<PAGE>
<PAGE>
Registration No. 333-72371
As filed with the Securities and Exchange Commission on
March 10, 1999
================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
PRE-EFFECTIVE
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
KENTUCKY NATIONAL BANCORP, INC.
(Exact name of registrant as specified in charter)
<TABLE>
<CAPTION>
<S> <C> <C>
INDIANA 6021 APPLIED FOR
- ---------------------------- ---------------------------- ---------------------
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code No.) Identification Number)
</TABLE>
1000 NORTH DIXIE AVENUE
ELIZABETHTOWN, KENTUCKY 42701
(502) 737-6000
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
RONALD J. PENCE, PRESIDENT
KENTUCKY NATIONAL BANCORP, INC.
1000 NORTH DIXIE AVENUE
ELIZABETHTOWN, KENTUCKY 42701
(502) 737-6000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
copies to:
JAMES C. STEWART, ESQUIRE
HOUSLEY KANTARIAN & BRONSTEIN, P.C.
1220 19TH STREET, N.W., SUITE 700
WASHINGTON, D.C. 20036
(202) 822-9611
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Approximate date of commencement of proposed sale to the public:
AS SOON AS PRACTICABLE AFTER EFFECTIVENESS.
If the securities being registered on this form are being
offered in connection with the formation of a holding company
and there is compliance with General Instruction G, check the
following box. [ ]
If this form is filed to register additional securities for
an offering pursuant to Rule 462(b) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same offering. [ ] ____________
If this form is a post-effective amendment filed pursuant
to Rule 462(d) under the Securities Act, check the following box
and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering.
[ ] ____________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT
ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE
DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH
SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL
THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
================================================================
<PAGE>
March __, 1999
Dear Fellow Shareholder:
On behalf of the Board of Directors, we invite you to
attend the 1999 Annual Meeting of Shareholders of Kentucky
National Bank which will be held in the Community Meeting Center
of the Nolin Rural Electric Co-operative Corporation Building,
411 Ring Road, Elizabethtown, Kentucky on Tuesday, April 27,
1999 at 5:00 p.m. local time. In addition to the election of
directors, shareholders will be asked to consider and a proposal
to establish a holding company for the Bank. Your Board of
Directors believes the holding company reorganization is in the
best interests of Kentucky National's shareholders and a very
important step in keeping the organization competitive.
If the holding company reorganization is approved by
shareholders and the appropriate bank regulatory agencies, all
outstanding shares of Kentucky National will be converted into
an equal number of shares of Kentucky National Bancorp, Inc., an
Indiana corporation recently formed by Kentucky National to
serve as its holding company. This proxy statement/prospectus
provides details on the reasons for the holding company
reorganization and also explains how your rights as a
shareholder of the holding company will differ from those you
currently have as a shareholder of Kentucky National.
This proxy statement/prospectus serves as the prospectus
for the shares that will be issued by Kentucky National Bancorp,
Inc. in the reorganization. The proxy statement/prospectus does
not contain all the information set forth in the registration
statement which the holding company has filed with the
Securities and Exchange Commission. We encourage you to read
the entire document carefully.
YOUR VOTE IS IMPORTANT, REGARDLESS OF THE NUMBER OF
SHARES YOU OWN. Because the holding company reorganization
requires the approval of two-thirds of the shares outstanding,
your failure to vote or abstention from voting is equivalent to
a vote against the reorganization. On behalf of the Board of
Directors, we urge you to please sign, date and return the
enclosed proxy card in the enclosed postage-prepaid envelope as
soon as possible even if you currently plan to attend the
Meeting. Returning the proxy will not prevent you from voting
in person, but will assure that your vote is counted if you are
unable to attend the meeting.
Sincerely,
Lawrence P. Calvert Ronald J. Pence
Chief Executive Officer President
PLEASE REFER TO RISK FACTORS ON PAGE 2 OF THE PROXY
STATEMENT/PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION, THE BOARD
OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, THE OFFICE OF THE
COMPTROLLER OF THE CURRENCY OR ANY STATE SECURITIES AUTHORITY
HAS APPROVED OR DISAPPROVED THESE SECURITIES, NOR PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR
DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE BANK INSURANCE FUND OR ANY OTHER GOVERNMENT
AGENCY.
THIS PROXY STATEMENT/PROSPECTUS IS DATED ____________,
1999 AND IS FIRST BEING MAILED TO SHAREHOLDERS ON ___________,
1999.
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<PAGE>
KENTUCKY NATIONAL BANK
1000 NORTH DIXIE AVENUE
ELIZABETHTOWN, KENTUCKY 42701
________________________________________________________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 27, 1999
________________________________________________________________
The Annual Meeting of Shareholders (the "Annual Meeting")
of Kentucky National Bank ("Kentucky National") will be held in
the Community Meeting Center of the Nolin Rural Electric
Co-operative Corporation Building, 411 Ring Road, Elizabethtown,
Kentucky, on Tuesday, April 27, 1999 at 5:00 p.m. local time.
The Annual Meeting is for the following purposes which are
more completely described in the accompanying Proxy
Statement/Prospectus:
1. The approval of the reorganization of the Bank into
the holding company form of ownership by approving
an Agreement and Plan of Reorganization, pursuant to
which Kentucky National will become a wholly owned
subsidiary of a holding company, Kentucky National
Bancorp, Inc., a newly formed Indiana corporation
("Holding Company"), and each outstanding share of
common stock of Kentucky National will be converted
into one share of common stock of the Holding
Company; and
2. The election of nine directors of Kentucky National;
3. Any other matters as may properly come before the
Annual Meeting or any adjournment thereof.
The Board of Directors is not aware of any other business
to come before the Annual Meeting.
Any action may be taken on any one of the foregoing
proposals at the Annual Meeting or any adjournment or
postponement thereof. Shareholders of record at the close of
business on March 19, 1999 (the "Record Date"), are the
shareholders entitled to vote at the Annual Meeting and any
adjournment thereof.
Appraisal rights will be available to shareholders as of
the Record Date who do not vote in favor of the holding company
reorganization and otherwise comply with the procedures set
forth in 12 U.S.C. 215a, a copy of which is attached as Exhibit
D to the accompanying Proxy Statement/Prospectus.
You are requested to fill in and sign the enclosed proxy
which is solicited by the Board of Directors and to mail it
promptly in the enclosed envelope. The proxy will not be used
if you attend and vote at the Annual Meeting in person.
BY ORDER OF THE BOARD OF DIRECTORS
KATHLYN JENEAN COOPER
CASHIER
Elizabethtown, Kentucky
March __, 1999
________________________________________________________________
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE KENTUCKY
NATIONAL THE EXPENSE OF A FURTHER REQUEST FOR PROXIES IN ORDER
TO ENSURE A QUORUM. A SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR
YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED WITHIN THE
UNITED STATES.
________________________________________________________________
<PAGE>
YOU SHOULD RELY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR
THAT WE HAVE REFERRED YOU TO. WE HAVE NOT AUTHORIZED ANY PERSON
TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT. THIS PROXY
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED
HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROXY STATEMENT/PROSPECTUS NOR ANY SALE HEREUNDER SHALL UNDER
ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE HOLDING COMPANY OR THE BANK SINCE
ANY OF THE DATES AS OF WHICH INFORMATION FURNISHED HEREIN OR
SINCE THE DATE HEREOF.
_______________________________________________________________
TABLE OF CONTENTS
Page
----
Questions and Answers Regarding Holding
Company Reorganization. . . . . . . . . . . . . . . . . . . .
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . .
Annual Meeting of Shareholders
General . . . . . . . . . . . . . . . . . . . . . . . . . . .
Voting and Revocation of Proxies. . . . . . . . . . . . . . .
Voting Securities and Principal Holders Thereof . . . . . . .
Proposal I - Proposed Holding Company Formation
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reasons for the Holding Company Reorganization. . . . . . . .
Plan of Reorganization. . . . . . . . . . . . . . . . . . . .
Effective Date. . . . . . . . . . . . . . . . . . . . . . . .
Exchange of Stock Certificates. . . . . . . . . . . . . . . .
Rights of Dissenting Shareholders . . . . . . . . . . . . . .
Federal Income Tax Consequences . . . . . . . . . . . . . . .
Consequences Under Federal Securities Laws. . . . . . . . . .
Effect on Organizational Stock Option and
Incentive Plan. . . . . . . . . . . . . . . . . . . . . .
Effect on Stock Transfer Agreement. . . . . . . . . . . . . .
Conditions to the Reorganization. . . . . . . . . . . . . . .
Regulatory Approvals. . . . . . . . . . . . . . . . . . . . .
Amendment, Termination or Waiver. . . . . . . . . . . . . . .
Comparison of Shareholders' Rights. . . . . . . . . . . . . .
Certain Anti-Takeover Provisions. . . . . . . . . . . . . . .
Provisions of the Holding Company's Articles. . . . . . . . .
of Incorporation and Bylaws. . . . . . . . . . . . . . .
Indiana Business Corporation Law . . . . . . . . . . . . . .
Business of Kentucky National Bancorp, Inc.. . . . . . . . .
and Kentucky National . . . . . . . . . . . . . . . . . .
Year 2000 Readiness Disclosure. . . . . . . . . . . . . . . .
Management of Kentucky National Bancorp, Inc. . . . . . . . .
Regulation of Kentucky National Bancorp, Inc. . . . . . . . .
Description of Holding Company Capital Stock. . . . . . . . .
Holding Company Common Stock. . . . . . . . . . . . . . . . .
Serial Preferred Stock. . . . . . . . . . . . . . . . . . . .
Accounting Treatment. . . . . . . . . . . . . . . . . . . . .
Legal Opinion . . . . . . . . . . . . . . . . . . . . . . . .
Vote Required . . . . . . . . . . . . . . . . . . . . . . . .
Proposal II - Election of Directors. . . . . . . . . . . . . . .
Meetings and Committees of the Board of Directors . . . . . .
Director Compensation . . . . . . . . . . . . . . . . . . . .
Executive Compensation. . . . . . . . . . . . . . . . . . . .
Transactions with Management. . . . . . . . . . . . . . . . .
Market for Kentucky National Common Stock. . . . . . . . . . . .
and Dividends . . . . . . . . . . . . . . . . . . . . . . .
Financial Statements . . . . . . . . . . . . . . . . . . . . . .
Shareholder Proposals. . . . . . . . . . . . . . . . . . . . . .
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . .
Exhibit A - Agreement and Plan of Reorganization . . . . . . A-1
Exhibit B - Articles of Incorporation. . . . . . . . . . . . B-1
Exhibit C - Bylaws . . . . . . . . . . . . . . . . . . . . . C-1
Exhibit D - Dissenter and Appraisal Rights . . . . . . . . . D-1
________________________________________________________________
<PAGE>
FORWARD-LOOKING STATEMENTS
- --------------------------
IN ADDITION TO HISTORICAL AND FACTUAL STATEMENTS, THE
INFORMATION DISCUSSED IN THIS PROXY STATEMENT/PROSPECTUS
CONTAINS FORWARD-LOOKING STATEMENTS, WHICH CAN BE IDENTIFIED BY
THE USE OF FORWARD-LOOKING PHRASES SUCH AS "BELIEVES,"
"EXPECTS," "MAY," "SHOULD," "PROJECTED," "CONTEMPLATES," OR
"ANTICIPATES" OR THE NEGATIVE THEREOF OR COMPARABLE WORDS THAT
INVOLVE RISKS AND UNCERTAINTIES. THE HOLDING COMPANY'S ACTUAL
RESULTS MAY DIFFER MATERIALLY FROM THE RESULTS DISCUSSED IN THE
FORWARD-LOOKING STATEMENTS. THE FOLLOWING MATTERS ARE
CAUTIONARY STATEMENTS IDENTIFYING IMPORTANT FACTORS WITH RESPECT
TO FORWARD-LOOKING STATEMENTS, INCLUDING CERTAIN RISKS AND
UNCERTAINTIES, THAT COULD CAUSE ACTUAL RESULTS TO VARY
MATERIALLY FROM THE FUTURE RESULTS DISCUSSED IN THE
FORWARD-LOOKING STATEMENTS.
________________________________________________________________
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________________________________________________________________
QUESTIONS AND ANSWERS REGARDING
THE HOLDING COMPANY REORGANIZATION
________________________________________________________________
THE FOLLOWING QUESTION AND ANSWER SECTION HIGHLIGHTS
SELECTED INFORMATION FROM THIS PROXY STATEMENT/PROSPECTUS AND
MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU.
TO UNDERSTAND THE HOLDING COMPANY REORGANIZATION FULLY, WE URGE
YOU TO READ CAREFULLY THIS ENTIRE DOCUMENT, INCLUDING THE
ATTACHMENTS.
WHY IS THE BOARD PROPOSING THE HOLDING COMPANY REORGANIZATION?
Your Board of Directors believes that the holding company
reorganization will provide Kentucky National with greater
financial and corporate flexibility. By having a holding
company, Kentucky National will have more options for
structuring acquisitions and will be able to raise capital by
means which are not available to Kentucky National. In
addition, by incorporating the holding company under a modern
state corporate code, your Board of Directors will have more
flexibility in conducting the day-to-day operations of Kentucky
National.
WILL THE HOLDING COMPANY REORGANIZATION CHANGE THE BUSINESS OF
THE BANK?
No. The holding company reorganization will not change the
current business of Kentucky National Bank. Following the
holding company reorganization, the principal activity of
Kentucky National Bancorp, Inc. will be owning and operating
Kentucky National Bank which will continue to conduct its
current business from its current offices. The principal
executive offices of both Kentucky National Bank and the holding
company will be located at 1000 North Dixie Avenue,
Elizabethtown, Kentucky 42701 and their telephone number
will be (502) 737-6000.
HOW WILL THE HOLDING COMPANY REORGANIZATION AFFECT SHAREHOLDERS?
In connection with this merger, you will receive one share of
stock in the holding company for each share of Kentucky National
stock which you currently own. Outstanding stock certificates
will no longer represent an interest in Kentucky National but
will instead represent an interest in Kentucky National's
holding company.
As a result of the holding company reorganization, you will
no longer own stock directly in Kentucky National but will
instead own stock in theholding company. Your rights will be
governed by the holding company's Articles of Incorporation and
Bylaws and the Indiana Business Corporation Law rather than
by Kentucky National's Articles of Association and Bylaws and
the National Bank Act and regulations of the Office of the
Comptroller of the Currency. For a detailed discussion of the
differences in the rights of shareholders, see "Proposal I
- -- Proposed Holding Company Reorganization -- Comparison
of Shareholders' Rights."
WHAT IS THE VOTE REQUIRED FOR APPROVAL OF THE HOLDING COMPANY
REORGANIZATION?
The holding company reorganization must be approved by at
least two-thirds of the shares outstanding. Your Board of
Directors has unanimously approved the holding company
reorganization and recommends that you vote for it as well.
Because the vote is based on the total number of shares
outstanding rather than the votes cast at the meeting,
your failure to vote has the same effect as a vote against
the holding company reorganization. As a result, your Board of
Directors recommends that you sign and return your proxy at your
earliest convenience even if you currently plan to attend the
meeting. Directors and executive officers of Kentucky National
currently own 85,360 shares of Kentucky National's stock or
35.6% of shares outstanding.
IS THE HOLDING COMPANY REORGANIZATION SUBJECT TO ANY OTHER
APPROVALS?
Yes. The holding company reorganization must also be
approved by the federal agencies that regulate national banks
and bank holding companies, respectively: the Office of the
Comptroller of the Currency and the Board of Governors of the
Federal Reserve System. Applications have been filed for these
approvals.
1<PAGE>
<PAGE>
DO SHAREHOLDERS HAVE THE RIGHT TO DISSENT TO THE HOLDING COMPANY
REORGANIZATION?
Yes. If you who vote against the reorganization and
provide the appropriate written notice to Kentucky National will
have the right to demand appraisal for their shares. You will
need to follow the procedures described in "Proposal I --
Proposed Holding Company Formation -- Rights of Dissenting
Shareholders." Your Board of Directors does not intend to
complete the holding company reorganization if shareholders seek
appraisal for more than 10% of the outstanding shares.
WHAT ARE THE TAX CONSEQUENCES TO SHAREHOLDERS?
Kentucky National has received an opinion from its special
counsel that no gains or losses will be recognized by it or by
you as a result of the reorganization, except for shareholders
who dissent from the reorganization and receive the appraised
value of their shares.
RISK FACTORS
In addition to the other information contained in this
proxy statement/prospectus, the following factors should be
considered carefully in evaluating the purchase of the shares of
Holding Company common stock offered hereby.
ANTI-TAKEOVER PROVISIONS IN THE HOLDING COMPANY'S ARTICLES
OF INCORPORATION AND BYLAWS MAY DISCOURAGE OFFERS TO ACQUIRE THE
HOLDING COMPANY THAT YOU MAY WANT TO CONSIDER. The Holding
Company's Articles of Incorporation and Bylaws contain certain
provisions that could delay, discourage or prevent an attempted
takeover of the Holding Company. These provisions include:
provisions requiring the affirmative vote of 80% of the shares
outstanding for the approval of Business Combinations with
Related Persons; the requirement of advance notice of
shareholder nominations and new business; a limitation of the
voting rights of holders of more than 10% of the Holding
Company's equity securities; the authorization of the issuance
of preferred stock; the classification of the Board of
Directors; and the requirement of an 80% vote to remove
directors or to amend certain provisions of the Articles of
Incorporation and the inability of shareholders to call special
meetings or to amend the Bylaws. These provisions could
discourage takeover proposals in which shareholders could
receive a premium for their share but which are not approved by
the Board of Directors.
LACK OF MARKET. There is no existing trading market for
the common stock of Kentucky National. It is not expected that
any trading market for the common stock of the Holding Company
will develop either.
2<PAGE>
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KENTUCKY NATIONAL BANK
PROXY STATEMENT/PROSPECTUS
ANNUAL MEETING OF SHAREHOLDERS
April 27, 1999
________________________________________________________________
GENERAL
________________________________________________________________
This proxy statement/prospectus is furnished in connection
with the solicitation of proxies by the Board of Directors of
Kentucky National Bank ("Kentucky National") for the annual
meeting of shareholders to be held in the Community Meeting
Center at the Nolin Rural Electric Co-Operative Corporation
Building, 411 Ring Road, Elizabethtown, Kentucky, Tuesday, April
27, 1999 at 5:00 p.m. local time (the "Annual Meeting"). The
accompanying Notice of Annual Meeting and this proxy
statement/prospectus, together with the enclosed form of proxy,
are first being mailed to you on or about March __, 1999.
________________________________________________________________
Voting and Revocation of Proxies
________________________________________________________________
Proxies solicited by your Board of Directors will be voted
as you direct on the proxy card. IF NO INSTRUCTIONS ARE GIVEN,
PROPERLY EXECUTED PROXIES WHICH HAVE NOT BEEN REVOKED WILL BE
VOTED IN FAVOR OF THE PROPOSED HOLDING COMPANY FORMATION AND FOR
THE NOMINEES FOR DIRECTOR SET FORTH BELOW. Proxies marked as
abstentions will not be counted as votes cast. In addition,
shares held in street name which have been designated by brokers
on proxy cards as not voted ("broker no votes") will not be
counted as votes cast. Proxies marked as abstentions or as
broker no votes, however, will be treated as shares present for
purposes of determining whether a quorum is present.
Even if you execute the enclosed form of proxy, you retain
the right to revoke your proxy at any time prior to exercise.
Unless so revoked, the shares represented by properly executed
proxies will be voted at the Annual Meeting and all adjournments
thereof. You may revoke your proxy at any time prior to
exercise by written notice to Kentucky National Bank or by the
filing of a properly executed, later-dated proxy. Your proxy
will not be voted if you attend the Annual Meeting and vote in
person. Your presence at the Annual Meeting alone will not
revoke your proxy, however.
________________________________________________________________
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
________________________________________________________________
The securities entitled to vote at the Annual Meeting
consist of the common stock of Kentucky National Bank.
Shareholders of record as of the close of business on March 19,
1999 (the "Record Date") are entitled to one vote for each share
then held except in elections of directors in which shareholders
may cumulate their votes. At the Record Date, Kentucky National
had 240,000 shares of Kentucky National common stock
outstanding. In order to have a quorum at the Annual Meeting,
at least a majority of the total outstanding shares of Kentucky
National common stock must be present, either in person or by
proxy.
The following table sets forth, as of the Record Date,
certain information as to the common stock beneficially owned by
all persons owning more than 5% of the common stock outstanding
at the Record Date. For purposes of this table, a person is
considered to be the beneficial owner of any shares of common
stock (1) over which he or she has or shares voting or
investment power, or (2) which he or she has the right to
acquire at any time within 60 days from the Record Date. "Voting
power" is the power to vote or direct the voting of shares and
"investment power" is the power to sell or direct the sale of
shares. In calculating percentage ownership for a given
individual or group of individuals, the number of shares of
common stock outstanding includes unissued shares subject to
options exercisable within 60 days of the Record Date held by
that individual or group.
3<PAGE>
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<TABLE>
<CAPTION>
AMOUNT AND PERCENT OF
NATURE OF SHARES OF
NAME AND ADDRESS BENEFICIAL COMMON STOCK
OF BENEFICIAL OWNER OWNERSHIP OUTSTANDING
- ------------------- ---------- -----------
<S> <C> <C>
Kevin Addington 12,040 5.02%
701 W. Park Road
Elizabethtown, Kentucky 42701
Robert E. Robbins 12,040 5.02
P.O. Box 2089
Elizabethtown, Kentucky 42701
Allen McNutt 12,040 5.02
109 Gaither Station Road
Elizabethtown, Kentucky 42701
Christopher Knight 12,040 5.02
1109 Woodland Drive
Elizabethtown, Kentucky 42701
Ronald J. Pence 14,040 (1) 5.80
1000 North Dixie Avenue
Elizabethtown, Kentucky 42701
<FN>
___________
(1) Includes 2,000 shares which Mr. Pence has the right to acquire pursuant
to the exercise of options.
</FN>
</TABLE>
________________________________________________________________
PROPOSAL I -- PROPOSED HOLDING COMPANY FORMATION
________________________________________________________________
SUMMARY
Your Board of Directors is seeking your approval of an
Agreement and Plan of Reorganization, dated January 13, 1999
(the "Plan of Reorganization"), by which Kentucky National will
become a wholly owned subsidiary of Kentucky National Bancorp,
Inc., an Indiana corporation recently formed by Kentucky
National for the purpose of becoming a holding company for
Kentucky National. Under the Plan of Reorganization, each
outstanding share of Kentucky National common stock (other than
shares as to which dissenters' rights of appraisal have been
properly exercised) will be converted into one share of Holding
Company common stock, and the former holders of Kentucky
National common stock will become the holders of all of the
outstanding Holding Company common stock. The Holding Company
was incorporated on February 5, 1999, and has no prior operating
history. Following the reorganization, it is intended that
Kentucky National will continue its operations at the same
location, with the same management, and subject to all the
rights, obligations and liabilities of Kentucky National
existing immediately prior to the reorganization.
REASONS FOR THE HOLDING COMPANY REORGANIZATION
Your Board of Directors believes that the formation of a
holding company will provide Kentucky National with greater
flexibility in structuring acquisitions of banks and other
companies, allow greater diversification in activities and
expand the means by which capital can be raised. In addition,
by incorporating the holding company under a modern state
corporate code, your Board of Directors will have more
flexibility in running the day-to-day operations of Kentucky
National. Various provisions of the Holding Company's Articles
of Incorporation and
4<PAGE>
<PAGE>
Bylaws and of the Indiana Business Corporation Act will also
reduce Kentucky National's vulnerability to hostile acquisitions
of control and help it to remain a locally owned and oriented
community bank. Your Board of Directors further believes that
the establishment of a holding company will increase Kentucky
National's competitiveness in attracting and retaining
personnel.
Acquisition Flexibility. The holding company structure
can be used to facilitate acquisitions of other banks and
potentially allows the acquisition of a greater range of
organizations. As a national bank, Kentucky National is
currently prohibited from having another bank as a subsidiary.
Consequently, any acquisition of another bank must be structured
as a direct merger of that bank with Kentucky National in which
one of the parties will disappear as a separate entity. Any
merger must also be approved by two-thirds of Kentucky
National's outstanding shares. With a holding company, an
acquisition may be structured so that the other bank is acquired
as a separate subsidiary that can continue to operate under its
original name and under the direction of a separate board of
directors. The ability to allow an acquired bank to operate
with some degree of autonomy may be an important factor in
negotiating an acquisition and allows the Holding Company to
take advantage of the acquired bank's name recognition and
goodwill. In addition, an acquisition of another bank by the
Holding Company can be structured so that approval of the
Holding Company's shareholders is not required. As a result,
the Holding Company could avoid the expense of a shareholder
meeting and can negotiate acquisitions with greater certainty
that the transaction will be consummated. Although Kentucky
National does not have any current agreements for the
acquisition of another bank or other entity, your Board of
Directors believes that it is desirable to be able to take
advantage of future acquisitions opportunities.
Financing Flexibility. The Holding Company's Articles of
Incorporation authorize the issuance of up to 5,000,000 shares
of common stock, $.01 par value per share, and up to 1,000,000
shares of preferred stock, $.01 par value per share. Kentucky
National's Articles of Association currently authorize the
issuance of 5,000,000 shares of common stock, $1.00 par value
per share and no shares of preferred stock. The Board of
Directors believes that the ability to issue preferred stock is
an important financing option. Preferred stock may be issued on
terms established by your Board of Directors without additional
approval by the shareholders. By contrast, the terms of any
preferred stock issued by Kentucky National must be set forth in
an amendment to the Articles of Association and specifically
approved by the shareholders. Your Board of Directors believes
that the ability to issue preferred stock without further
shareholder approval is necessary in order to negotiate the sale
of preferred stock.
The holding company structure will also allow the raising
of capital in ways that are not available to Kentucky National
on a stand-alone basis. For example, the Holding Company can
raise funds through the issuance of debt or trust preferred
securities and invest the proceeds in a manner that will qualify
as Tier 1 capital. In this way, capital can be raised without
diluting the percentage ownership interest of current
shareholders. While the Holding Company will be subject to
capital requirements that are similar to those applied to
Kentucky National, bank holding companies are permitted to
include a broader range of instruments in capital. For example,
bank holding companies may include some cumulative preferred
stock in Tier 1 capital while preferred stock will only count as
regulatory capital for Kentucky National if it is non-
cumulative.
Diversification. Bank holding companies are authorized to
engage in a variety of non-banking activities that have been
determined to be closely related to banking under the Bank
Holding Company Act of 1956. As a result, a bank holding
company is permitted to diversify into banking related
activities. While Kentucky National may establish operating
subsidiaries that engage in activities that are incidental or
part of the business of banking, the range of pre-approved
activities is currently less extensive than that permitted to
bank holding companies.
Corporate Flexibility. As a national bank, Kentucky
National is chartered under and governed by the National Bank
Act which was enacted in 1864 and contains many of its original
provisions regarding the corporate governance of national banks.
The National Bank Act does not permit the same operating
flexibility for national banks as most modern state corporate
codes confer on private corporations. As noted above, the Board
of Directors is not authorized to issue preferred stock without
shareholder approval. National banks must allow cumulative
voting
5<PAGE>
<PAGE>
in elections in directors. Directors of a national bank
cannot serve staggered terms. By incorporating the Holding
Company under a modern state corporate code, your Board of
Directors will have greater flexibility to conduct the business
of Kentucky National.
Enhancement of Independence. Your Board of Directors
believes the formation of a holding company will help Kentucky
National remain an independent, locally-owned community bank.
The Holding Company's Articles of Incorporation and Bylaws do
not contain certain provisions currently in Kentucky National's
Articles of Association such as cumulative voting which make it
easier for a dissident to obtain a seat on the Board even
without the approval of the majority of the shareholders. The
Holding Company's Articles of Incorporation and certain
provision of the Indiana Business Corporation Act also contain
provisions that can deter hostile acquisitions of control.
Increased Competitiveness. Your Board of Directors
believes that the establishment of the holding company will
enhance Kentucky National's ability to attract and retain
qualified personnel. Under the National Bank Act, officers must
serve at the will of the Board of Directors. Although national
banks are permitted by regulations of the Office of the
Comptroller of the Currency to enter into reasonable employment
agreements with officers, the "at will" provisions of the
National Bank Act limit the enforceability of employment
agreements. The Holding Company, however, will have greater
flexibility to enter into contractual commitments for employment
of officers.
YOUR BOARD OF DIRECTORS OF KENTUCKY NATIONAL HAS
UNANIMOUSLY APPROVED THE PLAN OF REORGANIZATION AND RECOMMENDS
THAT YOU VOTE "FOR" THE PLAN OF REORGANIZATION.
PLAN OF REORGANIZATION
The reorganization will be accomplished under the Plan of
Reorganization, which is attached as Exhibit A hereto. The
following discussion is qualified in its entirety by reference
to the Plan of Reorganization which is incorporated herein by
reference. The Plan of Reorganization was unanimously approved
by the Board of Directors on January 13, 1999.
The Holding Company is a newly organized Indiana
corporation which was formed by the Bank solely for the purpose
of effecting the reorganization, and, therefore, the Holding
Company has no prior operating history. The Plan of
Reorganization is by and among the Holding Company, Kentucky
National, and Kentucky National Interim Bank, a to-be-formed
interim national bank ("New Bank").
The reorganization will be accomplished by the following
steps: (1) the incorporation of the Holding Company under the
laws of the State of Indiana for the purpose of becoming the
sole shareholder of a newly formed interim national bank, and
subsequently becoming the sole shareholder of Kentucky National;
(2) the formation of an interim national bank, New Bank, which
will be wholly owned by the Holding Company; and (3) the merger
of Kentucky National and New Bank, with New Bank as the
surviving corporation but operating under the same charter and
name as Kentucky National. Pursuant to such merger, all of the
issued and outstanding shares of Kentucky National common stock
(other than shares as to which dissenters' rights of appraisal
have been properly exercised) will automatically be converted by
operation of law on a one-for-one basis into an equal number of
issued and outstanding shares of Holding Company common stock.
In addition, all of the issued and outstanding shares of common
stock of Kentucky National will automatically be converted by
operation of law on a one-for-one basis into an equal number of
issued and outstanding shares of New Bank Common Stock, which
will be all of the issued and outstanding stock of Kentucky
National.
After the reorganization, the former holders of Kentucky
National common stock will be the holders of all of the
outstanding Holding Company common stock. Thus, because the
Holding Company will hold all of the issued and outstanding
voting stock of Kentucky National, Kentucky National is
described herein as a "wholly owned" subsidiary of the Holding
Company following the reorganization.
6<PAGE>
<PAGE>
After the reorganization, Kentucky National will make a
capital distribution to the Holding Company to allow it to pay
for the expenses incurred on the Holding Company in connection
with the reorganization.
Future capitalization of the Holding Company will also
depend upon dividends declared by Kentucky National or the
raising of additional capital by the Holding Company through a
future issuance of securities or debt or through other means.
The Board of Directors of the Holding Company has no present
plans or intentions with respect to any future issuance of
securities or debt at this time.
After the reorganization, Kentucky National will continue
its existing business and operations as a wholly owned
subsidiary of the Holding Company, and the consolidated
capitalization, assets, liabilities, income and financial
statements of the Holding Company immediately following the
reorganization will be substantially the same as those of
Kentucky National immediately prior to consummation of the
reorganization. The Articles of Association and the Bylaws of
Kentucky National will continue in effect, and will not be
affected in any manner by the reorganization. The name
"Kentucky National Bank" will continue to be used. The
corporate existence of Kentucky National will continue
unaffected and unimpaired by the reorganization.
EFFECTIVE DATE
The "Effective Date" of the reorganization will be the
date specified in the certificate to be issued by the Office of
the Comptroller of the Currency and the Federal Reserve Board.
Although management of Kentucky National does not anticipate any
significant delays in obtaining these approvals and issuance of
the certificate, the effects of any such delays on holders of
the Kentucky National common stock would depend upon the
attendant facts and circumstances surrounding the specific
delay.
EXCHANGE OF STOCK CERTIFICATES
The outstanding stock certificates that represent one
share of Kentucky National common stock will be deemed
automatically to represent one share of the Holding Company
Common Stock. You will be required to exchange your present
stock certificates (bearing the name "Kentucky National Bank")
for new stock certificates (bearing the name "Kentucky National
Bancorp, Inc."). Your Board of Directors has reserved the right
to withhold any dividends from you if you do not exchange your
present stock certificates for new stock certificates within a
reasonable period of time after being requested to do so.
Upon completion of the reorganization, the Holding Company
will mail you a letter of transmittal and instructions related
to the exchange of your common stock certificate for
certificates representing the number of shares of Holding
Company common stock into which your common stock has been
converted as a result of the reorganization.
YOU SHOULD NOT SEND IN YOUR CERTIFICATES UNTIL WE NOTIFY
YOU TO DO SO.
RIGHTS OF DISSENTING SHAREHOLDERS
Federal law entitles a shareholder of a national bank who
does not vote for the reorganization to demand payment by
Kentucky National of the fair or appraised value for his shares.
If you wish to do so, you must deliver to Ronald J. Pence,
President, Kentucky National Bank, 1000 North Dixie Avenue,
Elizabethtown, Kentucky 42701, before voting on Proposal I,
written notice identifying yourself and stating your intention
to demand appraisal of and payment for your shares. This
written notice must be separate from and in addition to any
proxy or vote against Proposal I. A proxy or vote against the
Plan of Reorganization does not by itself constitute a demand
for appraisal. In addition to making written notice of your
demand, you must not vote in favor of the Plan of
Reorganization. If you return a signed proxy but do not specify
your vote, you will be deemed to have voted in
7<PAGE>
<PAGE>
favor of the Plan of Reorganization. If you abstain from voting
on the reorganization will not be deemed to have voted in favor
of the Plan of Reorganization.
Under the Plan of Reorganization, the obligations of the
Holding Company, Kentucky National and New Bank to consummate
the reorganization are conditioned upon the holders of not more
than 10% of the outstanding shares electing to exercise their
rights as dissenting shareholders. Although the parties to the
Plan of Reorganization could waive this condition, none of them
presently intends to do so.
If the reorganization is approved and adopted by the
shareholders at the Annual Meeting, Kentucky National will mail
a further notice to all shareholders who timely filed a written
notice of intention to demand payment and who refrained from
voting in favor of the proposed reorganization. The further
notice will include the following:
. information concerning where and when a request for
payment must be sent;
. instructions as to where and when a shareholder must
deposit the certificates representing his or her
shares of common stock in order to obtain payment;
. a form to be used for requesting payment which will
include a request for certification of the date on
which the shareholder, or the person on whose behalf
the shareholder dissents, acquired beneficial
ownership of the shares; and
. a copy of Section 215a of the National Bank Act.
The time set by Kentucky National for receipt of the demand for
payment and deposit of the certificates by shareholders shall
not be less than 30 days from the mailing of the notice. A
SHAREHOLDER WHO FAILS TO TIMELY FILE THE FORM FOR REQUESTING
PAYMENT OR FAILS TO DEPOSIT HIS OR HER COMMON STOCK
CERTIFICATES, AS REQUIRED BY THE NOTICE, SHALL NOT HAVE ANY
RIGHT TO RECEIVE PAYMENT OF THE FAIR VALUE OF HIS OR HER SHARES.
A dissenting shareholder shall retain all other rights of a
shareholder until those rights are modified by consummation of
the reorganization.
A vote against the Plan of Reorganization, whether cast by
proxy or in person at the Annual Meeting, shall not, in itself,
constitute the required written request for payment.
You may assert dissenters' rights as to fewer than all of
your shares of the common stock registered in your name only if
you dissent with respect to all the shares beneficially owned by
any one person and notify Kentucky National of the name and
address of the beneficial owner or owners on whose behalf you
dissent. You may assert dissenters' rights with respect to
shares owned beneficially but not registered in your name if you
submit to Kentucky National a written consent of the record
shareholder prior to commencement of the voting by the
shareholders on the Plan of Reorganization at the Annual
Meeting. You may not dissent with respect to some but less than
all shares owned beneficially, whether or not the shares so
owned are registered in your name.
The discussion in this section is only a summary of the
rights and obligations of dissenting shareholders and is
qualified in its entirety by reference to the provisions of
Section 215a of the National Bank Act, which provisions are
reproduced and set forth in full in Exhibit D to this proxy
statement/prospectus. You should read Exhibit D carefully since
if you fail to follow the procedures set forth in Section 215a
of the National Bank Act regarding dissenters' rights you will
waive your appraisal rights. You may wish to consult
independent legal counsel before exercising dissenters' rights.
Except as set forth herein, notification of the beginning
or end of any statutory period will not be given by Kentucky
National to any dissenting shareholders.
8<PAGE>
<PAGE>
TAX CONSEQUENCES
Kentucky National expects that, for tax purposes, the
reorganization will be treated as a tax-free reorganization and
that you will not recognize any gain or loss if you receive
Holding Company common stock in the reorganization solely in
exchange for your shares of Kentucky National common stock. The
Internal Revenue Service ("IRS") has not been asked to rule upon
the tax consequences of the reorganization. Instead, Kentucky
National will rely upon the opinion of Housley Kantarian &
Bronstein, P.C., its special counsel, as to certain federal
income tax consequences of the reorganization to the Kentucky
National shareholders. This tax opinion is based upon the
Internal Revenue Code of 1986, as amended, tax regulations now
in effect or proposed, current administrative rulings and
practice and judicial authority, all of which are subject to
change and any change may be made with retroactive effect.
Unlike private letter rulings received from the IRS, an opinion
is not binding upon the IRS and there can be no assurance that
the IRS will not take a position contrary to the positions
reflected in the opinion, or that the opinion will be upheld by
the courts if challenged by the IRS.
Based upon the opinion of Housley Kantarian & Bronstein,
P.C., which is based upon various representations and subject to
various assumptions and qualifications described below, the
following federal income tax consequences to the Kentucky
National shareholders will result from the reorganization.
(1) The merger of Kentucky National with and into New
Bank will constitute a reorganization within the
meaning of 368(a) of the Internal Revenue Code.
(2) You will not recognize any gain or loss upon your
exchange of Kentucky National common stock solely
for shares of Holding Company common stock.
(3) Your aggregate basis in your shares of Holding
Company common stock received pursuant to the
reorganization will be equal to the aggregate basis
of your shares of Kentucky National common stock
surrendered in exchange therefor.
(4) The holding period of your shares of Holding Company
common stock received pursuant to the reorganization
will include the period during which the shares of
Kentucky National common stock surrendered in
exchange therefor was held by you, provided that the
Kentucky National common stock is a capital asset in
your hands on the date of the reorganization.
(5) If you dissent to the reorganization and receive
solely cash in exchange for all of your shares of
Kentucky National common stock, the cash received
will be treated as having been received by you as a
distribution in redemption of your shares of
Kentucky National common stock, subject to the
provisions and limitations of Section 302 of the
Internal Revenue Code. Therefore, assuming you
satisfy at least one of the four conditions under
Section 302(b) of the Internal Revenue Code, such as
that your direct and indirect interest in Kentucky
National or the Holding Company will completely
terminate, you will recognize gain or loss in an
amount equal to the difference between the cash
received and your basis in your shares of Kentucky
National common stock.
The opinion of Housley Kantarian & Bronstein, P.C., is
based in part upon, and subject to the continuing validity in
all material respects through the date of the reorganization to,
various representations of Kentucky National and upon certain
assumptions and qualifications, including that the
reorganization is consummated in the manner and according to the
terms provided in the Plan of Reorganization. For instance, the
opinion assumes, among other things, the accuracy of the facts
regarding the reorganization as described in this proxy
statement/prospectus, including that only voting stock of the
Holding Company (i.e., the Holding Company common stock) will be
used in the reorganization, that Kentucky National will continue
its historic business operations following the reorganization,
and that there is no plan or intention by the Holding Company to
liquidate Kentucky
9<PAGE>
<PAGE>
National following the reorganization. Further, the tax opinion
assumes the satisfaction of the "continuity of interest"
requirement under judicial interpretations of Section 368(a) of
the Internal Revenue Code. Generally, under the "continuity of
interest" requirement, you must maintain a continuing
proprietary interest in the successor company (i.e., the Holding
Company) after the reorganization through ownership on an
aggregate basis of a minimum percentage of the stock of the
Holding Company. In addition, the opinion is qualified by
reference to the statutory, judicial and administrative tax
authorities then in effect, the subsequent change of which may
have retroactive effect or render the opinion invalid.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE
ADDRESSES THE MATERIAL FEDERAL INCOME TAX CONSEQUENCES.
HOWEVER, THIS DISCUSSION DOES NOT ADDRESS ALL ASPECTS OF FEDERAL
INCOME TAXATION WHICH MAY BE RELEVANT TO YOU IF YOU ARE ENTITLED
TO SPECIAL TREATMENT UNDER THE INTERNAL REVENUE CODE, SUCH AS
TRUSTS, INDIVIDUAL RETIREMENT ACCOUNTS, OTHER EMPLOYEE BENEFIT
PLANS, INSURANCE COMPANIES, AND SHAREHOLDERS WHO ARE NOT
CITIZENS OR RESIDENTS OF THE UNITED STATES. DUE TO THE
INDIVIDUAL NATURE OF TAX CONSEQUENCES, YOU ARE URGED TO CONSULT
YOUR OWN TAX AND FINANCIAL ADVISOR AS TO THE EFFECT OF THE
FEDERAL INCOME TAX CONSEQUENCES ON YOUR OWN FACTS AND
CIRCUMSTANCES AND ALSO AS TO ANY STATE, LOCAL, FOREIGN OR OTHER
TAX CONSEQUENCES ARISING OUT OF THE REORGANIZATION.
Cash payments made to Kentucky National shareholders who
exercise their right to dissent to the reorganization will be
subject to a 31% backup withholding tax under federal income tax
law unless certain requirements are met. Generally, Kentucky
National will be required to deduct and withhold the tax if: (1)
the shareholder fails to furnish a taxpayer identification
number ("TIN") to Kentucky National or fails to certify under
penalty of perjury that his or her TIN is correct; (2) the IRS
notifies Kentucky National that the TIN furnished by the
shareholder is incorrect; (3) the IRS notifies Kentucky National
that the shareholder has failed to report interest, dividends or
original issue discount in the past; or (4) there has been a
failure by the shareholder to certify under penalty of perjury
that such shareholder is not subject to such backup withholding
tax. Any amounts withheld by Kentucky National in collection of
the backup withholding tax will reduce the federal income tax
liability of the shareholder from whom such tax was withheld.
The TIN of an individual shareholder is that shareholder's
Social Security number.
CONSEQUENCES UNDER FEDERAL SECURITIES LAWS
The Holding Company has filed with the Securities and
Exchange Commission a registration statement under the
Securities Act for the registration of the Holding Company
common stock to be issued and exchanged pursuant to the Plan of
Reorganization. This Proxy Statement and the accompanying
Notice of Annual Meeting constitute the Prospectus of the
Holding Company filed as part of such registration statement.
Upon consummation of the reorganization, the Holding Company
will be required to comply with the periodic reporting
requirements under the Securities Exchange Act of 1934 for as
long as it has at least 300 shareholders. The Holding Company
will also be subject to the general anti-fraud provisions of the
federal securities laws after the reorganization.
The registration under the Securities Act of shares of
Holding Company common stock to be issued in connection with the
reorganization does not cover the resale of such shares. The
Holding Company common stock acquired by persons who are not
affiliates of the Holding Company or Kentucky National may be
resold without registration. Shares received by affiliates of
Kentucky National will be subject to the resale restrictions of
Rule 145 under the Securities Act, which are substantially the
same as the restrictions of Rule 144 discussed below. For
purposes of these Rules, an "affiliate" of an issuer is any
person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under
common control with, such issuer. The Rule 145 restrictions
terminate after one year if the Holding Company continues to
comply with the reporting requirements under the Securities
Exchange Act of 1934, but any affiliate of Kentucky National who
becomes an affiliate of the Holding Company will continue to be
subject to the restrictions on sales by affiliates under Rule
144.
If the Holding Company meets the current public
information requirements of Rule 144 under the Securities Act,
each affiliate of Kentucky National who complies with the other
conditions of Rule 144, including those that
10<PAGE>
<PAGE>
require the affiliate sales to be aggregated with those of
certain other persons, would be able to sell in the public
market, without registration, in any three-month period, a
number of shares not to exceed the greater of:
. 1.0% of the outstanding shares of the Holding
Company, or
. the average weekly volume of trading in such shares
during the preceding four calendar weeks.
Provision may be made in the future by the Holding Company to
permit affiliates to have their shares registered for sale under
the Securities Act under certain circumstances.
EFFECT ON ORGANIZATIONAL STOCK OPTION AND INCENTIVE PLAN
After completion of the reorganization, the Organizational
Stock Option and Incentive Plan (the "Option Plan") of Kentucky
National will become the stock option plan of the Holding
Company. Stock options with respect to shares of the common
stock granted under the Option Plan and outstanding prior to
consummation of the reorganization will automatically become
options to purchase the same number of shares of Holding Company
common stock upon completing the reorganization, with identical
terms and conditions and for an identical price. The Holding
Company will assume all of Kentucky National's obligations with
respect to such outstanding options. By voting in favor of the
Plan of Reorganization, you will be approving the adoption by
the Holding Company of the existing Option Plan of Kentucky
National as the option plan of the Holding Company.
EFFECT ON STOCK TRANSFER AGREEMENT
You have previously agreed to be bound by the Stock
Transfer Agreement which, among other things, restricts the
assignment, sale, transfer, pledge or other encumbrance of the
shares of Kentucky National Common Stock. Pursuant to the Stock
Transfer Agreement, if you desire to sell or otherwise transfer
your shares for value, you will be required to first offer such
shares to the "Organizers," as defined in the Stock Transfer
Agent. The Stock Transfer Agreement is intended to preserve
community ownership of Kentucky National but may reduce the
liquidity of the common stock. The Stock Transfer Agreement
will continue in effect following the holding company
reorganization.
CONDITIONS TO THE REORGANIZATION
The Plan of Reorganization sets forth a number of
conditions which must be met before the reorganization will be
consummated, including, among others:
. the approval of the Plan of Reorganization by the
holders of two-thirds of the outstanding shares of
Kentucky National Common Stock,
. holders of no more than 10% of the outstanding
shares shall have exercised dissenters' appraisal
rights,
. the receipt of either a ruling from the IRS or an
opinion of counsel that the reorganization will be
treated as a non-taxable transaction under the
Internal Revenue Code (see "-- Tax Consequences"),
. the approval of the reorganization by the Office of
the Comptroller of the Currency and the Federal
Reserve Board and the receipt of all approvals from
any other governmental agencies which may be
required for the consummation of the reorganization,
and
. registration of the shares of the Holding Company
common stock to be issued in the reorganization
under the Securities Act, to the extent required by
applicable law, and the compliance
11<PAGE>
<PAGE>
by the Holding Company with all applicable state
securities laws relating to the issuance of the
Holding Company common stock.
REGULATORY APPROVALS
Applications to charter the New Bank and for approval of
the reorganization of Kentucky National and the New Bank have
been filed with the Office of the Comptroller of the Currency.
The Holding Company has also filed a notice with the Federal
Reserve Board for permission to become a Bank Holding Company.
In general, the regulators may disapprove this transaction
if the reorganization of Kentucky National into a one-bank
holding company would not be consistent with adequate sound
banking practices and would not be in the public interest.
In addition, the reorganization may not be consummated for
15 days from the date of the later approval by the Office of the
Comptroller of the Currency or approval by the Federal Reserve
Board if there has been no challenge issued by the United States
Department of Justice on anti-trust grounds in which case the
period of time before which consummation may occur may be
extended. The reorganization of Kentucky National into a
one-bank holding company cannot proceed in the absence of
requisite regulatory approvals. The approval of the Office of
the Comptroller of the Currency and Federal Reserve Board
reflect only the view that the transaction does not contravene
the competitive standards of the law and is consistent with
regulatory concerns relating to bank management and to the
safety and soundness of the subject banking organizations. Such
approval is not to be interpreted as an opinion by the Office of
the Comptroller of the Currency or the Federal Reserve Board
that the reorganization is favorable to the shareholders from a
financial point of view or that the Office of the Comptroller of
the Currency or the Federal Reserve Board have considered the
adequacy of the terms of the exchange. NEITHER THE OFFICE OF
THE COMPTROLLER OF THE CURRENCY NOR THE FEDERAL RESERVE BOARD
APPROVAL IS AN ENDORSEMENT OR RECOMMENDATION OF THE
REORGANIZATION.
There can be no assurance that the Office of the
Comptroller of the Currency or the Federal Reserve Board will
approve the reorganization, and, if approvals are granted, there
can be no assurance as to the grant date of such approvals.
AMENDMENT, TERMINATION OR WAIVER
Your Board of Directors may cause the Plan of
Reorganization to be amended or terminated if it determines for
any reason that such amendment or termination would be
advisable. Such amendment or termination may occur at any time
prior to the effective date of the reorganization, whether
before or after shareholder approval of the Plan of
Reorganization, by the mutual consent in writing of the Boards
of Directors of Kentucky National, the New Bank and the Holding
Company or by your Board of Directors only if the reorganization
would not be in the best interests of Kentucky National, its
employees, depositors, or shareholders. Additionally, any of
the terms or conditions of the Plan of Reorganization may be
waived by the party which is entitled to the benefit thereof.
COMPARISON OF SHAREHOLDERS' RIGHTS
As a result of the proposed reorganization, you will
become a shareholder in the Holding Company and your rights in
the future will be governed by the Indiana Business Corporation
Act. As a shareholder of Kentucky National, your rights are
governed by the National Bank Act and the regulations of the
Office of the Comptroller of the Currency Another result is
that the Articles of Incorporation and By-laws of the Holding
Company differ in several
12<PAGE>
<PAGE>
aspects from those of Kentucky National. The Articles of
Incorporation and Bylaws of the Holding Company are attached
hereto as Exhibits B and C. You should reviewe them for more
detailed information.
The following table compares your rights as a shareholder
of Kentucky National with your rights as a shareholder of the
Holding Company. This table is qualified by the more detailed
information appearing elsewhere in this proxy
statement/prospectus and in the exhibits hereto and is not
intended to be an exhaustive comparison. The Articles of
Incorporation and Bylaws of the Holding Company are attached
hereto as Exhibits B and C and should be reviewed for more
detailed information.
<TABLE>
<CAPTION>
KENTUCKY NATIONAL THE HOLDING COMPANY
----------------- -------------------
<S> <C> <C>
CAPITAL STOCK
(a) COMMON STOCK Authorized 1,000,000 Authorized 5,000,000
shares, $1.00 par value; shares, $.01 par value;
240,000 shares 240,000 shares of Common
outstanding. Stock expected to be
outstanding following the
reorganization.
(b) PREFERRED STOCK None authorized or Authorized, 1,000,000
outstanding. Any issuance shares, $.01 par value
of preferred stock would stock; none to be outstanding
require an amendment to following the reorganization.
the Articles of In the future, preferred stock
Association approved by could be issued on terms
shareholders. established by the Board
of Directors without
further shareholder
approval.
(c) VOTING RIGHTS One vote per share with One vote per share with no
cumulative voting in cumulative voting rights.
elections of directors. Shares held by any person
in excess of 10% of shares
outstanding are only
entitled to 1/100th of a
vote per share unless
approved in advance by a
majority of the Continuing
Directors.
(d) ASSESSABILITY OF Office of the Comptroller of Non-assessable.
SHARES the Currency may order pro
rata assessment for capital
deficiency.
(e) PREEMPTIVE RIGHTS None. None.
(f) DIVIDENDS As declared by the Board As declared by the Board
of Directors; without Office of Directors; Indiana law
of the Comptroller of the permits payment of
Currency approval, may not dividend only if, the
exceed in any calendar year corporation is able to pay
Kentucky National's net income its debts as they come due
for that year plus its retained in the usual course of
net income for the preceding business and the
two years, may not exceed corporation's assets
Kentucky National's undivided exceed its liabilities;
profits and may not be made if Kentucky National's dividend
after making the dividend, restriction applies
Kentucky National would be indirectly to the Holding
undercapitalized." Company as cash available
for dividend distributions
will initially come from
dividends paid
</TABLE>
13
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<PAGE>
<TABLE>
<CAPTION>
KENTUCKY NATIONAL THE HOLDING COMPANY
----------------- -------------------
<S> <C> <C>
to the Holding Company by Kentucky
National. Federal Reserve
Board policy states that a
bank holding company
should pay cash dividends
only out of income over
the past year and only if
prospective earnings
retention is consistent
with the organization's
expected future needs and
financial condition. In
addition, the Holding
Company may not pay a
dividend if: (1) after
giving effect to the
dividend, the Holding
Company would be insolvent
or (2) the dividend
exceeds the surplus of the
Holding Company.
SHAREHOLDER ACTION
(a) MERGERS, Approval by vote of at Approval by a vote of at
CONSOLIDATIONS, least 66-2/3% of least a majority of the
LIQUIDATIONS, outstanding shares. outstanding shares;
SALE OF SUBSTANTIALLY Approval of 80% of shares
ALL ASSETS required for certain
"Business Combinations,"
unless approved in advance
by a majority of
Continuing Directors.
(b) SPECIAL Upon request of a majority Upon request of a majority
SHAREHOLDER of the Board of Directors, of the Board of Directors,
MEETINGS or by any 15 or more a duly appointed committee
shareholders owning in the of the Board of Directors,
aggregate, not less than a the Chairman of the Board,
majority of stock. or the President.
Shareholders will not be
able to call special
meetings.
(c) AUTHORIZATION OF Approval by a vote of at Approval by a vote of at
ADDITIONAL SHARES least a majority of least a majority of
outstanding shares. outstanding shares; 80%
approval required for
issuance of shares in
certain "Business Combinations."
(d) AMENDMENT OF ARTICLES Approval by a vote of at Approval by vote of at
OF ASSOCIATION OR least a majority of least a majority of
INCORPORATION (OTHER outstanding shares. outstanding shares if
THAN FOR PURPOSES STATED majority of Board of
ABOVE) Directors also approves
amendment; otherwise,
approval by 80% of
outstanding shares.
(e) AMENDMENT OF THE May be amended by a May only be amended by a
BYLAWS majority vote of the majority vote of the
shareholders or by a Board of Directors.
majority vote of the Board
of Directors.
REPURCHASE OF CAPITAL STOCK Cannot repurchase or Stock can be repurchased
retire any part of its without regulation
stock without prior approval if: (1) after
regulatory approvals and giving effect to the
shareholder approval. purchase the
</TABLE>
14<PAGE>
<PAGE>
<TABLE>
<CAPTION>
KENTUCKY NATIONAL THE HOLDING COMPANY
----------------- -------------------
<S> <C> <C>
Holding Company would not
be insolvent or (2) the
purchase would not
exceed the surplus of
the Holding Company.
Permitted under Federal
Reserve Board regulations
with no prior approval
required for well-capitalized,
well-managed holding
companies. In all other
cases, no more than ten
percent of the outstanding
shares of Holding Company
common stock may be repurchased
in any 12-month period
without prior regulatory
approval.
BOARD OF DIRECTORS
(a) TERM OF DIRECTORS All directors elected annually. Directors have staggered
terms with one-third of
the board standing for
election each year.
(b) REMOVAL OF DIRECTORS Majority of shares for cause 80% of outstanding shares and
or if failure to fulfill only for cause.
requirements for qualification.
(c) SHAREHOLDER Must be delivered in Notice of nominations must be
NOMINATIONS writing not more than 50 made in writing not more than 60
days and not less than 14 and not less than 30 days prior to
days before the meeting at the meeting.
which directors will be
elected.
</TABLE>
CERTAIN ANTI-TAKEOVER PROVISIONS
The following discussion is a general summary of the
provisions of the Articles of Incorporation and Bylaws of the
Holding Company and certain other provisions of the Indiana
Business Corporation Law which may be deemed to have an anti-
takeover effect. The description of these provisions is
necessarily general and you should refer, in each case, to the
Articles of Incorporation and Bylaws of the Holding Company
which are attached as Exhibits B and C and incorporated herein
by reference.
While your Board of Directors is not aware of any effort
that might be made to obtain control of Kentucky National, the
Board of Directors believes that it is appropriate to include
certain provisions as part of the Holding Company's Articles of
Incorporation and Bylaws to protect the interests of the Holding
Company and its shareholders from hostile takeovers "anti-
akeover" provisions) which your Board of Directors might
conclude are not in the best interests of the Holding Company or
its shareholders. These provisions may have the effect of
discouraging a future takeover attempt which is not approved by
the Board of Directors but which you might deem to be in your
best interests or in which you might receive a substantial
premium for your shares over the current market prices. As a
result, shareholders who might desire to participate in such a
transaction may not have an opportunity to do so. Such
provisions will also make it more difficult to remove the
current Board of Directors or management of the Holding
Company.
15<PAGE>
<PAGE>
PROVISIONS OF THE HOLDING COMPANY'S ARTICLES OF INCORPORATION
AND BYLAWS
Restriction on Acquisition of Common Stock; Limitations on
Voting Rights. The Articles of Incorporation of the Holding
Company provide that no person may directly or indirectly,
acquire or offer to acquire beneficial ownership of more than
10% of any class of equity security outstanding of the Holding
Company (the "Limit"), unless the "continuing" Board of
Directors has first approved by a two-thirds vote the offer or
acquisition. Should any party acquire the beneficial ownership
of shares in excess of 10%, the record holders of such shares
would be entitled to cast only one-hundredth (1/100) of a vote
for each share beneficially owned in excess of 10%, and the
aggregate voting power of such holders shall be allocated
proportionately among such record holders. A person is a
beneficial owner of a security if he has the power to
vote or direct the voting of all or part of the voting rights of
the security, or has the power to dispose of or direct the
disposition of the security. The Articles of Incorporation
further provide that this provision limiting voting rights may
only be amended upon the vote of 80% of the outstanding shares
of voting stock.
Election of Directors. The Holding Company's Articles of
Incorporation provide that the board of directors of the Holding
Company will be divided into three staggered classes, with
directors in each class elected for three-year terms. As a
result of this provision, it would take two annual elections to
replace a majority of the Holding Company's board. The Articles
of Incorporation also provide that any vacancy occurring in the
board of directors, including a vacancy created by an increase
in the number of directors, will be filled by the board and any
director so chosen shall serve until the annual meeting at which
the other members of his class must stand for election.
Finally, the Bylaws impose certain notice and information
requirements in connection with the nomination by shareholders
of candidates for election to the board of directors or the
proposal by shareholders of business to be acted upon at an
annual meeting of shareholders.
Removal of Directors. The Articles of Incorporation provide
that a director may only be removed for cause by the affirmative
vote of at least 80% of the shares of the Holding Company
entitled to vote generally in an election of directors cast at a
meeting of shareholders called for that purpose.
Restrictions on Call of Special Meeting. The Articles of
Incorporation of the Holding Company provide that special
meetings of shareholders may be called only by a resolution
adopted by a majority of the board of directors, or a Committee
of the board.
Absence of Cumulative Voting. The Holding Company's
Articles of Incorporation provide that shareholders may not
cumulate their votes in elections of directors.
Authorized Shares. The Articles of Incorporation authorize
the issuance of 5,000,000 shares of common stock and 1,000,000
shares of preferred stock. The shares of common stock and
preferred stock were authorized in an amount greater than that
to be issued in the reorganization to provide your Board of
Directors with as much flexibility as possible to effect, among
other transactions, financings, acquisitions, stock dividends,
stock splits and the exercise of stock options. However, these
additional authorized shares may also be used by the Board of
Directors consistent with its fiduciary duty to deter future
attempts to gain control of the Holding Company. The Board of
Directors also has sole authority to determine the terms of any
one or more series of preferred stock, including voting rights,
conversion rates, and liquidation preferences. As a result of
the ability to fix voting rights for a series of preferred
stock, the board has the power, to the extent consistent with
its fiduciary duty, to issue a series of preferred stock to
persons friendly to management in order to attempt to block a
post-tender offer merger or other transaction by which a third
party seeks control, and thereby assist management to retain its
position. Your Board of Directors currently has no plans for
the issuance of additional shares, other than the possible
issuance of additional shares pursuant to the Organizational
Stock Option Incentive Plan.
Procedures for Certain Business Combinations. The Articles
of Incorporation require the affirmative vote of at least 80% of
the outstanding shares of the Holding Company entitled to vote
in the election of directors in order for the Holding Company to
engage in or enter into certain "Business Combinations," as
defined therein, with any "Related Person" (as defined below) or
any affiliates of the "Related Person," unless the proposed
transaction has been approved
16<PAGE>
<PAGE>
in advance by the Holding Company's Board of Directors,
excluding those who were not directors prior to the time the
"Related Person" became the "Related Person."
The term "Related Person" is defined to include any person
and the affiliates and associates of the person (other than the
Holding Company or its subsidiary) who beneficially owns,
directly or indirectly, 10% or more of the outstanding shares of
voting stock of the Holding Company. Any amendment to this
provision requires the affirmative vote of at least 80% of the
shares of the Holding Company entitled to vote generally in an
election of directors.
Amendments to Articles of Incorporation and Bylaws.
Amendments to the Holding Company's Articles of Incorporation
must be approved by the Holding Company's Board of Directors and
also by a majority of the outstanding shares of the Holding
Company's voting stock, provided, however, that approval by at
least 80% of the outstanding voting stock is generally required
for certain provisions (i.e., the provisions relating to: (1)
restrictions on the acquisition and voting of greater than 10%
of the common stock; (2) number, classification, election and
removal of directors; (3) amendment of Bylaws; (4) call of
special shareholder meetings; (5) limits on director liability;
(6) approval of Business Combinations with interested
shareholders; (7) power of indemnification; and (8) amendments
to provisions relating to the foregoing in the Articles of
Incorporation).
The Bylaws may only be amended by a majority vote of the
board of directors.
INDIANA BUSINESS CORPORATION LAW
The Indiana Business Corporation Law contains a statute
designed to provide Indiana corporations with additional
protection against hostile takeovers. The takeover statute,
which is codified in Chapter 43 of the Indiana Business
Corporation Law, among other things, prohibits the Holding
Company from engaging in certain business combinations
(including a merger) with a person who is the beneficial owner
of 10% or more of the Holding Company's outstanding voting stock
(an Interested Shareholder) during the five-year period
following the date such person became an Interested Shareholder.
This restriction does not apply if: (1) before such person
became an Interested Shareholder, the Board of Directors
approved the transaction in which the Interested Shareholder
becomes an Interested Shareholder or approved the business
combination; or (2) upon consummation of the transaction
which resulted in the shareholder's becoming an Interested
Shareholder, the Interested Shareholder owned at least 85% of
the voting stock of the Holding Company outstanding at the time
the transaction commenced, excluding for purposes of determining
the number of shares outstanding, those shares owned by (i)
persons who are directors and also officers, and (ii) employee
stock plans in which employee participants do not have the right
to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer; or (3) on
or subsequent to such date, the business combination is approved
by the Board of Directors and authorized at an annual or special
meeting of shareholders, and not by written consent, by the
affirmative vote of at least two-thirds of the outstanding
voting stock which is not owned by the Interested Shareholder.
The Holding Company may exempt itself from the requirements of
the statute by adopting an amendment to its Articles of
Incorporation. At the present time, the Board of Directors does
not intend to propose any such amendment.
In addition, the Indiana Control Share Acquisitions Statute
provides that if shares are acquired equal to or greater than
certain thresholds of voting power (that is, 20%, 33 1/3% and
50% of all voting shares), the shares will not be entitled to
any voting rights unless specifically granted by the adoption of
a resolution by the holders of at least a majority of the shares
entitled to vote. In addition, in the event a control share
acquisition of a majority of the outstanding shares of stock is
made and voting rights are approved for these shares, the
remaining shareholders will be entitled to have their shares
redeemed at fair value by the corporation.
17<PAGE>
<PAGE>
BUSINESS OF KENTUCKY NATIONAL BANCORP, INC. AND KENTUCKY
NATIONAL
GENERAL
Prior to completion of the reorganization, the Holding
Company will be a non-operating, wholly owned operating
subsidiary of Kentucky National. Upon the completion of the
reorganization, Kentucky National will become a wholly owned
subsidiary of the Holding Company, and you will become a
shareholder of the Holding Company with the same respective
ownership interest therein as you presently hold in Kentucky
National.
Immediately after consummation of the reorganization, it is
expected that the Holding Company will not engage in any
business activity other than to hold all of the stock of
Kentucky National. The Holding Company does not presently have
any arrangements or understandings regarding any acquisition or
merger opportunities. It is anticipated, however, that the
Holding Company in the future may pursue other investment
opportunities, including possible diversification through
acquisitions and mergers.
Kentucky National commenced operations on October 15,
1997. Kentucky National's deposits are insured to applicable
limits by the Federal Deposit Insurance Corporation. Kentucky
National is a member of the Federal Reserve Bank of St. Louis.
Kentucky National engages in the general commercial banking
business, primarily serving the city of Elizabethtown, Kentucky
and surrounding Hardin County through its main office and branch
in Elizabethtown. It offers a full range of banking and related
financial services focused primarily towards serving
individuals, the small to medium size businesses, and the
professional community. Kentucky National strives to serve the
banking needs of its customers in the Elizabethtown market while
developing personal hometown relationships with its customers.
Management believes that the marketing of customized services
will enable it to establish a niche in the financial services
marketplace in this market.
Kentucky National provides individuals and small and medium
size businesses in its market area with responsive and
technologically advanced banking services. These services
include loans that are priced on a deposit-based relationship,
easy access to Kentucky National's decision makers, and quick
and innovative action necessary to meet a customer's banking
needs.
The Holding Company's and Kentucky National's principal
executive offices are located at 1000 North Dixie Avenue,
Elizabethtown, Kentucky 42701, main telephone number is (502)
737-6000.
LENDING ACTIVITIES
Kentucky National offers a full range of short-to-medium
term commercial and personal loans. Commercial loans include
both secured and unsecured loans for working capital (including
inventory and receivables), business expansion (including
acquisition of real estate and improvements) and purchase of
equipment and machinery. Kentucky National also makes
agricultural loans. Consumer loans include secured and
unsecured loans for financing automobiles, recreational
equipment, home improvements, home education and personal
investments. Kentucky National also offers home equity loans
and lines of credit. Kentucky National also anticipates that it
will originate and hold or sell into the secondary market fixed-
and variable-rate mortgage loans and real estate construction
and acquisition loans. At December 31, 1998, Kentucky
National's loan portfolio totaled $34.2 million, net of
allowances and unearned fees and discounts.
Real Estate Lending. Kentucky National offers mortgage
loans for the purchase or refinancing of residential and
commercial real estate as well as construction and land
development loans and second mortgages secured by the borrower's
primary residence. At December 31, 1998, Kentucky National's
residential mortgages totaled $16.6 million or 47.21% of the
loan portfolio. Commercial and agricultural mortgage loans
totaled $3.8 million and $1.6 million, respectively, or 10.84%
and 4.58% of the total portfolio. Construction loans were $3.6
million, or 10.43% of the portfolio. Kentucky National's
commercial mortgages are secured by multi-family residential
properties, agricultural
18<PAGE>
<PAGE>
properties and commercial properties (primarily undeveloped real
estate). Residential mortgage loans may be originated on either
a fixed or variable rate basis. The residential and commercial
mortgages currently in Kentucky National's portfolio feature a
30-year amortization period with a balloon payment after five
years. Kentucky National does not hold any longer-term
fixed-rate residential mortgages in portfolio. Residential and
commercial construction loans are generally originated on a
variable rate basis. Substantially all of Kentucky National's
real estate loans are secured by properties in Elizabethtown,
Kentucky and surrounding areas. Under Kentucky National's loan
policies, the maximum permissible loan-to-value ratio for
owner-occupied residential mortgages is 90% of the lesser of the
purchase price or appraised value. Residential mortgage loans
may be made with loan-to-value ratios in excess of 80% provided
the borrower obtains private mortgage insurance for any loan
amounts in excess of 80%. For residential investment
properties, the maximum loan-to-value ratio is 75%. The maximum
permissible loan-to-value ratio for residential and commercial
construction loans is 80%. The maximum loan-to-value ratio for
permanent commercial mortgages is 75%. The maximum
loan-to-value ratio for land development loans is 70% and for
unimproved land is 65%. Kentucky National also offers home
equity loans secured by the borrower's primary residence
provided that the aggregate indebtedness on the property does
not exceed 80% of its value. Loan officers may make exceptions
to lending policy within their lending limits. Exceptions to
lending policy are reviewed monthly by the Board of Directors.
Commercial and Industrial Lending. Kentucky National
offers a full range of financing for local businesses and
professionals including installment loans for financing
purchases of equipment, receivable financing, and lines and
letters of credit. Such loans may be made on a secured or an
unsecured basis. Commercial and industrial loans totaled $3.6
million, or 10.46% of the portfolio at December 31, 1998. All
such loans are underwritten on the basis of the borrower's
creditworthiness rather than the value of the collateral.
Kentucky National's commercial loan customers consist primarily
of professionals and small to medium-sized businesses located in
the Elizabethtown area. Kentucky National believes that its
commercial loan portfolio is diversified as to industry.
Consumer Lending. Kentucky National offers a wide range of
consumer lending services. Kentucky National makes consumer
installment loans for the purchase of automobiles, boats and
other consumer durable goods. Consumer loans totaled $5.6
million, or 15.98% of the portfolio at December 31, 1998. Such
loans provide for repayment in regular installments and are
secured by the goods financed. In addition, Kentucky National
offers lines of credit and personal loans which may be made on
either a secured or unsecured basis. Security for Kentucky
National's secured personal loans and lines of credit generally
consists of deposits in Kentucky National. Kentucky National
also offers VISA and MasterCard credit cards through an
arrangement with a correspondent bank.
Although the risk of non-payment for any reason exists with
respect to all loans, certain other specific risks are
associated with each type of loan. The primary risks associated
with commercial loans, including commercial real estate loans,
are the quality of the borrower's management and a number of
economic and other factors which induce business failures and
depreciate the value of business assets pledged to secure the
loan, including competition, insufficient capital, product
obsolescence, changes in the cost of production, environmental
hazards, weather, changes in laws and regulations and general
changes in the marketplace. Primary risks associated with
residential real estate loans include fluctuating land and
property values and rising interest rates with respect to
fixed-rate, long-term loans. Residential construction lending
exposes Kentucky National to risks related to builder
performance. Consumer loans are affected primarily by domestic
instability and a variety of factors that may lead to the
borrower's unemployment, including deteriorating economic
conditions in one or more segments of a local or broader
economy.
Kentucky National's lending activities are conducted
pursuant to written policies approved by the Board of Directors
intended to ensure proper management of credit risk. Loans are
subject to a well defined credit process that includes credit
evaluation of borrowers, establishment of lending limits and
application of lending procedures, including the holding of
adequate collateral and the maintenance of compensating
balances, as well as procedures for on-going identification and
management of credit deterioration. Regular portfolio reviews
are to be performed by an outside consultant to identify
potential underperforming credits, estimate loss exposure and to
ascertain compliance with Kentucky National's policies. For
significant problem loans, management review consists of
evaluation of the financial strengths of the borrower and the
guarantor, the related collateral, and the effects of economic
conditions.
19<PAGE>
<PAGE>
PROPERTIES
The Holding Company is not expected to own or lease real or
personal property initially. Instead, it intends to utilize the
premises, equipment and furniture of Kentucky National without
the direct payment of any rental fees to Kentucky National.
Kentucky National leases both its main office at 1000 North
Dixie Avenue and its branch office at Dolphin Drive and U.S.
Highway 62 in Elizabethtown, Kentucky. The main office has
5,000 square feet of space and was constructed for Kentucky
National by a partnership in which each of Kentucky National's
directors has an interest. Kentucky National leases its main
office from the partnership under a ten-year lease with four
successive renewal options of ten years each. Rental payments
are $12,000 per month during the initial term of the lease with
provision for increase based on the percentage increase in the
Consumer Price Index. The branch office has 2,771 square feet
of space. Rental payments are approximately $3,750 per month
including payments on a land lease for the branch's drive-up
window. The Bank's investment in the branch office is
approximately $300,000.
LEGAL PROCEEDINGS
The Holding Company has not, since its organization, been a
party to any legal proceedings.
Although Kentucky National from time to time is involved in
various legal proceedings in the normal course of business,
there are no material legal proceedings to which it is a party
or to which its property is subject.
EMPLOYEES
At the present time, the Holding Company does not intend to
employ any persons other than its management. It will utilize
the support staff of Kentucky National from time to time and
reimburse Kentucky National for the time of its employees. If
the Holding Company acquires other banks or pursues other lines
of business, at such time it may hire additional employees.
At December 31, 1998, Kentucky National had 15 full-time
equivalent employees.
COMPETITION
It is expected that for the immediate future the primary
business of the Holding Company will be the ownership of
Kentucky National's common stock. Therefore, the competitive
conditions to be faced by the Holding Company will be the same
as those faced by Kentucky National.
The banking business is highly competitive. Kentucky
National will compete as a financial intermediary with other
commercial banks, savings associations, credit unions, mortgage
banking firms, consumer finance companies, securities brokerage
firms, insurance companies, money market mutual funds and other
financial institutions operating in the Elizabethtown market
area and elsewhere.
Kentucky National's market area is a highly competitive,
highly branched banking market. Competition in the market area
for loans to small businesses and professionals, Kentucky
National's target market, is intense, and pricing is important.
Most of Kentucky National's competitors have substantially
greater resources and lending limits than Kentucky National and
offer certain services, such as extensive and established branch
networks and trust services, that Kentucky National does not
expect to provide or will not provide initially. Moreover,
larger institutions operating in the Elizabethtown market may
have access to borrowed funds at lower cost than will be
available to Kentucky National. Deposit competition among
institutions in the market area also is strong.
20<PAGE>
<PAGE>
The Board of Directors believes that Kentucky National will
be able to compete effectively in this market. The Board of
Directors believes that the area will react favorably to
Kentucky National's proposed community bank focus and emphasis
on service to small and medium size businesses, individuals and
professional concerns. However, there can be no assurance of
Kentucky National's success in this regard.
YEAR 2000 READINESS DISCLOSURE
Like most financial services companies, Kentucky National
relies heavily on computers and other information technology
systems. As the year 2000 approaches, an important business
issue has emerged regarding how existing application software
programs and operating systems can accommodate this date value.
For many years, software applications routinely conserved
magnetic storage space by using only two digits to record
calendar years; for example, the year 1999 is stored as "99".
On January 1, 2000, the calendars in many software applications
will change from "99" to "00". Many of these software
applications, in their current form, will produce erroneous
results or will fail to run at all since their logic cannot deal
with this transaction.
Kentucky National's Year 2000 plan calls for the
identification of all systems that could be affected by theYear
2000 problem, the systematic assessment of their Year 2000
readiness and the institution of appropriate remedial measures
and contingency planning. As part of its Year 2000 plan,
Kentucky National has ranked its various computer systems
according to their importance to the continued functioning of
Kentucky National. Assessment procedures range from actual
testing for Kentucky National's most mission critical systems to
seeking written self assessments from individual borrowers.
Based on these assessments, Kentucky National has undertaken
appropriate remedial measures. Kentucky National's Year 2000
plan includes contingency and back-up plans for mission critical
systems.
Kentucky National has identified its most mission critical
system as its on-line core account processing which is performed
by a third party service provider. This service provider has
advised Kentucky National that it is Year 2000 compliant and has
successfully done testing with a number of its other customers.
The service provider tested Kentucky National's equipment and
links during the fourth quarter of 1998 and found them to be
Year 2000 compliant. Kentucky National has developed a
contingency plan for back-up data processing with another
provider in the event its current data processor is unable to
operate because of Year 2000 problems. Kentucky National also
uses personal computers and a variety of other software packages
in other facets of its day-to-day operations. These systems
were all purchased just before Kentucky National opened in
October 1997 and were selected in part based on their millennium
compliance. Management believes that it has also identified all
the equipment which relies on embedded computer chips to operate
and has received correspondence from the vendors indicating that
they are Year 2000 compliant. In addition to the risks posed by
the Year 2000 readiness of its internal systems, Kentucky
National recognizes that Bank is exposed to Year 2000 risks from
its customers. Kentucky National has surveyed its larger loan
customers regarding their Year 2000 readiness and is working to
increase their awareness of the problem. Kentucky National does
not believe that the costs associated with its Year 2000
planning will have a material impact on its results of
operations.
MANAGEMENT OF KENTUCKY NATIONAL BANCORP, INC.
Directors. The Holding Company's Articles of Incorporation
provide that the Board of Directors shall consist of not less
than seven nor more than fifteen members. The Board of
Directors will initially consist of nine members who will be
divided into three classes. Directors shall be elected for
staggered terms of three years so that one-third of the
directors are elected each year. The directors of the Holding
Company are, and upon completion of reorganization will continue
to be, the same persons who are at present the directors of
Kentucky National.
21<PAGE>
<PAGE>
The directors of Kentucky National and their proposed
classes as directors of the Holding Company are listed below:
NAME CLASS TERM TO EXPIRE
- ---- ----- --------------
Robert E. Robbins, M.D.
Lawrence P. Calvert
Ronald J. Pence
Kevin D. Addington
Henry Lee Chitwood
Lois Watkins Gray
William R. Hawkins
Christopher G. Knight, M.D.
Leonard Allen McNutt
For information regarding the principal occupation and
business experience of the directors for the past five years,
see "Proposal II -- Election of Directors."
EXECUTIVE OFFICERS. The executive officers of the Holding
Company are, and upon completion of the reorganization will be,
the following persons, each of whom is an officer with Kentucky
National:
NAME POSITION
---- --------
Robert E. Robbins Chairman of the Board
Lawrence P. Calvert Chief Executive Officer
Ronald J. Pence President
Jenean Cooper Secretary/Treasurer
For information regarding the principal occupation and
business experience for the past five years of the executive
officers, see "Proposal II -- Election of Directors."
EXECUTIVE COMPENSATION. Since the formation of the Holding
Company, none of its executive officers or directors has
received any remuneration from the Holding Company. It is
expected that unless and until the Holding Company becomes
actively involved in additional businesses, no separate
compensation will be paid to its directors and officers in
addition to compensation paid to them by Kentucky National.
However, the Holding Company may determine that such separate
compensation is appropriate in the future. At the present time,
the Holding Company does not intend to employ any persons other
than its present management. If the Holding Company acquires
other businesses, it may at such time hire additional employees.
INDEMNIFICATION OF DIRECTORS AND OFFICERS. Kentucky
National is permitted to indemnify its directors, officers and
employees against legal and other expenses incurred in defending
lawsuits brought against them by reason of the performance of
their official duties. Indemnification may be made to such
person only if final judgment on the merits is in his favor or,
in case of settlement, final judgment against him or final
judgment in his favor, other than on the merits, if a majority
of the disinterested directors of Kentucky National determines
that he was acting in good faith within the scope of his
employment or authority as he could reasonably have perceived it
under the circumstances and for a purpose he could have
reasonably believed under the circumstances was in the best
interest of Kentucky National or its shareholders. If a
majority of the disinterested directors of Kentucky National
22<PAGE>
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concludes that in connection with an action any person
ultimately may become entitled to indemnification, the directors
may authorize payment of reasonable costs and expenses arising
from defense or settlement of such action.
Article XVIII of the Holding Company's Articles of
Incorporation provides for indemnification of the Holding
Company's directors and officers. In the case of a threatened,
pending or completed action or suit by or in the name of the
Holding Company, the Holding Company shall indemnify a director
or officer for amounts actually and reasonably incurred by him
in connection with the defense or settlement of the action or
suit if the director or officer: is successful on the merits or
otherwise; acted in good faith in the transaction which is the
subject of the suit or action, and in a manner he reasonably
believed to be in, the best interest of the Holding Company or
in a criminal proceeding he either had (a) reasonable cause to
believe that his conduct was lawful, or (b) no reasonable cause
to believe his conduct was unlawful.
Under Indiana law, a corporation may indemnify a director or
officer made a party to a proceeding because such person was a
director or officer of the corporation if: the individual's
conduct was in good faith; and the individual reasonably
believed (A) in the case of conduct in the individual's official
capacity with the corporation, that the individual's conduct was
in the corporation's best interests, and (B) in all other cases,
that the individual's conduct was at least not opposed to the
corporation's best interests. An Indiana corporation may also
indemnify an officer or director in a criminal proceeding if the
individual had reasonable cause to believe that his conduct was
lawful; or no reasonable cause to believe that his conduct was
unlawful.
An Indiana corporation must, unless limited by its articles
of incorporation, indemnify any director or officer who was
wholly successful, on the merits or otherwise, in the defense of
a proceeding to which the individual was a party because the
individual was a director or officer of the corporation, against
reasonable expenses incurred by the director or officer in
connection with the proceeding. Unless limited by the
corporation's articles of incorporation, an officer or director
may apply to the court conducting the proceeding or another
court of competent jurisdiction for indemnification. The court
may order indemnification if it determines: the director or
officer is entitled to mandatory indemnification under Indiana
law; or the officer or director is fairly and reasonably
entitled to indemnification in view of all the relevant
circumstances, whether or not such director or officer met the
standard of conduct set forth for mandatory indemnification
under Indiana law. The Holding Company's Articles of
Incorporation do not contain any limitations on the ability of
the Holding Company to indemnify its directors and officers
under Indiana law.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or
persons controlling the Holding Company pursuant to the
foregoing provisions, the Holding Company has been informed that
in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
LIMITATION ON LIABILITY. As permitted for national banks,
Kentucky National's Articles of Association limit the Directors'
personal liability to the Bank for most breaches of fiduciary
duty and adopt Delaware law regarding the limitation of
liability for directors.
The Holding Company's Articles of Incorporation also provide
that directors and officers shall not be personally liable to
the Holding Company or its shareholders for monetary damages for
breach of his fiduciary duty as a director, except (1) to the
extent that it is proved that the person actually received an
improper benefit or profit in money, property or services for
the amount of the benefit or profit in money, property or
services actually received; (2) to the extent that a judgment or
other final adjudication adverse to the person is entered in a
proceeding based on a finding in the proceeding that the
person's action, or failure to act, was the result of active and
deliberate dishonesty and was material to the cause of action
adjudicated in the proceeding; or (3) to the extent otherwise
required by Indiana law.
This provision eliminates the potential liability of the
Holding Company's directors and officers for failure, through
ordinary negligence, to satisfy their duty of care, which
requires directors and officers to exercise informed
23<PAGE>
<PAGE>
business judgment in discharging their duties. It may thus
reduce the likelihood of derivative litigation against directors
and officers and discourage or deter shareholders from bringing
a lawsuit against directors and officers for breach of their
duty of care, even though such an action, if successful, might
otherwise have been beneficial to the Holding Company and its
shareholders. Shareholders may thus be surrendering a cause of
action based upon negligent business decisions, including those
relating to attempts to change control of the Holding Company.
The provision will not, however, affect the right to pursue
equitable remedies for breach of the duty of care, although such
remedies might not be available as a practical matter, and the
provision does not apply to breaches of duty prior to the
incorporation of the Holding Company or to breaches not
committed as a director, officer, employee or agent of the
Holding Company.
To the best of management's knowledge, there is currently no
pending or threatened litigation for which indemnification may
be sought or any recent litigation involving directors of
Kentucky National that might have been affected by the limited
liability provision in the Holding Company's Articles of
Incorporation had it been in effect at the time of the
litigation.
REGULATION OF KENTUCKY NATIONAL BANCORP, INC.
The Holding Company will be subject to the jurisdiction of
the Securities and Exchange Commission and of state securities
commissions for matters relating to the offering and sale of its
securities. Presently, the Bank is subject to the jurisdiction
of the Office of the Comptroller of the Currency. Accordingly,
additional issuances of Holding Company stock to raise capital
and for dividend reinvestment, stock option and other plans will
be subject to such registration (absent any exemption from
registration). If the Holding Company were to register
additional stock, it would incur some additional costs that the
Bank does not presently have to incur since the Office of the
Comptroller of the Currency does not presently impose any fee
for registering securities.
Upon completion of the reorganization, the Holding Company
will become a bank holding company within the meaning of the
Bank Holding Company Act of 1956, as amended ("BHCA"). As such,
it will be registered with the Federal Reserve Board and will be
subject to Federal Reserve Board regulations, examinations and
reporting requirements. As a subsidiary of a bank holding
company, Kentucky National will be subject to certain
restrictions in its dealings with the Holding Company and with
other companies affiliated with the Holding Company, and will
continue to be subject to regulatory requirements as a national
bank.
ACTIVITIES RESTRICTIONS. The Holding Company is required
to obtain prior approval of the Federal Reserve Board before
acquiring control, directly or indirectly, of more than five
percent of the voting shares or substantially all of the assets
of any institution, including another bank.
A bank holding company is prohibited from engaging in or
acquiring direct or indirect control of more than five percent
of the voting shares of any company engaged in non-banking
activities unless the Federal Reserve Board, by order or
regulation, has found such activities to be so closely related
to banking, managing, or controlling banks as to be a proper
incident thereto. In making this determination, the Federal
Reserve Board considers whether these activities offer benefits
to the public that outweigh any possible adverse effects.
Further, under the BHCA and the Federal Reserve Board's
regulations, a bank holding company and its subsidiaries are
prohibited from engaging in certain tie-in arrangements in
connection with any extension of credit or provision of credit
or provision of any property or services. The so-called
"anti-tie-in" provisions state generally that a bank may not
extend credit, lease, sell property or furnish any service to a
customer on the condition that the customer provide additional
credit or service to the bank, to its bank holding company or to
any other subsidiary of its bank holding company or on the
condition that the customer not obtain other credit or service
from a competitor of the bank, its bank holding company or any
subsidiary of its bank holding company.
CAPITAL REQUIREMENTS. The Federal Reserve Board has
established guidelines with respect to the maintenance of
appropriate levels of capital by bank holding companies with
consolidated assets of $150 million or more. For bank holding
companies with less than $150 million in consolidated assets,
the Federal Reserve Board applies the guidelines
24<PAGE>
<PAGE>
on a bank-only basis unless the bank holding company has
publicly held debt securities or is engaged in non-bank
activities involving significant leverage. The regulations
impose two sets of capital adequacy requirements: minimum
leverage rules, which require bank holding companies and state
non-member banks to maintain a specified minimum ratio of
capital to total assets, and risk-based capital rules, which
require the maintenance of specified minimum ratios of capital
to "risk-weighted" assets. The regulations of the Federal
Reserve Board require bank holding companies to maintain a
minimum leverage ratio of "Tier 1 capital" to total assets of
3.0%. Tier 1 capital is the sum of common shareholders' equity,
certain perpetual preferred stock (which must be noncumulative
with respect to banks), including any related surplus, and
minority interests in consolidated subsidiaries; minus all
intangible assets (other than certain purchased mortgage
servicing rights and purchased credit card receivables),
identified losses and investments in certain subsidiaries.
Although setting a minimum 3.0% leverage ratio, the capital
regulations state that only the strongest bank holding
companies, with composite examination ratings of 1 under the
rating system used by the federal bank regulators, would be
permitted to operate at or near such minimum level of capital.
All other bank holding companies are expected to maintain a
leverage ratio of at least 1% to 2% above the minimum ratio,
depending on the assessment of an individual organization's
capital adequacy by its primary regulator. Any bank holding
companies experiencing or anticipating significant growth would
be expected to maintain capital well above the minimum levels.
In addition, the Federal Reserve Board has indicated that
whenever appropriate, and in particular when a bank holding
company is undertaking expansion, seeking to engage in new
activities or otherwise facing unusual or abnormal risks, it
will consider, on a case-by-case basis, the level of an
organization's ratio of tangible Tier 1 capital to total assets
in making an overall assessment of capital.
In addition to the leverage ratio, the regulations of the
Federal Reserve Board require bank holding companies to maintain
a minimum ratio of qualifying total capital to risk-weighted
assets of at least 8.0% of which at least four percentage points
must be Tier 1 capital. Qualifying total capital consists of
Tier 1 capital plus Tier 2 or supplementary capital items which
include allowances for loan losses in an amount of up to 1.25%
of risk-weighted assets, cumulative preferred stock and
preferred stock with a maturity of 20 years or more and certain
other capital instruments. The includable amount of Tier 2
capital cannot exceed the institution's Tier 1 capital.
Qualifying total capital is further reduced by the amount of the
bank's investments in banking and finance subsidiaries that are
not consolidated for regulatory capital purposes, reciprocal
cross-holdings of capital securities issued by other banks and
certain other deductions. The risk-based capital regulations
assign balance sheet assets and the credit equivalent amounts of
certain off-balance sheet items to one of four broad risk weight
categories. The aggregate dollar amount of each category is
multiplied by the risk weight assigned to that category based
principally on the degree of credit risk associated with the
obligor. The sum of these weighted values equals the bank
holding company's risk-weighted assets.
RESTRICTIONS ON ACQUISITIONS. Bank holding companies are
prohibited from acquiring, without prior approval of the Federal
Reserve Board, (i) control of any other bank or bank holding
company or substantially all the assets thereof or (ii) more
than 5% of the voting shares of a bank or holding company
thereof which is not a subsidiary.
TRANSACTIONS WITH AFFILIATES. Transactions between banks
and any affiliate are governed by Sections 23A and 23B of the
Federal Reserve Act, as amended. An affiliate of a bank is any
company or entity which controls, is controlled by or is under
common control with the bank. In a holding company context, the
parent holding company of a bank (such as the Holding Company)
and any companies which are controlled by such parent holding
company are affiliates of the bank. Generally, Sections 23A and
23B (i) limit the extent to which the bank or its subsidiaries
may engage in "covered transactions" with any one affiliate to
an amount equal to 10% of such bank's capital stock and surplus,
and contain an aggregate limit on all such transactions with all
affiliates to an amount equal to 20% of such capital stock and
surplus and (ii) require that all such transactions be on terms
substantially the same, or at least as favorable to the
institution or subsidiary, as those provided to a non-affiliate.
The term "covered transaction" includes the making of loans,
purchase of assets, issuance of a guarantee and similar other
types of transactions.
The restrictions contained in Section 22(h) of the Federal
Reserve Act, as amended, apply to loans by banks to executive
officers, directors and principal shareholders (such as the
Holding Company). Section 22(h) requires that loans to
directors, executive officers and greater than 10% shareholders
be made on terms substantially the same as offered in comparable
transactions to other persons. Under Section 22(h), loans to an
executive officer and to a greater
25<PAGE>
<PAGE>
than 10% shareholder of a bank (18% in the case of institutions
located in an area with less than 30,000 in population), and
certain affiliated entities of either, may not exceed together
with all other outstanding loans to such person and affiliated
entities the bank's loan-to-one borrower limit (generally equal
to 15% of the institution's unimpaired capital and surplus and
an additional 10% of such capital and surplus for loans fully
secured by certain readily marketable collateral). Section
22(h) also prohibits loans, above amounts prescribed by the
appropriate federal banking agency, to directors, executive
officers and greater than 10% shareholders of a bank, and their
respective affiliates, unless such loan is approved in advance
by a majority of the board of directors of the association with
any "interested" director not participating in the voting. The
Federal Reserve Board has prescribed the loan amount (which
includes all other outstanding loans to such person), as to
which such prior board of director approval is required, to be
the greater of $25,000 or 5% of capital and surplus (up to
$500,000).
DESCRIPTION OF HOLDING COMPANY CAPITAL STOCK
The Holding Company is authorized to issue 5,000,000 shares
of common stock, $0.01 par value per share, and 1,000,000 shares
of preferred stock, $0.01 par value per share. The Holding
Company currently expects to issue up to 240,000 shares of
Holding Company common stock in the holding company
reorganization. The Holding Company does not intend to issue
any shares of preferred stock in the holding company
reorganization, nor are there any present plans to issue such
preferred stock following the holding company reorganization.
Each share of common stock will have the same relative rights
as, and will be identical in all respects with, each other share
of common stock.
THE COMMON STOCK OF THE HOLDING COMPANY WILL REPRESENT
NONWITHDRAWABLE CAPITAL AND WILL NOT BE INSURED BY THE FDIC, OR
ANYOTHER GOVERNMENT AGENCY.
HOLDING COMPANY COMMON STOCK
Voting Rights. Each share of the Holding Company common
stock will have the same relative rights and will be identical
in all respects with every other share of the common stock. The
holders of the Holding Company common stock will possess
exclusive voting rights in the Holding Company, except to the
extent that shares of preferred stock issued in the future may
have voting rights, if any. Each holder of the common stock
will be entitled to only one vote for each share held of record
on all matters submitted to a vote of holders of the Holding
Company common stock and will not be permitted to cumulate their
votes in elections of the Holding Company's directors. The
voting rights of shares beneficially owned by any person in
excess of 10% of shares outstanding will be limited to 1/100th
of a vote unless the acquisition has previously been approved by
the Continuing Directors.
Liquidation. In the unlikely event of the complete
liquidation or dissolution of the Holding Company, the holders
of the common stock will be entitled to receive all assets of
the Holding Company available for distribution in cash or in
kind, after payment or provision for payment of (1) all debts
and liabilities of the Holding Company; (2) any accrued dividend
claims; and (3) liquidation preferences of any preferred stock
which may be issued in the future.
Dividends. From time to time, dividends may be declared and
paid to the holders of the common stock, who will share equally
in any such dividends.
Restrictions on Acquisition of the Holding Company Common
Stock. See "Certain Anti-Takeover Provisions" for a discussion
of the limitations on acquisition of shares of the common stock.
<PAGE>
Other Characteristics. Holders of the Holding Company
Common Stock will not have preemptive rights with respect to any
additional shares of the common stock which may be issued.
Therefore, the board of directors may sell shares of capital
stock of the Holding Company without first offering such shares
to existing shareholders of the Holding Company. The common
stock is not subject to call for redemption, and the outstanding
shares of common stock when issued and upon receipt by the
Holding Company of the full purchase price therefor will be
fully paid and non-assessable.
26<PAGE>
<PAGE>
Registrar and Transfer Agent. Illinois Stock Transfer
Company will act as Registrar and Transfer Agent for the Holding
Company's common stock.
SERIAL PREFERRED STOCK
None of the 1,000,000 authorized shares of preferred stock
of the Holding Company will be issued in the reorganization.
After completion of the holding company reorganization, the
Board of Directors of the Holding Company will be authorized to
issue serial preferred stock and to fix and state voting powers,
designations, preferences or other special rights of such shares
and the qualifications, limitations and restrictions thereof,
subject to regulatory approval but without shareholder approval.
If and when issued, the serial preferred stock is likely to rank
prior to the common stock as to dividend rights, liquidation
preferences, or both, and may have full or limited voting
rights. The Board of Directors, without shareholder approval,
can issue serial preferred stock with voting and conversion
rights which could adversely affect the voting power of the
holders of the common stock. The Board of Directors has no
present intention to issue any of the serial preferred stock.
ACCOUNTING TREATMENT
The reorganization will be accounted for as a reorganization
under common control treated as if a pooling of interests.
Therefore, the consolidated capitalization, assets, liabilities,
income and other financial data of the Holding Company
immediately following the reorganization will be substantially
the same as those of the Bank immediately prior to consummation
of the reorganization, and after the reorganization, will be
shown in the Holding Company's consolidated financial statements
at Kentucky National's historical recorded values. Because the
reorganization will not result in a change in such financial
statements, this proxy statement/prospectus does not include
financial statements of the Bank or the Holding Company.
LEGAL OPINION
The validity of the shares of the Holding Company common
stock issuable upon consummation of the reorganization will be
passed upon by Housley Kantarian & Bronstein, P.C., Washington,
D.C.
VOTE REQUIRED
Approval of the Plan of Reorganization requires the
affirmative vote of two-thirds of the total votes eligible to be
cast at the Annual Meeting. Since the required vote is based on
the number of shares outstanding, an abstention or failure to
vote, including a broker no vote, is equivalent to voting
against the Plan of Reorganization. The Board of Directors
recommends that you vote "FOR" the approval of the Plan of
Reorganization.
Approximately 85,360 shares or 35.6% of the shares of
Kentucky National common stock outstanding are held by
directors, executive officers and their affiliates. It is
expected that these shares will be voted "FOR" the
reorganization.
________________________________________________________________
PROPOSAL II -- ELECTION OF DIRECTORS
________________________________________________________________
Kentucky National's Articles of Association specify that the
Board of Directors must consist of not less than five nor more
than 25 members as fixed from time to time by resolution of a
majority of the full Board of Directors or by resolution of a
majority of the shareholders at any meeting thereof. Each
director must stand for election annually. Your Board of
Directors has fixed the number of directors at nine and has
nominated the persons named below, each of whom currently serves
as a director, for election as directors to serve until the next
annual meeting of shareholders and until their successors have
been elected and qualified.
27<PAGE>
<PAGE>
Under the Articles of Association, shareholders have the
right to cumulate your votes in the election of directors.
Under cumulative voting, your have the right to cast as many
votes as you would be entitled to cast for all nominees for a
single nominee or to distribute your votes among as many
nominees as you see fit. For example, if you own 100 shares,
you are entitled to 900 votes which may be voted as you desire
for one or more of the nominees. However, there is no provision
on the accompanying proxy card for the cumulation of votes by a
shareholder. Accordingly, to vote cumulatively, you must attend
the Annual Meeting and vote in person.
If any nominee is unable to serve, the shares represented by
all valid proxies will be voted for the election of a substitute
that your Board of Directors may recommend or the size of the
Board may be reduced to eliminate the vacancy. At this time,
the Board of Directors knows of no reason why any nominee might
be unavailable to serve.
The following table sets forth the names of the Board of
Directors' nominees for election as directors. Also set forth is
certain other information with respect to each person's age as
of December 31, 1998, their position with the Bank, the number
and percentage of shares of Common Stock beneficially owned.
Each director first became a director in 1997 when the Bank
commenced operations. For purposes of this table, a person is
deemed to be the beneficial owner of any shares of common stock
(1) over which he or she has or shares voting or investment
power, or (2) which he or she has the right to acquire at any
time within 60 days from the Record Date. "Voting power" is the
power to vote or direct the voting of shares and "investment
power" is the power to sell or direct the sale of shares. In
calculating percentage ownership for a given individual or group
of individuals, the number of shares of the common stock
outstanding includes unissued shares subject to options
exercisable within 60 days of the Record Date held by that
individual or group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
-------------------------------
NUMBER PERCENTAGE OF
NOMINEE AGE POSITIONS WITH THE BANK OF SHARES SHARES OUTSTANDING
- ------- --- ----------------------- ---------- ------------------
<S> <C> <C> <C> <C>
Robert E. Robbins, M.D. 64 Chairman of the Board, Director 12,040 5.02%
Lawrence P. Calvert 51 Chief Executive Officer, Director 8,040 (1) 3.32
Ronald J. Pence 43 President, Director 14,040 (1) 5.80
Kevin D. Addington 36 Director 12,040 5.02
Henry Lee Chitwood 53 Director 6,040 2.52
Lois Watkins Gray 61 Director 3,040 1.27
William R. Hawkins 41 Director 6,040 2.52
Christopher G. Knight, M.D. 54 Director 12,040 5.02
Leonard Allen McNutt 55 Director 12,040 5.02
All directors and executive
officers as a group
(10 persons) 90,693 (2) 37.17%
<FN>
___________
(1) Includes 2,000 shares which he has the right to acquire pursuant to the
exercise of options.
(2) Includes 5,333 which executive officers have the right to acquire pursuant
to the exercise of options.
</FN>
</TABLE>
The following is a summary of the business experience of
the nominees. Unless otherwise indicated, each nominee has
served in their current position for the last five years.
ROBERT E. ROBBINS, M.D. practices general surgery with
Surgical Specialists, PSC, in Elizabethtown, Kentucky. He also
is the Chief of Staff-Elect of the Hardin Memorial Hospital
Medical Staff and is active in numerous local and national
medical organizations. In addition, Dr. Robbins is active in
property development in the Elizabethtown area. He has also
served as a past president of the Elizabethtown Lions Club and
as a former First Vice President of the Elizabethtown Chamber of
Commerce.
LAWRENCE P. CALVERT has served as the Chief Executive
Officer of Kentucky National since its opening in October 1997.
Mr. Calvert has over 23 years of experience in banking in Hardin
County. Most recently, Mr. Calvert served as the Chief
Executive Officer of The Cecilian Bank, a $100 million asset
bank with five locations in Hardin
28<PAGE>
<PAGE>
County. Mr. Calvert joined The Cecilian Bank in 1973 and left
that bank in January of 1997 in order to help organize the Bank.
Mr. Calvert has various other business interests in Hardin
County and is serving as a director of the Elizabethtown Chamber
of Commerce.
RONALD J. PENCE has served as the President of Kentucky
National since it opened for business in October 1997. He has
over 18 years of banking experience in Hardin County, serving
most recently as the Chief Financial Officer of The Cecilian
Bank which he joined in 1978 and left in 1997 to assist in the
formation of Kentucky National. Mr. Pence has numerous business
interest in Hardin County and is active in civic affairs. He
currently serves as a director of the Rotary International.
KEVIN D. ADDINGTON is the President of Addington
Transportation, Inc. which owns and operates warehouse and
storage facilities in the Elizabethtown area. Mr. Addington is
also the owner of Addington Properties which is engaged in
property leasing and management. He is active in local civic
affairs and serves as Administrative Board Chairman for the
Cecilia United Methodist Church.
HENRY LEE CHITWOOD is a sales executive for Bean Publishing
Co., an office equipment and furnishings supplier. Mr. Chitwood
also has various property interests.
LOIS WATKINS GRAY is the superintendent of Schools for
Hardin County, a position which she has held since 1992. Ms.
Gray has served as an educator for six years in Hardin County.
She is also active in state and national educational and
professional groups.
WILLIAM R. HAWKINS is the founder and owner of Three Oaks
Marketing and Development which markets satellite television
systems. Operating under the name Starpath of Hardin County,
Mr. Hawkins' company holds the franchise for providing direct
television programming for Hardin county. Mr. Hawkins is active
in industry groups and trade associations having held numerous
posts in the Satellite Broadcasting and Communication
Association of America. Mr. Hawkins is also a founder of the T.
Howard Foundation, an educational foundation on whose board of
directors he currently serves.
CHRISTOPHER G. KNIGHT, M.D. is an ophthalmologist
practicing with Knight & Smith, PSC in Elizabethtown, Kentucky.
He also has other diversified business interests in local
medical, media and real estate. Dr. Knight is active in local
medical and civic organizations. He serves on the Board of
Directors of Wesley Hilltop House.
LEONARD ALLEN MCNUTT is the owner and operator of McNutt
Construction Company, a general construction firm engaged in
commercial and industrial renovation and new construction. Mr.
McNutt has been engaged in construction and construction
contracting in Hardin County for nearly 30 years. Mr. McNutt's
other business interest include part ownership of the Hardin
County Independent newspaper and local real estate investments.
Mr. McNutt is also active in various local civic organizations
and professional groups.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors holds regular monthly meetings and
special meetings as needed. During the year ended December 31,
1998, the Board of Directors met 21 times. No director attended
fewer than 75% of the total number of meetings of the Board of
Directors held during 1998 and the total number of meetings held
by all committees on which the director served during the
year.
Kentucky National's Executive, Audit and Personnel
Committee consisting of Directors Robbins, Gray, Pence and
Calvert acts as Kentucky National's audit and compensation
committees. As the audit committee, the Committee monitors
internal accounting controls and meets with Kentucky National's
independent auditors regarding these internal controls to assure
full disclosure of the Bank's financial condition. As the
compensation committee, the Committee evaluates and ascertains
the appropriateness of compensation levels paid to the officers
of Kentucky National. The Executive, Audit and Compensation
Committee met three times during 1998.
29<PAGE>
<PAGE>
The full Board of Directors acts as a nominating committee
for the annual selection of its nominees for election as
directors. While the Board of Directors will consider nominees
recommended by shareholders, it has not actively solicited
recommendations from Kentucky National's shareholders for
nominees, nor established any procedures for this purpose. The
Board of Directors held one meeting during 1998 in order to make
nominations for directors.
DIRECTOR COMPENSATION
Directors receive a retainer of $500 a month for each month
in which there is only one board meeting and $700 per month for
any month in which there is more than one meeting. Directors do
not receive any additional fees for committee meetings. To date
the directors have deferred receipt of all fees.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The following table sets forth
the cash and noncash compensation awarded to or earned by the
Chief Executive Officer of Kentucky National and by each
executive officer whose salary and bonus earned in fiscal year
1998 exceeded $100,000 for services rendered in all capacities
to Kentucky National (the "Named Executive Officers"). For
fiscal year 1997, the salaries shown below for both Named
Executive Officers include salary paid by the organizers of
Kentucky National Bank prior to its opening which was reimbursed
by Kentucky National upon completion of its organization.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------------------ -----------------------
RESTRICTED SECURITIES
NAME AND OTHER ANNUAL STOCK UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARD(S) OPTIONS COMPENSATION
- ------------------ ---- ------ ----- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Lawrence P. Calvert 1998 $115,000 $ -- $ -- -- -- $9,695 (1)
Chief Executive Officer 1997 112,879 -- -- -- 6,000 3,795
Ronald J. Pence 1998 $115,000 $ -- $ -- -- -- $8,535 (2)
President 1997 112,879 -- -- -- 6,000 2,635
<FN>
____________
(1) Mr. Calvert's "Other Compensation" for 1998 consisted of $1,895 in paid term life insurance
premiums and $7,800 in deferred directors' fees.
(2) Mr. Pence's "Other Compensation" for 1998 consisted of $735 in paid term life insurance
premiums and $7,800 in deferred director fees.
</FN>
</TABLE>
OPTION YEAR-END VALUE TABLE. The following table sets
forth information concerning the value of options held by the
Named Executive Officers at the end of fiscal year 1998. No
options were exercised during fiscal year 1998. Options are
considered in-the-money of the fair market value of the
underlying securities exceeds the exercise price. Neither Mr.
Calvert's nor Mr. Pence's options were in-the-money at December
31, 1998.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT YEAR-END AT YEAR-END
--------------------------- --------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Lawrence P. Calvert 2,000 4,000 $ -- $ --
Ronald J. Pence 2,000 4,000 -- --
</TABLE>
30<PAGE>
<PAGE>
TRANSACTIONS WITH MANAGEMENT
From time to time, Kentucky National engages in banking
transactions, including loans, with its directors, officers and
their associates in the ordinary course of business. At
December 31, 1998, $204,400 of loans to directors, officers and
their associates were outstanding. Loans to directors and
executive officers will only be made in the ordinary course of
business and on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for
comparable transactions with other persons and will not involve
more than the normal risk of collectibility or present other
unfavorable features.
Kentucky National leases its main office from Kentucky
National Properties, L.L.C., a limited liability company in
which each of the directors has a 10% ownership interest. The
lease is for a ten-year term with four successive renewal
options of ten years each. Rental payments are $12,000 per month
during the initial term of the lease with provision for increase
based on the percentage increase in the Consumer Price Index.
During the term of the lease and any renewals thereof, the
premises may only be used for a bank or banking institution
unless the prior written consent of the lessor has been
received.
During 1998, McNutt Construction Company, which is owned and
operated by Director McNutt, acted as general contractor for
improvements to Kentucky National's new branch at Dolphin Drive
and U.S. Highway 62. Payments by Kentucky National to McNutt
Construction Company totaled $309,980 for the year.
________________________________________________________________
MARKET FOR KENTUCKY NATIONAL COMMON STOCK AND DIVIDENDS
________________________________________________________________
There is currently no established market for the Kentucky
National common stock and no bid or asked quotes are available.
The most recent trade of which Kentucky National is aware took
place at $25 per share. It is not expected that a market in the
common stock of Kentucky National Bancorp, Inc. will develop.
There were approximately 336 shareholders of record at the
Record Date.
Since commencing operations, Kentucky National has not paid
any dividends. For additional information describing regulatory
restrictions on the payment of dividends, see "Proposal I --
Proposed Holding Company Formation -- Comparison of
Shareholders' Rights -- Payment of Dividends."
________________________________________________________________
FINANCIAL STATEMENTS
________________________________________________________________
The audited financial statements of Kentucky National for
its fiscal year ended December 31, 1998, prepared in conformity
with generally accepted accounting principles, are included in
the Annual Report to Shareholders which accompanies this proxy
statement/prospectus. No financial statements of the Holding
Company are presented in this proxy statement/prospectus, as the
Holding Company currently has no significant assets or
liabilities. In addition, no pro forma consolidated financial
statements of the Holding Company are included herein since such
statements would reflect no material differences from the
consolidated financial statements of Kentucky National.
________________________________________________________________
SHAREHOLDER PROPOSALS
________________________________________________________________
If the holding company reorganization is approved by
shareholders, it is anticipated that the 2000 Annual Meeting of
Shareholders will be held in accordance with the Articles of
Incorporation and Bylaws of the Holding Company rather than the
Articles of Association and Bylaws of Kentucky National. In
order for a shareholder proposal to be considered at an annual
meeting of the Holding Company's shareholders, it must be
delivered or mailed to the Secretary not more than 60 nor less
than 30 days prior to the meeting provided that if less than 31
days' notice is given, shareholder proposals may be submitted
not later than the tenth day following the day on which notice
of the meeting was mailed to shareholders.
31<PAGE>
<PAGE>
________________________________________________________________
MISCELLANEOUS
________________________________________________________________
Your Board of Directors is not aware of any business to come
before the Annual Meeting other than those matters described
above in this proxy statement/prospectus. However, if any other
matters should properly come before the Annual Meeting, it is
intended that proxies in the accompanying form will be voted in
respect thereof in accordance with the judgment of the person or
persons voting the proxies, including matters relating to the
conduct of the Annual Meeting.
The cost of solicitation of proxies will be borne by
Kentucky National. Kentucky National will reimburse brokerage
firms and other custodians, nominees and fiduciaries for
reasonable expenses incurred by them in sending proxy material
to the beneficial owners of common stock. In addition to
solicitations by mail, directors, officers and regular employees
of Kentucky National may solicit proxies personally, by
telegraph or telephone without additional compensation.
32<PAGE>
<PAGE>
Exhibit A
KENTUCKY NATIONAL BANK
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION made as of this
13th day of January, 1999, among KENTUCKY NATIONAL BANCORP,
INC., an Indiana corporation (the "Holding Company"), KENTUCKY
NATIONAL BANK, Elizabethtown, Kentucky, a national banking
association (the "Bank"). In addition, as soon as reasonably and
legally possible, the Holding Company will form as a
wholly-owned subsidiary, a new national banking association
organized and existing under the laws of the United States (the
"New Bank") under the name and KENTUCKY NATIONAL INTERIM BANK,
which will upon such formation become a party to this Agreement
and to the Agreement of Merger attached hereto as Exhibit A-1.
All obligations of the New Bank will, until properly assumed by
the New Bank by its execution of this Agreement, be made and
assumed on its behalf by the Holding Company.
WHEREAS, the Holding Company, the Bank, and the New Bank
desire to effect the formation of a bank holding company whereby
the Bank and the New Bank will be merged, the surviving bank
will become a wholly-owned subsidiary of the Holding Company,
and the present stockholders of the Bank (except for those who
perfect dissenters' rights) will become stockholders of the
Holding Company, on the terms and conditions hereinafter set
forth;
NOW, THEREFORE, in consideration of the mutual covenants
and agreements contained herein, and intending to be legally
bound hereby, the parties agree as follows:
ARTICLE I
MERGER
------
1.1 AGREEMENT TO MERGE. Subject to the terms and
conditions hereinafter set forth, the parties hereto agree to
effect a merger of the Bank and the New Bank (the "Merger")
pursuant to the provisions of Section 215a of the National Bank
Act, as amended (the "Act") in accordance with the Agreement to
Merge, attached hereto as Exhibit A-1 and made a part hereof
(the "Merger Agreement").
1.2 HOLDING COMPANY COMMON STOCK. The Holding Company
shall make available to the Bank and the New Bank a sufficient
number of shares of the Common Stock, par value $0.01 per share
(the "Holding Company Common Stock"), of the Holding Company to
effect the Merger pursuant to the Merger Agreement.
ARTICLE II
SHARES OF THE HOLDING COMPANY AND OF THE SURVIVING BANK
-------------------------------------------------------
2.1 CONVERSION OF SHARES. The manner of converting the
shares of Common Stock, par value $1.00 per share, of the Bank
(the "Bank Common Stock") into shares of Holding Company Common
Stock and the shares of Common Stock of the New Bank into shares
of Common Stock of the surviving bank in the Merger and the
assumption of the outstanding options of the Bank by the Holding
Company, shall be as set forth in Section 7 of the Merger
Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE HOLDING COMPANY
-----------------------------------------------------
The Holding Company represents, warrants and agrees as
follows:
3.1 ORGANIZATION AND STANDING. The Holding Company is a
corporation duly organized and validly existing under the
Indiana Business Corporation Law.
A-1<PAGE>
<PAGE>
3.2 CAPITALIZATION. The Holding Company is authorized to
issue 5,000,000 shares of Common Stock, par value $0.01 per
share, of which 1000 shares are issued and outstanding and
1,000,000 shares of preferred stock, par value $0.01 per share,
of which no shares are issued and outstanding. There are no
outstanding options, warrants, calls, convertible securities,
subscriptions, or other commitments or rights of any nature with
respect to the Common Stock of the Holding Company.
3.3 AUTHORITY RELATIVE TO THIS AGREEMENT. The execution,
delivery, and performance of this Agreement have been duly
authorized by the Board of Directors of the Holding Company.
Subject to appropriate stockholder and regulatory approvals,
neither the execution and delivery of this Agreement nor the
consummation of the transactions provided for herein will
violate any agreement to which the Holding Company is a party or
by which it is bound or any law, order, or decree or any
provision of its Articles of Incorporation or By-laws.
3.4 ABSENCE OF LIABILITIES. Prior to the effective time
of the Merger, the Holding Company will have engaged only in the
transactions contemplated by this Agreement and the Merger
Agreement, will have no material liabilities and will have
incurred no material obligations except in connection with its
performance of the transactions provided for in this Agreement
and in the Merger Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BANK
------------------------------------------
The Bank represents, warrants and agrees as follows:
4.1 ORGANIZATION AND STANDING. The Bank is a national
banking association duly organized and validly existing under
the Act.
4.2 CAPITALIZATION. The Bank is authorized to issue
1,000,000 shares of Common Stock, par value $1.00 per share, of
which 240,000 shares are issued and outstanding. As of the date
of this Agreement, the Bank has issued 16,000 options at an
exercise price of $25.00 per share each. Each such option is
exercisable for one share of Bank Common Stock. There are no
other outstanding options, warrants, calls, convertible
securities, subscriptions, or other commitments or rights of any
nature with respect to the Bank Common Stock.
4.3 AUTHORITY RELATIVE TO THIS AGREEMENT. The execution,
delivery, and performance of this Agreement and of the Merger
Agreement have been duly authorized by the Board of Directors of
the Bank. Subject to appropriate stockholder and regulatory
approvals, neither the execution and delivery of this Agreement
or the Merger Agreement nor the consummation of the transactions
provided for herein or therein will violate any agreement to
which the Bank is a party or by which it is bound, or any law,
order, decree, or any provision of its Articles of Incorporation
or By-laws.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE NEW BANK
----------------------------------------------
The New Bank represents, warrants and agrees as follows:
5.1 ORGANIZATION AND STANDING. The New Bank is an interim
national banking institution in the process of formation under
the Act.
5.2 CAPITALIZATION. The New Bank is authorized to issue
1,000,000 shares of Common Stock, par value $1.00 per share, of
which 100,000 shares will be issued and outstanding and owned by
the Holding Company and nine organizers immediately prior to the
Merger.
5.3 AUTHORITY RELATIVE TO THIS AGREEMENT. The execution,
delivery, and performance of this Agreement and the Merger
Agreement have been duly authorized by the Board of Directors of
the New Bank. Subject to appropriate stockholder and regulatory
approvals, neither the execution and delivery of this Agreement
or the Merger
A-2<PAGE>
<PAGE>
Agreement nor the consummation of the transactions
provided for herein or therein will violate any agreement to
which the New Bank is a party or by which it is bound or any
law, order, decree, or any provision of its Articles of
Incorporation or By-laws.
5.4 ABSENCE OF LIABILITIES. Prior to the effective time
of the Merger, the New Bank will have engaged only in the
transactions contemplated by this Agreement and the Merger
Agreement, will have no material liabilities and will have
incurred no material obligations except in connection with its
performance of the transactions provided for in this Agreement
and in the Merger Agreement.
ARTICLE VI
COVENANTS OF THE HOLDING COMPANY
--------------------------------
The Holding Company agrees that between the date hereof and
the effective time of the Merger:
6.1 CAPITALIZATION OF THE NEW BANK. The Holding Company
shall purchase a total of 91,000 shares of Common Stock, par
value $1.00 per share, of the New Bank for $1.20 per share, and
shall cause the New Bank to do all things necessary to obtain a
charter as an interim national banking association, pursuant to
the Act, so as to permit the consummation of the Merger provided
for in the Merger Agreement. The Holding Company may also
purchase the subscription rights of the organizers of the New
Bank for the 9,000 shares of Common Stock issued to them in the
aggregate. Such shares of the organizers shall be purchased at
$1.20 per share.
6.2 APPROVAL OF MERGER. The Holding Company, as a
stockholder of the New Bank, shall approve this Agreement and
the Merger Agreement in accordance with applicable law.
6.3 ORGANIZATIONAL STOCK OPTION PLAN. The Holding Company
shall assume all of the Bank's obligations under the Bank's
Organizational Stock Option Plan and each outstanding option
thereunder shall become an option to purchase the same number of
shares of Holding Company Common Stock at the same exercise
price per share and on the same terms and conditions as before
the Merger. The Holding Company shall at all times reserve a
sufficient number of shares of Holding Company Common Stock to
fulfill its obligations under the Organizational Stock Option
Plan.
6.4 STOCK TRANSFER AGREEMENT. The Holding Company agrees
to be bound by and assume all of the obligations of the Bank
under the Stock Transfer Agreement by and among the Bank, the
Organizers of the Bank and each stockholder and place a legend
in the form specified on each certificate evidencing ownership
of shares of Holding Company Common Stock.
6.5 BEST EFFORTS. The Holding Company will use its best
efforts to take, or cause to be taken, all actions or do, or
cause to be done, all things necessary, proper or advisable
under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement and
the Merger Agreement, subject, however, to the requisite vote of
the stockholders of the Bank in accordance with the requirements
of the Act and applicable law.
ARTICLE VII
COVENANTS OF THE BANK
---------------------
The Bank agrees that between the date hereof and the
effective time of the Merger:
7.1 STOCKHOLDERS MEETING. The Bank shall submit this
Agreement and the Merger Agreement to the vote of its
stockholders, as provided by the Act and other applicable laws,
at the Annual Meeting of Stockholders to be held on or about
April 27, 1999, and any adjournment or postponement thereof.
A-3<PAGE>
<PAGE>
7.2 BEST EFFORTS. The Bank will use its best efforts to
take, or cause to be taken, all actions or do, or cause to be
done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the
transactions contemplated by this Agreement and the Merger
Agreement, subject, however, to the requisite vote of the
stockholders of the Bank in accordance with the requirements of
the Act and applicable law.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF THE PARTIES
----------------------------------------
The obligations of the parties to consummate this Agreement
and the Merger Agreement shall be subject to the following
conditions:
8.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF
COVENANTS. The representations and warranties and covenants
contained in Sections 3, 4, 5, 6, and 7 hereof shall be true as
of and at the effective time of the Merger, and each party shall
have performed all obligations required hereby to be performed
by it prior to the effective time of the Merger.
8.2 BANK STOCKHOLDER APPROVAL. The stockholders of the
Bank shall have duly approved this Agreement and the Merger
Agreement in accordance with applicable laws.
8.3 REGULATORY APPROVALS. Any federal or state regulatory
agency having jurisdiction (banking or otherwise), to the extent
that any consent or approval is required by applicable laws or
regulations for the consummation of this Agreement and the
Merger Agreement, shall have granted any necessary consent or
approval.
8.4 REGISTRATION STATEMENT. The Registration Statement on
Form S-4 (the "Registration Statement") filed by the Holding
Company, if required, under the Securities Act of 1933, as
amended, covering the shares of the Holding Company Common Stock
to be issued pursuant to the Merger Agreement shall have been
declared effective by the Securities and Exchange Commission;
and no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceeding
for that purpose shall have been initiated or, to the knowledge
of the Holding Company, shall be contemplated or threatened by
the Securities and Exchange Commission.
8.5 LITIGATION. There shall be no litigation or
proceeding pending or threatened for the purpose of enjoining,
restraining or preventing the consummation of the Merger, this
Agreement or the Merger Agreement or otherwise claiming that
such consummation is improper.
8.6 TAX OPINION. A tax opinion shall have been obtained
from Housley Kantarian & Bronstein, P.C., counsel to the Bank
that the conversion of the Bank Common Stock into the Holding
Company Common Stock will be tax free for federal income tax
purposes; provided, however, that the requirements of this
Section 8.6 may be waived by the affirmative vote of a majority
of the Board of Directors of each of the parties hereto.
ARTICLE IX
TERMINATION, WAIVER, AND AMENDMENT
----------------------------------
9.1 CIRCUMSTANCES OF TERMINATION. Anything herein or
elsewhere to the contrary notwithstanding, this Agreement and
the Merger Agreement may be terminated at any time before the
effective time of the Merger (whether before or after action
with respect thereto by the Bank's stockholders) only:
(a) by the mutual consent of the Board of Directors
of the Bank, the New Bank and the Holding Company evidenced
by an instrument in writing signed on behalf of each by any
two of their respective officers; or
(b) by the Board of Directors of the Bank if, in its
sole judgment, the Merger would be inadvisable because of
the number of stockholders of the Bank who perfect their
dissenter's rights in accordance with
A-4<PAGE>
<PAGE>
applicable law and the Merger Agreement, or if, in the sole
judgment of such Board, the Merger would not be in the best
interests of the Bank or its employees, depositors or
stockholders for any reason whatsoever.
9.2 EFFECT OF TERMINATION. In the event of the
termination and abandonment hereof, this Agreement and the
Merger Agreement shall become void and have no effect, without
any liability on the part of any of the parties, their
directors, officers or stockholders, except as set forth in
Section 10 hereof.
9.3 WAIVER. Any of the terms or conditions of this
Agreement and the Merger Agreement may be waived in writing at
any time by the Bank by action taken by its Board of Directors,
whether before or after action by the Bank's stockholders;
provided, however, that such action shall be taken only if, in
the judgment of the Board of Directors, such waiver will not
have a materially adverse effect on the benefits intended to be
granted hereunder to the stockholders of the Bank.
9.4 AMENDMENT. Anything herein or elsewhere to the
contrary notwithstanding, to the extent permitted by law, this
Agreement and the Merger Agreement may be amended at any time by
the affirmative vote of a majority of the Board of Directors of
each of the Bank, the Holding Company and the New Bank, whether
before or after action with respect thereto by the Bank's
stockholders and without further approval of such amendment by
the stockholders of the parties hereto; provided, however, that
Section 2.1 of this Agreement and Section 7 of the Merger
Agreement may not be amended after the meeting of the Bank's
stockholders referred to in Section 7.1 hereof except by the
vote of the Bank's stockholders required for the approval of the
Merger by such stockholders.
ARTICLE X
EXPENSES
--------
10.1 GENERAL. Each party hereto will pay its own expenses
incurred in connection with this Agreement and the Merger
Agreement, whether or not the transactions contemplated herein
are effected.
10.2 CAPITAL DISTRIBUTION. Upon the effective time of the
Merger, the surviving bank shall make a capital distribution to
the Holding Company in an amount equal to the sum of:
(a) the expenses of the Holding Company in connection
with the transactions contemplated herein, if any;
(b) the principal amount of any loan that the Holding
Company shall have obtained to purchase shares of Common
Stock of the New Bank as provided in 6.1 hereof; and
(c) the amount of any interest incurred by the
Holding Company on account of any loans obtained by it in
order to purchase shares of Common Stock of the New Bank as
provided in Section 6.1 hereof.
ARTICLE XI
MISCELLANEOUS
-------------
11.1 RESTRICTIONS ON AFFILIATES. The Holding Company may
cause stock certificates representing any shares issued to any
stockholder who may be deemed to be an affiliate of the Bank,
within the meaning of Rule 145 under the Securities Act of 1933,
as amended, to bear a legend setting forth any applicable
restrictions on transfer thereof under Rule 145 and may cause
stop-transfer orders to be entered with its transfer agent with
respect to any such certificates.
11.2 NO BROKERS. Each of the parties represents to the
other that it has not incurred and will not incur any liability
for brokerage fees or agents' commissions in connection with
this Agreement, the Merger Agreement and the transactions
contemplated hereby.
A-5<PAGE>
<PAGE>
11.3 RIGHT TO WITHHOLD DIVIDENDS. The Board of Directors
of the Holding Company reserves the right to withhold dividends
from any former stockholder of the Bank who fails to exchange
certificates representing the shares of the Bank for
certificates representing the shares of the Holding Company in
accordance with Section 7 of the Merger Agreement.
11.5 ENTIRE AGREEMENT. This Agreement (including the
Merger Agreement attached as an exhibit hereto) contains the
entire agreement among the parties with respect to the subject
matter hereof and supersedes all prior agreements, written or
oral, with respect thereto.
11.6 CAPTIONS. Descriptive headings are for convenience
only and shall not control or affect the meaning or construction
of any provisions of this Agreement or the Merger Agreement.
11.7 APPLICABLE LAW. This Agreement and the Merger
Agreement shall be governed by the laws of the Commonwealth of
Kentucky applicable to contracts executed in and to be performed
exclusively within the Commonwealth of Kentucky, regardless of
where they are executed.
11.8 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, and each such counterpart shall be
deemed to be an original instrument, but all such counterparts
together shall constitute but one agreement.
IN WITNESS WHEREOF, this Agreement has been executed as of
the day, month and year first above mentioned.
KENTUCKY NATIONAL BANCORP, INC.
By: /s/ Ronald J. Pence
---------------------------
Ronald J. Pence, President
KENTUCKY NATIONAL BANK
By: /s/ Ronald J. Pence
---------------------------
Ronald J. Pence, President
Kentucky National Interim Bank hereby agrees to and assumes
all of the obligations and agreements contained herein which
were agreed to and assumed on its behalf by Kentucky National
Bancorp, Inc.
Date:____________________
KENTUCKY NATIONAL INTERIM BANK
By: ____________________________
A-6<PAGE>
<PAGE>
EXHIBIT A-1
AGREEMENT TO MERGE
KENTUCKY NATIONAL BANK
WITH AND INTO, AND UNDER THE CHARTER OF,
KENTUCKY NATIONAL INTERIM BANK
UNDER THE TITLE OF "KENTUCKY NATIONAL BANK"
THIS AGREEMENT is made between KENTUCKY NATIONAL BANK
(hereinafter referred to as the "Bank"), a national banking
association located at 1000 North Dixie Avenue, City of
Elizabethtown, County of Hardin, in the Commonwealth of Kentucky
and KENTUCKY NATIONAL INTERIM BANK (hereinafter referred to as
the "New Bank"), a national banking association located at the
same address, and is JOINED IN AND assented to by KENTUCKY
NATIONAL BANCORP, INC., an Indiana corporation (hereinafter
referred to as the "Holding Company").
The Bank and the New Bank are banks duly organized under
the banking laws of the United States of America. As of
December 31, 1998, the Bank had capital stock issued and
outstanding in the amount of $240,000 (divided into 240,000
shares of common stock of the par value of $1.00 per share),
surplus of $_________ and undivided profits (including
unrealized gains on securities available for sale) of
$_____________.
The New Bank was organized on ______ __, 1999, and has
authorized capital stock in the amount of $1,000,000 (divided
into 1,000,000 shares of common stock of the par value of $1.00
per share). Immediately prior to the merger becoming effective,
100,000 shares of the New Bank shall be issued and outstanding
and the New Bank shall have a surplus in the amount of $20,000.
The merger hereby provided for shall hereinafter be called the
"Merger."
The Holding Company is a corporation duly organized under
the laws of the State of Indiana and has its principal office in
the City of Elizabethtown, County of Hardin, Commonwealth of
Kentucky. The Holding Company's authorized capital stock
consists of 6,000,000 shares of common stock, of the par value
of $.01 per share and 1,000,000 shares of preferred stock of the
par value of $.01 per share.
A majority of the Board of Directors of the Bank and a
majority of the Board of Directors of the New Bank have,
respectively, approved this Agreement and authorized its
execution. A majority of the Board of Directors of the Holding
Company has approved this Agreement, agreed that the Holding
Company shall join in and be bound by it, and authorized the
undertakings hereinafter made by the Holding Company.
This Agreement is and shall be deemed to be a plan of
reorganization within the meaning of Section 368 of the Internal
Revenue Code of 1986, as amended.
NOW, THEREFORE, in consideration of the premises, the Bank
and the New Bank, joined in by the Holding Company, hereby make
this Agreement prescribing the terms and conditions of merger of
the Bank and the New Bank as follows:
SECTION 1
The Bank shall be merged into the New Bank under the
Charter and Articles of Association of the New Bank pursuant to
the provisions of, and with the effect provided in, Section 2 of
Chapter 209 of the Act of Congress of November 7, 1918, as
amended (12 U.S.C. Section 215a).
A-1-1
<PAGE>
<PAGE>
SECTION 2
The name of the receiving association (hereinafter referred
to as the "Association") shall be "Kentucky National Bank" and
its charter number shall be 23434.
SECTION 3
The business of the Association shall be that of a national
banking association. This business shall be conducted by the
Association at its main office which shall be located at 1000
North Dixie Avenue, Elizabethtown, Kentucky, and its legally
established branches.
SECTION 4
The amount of capital stock of the Association shall be
$200,000 divided into 100,000 shares of common stock, each of
$1.00 par value, and at the time the Merger shall become
effective, the Association shall have a surplus of $_________,
and undivided profits, including capital reserves, which when
combined with the capital and surplus will be equal to the
combined capital structures of the merging banks as stated in
the preamble of this Agreement, adjusted, however, for normal
earnings and expenses between December 31, 1998, and the
effective time of the Merger.
SECTION 5
(a) Upon the Merger becoming effective, the corporate
existence of the Bank and the New Bank shall, as provided by the
aforementioned Act of Congress, be merged into and continued in
the Association, and the Association shall be deemed to be the
same corporation as the Bank and the New Bank. All rights,
franchises, and interests of the Bank and the New Bank,
respectively, in and to every type of property (real, personal,
and mixed) and chooses in action shall be transferred to and
vested in the Association by virtue of such Merger without any
deed or other transfer, and the Association, without any order
or action on the part of any court or otherwise, shall hold and
enjoy all rights of property, franchises, and interests,
including appointments, designations, and nominations, and all
other rights and interests as trustee, executor, administrator,
registrar of stocks and bonds, guardian of estates and persons,
assignee, receiver, and in every other fiduciary capacity, in
the same manner and to the same extent as such rights,
franchises, and interests were held or enjoyed by the
Bank and the New Bank, respectively, at the time the Merger
becomes effective. Thereafter, the Association shall engage in
the business of a national banking association at the main
office and the legally established and approved branches of the
Bank.
(b) Upon the Merger becoming effective, the Association
shall be liable for all liabilities of the Bank; and all
liabilities, obligations, and contracts of the Bank and of the
New Bank, respectively, matured or unmatured, whether accrued,
absolute, contingent, or otherwise, and whether or not reflected
or reserved against on balance sheets, books of account, or
records of the Bank or the New Bank, as the case may be, shall
be those of the Association, and shall not be released or
impaired by the merger, and all rights of creditors and other
obligees and all liens on property of either the Bank or the New
Bank shall be preserved unimpaired.
SECTION 6
This Agreement shall be submitted to the stockholders of
the Bank and the New Bank for ratification and confirmation at
meetings to be called and held in accordance with the applicable
provisions of law and their respective Articles of Association
and By-laws. The Bank and the New Bank shall proceed
expeditiously and cooperate fully in the procurement of any
other consents and approvals and in the taking of any other
action, and the satisfaction of all other requirements
prescribed by law or otherwise, necessary for consummation of
the Merger on the terms herein provided including, without being
limited to, the preparation and submission of an application to
the Comptroller of the Currency of the United States for
approval of the merger under the provisions of Section 18(c)
of the Federal Deposit Insurance Act, as amended (12 U.S.C.
Section 1828(c)) and Section 215a of Title 12 United States
Code.
A-1-2
<PAGE>
<PAGE>
SECTION 7
Upon the merger becoming effective:
(a) Each share of the common stock of the Bank (other than
shares as to which dissenters' rights of appraisal have been
elected and perfected in accordance with Section 11 hereof and
applicable law) shall, by virtue of this Agreement and without
any action on the part of the holder thereof, be converted into
and become one share of the common stock of the Holding Company,
and outstanding certificates representing shares of common
stock, par value $1.00 per share, of the Bank shall thereafter
represent shares of common stock, par value $0.01 per share, of
the Holding Company. Each holder of any such shares of the Bank
which shall have been so converted into common stock of the
Holding Company, shall, upon surrender in proper form to the
Association for cancellation of one or more stock certificates
(hereinafter called "Old Certificates") which, prior to the
merger becoming effective, represented common stock of the Bank,
be entitled to receive as evidence of the shares so converted
one or more stock certificates (hereinafter called "New
Certificates") bearing the name of the Holding Company as
issuer, for the number of shares of Holding Company represented
by such Old Certificates when surrendered. Until so surrendered,
each Old Certificate shall be deemed, for all corporate
purposes, to evidence the ownership of the number of shares of
common stock of the Holding Company which the holder thereof
would be entitled to receive upon its surrender, except that
Holding Company may withhold, from the holder of shares
represented by such Old Certificates, distribution of any or all
dividends declared by the Holding Company on such shares until
such time as such Old Certificate shall be surrendered in
exchange for one or more New Certificates, at which time
dividends so withheld by the Holding Company with respect to
such shares shall be delivered, without interest thereon, to the
stockholder to whom such New Certificates are issued.
(b) The amount, and the number of shares, of common stock
of the New Bank outstanding immediately before the merger
becomes effective (specifically $200,000 divided into 200,000
shares of the par value of $1.00 each) shall be the amount and
the number of shares of the common stock of the Association
outstanding upon the completion of the merger.
(c) No cash shall be allocated to stockholders of the Bank
(except as to those stockholders who elect to dissent from the
plan of merger as provided in Section 11 hereof) or to any other
person, firm, or corporation, and stock shall be allocated as
follows:
(i) To stockholders of the Bank of record at the time
the Merger becomes effective there shall be allocated one
share of common stock of the Holding Company for each one
share of common stock of the Bank held of record at the
time of the Merger; and
(ii) To the Holding Company there shall be allocated
the amount, and the number of shares, of common stock of
the Association of the par value of $1.00 per share, which
shall be equal to the amount, and the number of shares, of
common stock of the Bank outstanding immediately before the
Merger.
(d) The Holding Company shall assume all of the
obligations of the Bank under the stock options outstanding to
the extent that such options remain unexercised on the effective
date of the Merger of the Bank and the New Bank. Option holders
shall receive options to purchase the same number of shares at
the same option exercise price that the option held had such
option been exercised prior to the Merger.
(e) The shares of the capital stock of the New Bank issued
and outstanding at the time of the Merger shall continue to be
issued and outstanding shares of the Association.
<PAGE>
SECTION 8
Neither of the banks shall declare or pay any dividend to
its stockholders between the date of this Agreement and the time
at which the Merger shall become effective, except in the
ordinary course of business, nor dispose of any of its assets in
any other manner except in the normal course of business and for
adequate value.
A-1-3
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SECTION 9
The present Board of Directors of the Bank shall continue
to serve as the Board of Directors of the Association until the
next annual meeting or until such time as their successors have
been elected and have qualified.
SECTION 10
Effective as of the time this Merger shall become effective
as specified in the "Certificate Approving Merger" to be issued
by the Comptroller of the Currency, the Articles of Association
of the Association shall read in their entirety as provided in
Exhibit A hereto. The By-Laws of the Association shall be the
By-Laws of the Bank.
SECTION 11
Any stockholder of the Bank who shall have voted against
the Merger at the meeting of the stockholders of the Bank held
for the purpose set forth in Section 6 of this Agreement or who
shall have given notice in writing at or prior to such meeting
to the presiding officer that he dissents from the plan of
merger, shall be entitled to receive the value of the shares so
held by him when the Merger shall be approved by the Comptroller
of the Currency upon written request made to the Association at
any time before 30 days after the date of consummation of the
Merger, accompanied by the surrender of his stock certificates.
The value of the shares of any dissenting stockholder shall be
ascertained, as of the effective date of the Merger, by an
appraisal made by a committee of three persons, composed of (1)
one selected by the vote of the holders of the majority of the
stock, the owners of which are entitled to payment in cash (by
reason of such dissent and request for appraisal); (2) one
selected by the directors of the Association; and (3) one
selected by the two so selected. The valuation agreed upon by
any two of the three appraisers shall govern. If the value so
fixed shall not be satisfactory to any dissenting stockholder
who has requested payment, that stockholder may, within five
days after being notified of the appraised value of such shares,
appeal to the Comptroller of the Currency, who shall cause a
reappraisal to be made which shall be final and binding as to
the value of the shares of the appellant. If within 90 days from
the date of consummation of the Merger, for any reason
one or more of the appraisers is not selected as herein
provided, or the appraisers fail to determine the value of such
shares, the Comptroller of the Currency shall upon written
request of any interested party cause an appraisal to be made
which shall be final and binding on all parties. The expenses of
the Comptroller of the Currency in making the reappraisal or the
appraisal, as the case may be, shall be paid by the Association.
The value of the shares ascertained shall be promptly paid to
the dissenting stockholders by the Association.
SECTION 12
Effectuation of the Merger herein provided for is
conditional upon:
(a) Ratification and confirmation of this Agreement
by vote of the stockholders of the Bank and the New Bank as
required by law;
(b) The approval of the Office of the Comptroller of
the Currency of the merger herein provided for; and
(c) Procurement of all other consents and approvals,
and satisfaction of all other requirements prescribed by
law, which are necessary for consummation of the merger.
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SECTION 13
In the event that:
(a) The number of shares of capital stock of the Bank
voted against the Merger, or in respect of which written
notice is given purporting to dissent from the Merger,
shall make consummation of the Merger unwise in the opinion
of either the Board of Directors of the Bank or the Board
of Directors of the New Bank; or
(b) Any action, suit, proceeding, or claim has been
instituted, made or threatened relating to the proposed
merger which shall make consummation of the Merger
inadvisable in the opinion of either the Board of Directors
of the Bank or the Board of Directors of the New Bank; or
(c) Any action, consent or approval, governmental,
or otherwise, which is, or in the opinion of counsel for
the Bank may be, necessary to permit or enable the
Association, upon and after the Merger, to conduct all or
any part of the business and activities of the Bank up to
the time of the Merger, in the manner in which such
activities and business are then conducted, shall not have
been obtained; or
(d) For any other reason consummation of the merger
is inadvisable in the opinion of the respective Boards of
Directors of both the Bank and the New Bank; then this
Agreement may be terminated at any time before the merger
becomes effective by written notice by either the Bank or
the New Bank to the other of them, authorized or approved
by resolution adopted by the Board of Directors of the one
of them giving such notice. Upon termination by written
notice as provided in this Section 13, this Agreement shall
be void and of no further effect, and there shall be no
liability by reason of this Agreement or the termination
thereof on the part of the Bank, the New Bank, Holding
Company or the directors, officers, employees, agents or
stockholders, or any of them.
SECTION 14
Subject to the terms of and upon satisfaction of all
requirements of law and the conditions specified in this
Agreement, including, among other conditions, receipt of the
approval of the Comptroller of the Currency specified in the Act
of Congress referred to in Section l of this Agreement, the
merger shall become effective at the time specified in the
certificate to be issued by the Comptroller of the Currency
under the seal of his office approving the merger.
A-1-5<PAGE>
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WITNESS, the signature and seals of said merging banks this
____ day of _________, 1999, each hereunto set by its President
and attested by its Cashier, pursuant to a resolution of its
Board of Directors, acting by a majority thereof, and witness
the signatures hereto of a majority of each of said Boards of
Directors:
ATTEST: KENTUCKY NATIONAL BANK
(SEAL)
By: _______________________ By: ___________________________
Cashier Ronald J. Pence, President
ATTEST: KENTUCKY NATIONAL INTERIM BANK
(SEAL)
By: _______________________ By: ____________________________
Cashier Ronald J. Pence, President
* * * * *
Kentucky National Bancorp, Inc. hereby joins in and assents
to the foregoing Agreement, undertakes that it will be bound
thereby and that it will do and perform all acts and things
therein referred to or provided to be done by it.
IN WITNESS WHEREOF, Kentucky National Bancorp, Inc. has
caused this undertaking to be executed by its duly authorized
officer and its corporate seal to be hereunto affixed this ___
day of __________, 1999.
KENTUCKY NATIONAL BANCORP, INC.
By: __________________________
Ronald J. Pence, President
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Exhibit B
ARTICLES OF INCORPORATION
OF
KENTUCKY NATIONAL BANCORP, INC.
ARTICLE I
NAME
The name of the corporation is Kentucky National Bancorp,
Inc. (the "Corporation") and the address of the initial
principal office of the Corporation is 1000 North Dixie Avenue,
Elizabethtown, Kentucky 42701.
ARTICLE II
REGISTERED OFFICE
The address of the Corporation's registered office is One
North Capitol Avenue, in the City of Indianapolis, in the County
of Marion, in the State of Indiana. The name of the
Corporation's registered agent at the registered office is CT
Corporation System.
ARTICLE III
POWERS
The purpose for which the Corporation is organized is to
act as a bank holding company and to transact all other lawful
business for which corporations may be incorporated pursuant to
the laws of Indiana. The Corporation shall have all the powers
of a corporation organized under said laws.
ARTICLE IV
TERM
The Corporation is to have perpetual existence.
ARTICLE V
INCORPORATOR
The name and street address of the incorporator are as
follows:
NAME STREET ADDRESS
---- --------------
Ronald J. Pence 1000 North Dixie Avenue
Elizabethtown, Kentucky 42701
B-1
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ARTICLE VI
INITIAL DIRECTORS
The number of directors constituting the initial board of
directors of the Corporation is nine, and the names and
addresses of the persons who are to serve as directors until
their successors are elected and qualified are:
NAME STREET ADDRESS
---- --------------
Dr. Robert Earl Robbins 1000 North Dixie Avenue
Elizabethtown, Kentucky 42701
Lawrence P. Calvert 1000 North Dixie Avenue
Elizabethtown, Kentucky 42701
Ronald J. Pence 1000 North Dixie Avenue
Elizabethtown, Kentucky 42701
Leonard Allen McNutt 1000 North Dixie Avenue
Elizabethtown, Kentucky 42701
Lois Watkins Gray 1000 North Dixie Avenue
Elizabethtown, Kentucky 42701
Kevin D. Addington 1000 North Dixie Avenue
Elizabethtown, Kentucky 42701
William R. Hawkins 1000 North Dixie Avenue
Elizabethtown, Kentucky 42701
Dr. Christopher G. Knight 1000 North Dixie Avenue
Elizabethtown, Kentucky 42701
Henry Lee Chitwood 1000 North Dixie Avenue
Elizabethtown, Kentucky 42701
ARTICLE VII
CAPITAL STOCK
The aggregate number of shares of all classes of capital
stock that the Corporation has authority to issue is 6,000,000,
of which 5,000,000 are to be shares of common stock, $.01 par
value per share, and of which 1,000,000 are to be shares of
serial preferred stock, $.01 par value per share. The shares
may be issued by the Corporation from time to time as approved
by the board of directors of the Corporation without the
approval of the shareholders, except as otherwise provided in
this Article VII. The consideration for the issuance of the
shares shall be paid to or received by the Corporation in full
before their issuance and shall not be less than the par value
per share. The board of directors may authorize shares to be
issued for consideration consisting of any tangible or
intangible property or benefit to the Corporation, including
cash, promissory notes, services performed, contracts for
services to be performed, or other securities of the
Corporation. In the absence of actual fraud in the transaction,
the judgment of the board of directors as to the adequacy of
such consideration shall be conclusive. Upon payment of such
consideration such shares shall be deemed to be fully paid and
nonassessable. In the case of a stock dividend, the part of the
surplus of the Corporation which is transferred to stated
capital upon the issuance of shares as a stock dividend shall be
deemed to be the consideration for their issuance.
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A description of the different classes and series (if any)
of the Corporation's capital stock, and a statement of the
relative powers, designations, preferences and rights of the
shares of each class and series (if any) of capital stock and
the qualifications, limitations or restrictions thereof, are as
follows:
A. COMMON STOCK. Except as otherwise provided in these
Articles of Incorporation or by Indiana law, the holders of the
common stock shall exclusively possess all voting power. Each
holder of shares of common stock shall be entitled to one vote
for each share held by such holder.
Whenever there shall have been paid, or declared and set
aside for payment, to the holders of the outstanding shares of
any class of stock having preference over the common stock as to
the payment of dividends, the full amount of dividends and
sinking fund or retirement fund or other retirement payments, if
any, to which such holders are respectively entitled in
preference to the common stock, then dividends may be paid on
the common stock, and on any class or series of stock entitled
to participate therewith as to dividends, out of any assets
legally available for the payment of dividends, but only when
and as declared by the board of directors of the Corporation.
In the event of any liquidation, dissolution or winding up
of the Corporation, after there shall have been paid, or
declared and set aside for payment, to the holders of the
outstanding shares of any class having preference over the
common stock in any such event, the full preferential amounts to
which they are respectively entitled, the holders of the common
stock and of any class or series of stock entitled to
participate therewith, in whole or in part, as to distribution
of assets shall be entitled, after payment or provision for
payment of all debts and liabilities of the Corporation, to
receive the remaining assets of the Corporation available for
distribution, in cash or in kind.
Each share of common stock shall have the same relative
powers, preferences and rights as, and shall be identical in all
respects with, all the other shares of common stock of the
Corporation.
B. SERIAL PREFERRED STOCK. Except as otherwise provided in
these Articles of Incorporation, the board of directors of the
Corporation is further authorized, by resolution or resolutions
from time to time adopted without shareholder action and by
filing articles of amendment with the Secretary of State of
Indiana, to provide for the issuance of serial preferred stock
in series and to fix and state the powers, designations,
preferences and relative, participating, optional or other
special rights of the shares of each such series, and the
qualifications, limitations or restrictions thereof, including,
but not limited to determination of any of the following:
1. the distinctive serial designation and the number of
shares constituting such series; and
2. the dividend rates or the amount of dividends to be paid
on the shares of such series, whether dividends shall be
cumulative and, if so, from which date or dates, the payment
date or dates for dividends, and the participating or other
special rights, if any, with respect to dividends; and
3. the voting powers, full or limited, if any, of the
shares of such series; and
4. whether the shares of such series shall be redeemable
and, if so, the price or prices at which, and the terms and
conditions upon which such shares may be redeemed; and
5. the amount or amounts payable upon the shares of such
series in the event of voluntary or involuntary liquidation,
dissolution or winding up of the Corporation; and
6. whether the shares of such series shall be entitled to
the benefits of a sinking or retirement fund to be applied to
the purchase or redemption of such shares, and, if so entitled,
the amount of such fund and the manner of its application,
including the price or prices at which such shares may be
redeemed or purchased through the application of such funds; and
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7. whether the shares of such series shall be convertible
into, or exchangeable for, shares of any other class or classes
or any other series of the same or any other class or classes of
stock of the Corporation and, if so convertible or exchangeable,
the conversion price or prices, or the rate or rates of
exchange, and the adjustments thereof, if any, at which such
conversion or exchange may be made, and any other terms and
conditions of such conversion or exchange; and
8. the subscription or purchase price and form of
consideration for which the shares of such series shall be
issued; and
9. whether the shares of such series which are redeemed or
converted shall have the status of authorized but unissued
shares of serial preferred stock and whether such shares may be
reissued as shares of the same or any other series of serial
preferred stock.
Each share of each series of serial preferred stock shall
have the same relative powers, preferences and rights as, and
shall be identical in all respects with, all the other shares of
the Corporation of the same series.
ARTICLE VIII
PREEMPTIVE RIGHTS
No holder of any of the shares of any class or series of
stock or of options, warrants or other rights to purchase shares
of any class or series of stock or of other securities of the
Corporation shall have any preemptive right to purchase or
subscribe for any unissued stock of any class or series, or any
unissued bonds, certificates of indebtedness, debentures or
other securities convertible into or exchangeable for stock of
any class or series or carrying any right to purchase stock of
any class or series; but any such unissued stock, bonds,
certificates of indebtedness, debentures or other securities
convertible into or exchangeable for stock or carrying any right
to purchase stock may be issued pursuant to resolution of the
board of directors of the Corporation to such persons, firms,
corporations or associations, whether or not holders thereof,
and upon such terms as may be deemed advisable by the board of
directors in the exercise of its sole discretion.
ARTICLE IX
REPURCHASE OF SHARES
The Corporation may from time to time, pursuant to
authorization by the board of directors of the Corporation and
without action by the shareholders, purchase or otherwise
acquire shares of any class, bonds, debentures, notes, scrip,
warrants, obligations, evidences of indebtedness, or other
securities of the Corporation in such manner, upon such terms,
and in such amounts as the board of directors shall determine;
subject, however, to such limitations or restrictions, if any,
as are contained in the express terms of any class of shares of
the Corporation outstanding at the time of the purchase or
acquisition in question or as are imposed by law or regulation.
Any shares of capital stock so acquired may either be held in
treasury or treated as authorized but unissued shares as
determined by the board of directors.
B-4<PAGE>
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ARTICLE X
MEETINGS OF SHAREHOLDERS; NO CUMULATIVE VOTING
A. Except as otherwise required by law, notwithstanding any
other provision of these Articles of Incorporation or the Bylaws
of the Corporation, no action required to be taken or which may
be taken at any annual or special meeting of the shareholders of
the Corporation may be taken without a meeting, except any
action required or permitted to be taken at a shareholders'
meeting may be taken without a meeting if the action is taken by
all the shareholders entitled to vote on the action and the
action is evidenced by one or more written consents describing
the action taken, signed by all the shareholders entitled to
vote on the action and delivered to the Corporation.
B. Special meetings of the shareholders of the Corporation
for any purpose or purposes may be called at any time by the
board of directors of the Corporation, by a committee of the
board of directors which has been duly designated by the board
of directors and whose powers and authorities, as provided in a
resolution of the board of directors or in the Bylaws of the
Corporation, include the power and authority to call such
meetings, by the chairman of the board of directors or by the
President of the Corporation, but such special meetings may not
be called by any other person or persons, except as otherwise
provided in the Bylaws of the Corporation or required by law.
C. Meetings of shareholders may be held within or without
the State of Indiana, as the Bylaws may provide.
D. There shall be no cumulative voting by shareholders of
any class or series in the election of directors of the
Corporation.
ARTICLE XI
NOTICE FOR NOMINATIONS AND PROPOSALS
A. Nominations for the election of directors and proposals
for any new business to be taken up at any annual meeting of
shareholders may be made by the board of directors of the
Corporation or by any shareholder of the Corporation entitled to
vote generally in the election of directors. In order for a
shareholder of the Corporation to make any such nominations or
proposals, he or she shall give notice thereof in writing,
delivered or mailed by first class United States mail, postage
prepaid, to the Secretary of the Corporation not less than
thirty days nor more than sixty days prior to any such meeting;
provided, however, that if less than thirty-one days' notice of
the meeting is given to shareholders, such written notice shall
be delivered or mailed, as prescribed, to the Secretary of the
Corporation not later than the close of the tenth day following
the day on which notice of the meeting was mailed to
shareholders. Each such notice given by a shareholder with
respect to nominations for the election of directors shall set
forth (i) the name, age, business address and, if known,
residence address of each nominee proposed in such notice, (ii)
the principal occupation or employment of each such nominee,
(iii) the number of shares of stock of the Corporation which are
beneficially owned by each such nominee, (iv) such other
information as would be required to be included in a proxy
statement soliciting proxies for the election of the proposed
nominee pursuant to Regulation 14A of the Securities Exchange
Act of 1934, as amended, and (v) as to the shareholder giving
such notice (A) his name and address as they appear on the
Corporation's books, and (B) the class and number of shares of
the Corporation which are beneficially owned by such
shareholder. In addition, the shareholder making such
nomination shall promptly provide any other information
reasonably requested by the Corporation.
B. Each such notice given by a shareholder to the Secretary
with respect to business proposals to bring before a meeting
shall set forth in writing as to each matter: (i) a brief
description of the business desired to be brought before the
meeting and the reasons for conducting such business at the
meeting; (ii) the name and address, as they appear on the
Corporation's books, of the shareholder proposing such business;
(iii) the class and number of shares of the Corporation which
are beneficially owned by the shareholder; and (iv) any material
interest of the shareholder in such
B-5<PAGE>
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business. Notwithstanding anything in these Articles of
Incorporation to the contrary, no business submitted by
shareholders shall be conducted at the meeting except in
accordance with the procedures set forth in this Article XI.
C. The Chairman of the annual meeting of shareholders may,
if the facts warrant, determine and declare to such meeting that
a nomination or proposal was not made in accordance with the
foregoing procedure, and, if he should so determine, he shall so
declare to the meeting and the defective nomination or proposal
shall be disregarded.
ARTICLE XII
DIRECTORS
A. NUMBER; VACANCIES. The number of directors of the
Corporation shall be such number, not less than 7 nor more than
15 (exclusive of directors, if any, to be elected by holders of
preferred stock of the Corporation, voting separately as a
class), as shall be provided from time to time in or in
accordance with the Bylaws, provided that no decrease in the
number of directors shall have the effect of shortening the term
of any incumbent director, and provided further that no action
shall be taken to decrease or increase the number of directors
from time to time unless at least two-thirds of the directors
then in office shall concur in said action. Vacancies in the
board of directors of the Corporation, however caused, and newly
created directorships shall be filled by a vote of a majority of
the directors then in office, whether or not a quorum, and any
director so chosen shall hold office for a term expiring at the
annual meeting of shareholders at which the term of the group to
which the director has been chosen expires and when the
director's successor is elected and qualified. Directors
need not be residents of any particular state, country or other
jurisdiction.
B. STAGGERED BOARD. The board of directors of the
Corporation shall be divided into three groups of directors
which shall be designated Group I, Group II and Group III. The
members of each group shall be elected for a term of three years
and until their successors are elected and qualified. Such
groups shall be as nearly equal in number as the then total
number of directors constituting the entire board of directors
shall permit, with the terms of office of all members of one
group expiring each year. Should the number of directors not be
equally divisible by three, the excess director or directors
shall be assigned to Group I or II as follows: (i) if there
shall be an excess of one directorship over a number equally
divisible by three, such extra directorship shall be placed in
Group I; and (ii) if there be an excess of two directorships
over a number equally divisible by three, one shall be placed in
Group I and the other in Group II. At the first meeting of
shareholders at which directors are elected, directors of Group
I shall be elected to hold office for a term expiring at the
first succeeding annual meeting thereafter; directors of Group
II shall be elected to hold office for a term expiring at the
second succeeding annual meeting thereafter; and directors of
Group III shall be elected to hold office for a term expiring at
the third succeeding annual meeting thereafter. Thereafter, at
each succeeding annual meeting, directors of each group shall be
elected for three year terms. Notwithstanding the foregoing,
the director whose term shall expire at any annual meeting shall
continue to serve until such time as his successor shall have
been duly elected and shall have qualified unless his position
on the board of directors shall have been abolished by action
taken to reduce the size of the board of directors prior to said
meeting.
Should the number of directors of the Corporation be
reduced, the directorship(s) eliminated shall be allocated among
groups as appropriate so that the number of directors in each
group is as specified in the immediately preceding paragraph.
The board of directors shall designate, by the name of the
incumbent(s), the position(s) to be abolished. Notwithstanding
the foregoing, no decrease in the number of directors shall have
the effect of shortening the term of any incumbent director.
Should the number of directors of the Corporation be increased,
the additional directorships shall be allocated among groups as
appropriate so that the number of directors in each group is as
specified in the immediately preceding paragraph.
Whenever the holders of any one or more series of preferred
stock of the Corporation shall have the right, voting separately
as a class, to elect one or more directors of the Corporation,
the board of directors shall consist of ]said directors so
elected in addition to the number of directors fixed as provided
above in this Article XII. Notwithstanding
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the foregoing, and except as otherwise may be required by law,
whenever the holders of any one or more series of preferred
stock of the Corporation shall have the right, voting separately
as a class, to elect one or more directors of the Corporation,
the terms of the director or directors elected by such holders
shall expire at the next succeeding annual meeting of
shareholders.
ARTICLE XIII
REMOVAL OF DIRECTORS
Notwithstanding any other provision of these Articles of
Incorporation or the Bylaws of the Corporation, any director or
directors or the entire board of directors of the Corporation
may be removed only for cause and only by the affirmative vote
of the holders of at least eighty percent (80%) of the shares of
capital stock outstanding and eligible to vote in election of
directors. Notwithstanding the foregoing, whenever the holders
of any one or more series of preferred stock of the Corporation
shall have the right, voting separately as a class, to elect one
or more directors of the Corporation, the preceding provisions
of this Article XIII shall not apply with respect to the
director or directors elected by such holders of preferred stock
and such director or directors may only be removed for cause by
the affirmative vote of the holders of two-thirds of such
series, voting separately as a class.
ARTICLE XIV
RESTRICTIONS ON VOTING RIGHTS OF CERTAIN HOLDERS
(A) RESTRICTION ON VOTING RIGHTS OF CERTAIN HOLDERS. If,
at any time, any person shall acquire the beneficial ownership
of more than ten percent (10%) of any class of equity security
of the Corporation without the prior approval by a two-thirds
vote of the Continuing Directors, as defined in Article XV of
these Articles of Incorporation, then the record holders of
voting stock of the Corporation beneficially owned by such
acquiring person shall have only the voting rights set forth in
this Section (A) on any matter requiring their vote or consent.
With respect to each vote in excess of 10% of the voting power
of the outstanding shares of voting stock of the Corporation
which such record holders would otherwise be entitled to cast
without giving effect to this Section (A), such record holders
in the aggregate shall be entitled to cast only one-hundredth
(1/100th) of a vote, and the aggregate voting power of such
record holders, so limited for all shares of voting stock of the
Corporation beneficially owned by such acquiring person, shall
be allocated proportionately among such record holders. For
each such record holder, this allocation shall be accomplished
by multiplying the aggregate voting power, as so limited, of the
outstanding shares of voting stock of the Corporation
beneficially owned by such acquiring person by a fraction whose
numerator is the number of votes represented by the shares of
voting stock of the Corporation owned of record by such record
holder (and which are beneficially owned by such acquiring
person) and whose denominator is the total number of votes
represented by the shares of voting stock of the Corporation
that are beneficially owned by such acquiring person. A person
who is a record owner of shares of voting stock of the
Corporation that are beneficially owned simultaneously by more
than one person shall have, with respect to such shares, the
right to cast the least number of votes that such person would
be entitled to cast under this Section (A) by virtue of such
shares being so beneficially owned by any of such acquiring
persons.
(B) DEFINITIONS. The term "person" means an individual,
a group acting in concert, a corporation, a partnership, an
association, a joint stock company, a trust, an unincorporated
organization or similar company, a syndicate or any other group
acting in concert formed for the purpose of acquiring, holding
or disposing of securities of the Corporation. The term
"acquire" includes every type of acquisition, whether effected
by purchase, exchange, operation of law or otherwise. The term
"offer" includes every offer to buy or otherwise acquire,
solicitation of an offer to sell, tender offer for or request
for invitation for tenders of, a security or interest in a
security for value. The term "acting in concert" includes: (1)
knowing participation in a joint activity or conscious parallel
action towards a common goal whether or not pursuant to an
express agreement; and (2) a combination or pooling of voting or
other interests in
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the Corporation's outstanding shares for a common purpose
pursuant to any contract, understanding, relationship, agreement
or other arrangement, whether written or otherwise. The term
"beneficial ownership" shall have the meaning defined in Rule
13d-3 of the General Rules and Regulations under the Securities
Exchange Act of 1934.
(C) EXCLUSION FOR UNDERWRITERS, EMPLOYEE BENEFIT PLANS AND
CERTAIN PROXIES. The restrictions contained in this Article XIV
shall not apply to: (1) any underwriter or member of an
underwriting or selling group involving a public sale or resale
of securities of the Corporation or a subsidiary thereof;
provided, however, that upon completion of the sale or resale of
such securities, no such underwriter or member of such selling
group is a beneficial owner of more than ten percent (10%) of
any class of equity security of the Corporation; (2) any proxy
granted to one or more Continuing Directors, as defined in
Article XV of these Articles of Incorporation, by a shareholder
of the Corporation; or (3) any employee benefit plans of the
Corporation or a subsidiary thereof. In addition, the
Continuing Directors, as defined in Article XV of these Articles
of Incorporation, the officers and employees of the Corporation
and its subsidiaries, the directors of subsidiaries of the
Corporation, the employee benefit plans of the Corporation and
its subsidiaries, entities organized or established by the
Corporation or any subsidiary thereof pursuant to the terms of
such plans and trustees and fiduciaries with respect to such
plans acting in such capacity shall not be deemed to be a group
with respect to their beneficial ownership of voting stock of
the Corporation solely by virtue of their being directors,
officers or employees of the Corporation or a subsidiary thereof
or by virtue of the Continuing Directors, as defined in Article
XV of these Articles of Incorporation, the officers and
employees of the Corporation and its subsidiaries and the
directors of subsidiaries of the Corporation being fiduciaries
or beneficiaries of an employee benefit plan of the Corporation
or a subsidiary of the Corporation. Notwithstanding the
foregoing, no director, officer or employee of the Corporation
or any of its subsidiaries, or group of any of them, shall be
exempt from the provisions of this Article XIV should any such
person or group become a beneficial owner of more than ten
percent (10%) of any class of equity security of the
Corporation.
(D) DETERMINATIONS. A majority of the Continuing
Directors, as defined in Article XV of these Articles of
Incorporation, shall have the power to construe and apply the
provisions of this Article XIV and to make all determinations
necessary or desirable to implement such provisions, including
but not limited to matters with respect to: (1) the number of
shares beneficially owned by any person; (2) whether a person
has an agreement, arrangement or understanding with another as
to the matters referred to in the definition of beneficial
ownership; (3) the application of any other definition or
operative provision of this Article XIV to the given facts; or
(4) any other matter relating to the applicability or effect of
this Article XIV. Any constructions, applications or
determinations made by the Continuing Directors, as defined in
Article XV of these Articles of Incorporation, pursuant to this
Article XIV in good faith and on the basis of such information
and assistance as was then reasonably available for such purpose
shall be conclusive and binding upon the Corporation and its
shareholders.
ARTICLE XV
APPROVAL OF CERTAIN BUSINESS COMBINATIONS
The shareholder vote required to approve Business
Combinations (as hereinafter defined) shall be as set forth in
this Article XV.
A. (1) Except as otherwise expressly provided in this
Article XV, the affirmative vote of the holders of (i) at least
eighty percent (80%) of the outstanding shares entitled to vote
thereon (and, if any class or series of shares is entitled to
vote thereon separately, the affirmative vote of the holders of
at least eighty percent of the outstanding shares of each such
class or series), and (ii) at least a majority of the
outstanding shares entitled to vote thereon, not including
shares deemed beneficially owned by a Related Person (as
hereinafter defined), shall be required in order to authorize
any of the following:
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(a) any merger or consolidation of the
Corporation with or into a Related Person (as hereinafter
defined);
(b) any sale, lease, exchange, transfer or other
disposition, including without limitation, a mortgage, or any
other security device, of all or any Substantial Part (as
hereinafter defined) of the assets of the Corporation (including
without limitation any voting securities of a subsidiary) or of
a subsidiary, to a Related Person;
(c) any merger or consolidation of a Related
Person with or into the Corporation or a subsidiary of the
Corporation;
(d) any sale, lease, exchange, transfer or other
disposition of all or any Substantial Part of the assets of a
Related Person to the Corporation or a subsidiary of the
Corporation;
(e) the issuance of any securities of the
Corporation or a subsidiary of the Corporation to a Related
Person;
(f) the acquisition by the Corporation or a
subsidiary of the Corporation of any securities of a Related
Person;
(g) any reclassification of the common stock of
the Corporation, or any recapitalization involving the common
stock of the Corporation; and
(h) any agreement, contract or other arrangement
providing for any of the transactions described in this Article
XV.
(2) Such affirmative vote shall be required
notwithstanding any other provision of these Articles of
Incorporation, any provision of law or any agreement with any
regulatory agency or national securities exchange which might
otherwise permit a lesser vote or no vote.
(3) The term "Business Combination" as used in this
Article XIV shall mean any transaction which is referred to in
any one or more of clauses (a) through (h).
B. The provisions of paragraph A shall not be applicable
to any particular Business Combination, and such Business
Combination shall require only such affirmative vote as is
required by any other provision of these Articles of
Incorporation, any provision of law or any agreement with any
regulatory agency or national securities exchange, if the
Business Combination shall have been approved by a majority of
the Continuing Directors (as hereinafter defined); provided,
however, that such approval shall only be effective if obtained
at a meeting at which a Continuing Director Quorum (as
hereinafter defined) is present.
C. For the purposes of this Article XV the following
definitions apply:
(1) The term "Related Person" shall mean and include
(a) any individual, corporation, partnership or other person or
entity which together with its "affiliates" (as that term is
defined in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934), "beneficially owns" (as
that term is defined in Rule 13d-3 of the General Rules and
Regulations under the Securities Act of 1934) in the aggregate
ten percent (10%) or more of the outstanding shares of the
common stock of the Corporation; and (b) any "affiliate" (as
that term is defined in Rule 12b-2 under the Securities Exchange
Act of 1934) of any such individual, corporation, partnership or
other person or entity. Without limitation, any shares of the
common stock of the Corporation which any Related Person has the
right to acquire pursuant to any agreement, upon exercise of
conversion rights, warrants or options or otherwise, shall be
deemed "beneficially owned" by such Related Person.
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(2) The term "Substantial Part" shall mean more than
twenty-five (25%) percent of the total assets of the
Corporation, as of the end of its most recent fiscal year ending
prior to the time the determination is made.
(3) The term "Continuing Director" shall mean any
member of the Board of Directors of the Corporation who is
unaffiliated with the Related Party and was a member of the
Board prior to the time that the Related Party became a Related
Party, and any successor of a Continuing Director who is
unaffiliated with the Related Party and is recommended to
succeed a Continuing Director by a majority of Continuing
Directors then on the Board.
(4) The term "Continuing Director Quorum" shall mean
two-thirds of the Continuing Directors capable of exercising the
powers conferred on them.
ARTICLE XVI
EVALUATION OF BUSINESS COMBINATIONS
In connection with the exercise of its judgment in
determining what is in the best interests of the Corporation and
of the shareholders, when evaluating a Business Combination (as
defined in Article XV of these Articles of Incorporation) or a
tender or exchange offer, the board of directors of the
Corporation shall, in addition to considering the adequacy of
the amount to be paid in connection with any such transaction,
consider all of the following factors and any other factors
which it deems relevant: (i) the social and economic effects of
the transaction on the Corporation and its subsidiaries,
employees, depositors, loan and other customers, creditors and
other elements of the communities in which the Corporation and
its subsidiaries operate or are located; (ii) the business and
financial condition and earnings prospects of the acquiring
person or entity, including, but not limited to, debt service
and other existing financial obligations, financial obligations
to be incurred in connection with the acquisition and other
likely financial obligations of the acquiring person or entity
and the possible effect of such conditions upon the Corporation
and its subsidiaries and the other elements of the communities
in which the Corporation and its subsidiaries operate or are
located; and (iii) the competence, experience and integrity
of the acquiring person, entity or group and its management.
ARTICLE XVII
LIMITED LIABILITY OF DIRECTORS
No director of the Corporation shall be subject to liability
for any action taken as a director, or any failure to take any
action as a director, unless both (i) the director has breached
or failed to perform the duties of the director's office in
compliance with applicable law, and (ii) the breach or failure
to perform constitutes willful misconduct or recklessness under
applicable law.
If the Indiana Business Corporation Law or other applicable
law is amended after the effective date of these Articles of
Incorporation to permit further limitation or elimination of the
liability of directors, then the liability of every director of
the Corporation shall be eliminated or limited to the fullest
extent permitted under the Indiana Business Corporation Law or
other applicable law as amended.
Any repeal or modification of the foregoing paragraphs by
the shareholders of the Corporation shall not adversely affect
any right or protection of a director of the Corporation
existing at the time of such repeal or modification.
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ARTICLE XVIII
INDEMNIFICATION
A. PERSONS ENTITLED TO INDEMNIFICATION. The Corporation
shall indemnify, to the extent provided in paragraph B of this
Article XVIII:
1. any person who is or was a director, officer, employee
or agent of the Corporation; and
2. any person who, while a director, officer, employee or
agent of the Corporation, serves or has served at the
Corporation's request as a director, officer, employee,
partner, manager, member or trustee of another
corporation, limited liability corporation, partnership,
joint venture, trust, employee benefit plan or other
enterprise.
For purposes of clause A.2, a person shall be considered to
be serving an employee benefit plan at the Corporation's request
if the person's duties to the Corporation also impose duties on,
or otherwise involve services by, the person to the plan or to
participants in or beneficiaries of the plan.
B. EXTENT. In case of a threatened, pending or completed
suit, action or proceeding (whether civil, criminal,
administrative or investigative and whether formal or informal
(hereinafter a "Proceeding") against a person described in
paragraph A by reason of his holding a position described in
paragraph A, the Corporation shall indemnify him if he satisfies
the standard in paragraph C, for amounts actually and reasonably
incurred by him in connection with the defense or settlement of
the Proceeding, including, but not limited to (i) reasonable
expenses (including attorneys' fees), (ii) amounts paid in
settlement, (iii) judgments, (iv) penalties, and (v) fines
(including any excise tax assessed with respect to an employee
benefit plan).
C. STANDARD. A person described in paragraph A shall be
indemnified if:
1. he is wholly successful, on the merits or otherwise,
in the defense of the Proceeding; or
2. (i) his conduct in the transaction which is the subject
of the Proceeding was in good faith; and
(ii) he reasonably believed that:
a. in the case of conduct in his official capacity
as a director, officer or employee of the Corporation,
his conduct was in the Corporation's best interests,
which shall include any and all actions taken in
connection with the Corporation's response to a tender
offer or other offer or proposal of another party to
engage in a Business Combination (as defined in
Article XV of these Articles of Incorporation) not
approved by the Continuing Directors (as defined
in Article XV of these Articles of Incorporation);
b. in the case of conduct with respect to an
employee benefit plan, his conduct was in the
interests of the participants in and beneficiaries of
the plan; and
c. in all other cases, his conduct was at least
not opposed to the best interests of the Corporation;
and
(iii) in the case of a criminal proceeding, he either
had (a) reasonable cause to believe that his conduct
was lawful, or (b) no reasonable cause to believe
that his conduct was unlawful.
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The termination of a Proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo
contendere or its equivalent shall not, in itself,
create a presumption that the person failed to satisfy
the standard of this subparagraph C.2.
D. DETERMINATION THAT STANDARD HAS BEEN MET. A
determination that the standard of subparagraph C.2 has been
satisfied may be made by:
1. the board of directors by a majority vote of a
quorum consisting of directors of the Corporation not at
the time parties to the Proceeding ("disinterested
directors"); or
2. if a quorum consisting of disinterested directors cannot be
obtained, by a majority vote of a committee duly designated
by the board of directors (in which designation directors
who are parties to the Proceeding may participate)
consisting solely of two or more disinterested directors;
or
3. special legal counsel (selected by the board of directors
or its committee in the manner prescribed in clauses D.1 or
D.2 or, if a quorum of disinterested directors cannot be
obtained, or a committee of disinterested directors cannot
be appointed in accordance with clause D.2, then selected
by a majority vote of the full board of directors (in which
selection directors who are parties to the Preceeding may
participate)); or
4. the shareholders of the Corporation, providedthat shares
owned by or voted under the control of directors
who are, at the time, parties to the Proceeding may not be
voted on the determination.
E. PRORATION. Anyone making a determination under
paragraph D may determine that a person has met the standard as
to some matters but not as to others, and may reasonably prorate
amounts to be indemnified.
F. ADVANCE PAYMENT. The Corporation may pay for or
reimburse the reasonable expenses incurred by a person described
in paragraph A who is a party to a Proceeding in advance of
final disposition of the Proceeding if:
1. the person furnishes the Corporation a written
affirmation of their good faith belief that they have met
the standard of conduct described in subparagraph C.2;
2. the person furnishes the Corporation a written
undertaking, executed personally or on their behalf, to
repay the advance if it is ultimately determined that the
person did not met the standard of conduct described in
subparagraph C.2; and
3. a determination is made that the facts then known
to those making the determination would not preclude
indemnification under this Article XVIII.
The undertaking required by clause F.2 shall be an unlimited
general obligation of the director but need not be secured and
may be accepted without reference to financial ability to make
repayment. Determinations and authorization of payments under
this paragraph F shall be made in the manner specified in
paragraph D of this Article XVIII.
G. NONEXCLUSIVE. The indemnification and advancement of
expenses provided by paragraphs A-F or otherwise granted
pursuant to Indiana law shall not be exclusive of any other
rights to indemnification to which a person may be entitled by
law, bylaw, agreement, vote of shareholders or disinterested
directors, or otherwise.
H. CONTINUATION. The indemnification provided by this
Article XVIII shall be deemed to be a contract between the
Corporation and the persons entitled to indemnification
thereunder, and any repeal or modification of this Article XVIII
shall not affect any rights or obligations then existing with
respect to any state of facts then or theretofore existing or
any Proceeding theretofore or thereafter brought based in whole
or in part upon any such state of facts. The
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indemnification and advance payment provided by paragraphs A
through F shall continue as to a person who has ceased to hold a
position named in paragraph A and shall inure to his heirs,
executors and administrators.
I. INSURANCE. The Corporation may purchase and maintain
insurance on behalf of any person who holds or who has held any
position named in paragraph A, against any liability incurred by
him in any such position, or arising out of his status as such,
whether or not the Corporation would have power to indemnify him
against such liability under paragraphs A-I of this Article
XVIII.
J. JUDICIAL DETERMINATION. Any person described in
paragraph A who is a party to a Proceeding may apply for
indemnification to the court conducting the Proceeding or to
another court of competent jurisdiction. On receipt of an
application, the court, after giving any notice the court
considers necessary, may order indemnification if it determines:
1. the person is entitled to indemnification under
subparagraph C.1, in which case the court shall also order
the Corporation to pay the person's reasonable expenses
incurred to obtain court-ordered indemnification; or
2. the person is fairly and reasonably entitled to
indemnification in view of all the relevant circumstances,
whether or not the person met the standard of conduct set
forth in subparagraph C.2.
K. Savings Clause. If this Article XVIII or any portion
hereof shall be invalidated on any ground by any court of
competent jurisdiction, then the Corporation shall nevertheless
indemnify each director, officer, employee, and agent of the
Corporation as to costs, charges, and expenses (including
attorneys' fees), judgments, fines, and amounts paid in
settlement with respect to any action, suit, or proceeding,
whether civil, criminal, administrative, or investigative,
including an action by or in the right of the Corporation to the
full extent permitted by any applicable portion of this Article
XVIII that shall not have been invalidated and to the full
extent permitted by applicable law.
ARTICLE XIX
AMENDMENT OF BYLAWS
In furtherance and not in limitation of the powers conferred
by statute, the board of directors of the Corporation is
expressly authorized to make, repeal, alter, amend and rescind
the Bylaws of the Corporation. Notwithstanding any other
provision of these Articles of Incorporation or the Bylaws of
the Corporation, the Bylaws shall not be made, repealed,
altered, amended or rescinded by the shareholders of the
Corporation.
ARTICLE XX
AMENDMENT OF ARTICLES OF INCORPORATION
The Corporation reserves the right to repeal, alter, amend
or rescind any provision contained in these Articles of
Incorporation in the manner now or hereafter prescribed by law,
and all rights conferred on shareholders herein are granted
subject to this reservation. Notwithstanding the foregoing,
unless a majority of the Company's Continuing Directors
approves their repeal, amendment, alteration, or rescission, in
which case only the affirmative vote of the holders of a
majority of the outstanding shares of capital stock of the
Corporation entitled to vote in the election of directors is
required, the provisions set forth in Articles X, XI, XII, XIII,
XIV, XV, XVI, XVII, XVIII, XIX and this Article XX of these
Articles of Incorporation may not be repealed, altered, amended
or rescinded in any respect unless the same is approved by the
affirmative vote of the holders of not less than eighty percent
(80%) of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of
directors (considered for this purpose as a single class) cast
at a meeting of the shareholders called for that purpose
(provided that notice of such proposed adoption, repeal,
alteration, amendment or rescission is included in the notice of
such meeting).
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THE UNDERSIGNED, being the incorporator hereinbefore named,
for the purpose of forming a corporation pursuant to the
Business Corporation Law of Indiana, does make these Articles of
Incorporation, hereby declaring and certifying that this is my
act and deed and the facts herein stated are true, and
accordingly have hereunto set my hand this 4th day of February,
1999.
/s/ Ronald J.Pence
--------------------------
Incorporator
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EXHIBIT C
BYLAWS
OF
KENTUCKY NATIONAL BANCORP, INC.
ARTICLE I - Principal Office
The principal office of Kentucky National Bancorp, Inc. (the
"Corporation") shall be located at 1000 North Dixie Avenue in
the City of Elizabethtown, in the County of Hardin, in the
Commonwealth of Kentucky.
ARTICLE II - Shareholders
SECTION 1. PLACE OF MEETINGS. All annual and special
meetings of shareholders shall be held at the home office of the
Corporation or at such other place within or without the
Commonwealth of Kentucky as the board of directors may
determine.
SECTION 2. ANNUAL MEETING. A meeting of the shareholders
of the Corporation for the election of directors and for the
transaction of any other business of the Corporation shall be
held annually after each fiscal year at such date and time as
the board of directors may determine.
SECTION 3. SPECIAL MEETINGS. Special meetings of the
shareholders of the Corporation for any purpose or purposes may
be called at any time by the board of directors of the
Corporation, by a committee of the board of directors which has
been duly designated by the board of directors and whose powers
and authorities, as provided in a resolution of the board of
directors, include the power and authority to call such meeting,
by the chairman of the board of directors or by the president of
the Corporation, but such special meetings shall not be called
by any other person or persons, except as otherwise required by
law.
SECTION 4. CONDUCT OF MEETINGS. Annual and special
meetings shall be conducted in accordance with rules and
procedures adopted by the board of directors. The board of
directors shall designate, when present, either the chairman of
the board or the president to preside at such meetings.
SECTION 5. NOTICE OF MEETINGS. Written notice stating the
place, day and hour of the meeting and the purpose or purposes
for which the meeting is called shall be delivered neither fewer
than ten (10) nor more than sixty (60) days before the date of
the meeting, either personally or by mail, by or at the
direction of the chairman of the board, the president, the
secretary or the directors calling the meeting, to each
shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when
deposited in the mail, addressed to the shareholder at
the address as it appears on the stock transfer books or records
of the Corporation as of the record date prescribed in Section 6
of this Article II, with postage prepaid. If a shareholder
attends a meeting without objecting either at the beginning of
the meeting to holding the meeting or transacting business at
the meeting or upon presentation of a particular matter for
consideration at the meeting, or if a shareholder in writing
waives notice of the meeting or of a particular matter
either before or after the meeting, then notice of the meeting
or the matter to the shareholder shall be unnecessary. When any
meeting of shareholders, either annual or special, is adjourned
for thirty (30) days or more, notice of the adjourned meeting
shall be given as in the case of an original meeting. It shall
not be necessary to give any notice of the time and place of any
meeting adjourned for less than thirty (30) days or of the
business to be transacted at that meeting, other than an
announcement at the meeting at which such adjournment is taken.
SECTION 6. FIXING OF RECORD DATE. For the purpose of
determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or
shareholders entitled to receive payment of any dividend, or in
order to make a determination of shareholders for any other
proper purpose, the board of directors shall fix in advance a
date as the record date for any such determination of
shareholders. Such date in any case shall be not more
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than seventy (70) days prior to the date on which the particular
action, requiring such determination of shareholders, is to
be taken. When a determination of shareholders entitled to vote
at any meeting of shareholders has been made as provided in this
section, such determination shall apply to any adjournment not
more than one-hundred-twenty (120) days after the date fixed for
the original meeting. The board of directors shall fix a new
record date for any adjournment more than one hundred twenty
days after the date fixed for the original meeting.
SECTION 7. VOTING LISTS. At least five (5) days before
each meeting of the shareholders, the officer or agent having
charge of the stock transfer books for the Corporation shall
make a complete list of the shareholders entitled to vote at
such meeting or any adjournment, arranged in alphabetical order,
with the address and the number of shares of stock held by each.
The list of shareholders shall be kept on file at the home
office of the Corporation and shall be subject to inspection by
any shareholder at any time during usual business hours for a
period of at least five (5) days prior to such meeting. Such
list shall also be produced and kept open at the time and place
of the meeting and shall be subject to inspection by any
shareholder for any proper purpose during the entire time of the
meeting. The original stock transfer books shall constitute
prima facie evidence of the shareholders entitled to examine
such list or transfer books or to vote at any meeting of
shareholders.
Section 8. Quorum. A majority of the outstanding stock of
the Corporation entitled to vote, represented in person or by
proxy, shall constitute a quorum at a meeting of shareholders.
If less than a majority of the outstanding stock is represented
at a meeting, a majority of the stock so represented may adjourn
the meeting from time to time without further notice. At such
adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have
been transacted at the meeting as originally notified. The
shareholders present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the
withdrawal of enough shareholders to constitute less than a
quorum.
SECTION 9. PROXIES. At all meetings of shareholders, a
shareholder may vote by proxy executed in writing by the
shareholder or by its duly authorized attorney in fact. Proxies
solicited on behalf of the management shall be voted as directed
by the shareholders or, in the absence of such direction, as
determined by a majority of the board of directors. No proxy
shall be valid more than eleven months from the date of its
execution, unless otherwise provided in the proxy.
SECTION 10. VOTING. At each election for directors, every
shareholder entitled to vote at such election shall be entitled
to one vote for each share of common stock held by it. Unless
otherwise provided in the Corporation's Articles of
Incorporation, by these Bylaws or by applicable law, a majority
of those votes cast by shareholders at a lawful meeting shall be
sufficient to pass on a transaction or matter, except that
directors shall be elected by a plurality of the votes cast by
shareholders entitled to vote.
SECTION 11. VOTING OF SHARES IN THE NAME OF TWO OR MORE
PERSONS. When ownership of stock is recorded in the name of two
or more persons, in the absence of written directions to the
Corporation to the contrary, at any meeting of the shareholders
of the Corporation, any one or more of such holders of record
may cast, in person or by proxy, all votes to which such stock
is entitled. In the event an attempt is made to cast
conflicting votes, in person or by proxy, by the several
persons in whose names ownership of stock is recorded, the vote
or votes to which those holders of record are entitled shall be
cast as directed by a majority of those holders present in
person or by proxy at such meeting, but no votes shall be cast
for such stock if a majority cannot agree.
SECTION 12. VOTING OF STOCK OF CERTAIN HOLDERS. Stock held
in the name of another corporation may be voted by such officer,
agent or proxy as the bylaws of such corporation may prescribe,
or, in the absence of such provision, as the board of directors
of such corporation may determine. Stock held by an
administrator, executor, guardian or conservator may be voted by
it, either in person or by proxy, without a transfer of such
stock into its name. Stock held in the name of a trustee may be
voted by it, either in person or by proxy, but no trustee shall
be entitled to vote stock held by it without a transfer of such
stock into its name. Stock held in the name of a receiver
may be voted by such receiver, and stock held by or under the
control of a receiver may be voted by such receiver without the
transfer into
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its name, if authority to do so is contained in an appropriate
order of the court or other public authority by which such
receiver was appointed.
A shareholder whose stock is pledged shall be entitled to
vote such stock until the stock has been transferred into the
name of the pledgee, and thereafter the pledgee shall be
entitled to vote the stock so transferred.
Neither treasury shares of its own stock held by the
Corporation nor stock held by another corporation, if a majority
of the shares of stock entitled to vote for the election of
directors of such other corporation is held by the Corporation,
shall be voted at any meeting or counted in determining the
total number of outstanding shares of stock at any given time
for purposes of any meeting.
SECTION 13. INSPECTORS OF ELECTION. In advance of any
meeting of shareholders, the board of directors may appoint any
persons other than nominees for office as inspectors of election
to act at such meeting or any adjournment. The number of
inspectors shall be either one or three. Any such appointment
shall not be altered at the meeting. If inspectors of election
are not so appointed, the chairman of the board or the president
may make such appointment at the meeting. In case any person
appointed as an inspector fails to appear or fails or refuses to
act, the vacancy may be filled by appointment by the board of
directors in advance of the meeting or at the meeting by the
chairman of the board or the president.
Unless otherwise prescribed by applicable law, the duties of
such inspectors shall include: determining the number of shares
of stock and the voting power of each share of stock, the stock
represented at the meeting, the existence of a quorum, the
authenticity, validity and effect of proxies; receiving votes,
ballots or consents; hearing and determining all challenges and
questions in any way arising in connection with the right to
vote; counting and tabulating all votes or consents; determining
the result; and such other acts as may be proper to conduct the
election or the vote with fairness to all shareholders.
SECTION 14. NOMINATING COMMITTEE. The board of directors
shall act as a nominating committee for selecting the management
nominees for election as directors. Except in the case of
a nominee substituted as a result of the death or other
incapacity of a management nominee, the nominating committee
shall deliver written nominations to the secretary of the
Corporation at least twenty days prior to the date of the annual
meeting. No nominations for directors except those made by the
nominating committee shall be voted upon at the annual meeting,
unless other nominations by shareholders are made in writing and
delivered to the secretary of the Corporation in accordance with
the provisions of the Corporation's Articles of Incorporation.
SECTION 15. NEW BUSINESS. Any new business to be taken up
at the annual meeting shall be stated in writing and filed with
the secretary of the Corporation in accordance with the
provisions of the Articles of Incorporation. This provision
shall not prevent the consideration and approval or disapproval
at the annual meeting of reports of officers, directors and
committees, but in connection with such reports, no new business
shall be acted upon at such annual meeting unless stated and
filed as provided in the Articles of Incorporation.
ARTICLE III - Board of Directors
SECTION 1. GENERAL POWERS. The business and affairs of the
Corporation shall be under the direction of its board of
directors. The board of directors shall annually elect a
chairman of the board and a president from among its members and
shall designate, when present, either the chairman of the board
or the president to preside at its meetings.
SECTION 2. NUMBER, TERM AND ELECTION. The board of
directors shall consist of nine members, and shall, after the
first meeting of the shareholders at which directors are
elected, be divided into three groups as nearly equal in number
as possible. The members of each group shall be elected for
staggered terms of three years (and until their successors are
elected or qualified) in accordance with the provisions of the
Articles of Incorporation. The board of
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directors may increase or decrease the number of members of the
board of directors consistent with the Articles of
Incorporation.
SECTION 3. REGULAR MEETINGS. A regular meeting of the
board of directors shall be held without other notice than this
Bylaw immediately after, and at the same place as, the annual
meeting of shareholders. The board of directors may provide, by
resolution, the time and place for the holding of additional
regular meetings without other notice than such resolution.
SECTION 4. QUALIFICATION. Directors need not own stock of
the Corporation.
SECTION 5. SPECIAL MEETINGS. Special meetings of the board
of directors may be called by or at the request of the chairman
of the board, the president or one-third of the directors. The
persons authorized to call special meetings of the board of
directors may fix any place within the State of Kentucky as the
place for holding any special meeting of the board of directors
called by such persons. Members of the board of directors may
participate in special meetings by means of conference telephone
or similar communications equipment by which all persons
participating in the meeting can hear each other. Such
participation shall constitute presence in person.
SECTION 6. NOTICE OF SPECIAL MEETING. Written notice of
any special meeting shall be given to each director at least two
days prior thereto if delivered personally or by telegram, or at
least five days prior thereto if delivered by mail at the
address at which the director is most likely to be reached.
Such notice shall be deemed to be delivered when deposited in
the United States mail so addressed, with postage thereon
prepaid, if mailed, or when delivered to the telegraph company
if sent by telegram. Any director may waive notice of any
meeting by a signed writing filed with the secretary. The
attendance of a director at a meeting shall constitute waiver of
notice of such meeting, except where a director both attends a
meeting for the express purpose of objecting to holding the
meeting or transacting any business and does not thereafter vote
for or assent to any action taken at the meeting because the
meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any meeting of
the board of directors need be specified in the notice or waiver
of notice of such meeting.
SECTION 7. QUORUM. A majority of the number of directors
fixed by Section 2 of this Article III shall constitute a quorum
for the transaction of business at any meeting of the board of
directors; but if less than such majority is present at a
meeting, a majority of the directors present may adjourn the
meeting from time to time. Notice of any adjourned meeting
shall be given in the same manner as prescribed by Section 6 of
this Article III.
SECTION 8. MANNER OF ACTING. The act of the majority of
the directors present at a meeting at which a quorum is present
shall be the act of the board of directors, unless a greater
number is prescribed by these Bylaws, the Articles of
Incorporation or applicable law.
SECTION 9. ACTION WITHOUT A MEETING. Any action required
or permitted to be taken by the board of directors at a meeting
may be taken without a meeting if a consent in writing, setting
forth the action so taken, shall be signed by all of the
directors.
SECTION 10. RESIGNATION. Any director may resign at any
time by sending a written notice of such resignation to the home
office of the Corporation addressed to the chairman of the board
or the president. Unless otherwise specified, such resignation
shall take effect upon receipt by the chairman of the board or
the president.
SECTION 11. VACANCIES. Any vacancy occurring in the board
of directors shall be filled in accordance with the provisions
of the Articles of Incorporation. Any directorship to be filled
by reason of an increase in the number of directors may be
filled by the affirmative vote of two-thirds of the directors
then in office. The term of such director shall be in
accordance with the provisions of the Articles of Incorporation.
C-4<PAGE>
<PAGE>
SECTION 12. COMPENSATION. Directors, as such, may receive
a stated fee for their services. By resolution of the board of
directors, a reasonable fixed sum, and reasonable expenses of
attendance, if any, may be allowed for actual attendance at each
regular or special meeting of the board of directors. Members
of either standing or special committees may be allowed such
compensation for actual attendance at committee meetings as the
board of directors may determine. Nothing herein shall be
construed to preclude any director from serving the Corporation
in any other capacity and receiving remuneration therefor.
SECTION 13. PRESUMPTION OF ASSENT. A director of the
Corporation who is present at a meeting of the board of
directors at which action on any corporate matter is taken shall
be presumed to have assented to the action taken unless his
dissent or abstention shall be entered in the minutes
of the meeting or unless he shall file a written dissent to such
action with the person acting as the secretary of the meeting
before the adjournment thereof or shall forward such dissent by
registered mail to the secretary of the Corporation immediately
after the adjournment of the meeting. Such right to dissent
shall not apply to a director who voted in favor of such action.
SECTION 14. REMOVAL OF DIRECTORS. Any director or the
entire board of directors may be removed only in accordance with
the provisions of the Articles of Incorporation.
SECTION 15. ADVISORY DIRECTORS. The board of directors may
by resolution appoint advisory directors to the board, who shall
have such authority and receive such compensation and
reimbursement as the board of directors shall provide. Advisory
directors or directors emeriti shall not have the authority to
participate by vote in the transaction of business.
ARTICLE IV -- COMMITTEES OF THE BOARD OF DIRECTORS
The board of directors, by resolution passed by a majority
of the whole board, may designate one or more committees as it
may determine to be necessary or appropriate for the
conduct of the business of the Corporation and may prescribe the
duties, constitution and procedures thereof. Each committee
shall consist of one or more directors of the Corporation. The
board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified
member at any meeting of the committee.
Sections 5 through 9 of Article III, which govern meetings,
action without meetings, notice, waiver of notice, quorum and
voting requirements of the board of directors, apply to
committees and their members. The act of a the majority of the
members present at a meeting at which a quorum is present shall
be the act of the committee. The act of the committee, within
the authority delegated to it by the board of directors, shall
be the act of the board of directors.
The board of directors shall have power, by the affirmative
vote of a majority of the authorized number of directors, at any
time to change the members of, to fill vacancies in and to
discharge any committee of the board. Any member of any such
committee may resign at any time by giving notice to the
Corporation; provided, however, that only notice to the board,
the chairman of the board, the chief executive officer, the
chairman of such committee or the secretary shall be deemed to
constitute notice to the Corporation. Such resignation shall
take effect upon receipt of such notice or at any later time
specified therein; and, unless otherwise specified therein,
acceptance of such resignation shall not be necessary to make it
effective. Any member of any such committee may be removed at
any time, either with or without cause, by the affirmative vote
of a majority of the authorized number of directors at any
meeting of the board called for that purpose.
ARTICLE V -- OFFICERS
Section 1. Positions. The officers of the Corporation
shall be a president, one or more vice presidents, a secretary
and a treasurer, each of whom shall be elected by the board of
directors. The board of directors may also designate the
chairman of the board as an officer. The president shall be the
chief executive officer unless the board of directors designates
the chairman of the board as chief executive officer. The
president shall be a director of the
C-5<PAGE>
<PAGE>
Corporation. The offices of the secretary and treasurer may be
held by the same person, and a vice president may also be
either the secretary or the treasurer. The board of directors
may designate one or more vice presidents as executive vice
president or senior vice president. The board of directors may
also elect or authorize the appointment of such other officers
as the business of the Corporation may require. The officers
shall have such authority and perform such duties as the board
of directors may from time to time authorize or determine. In
the absence of action by the board of directors, the officers
shall have such powers and duties as generally pertain to their
respective offices. The secretary of the Corporation shall have
the responsibility of preparing the minutes of the directors'
and shareholders' meetings and for authenticating records of the
Corporation.
SECTION 2. ELECTION AND TERM OF OFFICE. The officers of
the Corporation shall be elected annually at the first meeting
of the board of directors held after each annual meeting of the
shareholders. If the election of officers is not held at such
meeting, such election shall be held as soon thereafter as
possible. Each officer shall hold office until a successor has
been duly elected and qualified or until the officer's death,
resignation or removal in the manner hereinafter provided.
Election or appointment of an officer, employee or agent shall
not of itself create contractual rights. The board of directors
may authorize the Corporation to enter into an employment
contract with any officer, but no such contract shall impair the
right of the board of directors to remove any officer
at any time in accordance with Section 3 of this Article V.
SECTION 3. REMOVAL. Any officer may be removed by vote of
two-thirds of the board of directors whenever in its judgment
the best interests of the Corporation will be served thereby,
but such removal, other than for cause, shall be without
prejudice to any contractual rights of the person so removed.
SECTION 4. VACANCIES. A vacancy in any office because of
death, resignation, removal, disqualification or otherwise may
be filled by the board of directors for the unexpired portion of
the term thereof.
SECTION 5. REMUNERATION. The remuneration of the officers
shall be fixed from time to time by the board of directors by
employment contracts or otherwise, and no officer shall be
prevented from receiving such salary by reason of the fact that
he is also a director of the Corporation.
ARTICLE VI -- CONTRACTS, LOANS, CHECKS, AND DEPOSITS
SECTION 1. CONTRACTS. To the extent permitted by
applicable law, and except as otherwise proscribed by the
Articles of Incorporation or these Bylaws with respect to
certificates for shares of stock, the board of directors may
authorize any officer, employee or agent of the Corporation to
enter into any contract or execute and deliver any instrument in
the name of and on behalf of the Corporation. Such authority
may be general or confined to specific instances.
SECTION 2. LOANS. No loans shall be contracted on behalf
of the Corporation and no evidence of indebtedness shall be
issued in its name unless authorized by the board of directors.
Such authority may be general or confined to specific instances.
SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts or
other orders for the payment of money, notes or other evidences
of indebtedness issued in the name of the Corporation shall be
signed by one or more officers, employees or agents of the
Corporation in such manner as shall from time to time be
determined by the board of directors.
SECTION 4. DEPOSITS. All funds of the Corporation not
otherwise employed shall be deposited from time to time to the
credit of the Corporation in such duly authorized depositories
as the board of directors may select.
C-6<PAGE>
<PAGE>
ARTICLE VII - CERTIFICATES FOR SHARES OF STOCK
AND THEIR TRANSFER
Section 1. CERTIFICATES FOR SHARES OF STOCK. The stock of
the Corporation shall be represented by certificates for shares
signed by the chairman of the board of directors, the president
or by any other officer of the Corporation authorized by the
board of directors, and by the secretary or an assistant
secretary, and may be sealed with the seal of the Corporation or
a facsimile thereof. Any or all of the signatures upon a
certificate may be facsimiles if the certificate is
countersigned by a transfer agent, or registered by a registrar,
other than the Corporation itself or an employee of the
Corporation. If any officer who has signed or whose facsimile
signature has been placed upon such certificate shall have
ceased to be such officer before the certificate is issued, the
certificate may be issued by the Corporation with the same
effect as if the person were the officer at the date of the
certificate's issue.
SECTION 2. FORM OF STOCK CERTIFICATES. All certificates
representing stock issued by the Corporation shall set forth
upon the face or back that the Corporation will furnish to any
shareholder upon request and without charge a full statement of
the designations, preferences, limitations and relative rights
of each class of stock authorized to be issued, the variations
in the relative rights and preferences between each such series
so far as the same have been fixed and determined and the
authority of the board of directors to fix and determine the
relative rights and preferences of subsequent series.
Each certificate representing stock shall state upon the
face thereof: that the corporation is organized under the laws
of the State of Indiana; the name of the person to whom issued;
the number and class of the shares of stock; the date of issue;
the designation of the series, if any, which such certificate
represents; the par value of each share of stock represented by
such certificate or a statement that the stock is without par
value. Other matters in regard to the form of the certificates
shall be determined by the board of directors.
SECTION 3. PAYMENT FOR STOCK. No certificate shall be
issued for any stock until such stock is fully paid.
SECTION 4. FORM OF PAYMENT FOR STOCK. The consideration
for the issuance of stock shall be paid in accordance with the
provisions of the Articles of Incorporation.
SECTION 5. TRANSFER OF STOCK. Transfer of shares of
capital stock of the Corporation shall be made only on its stock
transfer books. Authority for such transfer shall be given only
by the holder of record thereof, by its legal representative,
who shall furnish proper evidence of such authority, or by his
attorney thereunto authorized by power of attorney duly executed
and filed with the Corporation. Such transfer shall be made
only on surrender for cancellation of the certificate
of such shares of stock. The person in whose name shares of
capital stock are recorded on the books of the Corporation shall
be deemed by the Corporation to be the owner thereof for all
purposes.
SECTION 6. STOCK LEDGER. The stock ledger of the
Corporation shall be the only evidence as to who are the
shareholders entitled to examine the stock ledger, the list
required by Section 7 of Article II or the books of the
Corporation or to vote in person or by proxy at any meeting of
shareholders.
SECTION 7. LOST CERTIFICATES. The board of directors may
direct a new certificate to be issued in place of any
certificate theretofore issued by the Corporation and alleged to
have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming the certificate of
stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate, the board of directors may, in its
discretion and as a condition precedent to the issuance thereof,
require the owner of the lost, stolen or destroyed certificate,
or his legal representative, to give the Corporation a bond in
such sum as it may direct as indemnity against any claim that
may be made against the Corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
SECTION 8. BENEFICIAL OWNERS. The Corporation shall be
entitled to recognize the exclusive right of a person registered
on its books as the owner of stock to receive dividends, and
to vote as such owner, and shall not be bound
C-7<PAGE>
<PAGE>
to recognize any equitable or other claim to or interest
in such stock on the part of any other person, whether or not
the Corporation shall have express or other notice thereof,
except as otherwise provided by applicable law.
ARTICLE VIII - FISCAL YEAR; ANNUAL AUDIT
The fiscal year of the Corporation shall end on the
thirty-first day of December at the end of each calendar year.
The Corporation shall be subject to an annual audit as of the
end of its fiscal year by independent public accountants
appointed by and responsible to the board of directors.
ARTICLE IX - DIVIDENDS
Subject to the provisions of the Articles of Incorporation
and applicable law, the board of directors may, at any regular
or special meeting, declare dividends on the Corporation's
outstanding capital stock. Dividends may be paid in cash, in
property or in the Corporation's own stock.
ARTICLE X - CORPORATE SEAL
The corporate seal of the Corporation shall be in such form
as the board of directors may prescribe.
ARTICLE XI - AMENDMENTS
In accordance with the Articles of Incorporation, the board of
directors may repeal, alter, amend or rescind these Bylaws by
vote of two-thirds of the board of directors at a legal meeting
held in accordance with the provisions of these Bylaws. These
Bylaws may not be repealed, altered, amended or rescinded by the
shareholders of the corporation.
C-8<PAGE>
<PAGE>
EXHIBIT D
DISSENTER AND APPRAISAL RIGHTS
Dissenter and appraisal rights in a national bank are
governed by 12 U.S.C. 215a, the text of which is reproduced
below:
United States Code
Title 12. Banks and Banking
Chapter 2 -- National Banks
Subchapter XVI -- Consolidation and Merger
Section 215a. Merger of national banks or State banks into
national banks
(a) Approval of Comptroller, board and shareholders; merger
agreement; notice; capital stock; liability of receiving
association
[Omitted]
(b) Dissenting shareholders
If a merger shall be voted for at the called meetings
by the necessary majorities of the shareholders of each
association or State bank participating in the plan of merger,
and thereafter the merger shall be approved by the Comptroller,
any shareholder of any association or State bank to be merged
into the receiving association who has voted against such
merger at the meeting of the association or bank of which he is
a shareholder, or has given notice in writing at or prior to
such meeting to the presiding officer that he dissents from the
plan of merger, shall be entitled to receive the value of the
shares so held by him when such merger shall be approved by the
Comptroller upon written request made to the receiving
association at any time before thirty days after the date of
consummation of the merger, accompanied by the surrender of his
stock certificates.
(c) Valuation of shares
The value of the shares of any dissenting shareholder
shall be ascertained, as of the effective date of the merger, by
an appraisal made by a committee of three persons, composed of
(1) one selected by the vote of the holders of the majority of
the stock, the owners of which are entitled to payment in cash;
(2) one selected by the directors of the receiving association;
and (3) one selected by the two so selected. The valuation
agreed upon by any two of the three appraisers shall govern. If
the value so fixed shall not be satisfactory to any dissenting
shareholder who has requested payment, that shareholder may,
within five days after being notified of the appraised value of
his shares, appeal to the Comptroller, who shall cause a
reappraisal to be made which shall be final and binding as to
the value of the shares of the appellant.
(d) Application to shareholders of merging associations;
appraisal by Comptroller; expenses of receiving association;
sale and resale of shares; State appraisal and merger law
If, within ninety days from the date of consummation
of the merger, for any reason one or more of the appraisers is
not selected as herein provided, or the appraisers fail to
determine the value of such shares, the Comptroller shall upon
written request of any interested party cause an appraisal to be
made which shall be final and binding on all parties. The
expenses of the Comptroller in making the reappraisal or the
appraisal, as the case may be, shall be paid by the receiving
association. The value of the shares ascertained shall be
promptly paid to the dissenting shareholders by the receiving
association. The shares of stock of the receiving association
which would have been delivered to such dissenting shareholders
had they not requested payment shall be sold by the receiving
association at
D-1
<PAGE>
an advertised public auction, and the receiving association
shall have the right to purchase any of such shares at such
public auction, if it is the highest bidder therefor, for the
purpose of reselling such shares within thirty days thereafter
to such person or persons and at such price not
less than par as its board of directors by resolution may
determine. If the shares are sold at public auction at a price
greater than the amount paid to the dissenting shareholders, the
excess in such sale price shall be paid to such dissenting
shareholders. The appraisal of such shares of stock in any State
bank shall be determined in the manner prescribed by the law of
the State in such cases, rather than as provided in this
section, if such provision is made in the State law; and no such
merger shall be in contravention of the law of the State under
which such bank is incorporated. The provisions of this
subsection shall apply only to the shareholders of (and stock
owned by them in) a bank or association being merged into the
receiving association.
D-2
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article XVIII of the Holding Company's Articles of
Incorporation provides for indemnification of the Holding
Company's directors and officers. In the case of a threatened,
pending or completed action or suit by or in the name of the
Holding Company, the Holding Company shall indemnify a director
or officer for amounts actually and reasonably incurred by him
in connection with the defense or settlement of the action or
suit if the director or officer: (i) is successful on the
merits or otherwise; (ii) acted in good faith in the transaction
which is the subject of the suit or action, and in a manner he
reasonably believed to be in, the best interest of the Holding
Company or (iii) in a criminal proceeding he either had (a)
reasonable cause to believe that his conduct was lawful, or (b)
no reasonable cause to believe his conduct was unlawful.
Under Indiana law, a corporation may indemnify a director or
officer made a party to a proceeding because such person was a
director or officer of the corporation if: (i) the individual's
conduct was in good faith; and (ii) the individual reasonably
believed (A) in the case of conduct in the individual's official
capacity with the corporation, that the individual's conduct was
in the corporation's best interests, and (B) in all other cases,
that the individual's conduct was at least not opposed to the
corporation's best interests. An Indiana corporation may also
indemnify an officer or director in a criminal proceeding if the
individual: (i) had reasonable cause to believe that his
conduct was lawful; or (ii) had no reasonable cause to believe
that his conduct was unlawful.
An Indiana corporation must, unless limited by its articles
of incorporation, indemnify any director or officer who was
wholly successful, on the merits or otherwise, in the defense of
a proceeding to which the individual was a party because the
individual was a director or officer of the corporation, against
reasonable expenses incurred by the director or officer in
connection with the proceeding. Unless limited by the
corporation's articles of incorporation, an officer or director
may apply to the court conducting the proceeding or another
court of competent jurisdiction for indemnification. The court
may order indemnification if it determines: (i) the director or
officer is entitled to mandatory indemnification under Indiana
law; or (ii) the officer or director is fairly and reasonably
entitled to indemnification in view of all the relevant
circumstances, whether or not such director or officer met the
standard of conduct set forth for mandatory indemnification
under Indiana law. The Holding Company's Articles of
Incorporation do not contain any limitations on the ability of
the Holding Company to indemnify its directors and officers
under Indiana law.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The exhibits and financial statement schedules filed as part
of this Registration Statement are as follows:
(a) Exhibits
The following is a list and index of the exhibits filed
with this Registration Statement.
Exhibit
Number Description of Document
- ------ -----------------------
* 2 Agreement and Plan of Reorganization (attached as
Exhibit A to the Proxy Statement/Prospectus filed as
part of this registration statement).
* 3.1 Articles of Incorporation of Kentucky National
Bancorp, Inc. (attached as Exhibit B to the Proxy
Statement/Prospectus filed as part of this
registration statement).
* 3.2 Bylaws of Kentucky National Bancorp, Inc. (attached
as Exhibit C to the Proxy Statement/ Prospectus filed
as part of this registration statement).
5 Opinion of Housley Kantarian & Bronstein, P.C.
regarding legality of securities.
II-1<PAGE>
<PAGE>
** 8 Tax Opinion of Housley Kantarian & Bronstein,
P.C.
*10.1 Kentucky National Bank Organizational Stock Option
and Incentive Plan.
*10.2 Restrictive Stock Transfer Agreement
*10.3 Lease Between Kentucky National Properties L.L.P. and
Kentucky National Bank
23 Consents of Housley Kantarian & Bronstein, P.C.
(contained in its opinions filed as Exhibits 5.1 and
8).
*24 Power of Attorney (contained in the signature page to
this registration statement as originally filed).
*99 Form of proxy to be mailed to shareholders of
Kentucky National Bank
_____________
* Previously filed.
** To be filed by amendment.
(b) Financial Statement Schedules
Not applicable.
(c) Report or Appraisal
Not applicable.
ITEM 22. UNDERTAKINGS
(a) Rule 415 Offering. The undersigned registrant hereby
undertakes:
(1) to file, during any period in which offers or sales
are being made, a post-effective amendment to this registration
statement;
(i) to include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or
events arising after the effective date of the
registration statement (or most recent post effective
amendment thereof) which individually or in the aggregate,
represent a fundamental change in the information set
forth in the registration statement;
(iii) to include any material information with
respect to the plan of distribution not previously
disclosed in the registration statement or any material
change to such information in the registration statement.
(2) That, for purposes of determining any liability under
the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be a bona fide
offering thereof.
(b) Registration on Form S-4 of Securities Offered for
Resale.
(1) The undersigned registrant hereby undertakes as
follows: that prior to any public reoffering of the securities
registered hereunder through use of a prospectus which is a part
of this registration statement, by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c),
the issuer undertakes that such reoffering prospectus will
contain the information called for by the applicable
registration form with respect to reofferings by persons who may
be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
II-2<PAGE>
<PAGE>
(2) The registrant undertakes that every prospectus
(i) that is filed pursuant to paragraph (1)
immediately preceding, or
(ii) that purports to meet the requirements of
section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule
415,
will be filed as a part of an amendment to the registration
statement and will not be used until such amendment is
effective, and that, for the purposes of determining any
liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes to
supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired
involved therein, that was not the subject of, and included in
the registration statement when it became effective.
II-3<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the
registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in Elizabethtown, Kentucky on March 10, 1999.
KENTUCKY NATIONAL BANCORP, INC.
Date: March 10, 1999 By: /s/ Ronald J. Pence
-------------- ---------------------------
Ronald J. Pence
President
(Duly Authorized Representative)
Pursuant to the requirements of the Securities Act of
1933, as amended, this registration statement has been signed
below by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ------ ----
<S> <C> <C>
* /s/ Lawrence P. Calvert Chief Executive Officer and
- -------------------------- Director
Lawrence P. Calvert (Principal Executive Officer)
/s/ Ronald J. Pence President and Director March 10, 1999
- ------------------------ (Principal Financial and
Ronald J. Pence Accounting Officer)
* /s/ Robert E. Robbins Chairman of the Board and
- ------------------------ Director
Robert E. Robbins
* /s/ Kevin D. Addington Director
- -------------------------
Kevin D. Addington
* /s/ Henry Lee Chitwood Director
- -------------------------
Henry Lee Chitwood
* /s/ Lois Watkins Gray Director
- -------------------------
Lois Watkins Gray
* /s/ William R. Hawkins Director
- -------------------------
William R. Hawkins
* /s/ Christopher G. Knight Director
- ---------------------------
Christopher G. Knight
* /s/ Leonard Allen McNutt Director
- ---------------------------
Leonard Allen McNutt
* By: /s/ Ronald J. Pence March 10, 1999
---------------------
Ronald J. Pence
Attorney-in-Fact
</TABLE>
<PAGE>
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------ -----------------------
* 2 Agreement and Plan of Reorganization (attached
as Exhibit A to the Proxy Statement/Prospectus
filed as part of this registration
statement).
* 3.1 Articles of Incorporation of Kentucky National
Bancorp, Inc. (attached as Exhibit B to the
Proxy Statement/Prospectus filed as part of
this registration statement).
* 3.2 Bylaws of Kentucky National Bancorp, Inc.
(attached as Exhibit C to the Proxy Statement/
Prospectus filed as part of this registration
statement).
5 Opinion of Housley Kantarian & Bronstein, P.C.
regarding legality of securities.
** 8 Tax Opinion of Housley Kantarian & Bronstein,
P.C. (to be filed by amendment)
*10.1 Kentucky National Bank Organizational Stock
Option and Incentive Plan.
*10.2 Restrictive Stock Transfer Agreement
*10.3 Lease Between Kentucky National Properties,
L.L.C. and Kentucky National Bank
23 Consents of Housley Kantarian & Bronstein,
P.C. (contained in its opinions filed as
Exhibits 5.1 and 8).
*24 Power of Attorney (contained in the signature
page to this registration statement as
originally filed).
*99 Form of proxy to be mailed to shareholders of
Kentucky National Bank
___________
* Previously filed.
** To be filed by amendment.
Kentucky National Bancorp, Inc.
1000 North Dixie Avenue
Elizabethtown, Kentucky 42701
Re: Kentucky National Bancorp, Inc.
Registration Statement on Form S-4
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Ladies and Gentlemen:
We have served as special counsel for Kentucky National
Bancorp, Inc., an Indiana corporation, in connection with the
registration under the Securities Act of 1933, as amended, of
256,000 shares of common stock, $0.01 par value (the "Common
Stock") under a registration statement on Form S-4 (the
"Registration Statement").
Based upon the foregoing and having regard for such legal
considerations as we have deemed relevant, it is our opinion
that:
(1) the shares of Common Stock have been duly authorized;
and
(2) upon issuance, sale and delivery of the Common Stock
as contemplated in the Registration Statement, the
shares will be legally issued, fully paid and non-
assessable.
We hereby consent to the reference to our firm under the
heading "Proposal I -- Proposed Formation of Holding Company --
Legal Opinion" in the Prospectus and Proxy Statement contained
in the Registration Statement and to the filing of this opinion
as Exhibit 5 to the Registration Statement.
Very truly yours,
HOUSLEY KANTARIAN & BRONSTEIN, P.C.
By: /s/ James C. Stewart
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James C. Stewart
Washington, DC
March 10, 1999
