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SCHEDULE 14a
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement ( ) Confidential, for Use of the Commission
(X) Definitive Proxy Statement only (as permitted by Rule 14a-6 (a)(2))
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
AREA BANCSHARES CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required.
( ) Fee computed on table below per Exchange Act Rules 14a-6 (I)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
( ) Fee paid previously with preliminary materials:
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a) (2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement no. :
(3) Filing Party:
(4) Date Filed:
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AREA BANCSHARES CORPORATION
230 FREDERICA STREET
OWENSBORO, KY 42301
April 14, 2000
Dear Shareholder:
The annual meeting of shareholders will be held on May 15, 2000, at
11:00 A.M., Central Daylight Savings Time, at the main office of Area Bancshares
Corporation, 230 Frederica Street, Owensboro, Kentucky. The meeting will be held
in the boardroom of The Owensboro National Bank. The formal Notice of the
Meeting and Proxy Statement appear in the pages that follow.
Details on the items of business that will be discussed and voted on at
this year's meeting are included in this Proxy Statement.
I hope that you will be able to attend the annual meeting. However, if
you cannot attend in person, please sign and date the enclosed proxy and return
it promptly in the enclosed envelope to ensure that your shares are represented
at the annual meeting. If you later find that you may be present or for any
other reason desire to revoke your proxy, you may do so prior to the time it is
exercised.
On behalf of the Board of Directors and employees of Area Bancshares,
let me express our appreciation for your continued support and confidence.
Sincerely,
/s/ Thomas R. Brumley
- ---------------------
Thomas R. Brumley
President and Chief Executive Officer
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AREA BANCSHARES CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 15, 2000
To the Holders of Common Stock of Area Bancshares Corporation:
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders of Area
Bancshares Corporation, (the "Corporation"), a Kentucky corporation, will be
held at the main office of Area Bancshares Corporation, 230 Frederica Street,
Owensboro, Kentucky, on May 15, 2000, at 11:00 A.M., Central Daylight Savings
Time, in the boardroom of The Owensboro National Bank, for the following
purposes:
1) To elect fourteen directors to hold office until the next annual
election and until their successors are duly elected and qualified;
2) To approve and adopt the Area Bancshares Corporation 2000 Stock
Option and Equity Incentive Plan in the form attached as Exhibit A
to the Proxy Statement;
3) To ratify the appointment of KPMG LLP as corporate auditors for the
2000 calendar year; and
4) To transact such other business as may properly come before the
meeting.
Only holders of common stock of record at the close of business on
March 24, 2000, will be entitled to vote at the meeting or any adjournment
thereof.
TO ENSURE YOUR REPRESENTATION AT THE MEETING, THE BOARD OF DIRECTORS OF
THE CORPORATION REQUESTS THAT YOU MARK, SIGN, DATE AND RETURN THE ACCOMPANYING
PROXY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING.
YOU MAY REVOKE OR WITHDRAW YOUR PROXY AT ANY TIME BEFORE IT IS EXERCISED.
By Order of the Board of Directors,
/s/ Thomas R. Brumley
- ---------------------
Thomas R. Brumley
President and Chief Executive Officer
April 14, 2000
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AREA BANCSHARES CORPORATION
230 Frederica Street
Owensboro, KY 42301
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Area Bancshares Corporation (the "Corporation") of
proxies to be voted at the annual meeting of shareholders to be held on May 15,
2000. Any shareholder giving a proxy has the right to revoke it by a written
notice delivered to the Corporation's Secretary, P.O. Box 786, Owensboro,
Kentucky, 42302-0786, or delivered to the Corporation's Secretary in person at
the meeting, prior to the time the proxy is exercised. All proxies will be voted
in accordance with the directions of the shareholders. To the extent no
directions are given, proxies will be voted "FOR" the proposals listed in the
"Notice of Annual Meeting of Shareholders" on the previous page.
This Proxy Statement and form of proxy are first being mailed to
shareholders beginning on or about April 14, 2000.
The Corporation will bear the entire cost of soliciting proxies.
Solicitation will be primarily by mail. Officers of the Corporation and its
subsidiaries may solicit proxies personally, by telephone or special letter, but
such persons will not be specially compensated for such services.
SHARES OUTSTANDING AND VOTING
Only shareholders of record at the close of business on March 24, 2000
are entitled to notice of, and to vote at, the annual meeting. As of March 24,
2000, there were issued and outstanding 16,355,348 shares of common stock. The
Corporation has no class of stock outstanding other than common stock. In order
to constitute a quorum for the Annual Meeting, the holders of 8,177,675 shares
must be present or represented by proxies. Under Kentucky law and the
Corporation's Articles of Incorporation and By-laws, the aggregate number of
votes entitled to be cast by all shareholders present in person or represented
by proxy at the Annual Meeting, whether those shareholders vote "for", "against"
or "abstain" from voting, and broker non-votes, will be counted for purposes of
determining whether a quorum is present. Broker non-votes occur where a broker
submits a proxy card without exercising discretionary voting authority on a
non-routine matter.
Each share of the common stock is entitled to one vote on all matters
presented to the shareholders with the exception of the election of directors.
In the election of directors, cumulative voting rules may apply. Under
cumulative voting, each shareholder is entitled to cast as many votes in the
aggregate as shall equal the number of shares of the common stock owned by him
or her multiplied by the number of directors to be elected. Each shareholder, or
his or her proxy, may cast all of his or her votes (as thus determined) for a
single nominee for director or may distribute them among two or more nominees,
at the shareholder's discretion. Shareholders desiring to vote shares
cumulatively are required to deliver written notice of this fact to the
President of the Corporation at its principal office not less than seventy-two
(72) hours prior to the time for the election. Failure by any shareholder to
give this notice will constitute waiver of the shareholder's right to vote
cumulatively; provided, however, that if one or more shareholders shall give
such notice, all shareholders may vote cumulatively regardless of whether they
gave timely notice. As to the authority of the persons named as proxies in the
accompanying proxy card to cumulate votes, see the section entitled "Proposal
One: Election of Directors".
As of March 24, 2000, the trust departments of subsidiaries of the
Corporation held of record 1,684,996 shares of the Corporation's common stock in
a fiduciary capacity representing approximately 10.30 percent of the
Corporation's outstanding shares of common stock. With respect to 530,999 shares
(approximately 3.25 percent), the instrument creating the trust or fiduciary
relationship specifically directs the trustee to vote the shares and the
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shares are expected to be voted "for" the proposals presented for consideration.
The remaining shares held by the trust departments will be voted at the
direction of the beneficial owners.
Under the Corporation's Articles of Incorporation and By-laws and the
Kentucky Business Corporation Act, approval of the Area Bancshares Corporation
Stock Option Plan and the ratification of the selection of the Corporation's
auditors, and in the absence of a shareholder request for cumulative voting, the
election of directors, will require the affirmative vote of a majority of the
shares of common stock entitled to vote on the proposal. If cumulative voting
with respect to the election of fourteen directors is required by any
shareholder, the fourteen nominees receiving the most votes cast for the
election of directors at the annual meeting will be elected.
PRINCIPAL SHAREHOLDERS
The following table lists the persons whom, to our best knowledge,
beneficially owned 5% or more of the Corporation's outstanding shares of common
stock as of March 24, 2000. According to rules adopted by the Securities and
Exchange Commission, a "beneficial owner" of securities has or shares the power
to vote the securities or to direct their investment. Unless otherwise
indicated, the person listed is the record owner of, and has sole voting and
investment power with respect to his shares.
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of
Beneficial Owners Beneficial Ownership (1) Percent of Class
------------------ ------------------------ ----------------
<S> <C> <C>
C. M. Gatton 4,008,709 24.51%
P.O. Box 1147
Bristol, TN 37620
</TABLE>
---------------------------------------
(1) Shares represented include 180,000 shares held by C.M. Gatton
Trust, 20,508 shares held in custody for the benefit of Mr. Gatton,
18,612 shares held by the Customer One Profit Sharing Plan for the
benefit of Mr. Gatton, 5,000 shares held by the C. M. Gatton IRA
and 483 shares held by Mr. Gatton's spouse.
STOCK OWNED BY MANAGEMENT
The following table lists the number and percentage ownership of shares
of common stock beneficially owned by each nominee to serve as a director of the
Corporation, each executive officer named in the Summary Compensation Table
contained elsewhere in this Proxy Statement and all directors and executive
officers as a group as of March 24, 2000. Unless otherwise indicated, each
person is the record owner of, and has sole voting and investment power with
respect to his or her shares. The number of issued and outstanding shares used
to calculate the percentage of total ownership includes any shares covered by
the options issued to the individual or to members of the group, as applicable.
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<TABLE>
<CAPTION>
Name of Director Amount and Nature of Percent
or Executive Officer Beneficial Ownership of Class
- -------------------- -------------------- --------
<S> <C> <C>
Anthony G. Bittel 450,657(1) 2.76%
Samuel A. B. Boone 188,709(2) 1.15%
Thomas R. Brumley (3) 131,085(4) *
President and CEO
Cecile W. Garmon 1,330(5) *
C.M. Gatton 4,008,709(6) 24.51%
Gary H. Latham 350,006(7) 2.14%
Raymond C. McKinney 133,512(8) *
Ralph L. Oliver 720,722(9) 4.41%
Allan R. Rhodes 44,769(10) *
Jim R. Shelby 350(11) *
David W. Smith, Jr. 133,680(12) *
Thomas N. Thompson 658,213(13) 4.02%
Damon S. Vitale 64,000(14) *
Pollard White 11,250(15) *
Additional Executive Officers
- -----------------------------
John A. Ray 12,773(16) *
Executive Vice President-
Chief Operating Officer
Timothy O. Shelburne 6,363(17) *
Senior Vice President-
General Counsel
Edward J. Vega None *
Senior Vice President-
Chief Financial Officer
--------- ------
All directors and executive 6,916,128 42.29%
officers as a group (17 persons)
</TABLE>
- -------------------------------------
* Represents less than 1.00% of the Corporation's common stock.
(1) Shares represented include 124,094 shares held by A.G. Bittel Trust, 50,000
shares held by M.A. Bittel Trust, 24,100 shares held by Bittel Investment,
Inc., 251,800 shares held by Bittel Family Limited Partnership and 663
shares held by Mr. Bittel's spouse.
(2) Shares represented include 59,950 shares held by Boone Enterprises #8 and
63,147 shares held by Boone Enterprises #7.
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(3) Mr. Brumley also is an executive officer of the Corporation.
(4) Shares represented include 3,970 shares held by T.R. Brumley IRA and 4,428
shares held by the Corporation's 401(k) plan for the benefit of Mr.
Brumley.
(5) Shares represented include 950 shares held by Ms. Garmon's spouse.
(6) Shares represented include 180,000 shares held by C.M. Gatton Trust, 20,508
shares held in custody for the benefit of Mr. Gatton, 18,612 shares held by
the Customer One Profit Sharing Plan for the benefit of Mr. Gatton, 5,000
shares held by the C. M. Gatton IRA and 483 shares held by Mr. Gatton's
spouse.
(7) Shares represented include 17,160 shares held by Mr. Latham's spouse and
740 shares held by G. H. Latham IRA.
(8) Shares represented include 73,272 shares held by Mr. McKinney's spouse.
(9) Shares represented include 360,511 shares held by Mr.Oliver's spouse.
(10) Shares represented include 18,566 shares held in trust for the benefit of
Mr. Rhodes' spouse, 4,001 shares held in custody for the benefit of Mr.
Rhodes and 22,202 shares held by A. Rhodes IRA.
(11) Shares represented include 350 shares held by Mr. Shelby's spouse.
(12) Shares represented include 1,282 shares held by Mr. Smith's spouse and
6,550 shares held by Shawnee Park Shopping Center.
(13) Shares represented include 5,658 shares held by Mr. Thompson under the
Uniform Gifts to Minors Act and 4,500 shares held by Mr. Thompson as
trustee for the benefit of his children.
(14) Shares represented include 15,319 shares held by D. Vitale Trust, 18,204
shares held by Manchester Capital, LLC, 15,477 held in trust for the
benefit of various members of Mr. Vitale's family and 15,000 shares held by
the Vitale Charitable Lead Trust.
(15) Shares represented include 5,575 shares held in a custody account for the
benefit of Mr. White.
(16) Shares represented include 3,060 shares held by J. Ray IRA and 2,833 shares
held by the Corporation's 401(k) plan for the benefit of Mr. Ray.
(17) Shares represented include 1,918 shares held jointly with spouse, 1,990
shares in T. Shelburne Rollover IRA, 1,434 shares held by the Corporation's
401(k) plan for the benefit of Mr. Shelburne and 112 shares in
T. Shelburne IRA.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Corporation's directors and executive officers and persons who own
beneficially more than 10% of the outstanding common stock to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes in their ownership of the Corporation's common stock. Directors,
executive officers and greater than 10% shareholders are required to furnish the
Corporation with copies of the forms they file. To our knowledge, based on our
review
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of these reports, during the year ended December 31, 1999, our directors,
executive officers and greater than 10% shareholders complied with all
applicable Section 16 (a) filing requirements, except as follows: Ms. Cynthia W.
Carlton failed to file a Form 3. The preceding exception was corrected as soon
as it was discovered.
PROPOSAL ONE: ELECTION OF DIRECTORS
Among the items to be acted upon at the annual meeting of shareholders
is the election of fourteen directors. Each person elected will serve a term in
office of one year and until his or her successor is duly elected and qualified.
Each nominee to serve as a director is currently a director of the Corporation.
The Corporation's Articles of Incorporation and By-laws provide that
the Board shall consist of not less than five nor more than fifteen directors.
As permitted in the By-laws, effective as of May 15, 2000, the Board has fixed
the number of directors at fourteen.
Absent a contrary direction by the shareholder, the enclosed proxy will
be voted for the election of the nominees for directors listed below. The Board
of Directors has no reason to believe that any of the nominees will be
unavailable to serve as director. If any nominee should become unavailable
before the annual meeting, the persons named in the enclosed proxy card, or
their substitutes, or a majority of them, reserve the right to vote for a
substitute nominee selected by the Board of Directors. In addition, if any
shareholder votes his or her shares cumulatively for someone other than the
nominees named below, or for less than all of such nominees, the persons named
in the enclosed proxy card, or their substitutes, or a majority of them, shall
have complete discretion to vote cumulatively for less than all of the nominees
named below, for any substitute nominees, and for any of the persons nominated
as they may choose.
NOMINEES FOR ELECTION TO THE BOARD
<TABLE>
<CAPTION>
Position with Service
Name Age the Corporation Since (1)
----- --- --------------- ---------
<S> <C> <C> <C>
Anthony G. Bittel 83 Director 1976
Samuel A. B. Boone 39 Director 1996
Thomas R. Brumley 61 President, President and CEO 1982
Cecile W. Garmon 61 Director 1998
C. M. Gatton 68 Director and Chairman 1976
Gary H. Latham 68 Director 1986
Raymond C. McKinney 67 Director and Vice Chairman 1986
Ralph L. Oliver 69 Director 1987
Allan R. Rhodes 76 Director 1984
Jim R. Shelby 63 Director 1999
David W. Smith, Jr. 57 Director 1980
Thomas N. Thompson 51 Director 1986
Damon S. Vitale 61 Director 1998
Pollard White 79 Director 1986
</TABLE>
(1) Dates reflect service with the Corporation or one of its
subsidiaries.
BUSINESS EXPERIENCE OF DIRECTORS
Set forth below is information concerning all of the director-nominees
and the director emeritus of the Corporation, including their positions held
with Alliance Bank, Bank of Livingston County, Bank of Lyon County, Bowling
Green Bank and Trust Company, N.A., Broadway Bank & Trust, Citizens Deposit
Bank, Dees Bank of Hazel, First City Bank and Trust Company, First & Peoples
Bank, HNB Bank, N.A., Jefferson Banking
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Company, Peoples Bank of Murray, Peoples Commercial Bank, The New Farmers
National Bank of Glasgow, The Owensboro National Bank, Southern Deposit Bank and
The Vine Street Trust Company.
Anthony G. Bittel is President of Anthony Bittel Farms and Bittel
Investments, Inc., and serves as President of Big Independent Tobacco Warehouse
and General Manager of Owensboro Tobacco Warehouse Company. He also serves as a
director of The Owensboro National Bank.
Samuel A. B. Boone has served as President of the Lexington Quarry
Company since 1990 and served as General Manager of Wimbledon Farm in Lexington
from 1982 to 1990. He is a former director of Cardinal Bancshares, Inc.
Thomas R. Brumley has served as President and Chief Executive Officer
of the Corporation since 1990. He also serves as a director of Dees Bank of
Hazel, Jefferson Banking Company, Bank of Livingston County, Bank of Lyon
County, Peoples Bank of Murray, The Vine Street Trust Company and as Chairman of
The Owensboro National Bank.
Cecile W. Garmon is an Associate Professor in the Department of
Communications and Broadcasting at Western Kentucky University. She also serves
as a director of The New Farmers National Bank of Glasgow.
C. M. Gatton has served as Chairman of the Corporation since 1976. He
also serves as President of Bill Gatton Chevrolet-Cadillac, Director and
President of Arrowhead Acura, Inc., Chairman and President of Bill Gatton
Imports, Inc., Chairman and President of G. W. Automotive, Inc., President and
Director of Courtesy Chevrolet-Cadillac, Inc., Chairman and President of Saturn
of Huntsville, Inc., all of which are automobile dealerships. In addition, he
serves as Chairman and President of C. Gatton, Inc., Chairman and President of
Bill Gatton, Inc., Chairman of Adnoh, Inc., President of Universal Acceptance
Corporation, which furnishes credit to automobile purchasers, and Director of
Morrison Molded Fiber Glass Company. He also serves as a director of Dees Bank
of Hazel, Jefferson Banking Company, Bank of Livingston County, Bank of Lyon
County, Peoples Bank of Murray, The Vine Street Trust Company and as
Vice-Chairman of The Owensboro National Bank.
Gary H. Latham is currently retired. Prior to retirement, he was
Director and the Chief Executive Officer of Western State Hospital, a position
he held from 1960 to 1991. He also serves as a director of First City Bank and
Trust Company.
Raymond C. McKinney has been President of R. C. McKinney, Inc. since
1957. He has also served as Vice Chairman of the Corporation since 1986 and as
a director of First City Bank and Trust Company.
Ralph L. Oliver served as Chairman of Peoples Commercial Bancorp from
1989 until January 1999, when Peoples Commercial Bancorp merged with the
Corporation. He is a partner in Sisco Industrial Warehouse, President of Bisco
Industrial Warehouse, Inc. and COB Inc., and owner of Oliver Warehouse Co. and
Winchester Warehouse, Inc., all of which are commercial storage warehouses. He
also serves as Chairman of Peoples Commercial Bank.
Allan R. Rhodes has retired as Chairman of Allan Rhodes, Inc., an
automobile dealership in Paducah, Kentucky. He serves as Chairman of Broadway
Bank & Trust and also serves as an advisory director of Dees Bank of Hazel,
Jefferson Banking Company, Bank of Livingston County, Bank of Lyon County, The
Owensboro National Bank, Peoples Bank of Murray, and The Vine Street Trust
Company.
Jim R. Shelby, CPA, has served as Executive Vice President of The Trust
Company of Knoxville, a state bank with only trust powers, and has operated a
public accounting practice since 1997. He also serves as a director of
BankFirst, a Tennessee state banking association in Knoxville, Tennessee, and
Industrial Ceramic Solutions, a pollution control company in Oak Ridge,
Tennessee. He was a partner in Arthur Andersen & Co.
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from December 1993 until July 1994 and was Market Managing Partner for Coopers &
Lybrand from July 1994 until December 1996.
David W. Smith, Jr., has retired as President of Wyndall's Enterprises,
Inc., a retail grocery chain. He also serves as a director of The Owensboro
National Bank.
Thomas N. Thompson has served as President of Thompson Homes, Inc., a
residential construction and land development company since 1984. He also serves
as President of Diversified Management, Inc., a property management company,
Vice President of Martin-Thompson, Inc., a residential construction and land
development company, and is a partner in several rental real estate
partnerships. He also serves as a director of The Owensboro National Bank.
Damon S. Vitale is currently Chairman and President of Manchester
Capital, a private investment company. Prior to establishing Manchester Capital,
he was a principal organizer and President of DESA International, a manufacturer
of gas logs, space heaters and related products. He also serves as Chairman of
Bowling Green Bank and Trust Company, N.A.
Pollard White has practiced law since 1947. He is a member of the law
firm of White, White, Askew and Crenshaw. He also serves as Director Emeritus of
First City Bank and Trust Company.
MEETINGS AND COMMITTEES
During 1999, the Board of Directors of the Corporation held 12 regular
meetings and no special meetings.
During 1999 the Audit Committee met 6 times.
Each of the directors attended at least 75% of the aggregate of (a) the
total number of meetings of the Board of Directors held during the period for
which he or she was a director, and (b) the total number of meetings held by all
committees of the Board on which he or she served.
The members of the Audit Committee are Billy H. Brenner (director of
Citizens Deposit Bank), Cecile W. Garmon, Jean Kirkpatrick (director of Southern
Deposit Bank), Gary H. Latham, Allan R. Rhodes, Jim R. Shelby and David W.
Smith, Jr. The Committee recommends to the Board the engagement of independent
auditors; reviews with independent auditors the scope and results of the audit
engagement; reviews the scope, frequency, and results of internal audits and
examinations; reviews the adequacy of the Corporation's system of internal
accounting controls; and reviews the examination reports of the Corporation and
its subsidiaries.
The Corporation has no standing compensation committee. All decisions
regarding executive compensation are made by the full Board of Directors, as
discussed below under "Executive Compensation".
COMPENSATION OF DIRECTORS
For the year ended December 31, 1999, each non-management director
received a fee of $500 for each board meeting attended and $100 for each
committee meeting attended. The board fee will remain unchanged for 2000.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
ELECTION OF ALL 14 NOMINEES
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PROPOSAL TWO: APPROVAL OF THE 2000 STOCK OPTION AND EQUITY INCENTIVE PLAN
On March 20, 2000, the Board of Directors adopted the Area Bancshares
Corporation 2000 Stock Option and Equity Incentive Plan (the "Stock Plan")
subject to approval of the shareholders of the Corporation. At the Annual
Meeting, shareholders will be asked to consider and vote on the approval and
adoption of the Stock Plan. The Board of Directors believes that the granting of
stock options and other stock based awards will assist the Corporation in its
efforts to attract and retain highly qualified persons to serve as directors,
officers, employees and in other appropriate capacities.
The Board of Directors has reserved 250,000 shares of the Corporation's
common stock for issuance under awards that may be made under the Stock Plan,
subject to adjustment as provided in the Stock Plan.
Applicable provisions of the Internal Revenue Code of 1986, as amended
(the "Code") restrict the Corporation's ability, in the absence of shareholder
approval, to grant incentive stock options under Code Section 421 and to claim
deductions which may otherwise be associated with the grant of nonqualified
options or other equity awards under Code Section 162(m).
The following description of the Stock Plan is qualified in its
entirety by reference to the applicable provisions of the plan document.
TERMS OF THE STOCK PLAN
ADMINISTRATION
The Stock Plan will be administered by the Board of Directors or a
subcommittee of the Board of Directors whose members are selected by the Board
(the "Administrative Committee"). When appointing members to the Administrative
Committee, the Board of Directors will consider the advisability of complying
with the disinterested standards contained in both Section 162(m) of the Code
and Rule 16b-3 under the Securities Exchange Act of 1934, as amended. The
Administrative Committee will have at least two members. At the present time,
the full membership of the Board of Directors acts as the Administrative
Committee. The Administrative Committee has the authority to grant awards under
the Stock Plan and to make all other determinations that it may deem necessary
or advisable for the administration of the Stock Plan.
AWARDS
The Stock Plan permits the Administrative Committee to make awards of
shares of the Corporation's common stock, awards of derivative securities
related to the value of the common stock and tax reimbursement payments to
eligible persons. These discretionary awards may be made on an individual basis
or through a program approved by the Administrative Committee for the benefit of
a group of eligible persons. The Stock Plan permits the Administrative Committee
to make awards of a variety of equity-based incentives, including stock awards,
options to purchase shares of the Corporation's common stock, stock appreciation
rights, dividend equivalent rights, performance unit awards and phantom shares
(collectively, "Stock Incentives").
The number of shares of common stock as to which any Stock Incentive is
granted and to whom any Stock Incentive is granted will be determined by the
Administrative Committee, subject to the provisions of the Stock Plan. Stock
Incentives may be made exercisable or settled at the prices and may be made
forfeitable or terminable under the terms established by the Administrative
Committee, to the extent
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not otherwise inconsistent with the terms of the Stock Plan. Stock Incentives
generally are not transferable or assignable during a holder's lifetime.
STOCK INCENTIVES
OPTIONS. The Stock Plan provides for the grant of incentive stock
options and nonqualified stock options. The Administrative Committee will
determine whether an option is an incentive stock option or a nonqualified stock
option at the time the option is granted, and the option will be evidenced by a
Stock Incentive agreement. Options may be made exercisable on terms established
by the Administrative Committee, to the extent not otherwise inconsistent with
the terms of the Stock Plan. No eligible employee may be granted during any
single calendar year rights to shares of common stock under options or stock
appreciation rights which, in the aggregate, exceed 50,000 shares of common
stock.
The exercise price of an option will be set forth in the applicable
Stock Incentive agreement. The exercise price of an incentive stock option may
not be less than the fair market value of the common stock on the date of the
grant nor less than 110% of the fair market value if the participant owns more
than 10% of the outstanding common stock of the Corporation or any subsidiary.
At the time an incentive stock option is exercised, the Corporation will be
entitled to place a legend on the certificates representing the shares of common
stock purchased to identify them as shares of common stock purchased upon the
exercise of an incentive stock option. Nonqualified stock options may be made
exercisable at a price equal to, less than or more than the fair market value of
the common stock on the date that the option is granted. The Administrative
Committee may permit an option exercise price:
- to be paid in cash; or
- by the delivery of previously-owned shares of common stock; or
- to be satisfied through a cashless exercise executed through a
broker; or
- by having a number of shares of common stock otherwise issuable
at the time of exercise withheld.
The Administrative Committee also may authorize financing by the
Corporation to assist a participant with payment of the exercise price.
The term of an option will be specified in the applicable Stock
Incentive agreement. The term of an incentive stock option may not exceed ten
years from the date of grant; however, any incentive stock option granted to a
participant who owns more than 10% of the common stock of the Corporation or any
subsidiary will not be exercisable after the expiration of five years from the
date the option is granted. Subject to any further limitations in a stock
incentive agreement, in the event of a participant's termination of employment,
the term of an incentive stock option will expire, terminate and become
unexercisable no later than three months after the date of the termination of
employment; provided, however, that if termination of employment is due to death
or disability, one year will be substituted for the three-month period.
STOCK APPRECIATION RIGHTS. Stock appreciation rights may be granted
separately or in connection with another Stock Incentive, and the Administrative
Committee may provide that they are exercisable at the discretion of the holder
or that they will be paid at a specific time or times or upon the occurrence or
non-occurrence of events that may be specified in the applicable stock incentive
agreement. Stock
12
<PAGE> 13
appreciation rights may be settled in shares of common stock or in cash,
according to terms established by the Administrative Committee with respect to
any particular award.
STOCK AWARDS. The Administrative Committee may grant shares of common
stock to a participant, subject to restrictions and conditions, if any, as the
Administrative Committee may determine.
OTHER STOCK INCENTIVES. Dividend equivalent rights, performance units,
and phantom shares may be granted in numbers or units and subject to any
conditions and restrictions as determined by the Administrative Committee and
will be payable in cash or shares of common stock, as determined by the
Administrative Committee.
TAX REIMBURSEMENT PAYMENTS
The Administrative Committee may make cash tax reimbursement payments
designed to cover tax obligations of employees that result from the receipt or
exercise of a Stock Incentive.
TERMINATION OF STOCK INCENTIVES
The terms of a particular Stock Incentive may provide that they
terminate, among other reasons:
- upon the holder's termination of employment or other status with
respect to the Corporation or any affiliate of the Corporation;
- upon a specified date;
- upon the holder's death or disability; or
- upon the occurrence of a change in control of the Corporation.
Stock Incentives may include exercise, conversion or settlement rights
to a holder's estate or personal representative in the event of the holder's
death or disability. At the Administrative Committee's discretion, Stock
Incentives that are subject to termination may be cancelled, accelerated, paid
or continued, subject to the terms of the applicable agreement reflecting the
terms of a Stock Incentive and to the provisions of the Stock Plan.
REORGANIZATIONS
The number of shares of common stock reserved for issuance in
connection with the grant or settlement of a Stock Incentive or to which a Stock
Incentive is subject, as the case may be, and the exercise price of an option
are subject to adjustment in the event of any recapitalization of the
Corporation or similar event effected without the receipt of consideration.
In the event of specified corporate reorganizations, Stock Incentives
may be substituted, cancelled, accelerated, cashed-out or otherwise adjusted by
the Administrative Committee, provided that the adjustment is not inconsistent
with the terms of the Stock Plan or any agreement reflecting the terms of a
Stock Incentive. The Corporation may also use the Stock Plan to assume
obligations previously incurred in favor of persons who are eligible to
participate under the Stock Plan.
13
<PAGE> 14
AMENDMENTS OR TERMINATION
Although the Stock Plan may be amended or terminated by the Board of
Directors without shareholder approval, the Board of Directors also may
condition any amendment upon shareholder approval if shareholder approval is
deemed necessary or appropriate in consideration of tax, securities or other
laws. No amendment or termination by the Board of Directors may adversely affect
the rights of a holder of a Stock Incentive without the holder's consent.
BENEFITS TO NAMED EXECUTIVE OFFICERS AND OTHERS
As of March 24, 2000, no Stock Incentives have been granted under the
Stock Plan. In addition, the Administrative Committee has not yet made any
determination as to which eligible participants will be granted Stock Incentives
under the Stock Plan in the future.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion outlines generally the federal income tax
consequences of participation in the Stock Plan. Individual circumstances may
vary and each participant should rely on his or her own tax counsel for advice
regarding federal income tax treatment under the Stock Plan.
INCENTIVE STOCK OPTIONS
A participant will not recognize income and will not be taxed upon the
grant of an incentive stock option nor upon exercise of all or a portion of the
option. Instead, the participant will be taxed at the time he or she sells the
shares of common stock purchased on exercise of the incentive stock option. The
participant will be taxed on the difference between the price he or she paid for
the common stock and the amount for which he or she sells the common stock. If
the participant does not sell the shares of common stock during the two-year
period from the date of grant of the incentive stock option and one-year period
from the date the common stock is transferred to him or her, the gain will be
capital gain, and the Corporation will not be entitled to a corresponding
deduction. If the participant sells the shares of common stock at a gain prior
to that time, the difference between the amount the participant paid for the
common stock and the lesser of fair market value on the date of exercise or the
amount for which the stock is sold will be taxed as ordinary income. If the
participant sells the shares of common stock for less than the amount he or she
paid for the stock prior to the one- or two-year periods indicated, no amount
will be taxed as ordinary income and the loss will be taxed as a capital loss.
Exercise of an incentive stock option may subject a participant to, or increase
a participant's liability for, the alternative minimum tax.
NONQUALIFIED OPTIONS
A participant will not recognize income and will not be taxed upon the
grant of a nonqualified option or at any time prior to the exercise of all or a
portion of the option. At the time the participant exercises all or a portion of
a nonqualified option, he or she will recognize compensation taxable as ordinary
income in an amount equal to the excess of the fair market value of the common
stock on the date the option is exercised over the price paid for the common
stock, and the Corporation will then be entitled to a corresponding deduction.
Depending upon the period shares of common stock are held after
exercise, the sale or other taxable disposition of shares acquired through the
exercise of a nonqualified option generally will result in a short- or long-term
capital gain or loss equal to the difference between the amount realized on the
disposition and the fair market value of the shares when the nonqualified option
was exercised.
14
<PAGE> 15
Special rules apply to a participant who exercises a nonqualified
option by paying the exercise price, in whole or in part, by the transfer of
shares of common stock to the Corporation.
OTHER STOCK INCENTIVES
A participant will not recognize income and will not be taxed upon the
grant of a stock appreciation right, dividend equivalent right, performance unit
award or phantom share (collectively, the "Equity Incentives"). Generally, at
the time a participant receives payment under any Equity Incentive, he or she
will recognize compensation taxable as ordinary income in an amount equal to the
cash or fair market value of the common stock received, and the Corporation will
then be entitled to a corresponding deduction.
A participant will not be taxed upon the grant of a stock award if the
award is not transferable by the participant or is subject to a "substantial
risk of forfeiture," as defined in the Code. When the shares of common stock
that are subject to the stock award become transferable and are no longer
subject to a substantial risk of forfeiture, however, the participant will
recognize compensation taxable as ordinary income in an amount equal to the fair
market value of the stock subject to the award, less any amount paid for such
stock, and the Corporation will then be entitled to a corresponding deduction.
If a participant so elects at the time of receipt of a stock award, he or she
may include the fair market value of the stock subject to the award, less any
amount paid for that stock, in income at that time and the Corporation will also
be entitled to a corresponding deduction at that time.
SHAREHOLDER APPROVAL
The Board of Directors seeks shareholder approval because approval is
required under the Code as a condition to incentive stock option treatment and
will maximize the potential for deductions associated with any nonqualified
options and stock appreciation rights granted under the Stock Plan.
Approval of the Stock Plan requires the affirmative vote of the holders
of at least a majority of the outstanding shares of common stock of the
Corporation present, or represented and entitled to vote, at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE APPROVAL OF THE AREA BANCSHARES STOCK OPTION PLAN
PROPOSAL THREE: INDEPENDENT PUBLIC ACCOUNTANTS
For the fiscal year ended December 31, 1999, the accounting firm of
KPMG LLP served as the Corporation's independent public accountants and
auditors. The selection of the Corporation's independent public accountants is
not required to be submitted to the vote of shareholders, but the Board believes
the shareholders should have the opportunity to ratify the Board's selection of
KPMG LLP. A representative from the firm of KPMG LLP is expected to be present
at the annual meeting and will be available to make a statement should he or she
desire to do so, and to respond to questions of shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE RATIFICATION OF KPMG LLP AS CORPORATE AUDITORS
FOR THE 2000 CALENDAR YEAR
15
<PAGE> 16
EXECUTIVE COMPENSATION
The following table contains information concerning compensation paid
by the Corporation and subsidiaries to, or on behalf of, the Corporation's Chief
Executive Officer and each of the four other most highly compensated executive
officers of the Corporation during 1999 whose compensation exceeded $100,000.
The compensation policies and practices of the Corporation are described under
the section "Report of the Board of Directors on Executive Compensation".
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------- ----------------------
Other Restricted Securities All
Annual Stock Underlying Other
Name and Compen- Awards Options/ LTIP Compensation
Principal Position Year Salary Bonus sation (1) ($) SARs (#) Payouts ($) (2)
------------------ ---- ------ ----- ---------- ---------- ----------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Thomas R. Brumley 1999 228,000 77,133 --- 5,000
President and CEO 1998 228,000 22,000 --- 5,000
1997 228,000 --- --- 4,750
John A. Ray 1999 164,800 33,373 --- 5,000
Executive Vice Presi- 1998 131,846 24,907 --- 5,000
dent-Chief Operating 1997 109,100 8,041 95,445(3) 4,100
Officer
Timothy O. Shelburne 1999 112,500 18,794 --- 5,000
Senior Vice President- 1998 107,231 19,464 --- 5,000
General Counsel 1997 100,392 8,041 95,445(3) 4,800
Edward J. Vega (4) 1999 31,154 --- --- ---
Senior Vice President- ---
Chief Financial Officer ---
</TABLE>
- -----------------------------
(1) We have omitted information on "perks" and other personal benefits
because the aggregate value of these items does not meet the minimum
amount required for disclosure under Securities and Exchange
Commission regulations.
(2) Represents amounts contributed to the 401(k) plan on behalf of
executive officers.
(3) The value of the restricted stock awards as of December 31, 1999 was
$111,353 for Mr. Ray and Mr. Shelburne based on a closing price of
$24.50, being the closing price on the Nasdaq National Market on
December 31, 1999.
(4) Mr. Vega's employment with the Corporation began in October 1999.
OPTION GRANTS IN LAST FISCAL YEAR
There were no option grants by the Corporation to the named executive
officers in the Summary Compensation Table during the 1999 calendar year.
16
<PAGE> 17
RESTRICTED STOCK GRANTS IN LAST FISCAL YEAR
There were no stock grants by the Corporation to the named executive
officers in the Summary Compensation Table during the 1999 calendar year.
OPTIONS EXERCISED AND OPTION HOLDINGS
There were no option exercises during 1999 by the named executive
officers in the Summary Compensation Table.
PENSION PLAN
The Corporation maintains a non-contributory defined pension plan
covering substantially all employees who satisfy age and service requirements.
The benefits are generally based on years of service and average compensation.
Average compensation is generally computed using the five consecutive years
prior to retirement that yield the highest average.
The following table describes the annual benefit payable based on
compensation and years of service:
<TABLE>
<CAPTION>
Years of Service
Compensation 15 20 25 30 35
------------ -- -- -- -- --
<S> <C> <C> <C> <C> <C>
$100,000 $16,868 $23,490 $30,113 $36,735 $43,358
125,000 21,743 30,240 38,738 47,235 55,733
150,000 26,618 36,990 47,363 57,735 68,108
175,000 26,618 36,990 47,363 57,735 68,108
</TABLE>
The following table shows the named executive officers' years of
credited service, to the nearest year and current compensation covered by the
pension plan:
<TABLE>
<CAPTION>
Current Compensation
Executive Officer Years of Service Covered by the Pension Plan
----------------- ---------------- ---------------------------
<S> <C> <C>
Thomas R. Brumley 18 $150,000
John A. Ray 17 150,000
Timothy O. Shelburne 7 135,000
Edward J. Vega -- 130,000
</TABLE>
Compensation for plan purposes means total cash compensation, including
overtime pay and bonuses. A participant's annual compensation for plan purposes
is limited to $150,000 as required under Internal Revenue Code Section
401(a)(17).
The normal retirement benefit, 1/12th of which is payable monthly for
the life of the participant, is equal to the sum of the following:
- 0.65% of average earnings multiplied by the participant's years
of benefit service, plus
- 0.20% of average earnings multiplied by the participant's years
of benefit service in excess of 15 years, but not more than 35
years, plus
17
<PAGE> 18
- 0.65% of average earnings in excess of the then current covered
compensation for the participant, multiplied by the participant's
years of benefit service not in excess of 35 years.
"Average earnings" is the average annual compensation of a participant
for the five consecutive plan years which produce the highest average out of the
final ten plan years of service. "Covered compensation" is the average of the
taxable wage basis for the 35 years ending with the year the participant attains
Social Security retirement age, rounded, as permitted by the IRS. Benefits
listed in the pension plan table are not subject to any deduction for Social
Security or other offset amounts.
DEFINED CONTRIBUTION PLAN
The Corporation maintains a defined contribution Profit Sharing Trust
with an Internal Revenue Code 401(k) option ("401(k) Plan"). Under the
provisions of the 401(k) option, employees with six months of service may become
participants.
Contributions made to the plan by participants are fully vested when
made.
Contributions to the 401(k) Plan for the benefit of the participants
can be made in two ways. First, the participant can enter into a Salary
Reduction Agreement to contribute up to 15% of his or her salary to the 401(k)
Plan. Secondly, the Corporation will make a contribution to the 401(k) Plan
equal to 50% of the employee's contribution to the plan up to a maximum
contribution of 3.5% of the participant's salary. For purposes of the 401(k)
Plan, salary includes regular base pay only, and does not include any other
forms of compensation such as overtime, taxable fringe benefits or executive
incentive compensation.
EMPLOYMENT AND CHANGE OF CONTROL AGREEMENTS
At December 31, 1999 the Corporation did not have any employment or
change in control agreements with any of its executive officers.
EXECUTIVE OFFICERS
Information regarding the current executive officers of the
Corporation, including their names, ages, positions with the Corporation, and a
brief description of their business experience during the past five years, is
presented below.
Executive officers are elected annually by the Board of Directors.
Thomas R. Brumley, age 61, has served as President and Chief Executive
Officer of the Corporation since 1990. He served as Executive Vice President of
the Corporation from 1983 to 1986, and as President and Chief Executive Officer
of The Owensboro National Bank from 1983 to 1990.
John A. Ray, age 44, has served as Executive Vice President and Chief
Operating Officer of the Corporation since September 1999. He served as
Executive Vice President and Chief Financial Officer from 1998 to 1999. He
served as President and Chief Executive Officer of The Owensboro National Bank
from 1997 to 1998. He previously held the following positions with the
Corporation or its subsidiaries: Senior Vice President and Chief Financial
Officer of the Corporation from 1994 to 1997; First Senior Vice President of
Finance for The Owensboro National Bank from 1993 to 1994; Executive Vice
President and Chief Operating Officer for First Federal Savings and Loan
Association from 1992 to 1993 and First Senior Vice President of Finance for The
Owensboro National Bank from 1985 to 1992.
18
<PAGE> 19
Cynthia W. Carlton, age 50, has served as Senior Vice President of
Retail Administration since 1999. She served as Vice President-Director of
Retail Administration from 1998 to 1999. Prior to joining the Corporation, she
served as Senior Vice President-Marketing Director for Union Planters Bank in
Nashville, Tennessee from 1994 to 1999.
Brian R. Griesbach, age 47, has served as Senior Vice President of Loan
Administration since 1999. Prior to joining the Corporation, he served as Senior
Vice President from 1990 to 1999 at Regions Bank and CBT Corporation.
Kevin M. Gallagher, age 46, has served as Senior Vice President of
Operations since February 2000. Prior to joining the Corporation, he served as
Vice President of Operations and Technology from 1979 to 2000 at CNB Bancshares.
Edward F. Johnson, age 64, has served as Senior Vice President of the
Corporation in charge of operations from 1987 to 2000. Currently he is Senior
Vice President-Administration of the Corporation. He also serves as First Senior
Vice President of The Owensboro National Bank.
Timothy O. Shelburne, age 43, has served as General Counsel of the
Corporation since January 1995. He previously held the position of Vice
President and Compliance Officer with The Owensboro National Bank from August
1993 to December 1994. Prior to joining The Owensboro National Bank, he was a
partner in the law firm of Holbrook, Wible, Sullivan and Mountjoy. Mr. Shelburne
is the nephew by marriage of Thomas R. Brumley, the Corporation's President and
Chief Executive Officer.
Edward J. Vega, age 52, has served as Senior Vice President and Chief
Financial Officer since 1999. Prior to joining the Corporation, he held the
position of President of Financial Research Associates, LLC of St. Louis,
Missouri from 1997 to 1999 and Executive Vice President and Chief Financial
Officer of Union Planters Bank of Missouri (formerly Financial Bancshares, Inc.)
from 1984 to 1997.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors of the Corporation establishes the general
compensation policies of the Corporation, establishes the compensation plans and
specific compensation levels for executive officers and administers the
Corporation's Executive Incentive Compensation Program, and awards stock-based
compensation to executive officers and employees of the Corporation. Thomas R.
Brumley, President and Chief Executive Officer of the Corporation, participates
in compensation discussions and decisions affecting other executive officers of
the Corporation.
REPORT OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The entire Board acts as the Compensation Committee for the
Corporation's executive officers and the affiliate banks' chief executive
officers.
The Committee adjusts base salaries annually within a current 4 percent
guideline. Base salaries are augmented by an incentive bonus program for
performance beyond expected goals established for (a) net overhead (b) growth in
average assets (c) asset quality (d) net loan losses (e) return on equity-bank
and (f) return on equity-Corporation. The incentive bonus program is subject to
a number of limitations as follows:
19
<PAGE> 20
1. A bonus limitation of 7 percent of net income including accrual of bonus and
401(k) contribution.
2. A participation limitation of:
(a) Superior-Not more than 20% of total participants.
(b) Superior and Excellent-Not more than 50% of total participants.
(c) Above Average-Not more than 40% of total participants.
(d) Average-Must have at least 10% of total participants.
3. A participation schedule limitation of:
(a) Superior-Receive 60% of pool fund or a range of 17-32% of salary,
whichever is less.
(b) Excellent-Receive 30% of pool fund or a range of 9-16% of salary,
whichever is less.
(c) Above Average-Receive 10% of pool fund or a range of 3-8% of salary,
whichever is less.
(d) Average or Below-May receive $600 or 1/2 of lowest bonus in Above
Average category, whichever is less.
The Committee seeks to provide compensation opportunities that support
the ability to attract and retain competent officers who have the ability to
further the long-term goals of the Corporation. To this extent, a program of
limited stock options and restricted stock grants is used. Stock options and
restricted stock grants are limited to the chief executive officers of affiliate
banks or subsidiaries and executive officers of the Corporation. The Committee
determines the amount of the stock options or restricted stock grants according
to the person's responsibility and impact within the Corporation. All stock
options are granted at fair market value and are exercisable in accordance with
the terms of the Corporation's stock option plan.
1999 COMPENSATION FOR THE PRESIDENT & CEO
The Committee reviewed the compensation package for chief executive
officers at peer institutions ($1 billion to $2 billion in size) to establish a
competitive view of executive compensation. The Committee then considered the
Corporation's overall performance, record for increasing shareholder value,
success in meeting strategic objectives and leadership. Based on these factors
and the Corporation's financial results, the Committee determined Mr. Brumley's
base salary for 1999.
Mr. Brumley received $77,133 as an incentive bonus during 1999. Future
incentive compensation is determined on a sliding scale basis directly related
to the percentage of increase in earnings per share. If there is no increase in
earnings per share, no incentive compensation will be paid.
SECTION 162(M) OF THE INTERNAL REVENUE CODE
It is our responsibility to address the issues raised by Section 162(m)
of the Internal Revenue Code, as amended. The revisions to Section 162(m) made
certain nonperformance-based compensation in excess of $1,000,000 to executives
of public companies nondeductible to the companies beginning in 1994.
We have reviewed these issues and have determined that no portion of
compensation payable to any executive officer for 1999 is nondeductible.
Submitted by the Compensation Committee:
C. M. Gatton (Chairman) Ralph L. Oliver
Anthony G. Bittel Allan R. Rhodes
Samuel A. B. Boone Jim R. Shelby
Thomas R. Brumley David W. Smith, Jr.
Cecile W. Garmon Thomas N. Thompson
Gary H. Latham Damon S. Vitale
Raymond C. McKinney Pollard White
20
<PAGE> 21
COMPARATIVE STOCK PERFORMANCE
The following Performance Graph compares the cumulative total
shareholder return on the Corporation's common stock from January 2, 1996
through December 31, 1999 with the cumulative total return on the Nasdaq Market
Value Index ("Broad Market Index") and the Peer Group Industry Index ("Industry
Index") as provided by the University of Chicago Graduate School of Business,
Center for Research in Security Prices using the Nasdaq Bank Stock Index. The
cumulative total shareholder return computations included in the Performance
Graph assume an investment of $100 in the Corporation's common stock, the Broad
Market Index and the Industry Index on January 2, 1996 with the reinvestment of
all dividends.
COMPARISON OF CUMULATIVE TOTAL RETURN OF AREA BANCSHARES,
BROAD MARKET INDEX AND INDUSTRY INDEX
FINANCIAL PERFORMANCE
<TABLE>
<CAPTION>
1/96 6/96 12/96 6/97 12/97 6/98 12/98 6/99 12/99
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Area 100.000 117.37 131.58 148.03 154.95 220.02 170.43 176.75 160.31
Market 100.000 112.55 122.32 136.88 149.88 180.22 211.20 258.48 381.55
Peer 100.000 105.99 132.44 165.67 221.74 229.59 220.21 226.85 211.66
</TABLE>
Prior to January 2, 1996 the Corporation's common stock was not
registered on any exchange and was not traded on the over-the-counter market.
Sporadic sales of our shares occurred from time to time. Additionally, there was
no established public market for the stock. Accordingly, the volume of trading
was often insufficient to establish a meaningful market price. As a result, any
prior history of quotations does not necessarily reflect the price that would be
paid for the shares in a liquid market.
On December 7, 1995 the Corporation received approval for its common
stock to be listed on the Nasdaq National Market and trading commenced January
2, 1996. The market price used in the Performance Graph for dates after January
2, 1996 represents market trades on the Nasdaq market system.
TRANSACTIONS WITH EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Corporation are customers
of the Corporation's affiliates and have had and expect to have business and
banking transactions with these affiliates in the ordinary course of
21
<PAGE> 22
business. In addition, some of the executive officers and directors of the
Corporation are also officers, directors or principal shareholders of
corporations that are both customers of the Corporation's affiliates and that
have had and expect to have business and banking transactions with the
Corporation's affiliates in the ordinary course of business. All of these
banking transactions were in the ordinary course of business, were made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons and, in
the opinion of management of the Corporation and its affiliates, did not involve
more than normal risk of collectibility or present other unfavorable or unusual
features.
ANNUAL REPORT
The Corporation will provide its shareholders with a copy of its Annual
Report on Form 10-K which is required to be filed with the Securities and
Exchange Commission for the year ended December 31, 1999. There is no charge for
this Annual Report. Requests should be in writing and should be addressed to:
Secretary
Area Bancshares Corporation
P.O. Box 786
Owensboro, Kentucky 42302-0786
OTHER MATTERS
The Board of Directors of the Corporation does not know of any matters
for action by shareholders at the annual meeting other than the matters
described in the notice. However, the enclosed proxy card confers discretionary
authority with respect to any other matters that may properly come before the
meeting.
It is important that proxies be returned promptly. The Corporation
requests that whether or not you expect to attend in person, return your proxy
card to be sure that a quorum is present at the meeting. You may send your proxy
card to the Corporation in the enclosed postage-paid envelope.
By Order of the Board of Directors
/s/ Thomas R. Brumley
---------------------
Thomas R. Brumley
President and Chief Executive Officer
Owensboro, Kentucky
April 14, 2000
22
<PAGE> 23
EXHIBIT A
AREA BANCSHARES CORPORATION
2000 STOCK OPTION AND EQUITY INCENTIVE PLAN
<PAGE> 24
AREA BANCSHARES CORPORATION
2000 STOCK OPTION AND EQUITY INCENTIVE PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. DEFINITIONS.............................................................1
1.1 DEFINITIONS................................................................1
SECTION 2 THE STOCK OPTION AND EQUITY INCENTIVE PLAN...............................3
2.1 PURPOSE OF THE PLAN........................................................4
2.2 STOCK SUBJECT TO THE PLAN..................................................4
2.3 ADMINISTRATION OF THE PLAN.................................................4
2.4 ELIGIBILITY AND LIMITS.....................................................4
SECTION 3 TERMS OF STOCK INCENTIVES................................................5
3.1 TERMS AND CONDITIONS OF ALL STOCK INCENTIVES...............................5
3.2 TERMS AND CONDITIONS OF OPTIONS............................................5
(a) Option Price............................................................5
(b) Option Term.............................................................6
(c) Payment.................................................................6
(d) Conditions to the Exercise of an Option.................................6
(e) Termination of Incentive Stock Option...................................6
(f) Special Provisions for Certain Substitute Options.......................7
3.3 TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS..........................7
(a) Settlement..............................................................7
(b) Conditions to Exercise..................................................7
3.4 TERMS AND CONDITIONS OF STOCK AWARDS.......................................7
3.5 TERMS AND CONDITIONS OF DIVIDEND EQUIVALENT RIGHTS.........................7
(a) Payment.................................................................8
(b) Conditions to Payment...................................................8
3.6 TERMS AND CONDITIONS OF PERFORMANCE UNIT AWARDS............................8
(a) Payment.................................................................8
(b) Conditions to Payment...................................................8
3.7 TERMS AND CONDITIONS OF PHANTOM SHARES.....................................8
(a) Payment.................................................................8
(b) Conditions to Payment...................................................8
3.8 TREATMENT OF AWARDS UPON TERMINATION OF EMPLOYMENT.........................9
SECTION 4 RESTRICTIONS ON STOCK....................................................9
4.1 ESCROW OF SHARES...........................................................9
4.2 RESTRICTIONS ON TRANSFER...................................................9
SECTION 5 GENERAL PROVISIONS.......................................................9
5.1 WITHHOLDING................................................................9
5.2 CHANGES IN CAPITALIZATION; MERGER; LIQUIDATION............................10
5.3 CASH AWARDS...............................................................11
5.4 COMPLIANCE WITH CODE......................................................11
5.5 RIGHT TO TERMINATE EMPLOYMENT.............................................11
5.6 NON-ALIENATION OF BENEFITS................................................11
5.7 RESTRICTIONS ON DELIVERY OF SALE OF SHARES; LEGENDS.......................11
5.8 LISTING AND LEGAL COMPLIANCE..............................................11
5.9 TERMINATION AND AMENDMENT OF THE PLAN.....................................11
5.10 STOCKHOLDER APPROVAL......................................................12
5.11 CHOICE OF LAW.............................................................12
</TABLE>
<PAGE> 25
AREA BANCSHARES CORPORATION
2000 STOCK OPTION AND EQUITY INCENTIVE PLAN
SECTION 1. DEFINITIONS
1.1 Definitions. Whenever used herein, the masculine pronoun will
be deemed to include the feminine, and the singular to include the plural,
unless the context clearly indicates otherwise, and the following capitalized
words and phrases are used herein with the meaning thereafter ascribed:
(a) "Affiliate" means (i) any corporation (other than the
Company) in an unbroken chain of corporations ending with the Company if, at the
time of granting of the Option, each of the corporations (other than the
Company) owns stock possessing fifty percent (50%) or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain, or (ii) any corporation (other than the Company) in an unbroken chain of
corporations beginning with the Company if, at the time of granting of the
Option, each of the corporations, other than the last corporation in the
unbroken chain, owns stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
(b) "Board of Directors" means the board of directors of the
Company.
(c) "Change in Control" means any one of the following events
following the date of grant of the applicable Stock Incentive:
(1) the acquisition by any person or persons acting in
concert of then outstanding voting securities of the Company, if, after the
transaction, the acquiring person(s) own, control or hold with power to vote
fifty percent (50%) or more of any class of voting securities of the Company;
(2) a merger, consolidation, share exchange, combination,
reorganization or like transaction involving the Company in which the
stockholders of the Company immediately prior to such transaction do not own at
least fifty percent (50%) of the value or voting power of the issued and
outstanding capital stock of the Company or its successor immediately after such
transaction;
(3) the sale, transfer or assignment of all or
substantially all of the assets of the Company and its Affiliates (other than as
security for the Company's obligations) in any one transaction or a series of
related transactions occurring within a one (1) year period; or
(4) the dissolution or liquidation of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as
amended.
(e) "Committee" means the committee appointed by the Board of
Directors to administer the Plan or, in lieu of any such appointment, the full
membership of the Board of Directors. The Board of Directors shall consider the
advisability of whether the members of the Committee shall consist solely of at
least two members of the Board of Directors who are both "outside directors" as
defined in Treas. Reg. ss. 1.162-27(e) as promulgated by the Internal Revenue
Service and "non-employee directors" as defined in Rule 16b-3(b)(3) as
promulgated under the Exchange Act.
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(f) "Company" means Area Bancshares Corporation, a Kentucky
corporation.
(g) "Disability" has the same meaning as provided in the
long-term disability plan or policy maintained or, if applicable, most recently
maintained, by the Company or, if applicable, any Affiliate of the Company for
the Participant. If no long-term disability plan or policy was ever maintained
on behalf of the Participant or, if the determination of Disability relates to
an Incentive Stock Option, Disability means 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 will be made by the Committee and will be supported
by advice of a physician competent in the area to which such Disability relates.
(h) "Dividend Equivalent Rights" means certain rights to
receive cash payments as described in Section 3.5.
(i) "Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time.
(j) "Fair Market Value" with regard to a date means:
(1) the average of the high and low prices at which Stock
shall have been sold on that date or the last trading date prior to that date as
reported by the Nasdaq Stock Market (or, if applicable, as reported by a
national securities exchange selected by the Committee on which the shares of
Stock are then actively traded) and published in The Wall Street Journal,
(2) if Stock is not traded on a securities exchange, but
is reported by the Nasdaq Stock Market and market information is published on a
regular basis in The Wall Street Journal, the average of the published high and
low sales prices for that date or the last business day prior to that date as
published in The Wall Street Journal,
(3) if such market information is not published on a
regular basis, the average of the high bid and low asked prices of Stock in the
over-the-counter market on that date or the last business day prior to that
date, as reported by the Nasdaq Stock Market, or, if not so reported, by a
generally accepted reporting service, or
(4) if Stock is not publicly traded, as determined in good
faith by the Committee with due consideration being given to (i) the most recent
independent appraisal of the Company, if such appraisal is not more than twelve
months old and (ii) the valuation methodology used in any such appraisal
provided that, for purposes of granting awards other than Incentive Stock
Options, Fair Market Value of the shares of Stock may be determined by the
Committee by reference to the average market value determined over a period
certain or as of specified dates, to a tender offer price for the shares of
Stock (if settlement of an award is triggered by such an event) or to any other
reasonable measure of fair market value.
(k) "Incentive Stock Option" means an incentive stock option
contemplated by the provisions of Code Section 422 or any successor thereto.
(l) "Nonqualified Stock Option" means an option that is not
designated as, or otherwise intended to be, an Incentive Stock Option.
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(m) "Option" means a Nonqualified Stock Option or an Incentive
Stock Option.
(n) "Over 10% Owner" means an individual who at the time an
Incentive Stock Option is granted owns Stock possessing more than 10% of the
total combined voting power of the Company or one of its Subsidiaries,
determined by applying the attribution rules of Code Section 424(d).
(o) "Participant" means an individual who receives a Stock
Incentive hereunder.
(p) "Performance Unit Award" refers to a performance unit
award as described in Section 3.6.
(q) "Phantom Shares" refers to the rights described in
Section 3.7.
(r) "Plan" means the Area Bancshares Corporation 2000 Stock
Option and Equity Incentive Plan.
(s) "Stock" means the Company's no par value common stock.
(t) "Stock Appreciation Right" means a stock appreciation
right described in Section 3.3.
(u) "Stock Award" means a stock award described in Section
3.4.
(v) "Stock Incentive Agreement" means an agreement between the
Company and a Participant or other documentation evidencing an award of a Stock
Incentive.
(w) "Stock Incentive Program" means a written program
established by the Committee, pursuant to which Stock Incentives are awarded
under the Plan under uniform terms, conditions and restrictions set forth in
such written program.
(x) "Stock Incentives" means, collectively, Dividend
Equivalent Rights, Options, Performance Unit Awards, Phantom Shares, Stock
Appreciation Rights and Stock Awards.
(y) "Subsidiary" means any corporation (other than the
Company) in an unbroken chain of corporations beginning with the Company if,
with respect to Incentive Stock Options, at the time of the granting of the
Option, each of the corporations other than the last corporation in the unbroken
chain owns stock possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in the chain.
(z) "Termination of Employment" means the termination of
the employee-employer relationship between a Participant and the Company and its
Affiliates, regardless of whether 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 will, in its absolute discretion, determine the effect of all matters
and questions relating to a Termination of Employment, including, but not by way
of limitation, the question of whether a leave of absence constitutes a
Termination of Employment.
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SECTION 2 THE STOCK OPTION AND EQUITY INCENTIVE PLAN
2.1 Purpose of the Plan. The Plan is intended to (a) provide incentive
to officers, employees, directors, consultants and other service providers of
the Company and its Affiliates to stimulate their efforts toward the continued
success of the Company and to operate and manage the business in a manner that
will provide for the long-term growth and profitability of the Company; (b)
encourage stock ownership by officers, employees, directors, consultants and
other service providers by providing them with a means to acquire a proprietary
interest in the Company, acquire shares of Stock, or to receive compensation
which is based upon appreciation in the value of Stock; and (c) provide a means
of obtaining, rewarding and retaining key personnel and service providers.
2.2 Stock Subject to the Plan. Subject to adjustment in accordance with
Section 5.2, 250,000 shares of Stock (the "Maximum Plan Shares") are hereby
reserved exclusively for issuance pursuant to Stock Incentives. At such time as
the Company becomes subject to Section 16 of the Exchange Act, at no time may
the Company have outstanding under the Plan Stock Incentives subject to Section
16 of the Exchange Act and shares of Stock issued in respect of Stock Incentives
under the Plan in excess of the Maximum Plan Shares. The shares of Stock
attributable to the nonvested, unpaid, unexercised, unconverted or otherwise
unsettled portion of any Stock Incentive that is forfeited or cancelled or
expires or terminates for any reason without becoming vested, paid, exercised,
converted or otherwise settled in full will again be available for purposes of
the Plan.
2.3 Administration of the Plan. The Plan is administered by the
Committee. The Committee has full authority in its discretion to determine the
officers, employees, directors, consultants and service providers of the Company
or its Affiliates to whom Stock Incentives will be granted and the terms and
provisions of Stock Incentives, subject to the Plan. Subject to the provisions
of the Plan, the Committee has full and conclusive authority to interpret the
Plan; to prescribe, amend and rescind rules and regulations relating to the
Plan; to determine the terms and provisions of the respective Stock Incentive
Agreements and to make all other determinations necessary or advisable for the
proper administration of the Plan. The Committee's determinations under the Plan
need not be uniform and may be made by it selectively among persons who receive,
or are eligible to receive, awards under the Plan (whether or not such persons
are similarly situated). The Committee's decisions are final and binding on all
Participants.
2.4 Eligibility and Limits. Stock Incentives may be granted only to
officers, employees, directors, consultants and other service providers of the
Company, or any Affiliate of the Company; provided, however, that an Incentive
Stock Option may only be granted to an employee of the Company or any
Subsidiary. In the case of Incentive Stock Options, the aggregate Fair Market
Value (determined as at the date an Incentive Stock Option is granted) of Stock
with respect to which stock options intended to meet the requirements of Code
Section 422 become exercisable for the first time by an individual during any
calendar year under all plans of the Company and its Subsidiaries may not exceed
$100,000; provided further, that if the limitation is exceeded, the Incentive
Stock Option(s) which cause the limitation to be exceeded will be treated as
Nonqualified Stock Option(s). Pursuant to Section 162(m) of the Code and the
regulations thereunder, for compensation to be treated as qualified
performance-based compensation, subject to adjustment in accordance with Section
5.2, the maximum number of shares of Stock with respect to which Options or
Stock Appreciation Rights may be granted during any calendar year to any
employee may not exceed 50,000. In applying this limitation, if an Option or
Stock Appreciation Right, or any portion thereof, granted to an employee is
cancelled or repriced for any reason, then the shares of Stock attributable to
such cancellation or repricing either shall continue to be counted
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as an outstanding grant or shall be counted as a new grant of shares of Stock,
as the case may be, against the affected employee's 50,000 limit for the
appropriate calendar year.
SECTION 3 TERMS OF STOCK INCENTIVES
3.1 Terms and Conditions of All Stock Incentives.
(a) The number of shares of Stock as to which a Stock
Incentive may be granted will be determined by the Committee in its sole
discretion, subject to the provisions of Section 2.2 as to the total number of
shares available for grants under the Plan and subject to the limits on Options
and Stock Appreciation Rights in Section 2.4.
(b) Each Stock Incentive will either be evidenced by a Stock
Incentive Agreement in such form and containing such terms, conditions and
restrictions as the Committee may determine to be appropriate, or be made
subject to the terms of a Stock Incentive Program, containing such terms,
conditions and restrictions as the Committee may determine to be appropriate.
Each Stock Incentive Agreement or Stock Incentive Program is subject to the
terms of the Plan and any provisions contained in the Stock Incentive Agreement
or Stock Incentive Program that are inconsistent with the Plan are null and
void.
(c) The date a Stock Incentive is granted will be the date on
which the Committee has approved the terms and conditions of the Stock Incentive
and has determined the recipient of the Stock Incentive and the number of shares
covered by the Stock Incentive, and has taken all such other actions necessary
to complete the grant of the Stock Incentive.
(d) Any Stock Incentive may be granted in connection with all
or any portion of a previously or contemporaneously granted Stock Incentive.
Exercise or vesting of a Stock Incentive granted in connection with another
Stock Incentive may result in a pro rata surrender or cancellation of any
related Stock Incentive, as specified in the applicable Stock Incentive
Agreement or Stock Incentive Program.
(e) Unless otherwise permitted by the Committee, Stock
Incentives are not transferable or assignable except by will or by the laws of
descent and distribution and are exercisable, during the Participant's lifetime,
only by the Participant; or in the event of the Disability of the Participant,
by the legal representative of the Participant; or in the event of death of the
Participant, by the legal representative of the Participant's estate or if no
legal representative has been appointed, by the successor in interest determined
under the Participant's will. Notwithstanding the foregoing, the Committee shall
not permit Incentive Stock Options to be transferred or assigned beyond the
limitations set forth in this Section 3.1(e).
3.2 Terms and Conditions of Options. Each Option granted under the Plan
must be evidenced by a Stock Incentive Agreement. At the time any Option is
granted, the Committee will determine whether the Option is to be an Incentive
Stock Option described in Code Section 422 or a Nonqualified Stock Option, and
the Option must be clearly identified as to its status as an Incentive Stock
Option or a Nonqualified Stock Option. Incentive Stock Options may only be
granted to employees of the Company or any Subsidiary. At the time any Incentive
Stock Option granted under the Plan is exercised, the Company will be entitled
to legend the certificates representing the shares of Stock purchased pursuant
to the Option to clearly identify them as representing the shares purchased upon
the exercise of an Incentive Stock Option. An Incentive Stock Option may only be
granted within ten (10) years from the earlier of the date the Plan is adopted
or approved by the Company's stockholders.
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(a) Option Price. Subject to adjustment in accordance
with Section 5.2 and the other provisions of this Section 3.2, the exercise
price (the "Exercise Price") per share of Stock purchasable under any Option
must be as set forth in the applicable Stock Incentive Agreement, but in no
event may it be less than the Fair Market Value on the date the Option is
granted with respect to an Incentive Stock Option. With respect to each grant of
an Incentive Stock Option to a Participant who is an Over 10% Owner, the
Exercise Price may not be less than 110% of the Fair Market Value on the date
the Option is granted.
(b) Option Term. Any Incentive Stock Option granted to a
Participant who is not an Over 10% Owner is not exercisable after the expiration
of ten (10) years after the date the Option is granted. Any Incentive Stock
Option granted to an Over 10% Owner is not exercisable after the expiration of
five (5) years after the date the Option is granted. The term of any
Nonqualified Stock Option must be as specified in the applicable Stock Incentive
Agreement.
(c) Payment. Payment for all shares of Stock purchased
pursuant to the exercise of an Option will be made in any form or manner
authorized by the Committee in the Stock Incentive Agreement or by amendment
thereto, including, but not limited to, cash or, if the Stock Incentive
Agreement provides:
(1) by delivery to the Company of a number of shares of
Stock which have been owned by the holder for at least six (6) months prior to
the date of exercise having an aggregate Fair Market Value of not less than the
product of the Exercise Price multiplied by the number of shares the Participant
intends to purchase upon exercise of the Option on the date of delivery;
(2) in a cashless exercise through a broker; or
(3) by having a number of shares of Stock withheld, the
Fair Market Value of which as of the date of exercise is sufficient to satisfy
the Exercise Price.
In its discretion, the Committee also may authorize (at the time an Option is
granted or thereafter) Company financing to assist the Participant as to payment
of the Exercise Price on such terms as may be offered by the Committee in its
discretion. Payment must be made at the time that the Option or any part thereof
is exercised, and no shares may be issued or delivered upon exercise of an
option until full payment has been made by the Participant. The holder of an
Option, as such, has none of the rights of a stockholder.
(d) Conditions to the Exercise of an Option. Each Option
granted under the Plan is exercisable by whom, at such time or times, or upon
the occurrence of such event or events, and in such amounts, as the Committee
specifies in the Stock Incentive Agreement; provided, however, that subsequent
to the grant of an Option, the Committee, at any time before complete
termination of such Option, may accelerate the time or times at which such
Option may be exercised in whole or in part, including, without limitation, upon
a Change in Control and may permit the Participant or any other designated
person to exercise the Option, or any portion thereof, for all or part of the
remaining Option term, notwithstanding any provision of the Stock Incentive
Agreement to the contrary.
(e) Termination of Incentive Stock Option. With respect to an
Incentive Stock Option, in the event of Termination of Employment of a
Participant, the Option or portion thereof held by the Participant which is
unexercised will expire, terminate, and become unexercisable no
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later than the expiration of three (3) months after the date of Termination of
Employment; provided, however, that in the case of a holder whose Termination of
Employment is due to death or Disability, one (1) year will be substituted for
such three (3) month period; provided, further that such time limits may be
exceeded by the Committee under the terms of the grant, in which case, the
Incentive Stock Option will be a Nonqualified Stock Option if it is exercised
after the time limits that would otherwise apply. For purposes of this
Subsection (e), Termination of Employment of the Participant will not be deemed
to have occurred if the Participant is employed by another corporation (or a
parent or subsidiary corporation of such other corporation) which has assumed
the Incentive Stock Option of the Participant in a transaction to which Code
Section 424(a) is applicable.
(f) Special Provisions for Certain Substitute Options.
Notwithstanding anything to the contrary in this Section 3.2, any Option issued
in substitution for an option previously issued by another entity, which
substitution occurs in connection with a transaction to which Code Section
424(a) is applicable, may provide for an exercise price computed in accordance
with such Code Section and the regulations thereunder and may contain such other
terms and conditions as the Committee may prescribe to cause such substitute
Option to contain as nearly as possible the same terms and conditions (including
the applicable vesting and termination provisions) as those contained in the
previously issued option being replaced thereby.
3.3 Terms and Conditions of Stock Appreciation Rights. Each Stock
Appreciation Right granted under the Plan must be evidenced by a Stock Incentive
Agreement. A Stock Appreciation Right entitles the Participant to receive the
excess of (1) the Fair Market Value of a specified or determinable number of
shares of the Stock at the time of payment or exercise over (2) a specified or
determinable price which, in the case of a Stock Appreciation Right granted in
connection with an Option, may not be less than the Exercise Price for that
number of shares subject to that Option. A Stock Appreciation Right granted in
connection with a Stock Incentive may only be exercised to the extent that the
related Stock Incentive has not been exercised, paid or otherwise settled.
(a) Settlement. Upon settlement of a Stock Appreciation Right,
the Company must pay to the Participant the appreciation in cash or shares of
Stock (valued at the aggregate Fair Market Value on the date of payment or
exercise) as provided in the Stock Incentive Agreement or, in the absence of
such provision, as the Committee may determine.
(b) Conditions to Exercise. Each Stock Appreciation Right
granted under the Plan is exercisable or payable at such time or times, or upon
the occurrence of such event or events, and in such amounts, as the Committee
specifies in the Stock Incentive Agreement; provided, however, that subsequent
to the grant of a Stock Appreciation Right, the Committee, at any time before
complete termination of such Stock Appreciation Right, may accelerate the time
or times at which such Stock Appreciation Right may be exercised or paid in
whole or in part.
3.4 Terms and Conditions of Stock Awards. The number of shares of
Stock subject to a Stock Award and restrictions or conditions on such shares, if
any, will be as the Committee determines, and the certificate for such shares
will bear evidence of any restrictions or conditions. Subsequent to the date of
the grant of the Stock Award, the Committee has the power to permit, in its
discretion, an acceleration of the expiration of an applicable restriction
period with respect to any part or all of the shares awarded to a Participant.
The Committee may require a cash payment from the Participant in an amount no
greater than the aggregate Fair Market Value of the shares of Stock awarded
determined at the date of grant in exchange for the grant of a Stock Award or
may grant a Stock Award without the requirement of a cash payment.
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3.5 Terms and Conditions of Dividend Equivalent Rights. A Dividend
Equivalent Right entitles the Participant to receive payments from the Company
in an amount determined by reference to any cash dividends paid on a specified
number of shares of Stock to Company stockholders of record during the period
such rights are effective. The Committee may impose such restrictions and
conditions on any Dividend Equivalent Right as the Committee in its discretion
shall determine, including the date any such right shall terminate and may
reserve the right to terminate, amend or suspend any such right at any time.
(a) Payment. Payment in respect of a Dividend Equivalent Right
may be made by the Company in cash or shares of Stock (valued at Fair Market
Value on the date of payment) as provided in the Stock Incentive Agreement or
Stock Incentive Program, or, in the absence of such provision, as the Committee
may determine.
(b) Conditions to Payment. Each Dividend Equivalent Right
granted under the Plan is payable at such time or times, or upon the occurrence
of such event or events, and in such amounts, as the Committee specifies in the
applicable Stock Incentive Agreement or Stock Incentive Program; provided,
however, that subsequent to the grant of a Dividend Equivalent Right, the
Committee, at any time before complete termination of such Dividend Equivalent
Right, may accelerate the time or times at which such Dividend Equivalent Right
may be paid in whole or in part.
3.6 Terms and Conditions of Performance Unit Awards. A Performance
Unit Award shall entitle the Participant to receive, at a specified future date,
payment of an amount equal to all or a portion of the value of a specified or
determinable number of units (stated in terms of a designated or determinable
dollar amount per unit) granted by the Committee. At the time of the grant, the
Committee must determine the base value of each unit, the number of units
subject to a Performance Unit Award, the performance factors applicable to the
determination of the ultimate payment value of the Performance Unit Award and
the period over which Company performance shall be measured. The Committee may
provide for an alternate base value for each unit under certain specified
conditions.
(a) Payment. Payment in respect of Performance Unit Awards may
be made by the Company in cash or shares of Stock (valued at Fair Market Value
on the date of payment) as provided in the applicable Stock Incentive Agreement
or Stock Incentive Program or, in the absence of such provision, as the
Committee may determine.
(b) Conditions to Payment. Each Performance Unit Award granted
under the Plan shall be payable at such time or times, or upon the occurrence of
such event or events, and in such amounts, as the Committee may specify in the
applicable Stock Incentive Agreement or Stock Incentive Program; provided,
however, that subsequent to the grant of a Performance Unit Award, the
Committee, at any time before complete termination of such Performance Unit
Award, may accelerate the time or times at which such Performance Unit Award may
be paid in whole or in part.
3.7 Terms and Conditions of Phantom Shares. Phantom Shares shall
entitle the Participant to receive, at a specified future date, payment of an
amount equal to all or a portion of the Fair Market Value of a specified number
of shares of Stock at the end of a specified period. At the time of the grant,
the Committee will determine the factors which will govern the portion of the
rights so payable, including, at the discretion of the Committee, any
performance criteria that must
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be satisfied as a condition to payment. Phantom Share awards containing
performance criteria may be designated as Performance Share Awards.
(a) Payment. Payment in respect of Phantom Shares may be made
by the Company in cash or shares of Stock (valued at Fair Market Value on the
date of payment) as provided in the applicable Stock Incentive Agreement or
Stock Incentive Program, or, in the absence of such provision, as the Committee
may determine.
(b) Conditions to Payment. Each Phantom Share granted under
the Plan is payable at such time or times, or upon the occurrence of such event
or events, and in such amounts, as the Committee may specify in the applicable
Stock Incentive Agreement or Stock Incentive Program; provided, however, that
subsequent to the grant of a Phantom Share, the Committee, at any time before
complete termination of such Phantom Share, may accelerate the time or times at
which such Phantom Share may be paid in whole or in part.
3.8 Treatment of Awards Upon Termination of Employment. Except as
otherwise provided by Plan Section 3.2(e), any award under this Plan to a
Participant who has experienced a Termination of Employment may be cancelled,
accelerated, paid or continued, as provided in the applicable Stock Incentive
Agreement or Stock Incentive Program, or, in the absence of such provision, as
the Committee may determine. The portion of any award exercisable in the event
of continuation or the amount of any payment due under a continued award may be
adjusted by the Committee to reflect the Participant's period of service from
the date of grant through the date of the Participant's Termination of
Employment or such other factors as the Committee determines are relevant to its
decision to continue the award.
SECTION 4 RESTRICTIONS ON STOCK
4.1 Escrow of Shares. Any certificates representing the shares of
Stock issued under the Plan will be issued in the Participant's name, but, if
the applicable Stock Incentive Agreement or Stock Incentive Program so provides,
the shares of Stock will be held by a custodian designated by the Committee (the
"Custodian"). Each applicable Stock Incentive Agreement or Stock Incentive
Program providing for transfer of shares of Stock to the Custodian must appoint
the Custodian as the attorney-in-fact for the Participant for the term specified
in the applicable Stock Incentive Agreement or Stock Incentive Program, with
full power and authority in the Participant's name, place and stead to transfer,
assign and convey to the Company any shares of Stock held by the Custodian for
such Participant, if the Participant forfeits the shares under the terms of the
applicable Stock Incentive Agreement or Stock Incentive Program. During the
period that the Custodian holds the shares subject to this Section, the
Participant is entitled to all rights, except as provided in the applicable
Stock Incentive Agreement or Stock Incentive Program, applicable to shares of
Stock not so held. Any dividends declared on shares of Stock held by the
Custodian must as provided in the applicable Stock Incentive Agreement or Stock
Incentive Program, be paid directly to the Participant or, in the alternative,
be retained by the Custodian or by the Company until the expiration of the term
specified in the applicable Stock Incentive Agreement or Stock Incentive Program
and shall then be delivered, together with any proceeds, with the shares of
Stock to the Participant or to the Company, as applicable.
4.2 Restrictions on Transfer. The Participant does not have the
right to make or permit to exist any disposition of the shares of Stock issued
pursuant to the Plan except as provided in the Plan or the applicable Stock
Incentive Agreement or Stock Incentive Program. Any disposition of the shares of
Stock issued under the Plan by the Participant not made in accordance with the
Plan or the applicable Stock Incentive Agreement or Stock Incentive Program will
be void. The
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Company will not recognize, or have the duty to recognize, any disposition not
made in accordance with the Plan and the applicable Stock Incentive Agreement or
Stock Incentive Program, and the shares so transferred will continue to be bound
by the Plan and the applicable Stock Incentive Agreement or Stock Incentive
Program.
SECTION 5 GENERAL PROVISIONS
5.1 Withholding. The Company must deduct from all cash
distributions under the Plan any taxes required to be withheld by federal, state
or local government. Whenever the Company proposes or is required to issue or
transfer shares of Stock under the Plan or upon the vesting of any Stock Award,
the Company has the right to require the recipient to remit to the Company an
amount sufficient to satisfy any federal, state and local withholding tax
requirements prior to the delivery of any certificate or certificates for such
shares or the vesting of such Stock Award. A Participant may pay the withholding
tax in cash, or, if the applicable Stock Incentive Agreement or Stock Incentive
Program provides, a Participant may elect to have the number of shares of Stock
he is to receive reduced by, or with respect to a Stock Award, tender back to
the Company, the smallest number of whole shares of Stock which, when multiplied
by the Fair Market Value of the shares of Stock determined as of the Tax Date
(defined below), is sufficient to satisfy federal, state and local, if any,
withholding taxes arising from exercise or payment of a Stock Incentive (a
"Withholding Election"). A Participant may make a Withholding Election only if
both of the following conditions are met:
(a) The Withholding Election must be made on or prior to
the date on which the amount of tax required to be withheld is determined (the
"Tax Date") by executing and delivering to the Company a properly completed
notice of Withholding Election as prescribed by the Committee; and
(b) Any Withholding Election made will be irrevocable except
on six months advance written notice delivered to the Company; however, the
Committee may in its sole discretion disapprove and give no effect to the
Withholding Election.
5.2 Changes in Capitalization; Merger; Liquidation.
(a) The number of shares of Stock reserved for the grant of
Options, Dividend Equivalent Rights, Performance Unit Awards, Phantom Shares,
Stock Appreciation Rights and Stock Awards; the number of shares of Stock
reserved for issuance upon the exercise or payment, as applicable, of each
outstanding Option, Dividend Equivalent Right, Performance Unit Award, Phantom
Share and Stock Appreciation Right and upon vesting or grant, as applicable, of
each Stock Award; the Exercise Price of each outstanding Option and the
specified number of shares of Stock to which each outstanding Dividend
Equivalent Right, Performance Unit Award, Phantom Share and Stock Appreciation
Right pertains may be proportionately adjusted for any increase or decrease in
the number of issued shares of Stock resulting from a subdivision or combination
of shares or the payment of a stock dividend in shares of Stock to holders of
outstanding shares of Stock or any other increase or decrease in the number of
shares of Stock outstanding effected without receipt of consideration by the
Company.
(b) In the event of any merger, consolidation, extraordinary
dividend (including a spin-off), reorganization or other change in the corporate
structure of the Company or its Stock or tender offer for shares of Stock, the
Committee, in its sole discretion, may make such adjustments with respect to
awards and take such other action as it deems necessary or appropriate to
reflect or in anticipation of such merger, consolidation, extraordinary dividend
(including a spin-
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off), reorganization, other change in corporate structure or tender offer,
including, without limitation, the assumption of other awards, substitution of
new awards, the termination or adjustment of outstanding awards, the
acceleration of awards or the removal of restrictions on outstanding awards, all
as may be provided in the applicable Stock Incentive Agreement or, if not
expressly addressed therein, as the Committee subsequently may determine in the
event of any such merger, consolidation, extraordinary dividend (including a
spin-off), reorganization or other change in the corporate structure of the
Company or its Stock or tender offer for shares of Stock. Any adjustment
pursuant to this Section 5.2 may provide, in the Committee's discretion, for the
elimination without payment therefor of any fractional shares that might
otherwise become subject to any Stock Incentive.
(c) The existence of the Plan and the Stock Incentives
granted pursuant to the Plan must not affect in any way the right or power of
the Company to make or authorize any adjustment, reclassification,
reorganization or other change in its capital or business structure, any merger
or consolidation of the Company, any issue of debt or equity securities having
preferences or priorities as to the Stock or the rights thereof, the dissolution
or liquidation of the Company, any sale or transfer of all or any part of its
business or assets, or any other corporate act or proceeding.
5.3 Cash Awards. The Committee may, at any time and in its
discretion, grant to any holder of a Stock Incentive the right to receive, at
such times and in such amounts as determined by the Committee in its discretion,
a cash amount which is intended to reimburse such person for all or a portion of
the federal, state and local income taxes imposed upon such person as a
consequence of the receipt of the Stock Incentive or the exercise of rights
thereunder.
5.4 Compliance with Code. All Incentive Stock Options to be
granted hereunder are intended to comply with Code Section 422, and all
provisions of the Plan and all Incentive Stock Options granted hereunder must be
construed in such manner as to effectuate that intent.
5.5 Right to Terminate Employment or Service Relationship. Nothing
in the Plan or in any Stock Incentive Agreement confers upon any Participant the
right to continue as an officer, employee, director, consultant or other service
provider of the Company or any of its Affiliates or affect the right of the
Company or any of its Affiliates to terminate the Participant's employment or
service relationship at any time.
5.6 Non-alienation of Benefits. Other than as specifically
provided herein, no benefit under the Plan may be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or
charge; and any attempt to do so shall be void. No such benefit may, prior to
receipt by the Participant, be in any manner liable for or subject to the debts,
contracts, liabilities, engagements or torts of the Participant.
5.7 Restrictions on Delivery and Sale of Shares; Legends. Each
Stock Incentive is subject to the condition that if at any time the Committee,
in its discretion, shall determine that the listing, registration or
qualification of the shares covered by such Stock Incentive upon any securities
exchange or under any state or federal law is necessary or desirable as a
condition of or in connection with the granting of such Stock Incentive or the
purchase or delivery of shares thereunder, the delivery of any or all shares
pursuant to such Stock Incentive may be withheld unless and until such listing,
registration or qualification shall have been effected. If a registration
statement is not in effect under the Securities Act of 1933 or any applicable
state securities laws with respect to the shares of Stock purchasable or
otherwise deliverable under Stock Incentives then outstanding, the Committee may
require, as a condition of exercise of any Option or as a condition to any other
delivery of Stock pursuant to a Stock Incentive, that the Participant or other
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<PAGE> 36
recipient of a Stock Incentive represent, in writing, that the shares received
pursuant to the Stock Incentive are being acquired for investment and not with a
view to distribution and agree that the shares will not be disposed of except
pursuant to an effective registration statement, unless the Company shall have
received an opinion of counsel that such disposition is exempt from such
requirement under the Securities Act of 1933 and any applicable state securities
laws. The Company may include on certificates representing shares delivered
pursuant to a Stock Incentive such legends referring to the foregoing
representations or restrictions or any other applicable restrictions on resale
as the Company, in its discretion, shall deem appropriate.
5.8 Listing and Legal Compliance. The Committee may suspend the
exercise or payment of any Stock Incentive so long as it determines that
securities exchange listing or registration or qualification under any
securities laws is required in connection therewith and has not been completed
on terms acceptable to the Committee.
5.9 Termination and Amendment of the Plan. The Board of Directors at
any time may amend or terminate the Plan without stockholder approval; provided,
however, that the Board of Directors may condition any amendment on the approval
of stockholders of the Company if such approval is necessary or advisable with
respect to tax, securities or other applicable laws. No such termination or
amendment without the consent of the holder of a Stock Incentive may adversely
affect the rights of the Participant under such Stock Incentive.
5.10 Stockholder Approval. The Plan must be submitted to the
stockholders of the Company for their approval within twelve (12) months before
or after the adoption of the Plan by the Board of Directors of the Company. If
such approval is not obtained, any Stock Incentive granted hereunder will be
void.
5.11 Choice of Law. The laws of the Commonwealth of Kentucky govern the
Plan, to the extent not preempted by federal law, without reference to the
principles of conflict of laws.
IN WITNESS WHEREOF, the Company has executed this Plan on this 20th day
of March, 2000.
AREA BANCSHARES CORPORATION
/s/ Thomas R. Brumley
---------------------
By: Thomas R. Brumley
Title: President and Chief Executive Officer
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<PAGE> 37
EXHIBIT B
AREA BANCSHARES CORPORATION
230 Frederica Street, Owensboro, Kentucky 42301
THIS PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR
THE ANNUAL MEETING OF STOCKHOLDERS ON MAY 15, 2000
The Board of Directors recommends a vote FOR Items 1, 2 and 3.
The undersigned hereby appoints Raymond C. McKinney and David W. Smith, and
either of them, or their designees, each with full power of substitution, as
lawful proxies to represent and vote at the annual meeting of the shareholders
of the Corporation to be held on Monday, May 15, 2000, beginning at 11:00 A.M.
Central Daylight Savings Time and at any adjournment or adjournments thereof, as
fully and with the same effect as the undersigned might or could do if
personally present, with respect to the following matters and, in their
discretion upon any other matters that may properly come before the meeting:
1. Election of 14 directors to serve for a term of 1 year ending in 2001.
The nominees are: Anthony G. Bittel, Samuel A.B. Boone, Thomas R. Brumley,
Cecile W. Garmon, C.M. Gatton, Gary H. Latham, Raymond C. McKinney, Jr., Ralph
L. Oliver, Allan R. Rhodes, Jim R. Shelby, David W. Smith, Jr., Thomas N.
Thompson, Damon S. Vitale, and Pollard White.
<TABLE>
<S> <C> <C>
[ ] FOR all nominees listed. [ ] WITHHOLD AUTHORITY [ ] FOR all nominees EXCEPT
to vote for all nominees listed. nominees whose names
are written in the space
below.
------------------------------------------------------------------------------------------------------
</TABLE>
2. Approval of the 2000 Stock Option and Equity Incentive Plan dated
March 20, 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Ratification of the appointment of KPMG LLP as independent accountants.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
This proxy, when properly executed and returned, will be voted in the manner
directed herein by the undersigned. If no direction is made, this proxy will be
voted for all nominees in Proposal 1, Proposal 2 and Proposal 3.
The undersigned hereby ratifies and confirms that the proxies appointed above,
or either of them, or their designees, may lawfully do or cause to be done by
virtue hereof, and acknowledges receipt of the notice of the annual meeting and
the Proxy Statement accompanying it.
Dated_________________________, 2000
____________________________________
____________________________________
Please insert date of signing. Please sign
exactly as name appears at left. If signing
as attorney, administrator, executor,
trustee, or guardian give full title as
such.
