Document:

EXHIBIT
10.5

 

Senior
Management Incentive Compensation Plan (2003)

 

 

COMMUNITY TRUST BANCORP, INC.

 

SENIOR MANAGEMENT INCENTIVE

COMPENSATION PLAN

 

EFFECTIVE JANUARY 1, 2003

 

 

SENIOR MANAGEMENT INCENTIVE COMPENSATION PLAN

 

TABLE OF CONTENTS

 

 

	
  ARTICLE

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  I.

  	
  Objectives

  	
  1

  
	
   

  	
   

  	
   

  
	
  II.

  	
  Definitions

  	
  2

  
	
   

  	
   

  	
   

  
	
  III.

  	
  Administration of the Plan

  	
  3

  
	
   

  	
   

  	
   

  
	
  IV.

  	
  Participant Eligibility

  	
  4

  
	
   

  	
   

  	
   

  
	
  V.

  	
  Payment to Participants

  	
  5

  
	
   

  	
   

  	
   

  
	
  VI.

  	
  Determination of Annual Award Fund

  	
  6

  
	
   

  	
   

  	
   

  
	
  VII.

  	
  Calculation of Award

  	
   

  
	
   

  	
  Table I
  - 2003 Annual Cash Incentive Compensation

  Award - Group I

  	
  7

  
	
   

  	
   

  	
   

  
	
   

  	
  Table
  II - 2003 Annual Cash Incentive Compensation

  Award - Group II

  	
  8

  
	
   

  	
   

  	
   

  
	
   

  	
  Table
  III - 2003 Annual Cash Incentive Compensation

  Award - Group III

  	
  9

  
	
   

  	
   

  	
   

  
	
   

  	
  Table
  VI - 2003 Senior Management Incentive

  Compensation Plan - Stock Option Awards

  	
  10

  
	
   

  	
   

  	
   

  
	
  VIII.

  	
  Miscellaneous Provisions

  	
  11

  
	
   

  	
  Attachment
  A - Notice of Participation

  	
  12

  
	
   

  	
  Attachment
  B - Designation of Beneficiary

  	
  13

  

 

 

ARTICLE I

OBJECTIVES

 

Section 1.01

This plan is designed to reward senior management for meeting or
exceeding industry standards for profitability and adopted to achieve the
following objectives:

 

	
  (a)

  	
   

  	
  Increase the profitability and growth of Community Trust Bancorp,
  Inc. in a manner which is consistent with other goals of the Company, its
  stockholders and its employees,

  
	
   

  	
   

  	
   

  
	
  (b)

  	
   

  	
  Provide executive compensation which is competitive with other
  financial institutions,

  
	
   

  	
   

  	
   

  
	
  (c)

  	
   

  	
  Attract and retain personnel of outstanding ability and encourage
  excellence in the performance of individual responsibilities,

  
	
   

  	
   

  	
   

  
	
  (d)

  	
   

  	
  Motivate and reward those members of management who contribute to the
  success of the Company,

  
	
   

  	
   

  	
   

  
	
  (e)

  	
   

  	
  Distinguish among the performance contributions of some individuals
  by providing financial recognition for individual performance, as well as
  group performance, and

  
	
   

  	
   

  	
   

  
	
  (f)

  	
   

  	
  Allow the flexibility which permits revision and strengthening from
  time to time to reflect changing organizational goals and objectives.

  

 

1

 

ARTICLE II

 

DEFINITIONS

 

Section 2.01

As used herein, the following words and phrases shall have the meanings
below unless the context clearly indicates otherwise:

 

	
  (a)

  	
   

  	
  “Annual
  Incentive Plan” or “Annual Plan” shall mean the Senior
  Management Incentive Compensation Plan set forth in this document and all
  amendments thereto.

  
	
   

  	
   

  	
   

  
	
  (b)

  	
   

  	
  “Award
  Period” means one Fiscal Year.

  
	
   

  	
   

  	
   

  
	
  (c)

  	
   

  	
  “Board”
  means the Board of Directors of Community Trust Bancorp, Inc.

  
	
   

  	
   

  	
   

  
	
  (d)

  	
   

  	
  “Company”
  means Community Trust Bancorp, Inc., and its subsidiaries.

  
	
   

  	
   

  	
   

  
	
  (e)

  	
   

  	
  “Compensation
  Committee” means the Compensation Committee of the Board.

  
	
   

  	
   

  	
   

  
	
  (f)

  	
   

  	
  “Disability”
  means the total and permanent disability of a participant as defined by any
  Long-Term Disability Plans in effect for the Company and as thereafter may be
  amended.

  
	
   

  	
   

  	
   

  
	
  (g)

  	
   

  	
  “Effective
  Date” means the date upon which the Plan shall become effective.

  
	
   

  	
   

  	
   

  
	
  (h)

  	
   

  	
  “Fiscal
  Year” means the accounting period adopted by the Company for
  federal income tax purposes.

  
	
   

  	
   

  	
   

  
	
  (i)

  	
   

  	
  “Participant”
  means a person designated by the Company to participate in the Plan.

  
	
   

  	
   

  	
   

  
	
  (j)

  	
   

  	
  “Plan”
  shall mean the Company’s Senior Management Incentive Compensation Plan.

  
	
   

  	
   

  	
   

  
	
  (k)

  	
   

  	
  “Salary”
  or “Salaries”
  shall mean the base salary in effect for each participant as of the last pay
  period in December of the Award Period.

  
	
   

  	
   

  	
   

  
	
  (l)

  	
   

  	
  “Stock
  Option” shall mean Stock Options granted under the Community Trust
  Bancorp, Inc. 1998 Stock Option Plan as hereinafter may be amended including
  substitutions or replacements of the Plan. 
  Such options shall be Incentive Stock Options to the extent possible
  under tax laws in effect at the time the option is awarded.

  

 

2

 

ARTICLE
III

 

ADMINISTRATION OF THE
PLAN

 

 

Section 3.01

The Compensation Committee shall administer the Plan and employ such
other agents as may reasonably be required to administer the Plan.

 

Section 3.02

The Compensation Committee shall adopt such rules and regulations of
general application as are beneficial for the administration of the Plan and
shall make all discretionary decisions involving a participant of the Plan.
Said committee shall also have the right to interpret the Plan, to determine
the Effective Date, and to approve all employees who are to participate in the
Plan.

 

Section 3.03

A majority of the Compensation Committee shall constitute a
quorum.  The acts of a majority of the
members present at any meeting at which there is a quorum shall be valid
acts.  Acts reduced to and approved in
writing by a majority of said committee shall also be valid acts.

 

Section 3.04

All incentive compensation payable under the Plan shall be paid from
the general assets of the Company.  To
the extent that any person acquires a right to receive payments under the Plan,
such right shall be no greater than the right of any unsecured creditor of the
Company.

 

Section 3.05

The Compensation Committee may authorize the President and CEO of the
Company to send a written notice of such Plan to each selected
Participant.  No person shall have the
right to be included in the Plan until receiving said notice in the form of
Attachment “A” hereto.

 

Section 3.06

All costs and expenses involved in the administration of this Plan
shall be paid by the Company.

 

Section 3.07

Any determination or action of the Compensation Committee or the Board
shall be final, conclusive and binding on all participants and their
beneficiaries, heirs, personal representatives, executors and administrators.

 

Section 3.08

The Board of Directors, in its sole discretion, may amend, modify or
terminate the Plan at any time.  The
Board shall also annually review the pre-determined performance standards and
may amend such schedules in its sole discretion.

 

3

 

ARTICLE
IV

 

PARTICIPANT
ELIGIBILITY

 

Section 4.01

The following groups shall participate in the Plan:

 

	
  (a)

  	
   

  	
  Group I shall consist of the Executive Committee of the Corporation.

  
	
   

  	
   

  	
   

  
	
  (b)

  	
   

  	
  Group II shall consist of the (1) CTB officers responsible for the
  divisions of Commercial Lending, Consumer Lending, Residential Real Estate
  Lending, Finance, Sales and Marketing, Human Resources, Compliance,
  Facilities Management and (2) the Presidents of each market

  
	
   

  	
   

  	
   

  
	
  (c)

  	
   

  	
  Group III shall consist of Senior Vice Presidents of consolidated
  functions who are selected for participation by the Compensation Committee.

  
	
   

  	
   

  	
   

  
	
  (d)

  	
   

  	
  Individuals below SVP level may be recommended and approved by the
  Compensation Committee for special awards of options for extraordinary
  performance.

  

 

Section 4.02

Voluntary or involuntary termination of full-time employment of a
Participant prior to the payment of incentive awards for an Award Period will
result in such Participant forfeiting any incentive compensation for the Award
Period (except as provided in Section 4.03 herein).

 

Section 4.03

If a Participant dies, retires, becomes disabled, or is granted a leave
of absence during an Award Period, the Compensation Committee may, at its
discretion or under such rules as it may have prescribed, award partial
incentive compensation based on the level of achievement in relation to goals
established for the Award Period.

 

Section 4.04

Directors who are also employees of the Company shall be eligible to
participate in the Plan.  However, a
director who is compensated on the basis of a fee or retainer, as distinguished
from a salary, shall not be eligible.

 

Section 4.05

New employees of the Company and persons promoted during the Award
Period who were not eligible to participate in the Plan at the beginning of the
Award Period, but have become a member of Group I, II, or III shall participate
in the Plan so long as such eligibility came into existence no later than six
(6) months after the beginning of said Award Period.  If a person becomes eligible at a date later than six (6) months
into an Award Period, such person shall not be a Participant under this Plan
until the first day of the next Award Period.

 

4

ARTICLE V

 

PAYMENT TO
PARTICIPANTS

 

Section 5.01

Incentive compensation to be awarded under the Plan shall be paid to
Participants within thirty days after the close of the Award Period.  Awards are not earned until paid to
Participants.

 

Section 5.02

A Participant may elect to defer payment of all or part of his or her
incentive compensation so long as the Participant requests such deferred
payment under the terms of the Company’s Voluntary Deferred Compensation Plan.

 

5

 

ARTICLE
VI

 

DETERMINATION
OF ANNUAL AWARD FUND

 

Section 6.01

The Annual Incentive Plan fund for each group shall be generated by a
percent of the aggregate salaries for the individuals in each group.  The target award fund shall be computed as
shown in Table I below:

 

TABLE I

 

TARGET ANNUAL AWARD
FUND

 

	
  GROUP

  	
   

  	
  AGGREGATE

  SALARIES

  	
   

  	
  TARGET
  AWARD EXPRESSED

  AS A% OF SALARIES

  	
   

  	
  TARGET

  ANNUAL

  AWARD FUND

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  I

  	
   

  	
  $

  	
   

  	
   

  	
  X

  	
  10%

  	
  =

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  II

  	
   

  	
  $

  	
   

  	
   

  	
  X

  	
  9%

  	
  =

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  III

  	
   

  	
  $

  	
   

  	
   

  	
  X

  	
  8.5%

  	
  =

  	
   

  	
  $

  	
   

  	
   

  

 

Section 6.02

The actual amount of the Senior Management Incentive Compensation Plan
award fund shall be calculated according to a schedule comparing Earnings Per
Share and ROAA for the Award Period to a pre-determined performance standard.  When performance is at or above the
performance standard, the actual award fund is adjusted upward from the target
award fund.

 

Section 6.03

There shall be a minimum acceptable performance beneath which no
incentive awards are paid (sometimes referred to as the “threshold”) and a
maximum above which there is no additional award paid to avoid excessive payout
in the event of windfall profits.  Said
minimum and maximum shall be reviewed annually and amended when necessary in
the sole discretion of the Compensation Committee.

 

Section 6.04

A Participant who is rated a “4” or “5” on the most recent Performance
Appraisal and Development Plan shall not be eligible to receive an award under
the Plan.

 

6

 

ARTICLE
VII

 

CALCULATION OF AWARD

 

Section 7.01

The Corporation’s (Group I) will earn an award determined by Earnings
Per Share, as shown below:

 

TABLE I

 

2003
ANNUAL CASH INCENTIVE COMPENSATION AWARD

INITIAL
CALCULATION

 

Group I - Executive Committee of Community
Trust Bancorp, Inc.

 

	
  *Target/ROAA

  	
   

  	
  Award As
  A% of

  Target Award

  	
   

  	
  Award As
  A% of

  Salary

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Group I

  	
   

  
	
  ROAA

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Base             1.15%

  	
   

  	
  100%

  	
   

  	
  10%

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.23%

  	
   

  	
  200%

  	
   

  	
  20%

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.28%

  	
   

  	
  300%

  	
   

  	
  30%

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.33%

  	
   

  	
  400%

  	
   

  	
  40%

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.38%+

  	
   

  	
  600%

  	
   

  	
  60%

  	
   

  

 

* For 2003, 100% of Targeted ROAA and $2.30
earnings per share is required for an incentive to be earned.

 

7

 

Section 7.02

The Corporation’s (Group II) will earn an award determined by Earnings
Per Share, as shown below:

 

TABLE II

 

2003
ANNUAL CASH INCENTIVE COMPENSATION AWARD

INITIAL
CALCULATION

 

Group II – Consolidated Division Officers of
CTB and Market Presidents

 

	
  EPS as A% of

  *Target/ROAA

  	
   

  	
  Award As
  A% of

  Target Award

  	
   

  	
  Award As
  A% of

  Salary

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Group II

  	
   

  
	
  ROAA

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Base             1.15%

  	
   

  	
  100%

  	
   

  	
  9%

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.23%

  	
   

  	
  133%

  	
   

  	
  12%

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.28%

  	
   

  	
  200%

  	
   

  	
  18%

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.33%

  	
   

  	
  275%

  	
   

  	
  25%

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.38%+

  	
   

  	
  333%

  	
   

  	
  30%

  	
   

  

 

*      For 2003, 100% of the targeted ROAA and $2.30
earnings per share is required for an incentive to be earned.

 

8

 

Section 7.03

Senior Vice Presidents of consolidated functions designated by the
Compensation Committee will earn an award primarily determined by earnings per
share, as shown below:

 

TABLE III

 

2003
ANNUAL CASH INCENTIVE COMPENSATION AWARD

INITIAL
CALCULATION

 

Group III - Senior Vice Presidents of
Consolidated Functions

 

	
  EPS as A% of

  *Target/ROAA

  	
   

  	
  Award As
  A% of

  Target Award

  	
   

  	
  Award As
  A% of

  Salary

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Group V

  	
   

  
	
  ROAA

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Base             1.15%

  	
   

  	
  100%

  	
   

  	
  8.5%

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.23%

  	
   

  	
  118%

  	
   

  	
  10%

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.28%

  	
   

  	
  176%

  	
   

  	
  15%

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.33%

  	
   

  	
  235%

  	
   

  	
  20%

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.38%+

  	
   

  	
  294%

  	
   

  	
  25%

  	
   

  

 

* For 2003, 100% of the targeted ROAA and $2.30 earnings per share is
required to earn an incentive.

 

9

 

Section 7.04

Participants in Groups I, II, and III shall be eligible to receive
Stock Options awards on the same day that cash awards are paid under the terms
of this Plan.  Such Stock Options shall
have a face value equal to the percentage of salary shown on Table IV below,
adjusted in the same manner and in the same proportion as cash awards are
adjusted under the terms of Sections 7.01, 7.02, and 7.03, and rounded down as
necessary to grant an option for whole shares.

 

TABLE IV

 

2003 SENIOR MANAGEMENT
INCENTIVE COMPENSATION PLAN

STOCK OPTION AWARDS

 

	
  EPS as A% of

  * Target/ROAA

  	
   

  	
  Stock
  Option Award As

  A% of Salary

  	
   

  
	
   

  	
   

  	
  Group I

  	
   

  	
  Group II

  	
   

  	
  Group III

  	
   

  
	
       ROAA

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Base             1.15%

  	
   

  	
  100%

  	
   

  	
  50%

  	
   

  	
  25%

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.23%

  	
   

  	
  125%

  	
   

  	
  60%

  	
   

  	
  30%

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.28%

  	
   

  	
  150%

  	
   

  	
  70%

  	
   

  	
  35%

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.33%

  	
   

  	
  175%

  	
   

  	
  80%

  	
   

  	
  40%

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.38%+

  	
   

  	
  200%

  	
   

  	
  100%

  	
   

  	
  50%

  	
   

  

 

* For 2003, 100% of Targeted ROAA and $2.30
earnings per share is required for an incentive to be earned.

 

10

 

ARTICLE VIII

 

MISCELLANEOUS
PROVISIONS

 

Section 8.01

If the financial performance of the Company for any Fiscal Year taken
into account for determination of an award is found to be incorrect by the
Company’s independent certified public accountants and was more than the
correct amount, there shall be no recourse by the Company against any person or
estate.  However, the Company shall have
the right to correct such error by reducing by the excess amount any subsequent
payments yet to be made under the Plan.

 

Section 8.02

The Compensation Committee may elect to remove unusual, extraordinary
or non-recurring items from the calculation of the Earnings Per Share.

 

Section 8.03

The Company shall not merge into or consolidate with another entity or
sell all or substantially all of its assets to another entity unless such other
entity shall become obligated to perform the terms and conditions hereof
relating to any awards already earned but not yet paid to the participant on
his/her behalf.

 

11

 

ATTACHMENT A

 

NOTICE
OF PARTICIPATION

 

                           
is eligible for participation in the 2003 Plan Year for Community Trust
Bancorp, Inc. Senior Management Incentive Compensation Plan, such participant
being subject to all of the terms and conditions of said Plan.

 

 

	
   

  	
  Compensation Committee of the Board of Directors

  
	
   

  	
   

  
	
   

  	
  BY:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Dated:

  	
   

  	
   

  
						

 

12

 

ATTACHMENT B

 

DESIGNATION OF
BENEFICIARY

 

I,                            
a participant in the Community Trust Bancorp, Inc. Senior Management Incentive
Compensation Plan, name the following as my primary beneficiary under said Plan
in the event of my death prior to receiving an award payable to me under said Plan.

 

	
   

  	
   

  	
   

  
	
  Name

  	
   

  	
  Relationship

  
	
   

  
	
  Address

  

 

If the primary beneficiary predeceases me, I designate the following
persons as a contingent beneficiary, in the order shown, to receive an award
payable to me under the Plan:

 

	
   

  	
   

  	
   

  
	
  Name

  	
   

  	
  Relationship

  
	
   

  
	
  Address

  

 

	
   

  	
   

  	
   

  
	
  Name

  	
   

  	
  Relationship

  
	
   

  
	
  Address

  

 

	
   

  	
   

  	
   

  
	
  Name

  	
   

  	
  Relationship

  
	
   

  
	
  Address

  

 

This supersedes any previous
beneficiary designation made by me with respect to this Plan.  However, any compensation covered by the
Community Trust Bancorp, Inc. Voluntary Deferred Compensation Plan shall be
governed by the Beneficiary Designation applicable to that Plan.

 

	
   

  	
   

  	
   

  
	
  Date

  	
   

  	
  Signature of Participant

  

 

13Exhibit 10.18

 

PROMISSORY NOTE

 

 

	

  $100,000.00

  	

   

  	

  New Brighton, MN

  	

   

  
	

   

  	

   

  	

  February 27, 2002

  	

   

  

 

FOR VALUE

RECEIVED, the undersigned FOUNDERS FOOD & FIRKINS LTD., a Minnesota

corporation (the “Borrower”), hereby promises to pay to the order of NEW

BRIGHTON VENTURES, INC. (the “Lender”), at its office at 2397 Palmer Drive, New

Brighton, Minnesota, the principal sum of One Hundred Thousand and no/100

Dollars ($100,000.00), in lawful money of the United States of America, and to

pay interest (calculated on the basis of actual days elapsed and a three

hundred sixty-five (365) day year) on said principal sum, or the unpaid balance

thereof, at a rate equal to prime plus one half of one percent (Prime + 0.5%)

per annum.

 

Beginning in

December 2001 and each month thereafter until said principal has been fully

paid, the Borrower shall pay monthly installments of accrued interest only on

the outstanding principal balance.

 

The principal

balance of this loan is due and payable upon 30 days following demand for

payment.

 

 

	

   

  	

  FOUNDERS FOOD & FIRKINS LTD.

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  By: 

  	

  /s/ Steven J. Wagenheim

  	

   

  
	

   

  	

   

  
	

   

  	

  Title:  President/Chief Executive Office

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