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:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2)
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
LAKELAND FINANCIAL CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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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):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] 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
by the Form or Schedule and the date of its filing.
1) Amount previously paid:
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2) Form Schedule or Registration Statement No.:
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4) Date Filed:
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NOTICE OF ANNUAL MEETING
OF THE SHAREHOLDERS OF
LAKELAND FINANCIAL CORPORATION
The annual meeting of the shareholders of Lakeland Financial Corporation
will be held on Tuesday, April 14, 1998, at 12:00 Noon (EST) in the Shrine
Building located at the Kosciusko County Fairgrounds in Warsaw, Indiana. The
purpose of the meeting will be: (1) to elect four (4) members of the Board of
Directors; (2) to increase the authorized capital stock of the Corporation
from 10,000,000 shares to 90,000,000 shares; (3) to delete from the Articles
of Incorporation the requirement that directors must reside within the Bank's
Community Reinvestment Act market area; (4) to delete from the Articles of
Incorporation Article IX Section 12 requiring votes in excess of a simple
majority upon some corporate transactions; (5) to adopt new Article IX Section
12 of the Articles of Incorporation; (6) to approve the Lakeland Financial
Corporation 1997 Share Incentive Plan and the offering of 300,000 shares of
Lakeland Financial Corporation common stock thereunder; and (7) to transact
such other business as may properly be brought before the meeting.
Only shareholders of record on the Corporation's books at the close of
business on February 23, 1998, will be entitled to vote at the annual meeting.
A Proxy Statement accompanies and forms a part of this Notice. Your copy
of the 1997 Annual Report is also enclosed.
-------------------------------------------
R. Douglas Grant, President
Lakeland Financial Corporation
P.O. Box 1387
Warsaw, IN 46581-1387
(219) 267-6144
IMPORTANT - PLEASE SIGN, DATE AND MAIL YOUR PROXY PROMPTLY.
In order to have adequate representation to assure a voting quorum at the
meeting, you are urged to return your signed proxy in the enclosed envelope,
which requires no postage. If you are able to attend the annual meeting, you
may revoke your proxy prior to commencement of the meeting and vote in person.
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LAKELAND FINANCIAL CORPORATION
202 East Center Street
Post Office Box 1387
Warsaw, Indiana 46581-1387
(219) 267-6144
PROXY STATEMENT
PERSONS MAKING THE SOLICITATION
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Lakeland Financial Corporation (the "Corporation")
of proxies for use at the annual meeting of shareholders of the Corporation to
be held on April 14, 1998.
Lakeland Financial Corporation owns all of the outstanding shares of Lake
City Bank, Warsaw, Indiana (the "Bank") and Lakeland Capital Trust (the
"Trust"). The total expense of this solicitation will be paid by Lakeland
Financial Corporation. In addition to use of the mails, proxies may be
solicited personally or by telephone or telegraph by officers, directors and
certain employees of the Corporation and the Bank, who will not be specially
compensated for such soliciting.
The approximate date on which this statement and accompanying form of
proxy are first mailed to shareholders is March 16, 1998.
REVOCABILITY OF PROXY
---------------------
Any shareholder giving a proxy has the right to revoke it at any time
before it is exercised. Therefore, execution of the proxy will not in any way
affect the shareholder's right to vote in person if he or she attends the
meeting. Revocation may be made prior to the meeting by written notice sent to
the President of the Corporation at the offices of the Corporation at 202 East
Center Street, P.O. Box 1387, Warsaw, Indiana, 46581-1387; or it may be done
personally upon oral or written request at the annual meeting. The shares
represented by proxies will be voted as instructed by the shareholders giving
the proxies. In the absence of specific instructions to the contrary, proxies
will be voted "FOR" the election of the nominees for directors listed and
"FOR" each of the proposals numbered two through six.
VOTING OF SECURITIES
--------------------
Only shareholders of record as of February 23, 1998, will be entitled to
vote. The Corporation presently has, as its only class of voting securities,
2,899,495 shares of common stock. Each share entitles the holder thereof to
one vote upon each matter to be voted upon at the annual meeting. The
affirmative vote of a majority of the shares present at the annual meeting
will be sufficient to elect nominees and adopt the proposals submitted by the
directors.
SECURITY OWNERSHIP
------------------
As of February 20, 1998, the following persons or groups, as best known
to the Corporation, were beneficial owners of more than five percent of the
Corporation's voting securities. The sole class of voting securities is common
stock.
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Amount and Nature
Name and Address of Beneficial Percent of
of Owners Ownership Class
- --------------------------- ----------------------- ----------
Helen Koch 157,052 Shares (1) 5.42%
1511 Locust - Apt. 201
Elkhart, IN 46514
Lakeland Financial 326,156 Shares (2) 11.25%
Corporation 401(k) Plan
Post Office Box 1387
Warsaw, Indiana 46581-1387
(1) All 157,052 shares are held in the Ola Sloan Testamentary Trust for Helen
Koch. This information has been supplied by the trust for which the Bank
serves as trustee. Helen Koch, the beneficiary of this trust, exercises
voting power but not investment power over the shares held in the trust.
(2) This information has been supplied by the Bank which serves as trustee of
the trust for the plan. Participant employees of the Corporation and the
Bank exercise voting and investment power over the shares attached to
their respective accounts. The Bank exercises sole investment power over
those shares not allocated to any participant account.
As of February 20, 1998, the following table shows the number of common
shares beneficially owned by all directors and nominees naming them, and of
all directors and officers as a group, not naming them. The sole class of
voting securities is common stock.
Name of Individual or Amount and Nature
Number of Persons of Beneficial Percent of
In Group Ownership (1) Class
- --------------------------- ----------------------- ----------
Eddie Creighton 70,080 (2) 2.42%
Anna K. Duffin 1,500 (3) (12)
L. Craig Fulmer 1,494 (12)
R. Douglas Grant 47,083 (4) 1.62%
Jerry L. Helvey 32,424 (5) 1.12%
Allan J. Ludwig 2,196 (6) (12)
J. Alan Morgan 51,200 (7) 1.77%
Richard L. Pletcher 620 (8) (12)
Joseph P. Prout 7,940 (9) (12)
Terry L. Tucker 2,640 (12)
George L. White 1,320 (10) (12)
Officers and Directors 246,190 (11) 8.49%
as a Group
(14 individuals
including those
named above)
(1) The information contained in this column is based upon information
furnished to the Corporation by the persons named above and as shown on
the transfer records of the Corporation. The nature of beneficial
ownership for shares shown in this column, unless otherwise noted,
represents sole voting and investment power.
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(2) Includes 56,086 shares held by CB Farms, LLC, as to which Mr. Creighton
shares voting and investment powers; 4,094 shares held by Mr. Creighton's
Individual Retirement Account as to which he exercises both voting and
investment power; and 1,980 shares, held by Mr. Creighton's wife, with
respect to which shares he disclaims any beneficial ownership.
(3) All of which shares Mrs. Duffin owns jointly with her husband and shares
voting and investment power.
(4) This includes all shares which have been allocated to Mr. Grant under the
401(k) Plan for 1996 and all prior years.
(5) Includes 25,310 shares held individually by Mr. Helvey's wife, as to
which shares he disclaims any beneficial interest.
(6) Includes 600 shares held by Ludwig, Inc., as to which Mr. Ludwig
exercises voting and investment power.
(7) Includes 158 shares held individually by Mr. Morgan's wife, with respect
to which shares Mr. Morgan disclaims any beneficial interest.
(8) Includes 200 shares held by Mr. Pletcher's Individual Retirement Account.
Also included are 200 shares held by Mr. Pletcher's wife's Individual
Retirement Account, with respect to which shares Mr. Pletcher disclaims
any beneficial interest.
(9) Includes 2,000 shares held individually by Mr. Prout's wife, with respect
to which shares Mr. Prout disclaims any beneficial interest.
(10) Includes 1,210 shares held jointly with Mr. White's wife, with whom he
shares voting and investment power.
(11) This includes shares which have been allocated to Executive Officers
under the 401(k) Plan for 1996 and all prior years.
(12) The named director's percentage ownership of the Corporation's common
securities is less than one percent (1%).
ELECTION OF DIRECTORS
---------------------
It is intended that all shares represented by proxy will be voted "FOR"
the re-election of the incumbent directors listed below, unless otherwise
instructed.
The following table contains information with respect to nominees, whose
terms as incumbent directors expire on April 14, 1998. The information
includes service to Lake City Bank prior to the formation of Lakeland
Financial Corporation.
Term
Name Age Date Expires
---- --- ---- -------
Anna K. Duffin 64 Director since 1994 4/1998
Mrs. Duffin is active in civic affairs in the Goshen area.
L. Craig Fulmer 55 Director since 1993 4/1998
Mr. Fulmer is Chairman of Heritage Financial Group, Inc., a real
estate investment and management company based in Elkhart, Indiana.
Joseph P. Prout 69 Director since 1971 4/1998
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Mr. Prout is President of Owens Supermarkets, Inc., a food
supermarket chain.
Terry L. Tucker 57 Director since 1988 4/1998
Mr. Tucker is President of Maple Leaf Farms, Inc., which is
primarily engaged in duck production, processing and sales,
although it also processes and sells other food products.
INCUMBENT DIRECTORS
-------------------
In addition to the foregoing incumbent directors who shall stand for
election at the annual meeting April 14, 1998, the following named individuals
serve on the Board of Directors.
Term
Name Age Date Expires
---- --- ---- -------
Eddie Creighton 65 Director since 1970 4/1999
Mr. Creighton is General Manager of CB Farms, LLC, which owns and
operates Creighton Brothers, LLC and Crystal Lake, LLC, which are
involved in poultry and egg production and sales, although they also
produce and sell other agricultural and food products.
R. Douglas Grant 64 Director since 1980 4/2000
Mr. Grant has served as President of the Bank since 1980 and as
President of the Corporation since its formation. In 1993, Mr. Grant
was elected as Chairman of the Board of Directors of both the
Corporation and the Bank.
Jerry L. Helvey 64 Director since 1974 4/2000
Mr. Helvey is President of Helvey & Associates, Inc., a group of
collection agencies.
Allan J. Ludwig 59 Director since 1996 4/2000
Mr. Ludwig is an entrepreneur and industrial developer.
J. Alan Morgan 62 Director since 1974 4/1999
Mr. Morgan is retired.
Richard L. Pletcher 56 Director since 1992 4/2000
Mr. Pletcher is President of Pletcher Enterprises, Inc., a holding
company, and CEO of its principal subsidiary Amish Acres, LLC, a
heritage resort.
George L. White 65 Director since 1984 4/1999
Mr. White retired as President of United Telephone Company of
Indiana, Inc. on December 31, 1991.
No Director is a director of another "public corporation" (i.e. subject
to the reporting requirements of the Securities Exchange Act of 1934) or of
any investment company, except Mr. Fulmer who is a director of Starcraft
Corporation.
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PROPOSALS TO BE SUBMITTED TO SHAREHOLDERS
-----------------------------------------
The following proposals were adopted by the Board of Directors of the
Corporation subject to the shareholders approval at the November and December,
1997 meetings of the Board of Directors. The Board of Directors recommends
approval of each of these proposals. It is intended that all shares
represented by proxy will be voted "FOR" each proposal unless instructed
otherwise. The numbers assigned to the proposals below match the numbers on
the notice of the meeting and on the proxy.
PROPOSAL #2
INCREASE OF CAPITAL STOCK
-------------------------
The Board of Directors proposes that Article V Section 1 of the Articles
of Incorporation be amended to increase the total number of authorized shares
of the common capital stock of the Corporation from 10,000,000 to 90,000,000.
The additional shares would have the same rights as all existing shares. If
approved, Article V Section 1 would read as follows:
SECTION 1. NUMBER OF SHARES. The total number of shares which the
Corporation is to have authority to issue is 90,000,000, all of
which are without par value.
In the event the additional shares are authorized, the balance
(authorized but unissued) of 87,093,008 shares of common capital stock would
be available for issuance and use in connection with business acquisitions by
the Corporation, other types of financing (both equity and debt),
distributions to shareholders of future stock splits or dividends, shares for
the proposed 1997 Share Incentive Plan if approved by the shareholders and
other corporate purposes. The Board of Directors would have the power to issue
all or any part of such shares without further authorization of the
shareholders. Examples of such issuance and use of additional shares would
include the Corporation's acquisition of the stock or the assets of another
company, or the issuance of shares to the public in one or more transactions
to raise additional capital. In other instances, shareholders authorization
would have to be obtained, as, for example, an acquisition by means of a
statutory merger or the adoption of certain additional employee stock option
or related plans. It is the intention of the Board of Directors that the
issuance of additional shares would not be submitted to a shareholder vote
unless required by applicable law.
Although the proposed amendment is not intended to be an anti-takeover
measure, shareholders should note that, under certain circumstances, the
additional shares could be used to make any attempt to gain control of the
Corporation or the Board of Directors more difficult or time-consuming. Any of
the additional shares could be privately placed with purchasers who might side
with the Board of Directors in opposing a hostile takeover bid. It is possible
that such shares could be sold with or without an option on the part of the
Corporation to repurchase such shares, or on the part of the purchaser to put
such shares to the Corporation.
If the increase in shares is authorized, it is the intention of the Board
of Directors to use some of the authorized but unissued shares for a stock
split or dividend during 1998. Other than this, the Board of Directors has no
present intention to issue any of the additional shares either in connection
with any acquisition, any equity or other financing, or otherwise.
PROPOSAL #3
DELETE DIRECTOR'S RESIDENCY REQUIREMENT
---------------------------------------
The Board of Directors proposes that Article VII Section 3 of the
Articles of Incorporation be amended by deleting subparagraph (b), which
requires that each director reside within the Bank's Community Reinvestment
Act market area.
This requirement was included in the original Articles of Incorporation
at a time when by law the Bank was limited to conducting business in Kosciusko
County, Indiana. Since that time the laws have been changed to permit both
statewide and interstate banking. As the market area of the Bank has expanded,
the Board has from time to time considered whether or not it would be
beneficial to elect directors who reside outside the existing market area
boundaries, but whose business is conducted within the Bank's market area; or,
directors who reside in areas not covered by the Bank's market area, but
reside in an area considered to be desirable
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for expansion in the near future. Approval of this proposal will permit the
election of directors who do not reside in the Bank's Community Reinvestment
Act market area.
As the Corporation has expanded throughout north central Indiana, the
search for new directors has become more regional in nature and less focused
upon a specific county or counties. This trend will continue in the future as
the Corporation continues to expand. Deletion of the residency requirement
will permit recruitment of directors in anticipation of this expansion, rather
than in reaction to it.
If the residency requirement is deleted, the Board of Directors has no
present intention of adding a new director who lives outside the Bank's market
area. The adoption of this proposal will simply increase the pool of eligible
persons to serve on the Board of Directors at such times as the Board of
Directors consider future appointments.
PROPOSAL #4
DELETE SUPER-MAJORITY VOTING
----------------------------
The Board of Directors proposes that Article IX Section 12 of the
Articles of Incorporation be deleted in its entirety. Article IX Section 12 of
the Articles of Incorporation requires the affirmative vote of two-thirds of
the outstanding shares of the common stock of the Corporation to approve (a)
any merger or consolidation with a control person; (b) any sale, lease,
exchange or transfer of any material part of the assets of the Corporation to
any control person; and (c) any liquidation or dissolution of the Corporation.
A "control person" is defined as any person or entity which owns or controls,
directly or indirectly, 10% or more of the outstanding voting securities of
the Corporation or which has acquired 5% or more of the outstanding voting
securities of the Corporation within the twelve (12) months immediately
preceding any such vote.
The super majority voting requirements were included in the Articles of
Incorporation at the time the Corporation was formed to slow down or prevent a
hostile takeover. These provisions, much like those for directors residency,
were a proactive reaction to an unknown future hostile takeover environment
which has since proved to be nearly nonexistent. As a result, the Board of
Directors finds that these limitations could restrict its ability to manage
the Corporation, without any corresponding benefit.
If the Super-Majority provisions are deleted, the Board of Directors has
no present intention of entering into any transaction which would now require
a super-majority vote. Also, to the best knowledge of the Board of Directors
and management, there is not presently any person or entity which would
qualify as a control person.
PROPOSAL #5
CONSIDERATION OF COMMUNITY FACTORS
----------------------------------
The Board of Directors proposes that a new Article IX Section 12 be added
to the Articles of Incorporation which will require the Board of Directors to
consider the interest of community, employees and customers when considering
any merger, sale or other corporate transaction. The new Article IX Section 12
shall read as follows:
"SECTION 12. Prior to the approval of any merger, consolidation, sale,
exchange, transfer, mortgage, liquidation or dissolution of all or
substantially all of the assets of the Corporation, the Board of
Directors shall make an evaluation of all relevant factors and issues
arising out of or in connection with any such transaction and shall
report to the shareholders the conclusions which the Board of Directors
reaches from such evaluation. Relevant factors and issues shall include,
but are not limited to, consideration of the impact which any such
transaction would have on: (a) the community in which the Corporation or
its subsidiaries conducts business; (b) the employees of the Corporation
or any of its subsidiaries; and (c) the suppliers and customers of the
Corporation and its subsidiaries; and may also include any and all other
factors which the Board of Directors in its discretion deems relevant."
This provision will require that the Board of Directors take into
consideration the effect of the identified transactions on the community,
employees, suppliers and customers of the Corporation affected by a proposed
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transaction and report their conclusions to the shareholders. The shareholders
do not have to consider the report when voting their shares. The purpose of
this amendment is to ensure that the shareholders will be fully informed of
the effect of a proposed transaction on constituencies which have no vote on
the transaction but are impacted by the vote.
The Corporation and the Bank are now and have been for many years
community based organizations. Historically, the Bank and its offices have
strong roots in the communities in which they do business and a sincere effort
is made by the Bank to ensure that employees live and are active in the
communities in which they work. Moreover, many of our shareholders live and
work in these same communities. As a result, our communities and shareholders
rely upon the various offices not only for their financial needs, but as a
source of people to serve the community. With this community based philosophy
in mind, the Board of Directors believes that it is in the best interest of
the Corporation that these needs and the effects of transactions upon the
employees, communities, suppliers and customers be brought to the attention of
the shareholders before a vote is taken that may alter these relationships.
This provision might be considered as an anti-takeover provision since it
ensures that certain information is brought before the shareholders that
otherwise might not be formally considered; however, the Board of Directors
does not propose this as a means to oppose a hostile takeover, but to ensure
that any transaction (hostile or friendly) is voted upon by the shareholders
with as complete knowledge as possible of the effects of a proposed
transaction.
If this provision is adopted, the Board of Directors has no present
knowledge of any transaction to which this provision would apply.
PROPOSAL #6
APPROVAL OF 1997 SHARE INCENTIVE PLAN
-------------------------------------
The Board of Directors proposes and has approved the Lakeland Financial
Corporation 1997 Share Incentive Plan (the "1997 Plan") effective as of
December 9, 1997, subject to approval by the shareholders. A total of 300,000
shares of authorized but unissued Lakeland Financial Corporation common stock
will be reserved for use in the Plan, if it is approved, having a market value
as of February 20, 1997 of $14,100,000.00. The Plan shall be administered by a
committee of Directors who are not members of the Plan at the time of the
grant of options (the "Committee"). All employees and directors are eligible
to participate in the Plan. The Committee will designate those employees and
directors who will participate in the Plan and the number of shares to be
offered to each Participant.
The purpose of the Plan is to promote the long-term financial performance
of the Corporation by (a) attracting and retaining executive and other key
employees and directors of the Corporation and the Bank through incentive
compensation opportunities; (b) motivating such employees and directors to
further the long- term goals of the Corporation and the Bank; and (c)
furthering the identity of interests of participating employees, directors and
Corporation shareholders through opportunities for increased employee
ownership of the Corporation.
The option price is to be established by the Committee at the time of the
grant, but may not be less than the fair market value of the shares (as
reported on the NASDAQ market system) on the day before the date of the grant.
The terms of the grant will be determined by the Committee to meet the
purposes and objectives of the Plan and will be specified in a written
agreement with the employee or director. The grantee of the option will not
have any rights of a shareholder until the option is exercised and such shares
have been paid for and issued. The maximum term for which an option can be
granted is ten (10) years, although the Committee can reduce the time the
option is exercisable. Unexercised options terminate upon termination of
employment except disability, death or retirement. The complete text of the
Plan is set forth in "Exhibit A" to this Proxy Statement.
The Plan may be amended or terminated by the Committee at any time,
however the Committee must have the consent of the holders of a majority of
Corporation shares entitled to vote at a duly held meeting of shareholders to:
(a) increase the number of shares which may be issued; (b) reduce the minimum
option price; (c) increase the maximum period during which options may be
exercised; (d) extend the term of the Plan; or
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(e) amend the standards for participation. Amendment or termination of the
Plan will not affect any grant or award previously made to a participant.
The Plan is not qualified under Section 401(a) of the Internal Revenue
Code. However, some options granted under the Plan are intended to meet the
requirements of Incentive Share Options under Section 422 of the Internal
Revenue Code. An optionee granted an Incentive Share Option under the Plan
does not realize any income for tax purposes at the time an Incentive Share
Option is granted or exercised, and, if he or she does not dispose of the
shares acquired on exercise of the option for a period of two years from the
date of grant, and eighteen (18) months after exercise, the optionee will be
taxed at long-term capital gains tax rates in the year during which the shares
are sold. The Corporation will not be entitled to any deduction with respect
to the grant or the exercise of the option.
If the employee disposes of the shares at a gain before expiration of the
two year period after grant of the option, or within eighteen (18) months
after exercise of the option, the option will fail to qualify as an Incentive
Share Option and the delay of taxation described above will not apply.
Optionees may be subject to the Alternative Minimum Tax for the bargain
element of the option at the time of exercise of an Incentive Share Option.
The tax is on the amount by which Alternate Minimum Tax Income exceeds
exemptions ($33,750 for a single person, $45,000 for a joint return or
surviving spouse, and $22,500 for estates and trusts or married persons filing
separately). The tax is 26% for the first $175,000 that exceeds the
exemptions, and 28% for any additional amount that exceeds the exemptions. A
taxpayer's net capital gains are taxed at the rates of 20% and 10% for
Alternative Minimum Tax purposes pursuant to the recent tax relief legislation
passed by Congress. These exemptions will be reduced by 25 cents for each
$1.00 by which Alternative Minimum Tax Income exceeds $150,000 for joint
filers and surviving spouses, $112,500 for single tax payers and $75,000 for
married tax payers filing separately and for estates and trusts. If the
Alternative Minimum Tax is greater than the regular tax applicable to the
subject income, the excess thereof is imposed in addition to the regular tax.
The excess of the fair market value of a share (valued at the time of
exercise) over the option price of shares issued pursuant to the exercise of
an Incentive Share Option is an item of tax preference under the Alternative
Minimum Tax.
The exercise of an option may result in the Corporation's obligation to
collect from the employee and pay to governmental authorities withholding
taxes.
An option that fails to qualify as an Incentive Share Option is a
Non-Qualified Share Option and does not result in taxable income at the time
the option is granted. Upon exercise of the option, the optionee will realize
ordinary income to the extent of the difference between the fair market value
of the shares at the date of exercise and the price paid. The Corporation will
be entitled to a federal income tax deduction equal to the amount treated as
ordinary income to the employee. The amount treated as ordinary income to the
optionee under a Non-Qualified Share Option is not a tax preference item under
the Alternative Minimum Tax.
As the amount of ordinary income realized by the optionee will be treated
as compensation, it will likely be subject to applicable withholding of
federal and state income taxes and social security taxes. The Corporation will
make arrangements with the optionee, prior to the delivery of any shares
purchased, for the payment by the optionee of the amount of money required to
be so withheld by the optionee's employer.
The basis of shares in the hands of the optionee after exercise will be
equal to the price paid by the optionee plus the amount of ordinary income
realized upon exercise. A subsequent gain or loss on sale of the shares will
be taxed at ordinary income tax rates.
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EXECUTIVE OFFICERS
------------------
The following named individuals in addition to Mr. Grant serve as
executive officers of the Corporation.
Name Age Date
- ---- --- ----
Paul S. Siebenmorgen 48 Officer since 1980
Mr. Siebenmorgen presently serves as an Executive Vice President of both
the Corporation and the Bank and has served as an officer of the Bank
since 1980.
Walter L. Weldy 57 Officer since 1990
Mr. Weldy presently serves as an Executive Vice President of both the
Corporation and the Bank. He first joined Lake City Bank as a Senior Vice
President in 1990.
Terry M. White 40 Officer since 1993
Mr. White presently serves as Executive Vice President, Secretary and
Treasurer of the Corporation and the Bank. He first joined Lake City Bank
as a Senior Vice President in April, 1993. Prior to joining Lake City
Bank, Mr. White served as First Vice President, Chief Planning and
Investment Officer of Norwest, Indiana, Fort Wayne and its predecessor
Lincoln Financial Corp. from December, 1985 to March, 1993.
There are no arrangements or understandings between any of the directors,
executive officers, or any other persons pursuant to which any of the
Corporation's directors or executive officers have been selected for their
respective positions.
COMPLIANCE WITH SECTION 16(a)
-----------------------------
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Corporation pursuant to Securities and Exchange Act Rule
16a-3(e) during its most recent fiscal year and Form 5 and amendments thereto
furnished to the Corporation with respect to its most recent fiscal year, no
director or executive officer failed to file on a timely basis, as disclosed
in the above forms, reports required by Section 16(a) of the Securities
Exchange Act of 1934, except Mr. Weldy who filed one late report.
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
----------------------------------------------
All members of the Board of Directors of the Corporation also serve as
members of the Board of Directors of the Bank. The Board of Directors held 12
regularly scheduled meetings during 1997. The Board of Directors has, in
addition to other committees, an Audit Committee and a Compensation Committee.
There is no Nominating Committee.
The Audit Committee, comprised of Anna K. Duffin, Richard L. Pletcher,
Terry L. Tucker and George L. White, held 12 meetings during 1997. The
functions performed by the Audit Committee include: making recommendations to
the Board of Directors with respect to selection of the Corporation's
independent auditors; reviewing the independence of the independent auditors;
reviewing actions by management on the independent auditors' and internal
auditors' recommendations; meeting with management, the internal auditors and
the independent auditors to review the effectiveness of the Corporation's
system of internal control and internal audit procedures; and reviewing
reports of bank regulatory agencies and monitoring management's compliance
with recommendations contained in those reports. To promote independence of
the audit function, the committee consults separately and jointly with the
independent auditors, the internal auditors and management.
The Compensation Committee comprised of L. Craig Fulmer, R. Douglas
Grant, Jerry L. Helvey and George L. White held 2 meetings during 1997. The
functions performed by the Compensation Committee
9
<PAGE>
include making recommendations to the full Board of Directors with respect to
officer's salaries and setting awards in accord with the Corporation's benefit
plans.
DIRECTORS' ATTENDANCE
---------------------
During 1997, no director attended less than 75% of the total number of
meetings they were eligible to attend, except Mr. Morgan who attended 38%, Mr.
Prout who attended 63% and Mr. Tucker who attended 71%.
EXECUTIVE COMPENSATION
----------------------
Shown below is the compensation paid by the Corporation, and its
subsidiary, for the years 1997, 1996 and 1995 to each of its executive
officers in an amount exceeding $100,000.
SUMMARY COMPENSATION TABLE(1)
-----------------------------
Annual Compensation
-------------------
(a) (b) (c) (d (e)
Name and All other
Principal Position Year Salary($) Bonus($) Compensation($)(2)
- ------------------ ---- --------- -------- ------------------
R. Douglas Grant 1997 260,000 73,500 17,167
Chairman, President 1996 210,000 66,500 22,914
and Chief Executive 1995 190,000 66,000 27,714
Officer
Paul S. Siebenmorgen 1997 112,538 24,998 10,200
Executive Vice President 1996 95,230 22,727 12,476
1995 86,580 23,529 11,345
Walter L. Weldy 1997 89,408 17,436 8,763
Executive Vice President 1996 73,534 11,425 10,534
1995 65,285 11,857 8,900
Charles D. Smith 1997 89,000 13,860 7,477
Senior Vice President 1996 79,250 12,557 10,126
of Bank 1995 71,754 13,000 9,582
(1) The Corporation does not maintain any Long-Term Compensation Plans or
programs for its executive officers.
(2) The amounts set forth in column (e) for Mr. Grant, Mr. Siebenmorgen, Mr.
Weldy and Mr. Smith include the following:
401(k) Plan matching contributions, including Supplemental 401(k), paid
by the Corporation($)
Mr. Grant Mr. Siebenmorgen Mr. Weldy Mr. Smith
1997 - 11,875* 8,440* 6,706 6,690
1996 - 18,000 11,427 8,824 9,504
1995 - 22,800 10,390 7,834 8,610
*1997 Supplemental 401(k) contributions not yet available.
10
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PENSION PLAN TABLE
------------------
The Corporation's defined benefit retirement plan covers all employees
over 21 years of age with more than one year of service. The benefit is
computed on the basis of average salary or wages for the five (5) years
preceding retirement which produces the highest benefit. Normal retirement age
is 65. Participants receive credit for 2-1/2% of their average salary for each
year up to 20 years service. The principal benefit under the plan is a
lifetime annuity for the joint lives of participants and their spouses. This
amount is offset by social security benefits. On December 31, 1985, the then
existing plan was terminated and the current plan was adopted effective
January 1, 1986. Participants in the terminated plan were paid cash or
received annuities for their earned benefits as of December 31, 1985. The
amounts paid for annuities purchased as a part of the plan termination will
reduce the benefits to be paid out of the new plan. Mr. Grant and Mr.
Siebenmorgen received annuities costing $33,286 and $1,878, respectively, as a
part of the plan termination.
Remuneration Years of Credited Service
- ------------ -------------------------
15 20 25 30 35
--------------------------------------------------------
100,000 37,500 50,000 50,000 50,000 50,000
150,000 56,250 75,000 75,000 75,000 75,000
200,000 75,000 100,000 100,000 100,000 100,000
250,000 93,750 125,000 125,000 125,000 125,000
300,000 112,500 150,000 150,000 150,000 150,000
350,000 131,250 175,000 175,000 175,000 175,000
400,000 150,000 150,000 150,000 150,000 150,000
450,000 168,750 225,000 225,000 225,000 225,000
500,000 187,500 250,000 250,000 250,000 250,000
The amounts shown above include amounts payable under a Supplemental
Employees Retirement Plan which is a non-qualified plan payable as a general
creditor of the Corporation. In 1989, the Corporation amended its defined
benefit plan and the amendments could result in highly compensated employees
receiving a reduced pension benefit. The Supplemental Employee Retirement Plan
did not create any new benefits, but was adopted to offset any such reduction
in pension benefits.
The salaries and bonuses shown in the Summary Compensation Table for Mr.
Grant, Mr. Siebenmorgen, Mr. Weldy and Mr. Smith approximate covered
compensation under the plan. Mr. Grant, Mr. Siebenmorgen, Mr. Weldy and Mr.
Smith had 19, 17, 7 and 11 years of credited service respectively at December
31, 1997.
COMPENSATION COMMITTEE INTERLOCKS
and
INSIDER PARTICIPATION
----------------------------------
During 1997, this Committee consisted of Mr. Fulmer, Mr. Grant, Mr.
Helvey, and Mr. White. Inside directors (full-time employees of the
Corporation) serving on the Compensation Committee are asked to leave the
meeting during the time the Committee is deliberating their compensation or
that of their superiors, but inside directors do participate in evaluating and
establishing the salaries of other executive officers. Mr. Grant, the
President and Chief Executive Officer of the Corporation, participated during
1997 in establishing the salaries of all executive officers except his own.
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
------------------------------------
The Compensation Committee has furnished the following report on
Executive Compensation.
11
<PAGE>
General
- -------
The Corporation annually reviews executive officer compensation in
December with the new compensation to become effective on the following
January 1. In establishing executive compensation the Corporation has
historically divided compensation into two (2) separate components: salary and
bonus. When fixing an individual executive officer's compensation these two
(2) components are intended to work together to compensate the executive
officer fairly for his services and reward the executive officer based upon
the Corporation's performance during the year. The Corporation further
encourages the executive officers and all employees to acquire a personal
interest in the long-term success of the Corporation through stock ownership
under the Corporation's 401(k) Plan. The Board of Directors retains final
approval over executive compensation.
Salary
- ------
Executive officer salaries are established by the Corporation based upon
a wide variety of factors, including prior years salary, duties and
responsibilities, evaluations by supervisors, and salaries for comparable
positions paid by similarly situated financial institutions. When establishing
the salary of executive officers other than Mr. Grant, Mr. Grant participates
and makes recommendations to the Committee. Furthermore, the Committee has
available copies of an annual survey of financial institution salaries paid by
Indiana banks published by the Indiana Banker's Association and also a salary
survey prepared by Crowe, Chizek and Company, LLP. Using this information the
Committee establishes salaries using an informal and subjective analysis,
primarily focused upon paying competitive salaries sufficient to retain the
services of its executive officers without paying salaries which are
significantly greater than those paid by similarly situated financial
institutions. Although overall profitability of the Corporation is a factor in
establishing executive officer salaries, no specific weight is given to
financial performance. Likewise, consideration is given to the performance of
the Corporation's stock during the preceding several years, but no specific
weight is given to this factor. The salary paid to Mr. Grant, as President and
Chief Executive Officer, during 1997 as shown in the Summary Compensation
Table of the Proxy Statement was based upon the Board's satisfaction in 1996
with the overall profitability of the Corporation and performance of the
Corporation's stock and retaining his services for future years, without any
specific reference being made to qualitative or quantitative performance
factors. Similar considerations were used in establishing Mr. Grant's 1998
salary.
Bonus
- -----
Executive officer bonuses, including Mr. Grant's, are determined by an
established Executive Incentive Compensation Program which is periodically
reviewed by the Committee. The Bonus Program applies to all executive officers
of the Corporation, as well as designated officers of the Bank. As
established, the Committee retains the right to modify the Program and/or
withhold payment at any time. Historically, payments have not been withheld
since its adoption. The Bonus Program is designed to encourage the Executive
Officers to maximize the annual profits of Lake City Bank with an incentive to
conserve capital. During its December 1997 review, the Committee chose not to
modify the Bonus Program or withhold payment for fiscal year 1997. On December
31, 1993, the Corporation and Bank adopted provisions of Statement of
Financial Accounting Standard ("SFAS") 115 which requires recognition of
unrealized gains or losses on certain debt and equity securities held in the
Bank's investment securities portfolio at year end. For purposes of the Bonus
Program, unrealized gains and losses in the investment securities portfolio of
the Bank are excluded from equity capital.
Bonuses are computed on the Return on Investment (Shareholders' Equity).
It is based upon net profit (after taxes) and includes all realized securities
gains and losses (including tax effect), before payment of bonuses and
contributions to the 401(k) Plan. The year end Return on Investment computed
on the January 1 shareholders' equity must equal or exceed 12% or no bonus is
paid. Thereafter, based upon an established schedule, a percentage of each
eligible officer's salary is paid as a bonus.
As established, the Bonus Program provides that the President and Chief
Executive Officer of the Corporation receives two (2) times the established
percentage for his bonus and the Executive Vice Presidents receive one and one
half (1 1/2) times the established percentage for their bonuses. For 1996 the
Return on Investment established a 17.5% bonus payable in 1997. Bonuses for
officers receiving promotions during the year are prorated.
12
<PAGE>
Stock Ownership
- ---------------
The Corporation encourages all employees, including executive officers,
to acquire its stock and participate in its long-term growth. To facilitate
this, the Corporation has adopted the Lakeland Financial Corporation 401(k)
Plan (the "Plan") effective January 1, 1984, which includes as an option
investment in Corporation stock. Under the Plan employees are eligible to
redirect up to 9% of their regular basic compensation into a tax deferred
trust. All employees 21 years of age and older having more than 1 year service
with the Bank or the Corporation are eligible to participate in the Plan;
however, participation is voluntary. The Plan requires that the Corporation
make matching contributions for participants under certain conditions
described below. Corporation matching contributions are made on up to 6% of
each participant's regular basic compensation. In those years in which the
Corporation has paid a dividend to its shareholders, the Corporation will make
a matching contribution to the Plan according to the following schedule based
upon the net earnings of the Corporation, before making any deductions for
employee incentive plans, expressed as a percentage of the January 1 equity
capital of the Corporation:
Percentage of Percentage Match of
Equity Capital Participant Contributions
---------------- -------------------------
Less than 13.00% 25%
13.00% to 14.99% 50%
15.00% to 16.99% 75%
17.00% to 18.99% 100%
19.00% to 20.99% 125%
21.00% to 22.49% 150%
22.50% to 23.99% 175%
24.00% or more 200%
Due to the adoption of SFAS 115 requiring the recognition of unrealized
gains and losses in certain of the investment securities portfolios,
commencing in 1993, equity capital is defined as the total of the capital
stock, surplus and retained earnings accounts, excluding the equity accounts
relating to market valuation adjustments as defined in SFAS 115. The matching
contributions may, at the election of each participant, be invested in any one
or more of six equity and income accounts, one of which holds stock of the
Corporation exclusively. All Corporation stock held by the trust is purchased
by independent agents in open market transactions and voting power is
exercised by the individual participants. Participant accounts are distributed
to the individual participants upon termination of employment and may include
Corporation stock. All participants are always 100% vested in their salary
redirections and become 100% vested in Corporation contributions upon
retirement, disability or in accordance with the schedule shown below.
Years of Service 401(k) Percentage Vested
----------------- ------------------------
Less than 3 years 0%
3 years 20%
4 years 40%
5 years 60%
6 years 80%
7 years or more 100%
The contributions made to the Plan for 1997, 1996 and 1995 on behalf of
Mr. Grant, Mr. Siebenmorgen, Mr. Weldy and Mr. Smith are shown in footnote 2
to the Summary Compensation Table of the Proxy Statement. During 1994, a
Supplemental 401(k) Plan was adopted to offset benefit reductions for senior
executive officers. This new plan did not create any new benefits and is used
solely to offset required reductions in the 401(k) Plan. Contributions to the
Supplemental 401(k) Plan may not be invested in Corporation stock. The
officers who participate in this Supplemental 401(k) Plan have no interest in
the trust established under the plan, but are general creditors.
Approved by the Lakeland Financial Corporation Compensation Committee as
of December 31, 1997.
13
<PAGE>
L. Craig Fulmer Jerry L. Helvey, Chairman
R. Douglas Grant George L. White
STOCK PRICE PERFORMANCE
-----------------------
The Stock Price Performance Graph below shall not be deemed incorporated
by reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933 or under the
Securities Exchange Act of 1934, except to the extent Lakeland Financial
Corporation specifically incorporates this information by reference, and shall
not otherwise be deemed filed under such Acts.
The graph below compares cumulative total return* of Lakeland Financial
Corporation, the NASDAQ Market Index and a Peer Group Index.
The following table was presented as a graph in the proxy material mailed
to the shareholders.
Lakeland
Financial Peer
Date Corporation Group NASDAQ
-------- ----------- --------- ---------
1/1/93 $ 100.00 $ 100.00 $ 100.00
12/31/93 132.63 126.49 119.95
12/31/94 179.26 131.94 125.94
12/31/95 217.14 172.04 163.35
12/31/96 323.58 208.39 202.99
12/31/97 522.09 336.10 248.30
* Assumes $100 invested on January 1, 1993 and that all dividends were
reinvested.
The Peer Group selected for display in the above graph is all banks in
the United States with total assets of less than one billion dollars whose
equity securities were traded on an organized exchange for the last five (5)
consecutive years.
DIRECTORS' COMPENSATION
-----------------------
During 1997, directors who were not full time employees of the
Corporation, or its subsidiaries, were paid an annual fee of $6,000.00 and an
additional $275.00 for each meeting of the Board attended and $275.00 for each
committee meeting attended. They are not eligible to participate in the 401(k)
Plan or the Defined Benefit Plan. Inside directors (those who are full time
employees of the Corporation or its subsidiaries) are not paid a director's
fee. Directors are permitted to defer receipt of their director's fees and
earn a rate of return based upon the Bank's six (6) month certificate of
deposit rates. Effective January 1, 1997, this plan was broadened to add an
option to permit the directors to earn a return based upon the performance of
Corporation stock rather than the certificate of deposit rate. The Corporation
may, but is not required to, fund the deferred
14
<PAGE>
fees into a trust which may hold Corporation stock. The plan is unqualified
and the directors have no interest in the trust. The deferred fees and any
earnings thereon are unsecured obligations of the Corporation. Any shares held
in the trust are treated as treasury shares and may not be voted.
INDEBTEDNESS OF MANAGEMENT
--------------------------
During 1997, the Bank had extended, and expects to continue to extend,
loans to its directors and officers and to their related interests. Such loans
were, and will continue to be, made only upon the same terms, conditions,
interest rates, and collateral requirements as those prevailing at the same
time for comparable loans extended from time to time to other, unrelated
borrowers. Loans to directors and officers do not and will not involve greater
risks of collectability, or present other unfavorable features, than loans to
other borrowers.
INDEPENDENT PUBLIC ACCOUNTANTS
------------------------------
During 1997, Crowe, Chizek and Company, LLP again served as the
Corporation's Independent Public Accountants. As of this date no determination
has been made as to selection of Independent Public Accountants for 1998. As a
matter of practice for the past several years, the Directors have not made a
final decision on selection of Independent Public Accountants until after the
completion of all audit services for the prior year. This includes portions of
the Corporation's 10-K which is not completed as of the date of this proxy
statement. A representative of Crowe, Chizek and Company, LLP is not expected
to be present at the annual meeting of the Corporation.
PROPOSALS OF SHAREHOLDERS
-------------------------
Any proposal which any shareholder may intend to present at the annual
meeting to be held in 1999 must be received by the Corporation on or before
the 16th day of November, 1998, if such proposal is to be included in the
Proxy Statement and Form of Proxy pertaining to the 1999 Annual Meeting.
GENERAL
-------
ON YOUR WRITTEN REQUEST ADDRESSED TO SECRETARY, LAKELAND FINANCIAL
CORPORATION AT P.O. BOX 1387, WARSAW, INDIANA 46581-1387, A COPY OF LAKELAND
FINANCIAL CORPORATION'S ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL
STATEMENTS AND SCHEDULES THERETO, WILL BE PROVIDED WITHOUT CHARGE TO YOU.
As of the date of this Proxy Statement, management knows of no matters to
be brought before the annual meeting other than the matters outlined in this
Proxy Statement. If, however, further business should properly be introduced
by others, proxy holders will act in accordance with their own best judgment.
-------------------------------------------
R. Douglas Grant, President
15
<PAGE>
APPENDIX A
"EXHIBIT A"
LAKELAND FINANCIAL CORPORATION 1997 SHARE INCENTIVE PLAN
The Form S-8 relating to the registration of shares to be issued pursuant
to the 1997 Share Incentive Plan, if approved by the shareholders, will be
filed with the Securities and Exchange Commission on or before May 15, 1998.
This page will not be included with the proxy materials mailed to
shareholders, the following "EXHIBIT A" will be included in the mailing to
shareholders.
<PAGE>
"EXHIBIT A"
LAKELAND FINANCIAL CORPORATION 1997 SHARE INCENTIVE PLAN
Section 1
---------
General
-------
1.1 EFFECTIVE DATE AND PURPOSE. Lakeland Financial Corporation, an Indiana
corporation ("Lakeland"), has established the LAKELAND FINANCIAL
CORPORATION 1997 QUALIFIED SHARE INCENTIVE PLAN (the "Plan") effective as
of December 9, 1997 (the "Effective Date"), subject to approval of the
Plan at the 1998 Annual Meeting of Lakeland shareholders by the holders
of a majority of the shares of Lakeland entitled to vote at that meeting.
The purpose of the Plan is to promote the long-term financial performance
of Lakeland by (a) attracting and retaining executive and other key
employees and directors of Lakeland and its Subsidiaries, as they may
exist from time to time (as defined in subsection 2.1) who possess
outstanding abilities with incentive compensation opportunities which are
competitive with those of other major corporations; (b) motivating such
employees and directors to further the long- range goals of Lakeland; and
(c) furthering the identity of interests of participating employees,
directors, and Lakeland shareholders through opportunities for increased
employee ownership of Lakeland common shares.
1.2 PLAN ADMINISTRATION. The Plan shall be administered by the Committee (as
described below). In addition to those rights, duties and powers vested
in the Committee by other provisions of the Plan, the Committee shall
have sole authority to:
(a) interpret the provisions of the Plan;
(b) adopt, amend and rescind rules and regulations for the administration
of the Plan;
(c) impose such limitations, restrictions and conditions upon grants and
awards under the Plan as it shall deem appropriate; and
(d) make all other determinations deemed by it to be necessary or
advisable for the administration of the Plan;
provided that the Committee shall exercise its authority in accordance
with the provision of the Plan. The Committee may not exercise its
authority at any time that it has fewer than two members. The Committee
shall exercise its authority only by a majority vote of its members at a
meeting or by a written consent without a meeting. Actions and
interpretations of the Plan by the Committee shall be binding on
participating employees and on Lakeland.
At any date, the members of the Committee shall be those members of
the Board of Directors of Lakeland who are Disinterested Persons, that is
a director who is not, during the one (1) year preceding service on the
Committee, or during such service, granted or awarded equity securities
pursuant to the Plan or any other plan of Lakeland or a Subsidiary or
other affiliate, except that:
(x) participation in a Lakeland employee benefit plan that complies
with Regulation Section 240.16b-3 shall not disqualify a director from
being a Disinterested Person;
(y) an election to receive a director's fee in either cash or
securities, or partly in cash or partly in securities, shall not
disqualify a director from being a Disinterested Person; and
(z) participation in a plan shall not disqualify a director from
being a Disinterested Person for purposes of administering another plan
that does not permit participation by directors.
16
<PAGE>
From time to time the Board may increase the size of the Committee
and appoint additional members thereof, remove members, and appoint new
members in substitution, but in all events such new members shall be
Disinterested Persons. Lakeland shall indemnify the members of the
Committee for actions taken or not taken in their capacities as
administrators of the Plan.
1.3 SHARES AVAILABLE. The sum of the number of common shares of Lakeland for
which Incentive Share Options ("ISO" or "ISOs") and Non-Qualified Share
Options ("NQSO" or "NQSOs") (both as defined in Section 3.1) may be
granted may not exceed 300,000, subject to the adjustments described
below. If all or a portion of an ISO or NQSO expires or is terminated
without having been exercised in full, then the number of shares which
are forfeited or not purchased shall again be available for purposes of
making grants under this Plan. The common shares of Lakeland delivered
pursuant to the Plan shall be authorized but unissued shares or
reacquired shares held by Lakeland as treasury shares (including shares
purchased in the open market). In the event of a merger, consolidation,
reorganization, recapitalization, share dividend, share split or other
similar change in the corporate structure or capitalization of Lakeland
which affects the Lakeland common shares, appropriate adjustment, as
determined by the Board of Directors of Lakeland (or its successor),
shall be made with respect to the number and kinds of shares (or other
securities) which may thereafter be awarded or be subject to options
under the Plan. Agreements evidencing grants and awards under the Plan
shall be subject to and shall provide for appropriate adjustments, as
determined by the Board of Directors of Lakeland (or its successor) in
the event of such changes in the corporate structure or capitalization of
Lakeland occurring after the date of grant or award.
1.4 TERM, AMENDMENT AND TERMINATION OF PLAN. Grants and awards may not be
made under the Plan after the earlier of [9 years and 364 days from the
date listed above as the Effective Time], or the termination date of the
Plan. The Committee may amend or terminate the Plan at any time except
that, without the approval of the holders of a majority of Lakeland
shares entitled to vote at a duly held meeting of such shareholders, the
Committee may not:
(a) increase the number of common shares which may be issued under the
Plan, except as provided in subsection 1.3;
(b) reduce the minimum option price under any share option, except as
provided in subsection 1.3;
(c) increase the maximum period during which ISOs and NQSOs may be
exercised;
(d) extend the term of the Plan; or
(e) amend the standards for participation described in Section 2.
In addition, the Committee may amend or modify any outstanding
option in any manner to the extent that the Committee would have had the
authority to initially grant such option as so modified or amended,
including without limitation, to change the date or dates as of which an
option becomes exercisable.
Amendment or termination of the Plan shall not affect the validity
of terms of any grant or award previously made to a Participant in any
way which is adverse to the Participant without the consent of the
Participant.
1.5 COMPLIANCE WITH APPLICABLE LAW. The Committee may postpone any exercise
of an ISO or NQSO for such time as the Committee in its discretion may
deem necessary in order to permit Lakeland (a) to effect or maintain
registration of the Plan or common shares issuable pursuant to the Plan
under the Securities Act of 1933, as amended, or the securities laws of
any applicable jurisdiction; (b) to take any action necessary to comply
with restrictions or regulations incident to the maintenance of a public
market for Lakeland common shares; or (c) to determine that no action
referred to in (a) or (b) above needs to be taken. Lakeland shall not be
obligated to issue shares upon exercise of an ISO or an NQSO in violation
of any law or regulation. Any such postponement shall not without action
of the Committee extend the term of an ISO or NQSO. Neither Lakeland, nor
its directors or officers, shall
17
<PAGE>
have any obligation or liability to any Participant (or successor in
interest) because of the loss of rights under any grant or award under
the Plan due to postponements pursuant to this subsection.
1.6. WITHHOLDING TAXES. Lakeland and its Subsidiaries shall have the right to
require payment, in cash or in equivalent value in Lakeland common
shares, from any person entitled to receive Lakeland common shares
pursuant to the Plan of the amount of any tax required by law to be
withheld with respect to that share.
Section 2
---------
Plan Participation
------------------
2.1 PARTICIPATION DESIGNATIONS. The Committee may, at any time, designate any
person to be a Participant who is either (i) employed by Lakeland or a
Subsidiary, or (ii) a member of the Board of Directors of Lakeland. For
purposes of the Plan, the term "Subsidiary" means any corporation of
which, at any date, Lakeland owns directly, or indirectly through an
unbroken chain of subsidiary corporations, shares possessing 50 percent
or more of the total combined voting power of all classes of shares of
that corporation.
2.2 PARTICIPATION IS NOT A CONTRACT OF EMPLOYMENT. The Plan does not
constitute a contract of employment. Participating in the Plan does not
give any employee the right to be retained in the employ of Lakeland or a
Subsidiary and does not limit in any way the right of Lakeland or a
Subsidiary to change the duties or responsibilities of any employee.
Section 3
---------
Share Options
-------------
3.1 GRANTEES. The Committee may, at any time, designate a Participant to
receive an ISO or NQSO whether or not the Participant has previously
received a grant under the Plan. For purposes of the Plan, the terms
"ISO" or "Incentive Share Option" mean an option to purchase Lakeland
common shares which meet the requirements of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code") and the terms "NQSO" or
"Non-Qualified Share Option" means an option to purchase Lakeland common
shares which is not an Incentive Share Option. Each ISO and NQSO granted
under the Plan shall be evidenced by a written agreement between the
Participant and Lakeland in a form approved by the Committee. The
provisions of each agreement shall be determined by the Committee in
accordance with the provisions of the Plan. A Participant shall not have
any rights of a shareholder of Lakeland common shares with respect to
shares subject to an ISO or NQSO until such shares are purchased upon
exercise of the option.
3.2 NUMBER OF SHARES OPTIONED AND OPTION PRICE. The Committee shall, subject
to the limitations of subsection 1.3 and this Section 3, determine the
number of Lakeland common shares which may be purchased and the option
price of each share on exercise of each ISO and NQSO granted under the
Plan. Non-employee members of the Board of Directors of Lakeland shall be
eligible only to receive NQSOs. The amount of the aggregate Fair Market
Value of shares with respect to ISOs that are exercisable for the first
time by any Participant during any calendar year shall not exceed
$100,000; to the extent they do, they shall be treated as NQSOs. The
foregoing limitation shall be applied by taking options into account in
the order in which they were granted. In the event and to the extent
limits on the maximum number of shares for which ISOs may be granted
under Code Section 422(b) shall be increased, the maximum number of
shares or amount for which ISOs may be granted under this Plan and other
plans shall be similarly increased. The option price of each share under
an ISO or NQSO shall not be less than 100 percent of the Fair Market
Value of a common share of Lakeland on the date the option is granted.
For purposes of the Plan, the term "Fair Market Value" means the closing
price of a Lakeland common share, as reported by the National Association
of Securities Dealers Automated Quotations system on the day preceding
the date of grant, or, in the event the share was not traded on such
date, on the first date that the share was so traded which next precedes
the date as of which the determination is being made. Provided, however,
if a Participant, at the time
18
<PAGE>
an option is granted, owns shares possessing more than ten percent (10%)
of the total combined voting power of all classes of shares of Lakeland,
or any subsidiary corporations, as the case may be, then the option price
of an ISO shall be not less than one hundred ten percent (110%) of the
Fair Market Value of a Lakeland common share on the date the option is
granted. For purposes of applying this rule, the rules of Code Section
424(d) relating to attribution of share ownership shall apply in
determining share ownership of the Participant, and shares that the
Participant may purchase under other outstanding options shall not be
treated as shares owned by the Participant.
3.3 EXERCISE OF ISOS AND PAYMENTS. Each ISO and NQSO shall become exercisable
in full at such time, or in such portions at such times, as the Committee
determines, subject to the following provisions of this subsection 3.3.
Each grant shall vest and may be exercised in the time period set forth
in the terms of the grant, except as provided in Section 3.4. During any
period that an ISO or NQSO is exercisable, it may be exercised by
delivering a written notice to Lakeland at its principal office by
registered or certified mail stating the number of shares with respect to
which the ISO is being exercised and specifying a date not less than five
(5) nor more than 15 days after the receipt of such notice on which the
shares will be taken up and payment made therefore. Payment may be made
in (a) cash, or (b) in the event the Committee shall so authorize such an
exchange, in Lakeland common shares with an aggregate Fair Market Value
as of the closing of trading on the trading day immediately preceding the
date of exercise equal to the purchase price, or in any combination of
cash and, if authorized by the Committee, such shares, or (c) in options
to purchase Lakeland common shares with an aggregate Fair Market Value as
of the close of trading on the trading day immediately preceding the date
of exercise equal to the purchase price. Once an ISO or NQSO is
exercised, those shares acquired pursuant to that ISO must be held for a
period of at least one (1) year before there may be a disposition.
3.4 TERMINATION OF ISOS. Each ISO and NQSO shall terminate and not be
exercisable after the date determined by the Committee, on the earlier of
(a) the tenth (10th) anniversary of the date that the option was granted;
(b) the date upon which the Participant's employment with Lakeland and
all Subsidiaries terminates for reasons other than described in (c) or
(d) next following; (c) the first anniversary of the date the
Participant's employment with Lakeland and all Subsidiaries terminates on
account of death or Disability (as defined in Section 22(e)(3) of the
Code); or (d) the first anniversary of the Participant's retirement, or
such later date as may be approved by the Committee, from employment by
Lakeland or a Subsidiary. Provided, in the event the Participant owns
greater than ten percent (10%) of the common shares of Lakeland at the
time an option is granted, the termination date described in (a), above,
shall be modified in respect of such option granted at or after such time
to read the fifth (5th) anniversary of the date that the option was
granted.
3.5 TRANSFERABILITY. No ISO or NQSO granted to a Participant may be
transferred by the Participant except by will or the laws of descent and
distribution, and, except as respects exercise within the period
described at Section 3.4(d), above, may be exercisable during the
Participant's lifetime only by the Participant.
3.6 CHANGE IN CONTROL. Notwithstanding anything to the contrary contained
herein, any option granted pursuant to the Plan that has been held by a
Participant for a period of at least two (2) years or by a transferee for
a period of at least one (1) year shall, in the case of a change in
control ("Change in Control"), as hereinafter defined, become fully
exercisable as to all shares, irrespective of any restrictions on vesting
or staged exercisabililty of such options, from and after the date of
such Change in Control and shall, subject to the expiration provisions of
Section 3.4(a), above, remain exercisable for a period of three (3)
months following the employee's termination of employment with Lakeland
or any Subsidiary, if said termination occurs within one (1) year after
the date of the Change in Control.
The term "Change in Control" shall mean a Change in Control of a nature
such that (1) it would be required to be reported by a person or entity
subject to the reporting requirements of Section 14(a) of the Securities
Exchange Act of 1934 in response to Schedule 14A of Regulation 14A, or
successor provisions thereto, as in effect on the date hereof, (2) a
"person" or "group" (as those terms are used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934), is or becomes the "beneficial
owner" (as defined in Rule 13d-3 issued under the Securities Exchange
Act), directly or indirectly, of
19
<PAGE>
securities of Lakeland, representing in excess of thirty percent (30%) of
the voting securities of Lakeland then outstanding, followed by the
election by said person or group of one or more representatives to the
Board of Directors of Lakeland; (3) a person or group, as hereinabove
defined, is or becomes the beneficial owner, directly or indirectly, of
securities of Lakeland, representing in excess of fifty percent (50%) of
the voting securities of Lakeland then outstanding, whether or not
followed by the election by said person or group of one or more
representatives to the Board of Directors of Lakeland; or (4) any other
event, including but not limited to those set forth in paragraphs (1)
through (3) above, which shall have the effect of placing control of the
business and affairs of Lakeland in a person or group as hereinabove
defined, other than or different from the present shareholders of
Lakeland.
LAKELAND FINANCIAL CORPORATION
By ----------------------------------------
R. Douglas Grant, President
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APPENDIX B
FORM OF PROXY
<PAGE>
LAKELAND FINANCIAL CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints R. Douglas Grant and Terry M. White
proxies with full power of substitution to vote all Common Stock of Lakeland
Financial Corporation held of record by the undersigned on February 23, 1998,
at the annual meeting of shareholders on April 14, 1998, or any adjournment
thereof.
1. Election of Directors for all nominees listed below: [ ]
Withhold authority to vote for all nominees listed below: [ ]
Anna K. Duffin, L. Craig Fulmer, Joseph P. Prout, Terry L.
Tucker
Instruction: To withhold authority to vote for any
individual nominee write that nominee's name on the space
provided below.
---------------------------------------------------------
2. Directors' proposal to increase capital stock [ ]For [ ]Against
3. Directors' proposal to delete Director's residency
requirement from Articles of Incorporation [ ]For [ ]Against
4. Directors' proposal to delete super-majority voting
from Articles of Incorporation [ ]For [ ]Against
5. Directors' proposal to add consideration of community
factors to Articles of Incorporation [ ]For [ ]Against
6. Directors' proposal to approve Lakeland Financial
Corporation 1997 Share Incentive Plan [ ]For [ ]Against
7. In their discretion the proxies are authorized to vote
upon such other business as may properly come before
the meeting [ ]For [ ]Against
Unless otherwise specified, the proxies are appointed to vote for the
proposals. This proxy when properly executed will be voted in the manner
directed by the undersigned shareholder(s).
- --------------------------- --------------------------- DATED , 1998
Signature of shareholder Signature of shareholder ---------
Please sign exactly as your name is printed hereon. When signing as
attorney, executor, administrator, personal representative, trustee or
guardian, please give full title.
If a corporation, please sign in
full corporate name by authorized
office. If a partnership, please
sign in partnership name by
authorized person. Please mark,
sign, date and return promptly in
the enclosed envelope.
