission, consultation on IRS examinations and
consultation with the internal audit staff concerning documentation and
testing of internal accounting controls.
Ernst & Young replaced Crowe Chizek on January 23, 1996. During the
two most recent fiscal years and interim period prior to January 23, 1996,
there have been no disagreements with Crowe Chizek on any matter of
accounting principles or practices, financial statement disclosure or
auditing scope or procedure or any reportable events.
Crowe Chizek's report on the financial statements for the final two
years contained no adverse opinion or disclaimer of opinion and was not
qualified or modified as to uncertainty, audit scope or accounting
principles.
The decision to change independent certified public accountants was
recommended by the Audit and Asset Quality Committee and is subject to
approval of the full Board of Directors.
Neither Crowe Chizek nor Ernst & Young is expected to have a
representative present at the meeting.
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SHAREHOLDER PROPOSALS
It is currently contemplated that the Company's 1999 Annual Meeting of
Shareholders will be held on or about April 27, 1999. In the event that a
shareholder desires to have a proposal considered for presentation at the
Company's 1999 Annual Meeting of Shareholders and inclusion in the Proxy
Statement for such meeting, the proposal must be forwarded in writing to
the Secretary of the Company so that it is received no later than November
17, 1998. Any such proposal must comply with the requirements of Rule
14(a)-8 promulgated under the Act.
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MISCELLANEOUS
The Board of Directors of the Company knows of no other business to be
presented to the Annual Meeting. If other matters should properly come
before the Annual Meeting or any adjournment thereof, a vote may be cast
pursuant to the accompanying proxy in accordance with the judgment of the
person or persons voting the proxy. The Board of Directors urges each
shareholder who does not intend to be present and to vote at the Annual
Meeting to complete, sign and return the enclosed proxy as promptly as
possible.
By Order of the Board of Directors
Burlin Coleman
Burlin Coleman
President and Chairman of the Board
Jean R. Hale
Jean R. Hale
Executive Vice President
Pikeville, Kentucky
March 13, 1998
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EXHIBIT A.
COMMUNITY TRUST BANCORP, INC.
1998 STOCK OPTION PLAN
ARTICLE 1. PURPOSE
The purpose of this 1998 Stock Option Plan ("Plan") is to advance the
interest of Community Trust Bancorp, Inc., a Kentucky corporation
("Company"), and its shareholders by encouraging employees who will
largely be responsible for the long-term success and development of the
Company. The Plan is also intended to provide flexibility to the Company
in attracting, retaining and motivating employees and promoting their
efforts on behalf of the Company.
ARTICLE 2. DEFINITIONS AND CONSTRUCTION
2.1 Definitions. As used in the Plan, terms defined parenthetically
immediately after their use shall have the respective meanings provided by
such definitions, and the terms set forth below shall have the following
meanings (in either case, such terms shall apply equally to both the
singular and plural forms of the terms defined):
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Cause" shall mean, unless otherwise defined in an Option
Agreement evidencing an Award, a felony conviction of a Participant or the
failure of a Participant to contest prosecution for a felony, or a
Participant's willful misconduct or dishonesty, any of which is determined
by the Committee to be directly and materially harmful to the business or
reputation of the Company or its Subsidiaries.
(c) A "Change in Control" shall mean any of the following
events:
(1) An acquisition (other than directly from the Company)
of any voting securities of the Company ("Voting Securities") by any
Person immediately after which such Person has beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act)
("Beneficial Ownership and/or Beneficially Owned") of 20% or more of the
combined voting power of the Company's then outstanding Voting Securities;
provided, however, that in determining whether a Change in Control has
occurred, Voting Securities which are acquired in a Non-Control
Acquisition (as hereinafter defined) shall not constitute an acquisition
which would cause a Change in Control. A Non-Control Acquisition shall
mean an acquisition by (i) the Company or any Subsidiary, (ii) an employee
benefit plan (or a trust forming a part thereof) maintained by the Company
or any Subsidiary, or (iii) any Person in connection with a Non-Control
Transaction (as hereinafter defined);
(2) The individuals who, as of December 31, 1997, are
members of the Board ("Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however, that if
the election, or nomination for election by the Company's shareholders, of
any new director was approved by a vote of at least a majority of the
Incumbent Board, such new director shall, for purposes of the Plan, be
considered as a member of the Incumbent Board; provided, further, however,
that no individual shall be considered a member of the Incumbent Board if
such individual initially assumed office as a result of either an actual
or threatened election contest (as described in Rule 14a-11 promulgated
under the Exchange Act) ("Election Contest") or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than
the Board ("Proxy Contest") including by reason of any agreement intended
to avoid or settle any Election Contest or Proxy Contest; or
(3) Approval by shareholders of the Company of:
(A) A merger, consolidation or reorganization
involving the Company, unless such is a Non-Control Transaction. For
purposes of the Plan, the term "Non-Control Transaction" shall mean a
merger, consolidation or reorganization of the Company in which:
(i) the shareholders of the Company, immediately
before such merger, consolidation or reorganization, own, directly or
indirectly immediately following such merger, consolidation or
reorganization, at least a majority of the combined voting power of the
voting securities of the corporation resulting from such merger or
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consolidation or reorganization ("Surviving Corporation") over which any
Person has Beneficial Ownership in substantially the same proportion as
their ownership of the Voting Securities immediately before such merger,
consolidation or reorganization;
(ii) the individuals who were members of the
Incumbent Board immediately prior to the execution of the agreement
providing for such merger, consolidation or reorganization constitute at
least a majority of the members of the board of directors of the Surviving
Corporation; and
(iii) no Person (other than the Company, any
Subsidiary, any employee benefit plan (or any trust forming a part
thereof) maintained by the Company, the Surviving Corporation, or any
Person who, immediately prior to such merger, consolidation or
reorganization had Beneficial Ownership of 20% or more of the then
outstanding Voting Securities) has Beneficial Ownership of 20% or more of
the combined voting power of the Surviving Corporation's then outstanding
voting securities;
(B) A complete liquidation or dissolution of the
Company; or
(C) An agreement for the sale or other disposition of
all or substantially all of the assets of the Company to any Person (other
than a transfer to a Subsidiary).
(4) Any other event that the Committee shall determine
constitutes an effective Change in Control of the Company.
Notwithstanding the foregoing, a Change in Control shall not be
deemed to occur solely because any Person ("Subject Person") acquired
Beneficial Ownership of more than the permitted amount of the outstanding
Voting Securities as a result of the acquisition of Voting Securities by
the Company which, by reducing the number of Voting Securities
outstanding, increases the proportional number of shares Beneficially
Owned by the Subject Person; provided, however, that if a Change in
Control would occur (but for the operation of this sentence) as a result
of the acquisition of Voting Securities by the Company, and after such
share acquisition by the Company, the Subject Person becomes the
Beneficial Owner of any additional Voting Securities which increases the
percentage of the then outstanding Voting Securities Beneficially Owned by
the Subject Person, then a Change in Control shall occur.
(d) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, or any successor thereto.
(e) "Committee" shall mean the committee described in Section
3.1.
(f) "Disability" shall mean the total disability as determined
by the Committee in accordance with standards and procedures similar to
those under the Company's long-term disability plan, or, if none, a
physical or mental infirmity which the Committee determines impairs the
Participant's ability to perform substantially his or her duties for a
period of 180 consecutive days.
(g) "Employee" shall mean an individual who is a full-time
employee of the Company, a Subsidiary or a partnership or limited
liability company in which the Company or its Subsidiaries own a majority
interest.
(h) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.
(i) "Fair Market Value" of the Shares shall mean, as of any
applicable date, the closing sale price of the Shares on the Nasdaq
National Market System or any national or regional stock exchange on which
the Shares are traded, or if no such reported sale of the Shares shall
have occurred on such date, on the next preceding date on which there was
such a reported sale. If there shall be any material alteration in the
present system of reporting sale prices of the Shares, or if the Shares
shall no longer be listed on the Nasdaq National Market System or a
national or regional stock exchange, the fair market value of the Shares
as of a particular date shall be determined by such method as shall be
determined by the Committee.
(j) "ISOs" shall have the meaning given such term in Section
6.1.
(k) "NQSOs" shall have the meaning given such term in Section
6.1.
(l) "Option" shall mean an option to purchase Shares granted
pursuant to Article 6.
(m) "Option Agreement" shall mean an agreement evidencing the
grant of an Option as described in Section 6.2.
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(n) "Option Exercise Price" shall mean the purchase price per
Share subject to an Option, which shall not be less than the Fair Market
Value of the Share on the date of grant (110% of Fair Market Value in the
case of an ISO granted to a Ten Percent Shareholder).
(o) "Participant" shall mean any Employee selected by the
Committee to receive an Option under the Plan.
(p) "Person" shall have the meaning ascribed to such term in
Section 3(a)(9) of the Exchange Act and as used in Sections 13(d) and
14(d) thereof, including a "group" as defined in Section 13(d).
(q) "Plan" shall mean this Community Trust Bancorp, Inc. 1998
Stock Option Plan as the same may be amended from time to time.
(r) "Retirement" shall mean retirement by a Participant in
accordance with the terms of the Company's retirement or pension plans.
(s) "Shares" shall mean the shares of the Company's common
stock, par value $5.00 per share.
(t) "Subsidiary" shall mean, with respect to any company, any
corporation or other Person of which a majority of its voting power,
equity securities, or equity interest is owned directly or indirectly by
such company.
(u) "Ten Percent Shareholder" shall mean an Employee who, at
the time an ISO is granted, owns (within the meaning of section 422(b)(6)
of the Code) stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company.
(v) Gender and Number. Except where otherwise indicated by the
context, reference to the masculine gender shall include the feminine
gender, the plural shall include the singular and the singular shall
include the plural.
2.2 Severability. In the event any provision of the Plan shall be
held illegal or invalid for any reason, the illegality or invalidity shall
not affect the remaining parts of the Plan, and the Plan shall be
construed and enforced as if the illegal or invalid provision had not been
included.
ARTICLE 3. ADMINISTRATION
3.1 The Committee. The Plan shall be administered by a Committee
appointed by the Board consisting of two or more "non-employee" directors
of the Company or the entire Board. The Committee shall meet at such
times and places as it determines and may meet through a telephone
conference call. The members of the Committee shall be appointed from time
to time by, and shall serve at the discretion of, the Board.
3.2 Authority of the Committee. Subject to the provisions of the
Plan, the Committee shall have full authority to:
(a) select Participants to whom Options are granted;
(b) determine the size and frequency of Options granted under
the Plan;
(c) determine the terms and conditions of Options;
(d) cancel or modify, with the consent of the Participant,
outstanding Options and grant new Options in substitution therefore;
(e) accelerate the exercisability of any Options, for any
reason;
(f) construe and interpret the Plan and any agreement or
instrument entered into under the Plan;
(g) establish, amend and rescind rules and regulations for the
Plan's administration; and
(h) amend the terms and conditions of any outstanding Option to
the extent such terms and conditions are within the discretion of the
Committee as provided in the Plan.
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The Committee shall make all other determinations which may be
necessary or advisable for the administration of the Plan. The Committee
may delegate its authority as identified hereunder; provided, however,
that such delegation is permitted by law and Rule 16b-3 promulgated under
the Exchange Act.
3.3 Decisions Binding. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan, and all related orders
or resolutions of the Board, shall be final, conclusive and binding upon
all persons, including the Company, its shareholders, Employees,
Participants and their estates and beneficiaries.
3.4 Section 16 Compliance; Bifurcation of Plan. It is the intention
of the Company that the Plan and the administration of the Plan comply in
all respects with Section 16(b) of the Exchange Act and the rules and
regulations promulgated thereunder. If any Plan provision, or any aspect
of the administration of the Plan, is found not to be in compliance with
Section 16(b) of the Exchange Act, the provision or administration shall
be deemed null and void, and in all events the Plan shall be construed in
favor of its meeting the requirements of Rule 16b-3 promulgated under the
Exchange Act. Notwithstanding anything in the Plan to the contrary, the
Board or the Committee, in its discretion, may bifurcate the Plan so as to
restrict, limit or condition the use of any provision of the Plan to
Participants who are subject to Section 16 of the Exchange Act without so
restricting, limiting or conditioning the Plan with respect to other
Participants.
ARTICLE 4. SHARES AVAILABLE UNDER THE PLAN
4.1 Number of Shares. Subject to adjustment as provided in Section
, the number of Shares reserved for issuance upon the exercise of Options
and the payment of benefits in connection with Options is 650,000 Shares,
plus 10% of any increase (other than any increase due to Shares issued
pursuant to the Plan or the Community Bancorp, Inc. 1989 Stock Option
Plan) in the number of authorized and issued Shares in excess of
10,062,487 Shares. Any Shares issued under the Plan may consist, in whole
or in part, of authorized and unissued Shares. If and to the extent an
Option shall expire or terminate for any reason without having been
exercised in full (including a cancellation and regrant of an Option), or
shall be forfeited, the Shares associated with such Options shall again
become available for Options under the Plan.
4.2 Adjustments in Authorized Shares and Outstanding Awards. In the
event of a merger, reorganization, consolidation, recapitalization,
reclassification, split-up, spin-off, separation, liquidation, stock
dividend, stock split, reverse stock split, property dividend, share
repurchase, share combination, share exchange, issuance of warrants,
rights or debentures, or other change in the corporate structure of the
Company affecting the Shares, the Committee may substitute or adjust the
total number and class of Shares or other stock or securities which may be
issued under the Plan, and the number, class and/or price of Shares
subject to outstanding Options, as it determines to be appropriate and
equitable to prevent dilution or enlargement of the rights of Participants
and to preserve, without exceeding, the value of any outstanding Options;
and further provided, that the number of Shares subject to any Option
shall always be a whole number. In the case of ISOs, such adjustments
shall be made in such a manner so as not to constitute a "modification"
within the meaning of section 424(h)(3) of the Code and only to the extent
otherwise permitted by sections 422 and 424 of the Code.
ARTICLE 5. ELIGIBILITY AND PARTICIPATION
All Employees are eligible to receive Options under the Plan. In
selecting Employees to receive Options under the Plan, as well as in
determining the number of Shares subject to, and the other terms and
conditions applicable to, each Option, the Committee shall take into
consideration such factors as it deems relevant in promoting the purposes
of the Plan, including the duties of the Employees, their present and
potential contribution to the success of the Company and their anticipated
number of years of active service as employees.
ARTICLE 6. STOCK OPTIONS
6.1 Grant of Options. Subject to the terms and provisions of the
Plan, the Committee may grant Options to Participants at any time and from
time to time, in the form of options which are intended to qualify as
incentive stock options within the meaning of section 422 of the Code
("ISOs"), Options which are not intended to so qualify ("NQSOs") or a
combination thereof. All ISOs must be granted within ten years from the
date on which the Plan was adopted by the Board, and may only be granted
to employees of the Company or any subsidiary corporation (within the
meaning of section 422(f) of the Code). The maximum number of Shares with
respect to which Options may be granted to any Participant during any
calendar year shall be 100,000, subject to adjustment as provided in
Section .
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6.2 Option Agreement. Each Option shall be evidenced by an Option
Agreement that shall specify the Option Exercise Price, the duration of
the Option, the number of Shares to which the Option relates and such
other provisions as the Committee may determine or which are required by
the Plan. The Option Agreement shall also specify whether the Option is
intended to be an ISO or a NQSO and shall include such provisions
applicable to the particular type of Option granted.
6.3 Duration of Options. Each Option shall expire at such time as
is determined by the Committee at the time of grant; provided, however,
that no Option shall be exercised later than the tenth anniversary of its
grant (fifth anniversary in the case of an ISO granted to a Ten Percent
Shareholder).
6.4 Exercise of Options. Options shall be exercisable at such times
and be subject to such restrictions and conditions as the Committee shall
approve at the time of grant, which need not be the same for each grant or
for each Participant. Except as provided in Section 6.6, however, in no
event may any Option become exercisable within six months of the date of
grant in the case of any Participant subject to section 16(b) of the
Exchange Act. Subject to the foregoing sentence, the Committee may
accelerate the exercisability of any Option. Options shall be exercised,
in whole or in part, by delivery to the Company of a written notice of
exercise, setting forth the number of Shares with respect to which the
Option is to be exercised and accompanied by full payment of the Option
Exercise Price and all applicable withholding taxes.
6.5 Payment of Option Exercise Price. The Option Exercise Price for
Shares as to which an Option is exercised shall be paid to the Company in
full at the time of exercise either (a) in cash in the form of currency or
other cash equivalent acceptable to the Company, (b) by tendering Shares
having a Fair Market Value (determined as of the close of the business day
immediately preceding the day on which the Option is exercised) equal to
the Option Exercise Price (provided, however, that in the case of a
Participant subject to section 16(b) of the Exchange Act, such Shares have
been held by the Participant for at least six months prior to their
tender), (c) any other reasonable consideration that the Committee may
deem appropriate or (d) by a combination of the forms of consideration
described in (a), (b) and (c) of this Section . The Committee may permit
the cashless exercise of Options as described in Regulation T promulgated
by the Federal Reserve Board, subject to applicable securities law
restrictions, or by any other means which the Committee determines to be
consistent with the Plan's purpose and applicable law.
6.6 Vesting Upon Change in Control. Upon a Change in Control, any
then outstanding Options held by Participants shall become fully vested
and immediately exercisable. Furthermore, if provided in an Option
Agreement, the Participant shall have the right to sell the Option back to
the Company for an amount generally equal to the excess of the Fair Market
Value of the Shares subject to the Option over the Option Exercise Price.
6.7 Termination of Employment. If the employment of a Participant
is terminated for Cause, all then outstanding Options of such Participant,
whether or not exercisable, shall terminate immediately. If the employment
of a Participant is terminated for any reason other than for Cause, death,
Disability or Retirement, to the extent then outstanding Options of such
Participant are exercisable, such Options may be exercised by such
Participant or such Participant's personal representative at any time
prior to the expiration date of the Options or within 90 days after the
date of such termination of employment, whichever is earlier. In the event
of the Retirement of a Participant, to the extent then outstanding Options
of such Participant are exercisable, such Options may be exercised by the
Participant (a) in the case of NQSOs, within one year after the date of
Retirement and (b) in the case of ISOs, within 90 days after Retirement;
provided, however, that no such Options may be exercised on a date
subsequent to their expiration. In the event of the death or Disability of
a Participant while employed by the Company or a Subsidiary, all then
outstanding Options of such Participant shall become fully vested and
immediately exercisable, and may be exercised at any time (a) in the case
of NQSOs, within one year after the date of death or determination of
Disability and (b) in the case of ISOs, within one year after the date of
death or determination of Disability; provided, however, that no such
Options may be exercised on a date subsequent to their expiration. In the
event of the death of a Participant, the Option may be exercised by the
person or persons to whom rights pass by will or by the laws of descent
and distribution, or if appropriate, the legal representative of the
deceased Participant's estate. In the event of the Disability of a
Participant, Options may be exercised by the Participant, or if such
Participant is incapable of exercising the Options, by such Participant's
legal representative.
6.8 Transferable Options. The Committee may, in its discretion by
appropriate provision in the Participant's Option Agreement, authorize all
or a portion of any NQSOs granted to a Participant to be on terms which
permit transfer by such Participant to (i) the spouse, children or
grandchildren of the Participant ("Immediate Family Members"), (ii) a
trust or trusts for the exclusive benefit of such Participant and/or his
Immediate Family Members, or (iii) a partnership or limited liability
company in which such Participant and/or his Immediate Family Members are
the only partners or members, as applicable; provided that (a) there may
be no consideration for any such transfer, (b) the Option Agreement must
expressly provide for transferability in a manner consistent with this
Section 6.8 and (c) subsequent transfers of transferable NQSOs shall be
prohibited except by will or the laws of descent and distribution.
Following transfer, any such NQSOs shall continue to be subject to the
same terms and conditions as were applicable immediately prior to
transfer, provided that for purposes of this Article (excluding Section )
the term "Participant" shall be deemed to refer to the transferee. The
events of termination of employment as set forth in Section shall
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continue to be applied with respect to the original Participant. Any
transferred NQSOs shall be exercisable by the transferee only to the
extent, and for the periods, specified in the Option Agreement.
6.9 Repurchase. Upon approval of the Committee, the Company may
repurchase a previously granted Option from a Participant by mutual
agreement before such Option has been exercised by payment to the
Participant of an amount equal to the amount by which (i) the Fair Market
Value of the Shares subject to the Option on the date immediately
preceding the date of repurchase exceeds (ii) the Option Exercise Price of
such Shares.
ARTICLE 7. AMENDMENT, MODIFICATION AND TERMINATION
7.1 Effective Date. The Plan shall become effective upon
adoption by the Board. The Plan shall be rescinded and all Options granted
hereunder shall be null and void unless within 12 months from the date of
the adoption of the Plan by the Board it shall have been approved by the
holders of a majority of the outstanding Shares present or represented and
entitled to vote on the Plan at a shareholders' meeting.
7.2 Termination Date. The Plan shall terminate on the earliest to
occur of (a) the tenth anniversary of the adoption of the Plan by the
Board, (b) the date when all Shares available under the Plan shall have
been acquired pursuant to the exercise of Options, or (c) such other date
as the Board may determine in accordance with Section .
7.3 Amendment, Modification and Termination. The Board may, at any
time, amend, suspend or terminate the Plan or any portion thereof provided
that (a) no amendment shall be made without shareholder approval if such
approval is necessary to satisfy any applicable tax or regulatory law or
regulation and the Board determines it is appropriate to seek shareholder
approval, and (b) upon or following a Change in Control no amendment may
adversely affect the rights of any person in connection with a previously
granted Option.
7.4 Awards Previously Granted. No amendment, modification or
termination of the Plan shall in any manner adversely affect any
outstanding Option without the written consent of the Participant holding
such Option.
ARTICLE 8. NON-TRANSFERABILITY
Except as expressly provided in the Plan, a Participant's rights
under the Plan may not be assigned, pledged or otherwise transferred other
than by will or the laws of descent and distribution. Except as expressly
provided in the Plan, during a Participant's lifetime, an Option may be
exercised only by such Participant.
ARTICLE 9. NO GRANTING OF EMPLOYMENT RIGHTS
Neither the Plan, nor any action taken under the Plan, shall be
construed as giving any Employee the right to become a Participant, nor
shall an Option under the Plan be construed as giving a Participant any
right with respect to continuance of employment by the Company. The
Company expressly reserves the right to terminate, whether by dismissal,
discharge or otherwise, a Participant's employment at any time, with or
without Cause, except as may otherwise be provided by any written
agreement between the Company and the Participant.
ARTICLE 10. WITHHOLDING
10.1 Tax Withholding. A Participant shall remit to the Company an
amount sufficient to satisfy Federal, state and local taxes (including the
Participant's FICA and Medicare obligation) required by law to be withheld
with respect to any exercise or payment made under or as a result of the
Plan.
10.2 Share Withholding. If the Company has a withholding obligation
upon the issuance of Shares under the Plan, a Participant may, subject to
the discretion of the Committee, elect to satisfy the withholding
requirement, in whole or in part, by having the Company withhold Shares
having a Fair Market Value on the date the withholding tax is to be
determined equal to the amount required to be withheld under applicable
law. Notwithstanding the foregoing, the Committee may, by the adoption of
rules or otherwise, modify the provisions of this Section or impose such
other restrictions or limitations on such elections as may be necessary to
ensure that such elections will be exempt transactions under section 16(b)
of the Exchange Act.
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ARTICLE 11. INDEMNIFICATION
No member of the Board or the Committee, nor any officer or Employee
acting on behalf of the Board or the Committee, shall be personally liable
for any action, determination or interpretation taken or made with respect
to the Plan, and all members of the Board, the Committee and each officer
or Employee of the Company acting on their behalf shall, to the extent
permitted by law, be fully indemnified and protected by the Company with
respect to any such action, determination or interpretation.
ARTICLE 12. SUCCESSORS
All obligations of the Company with respect to Options granted under
the Plan shall be binding on any successor to the Company, whether the
existence of such successor is a result of a direct or indirect purchase,
merger, consolidation or otherwise, of all or substantially all of the
business and/or assets of the Company.
ARTICLE 13. GOVERNING LAW
To the extent not preempted by Federal law, the Plan, and all
agreements under the Plan, shall be governed by, and construed in
accordance with, the laws of the Commonwealth of Kentucky without regard
to its conflict of laws rules. Furthermore, the Plan and all Option
Agreements relating to ISOs shall be interpreted so as to qualify as
incentive stock options under the Code.
IN WITNESS WHEREOF, this Community Trust Bancorp, Inc. Incentive
Stock Option Plan has been executed by the Company as of the 27th day of
January, 1998, being the date the Plan was adopted by the Board.
COMMUNITY TRUST BANCORP, INC.
By:Burlin Coleman
Burlin Coleman
Title: Chairman of the Board,
President and Chief Executive
Officer
