COMMUNITY
TRUST BANCORP, INC.
346
North Mayo Trail
Pikeville,
Kentucky 41501
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
TO
BE HELD APRIL 25, 2006
The
Annual Meeting of Shareholders of Community Trust Bancorp, Inc. will be held
at
Community Trust Bank, Inc., 346 North Mayo Trail, Pikeville, Kentucky, on
Tuesday, April 25, 2006 at 10:00 a.m. EDT for the following
purposes:
1. To
elect
a Board of eight Directors to hold office until the next Annual Meeting of
Shareholders and until their successors are elected and qualify.
2. To
consider and approve the proposed 2006 Stock Ownership Incentive
Plan.
3.
To
ratify and approve the
appointment of Deloitte & Touche LLP as the Corporation's Independent
Registered Public Accounting Firm for the fiscal year ending December 31,
2006.
4. To
transact such other business as may properly come before the meeting or any
adjournment thereof.
Only
those holders of stock of record at the close of business on February 28, 2006
are entitled to notice of and to vote at the Annual Meeting and any adjournment
thereof.
The
Proxy
Statement describing matters to be considered at the Annual Meeting is attached
to this notice.
We
hope
you will attend the meeting and vote your shares in person.
By
Order
of the Board of Directors
/s/
Jean
R. Hale
Jean
R.
Hale
Chairman,
President and CEO
Pikeville,
Kentucky
March
31,
2006
IMPORTANT
WHETHER
OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE MARK, DATE, AND SIGN
THE
ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE, WHICH DOES NOT REQUIRE
ANY POSTAGE IF MAILED IN THE U.S. IN THE EVENT YOU ATTEND THE MEETING, YOU
MAY
REVOKE YOUR PROXY AND VOTE YOUR SHARES IN PERSON AT ANY TIME BEFORE YOUR PROXY
IS EXERCISED.
Community
Trust Bancorp, Inc.
346
North Mayo Trail
Pikeville,
Kentucky 41501
PROXY
STATEMENT
Annual
Meeting of Shareholders
to
be held April 25, 2006
INTRODUCTION
This
Proxy Statement and accompanying proxy are furnished in connection with the
solicitation of proxies by the Board of Directors of Community Trust Bancorp,
Inc. (the "Corporation") for use at the Annual Meeting of Shareholders (the
"Annual Meeting") to be held on Tuesday, April 25, 2006, at 10:00 a.m. (EDT),
at
Community Trust Bank, Inc., 346 North Mayo Trail, Pikeville, Kentucky, and
any
adjournments thereof. A copy of the Corporation's 2005 Annual Report to
Shareholders accompanies this Proxy Statement.
The
cost
of solicitation of proxies will be borne by the Corporation. In addition to
the
use of the mail, proxies may be solicited in person, by telephone and other
means of communication by directors, officers, and other employees of the
Corporation, none of whom will receive additional compensation for such
services. The Corporation will also request brokerage houses, custodians, and
nominees to forward soliciting materials to the beneficial owners of stock
held
of record by them and will pay the reasonable expenses of such persons for
forwarding such materials. This Proxy Statement and the accompanying proxy
are
first being mailed or given to shareholders of the Corporation on or about
March
31, 2006.
RECORD
DATE AND VOTING SECURITIES
The
Common Stock of the Corporation ("Common Stock") is the only class of
outstanding voting securities. Only holders of Common Stock of record at the
close of business on February 28, 2006 (the "Record Date") are entitled to
notice of and to vote at the Annual Meeting. At the Record Date, there were
15,009,954 shares of Common Stock outstanding. With respect to the election
of
directors, shareholders have cumulative voting rights. Accordingly, each
shareholder will have the right to cast as many votes in the aggregate as equals
the number of shares of Common Stock held by the shareholder multiplied by
the
number of directors to be elected at the Annual Meeting. Each shareholder may
cast all of his or her votes for one candidate or distribute such votes among
two or more candidates. Shareholders will be entitled to one vote for each
share
of Common Stock held of record on the Record Date with regard to all other
matters that properly come before the Annual Meeting or any adjournment
thereof.
Each
proxy, unless the shareholder otherwise specifies, will be voted in favor of
the
election of the eight nominees for director named herein, the approval of the
2006 Stock Ownership Incentive Plan, and the appointment of Deloitte &
Touche LLP as the Corporation's Independent Registered Public Accounting Firm
for the fiscal year ending December 31, 2006. Where a shareholder has
appropriately specified how the proxy is to be voted, it will be voted
accordingly. As to any other matter which may properly be brought before the
Annual Meeting or any adjournment thereof, a vote may be cast pursuant to the
accompanying proxy in accordance with the judgment of the person or persons
voting the proxy. A shareholder may revoke his or her proxy at any time prior
to
its exercise. Revocation may be effected by written notice to the Corporation,
by a subsequently dated proxy received by the Corporation, by oral revocation
in
person at the Annual Meeting or any adjournment thereof, or by voting in person
at the Annual Meeting or any adjournment thereof.
A
majority of the outstanding shares present in person or by proxy is required
to
constitute a quorum to transact business at the Annual Meeting. Abstentions
will
be treated as present for purposes of determining a quorum, but as unvoted
shares for purposes of determining the approval of any matter submitted to
the
shareholders for a vote. If a broker indicates that it does not have
discretionary authority as to certain shares to vote on a particular matter,
such shares will not be considered as present and entitled to vote with respect
to such matter.
PRINCIPAL
SHAREHOLDERS
The
following table sets forth information as to each shareholder known by the
Corporation to beneficially own more than five percent of the Common Stock
as of
the Record Date.
|
Beneficial
Owners
|
Amount
and Nature
|
Percent
|
|
|
Name
and Address
|
of
Beneficial Ownership
|
of
Class
|
|
|
Community
Trust and Investment Company
|
1,468,821
(1)
|
9.8%
|
|
|
As
Fiduciary
|
|||
|
100
East Vine St., Suite 400
|
|||
|
Lexington,
Kentucky 40507
|
(1)
The
shares indicated are held by Community Trust and Investment Company, a
subsidiary of the Corporation, in fiduciary capacities as trustee, executor,
agent, or otherwise. Of the shares indicated, Community Trust and Investment
Company has sole voting rights with respect to 1,319,228 shares and no voting
rights with respect to 149,593 shares. Community Trust and Investment Company
has shared investment authority with respect to 84,478 shares and sole
investment authority with respect to 253,285 shares.
ELECTION
OF DIRECTORS
The
Corporation's directors are elected at each annual meeting of the shareholders
and hold office until the next election of directors or until their successors
are duly elected and qualify. The persons named below, all of whom currently
serve as directors of the Corporation, have been nominated for election to
serve
until the 2007 Annual Meeting of Shareholders. The following table sets forth
certain information respecting the persons nominated to be directors of the
Corporation as of the Record Date:
|
Amount
and
|
||||||||
|
Positions
|
Nature
of
|
|||||||
|
And
|
Director
|
Principal
|
Beneficial
|
Percent
|
||||
|
Name
and Age (1)
|
Offices*
|
Since
|
Occupation
(2)
|
Ownership
|
(3)
|
of
Class
|
||
|
Charles
J. Baird; 56
|
Director
|
1987
|
Shareholder,
Baird and Baird, P.S.C.
|
304,401
|
(5)
|
2.0%
|
||
|
Nick
A. Cooley; 72
|
Director
|
1980
|
President,
Unit Coal Corporation
|
59,644
|
(4)
|
|||
|
William
A. Graham, Jr.; 69
|
Director
|
1990
|
Chairman
of the Advisory Board, Flemingsburg Market, Community Trust Bank,
Inc.
|
101,296
|
(4)
|
|||
|
Jean
R. Hale; 59
|
Chairman,
President and CEO
|
1993
|
Chairman,
President and CEO, Community Trust Bancorp, Inc.
|
198,230
|
(6)
|
1.3%
|
||
|
James
E. McGhee, II; 48
|
Director
|
2005
|
Vice
President, Dyno East Kentucky
|
3,542
|
(4)
|
|||
|
M.
Lynn Parrish; 56
|
Director
|
1993
|
Chairman,
Knott Floyd Land Co., Inc.
|
103,451
|
(7)
|
(4)
|
||
|
Paul
E. Patton; 68
|
Director
|
2004
|
Former
Governor of Kentucky
|
7,173
|
(8)
|
(4)
|
||
|
Dr.
James R. Ramsey; 57
|
Director
|
2003
|
President,
University of Louisville
|
770
|
(4)
|
|||
|
All
directors and executive officers as a group
|
922,507
|
(9)
|
6.1%
|
|||||
|
(17
in number including the above named individuals)
|
||||||||
*Jean
R.
Hale is also a director of Community Trust Bank, Inc. and Community Trust and
Investment Company.
| (1) |
The
ages listed are as of February 28,
2006.
|
| (2) |
Each
of the nominees has been engaged in the principal occupation specified
above for five years or more, except Jean R. Hale, Dr. James R. Ramsey,
and Governor Paul E. Patton. Ms. Hale was promoted from President
and CEO
of Community Trust Bancorp, Inc. to Vice Chairman of the Board in
April
2001 and to Chairman of the Board on December 31, 2004. Dr. Ramsey
has
been President of the University of Louisville since November 2002.
From
August 1999 until November 2002, Dr. Ramsey served as Senior Executive
of
the University of Louisville, and from August 1999 through November
2002,
Dr. Ramsey served in various positions with the Commonwealth of Kentucky,
including State Budget Director, Senior Policy Advisor, and Interim
Commissioner of the Office of New Economy. Governor Patton was elected
as
Kentucky's 59th
governor in 1995. After serving eight years as Governor, he is now
retired
from public office and volunteers his time as a fund-raiser at Pikeville
College.
|
| (3) |
Under
the rules of the Securities and Exchange Commission, a person is
deemed to
beneficially own a security if the person has or shares the power
to vote
or direct the voting of such security, or the power to dispose or
to
direct the disposition of such security. A person is also deemed
to
beneficially own any shares which that person has the right to acquire
beneficial ownership within sixty days. Shares of Common Stock subject
to
options exercisable within sixty days are deemed outstanding for
computing
the percentage of class of the person holding such options but are
not
deemed outstanding for computing the percentage of class for any
other
person. Unless otherwise indicated, the named persons have sole voting
and
investment power with respect to shares held by
them.
|
| (4) |
Less
than 1 percent.
|
| (5) |
Includes
17,196 shares held as trustee under various trust agreements established
by Mr. Baird’s mother, Florane J. Baird, for her grandchildren and 222,205
shares held as trustee of the Bryan M. Johnson Testamentary Trust
FBO
Rosemary Dean.
|
| (6) |
Includes
76,580 shares which Ms. Hale may acquire pursuant to options exercisable
within sixty days of the Record Date and 48,198 shares held in the
KSOP
(the Corporation's combination of Employee Stock Ownership and 401K
Plans)
which Ms. Hale has the power to
vote.
|
| (7) |
Includes
103,451 shares beneficially owned by Mr. Parrish held in MLP Limited
Partnership over which Mr. Parrish has sole voting and investment
power.
|
| (8) |
Excludes
9,961 shares held by Governor Patton's wife, over which Governor
Patton
has no voting or investment power.
|
| (9) |
Includes
163,961 shares which may be acquired by all directors and executive
officers as a group pursuant to options exercisable within sixty
days of
the Record Date.
|
Unless
authority to do so is withheld, it is the intention of the persons named in
the
proxy to vote for the election of each of the nominees listed above. All
nominees have indicated a willingness to serve and the Corporation does not
anticipate that any of the above nominees will decline or be unable to serve
if
elected as a director. However, in the event that one or more of such nominees
is unable, unwilling or unavailable to serve, the persons named in the proxy
shall have authority, according to their judgment, to vote for such substitute
nominees as they, after consultation with the Corporation's Board of Directors,
shall determine. If considered desirable, cumulative voting will be exercised
by
the persons named in the proxy to elect as many of such nominees as
possible.
The
Nominating and Corporate Governance Committee assists the Board in identifying
qualified persons to serve as directors of the Corporation. The Committee will
evaluate proposed director nominees, including incumbent directors prior to
recommending renomination. The Nominating and Corporate Governance Committee
selects as candidates for nomination individuals of high personal and
professional integrity and ability who can contribute to the Board’s collective
effectiveness in serving the interests of the Corporation’s
shareholders.
The
Nominating and Corporate Governance Committee will consider candidates nominated
by shareholders. The Nominating and Corporate Governance Committee will evaluate
candidates recommended by shareholders on the same basis as it evaluates any
other properly recommended nominee. Shareholders who desire to recommend a
candidate for election at the next annual meeting of stockholders should submit
the name of the candidate and information concerning the qualifications of
the
candidate by mail to the Nominating and Corporate Governance Committee at the
Corporation’s address on or before December 31, 2006.
The
following persons are executive officers of Community Trust Bancorp, Inc. as
of
the Record Date. They are not nominated to serve as directors. Their security
ownership as of the Record Date is as follows:
|
Name
|
Position
|
Amount
and Nature of Beneficial Ownership
|
Percent
of
Class
|
||
|
James
B. Draughn
|
Executive
Vice President
|
12,598
|
(2)
|
(1)
|
|
|
James
J. Gartner
|
Executive
Vice President
|
3,577
|
(3)
|
(1)
|
|
|
Mark
A. Gooch
|
Executive
Vice President and Secretary
|
74,669
|
(4)
|
(1)
|
|
|
Larry
W. Jones
|
Executive
Vice President
|
3,380
|
(5)
|
(1)
|
|
|
Tracy
E. Little
|
Executive
Vice President
|
2,249
|
(6)
|
(1)
|
|
|
Richard
W. Newsom
|
Executive
Vice President
|
16,212
|
(7)
|
(1)
|
|
|
Ricky
D. Sparkman
|
Executive
Vice President
|
6,294
|
(8)
|
(1)
|
|
|
Kevin
J. Stumbo
|
Executive
Vice President and Treasurer
|
6,756
|
(9)
|
(1)
|
|
|
Michael
S. Wasson
|
Executive
Vice President
|
18,265
|
(10)
|
(1)
|
|
| (1) |
Less
than 1 percent.
|
| (2) |
Includes
5,269 shares which Mr. Draughn may acquire pursuant to options exercisable
within sixty days of the Record Date and 7,329 shares held in KSOP
which
Mr. Draughn has the power to vote.
|
| (3) |
Includes
2,819 shares which Mr. Gartner may acquire pursuant to options exercisable
within sixty days of the Record Date and 758 shares held in KSOP
which Mr.
Gartner has the power to vote.
|
| (4) |
Includes
60,674 shares which Mr. Gooch may acquire pursuant to options exercisable
within sixty days of the Record Date and 13,557 shares held in KSOP
which
Mr. Gooch has the power to vote.
|
| (5) |
Includes
2,493 shares which Mr. Jones may acquire pursuant to options exercisable
within sixty days of the Record Date and 524 shares held in KSOP
which Mr.
Jones has the power to vote.
|
| (6) |
Includes
1,214 shares which Mr. Little may acquire pursuant to options exercisable
within sixty days of the Record Date and 725 shares held in KSOP
which Mr.
Little has the power to vote.
|
| (7) |
Includes
5,066 shares which Mr. Newsom may acquire pursuant to options exercisable
within sixty days of the Record Date and 11,146 shares held in KSOP
which
Mr. Newsom has the power to vote.
|
| (8) |
Includes
2,277 shares which Mr. Sparkman may acquire pursuant to options
exercisable within sixty days of the Record Date and 4,017 shares
held in
KSOP which Mr. Sparkman has the power to
vote.
|
| (9) |
Includes
1,012 shares which Mr. Stumbo may acquire pursuant to options exercisable
within sixty days of the Record Date and 5,744 shares held in KSOP
which
Mr. Stumbo has the power to vote.
|
| (10) |
Includes
6,557 shares which Mr. Wasson may acquire pursuant to options exercisable
within sixty days of the Record Date and 2,609 shares held in KSOP
which
Mr. Wasson has the power to vote.
|
INFORMATION
CONCERNING THE BOARD OF DIRECTORS
Directors
of the Corporation, excluding the Chairman of the Audit Committee, who are
not
also officers of the Corporation, were paid $5,000 per quarter for 2005, plus
$600 for any Committee or special-called Board meeting other than those held
on
the same day as the regularly scheduled quarterly Board meeting. The Chairman
of
the Audit Committee was paid $6,250 per quarter for 2005 plus $600 for any
special-called Board meeting other than those held on the same day as the
regularly scheduled quarterly Board meeting. Directors who are also officers
of
the Corporation did not receive additional compensation for serving as a
director. Fees paid to Directors of the Corporation for 2005 totaled
$170,600.
The
Board
of Directors has determined that the following six of the Corporation’s eight
directors are “independent” as defined by applicable law and NASDAQ listing
standards: Nick A. Cooley, William A. Graham, Jr., M. Lynn Parrish, Dr. James
R.
Ramsey, Governor Paul E. Patton, and James E. McGhee, II. Mr. Parrish has been
selected by the Board of Directors as the "lead independent
director."
During
2005, the Board held four executive sessions of those members of the Board
who
met current standards of independence.
Corporate
Governance Guidelines and the Code of Business Conduct and Ethics adopted by
the
Board may be found on the Corporation’s website at www.ctbi.com.
Shareholders
may communicate directly with the Board of Directors by sending a written
communication addressed to the Chairman of the Board of Directors at the
Corporation’s address.
The
Board
of Directors held seven meetings during the 2005 fiscal year, including the
annual organizational meeting. Each director attended at least 75% of the
aggregate number of Board meetings and meetings of Board committees on which
such director served in 2005, except Nick A. Cooley who attended 61% of the
meetings. It is the Board’s policy that directors should attend each annual
meeting of shareholders subject to a substantial personal or business conflict.
All of the Corporation’s directors who were serving at the time attended the
2005 annual meeting of shareholders, except William A. Graham, Jr. who was
unable to attend due to a substantial personal conflict. The Board has the
following committees: Audit and Asset Quality Committee, Compensation Committee,
Executive Committee, Nominating and Corporate Governance Committee, Risk and
Compliance Committee, and Corporate Retirement and Employee Benefit
Committee.
The
Audit
and Asset Quality Committee (the "Audit Committee") Charter was last amended
in
2004 and therefore is not included herein. The Audit Committee Charter may
be
found on the Corporation's website at www.ctbi.com.
The
Audit Committee consists of Dr. James R. Ramsey, William A. Graham, Jr., Nick
A.
Cooley, M. Lynn Parrish, Governor Paul E. Patton, and James E. McGhee, II,
all
of whom meet the independence standards of Rule 4200(a)(15) and the audit
committee qualifications of Rule 4350(d)(2) of the NASDAQ listing standards.
The
Board has determined that Dr. James R. Ramsey is an audit committee financial
expert for the Corporation and is independent as described above. The Audit
Committee met thirteen times during 2005. The Audit Committee monitors the
integrity of the Corporation’s financial statements, the independent registered
public accounting firm’s qualifications and independence, the performance of the
Corporation’s internal audit function, the Corporation’s system of internal
controls, the Corporation’s financial reporting and system of disclosure
controls, and compliance with the Corporate Governance Guidelines and Code
of
Business Conduct and Ethics. The Audit Committee has established procedures
for
the confidential, anonymous submission of concerns about accounting matters,
internal controls, and auditing matters.
The
Compensation Committee consists of Nick A. Cooley, M. Lynn Parrish, and Governor
Paul E. Patton, all of whom meet the applicable independence standards. The
Compensation Committee Charter may be found on the Corporation's website at
www.ctbi.com.
The
Compensation Committee: (i) oversees and recommends to the Board executive
officer compensation; and (ii) evaluates and approves benefit and incentive
compensation policies and programs for the Corporation. This committee met
twice
during 2005.
The
Nominating and Corporate Governance Committee consists of M. Lynn Parrish,
Nick
A. Cooley, and James E. McGhee, II, all of whom meet the applicable independence
standards. The Nominating and Corporate Governance Committee Charter can also
be
found on the Corporation's website at www.ctbi.com.
The
Nominating and Corporate Governance Committee: (i) evaluates and recommends
nominee directors for election to the Board; and (ii) develops and recommends
to
the Board policies and guidelines relating to corporate governance and the
identification and nomination of directors and committee members. This
committee met once during 2005.
REPORT
OF THE AUDIT AND ASSET QUALITY COMMITTEE
The
Audit
and Asset Quality Committee oversees the Corporation's financial reporting
process on behalf of the Board of Directors. Management has the responsibility
for the preparation of the Corporation's consolidated financial statements
and
management's assertion on the design and effectiveness of the Corporation's
internal control over financial reporting, and the independent registered public
accounting firm has the responsibility for the examination of those consolidated
financial statements. In fulfilling its oversight responsibilities, the
Committee reviewed the audited consolidated financial statements of the
Corporation as of and for the year ended December 31, 2005 and management's
assertion on the design and effectiveness of the Corporation's internal control
over financial reporting as of December 31, 2005 with management and the
independent registered public accounting firm.
All
directors who serve on the Committee are "independent" for purposes of the
NASDAQ listing standards. The Board of Directors has determined that none of
the
Committee members has a relationship to the Corporation that may interfere
with
his independence from the Corporation and its management.
The
Committee reviewed with the independent registered public accounting firm,
which
is responsible for expressing an opinion on the conformity of those audited
financial statements with accounting principles generally accepted in the United
States of America, their judgments as to the quality, not just the
acceptability, of the Corporation's accounting principles and such other matters
as are required to be discussed with the Committee under auditing standards
generally accepted in the United States of America. Additionally, the
Committee's review included discussion with the Corporation's independent
registered public accounting firm of matters required to be discussed pursuant
to Statement on Auditing Standards No. 61 ("SAS 61") (Communication with Audit
Committees). SAS 61 requires the Corporation's independent registered public
accounting firm to provide the Committee with additional information regarding
the scope and results of their audit of the Corporation's financial statements,
including with respect to (i) their responsibility under audit standards
generally accepted in the United States of America, (ii) significant accounting
policies, (iii) management judgments and estimates, (iv) any significant audit
adjustments, (v) any disagreements with management, and (vi) any difficulties
encountered in performing the audit.
The
Committee received from Deloitte & Touche LLP a letter providing the
disclosures required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees) with respect to any
relationships between Deloitte & Touche LLP and the Corporation that, in
their professional judgment, may reasonably be thought to bear on independence.
Deloitte & Touche has discussed its independence with the Committee and has
confirmed in such letter that, in its professional judgment, it is independent
of the Corporation within the meaning of the federal securities
laws.
The
Committee discussed with the Corporation's internal auditors and independent
registered public accounting firm the overall scope and plans for their
respective audits. The Committee met with its internal auditors and independent
registered public accounting firm, with and without management present, to
discuss the results of their examinations, their evaluations of the
Corporation's internal controls, and the overall quality of the Corporation's
financial reporting. The Committee held thirteen meetings during fiscal year
2005.
In
reliance on the reviews and discussions referred to above, the Committee
recommended to the Board of Directors that the audited financial statements
be
included in the Annual Report on Form 10-K for the year ended December 31,
2005
for filing with the Securities and Exchange Commission. The Committee has also
recommended, subject to shareholder ratification, the selection of Deloitte
& Touche LLP as the Corporation’s independent registered public accounting
firm.
Dr.
James
R. Ramsey, Chairman M.
Lynn
Parrish, Vice Chairman
Nick
A.
Cooley, Member William
A. Graham, Jr., Member
James
E.
McGhee, II, Member Governor
Paul E. Patton, Member
March
24,
2006
INTEREST
OF MANAGEMENT IN CERTAIN TRANSACTIONS
In
the
ordinary course of business, the Corporation, through its wholly-owned
commercial bank subsidiary, Community Trust Bank, Inc. (the "Bank"), has had
in
the past and expects to have in the future banking transactions, including
lending to its directors, officers, principal shareholders, and their
associates. When these banking transactions are credit transactions, they are
made in the ordinary course of business, on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with others. In the opinion of the Corporation's Board
of Directors, such transactions do not involve more than the normal risk of
collectability or present any other unfavorable features.
Mr.
Charles J. Baird, a director of the Corporation, is a shareholder in Baird
and
Baird, P.S.C., a law firm that provided services to the Corporation and its
subsidiaries during 2005 and will be retained by the Corporation and its
subsidiaries during the fiscal year 2006. Approximately $744,000 in legal fees
and $168,183 in expenses paid on behalf of the Corporation, $912,183 in total,
were paid to Baird and Baird, P.S.C. during 2005.
SECTION
16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section
16(a) of the Securities Exchange Act of 1934 (the "Act") requires the
Corporation's executive officers and directors and persons who own more than
ten
percent (10%) of the Common Stock to file initial reports of ownership and
changes in ownership with the Securities and Exchange Commission ("SEC"), as
well as to furnish the Corporation with a copy of such report. Additionally,
SEC
regulations require the Corporation to identify in its Proxy Statement those
individuals for whom one of the referenced reports was not filed on a timely
basis during the most recent fiscal year. Based upon a review of Forms 3, 4,
and
5 furnished to the Corporation, the Corporation believes that there was one
late
filing during 2005. One Form 4, "Statement of Changes in Beneficial Ownership
of
Securities," was inadvertently filed past the due date with regard to one
transaction on behalf of Tracy E. Little, Executive Vice President of the
Corporation.
EMPLOYMENT
CONTRACTS, TERMINATION OF EMPLOYMENT AND
CHANGE-IN-CONTROL
ARRANGEMENTS
As
of
December 31, 2005, the Corporation had executed certain termination of
employment and change-in-control agreements ("Severance Agreements") with each
of its executive officers. The following table shows the date on which each
Severance Agreement was executed.
|
Name
|
Date
of Execution
|
|
Jean
R. Hale
|
January
23, 1999
|
|
Mark
A. Gooch
|
January
1, 2000
|
|
Michael
S. Wasson
|
October
24, 2000
|
|
James
B. Draughn
|
July
24, 2001
|
|
Kevin
J. Stumbo
|
April
23, 2002
|
|
Richard
W. Newsom
|
April
23, 2002
|
|
Ricky
D. Sparkman
|
April
23, 2002
|
|
James
J. Gartner
|
January
28, 2003
|
|
Larry
W. Jones
|
January
28, 2003
|
|
Tracy
E. Little
|
March
6, 2004
|
The
Severance Agreements are effective for a term equal to the longer of three
years
or the covered period should a change-in-control of the Corporation occur during
such three-year period. These agreements are automatically renewable for
additional one-year periods, and the covered period during which the terms
and
conditions of the Severance Agreements are effective is the period of time
following a change-in-control equal to (i) two years following the occurrence
of
the change-in-control in the event of an involuntary termination or a voluntary
termination following a change in duties, or (ii) the thirteenth month following
the change-in-control in the event of a voluntary termination not preceded
by a
change in duties.
The
Severance Agreements require the payment to the applicable named executive
officer of a severance amount in the event of an involuntary or voluntary
termination of employment after a change-in-control of the Corporation during
the covered period. The severance amount payable under the Severance Agreements
is equal to (i) 2.99 times the named executive officer's base annual salary
in
the event of involuntary termination or in the event of a voluntary termination
of employment preceded by a change in duties subsequent to a change-in-control
of the Corporation, or (ii) 2.00 times the named executive officer's annual
base
salary in the event of a voluntary termination of employment not preceded by
a
change in duties subsequent to a change-in-control of the
Corporation.
A
change-in-control occurs, for purposes of the Severance Agreements, when (i)
any
person, including a group under Section 13(d)(3) of the Securities Exchange
Act
of 1934, is or becomes the owner of 30% or more of the combined voting power
of
the Corporation’s outstanding securities; (ii) as a result of, or in connection
with, any tender offer, exchange offer, merger or other combination, sale of
assets or contested election, the persons who were directors of the Corporation
before such transaction(s) cease to constitute a majority of the Board of
Directors of the Corporation or successor of the Corporation; (iii) a tender
or
exchange offer is made and consummated for the ownership of 30% or more of
the
combined voting power of the Corporation's outstanding voting securities; or
(iv) the Corporation transfers substantially all of its assets to another
corporation that is not a wholly-owned subsidiary of the
Corporation.
EXECUTIVE
COMPENSATION
The
following table sets forth the total annual compensation paid or accrued by
the
Corporation to or for the account of the Chief Executive Officer and each of
the
other four most highly compensated executive officers of the Corporation for
the
fiscal year ended December 31, 2005.
SUMMARY
COMPENSATION TABLE
|
Annual
Compensation
|
Long-Term
Compensation
|
||||
|
Name
and
Principal
Position
|
Year
|
Salary
($)
|
Bonus
(1)
($)
|
Options
(2)
(#)
|
All
Other
Compensation
(3)
($)
|
|
Jean
R. Hale (4)
|
2005
|
321,193
|
32,000
|
9,552
|
20,150
|
|
Chairman,
President and
|
2004
|
296,104
|
29,500
|
8,250
|
17,566
|
|
Chief
Executive Officer
|
2003
|
275,000
|
0
|
12,390
|
17,341
|
|
Mark
A. Gooch
|
2005
|
244,219
|
24,500
|
7,284
|
17,638
|
|
Executive
Vice President
|
2004
|
224,480
|
22,500
|
5,500
|
15,454
|
|
and
Treasurer
|
2003
|
209,218
|
0
|
9,293
|
15,134
|
|
Michael
S. Wasson
|
2005
|
168,498
|
16,800
|
5,212
|
14,342
|
|
Executive
Vice President
|
2004
|
161,337
|
16,110
|
2,750
|
9,903
|
|
2003
|
153,917
|
0
|
7,005
|
9,950
|
|
|
Tracy
E. Little (5)
|
2005
|
161,198
|
15,600
|
4,856
|
11,938
|
|
Executive
Vice President
|
2004
|
153,046
|
15,000
|
19,250
|
20,378
|
|
2003
|
61,917
|
0
|
0
|
18,136
|
|
|
Larry
W. Jones (6)
|
2005
|
151,802
|
15,010
|
4,664
|
13,116
|
|
Executive
Vice President
|
2004
|
145,845
|
14,430
|
2,750
|
11,498
|
|
2003
|
145,668
|
20,000
|
1,770
|
3,015
|
|
| (1) |
With
the exclusion of the one-time signing bonus paid to Mr. Jones in
2003, all
bonuses were paid under the Senior Management Incentive Compensation
Plan,
which is open to all executive officers, market presidents, and
consolidated division heads and certain senior vice presidents of
consolidated functions who are selected for participation by the
Compensation Committee. Individuals below senior vice president level
may
be recommended and approved by the Compensation Committee for special
awards of options for extraordinary performance. Bonuses for executive
officers are earned based on the Corporation reaching certain earnings
per
share and return on assets goals. (See Report of the Compensation
Committee.)
|
| (2) |
The
options were granted under the 1998 Stock Option Plan (the "Option
Plan").
The Option Plan permits the grant of options to employees of the
Corporation and its subsidiaries whose efforts contribute, or may
be
expected to contribute materially, to the successful performance
of the
Corporation.
|
| (3) |
Amounts
in this column include contributions made by the Corporation under
the
KSOP Plan and relocation expenses. For 2005, all amounts listed are
KSOP
Plan contributions. For 2004 and 2003, all amounts are KSOP Plan
contributions, except the amounts shown for Mr. Little which consist
partially of relocation expenses in 2004 and solely of relocation
expenses
in 2003. Participation in the KSOP Plan is available to any employee
of
the Corporation or its subsidiaries who has been employed for one
year,
completed 1,000 hours of service, and attained the age of 21
("Participant"). Through December 31, 2005, Participants could contribute
1% to 15% of their annual salary to the 401K portion of the Plan
and the
Corporation would contribute 50% of the Participant’s first 8% of
contributions. The Corporation also contributes a base percentage
of each
Participant's salary as determined annually by the Board of Directors
to
the ESOP portion of the Plan. For 2005, 2004, and 2003, the Corporation
made a base contribution of 4% of each Participant’s annual salary to the
ESOP portion of the Plan.
|
| (4) |
On
April 24, 2001, Ms. Hale became Vice Chairman of the Board of Directors
of
the Corporation, and upon the retirement of Burlin Coleman on December
31,
2004, she became Chairman of the Board.
|
| (5) |
Mr.
Little began employment with the Corporation on August 4, 2003. Prior
to
joining the Corporation, Mr. Little served for three years in Sarasota,
Florida as Vice President of Fisher Investments, Inc., a $10 billion
private investment firm headquartered in Woodside, California. For
the two
years prior, he served as Senior Vice President and Executive Officer
in
charge of the private client group of Provident Bank of Florida.
Mr.
Little has thirty-seven years in the trust and banking business and
has
been the executive in charge of five different trust departments
and trust
companies.
|
| (6) |
Mr.
Jones was employed by AmSouth Bancorp, a $35 billion financial services
corporation, as District/City President for three years prior to
joining
the Corporation in 2002. Mr. Jones was employed by First American
National
Bank as Division Manager for north Mississippi for one year prior
to its
merger with AmSouth in 1999. For the thirty years prior, Mr. Jones
was
employed by Deposit Guaranty National Bank, formerly Security State
Bank,
prior to its merger with First American National Bank most recently
as
President/Community Bank.
|
The
following table sets forth the information regarding options granted to the
named executive officers in 2005.
OPTIONS/SAR
GRANTS IN LAST FISCAL YEAR
|
Individual
Grants
|
Potential
Realizable Value at Assumed Annual Rates of Stock Price Appreciation
for
Option Term (2)
|
|||||
|
Number
of
|
Percent
of Total
|
|||||
|
Securities
|
Options/SARs
|
Exercise
|
||||
|
Underlying
|
Granted
to
|
or
Base
|
||||
|
Options/SARs
|
Employees
|
Price
|
Expiration
|
|||
|
Name
|
Granted
(1) (#)
|
in
Fiscal Year
|
($/SH)
|
Date
|
5%
($)
|
10%
($)
|
|
Jean
R. Hale
|
9,552
|
8.84%
|
30.88
|
01/28/2015
|
185,533
|
470,175
|
|
Mark
A. Gooch
|
7,284
|
6.74%
|
30.88
|
01/28/2015
|
141,481
|
358,538
|
|
Michael
S. Wasson
|
5,212
|
4.83%
|
30.88
|
01/28/2015
|
101,235
|
256,549
|
|
Tracy
E. Little
|
4,856
|
4.50%
|
30.88
|
01/28/2015
|
94,321
|
239,026
|
|
Larry
W. Jones
|
4,664
|
4.32%
|
30.88
|
01/28/2015
|
90,591
|
229,575
|
| (1) |
Options
granted as senior management incentive options in the 1998 Option
Plan
become exercisable in equal 25% installments beginning one year after
the
date of the grant and become fully exercisable upon a change in control
of
the Corporation. Options granted as management retention options
in the
1998 Option Plan become exercisable after five years and become fully
exercisable upon a change in control of the Corporation. Options
expire if
not exercised ten years after the date of the
grant.
|
| (2) |
These
amounts, based on assumed appreciation rates of 5% and 10%, rates
prescribed by the Securities and Exchange Commission rules, are not
intended to forecast possible future appreciation, if any, of the
common
stock price. Moreover, these values do not take into consideration
the
provisions of the options providing for nontransferability, vesting
over a
period of years or termination of the options following termination
of
employment. The amounts shown are pre-tax and assume the options
will be
held throughout the entire ten-year term. Actual gains, if any, are
dependent upon the future performance of the common stock, as well
as the
continued employment of the option holder through the vesting
periods.
|
The
following table sets forth information concerning options exercised by the
named
executive officers during 2005 and the number and value of unexercised options
held by the named executive officers of the Corporation at December 31, 2005.
No
SARs were held by the named executive officers at December 31,
2005.
AGGREGATE
OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND
FISCAL YEAR-END OPTIONS/SAR VALUES
|
Shares
Acquired on Exercise (#)
|
Value
Realized ($)
|
Number
of Securities Underlying Unexercised Options/SARs at Fiscal Year-End
(#)
|
Value
of Unexercised In-the-Money Options/SARs at Fiscal Year-End ($)
(1)
|
|||
|
Name
|
Exercisable
|
Unexercisable
|
Exercisable
|
Unexercisable
|
||
|
Jean
R. Hale
|
35,431
|
818,314
|
57,785
|
50,617
|
890,699
|
529,109
|
|
Mark
A. Gooch
|
20,000
|
379,780
|
43,219
|
40,724
|
678,418
|
457,289
|
|
Michael
S. Wasson
|
26,620
|
622,908
|
3,502
|
18,120
|
34,204
|
137,616
|
|
Tracy
E. Little
|
0
|
0
|
0
|
24,106
|
0
|
44,894
|
|
Larry
W. Jones
|
0
|
0
|
885
|
34,919
|
8,644
|
305,035
|
(1) Based
on
the closing price of the common stock at December 31, 2005.
REPORT
OF THE COMPENSATION COMMITTEE
The
principal duties of the Compensation Committee are to review the compensation
of
executive officers of the Corporation and make recommendations to the Board
for
approval. Compensation for executive officers consists of base salary, bonus,
and stock options under the Option Plan.
The
total
compensation package, including base salaries, is set at levels the Compensation
Committee believes are sufficient to attract and retain qualified executives.
It
is the goal of the Compensation Committee to retain quality executives, which
will mutually benefit the executives and the Corporation. The Compensation
Committee believes its total compensation package is in line with compensation
packages offered by other companies within the Corporation's peer group of
bank
holding companies with total consolidated assets of one to three billion
dollars. This peer group is not the peer group used to construct the performance
graph contained in this proxy statement.
Bonuses
to executive officers are computed under the senior management incentive plan,
which is open to all senior executives. The bonuses for the executive officers
are based on earnings per share and return on assets of the
Corporation.
The
number of stock options granted is also determined under the terms of the senior
management incentive plan and issued under the Option Plan. The number of stock
options granted to each executive officer is based on earnings per share and
return on assets of the Corporation. Upon approval by the Compensation
Committee, stock options may also be issued to senior executives for management
retention purposes. All options granted to executive officers during 2005 were
senior management incentive options.
The
salary of Jean R. Hale, the Chief Executive Officer, was not tied to stock
performance in 2005. The Compensation Committee believes the compensation of
the
Chief Executive Officer is in line with the chief executive officer compensation
of other companies in the peer group of bank holding companies with total
consolidated assets of one to three billion dollars. Ms. Hale's bonus and number
of stock options were determined based on the criteria applicable to all other
executive officers as described above.
OBRA
Deductibility Limitation.
The
Omnibus Budget Reconciliation Act of 1994 ("OBRA") prohibits the tax deduction
by public companies of compensation of certain executive officers in excess
of
$1 million, unless certain criteria are met. The Corporation has determined
not
to take any action at this time with respect to its compensation plans to seek
to meet these criteria.
During
2005, there were no interlocking relationships between any executive officers
of
the Corporation and any entity whose directors or executive officers serve
on
the Board of Directors' Compensation Committee.
M.
Lynn
Parrish, Chairman
Nick
A.
Cooley, Vice Chairman
Governor
Paul E. Patton, Member
March
24,
2006
COMMON
STOCK PERFORMANCE
The
following graph shows the cumulative return experienced by the Corporation's
shareholders during the last five years compared to the NASDAQ Stock Market's
National Market and the NASDAQ Bank Stock Index. The graph assumes the
investment of $100 on December 31, 2000 in the Corporation's common stock and
in
each index and the reinvestment of all dividends paid during the five-year
period.
Comparison
of 5 Year Cumulative Total Return
among
Community Trust Bancorp, Inc., NASDAQ Stock Market (U.S.),
and
NASDAQ Bank Stocks
|
Fiscal
Year Ending December 31 ($)
|
||||||
|
|
2000
|
2001
|
2002
|
2003
|
2004
|
2005
|
|
Community
Trust Bancorp, Inc.
|
100.00
|
165.26
|
198.41
|
269.35
|
325.95
|
319.60
|
|
NASDAQ
Stock Market (U.S.)
|
100.00
|
79.32
|
54.84
|
81.99
|
89.22
|
91.12
|
|
NASDAQ
Bank Stocks
|
100.00
|
108.27
|
110.84
|
142.58
|
163.17
|
159.40
|
PROPOSED
2006 STOCK OWNERSHIP INCENTIVE PLAN
Background
The
purpose of the proposed 2006 Stock Ownership Incentive Plan (“Incentive Plan”)
is to enhance the ability of the Corporation and its subsidiaries to secure
and
retain the services of qualified employees and to provide incentives for such
employees to exert maximum efforts for the success of the Corporation. On March
9, 2006, the Compensation Committee approved the Incentive Plan and recommended
that the Board of Directors approve the Incentive Plan. The Board of Directors
approved and adopted the Incentive Plan on March 9, 2006, subject to the receipt
of shareholder approval.
The
Board
of Directors believes that it is in the best interest of the Corporation and
its
shareholders to adopt the Incentive Plan to allow the Corporation to provide
adequate equity incentive compensation to employees. The Corporation’s 1998
Stock Option Plan (“1998 Plan”) only provides for awards in the form of stock
options. The Incentive Plan would allow substantially more flexibility to the
Compensation Committee to make awards in the form of stock options, stock
appreciation rights, restricted stock and performance units.
Summary
of Material Features
The
following is a summary of the material features of the Incentive Plan. The
summary is not a complete description of the Incentive Plan and is qualified
in
its entirety by reference to the terms of the Incentive Plan. A copy of the
Incentive Plan is attached as Appendix A to this proxy statement.
Authorized
Shares.
The
number of shares of Common Stock authorized for issuance under the Incentive
Plan is 1,500,000 shares. Shares as to which options or other awards under
the
Incentive Plan lapse, expire, terminate, are forfeited or are canceled will
again be available for awards under the Incentive Plan.
In
addition, any shares of Common Stock reserved for issuance under the 1998 Plan
in excess of the number of shares as to which options are awarded under the
1998
Plan, plus any shares as to which options granted under the 1998 Plan may lapse,
expire, terminate or be canceled, will also be available for issuance under
the
Incentive Plan. As of March 17, 2006, there were 136,081 shares remaining
available for issuance under the 1998 Plan. Following receipt of shareholder
approval of the Incentive Plan, the Corporation does not intend to issue any
additional options under the 1998 Plan. No shares remain available for issuance
under the Corporation’s 1989 Stock Option Plan.
In
the
event of any change in the corporate structure of the Corporation affecting
the
Common Stock, such as a merger, reorganization, consolidation, recapitalization,
reclassification, stock split or similar transaction, the Compensation Committee
may substitute or adjust the total number and class of securities which may
be
issued under the Incentive Plan and the number, class and price of shares
subject to outstanding awards as it, in its discretion, determines to be
appropriate and equitable to prevent dilution or enlargement of the rights
of
participants and to preserve the value of outstanding awards.
Eligible
Participants.
Full-time employees of the Corporation and its subsidiaries are eligible to
receive awards under the Incentive Plan. Participants will be selected by the
Compensation Committee. As of December 31, 2005, the Corporation and its
subsidiaries had approximately 1,003 full-time employees.
New
Plan Benefits.
No
awards have been granted under the Incentive Plan. Because the benefits under
the Incentive Plan will depend on the Compensation Committee’s future actions
and the fair market value of the Corporation’s stock at various future dates,
the benefits payable under the Incentive Plan and the benefits that would have
been payable had the Incentive Plan been in effect during 2005 are not
determinable. The closing price of the Corporation’s Common Stock on March 17,
2006 on the NASDAQ National Market System was $31.68 per share.
Administration
of the Incentive Plan.
The
Incentive Plan will be administered by the Compensation Committee of the Board
of Directors. The Compensation Committee will determine, subject to the terms
of
the Incentive Plan, the persons to receive awards, the size, type and frequency
of awards, the terms and conditions of each award, and whether any performance
goals have been met. The Compensation Committee will also have the power to
accelerate the exercisability of awards, waive restrictions and conditions
applicable to awards, and interpret the provisions of the Incentive Plan.
Limitations
on Awards.
No more
than 400,000 shares of restricted stock may be awarded under the Incentive
Plan.
In addition, the number and amount of awards that may be granted to any one
person in a single fiscal year under the Incentive Plan is limited as follows:
(a) stock options - 100,000 shares; (b) stock appreciation rights - 100,000
shares; (c) restricted stock - 40,000 shares; and (d) performance units -
maximum value of $250,000. In the event of any change in the corporate structure
of the Corporation affecting the Common Stock, such as a merger, reorganization,
consolidation, recapitalization, reclassification, stock split or similar
transaction, the Compensation Committee will make appropriate and equitable
adjustments to the award limitations under the Incentive Plan.
Stock
Options. The
Compensation Committee may from time to time award options to a participant
subject to the limitations described above. Stock options give the holder a
right to purchase shares of the Corporation’s Common Stock within a specified
period of time at a specified price, which will not be less than the fair market
value of the Common Stock at the time of grant. Two types of options may be
granted: incentive stock options (“ISOs”) and nonqualified stock options
(“NQSOs”).
Stock
Appreciation Rights. From
time
to time, the Compensation Committee may grant stock appreciation rights (“SARs”)
to participants. The SAR grant price will equal 100% of the fair market value
of
a share of the Corporation’s Common Stock on the date of grant. An SAR entitles
the holder upon exercise to receive a payment from the Corporation in an amount
determined by multiplying: (a) the difference between the fair market value
of a
share of Common Stock on the date of exercise and the SAR grant price; by (b)
the number of shares of Common Stock with respect to which the SAR is exercised.
At the discretion of the Compensation Committee, the payment may be made in
the
form of cash, shares of Common Stock of equivalent value on the date of exercise
of the SAR, or in a combination of cash and shares of Common Stock.
Restricted
Stock. Restricted
stock may be granted by the Compensation Committee from time to time under
the
Incentive Plan, upon such terms and conditions as it may specify. The Committee
may determine the events upon which the restricted stock will be forfeitable
and
impose restrictions based on the achievement of specific performance goals
relating to the Corporation, a subsidiary or a regional or business unit of
the
Corporation, or years of service. In its discretion, the Compensation Committee
may impose a requirement that the participant pay a specified purchase price
for
the restricted shares.
Performance
Units. The
Compensation Committee may grant performance units to participants which will
become payable in cash to participants upon achievement of specified performance
goals. The performance period will be a period of time (not less than one year
nor more than five years) for the measurement of the extent to which performance
goals are attained. The performance goals that are to be achieved with respect
to each performance unit will be established by the Compensation Committee
and
will be based on one or more of the following criteria, which may be expressed
in terms of Corporation-wide objectives or in terms of objectives that relate
to
the performance of the participant or a division, region, department or function
within the Corporation or a subsidiary on an absolute or relative basis, or
in
comparison to a peer group:
| · |
Net
income;
|
| · |
Growth
in net income;
|
| · |
Earnings
per share;
|
| · |
Growth
of earnings per share;
|
| · |
Return
on equity;
|
| · |
Return
on capital;
|
| · |
Production
of loans, deposits and fee income;
|
| · |
Growth
in loans, deposits and fee income;
and
|
| · |
Loan
portfolio performance
|
General
Provisions
No
Repricing.
Without
shareholder approval, neither the Compensation Committee nor the Board of
Directors of the Corporation will have any authority, with or without the
consent of the holders of awards, to “reprice” any awards after the date of
initial grant with a lower exercise price in substitution for the original
exercise price.
Non-Transferability.
A
participant’s rights under the Incentive Plan may not be assigned, pledged or
otherwise transferred other than by will or the laws of descent and
distribution, except that upon a participant’s death, the participant’s rights
to payment under an award may be transferred to a designated beneficiary.
However, in the case of a NQSO, the Compensation Committee may permit the
participant to transfer all or a portion of the NQSO without consideration
to
(a) the participant’s spouse or lineal descendants (“Family Members”); (b) a
trust for the exclusive benefit of Family Members; (c) a charitable remainder
trust of which the participant or Family Members are the exclusive
beneficiaries; or (d) a partnership or a limited liability company in which
the
participant and Family Members are the sole partners or members.
Change
in Control.
Upon a
Change in Control, as defined in the Incentive Plan, all outstanding options
and
SARs will become fully vested and immediately exercisable. In addition, any
restrictions and other conditions pertaining to restricted stock held by
participants will lapse and such shares will become immediately transferable
and
nonforfeitable, subject to applicable securities law requirements.
Upon
a
Change in Control, outstanding performance units will become fully vested and
payable as soon as reasonably practicable, but not later than 74 days following
the Change in Control, in an amount equal to the greater of: (a) the maximum
amount payable under the performance unit multiplied by a percentage equal
to
the percentage that would have been earned under the terms of the performance
unit assuming that the rate at which the performance goals have been achieved
as
of the date of the Change in Control would have continued to the end of the
performance period; or (b) the maximum amount payable under the performance
unit
multiplied by the percentage of the performance period completed by the
participant at the time of the Change in Control. However, if no maximum amount
payable is specified in the performance unit agreement, the amount payable
will
be the amount the Compensation Committee determines is reasonable.
Termination
of the Incentive Plan.
The
Incentive Plan will terminate on the earliest to occur of (a) the 10th
anniversary of its effective date; (b) the date when all shares available for
issuance under the Incentive Plan have been acquired and payment of all benefits
in connection with awards under the Incentive Plan has been made; or (c) such
other date as the Board of Directors may determine.
Amendment.
The
Board may amend, suspend, modify or terminate the Incentive Plan provided that
(a) no amendment may be made without shareholder approval if such approval
is
necessary to satisfy applicable laws or regulations and the Board determines
that it is appropriate to seek stockholder approval; and (b) upon and following
a Change in Control, no amendment may adversely affect the rights of any person
with regard to any award previously granted. In addition, the Compensation
Committee may not exercise its discretion with respect to awards if it would
cause compensation that would otherwise be considered performance-based
compensation within the meaning of section 162(m) under the Internal Revenue
Code of 1986, as amended (“Code”), to fail to qualify as performance-based
compensation. No amendment, modification or termination of the Incentive Plan
may in any manner adversely affect any outstanding award without the written
consent of the holder of the award.
Certain
Federal Income Tax Consequences
The
following discussion summarizes certain Federal income tax consequences
associated with the issuance and receipt of stock options, restricted stock,
performance units and stock appreciation rights. This summary is based on
existing Federal income tax laws, as in effect on the date of this proxy
statement, which may change, even retroactively. The tax laws applicable to
stock options, restricted stock, performance units and stock appreciation rights
are complex, so the following discussion of the tax considerations is
necessarily general in nature and not comprehensive. This summary does not
address all Federal income tax considerations, nor does it address state, local,
non-U.S., employment tax and other tax considerations. For example, this summary
does not discuss the implications of the recent deferred compensation rules
on
awards. Many shareholders may be subject to special tax rules and this summary
does not address all aspects of Federal income tax that may be relevant to
a
particular shareholder.
Stock
Options.
Generally, a participant is not required to recognize income at the time of
the
stock option’s grant. This is generally true for both incentive stock options
and non-qualified stock options. A participant holding a non-qualified stock
option recognizes ordinary income on the date of exercise of the non-qualified
stock option. The amount required to be included in income is equal to the
excess, if any, of the fair market value of the shares on the exercise date
over
the exercise price. The participant would take a tax basis in the shares equal
to the exercise price, plus the amount included in the participant’s income. Any
gain or loss realized on a subsequent disposition of the shares would generally
be treated as a capital gain or loss.
Generally,
a participant will not recognize taxable income on the exercise of an incentive
stock option, but the exercise of the option will result in alternative minimum
taxable income to the same extent as if the option had been a non-qualified
option. Generally, the participant will take a tax basis in the stock equal
to
the exercise price. Upon a subsequent sale of the stock acquired on the exercise
of an incentive stock option, the amount of the gain would be treated as
long-term capital gain equal to the difference between the sales price and
the
option’s exercise price so long as the stock is sold after (i) two years from
the date of grant of the incentive stock option and (ii) one year from the
exercise date of the incentive stock option. If the participant disposes of
the
stock prior to the expiration of these holding periods, the participant will
recognize ordinary income at the time of the “disqualifying disposition” equal
to the lesser of (i) the excess of the fair market value of the stock on the
date of exercise over the exercise price and (ii) the excess of the amount
received for the stock over the exercise price. The balance of the gain or
loss,
if any, will be long-term or short-term capital gain, depending on how long
the
stock was held. If the incentive stock option is exercised after the participant
ceases to be employed, special rules may apply.
In
the
case of a nonqualified option, the Corporation will generally be entitled to
a
compensation deduction in an amount equal to the amount of ordinary income
recognized by the participant, at the time such income is recognized. In the
case of an incentive stock option, the Corporation is not entitled to any
deduction, unless the participant makes a disqualifying disposition, in which
case the Corporation is generally entitled to a deduction equal to the amount
of
ordinary income recognized by the participant.
Restricted
Stock.
Generally, a participant will not recognize ordinary income on an award of
restricted stock, unless the participant makes an election pursuant to section
83(b) of the Code. If the participant makes a section 83(b) election, the
participant would recognize ordinary income on the date of the award equal
to
the excess of the fair market value of the stock over the amount paid, if any.
In the absence of a section 83(b) election, a participant will recognize
ordinary income on the date the stock vests (i.e., the date on which the stock
is either (a) transferable or (b) not subject to a substantial risk of
forfeiture) in an amount equal to the excess, if any, of the fair market value
of the stock on the vesting date over the amount paid for the stock. The
participant will take a tax basis in the stock equal to the amount paid for
the
stock, if any, plus the amount included in income. The participant’s holding
period begins after the stock vests (unless a section 83(b) election has been
made). Generally, a participant will recognize capital gain (or loss) on a
subsequent disposition of the stock. Generally, the Corporation will be entitled
to a deduction in an amount equal to the ordinary income recognized by the
participant at the time the participant recognizes the ordinary
income.
Performance
Units.
Generally, a participant will not recognize income on the grant of a performance
unit. Instead, the participant will recognize ordinary income on the date the
award is paid in cash. The participant will recognize ordinary income in an
amount equal to the amount of cash received.
The
Corporation generally will be entitled to a tax deduction in connection with
an
award in an amount equal to the ordinary income realized by a participant at
the
time the participant recognizes such income, provided that the deduction is
not
disallowed by section 162(m) or otherwise limited by the Code.
Stock
Appreciation Rights.
Generally, a participant is not required to recognize income at the time of
the
grant of a stock appreciation right. A participant holding a stock appreciation
right recognizes ordinary income on the date of exercise of the stock
appreciation right. The amount required to be included in income is equal to
the
fair market value of the shares or the cash received by the participant on
the
exercise date. The participant would take a tax basis in any shares received
upon exercise of a stock appreciation right equal to the participant’s income
with respect to the shares received. Any gain or loss realized on a subsequent
disposition of the shares would generally be treated as a capital gain or loss.
The Corporation would generally be entitled to a compensation deduction equal
to
the ordinary income recognized by the participant at the time such income is
recognized.
Section
409A. Awards
of
stock options, restricted stock, performance units and stock appreciation rights
may, in some cases, result in deferral of compensation that is subject to the
requirements of section 409A of the Code. Generally, to the extent that
deferrals of these awards fail to meet the requirements of section 409A of
the
Code, these awards may be subject to immediate taxation and penalties. It is
the
intent of the Corporation that the awards under the Incentive Plan will be
structured and administered in compliance with section 409A of the Code or
an
exemption therefrom.
Shareholder
Approval
An
affirmative vote of a majority of all shares present in person or by proxy
at
the Annual Meeting and entitled to vote is necessary to approve the 2006 Stock
Ownership Incentive Plan.
THE
BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE APPROVAL OF THE 2006 STOCK
OWNERSHIP INCENTIVE PLAN.
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
Upon
recommendation by the Audit Committee and the Board of Directors, on April
26,
2005, the shareholders of Community Trust Bancorp, Inc. ratified the selection
of Deloitte & Touche LLP ("Deloitte & Touche") to serve as independent
registered public accounting firm for 2005.
Aggregate
fees billed to the Corporation for the fiscal years ending December 31, 2004
and
2005 by the Corporation's principal accounting firm, Deloitte & Touche LLP
were as follows:
|
2004
|
2005
|
||||
|
Audit
fees
|
$
|
508,807
|
$
|
420,150
|
|
|
Audit
related fees
|
25,250
|
26,600
|
|||
|
Subtotal
|
534,057
|
446,750
|
|||
|
Tax
fees
|
25,900
|
21,800
|
|||
|
Total
|
$
|
559,957
|
$
|
468,550
|
|
Audit
related fees included payments for audits of the Community Trust Bancorp, Inc.
Voluntary Employees' Beneficiary Plan and Trust and the KSOP Plan and
out-of-pocket expenses related to the audit of the consolidated financial
statements. Tax fees include payments for preparation of the federal and state
corporate income tax returns.
The
Audit
Committee pre-approves all audit and non-audit services performed by the
independent auditor. The Audit Committee will periodically grant general
pre-approval of certain audit and non-audit services. Any other services must
be
specifically approved by the Audit Committee, and any proposed services
exceeding the pre-approved cost levels must be specifically pre-approved by
the
Audit Committee. In periods between Audit Committee meetings, the Chairman
of
the Audit Committee has the delegated authority from the Committee to
pre-approve additional services, and such pre-approvals are then communicated
to
the full Audit Committee.
RATIFICATION
OF THE SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
The
Audit
and Asset Quality Committee of the Board of Directors will request shareholders
to ratify its selection of Deloitte & Touche to examine the consolidated
financial statements of the Corporation for the fiscal year ending December
31,
2006. Deloitte & Touche has audited the Corporation's financial statements
since 2000. Deloitte & Touche is not expected to have a representative
present at the Annual Meeting.
SHAREHOLDER
PROPOSALS
It
is
currently contemplated that the Corporation's 2007 Annual Meeting of
Shareholders will be held on or about April 24, 2007. In the event that a
shareholder desires to have a proposal considered for presentation at the
Corporation's 2007 Annual Meeting of Shareholders and inclusion in the Proxy
Statement for such meeting, the proposal must be forwarded in writing to the
Secretary of the Corporation so that it is received no later than December
1,
2006. Any such proposal must comply with the requirements of Rule 14(a)-8
promulgated under the Act. If a shareholder intends to present a proposal at
the
2007 Annual Meeting of Shareholders, but has not sought the inclusion of such
proposal in the Corporation's proxy, notice of meeting, and proxy statement,
such proposal must be received by the Secretary of the Corporation prior to
February 14, 2007 or the Corporation’s management proxies for the 2007 Annual
Meeting will be entitled to use their discretionary voting authority should
such
proposal then be raised, without any discussion of the matter in the
Corporation’s proxy, notice of meeting or proxy statement.
MISCELLANEOUS
The
Board
of Directors of the Corporation knows of no other business to be presented
to
the Annual Meeting. If other matters should properly come before the Annual
Meeting or any adjournment thereof, a vote may be cast pursuant to the
accompanying proxy in accordance with the judgment of the person or persons
voting the proxy. The Board of Directors urges each shareholder who does not
intend to be present and to vote at the Annual Meeting to complete, sign, and
return the enclosed proxy as promptly as possible.
By
Order
of the Board of Directors
/s/
Jean R. Hale
Jean
R.
Hale
Chairman
of the Board,
President
and CEO
Pikeville,
Kentucky
March
31,
2006
COMMUNITY
TRUST BANCORP,
INC.
2006
STOCK OWNERSHIP INCENTIVE PLAN
ARTICLE
1
PURPOSE
The
purpose of the 2006 Stock Ownership Incentive Plan ("Plan") is to enhance
the
ability of Community Trust Bancorp, Inc., a Kentucky corporation ("Company")
and
its subsidiaries to secure and retain the services of persons eligible to
participate in the Plan and to provide incentives for such persons to exert
maximum efforts for the success of the Company.
ARTICLE
2
DEFINITIONS
AND CONSTRUCTION
2.1 Definitions.
As used
in the Plan, terms defined parenthetically immediately after their use shall
have the respective meanings provided by such definitions, and the terms
set
forth below shall have the following meanings (in either case, such meanings
shall apply equally to both the singular and plural forms of the terms
defined):
| (a) |
"Award"
shall mean, individually or collectively, a grant under the Plan
of
Options, Restricted Stock, Performance Units or Stock Appreciation
Rights.
|
| (b) |
"Beneficial
Ownership" or "Beneficially Owned" shall mean beneficial ownership
or
beneficially owned within the meaning of Rule 13d-3 promulgated under
the
Exchange Act.
|
| (c) |
"Board"
shall mean the Board of Directors of the
Company.
|
| (d) |
"Cause"
shall mean, unless otherwise defined in an agreement granting Options,
Restricted Stock, Performance Units or Stock Appreciation Rights
(1) a
Participant’s willful misconduct or dishonesty which is determined by the
Committee to be directly and materially harmful to the business or
reputation of the Company or its Subsidiaries; or (2) a Participant
being
convicted of a felony, or failing to contest a felony
prosecution.
|
| (e) |
A
"Change in Control" shall mean any of the following
events:
|
| (1) |
An
acquisition (other than directly from the Company) of any Voting
Securities by any Person immediately after which such Person has
Beneficial Ownership of 20% or more of the combined voting power
of the
Company's then outstanding Voting Securities; provided, however,
that in
determining whether a Change in Control has occurred, Voting Securities
which are acquired in a Non-Control Acquisition shall not constitute
an
acquisition which would cause a Change in
Control;
|
| (2) |
The
individuals who, as of January 1, 2006, are members of the Board
("Incumbent Board") cease for any reason to constitute at least a
majority
of the Board; provided, however, that if any new director is approved
by a
vote of at least a majority of the Incumbent Board, such new director
shall, for all purposes of the Plan, be considered as a member of
the
Incumbent Board; provided further, however, that no individual shall
be
considered a member of the Incumbent Board if such individual initially
assumed office as a result of either an actual or threatened election
contest (as described in Rule14a-1 promulgated under the Exchange
Act)
("Election Contest") or other actual or threatened solicitation of
proxies
or consents by or on behalf of a Person other than the Board ("Proxy
Contest") including by reason of any agreement intended to avoid
or settle
any Election Contest or Proxy Contest;
|
| (3) |
Approval
by shareholders of the Company of:
|
| (A) |
A
merger, consolidation or reorganization involving the Company, unless
such
transaction is a Non-Control Transaction;
|
| (B) |
A
complete liquidation or dissolution of the Company;
or
|
| (C) |
An
agreement for the sale or other disposition of all or substantially
all of
the assets of the Company to any Person (other than a transfer to
a
Subsidiary); or
|
| (4) |
Any
other event that the Committee shall determine constitutes an effective
Change in Control of the Company.
|
Notwithstanding
the foregoing, a Change in Control shall not be deemed to occur solely because
any Person ("Subject Person") acquired Beneficial Ownership of more than
the
permitted amount of the outstanding Voting Securities as a result of the
acquisition of Voting Securities by the Company which, by reducing the number
of
Voting Securities outstanding, increases the proportional amount of shares
Beneficially Owned by the Subject Person; provided, however, that if a Change
in
Control would occur (but for the operation of this sentence) as a result
of the
acquisition of Voting Securities by the Company, and after such share
acquisition by the Company, the Subject Person becomes the Beneficial Owner
of
any additional Voting Securities which increases the number of the then
outstanding Voting Securities Beneficially Owned by the Subject Person, then
a
Change in Control shall occur.
| (f) |
"Code"
shall mean the Internal Revenue Code of 1986, as amended from time
to
time, or any successor thereto.
|
| (g) |
"Committee"
shall mean the committee described in Section
3.1.
|
| (h) |
"Common
Stock" shall mean shares of the Company's common stock, par value
$5.00
per share.
|
| (i) |
"Company"
shall mean Community Trust Bancorp, Inc., a Kentucky
corporation.
|
| (j) |
"Disability"
shall mean a physical or mental infirmity which, in the judgment
of the
Committee, impairs the Participant's ability to perform substantially
his
or her duties for a period of 180 consecutive
days.
|
| (k) |
"Effective
Date" shall mean March 9, 2006, the date the Plan was adopted by
the
Board, subject to approval of the Company's
shareholders.
|
| (l) |
"Employee"
shall mean an individual who is a full-time employee of the Company
or a
Subsidiary.
|
| (m) |
"Exchange
Act" shall mean the Securities Exchange Act of 1934, as amended from
time
to time.
|
| (n) |
"Fair
Market Value" of a share of Common Stock shall mean, as of any applicable
date, the closing sale price of the Common Stock on the NASDAQ National
Market System or any national or regional stock exchange on which
the
Common Stock is then traded. If no such reported sale of the Common
Stock
shall have occurred on such date, Fair Market Value shall mean the
closing
sale price of the Common Stock on the next preceding date on which
there
was a reported sale. If the Common Stock is not listed on the NASDAQ
National Market System or a national or regional stock exchange,
the Fair
Market Value of a share of Common Stock as of a particular date shall
be
determined by such method as shall be determined by the
Committee.
|
| (o) |
"ISOs"
shall have the meaning given such term in Section
6.1.
|
| (p) |
"Non-Control
Acquisition" shall mean an acquisition by (i) the Company or any
Subsidiary, (ii) an employee benefit plan (or a trust forming a part
thereof) maintained by the Company or any Subsidiary, or (iii) any
Person
in connection with a Non-Control
Transaction.
|
| (q) |
"Non-Control
Transaction" shall mean a merger, consolidation or reorganization
of the
Company in which:
|
| (1) |
the
shareholders of the Company, immediately before such merger, consolidation
or reorganization, own, directly or indirectly immediately following
such
merger, consolidation or reorganization, at least a majority of the
combined voting power of the voting securities of the corporation
resulting from such merger or consolidation or reorganization ("Surviving
Corporation") in substantially the same proportion as their ownership
of
the Voting Securities immediately before such merger, consolidation
or
reorganization;
|
| (2) |
the
individuals who were members of the Incumbent Board immediately prior
to
the execution of the agreement providing for such merger, consolidation
or
reorganization constitute at least a majority of the members of the
board
of directors of the Surviving Corporation;
and
|
| (3) |
no
Person (other than the Company, any Subsidiary, any employee benefit
plan
[or any trust forming a part thereof] maintained by the Company,
the
Surviving Corporation, or any Person who, immediately prior to such
merger, consolidation or reorganization had Beneficial Ownership
of 20% or
more of the then outstanding Voting Securities) has Beneficial Ownership
of 20% or more of the combined voting power of the Surviving Corporation's
then outstanding voting securities.
|
| (r) |
"NQSOs"
shall have the meaning given such term in Section
6.1.
|
| (s) |
"Option"
shall mean an option to purchase shares of Common Stock granted pursuant
to Article 6.
|
| (t) |
"Option
Agreement" shall mean an agreement evidencing the grant of an Option
as
described in Section 6.2.
|
| (u) |
"Option
Exercise Price" shall mean the purchase price per share of Common
Stock
subject to an Option, which shall not be less than the Fair Market
Value
on the date of grant (110% of Fair Market Value in the case of an
ISO
granted to a Ten Percent Shareholder).
|
| (v) |
"Participant"
shall mean any Employee selected by the Committee to receive an Award
under the Plan.
|
| (w) |
"Performance
Goals" shall have the meaning given such term in Section
8.4.
|
| (x) |
"Performance
Period" shall have the meaning given such term in Section
8.3.
|
| (y) |
"Performance
Unit" shall mean the right to receive a payment from the Company
upon the
achievement of specified Performance Goals as set forth in a Performance
Unit Agreement.
|
| (z) |
"Performance
Unit Agreement" shall mean an agreement evidencing a Performance
Unit
Award, as described in Section 8.2.
|
| (aa) |
"Person"
shall have the meaning ascribed to such term in Section 3(a)(9) of
the
Exchange Act and as used in Sections 13(d) and 14(d) thereof, including
a
"group" as defined in Section 13(d).
|
| (bb) |
"Plan"
shall mean this Community Trust Bancorp, Inc. 2006 Stock Ownership
Incentive Plan as the same may be amended from time to
time.
|
| (cc) |
"Restriction
Period" shall mean the period determined by the Committee during
which the
transfer of shares of Common Stock is limited in some way or such
shares
are otherwise restricted or subject to forfeiture as provided in
Article
7.
|
| (dd) |
"Restricted
Stock" shall mean shares of Common Stock granted pursuant to Article
7.
|
| (ee) |
"Restricted
Stock Agreement" shall mean an agreement evidencing a Restricted
Stock
Award, as described in Section 7.2.
|
| (ff) |
"Retirement"
shall mean retirement by a Participant in accordance with the terms
of the
Company's retirement or pension plans, if any, or, if the Company
has no
such plans, then retirement after reaching age
65.
|
| (gg) |
"SAR"
or "Stock Appreciation Right" shall mean a right granted pursuant
to
Article 9 to receive a payment, in cash and/or Common Stock, as determined
by the Committee, equal to the excess of the Fair Market Value of
a
specified number of shares of Common Stock at the time the SAR is
exercised over the SAR Grant Price of such shares of Common Stock
on the
effective date of the grant of the SAR as set forth in the applicable
SAR
Agreement.
|
| (hh) |
"SAR
Agreement" shall mean an agreement evidencing an award of SARs, as
described in Section 9.2.
|
| (ii) |
"Subsidiary,"
with respect to any company, shall mean any corporation or other
Person of
which a majority of its voting power, equity securities, or equity
interest is owned, directly or indirectly, by such
company.
|
| (jj) |
"Ten
Percent Shareholder" shall mean an Employee who, at the time an ISO
is
granted, owns (within the meaning of section 422(b)(6) of the Code)
stock
possessing more than 10% of the total combined voting power of all
classes
of stock of the Company.
|
| (kk) |
"Voting
Securities" shall mean the voting securities of the
Company.
|
2.2 Gender
and Number.
Unless
otherwise indicated by the context, reference to the masculine gender shall
include the feminine gender, the plural shall include the singular and the
singular shall include the plural.
2.3 Severability.
In the
event any provision of the Plan shall be held illegal or invalid for any
reason,
the illegality or invalidity shall not affect the remaining parts of the
Plan,
and the Plan shall be construed and enforced as if the illegal or invalid
provision had not been included.
ARTICLE
3
ADMINISTRATION
3.1 The
Committee.
The
Plan shall be administered by the Compensation Committee of the Board, or
by any
other committee (the "Committee") appointed by the Board consisting of two
or
more directors of the Company. It is intended that each Committee member
shall
be a "non-employee director" within the meaning of Rule 16b-3 under the Exchange
Act, an "outside director" within the meaning of Section 162(m) of the Code,
and
an "independent director" within the meaning of the rules and regulations
of
NASDAQ or such other stock exchange on which the Common Stock is listed.
The
members of the Committee shall be appointed from time to time by, and shall
serve at the discretion of, the Board.
3.2 Authority
of the Committee.
Subject
to the provisions of the Plan, the Committee shall have full authority
to:
| (a) |
select
Participants to whom Awards are granted;
|
| (b) |
determine
the size, type and frequency of Awards granted under the
Plan;
|
| (c) |
determine
the terms and conditions of Awards, including any restrictions, conditions
or forfeiture provisions relating to the Award, which need not be
identical;
|
| (d) |
determine
whether and the extent to which Performance Goals have been
met:
|
| (e) |
determine
whether and when a Participant's status as an Employee has terminated
for
purposes of the Plan;
|
| (f) |
accelerate
the exercisability of, and accelerate or waive any or all the restrictions
and conditions applicable to, any Award, for any
reason;
|
| (g) |
extend
the duration of an Option exercise period or term of an
Award;
|
| (h) |
construe
and interpret the Plan and any agreement or instrument entered into
under
the Plan;
|
| (i) |
establish,
amend and rescind rules and regulations for the Plan's administration;
and
|
| (j) |
subject
to the rights of Participants, amend the terms and conditions of
any
outstanding Award to the extent such terms and conditions are within
the
discretion of the Committee as provided in the
Plan.
|
3.3 Delegation.
The
Committee shall have sole discretion to make all other determinations which
may
be necessary or advisable for the administration of the Plan. To the extent
permitted by law and Rule 16b-3 promulgated under the Exchange Act, the
Committee may delegate its authority. Notwithstanding the foregoing, the
Committee may not delegate its responsibilities hereunder if such delegation
would jeopardize compliance with the "outside directors" requirement or any
other applicable requirement under Section 162(m) of the Code or would violate
any rules or regulations of NASDAQ or other stock exchange on which the
Company’s Common Stock is listed.
3.4 Certain
Additional Forfeiture Events.
Without
limiting the generality of the authority granted to the Committee to specify
the
terms and conditions of an Award, the Committee may specify in an agreement
representing any Award that the Participant’s rights, payments and benefits with
respect to an Award shall be subject to reduction, cancellation, forfeiture
and
recoupment upon the occurrence of specified events. Such events may include,
but
are not limited to, violation of material Company policies, breach of
noncompetition or confidentiality agreements that may apply to the Participant,
or other conduct of the Participant that is detrimental to the business or
reputation of the Company.
3.5 Decisions
Binding.
All
determinations and decisions made by the Committee pursuant to the provisions
of
the Plan, and all related orders or resolutions of the Board, shall be final,
conclusive and binding upon all Persons, including the Company, its
stockholders, Employees, Participants, holders of Awards and estates,
representatives and beneficiaries of such Persons.
3.6 Section
16 Compliance; Bifurcation of Plan.
It is
the intention of the Company that the Plan and the administration of the
Plan
comply in all respects with Section 16(b) of the Exchange Act and the rules
and
regulations promulgated thereunder. If any Plan provision, or any aspect
of the
administration of the Plan, is found not to be in compliance with Section
16(b)
of the Exchange Act, the provision or administration shall be deemed null
and
void, and in all events the Plan shall be construed in favor of its meeting
the
requirements of Rule 16b-3 promulgated under the Exchange Act. Notwithstanding
anything in the Plan to the contrary, the Board or the Committee, in its
discretion, may bifurcate the Plan so as to restrict, limit or condition
the use
of any provision of the Plan to Participants who are subject to Section 16
of
the Exchange Act without so restricting, limiting or conditioning the Plan
with
respect to other Participants.
ARTICLE
4
SHARES
AVAILABLE UNDER THE PLAN
4.1 Number
of Shares.
Subject
to adjustment as provided in Section 4.3, the number of shares of Common
Stock
reserved for issuance under the Plan is 1,500,000 shares. Shares as to which
options or other Awards granted under the Plan lapse, expire, terminate,
are
forfeited or are canceled shall again become available for Awards under the
Plan. In addition, any shares of Common Stock reserved for issuance under
the
Company's 1998 Stock Option Plan ("1998 Plan") in excess of the number of
shares
as to which options or other benefits are awarded thereunder, plus any shares
as
to which options or other benefits granted under the 1998 Plan may lapse,
expire, terminate or be canceled, shall also be reserved and available for
issuance or reissuance under the Plan.
4.2 Shares
of Restricted Stock Available Under the Plan.
Subject
to adjustment as provided in Section 4.3, the number of shares of Common
Stock
which may be the subject of Awards granted in the form of Restricted Stock
is
limited to 400,000 shares.
4.3 Adjustments
in Authorized Shares and Outstanding Awards.
In the
event of any change in the corporate structure of the Company affecting the
Common Stock, including a merger, reorganization, consolidation,
recapitalization, reclassification, split-up, spin-off, separation, liquidation,
stock dividend, stock split, reverse stock split, extraordinary dividend,
share
repurchase, share combination, exchange of securities, dividend in kind or
any
similar corporate event or transaction, the Committee may substitute or adjust
the total number and class of shares of Common Stock or other stock or
securities which may be issued under the Plan, and the number, class and
price
of shares subject to outstanding Awards, as it, in its discretion, determines
to
be appropriate and equitable to prevent dilution or enlargement of the rights
of
Participants and to preserve, without exceeding, the value of any outstanding
Awards; provided, however, that the number of shares subject to any Award
shall
always be a whole number. In the case of ISOs, such adjustment shall be made
so
as not to result in a "modification" within the meaning of Section 424(h)
of the
Code.
ARTICLE
5
ELIGIBILITY
AND PARTICIPATION
All
Employees of the Company and its Subsidiaries are eligible to receive Awards
under the Plan. In selecting Employees to receive Awards under the Plan,
as well
as in determining the number of shares subject to, and the other terms and
conditions applicable to, each Award, the Committee shall take into
consideration such factors as it deems relevant in promoting the purposes
of the
Plan, including the duties and responsibilities of such persons, their present
and potential contribution to the success of the Company and their anticipated
number of years of active service or contribution remaining with the Company
or
a Subsidiary.
ARTICLE
6
STOCK
OPTIONS
6.1 Grant
of Options.
Subject
to the terms and provisions of the Plan, the Committee may grant Options
to
Participants at any time and from time to time, in the form of options which
are
intended to qualify as incentive stock options within the meaning of Section
422
of the Code ("ISOs"), Options which are not intended to so qualify ("NQSOs")
or
a combination thereof. Notwithstanding the foregoing, ISOs may only be granted
to Employees of the Company and its subsidiaries (within the meaning of Section
424(f) of the Code). The maximum number of shares in respect of which Options
may be granted to a Participant during any calendar year shall be 100,000
shares
(subject to adjustment as provided in Section 4.3).
6.2 Option
Agreement.
Each
Option shall be evidenced by an Option Agreement that shall specify the Option
Exercise Price, the duration of the Option, the number of shares to which
the
Option relates, forfeiture provisions as deemed appropriate by the Committee
and
such other provisions as the Committee may determine or which are required
by
the Plan. The Option Agreement shall also specify whether the Option is intended
to be an ISO or a NQSO and shall include provisions applicable to the particular
type of Option granted. To the extent that the aggregate Fair Market Value
of
shares of Common Stock with respect to which ISOs are exercisable for the
first
time by a Participant during any calendar year under the Plan and any other
stock option plan of the Company (or any "subsidiary" of the Company within
the
meaning of section 424 of the Code) shall exceed $100,000, or such higher
value
as may be permitted under section 424 of the Code, such Options shall be
treated
as NQSOs. For purposes of the foregoing calculation, Fair Market Value shall
be
determined as of the date on which each such ISO is granted.
6.3 Duration
of Options.
Subject
to the provisions of Section 6.7, each Option shall expire at such time as
is
determined by the Committee at the time of grant; provided, however, that
no
Option shall at the time of grant be exercisable later than the tenth
anniversary of its grant (the fifth anniversary in the case of an ISO granted
to
a Ten Percent Shareholder).
6.4 Exercise
of Options.
Options
shall be exercisable at such times and be subject to such restrictions and
conditions, including forfeiture provisions, as the Committee shall approve
at
the time of grant, which need not be the same for each grant or for each
Participant. Options shall be exercised by delivery to the Company of a written
notice of exercise, setting forth the number of shares with respect to which
the
Option is to be exercised and accompanied by full payment of the Option Exercise
Price and all applicable withholding taxes.
6.5 Payment
of Option Exercise Price.
The
Option Exercise Price for shares of Common Stock as to which an Option is
exercised shall be paid to the Company in full at the time of exercise either
(a) in cash in the form of currency or other cash equivalent acceptable to
the
Company, (b) by tendering previously acquired Common Stock having a Fair
Market
Value (at the close of business on the date the Company receives the notice
of
exercise) equal to the Option Exercise Price, (c) any other reasonable
consideration that the Committee may deem appropriate or (d) by a combination
of
the forms of consideration described in (a), (b) and (c) of this Section.
The
Committee may permit the cashless exercise of Options as described in Regulation
T promulgated by the Federal Reserve Board, subject to applicable securities
law
restrictions, or by any other means which the Committee determines to be
consistent with the Plan's purpose and applicable law.
6.6 Vesting
Upon Change in Control.
Upon a
Change in Control, any then outstanding Options held by Participants shall
become fully vested and immediately exercisable.
6.7 Termination
of Employment.
If the
Participant's status as an Employee is terminated for Cause, all then
outstanding Options of such Participant, whether or not exercisable, shall
terminate immediately. If the Participant's status as an Employee is terminated
for any reason other than for Cause, death, Disability or Retirement, to
the
extent then outstanding Options of such Participant are exercisable and subject
to the provisions of the relevant Option Agreement, such Options may be
exercised by such Participant or such Participant’s personal representative at
any time prior to the earlier of (a) the expiration date of the Options or
(b)
the date which is 60 days after the date of such termination of employment.
In
the event of the Retirement of a Participant, to the extent then outstanding
Options of such Participant are exercisable, such Options may be exercised
by
the Participant (a) in the case of NQSOs, within one year after the date
of
Retirement and (b) in the case of ISOs, within 90 days after Retirement;
provided, however, that no such Options may be exercised on a date subsequent
to
their expiration. In the event of the death or Disability of a Participant
while
employed by the Company or a Subsidiary, all then outstanding Options of
such
Participant shall become fully vested and immediately exercisable, and may
be
exercised at any time within one year after the date of death or determination
of Disability; provided however that no such Options may be exercised on
a date
subsequent to their expiration. Options may be exercised as provided in this
Section (a) in the event of the death of a Participant, by the person or
persons
to whom rights pass by will or by the laws of descent and distribution, or
if
appropriate, the legal representative of the decedent's estate and (b) in
the
event of the Disability of a Participant, by the Participant, or if the
Participant is incapacitated, by the Participant's legal
representative.
ARTICLE
7
RESTRICTED
STOCK
7.1 Grant
of Restricted Stock.
Subject
to the terms and provisions of the Plan, the Committee may grant shares of
Restricted Stock to Participants at any time and from time to time and upon
such
terms and conditions as it may determine. In its discretion, the Committee
may
impose (but shall not be required to impose) in the related Restricted Stock
Agreement, a requirement that a Participant pay a specified purchase price
for
each share of Restricted Stock). The maximum number of shares of Restricted
Stock that may be granted to a Participant during any calendar year shall
be
40,000 shares (subject to adjustment as provided in Section 4.3).
7.2 Restricted
Stock Agreement.
Each
Restricted Stock grant shall be evidenced by a Restricted Stock Agreement
which
shall specify the Restriction Period, the number of shares of Restricted
Stock
granted and such other provisions as the Committee may determine and which
are
required by the Plan.
7.3 Non-Transferability
of Restricted Stock.
Except
as provided in this Article 7 or the applicable Restricted Stock Agreement,
shares of Restricted Stock may not be sold, transferred, pledged, assigned
or
otherwise alienated or hypothecated until the end of the applicable Restriction
Period as specified in the Restricted Stock Agreement and the satisfaction
of
any other conditions determined at the time of grant specified in the Restricted
Stock Agreement. Except as provided in Section 7.9, however, in no event
may any
Restricted Stock become vested in a Participant subject to Section 16(b)
of the
Exchange Act prior to six months following the date of its grant.
7.4 Other
Restrictions.
The
Committee may impose such other restrictions on shares of Restricted Stock
as it
may deem advisable, including, without limitation, restrictions based upon
the
achievement of specific performance goals (relating to the Company, a Subsidiary
or regional or other business unit of the Company), years of service and/or
restrictions under applicable Federal or state securities laws. The Committee
may provide that any share of Restricted Stock shall be held (together with
a
stock power executed in blank by the Participant) in custody by the Company
until any or all restrictions thereon shall have lapsed.
7.5 Forfeiture.
The
Committee shall determine and set forth in a Participant's Restricted Stock
Agreement such events upon which a Participant's shares of Restricted Stock
(or
the proceeds of a sale thereof) shall be forfeitable, which may include,
without
limitation, the termination of a Participant's employment.
7.6 Certificate
Legend.
In
addition to any legends placed on certificates pursuant to Section 7.4, each
certificate representing shares of Restricted Stock shall bear the following
legend:
"The
sale
or other transfer of the shares represented by this Certificate, whether
voluntary, involuntary or by operation of law, is subject to certain
restrictions on transfer as set forth in the Community Trust Bancorp, Inc.
2006
Stock Ownership Incentive Plan, and in the related Restricted Stock Agreement.
A
copy of the Plan and such Restricted Stock Agreement may be obtained from
the
Secretary of Community Trust Bancorp, Inc."
7.7 Removal
of Restrictions.
Except
as otherwise provided in this Article 7 or the Restricted Stock Agreement,
shares of Restricted Stock shall become freely transferable by the Participant
and no longer subject to forfeiture after the last day of the Restriction
Period. Once the shares of Restricted Stock are released from their restrictions
(including forfeiture provisions), the Participant shall be entitled to have
the
legend required by Section 7.6 removed from the Participant's share certificate,
which certificate shall thereafter represent freely transferable and
nonforfeitable shares of Common Stock free from any and all restrictions
under
the Plan, subject to the requirements of applicable securities laws and
regulations.
7.8 Voting
Rights; Dividends and Other Distributions.
Unless
the Committee exercises its discretion as provided in Section 7.10, during
the
Restriction Period, Participants holding shares of Restricted Stock may exercise
full voting rights, and shall be entitled to receive all dividends and other
distributions paid with respect to such Restricted Stock. If any dividends
or
distributions are paid in Common Stock, such Common Stock shall be subject
to
the same restrictions as the shares of Restricted Stock with respect to which
they were paid.
7.9 Lapse
of Restrictions Upon Change in Control.
Upon a
Change in Control, any restrictions and other conditions pertaining to then
outstanding shares of Restricted Stock held by Participants, including, but
not
limited to, vesting requirements, shall lapse and such shares shall thereafter
be immediately transferable and nonforfeitable, subject to the requirements
of
applicable securities laws and regulations.
7.10 Treatment
of Dividends.
At the
time shares of Restricted Stock are granted to a Participant, the Committee
may,
in its discretion, determine that the payment of dividends, or a specified
portion thereof, declared or paid on such shares shall be deferred until
the
lapse of the restrictions with respect to such shares, such deferred dividends
to be held by the Company for the account of the Participant. In the event
of
such deferral, there may be credited at the end of each year (or portion
thereof) interest on the amount of the account during the year at a rate
per
annum as the Committee, in its discretion, may determine. Deferred dividends,
together with interest accrued thereon, if any, shall be (a) paid to the
Participant upon the lapse of restrictions on the shares of Restricted Stock
as
to which the dividends related as soon as practicable following the lapse
of
restrictions, but no later than 74 days following such lapse of restrictions
or
(ii) forfeited to the Company upon the forfeiture of such shares by the
Participant.
ARTICLE
8
PERFORMANCE
UNITS
8.1 Grant
of Performance Units.
The
Committee may, from time to time and upon such terms and conditions as it
may
determine, grant Performance Units which will become payable to a Participant
upon achievement of specified Performance Goals. The maximum payment that
can be
made pursuant to Performance Units granted to any one Participant in any
calendar year shall be $250,000.
8.2 Performance
Unit Agreement.
Each
Performance Unit grant shall be evidenced by a Performance Unit Agreement
that
shall specify the Performance Goals, the Performance Period and the number
of
Performance Units to which it pertains.
8.3 Performance
Period.
The
period of performance ("Performance Period") with respect to each Performance
Unit shall be such period of time, which shall not be less than one year,
nor
more than five years, as determined by the Committee, for the measurement
of the
extent to which Performance Goals are attained. The Performance Period may
commence prior to the date of grant of the Performance Unit to which it relates,
provided that at such time the attainment of the Performance Goal is
substantially uncertain and not more than 25% of the Performance Period has
expired.
8.4 Performance
Goals.
The
goals ("Performance Goals") that are to be achieved with respect to each
Performance Unit shall be those objectives established by the Committee as
it
deems appropriate, and which shall be based on one or more of the
following criteria, which may be expressed in terms of Company-wide objectives
or in terms of objectives that relate to the performance of the Participant,
or
a division, region, department or function within the Company or a Subsidiary
on
an absolute or relative basis or in comparison to a peer group: net income,
growth in net income, earnings per share, growth of earnings per share, return
on equity or return on capital, production of loans, deposits and fee income,
growth in loans, deposits and fee income and loan portfolio performance.
Each
Performance Unit Agreement shall specify a minimum acceptable level of
achievement with respect to the Performance Goals below which no payment
will be
made and shall set forth a formula for determining the payment to be made
if
performance is at or above such minimum based upon a range of performance
levels
relating to the Performance Goals. The Committee shall certify that the
Performance Goals for Awards of Performance Units under the Plan have been
satisfied prior to the determination and payment of any such incentive in
accordance with the Plan.
8.5 Adjustment
of Performance Goals.
The
Committee may adjust Performance Goals and the related minimum acceptable
level
of achievement if, in the sole judgment of the Committee, events or transactions
occur subsequent to the date of grant which are unrelated to the performance
of
the Participant and which the Committee expects to have a substantial effect
on
the ability of the Participant to attain the Performance Goals. If a Participant
is promoted, demoted or transferred to a Subsidiary or different operating
unit
of the Company during a Performance Period, then, to the extent that the
Committee determines the Performance Goals or Performance Period are no longer
appropriate, the Committee may, but shall not be required to, adjust, change
or
eliminate the Performance Goals or the applicable Performance Period as it
deems
appropriate in order to make them appropriate and comparable to the initial
Performance Goals or Performance Period. Notwithstanding the foregoing, the
Committee shall not be entitled to adjust, change or eliminate any Performance
Goals or Performance Period if the exercise of such discretion would cause
the
related compensation to fail to qualify as performance-based compensation
within
the meaning of Section 162(m) of the Code.
8.6 Termination
of Employment.
If the
employment of a Participant shall terminate prior to the expiration of the
Performance Period for any reason other than for death, Disability or
Retirement, the Performance Units then held by the Participant shall terminate
immediately without payment. In the case of termination of employment by
reason
of death, Disability or Retirement of a Participant prior to the expiration
of
the Performance Period, any then outstanding Performance Units of such
Participant shall be payable in an amount equal to the maximum amount payable
under the Performance Unit multiplied by a percentage equal to the percentage
that would have been earned under the terms of the Performance Unit Agreement
assuming that the rate at which the Performance Goals have been achieved
as of
the date of such termination of employment would have continued until the
end of
the Performance Period; provided, however, that if no maximum amount payable
is
specified in the Performance Unit Agreement, the amount payable shall be
such
amount as the Committee shall determine is reasonable.
8.7 Payment
Upon Change in Control.
Upon a
Change in Control, any then outstanding Performance Units shall become fully
vested and payable as soon as reasonably practicable, but no later than 74
days
following the Change in Control, in an amount which is equal to the greater
of
(a) the maximum amount payable under the Performance Unit multiplied by a
percentage equal to the percentage that would have been earned under the
terms
of the Performance Unit Agreement assuming that the rate at which the
Performance Goals have been achieved as of the date of such Change in Control
would have continued until the end of the Performance Period; or (b) the
maximum
amount payable under the Performance Unit multiplied by the percentage of
the
Performance Period completed by the Participant at the time of the Change
in
Control; provided, however, that if no maximum amount payable is specified
in
the Performance Unit Agreement, the amount payable shall be such amount as
the
Committee shall determine is reasonable.
8.8 Payment
of Performance Units.
Subject
to such terms and conditions as the Committee may impose, and subject to
the
limitations set forth in Section 8.1, Performance Units shall be payable:
(a)
within 74 days following the end of the Performance Period during which the
Participant attained at least the minimum acceptable level of achievement
under
the Performance Goals; or (b) in the event of a Change in Control, as soon
as
reasonably practicable following the Change in Control, but no later than
74
days following the Change in Control.
ARTICLE
9
STOCK
APPRECIATION RIGHTS
9.1 Grant
of SARs.
Subject
to the terms and conditions of the Plan, SARs may be granted to Participants
at
any time and from time to time upon such terms as shall be determined by
the
Committee in its discretion. The SAR grant price ("SAR Grant Price") shall
be
determined by the Committee and shall be specified in the agreement awarding
the
SARs. The SAR Grant Price shall equal one hundred percent (100%) of the Fair
Market Value of a share of Common Stock on the date of grant. The maximum
number
of shares with respect to which SARs may be granted to a Participant during
any
calendar year shall be 100,000 shares (subject to adjustment as provided
in
Section 4.3).
9.2 SAR
Agreement.
Each SAR
shall be evidenced by an SAR Agreement that shall specify the SAR Grant Price,
the term of the SAR and any such other provisions as the Committee shall
determine.
9.3 Term
of SAR.
The term
of the SAR granted under the Plan shall be determined by the Committee, in
its
sole discretion, and except as determined otherwise by the Committee and
specified in the SAR Agreement, no SAR shall be exercisable later than the
tenth
(10th)
anniversary date of its grant.
9.4 Exercise
of SAR.
SARs may
be exercised upon whatever terms and conditions the Committee, in its sole
discretion, shall impose. Unless the applicable SAR Agreement provides
otherwise, an SAR shall become cumulatively exercisable as to 25% of the
shares
of Common Stock covered thereby on each of the first, second, third and fourth
anniversaries of the date of grant. An SAR may be exercised for all or any
portion of the shares as to which it is exercisable. The partial exercise
of the
SAR shall not cause the expiration, termination or cancellation of the remaining
portion of the SAR.
9.5 Payment
of SAR Amount.
Upon the
exercise of an SAR, a Participant shall be entitled to receive payment from
the
Company in an amount determined by multiplying: (a) the difference between
the
Fair Market Value of a share of Common Stock on the date of exercise and
the SAR
Grant Price; by (b) the number of shares of Common Stock with respect to
which
the SAR is exercised. At the discretion of the Committee, the payment upon
SAR
exercise may be made in the form of cash, shares of Common Stock of equivalent
value (based on the Fair Market Value on the date of exercise of the SAR),
or in
some combination thereof. The Committee’s determination regarding the form of
SAR payout shall be set forth or reserved for later determination in the
SAR
Agreement pertaining to the grant of the SAR.
9.6 Termination
of Employment.
If the
Participant's status as an Employee is terminated for Cause, all then
outstanding SARs of such Participant, whether or not exercisable, shall
terminate immediately. If the Participant's status as an Employee is terminated
for any reason other than for Cause, death, Disability or Retirement, to
the
extent then outstanding SARs of such Participant are exercisable and subject
to
the provisions of the relevant SAR Agreement, such SARs may be exercised
by such
Participant at any time prior to the earlier of (a) the expiration date of
the
SARs or (b) the date which is 60 days after the date of such termination
of
employment. In the event of the Retirement of a Participant, to the extent
then
outstanding SARs of such Participant are exercisable, such SARs may be exercised
by the Participant within one year after the date of Retirement; provided,
however, that no such SARs may be exercised on a date subsequent to their
expiration. In the event of the death or Disability of a Participant while
employed by the Company or a Subsidiary, all then outstanding SARs of such
Participant shall become fully vested and immediately exercisable, and may
be
exercised at any time within one year after the date of death or determination
of Disability; provided, however, that no such SARs may be exercised on a
date
subsequent to their expiration. Options may be exercised as provided in this
Section 9.6 in the event of the death of a Participant, by the person or
persons
to whom rights pass by will or by the laws of descent and distribution, or
if
appropriate, the legal representative of the decedent's estate and in the
event
of the Disability of a Participant, by the Participant, or if the Participant
is
incapacitated, by the Participant's legal representative.
9.7 Payment
upon Change in Control. Upon
the
occurrence of a Change in Control, any SAR outstanding on such date shall
become
fully and immediately exercisable and shall remain exercisable until its
expiration, termination or cancellation pursuant to the terms of this Plan.
ARTICLE
10
AMENDMENT,
MODIFICATION AND TERMINATION
10.1 Termination
Date.
The
Plan shall terminate on the earliest to occur of (a) the tenth anniversary
of
the Effective Date, (b) the date when all shares of Common Stock available
under
the Plan shall have been acquired and the payment of all benefits in connection
with Awards has been made or (c) such other date as the Board may determine
in
accordance with Section 10.2.
10.2 Amendment,
Modification and Termination.
The
Board may, at any time, amend, suspend, modify or terminate the Plan provided
that (a) no amendment shall be made without stockholder approval if such
approval is necessary to satisfy any applicable tax or regulatory law or
regulation and the Board determines it is appropriate to seek stockholder
approval, and (b) upon or following the occurrence of a Change in Control,
no
amendment may adversely affect the rights of any Person in connection with
an
Award previously granted. The Committee may amend the terms of any Award,
prospectively or retroactively, but no such amendment shall impair the rights
of
any Participant without such Participant's consent. Options, SARs and certain
Performance Units granted under the Plan are intended to be performance-based
compensation within the meaning of Section 162(m) of the Code. The Committee
shall not be entitled to exercise any discretion otherwise authorized hereunder
with respect to such Options, SARs or Performance Units if the ability to
exercise such discretion or the exercise of such discretion itself would
cause
the compensation attributable to such Options, SARs or Performance Units
to fail
to qualify as performance-based compensation.
10.3 Awards
Previously Granted.
No
amendment, modification or termination of the Plan shall in any manner adversely
affect any outstanding Award without the written consent of the Participant
holding such Award.
10.4 No
Repricing.
Without
shareholder approval, neither the Committee nor the Board of Directors of
the
Company shall have any authority, with or without the consent of the affected
holders of Awards, to "reprice" an Award after the date of its initial grant
with a lower exercise price in substitution for the original exercise price.
This paragraph may not be amended, altered or repealed by the Board of Directors
of the Company or the Committee without approval of the shareholders of the
Company.
ARTICLE
11
NON-TRANSFERABILITY
11.1 Non-Transferability.
A
Participant's rights under this Plan may not be assigned, pledged or otherwise
transferred other than by will or the laws of descent and distribution, except
that upon a Participant's death, the Participant's rights to payment pursuant
to
an Award may be transferred to a beneficiary designated in accordance with
Section 11.2. Notwithstanding anything herein to the contrary, in the case
of
NQSOs, the Committee may, in its sole discretion, by appropriate provisions
in
the Participant's Option Agreement, permit the Participant to transfer all
or a
portion of the Option, without consideration, to (a) the Participant's spouse
or
lineal descendants ("Family Members"), (b) a trust for the exclusive benefit
of
Family Members, (c) a charitable remainder trust of which the Participant
and/or
Family Members are the exclusive beneficiaries (other than the charitable
beneficiary), or (d) a partnership or a limited liability company in which
the
Participant and Family Members are the sole partners or members, as applicable.
In the event that any Option is transferred by a Participant in accordance
with
the provisions of the immediately preceding sentence, then subsequent transfers
of the Option by the transferee shall be prohibited. For purposes of the
Option
Agreement and the Plan, the term "Optionee" shall be deemed to refer to the
transferee wherever applicable, and the provisions of Section 6.7 regarding
termination of employment shall refer to the Participant, not the transferee,
but the transferee shall be permitted to exercise the Option during the period
provided for in Section 6.7 and the Participant's Option Agreement following
the
Participant's termination of employment.
11.2 Designation
of Beneficiary.
A
Participant’s "beneficiary" is the person or persons entitled to receive
payments or other benefits or exercise rights that are available under the
Plan
in the event of the Participant’s death. A Participant may designate a
beneficiary or change a previously named beneficiary designation at such
times
as are prescribed by the Committee by using forms and following procedures
approved or accepted by the Committee for that purpose. If no beneficiary
is
designated by the Participant, at the Participant’s death the beneficiary shall
be the Participant’s estate. From time to time, the Committee may in its
discretion modify the requirements for beneficiary designations or institute
additional requirements for beneficiary designation.
ARTICLE
12
NO
GRANTING OF EMPLOYMENT RIGHTS; UNFUNDED STATUS
12.1 No
Employment Rights.
Neither
the Plan, nor any action taken under the Plan, shall be construed as giving
any
person the right to become a Participant, nor shall participation in, or
any
grant of an Award under, the Plan be construed as giving a Participant any
right
with respect to continuance of employment with the Company. The Company
expressly reserves the right to terminate, whether by dismissal, discharge
or
otherwise, a Participant's employment at any time, with or without Cause,
except
as may otherwise be expressly provided by any written agreement between the
Company and the Participant.
12.2 Unfunded
Plan.
Participants shall have no right, title or interest whatsoever in or to any
investments that the Company may make to aid it in meeting its obligations
under
the Plan. Nothing contained in the Plan, and no action taken pursuant to
its
provisions, shall create or be construed to create a trust of any kind, or
a
fiduciary relationship between the Company and any Participant, beneficiary,
legal representative or any other Person. Awards shall be general, unsecured
obligations of the Company. All payments to be made hereunder shall be paid
from
the general funds of the Company and no special or separate fund shall be
established and no segregation of assets shall be made to assure payment
of such
amounts except as expressly set forth in the Plan. The Plan is not intended
to
be subject to ERISA.
ARTICLE
13
WITHHOLDING
13.1 Tax
Withholding.
A
Participant shall remit to the Company an amount sufficient to satisfy Federal,
state and local taxes (including the Participant's FICA obligation) required
by
law to be withheld with respect to any grant, exercise, payment or lapse
of
restrictions made under, or occurring as a result of, the Plan.
13.2 Share
Withholding.
If the
Company has a withholding obligation upon the issuance of Common Stock under
the
Plan, a Participant may, subject to the discretion of the Committee, elect
to
satisfy the withholding requirement, in whole or in part, by having the Company
withhold shares of Common Stock having a Fair Market Value on the date the
withholding tax is to be determined equal to the amount required to be withheld
under applicable law. Notwithstanding the foregoing, the Committee may, by
the
adoption of rules or otherwise, modify the provisions of this Section 13.2
or
impose such other restrictions or limitations on such elections as may be
necessary to insure that such elections will be exempt transactions under
Section 16(b) of the Exchange Act.
ARTICLE
14
INDEMNIFICATION
No
member
of the Board or the Committee, nor any officer, Employee or agent acting
on
behalf of the Board or the Committee, shall be personally liable for any
action,
omission, determination or interpretation taken or made with respect to the
Plan, and all members of the Board, the Committee and each officer, Employee
and
agent of the Company acting on their behalf shall, to the extent permitted
by
law, be fully indemnified and protected by the Company with respect to any
such
action, omission, determination or interpretation against any cost, expense
(including counsel fees) or liability (including any sum paid in settlement
of a
claim with the approval of the Committee).
ARTICLE
15
SUCCESSORS
All
obligations of the Company with respect to Awards granted under the Plan
shall
be binding on any successor to the Company, whether the existence of such
successor is a result of a direct or indirect merger, consolidation, purchase
of
all or substantially all of the business or assets of the Company, or
otherwise.
ARTICLE
16
GOVERNING
LAW; REQUIREMENTS OF LAW
16.1 Governing
Law.
The Plan
shall be governed by, and construed in accordance with, the laws of the
Commonwealth of Kentucky without regard to its conflict of laws rules; provided,
however, that with respect to ISOs, the Plan and all agreements under the
Plan
shall be construed so that they qualify as incentive stock options within
the
meaning of Section 422 of the Code.
16.2 Requirements
of Law.
The
granting of Awards and the issuance of shares of Common Stock under the Plan
shall be subject to all applicable laws, rules and regulations, and to such
approvals by any governmental agencies or exchanges as may be required. The
Company shall receive the consideration required by law for the issuance
of
Awards under the Plan. The inability of the Company to obtain authority from
any
regulatory body having jurisdiction, which authority is deemed by the Company’s
counsel to be necessary to the lawful issuance of shares of Common Stock
hereunder, shall relieve the Company of any liability in respect of the failure
to issue such shares of Common Stock as to which the requisite authority
shall
not have been obtained. The certificates of shares of Common Stock issued
under
the Plan may include any legend that the Committee deems appropriate to reflect
any restrictions on transfer under the terms of the Plan or applicable laws
and
regulations.