KENTUCKY INVESTORS, INC.
200 CAPITAL AVENUE
FRANKFORT, KENTUCKY 40601
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 11, 1995
TO THE SHAREHOLDERS OF
KENTUCKY INVESTORS, INC.
Notice is hereby given that the annual meeting of shareholders of Kentucky
Investors, Inc., a Kentucky corporation, (the "Company") will be held at the
Investors Heritage Life Insurance Company auditorium, Second and Shelby Streets,
Frankfort, Kentucky 40601, on Thursday, May 11, 1995, at 11:00 A.M. (Eastern
Daylight Time), for the following purposes:
(1) To elect three Directors to hold office for a term of three years or
until their successors are duly elected and qualified;
(2) To approve an amendment to Article VI of the Company's Articles of
Incorporation to increase the number of authorized shares of common
stock of the Company from 1,225,000 to 4,000,000;
(3) To approve an amendment to Article X of the Company's Articles of
Incorporation to provide that Directors can only be removed for
cause;
(4) To approve an amendment to the Company's Articles of Incorporation to
add new Article XIII which will provide for the affirmative vote of
at least two-thirds of the outstanding voting shares to amend or
repeal Article X;
(5) To approve an amendment to the Company's Articles of Incorporation to
add new Article XIV which will incorporate the provisions of the
Kentucky Business Corporation Act pertaining to Business
Combinations; and
(6) To transact such other business as may properly come before the
meeting, or any adjournment thereof.
The Board of Directors, in accordance with the By-laws, has fixed the
close of business on April 3, 1995, as the record date for determining the
shareholders entitled to notice of and to vote at the meeting and any
adjournments thereof. The stock transfer books will not be closed.
It is hoped that you will attend the meeting, but if it is not your
intention to be present, you are respectfully requested to sign, date and return
the enclosed proxy immediately in the accompanying postage-prepaid envelope.
The proxy is being solicited by and on behalf of the Board of Directors of the
Company.
Your attention is directed to the Company's 1994 annual report and to the
proxy statement, both of which accompany this notice.
By Order of the Board of Directors
Wilma Yeary, CPS, Secretary
P.O. Box 717
Frankfort, Kentucky 40602
April 19, 1995
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS, MAY 11, 1995
The following information is furnished in connection with the solicitation
of the enclosed proxy by and on behalf of the Board of Directors of Kentucky
Investors, Inc. (the "Company" or "KII"), for use at the annual meeting of
shareholders of the Company to be held at the Investors Heritage Life Insurance
Company auditorium, Second and Shelby Streets, Frankfort, Kentucky 40601, on
Thursday, May 11, 1995, at 11:00 A.M. (Eastern Daylight Time), and at any
adjournment thereof, for the purposes set forth in the Notice of annual meeting.
PROXY MAY BE REVOKED
A shareholder executing and returning the enclosed proxy may revoke such
proxy at any time prior to exercise of the authority thereby given by giving
written notice to the Secretary of the Company as provided by Kentucky Revised
Statutes 271B.7-220(6).
COST AND METHOD OF SOLICITATION
The Board of Directors intends to solicit proxies by use of the mails, and
all costs of soliciting proxies for this annual meeting will be borne by the
Company. The proxy statement and form of proxy will be mailed to the
shareholders on April 19, 1995.
VOTING SECURITIES
The Company has issued one class of capital stock. There are 1,160,000
shares outstanding of which 779,895 are entitled to one vote each, except that
in election of Directors, cumulative voting rights apply as provided by Kentucky
Revised Statutes 271B.7-280. Each shareholder shall have the right to cast as
many votes in the aggregate as he is entitled to vote, multiplied by the number
of Directors to be elected, and may cast the whole number for one candidate or
distribute such votes among two or more candidates. Investors Heritage Life
Insurance Company ("IHLIC"), 200 Capital Avenue, Frankfort, Kentucky 40601 holds
directly 285,920 shares or 25% of the stock of the Company. Investors
Underwriters, Inc. ("IUI"), 200 Capital Avenue, Frankfort, Kentucky 40601 owns
94,185 shares or 8% of the stock of the Company. IHLIC owns 603 shares or 96%
of the stock of Investors Underwriters, Inc. HLW Investment Corp., 200 Capital
Avenue, Frankfort, Kentucky 40601, owns 130,824 shares or 11% of the Company.
No other person is known by the Company to own of record, or beneficially, more
than 5% of the Company's capital stock except as shown on the table below. The
Board of Directors has fixed April 3, 1995, as the record date for determining
those eligible to vote, and only such persons as are shareholders of record at
the close of business on that day will be entitled to vote at such meeting, and
at any adjournment thereof.
THE PURPOSE OF THE MEETING SHALL BE:
(1) To elect three Directors to hold office for a term of three years or
until their successors are duly elected and qualified;
(2) To approve an amendment to Article VI of the Company's Articles of
Incorporation to increase the number of authorized shares of common
stock of the Company from 1,225,000 to 4,000,000;
(3) To approve an amendment to Article X of the Company's Articles of
Incorporation to provide that Directors can only be removed for
cause;
(4) To approve an amendment to the Company's Articles of Incorporation to
add new Article XIII which will provide for the affirmative vote of
at least two-thirds of the outstanding voting shares to amend or
repeal Article X;
(5) To approve an amendment to the Company's Articles of Incorporation to
add new Article XIV which will incorporate the provisions of the
Kentucky Business Corporation Act pertaining to Business
Combinations; and
(6) To transact such other business as may properly come before the
meeting, or any adjournment thereof.
PROPOSAL ONE
ELECTION OF DIRECTORS
The Articles of Incorporation provide that three Directors shall be
elected at each annual meeting for a term of three years.
The persons named in the proxy shall vote the shares represented by the
proxies returned and duly executed in favor of the election of the three
Directors named below, unless the authority is withheld, to hold office for
terms of three years or until their successors are duly elected and qualified.
All nominees have consented to serve. In the event any of the persons named
below shall not be available, proxies will be voted for such substitute nominee,
or nominees, as the persons named in the proxy shall designate.
The following information is given with respect to the nominees for
election as Directors and for each of the other Directors whose terms will
continue after the meeting except as noted. Each Director was elected to his
present term of office by vote of the shareholders at an annual meeting. Each
of the Directors has had the business experience indicated for more than five
years except for Gordon Duke and David Reed. From 1987 to 1991, Mr. Duke was a
business consultant. In 1991 Mr. Duke served as the Budget Director for the
Commonwealth of Kentucky. During 1992, Mr. Duke became President of Court Key
Inc. In February 1994, Mr. Duke became Executive Vice President, Asset
Management Division, for Webb Companies, Lexington, Kentucky. For 17 years
prior to 1992, Mr. Reed was the President of Reed Crushed Stone, Gilbertsville,
Kentucky. Since that time Mr. Reed has been an independent businessman.
Number of Shares of Capital Stock of the
Company and Its Subsidiaries Beneficially
Owned, Directly or Indirectly, by Nominees
and Other Directors as of December 31, 1994.
IHLIC
Name,Position Kentucky (74% Owned Percentage
With the Company Director Investors, Subsi- of Stock
<F1>
&Business Experience Since Inc. (1) diary) Owned
NOMINEES:
*Dr. Jerry F. Howell,Jr. 1983 35,610 1,124 3%
Director. Head, Dept.
of Biological and
Environmental Science,
Morehead State University.
Director, IHLIC.
Age 53.
aDavid W. Reed 1982 25,950 1,214 2%
Director. Independent
Businessman.
Age 40.
+Warner Hines 1963 10,000 55 (-)
Director. Realtor.
Age 67.
Other Directors Whose Terms Will Continue
After Meeting:
<F2>
Helen S. Wagner 1986 30,000 2,500(2) 3%
Director. Real Estate
Broker,Secretary/
Treasurer,Wagner-Shuck
Builders,Inc. Director,
IHLIC.
Age 58.
+ Gordon Duke 1991 110 55 (-)
Director. Executive
Vice President, Asset
Management Division,
Webb Companies.
Age 49.
<F3>
<F4>
*+Robert M. Hardy,Jr. 1988 11,621(3) 18(4) (-)
aDirector & General
Counsel. Director &
General Counsel, IHLIC.
Age 37.
<F5>
<F13>
*+Harry Lee 1963 742,729(5) 732,541(13) 64%
<F6>
<F7>
<F14>
<F15>
Waterfield II (6) (7) (14)(15)
<F8>
<F9>
<F16>
<F17>
aChairman of the Board (8) (9) (16)(17)
<F10>
<F11>
<F20>
& President. Chairman (10) (11) (20)
<F12>
<F18>
of the Board, President (12) (18)
<F19>
<F21>
&Chief Executive Officer, (19) (21)
IHLIC.
Age 51.
+H. Glenn Doran 1963 20,000 783 2%
*Director. Chairman of
the Board, Peoples Bank
of Murray.
Age 69.
aJerry F. Howell 1963 6,000 346 (-)
Director. Independent
Investor. Director, IHLIC.
Age 81.
All Directors and Officers as a Group: 894,723
* Member of Executive Committee
+ Member of Finance Committee
a Member of Nominating Committee
(-) Indicates less than 1%
<F1>
(1) At December 31, 1994, 779,895 shares were outstanding and entitled to vote.
<F2>
(2) Includes 1,538 shares held in an irrevocable trust for the benefit of the
children of Helen S. Wagner.
<F3>
(3) Includes 3,423 shares purchased under Kentucky Investors, Inc., and
Affiliated Companies Employee Stock Ownership Plan ("ESOP") and Kentucky
Investors, Inc. and Affiliated Companies 401(k) Savings Plan and Trust Agreement
("401(k) Plan") held in Trust by Farmers Bank and Capital Trust Company,
Frankfort, Kentucky ("Farmers Bank").
<F4>
(4) Includes 7 shares purchased under the ESOP held in trust by Farmers Bank.
<F5>
(5) Mr. Waterfield II is part of a group which includes HLW Investment Corp.,
HLW Corporation, Laura F. Waterfield Estate, RoseGayle Waterfield Hardy, Nancy
Waterfield Walton, Harry Lee Waterfield II Irrevocable Trust Funds 1, 2 and 3,
RoseGayle Waterfield Hardy, Nancy Waterfield Walton and Harry Lee Waterfield II
Trust dated 12/22/76, IHLIC, IUI and TAP & CO.
<F6>
(6) Includes 130,824 shares of KII owned by HLW Investment Corp. of which Mr.
Waterfield II is an officer.
<F7>
(7) Includes 41,836 shares of KII owned by HLW Corporation of which Mr.
Waterfield II is an officer.
<F8>
(8) Includes 15,222 shares of KII held in trust for the benefit of the children
of Harry Lee Waterfield.
<F9>
(9) Includes 12,263 shares purchased under the ESOP and 401(k) Plan held in
Trust by Farmers Bank.
<F10>
(10) Includes 18,229 shares of KII held in the name of CEDE & Co., nominee for
the Estate of Laura F. Waterfield of which Mr. Waterfield II is co-executor.
<F11>
(11) Includes 12,063 shares of KII held by Nancy Waterfield Walton - see
Footnote (5).
<F12>
(12) Includes 9,502 shares of KII held by RoseGayle Waterfield Hardy - see
Footnote (5).
<F13>
(13) Includes 7,900 shares of IHLIC owned by HLW Investment Corp. of which
Harry Lee Waterfield II is an officer.
<F14>
(14) Includes 642 shares of IHLIC owned by HLW Corporation of which Harry Lee
Waterfield II is an officer.
<F15>
(15) Includes 3,038 shares of IHLIC held in the name of CEDE & Co., nominee for
the Estate of Laura F. Waterfield of which Mr. Waterfield II is co-executor.
<F16>
(16) Includes 200 shares of IHLIC held by Nancy Waterfield Walton - see
Footnote (5).
<F17>
(17) Includes 241 shares of IHLIC held by RoseGayle Waterfield Hardy - see
Footnote (5).
<F18>
(18) Includes 285,920 shares of KII held by IHLIC and 94,185 shares of KII held
by IUI. Mr. Waterfield II is Chairman of both companies. The corporations have
the power to dispose of these shares.
<F19>
(19) Includes 87,698 shares of KII, held in the name of TAP & CO for the
benefit of employees who participate in the ESOP and the 401(k) Plan. Mr.
Waterfield II is a member of the Administrative Committee which directs the
voting of these shares.
<F20>
(20) Includes 54,440 shares of IHLIC held in the name of TAP & CO. for the
benefit of employees who participate in the ESOP and the 401(k) Plan. Mr.
Waterfield II is a member of the Administrative Committee which directs the
voting of these shares.
<F21>
(21) Includes 14,330 shares of KII held in the name of CEDE & Co., nominee for
the nine separate Irrevocable Trusts, three each (Funds 1, 2 and 3) for Harry
Lee Waterfield II, RoseGayle Waterfield Hardy and Nancy Waterfield Walton,
respectively.
Meetings of the Board of Directors are held on call and there is an
organizational meeting following the annual meeting of shareholders. The Board
had 6 meetings in 1994.
The Board has an Executive Committee that exercises the power of the Board
of Directors in management of the business affairs during intervals between
meetings of the Board. The Board considers the action of the Executive
Committee and has approval and veto power over its actions. The Executive
Committee met 2 times in 1994.
The Board of Directors has provided for a Finance Committee that meets on
call and reviews and makes recommendations concerning investments to the Board
of Directors. The Finance Committee met 1 time in 1994.
The Board of Directors has provided for a Nominating Committee that meets
on call and submits recommendations to the Board of Directors for members of the
Board to be submitted to the shareholders for election. The Nominating
Committee met 1 time in 1994.
No one, except David Reed, attended fewer than 75% of the aggregate of the
total number of Board and Committee meetings. The Directors were paid $100 for
each Board Meeting.
PROPOSAL TWO
AMENDMENT TO ARTICLE VI OF THE ARTICLES OF INCORPORATION
The Board of Directors has directed that there be submitted to the
shareholders of the Company at the annual meeting a proposed amendment to
Article VI of the Company's Articles of Incorporation, as amended (the
"Articles"), to increase the number of authorized shares of common stock of the
Company from 1,225,000 shares to 4,000,000 shares. Such amendment was declared
advisable and unanimously approved by the Company's Board of Directors on
February 16, 1995. As more fully set forth below, the proposed amendment is
intended to improve the Company's flexibility in meeting its future needs for
unreserved common stock. In addition to general corporate purposes, the
proposed amendment can be used to make more difficult a change of control of the
Company.
PURPOSE AND EFFECTS OF AMENDMENT
As of the close of business on January 31, 1995, 1,160,000 shares of
common stock of the Company were issued and outstanding, leaving 65,000 shares
of common stock unreserved. If approved, the increased number of authorized
shares of common stock will be available for issue from time to time for such
purposes and considerations as the Board of Directors may approve and no further
vote of shareholders of the Company will be required, except as provided under
Kentucky law or under the rules of any national securities exchange on which
shares of common stock of the Company are then listed. The availability of
additional shares for issue, without the delay and expense of obtaining the
approval of shareholders at a special meeting, will afford the Company greater
flexibility in acting upon proposed transactions in which shares of common stock
may be issued.
The increase in the authorized common stock may also facilitate certain
anti-takeover devices that may be advantageous to the Board if the Board
attempts to prevent or delay a change of control. By using anti-takeover
devices, the Board could possibly thwart a merger or tender offer even though
shareholders might be offered a substantial premium over the then current market
price of the common stock. Therefore, employing such devices may adversely
impact shareholders who desire a change in management or who desire to
participate in a tender offer or other sale transaction involving the Company.
While it may be deemed to have potential anti-takeover effects, the proposed
amendment to increase the authorized common stock is not prompted by any
specific effort or takeover threat currently perceived by the Board. Moreover,
other than the measure set forth in Proposals Three, Four and Five herein, the
Board does not currently intend to propose additional anti-takeover measures in
the foreseeable future.
The additional shares of common stock for which authorization is sought
would be identical to the shares of common stock of the Company now authorized.
Holders of common stock do not have preemptive rights to subscribe to additional
securities which may be issued by the Company, which means that current
shareholders do not have a prior right to purchase any new issue of capital
stock of the Company in order to maintain their proportionate ownership thereof.
The additional authorized shares of common stock will give the Company
flexibility to issue common stock to a level that the Board of Directors
believes advisable. The additional shares of common stock for which
authorization is sought are available for issuance by the Company by action of
the Board of Directors and could be used for such purposes as stock dividends,
stock splits, acquisitions, reorganizations, offerings of stock or additional
compensation plans.
VOTE REQUIRED; BOARD OF DIRECTORS' RECOMMENDATION
The affirmative vote of the holders of a majority of the outstanding
shares of common stock entitled to vote at the annual meeting is required to
authorize the proposed increase in the authorized number of shares of common
stock. If the amendment is authorized, the text of Article VI of the Company's
Articles of Incorporation will be as follows:
The total authorized number of shares of stock in the corporation
shall be four million (4,000,000), each being of the par value of
One Dollar ($1.00). All shares shall have equal voting power of one
(1) vote for each share.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
PROPOSAL TO AMEND THE ARTICLES OF INCORPORATION TO INCREASE THE AUTHORIZED
NUMBER OF SHARES OF COMMON STOCK. Proxies solicited by management will be voted
FOR the proposal unless a vote against the proposal or abstention is
specifically indicated.
PROPOSED AMENDMENTS TO ARTICLE X AND THE ADDITION OF ARTICLE XIII AND ARTICLE
XIV TO THE COMPANY'S ARTICLES OF INCORPORATION
(Proposals Three, Four and Five on proxy)
GENERAL
In February, 1995, the Company's Board of Directors voted unanimously to
pass resolutions which propose amendments and additions to the Company's
Articles of Incorporation. Each of the amendments which have been proposed is
discussed and the full text of each amendment is included in this proxy
statement. Proposals Three, Four and Five are intended to discourage unfriendly
transactions such as unsolicited, hostile tender offers. It is the Company's
strategy to remain independent. The Board of Directors intends that any
prospective purchaser of the Company would be expected to negotiate with the
Board to assure that any purchaser would be required to offer terms which have
been approved by the Board and are fair to all shareholders.
The Company's Articles of Incorporation presently contain a provision for
the election of a staggered Board of Directors which is intended to have an
anti-takeover effect. The Company's By-laws presently contain a provision
which requires that a Director may only be removed for cause; however, Kentucky
law requires such a provision to be incorporated into the Articles. The Board
has unanimously approved each of these proposals.
THE BOARD OF DIRECTORS BELIEVES THE PROPOSED AMENDMENTS ARE IN THE BEST
INTEREST OF THE COMPANY AND ITS SHAREHOLDERS AND RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE AMENDMENTS DESCRIBED IN PROPOSALS THREE, FOUR AND FIVE.
PROPOSAL THREE
AMENDMENT TO ARTICLE X OF THE ARTICLES OF INCORPORATION
The Board of Directors has directed that there be submitted to the
shareholders of the Company at the annual meeting a proposed amendment to
Article X of the Company's Articles. Such amendment was declared advisable and
unanimously approved by the Company's Board of Directors on February 16, 1995.
As more fully set forth below, the proposed amendment would revise Article X of
the Articles to provide for removal of a Director only for cause. Article X
currently provides for a staggered Board of Directors with three Directors
elected at each annual meeting.
The proposal is intended to further ensure continuity of Board membership
and impede the ability of a third party to make sudden changes in Directors
through a proxy contest or the acquisition of a substantial stock interest.
Although the Company has not experienced any problems with respect to continuity
of the Board of Directors in the past, the Board believes that this proposal
will benefit the Company and its shareholders by preventing sudden disruptions
in management and policies in the future. However, to the extent the proposed
amendment would enable the Board of Directors to resist a change of control of
the Company, the proposal would enhance the tenure of the incumbent Directors.
This amendment may also benefit current management by making it more difficult
to replace Directors if their performance in office is considered
unsatisfactory.
The Board also recognizes that Proposal Four which will require the
affirmative vote of the holders of at least two-thirds of the outstanding voting
shares to amend or repeal such provision, if adopted, could have the effect of
making more difficult and possibly discouraging the accomplishment of a merger,
tender offer, proxy challenge or change of control which is opposed by the Board
of Directors, even when a majority of the shareholders considers such action to
be in its best interests. Under certain circumstances, the amendment could
enable the Board to defeat such actions, even if they were favored by a majority
of the shareholders.
PURPOSE AND EFFECTS OF THE AMENDMENT
Under current Kentucky law, a director can be removed from office by the
shareholders with or without cause, unless the articles of incorporation provide
otherwise. However, a director may not be removed if the number of shares
sufficient to elect him under cumulative voting is voted against his removal.
The Articles currently provide that the Company's Board of Directors is
classified into three classes, with one-third of the Directors elected each year
for a three-year term. The existence of a classified Board of Directors is
generally believed to discourage potential takeovers of a company because it
operates to delay a third party's ability to obtain control of the Board in a
relatively short period of time. This Proposal to provide that Directors can be
removed from that position only for cause might further discourage potential
takeover proposals. The amendment would delay a third party's control of the
Board of Directors because unless the shareholders voted to remove the Director
or Directors for cause, it would take at least two annual meetings of
shareholders to elect a majority. This amendment is currently a provision
contained in the Company's By-laws and is required by Kentucky law to be
incorporated into the Articles.
The Board of Directors believes that the proposed amendment is in the best
interests of the Company and its shareholders. The Board of Directors believes
that effective corporate governance is hampered when a Director is not free to
act in the best interest of the Company and its shareholders without concern
that he might be distracted or that his advice may be affected by the
uncertainties and risks created by his being subject to removal from the Board
without cause. The Board of Directors acknowledges that current and future
Directors could benefit from the approval of this amendment, and in this
connection the Directors may be considered to have a conflict of interest. The
Board of Directors is not aware of any action or contemplated action to remove a
Director from office.
VOTE REQUIRED; BOARD OF DIRECTORS RECOMMENDATION
The affirmative vote of the holders of a majority of the outstanding
shares of common stock entitled to vote at the annual meeting is required to
authorize the amendment to Article X of the Articles of Incorporation. If the
amendment is authorized, the text of Article X of the Company's Articles of
Incorporation will be as follows:
The number of Directors of the corporation shall be nine. The nine
members shall be divided into three classes, each consisting of three
members. The term of office of Directors of the first class shall expire
at the first annual meeting of the shareholders after their election; that
of the second class shall expire at the second annual meeting after their
election, and that of the third class shall expire at the third annual
meeting after their election. At each annual meeting after such
classification, the number of Directors equal to the number of the class
whose term expires at the time of such meeting shall be elected to hold
office until the third succeeding annual meeting. In the event of any
vacancy occurring in the Board of Directors, it shall be filled by the
affirmative vote of a majority of the remaining Directors, and shall be
for the unexpired term of his predecessor in office.
At a meeting of shareholders called expressly for that purpose, Directors
shall be removed, but only upon a showing of cause, by a vote of the
majority of the shareholders then entitled to vote at the election of
Directors, provided that if less than the entire Board of Directors is
removed, no Director may be removed if the votes cast against his removal
would be sufficient to elect him if then cumulatively voted at an election
of the entire Board of Directors.
All powers of the corporation not otherwise fixed by law or by these
Articles shall be vested in the Board of Directors, which shall have
authority to make and promulgate such By-Laws for the operation of the
corporation as are not inconsistent with the laws of the Commonwealth of
Kentucky or these Articles.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
PROPOSAL TO AMEND ARTICLE X OF THE ARTICLES OF INCORPORATION. Proxies solicited
by management will be voted FOR the proposal unless a vote against the proposal
or abstention is specifically indicated.
PROPOSAL FOUR
AMENDMENT TO ARTICLES OF INCORPORATION
TO ADD NEW ARTICLE XIII
The Board of Directors has directed that there be submitted to the
shareholders of the Company at the annual meeting a proposed amendment to the
Company's Articles to add new Article XIII. Such amendment was declared
advisable and unanimously approved by the Company's Board of Directors on
February 16, 1995. As more fully set forth below, the proposed amendment
requires the affirmative vote of the holders of at least two-thirds of the
voting power of all of the then outstanding shares of the Company entitled to
vote generally in the election of Directors, voting as a single class, in order
to alter, amend or repeal any provision of Article X of the Articles. Article X
currently provides for a staggered Board of Directors with three Directors
elected at each annual meeting. Proposal Three of this proxy statement would
revise Article X of the Articles to provide for the removal of a Director only
for cause.
PURPOSE AND EFFECTS OF THE AMENDMENT
Under Kentucky Law, amendments to articles of incorporation must generally
be approved by the Board of Directors and by the holders of a majority of the
outstanding shares voting thereon at a meeting of shareholders, unless the
articles of incorporation or the Board of Directors provide for a higher voting
requirement. In the case of supermajority voting provisions, Kentucky law
requires that any amendment or repeal thereof be approved by the vote of holders
of at least the same percentage of the outstanding shares entitled to vote
thereon prescribed by the requirements then in effect.
Proposed Article XIII would require that any amendment or repeal of
Article X be approved by shareholders owning at least two-thirds of the total
shares outstanding and entitled to vote generally in the election of Directors,
voting together as a single class. The requirement for an increased shareholder
vote to amend Article X is intended to prevent a shareholder that controls a
majority of the voting shares (or possibly less than a majority) from avoiding
the requirements of the staggered Board of Directors and the removal of
Directors for cause provisions discussed above by simply repealing or amending
Article X.
This proposal is intended to further ensure the continuity of Board
membership and impede the ability of a third party to make sudden changes in
Directors through a proxy contest or the acquisition of a substantial stock
interest. Although the Company has not experienced any problems with respect to
continuity of the Board of Directors in the past, the Board believes that this
proposal will benefit the Company and its shareholders by preventing sudden
disruptions in management and policies in the future. Such a provision, if
adopted, could have the effect of making more difficult and possibly
discouraging the accomplishment of a merger, tender offer, proxy challenge or
change of control which is opposed by the Board of Directors, even though a
majority of the shareholders consider such action to be in their best
interests.
The Board of Directors believes that the approval of Proposal Four is in
the best interests of the Company and its shareholders. The Board of Directors
acknowledges that current and future Directors could benefit from the approval
of this amendment, and in this connection the Directors may be considered to
have a conflict of interest.
VOTE REQUIRED; BOARD OF DIRECTORS RECOMMENDATION
The affirmative vote of the holders of a majority of the outstanding
shares of common stock entitled to vote at the annual meeting is required to
authorize the amendment to add Article XIII to the Company's Articles. If the
amendment is authorized, the text of new Article XIII of the Company's Articles
of Incorporation will be as follows:
ARTICLE XIII
Anything contained in these Articles of Incorporation or the By-laws to
the contrary notwithstanding and notwithstanding that a lesser percentage
may be specified or permitted by law, the affirmative vote of the holders
of at least two-thirds of the voting power of all of the then outstanding
shares of the corporation entitled to vote generally in the election of
Directors, voting together as a single class, shall be required to alter,
amend or repeal any provision of Article X.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
PROPOSAL TO AMEND THE ARTICLES OF INCORPORATION TO ADD NEW ARTICLE XIII.
Proxies solicited by management will be voted FOR the proposal unless a vote
against the proposal or abstention is specifically indicated.
PROPOSAL FIVE
AMENDMENT TO ARTICLES OF INCORPORATION
TO ADD NEW ARTICLE XIV
The Board of Directors has directed that there be submitted to the
shareholders of the Company at the annual meeting a proposed amendment to the
Company's Articles to add new Article XIV. Such amendment was declared
advisable and unanimously approved by the Company's Board of Directors on
February 16, 1995. As more fully set forth below, the proposed amendment is
intended to incorporate into the Company's Articles the provisions of Chapter
271B.12-200 et seq. of the Kentucky Revised Statutes, which were enacted by the
Kentucky General Assembly to deal with certain Business Combinations. In
addition to the general corporate purposes, the proposed amendment can be used
to make more difficult a change of control of the Company.
Kentucky Revised Statutes 271B.212-200 through 271B.212-230 (the "Business
Combinations Act") authorizes a corporation, by amendment to the articles of
incorporation, to require an established percentage of affirmative votes prior
to the effectuation of any Business Combination. The Company's Board of
Directors believes that it is advisable for general corporate purposes to follow
Kentucky law and to adopt the provisions set forth below.
The proposed amendment would add a new Article XIV to the Articles whereby
the Company would elect to be included under and subject to the provisions of
KRS 271B.12-200 through KRS 271B.12-230, as such sections may be amended from
time to time by the General Assembly of the Commonwealth of Kentucky, generally,
without qualification or limitation. The operation of the relevant provisions
adopted by this proposal would (a) require a special vote of shareholders to
approve a merger or other specified Business Combination between the Company and
an Interested Shareholder, unless the transaction is approved by a majority of
the disinterested Directors of the Company or certain minimum price requirements
are met; (b) restrict any merger or other Business Combination transaction
between the Company and an Interested Shareholder for a five-year period unless
the transaction is approved by a majority of the disinterested Directors of the
Company; and (c) require an increased shareholder vote to amend Article XIV.
Proposed Article XIV is hereinafter referred to as the "Business Combination
Amendment".
PURPOSES AND EFFECTS OF THE AMENDMENT
The Business Combination Amendment would require the affirmative vote of a
supermajority of the shareholders of the outstanding Voting Stock of the Company
as a condition for mergers and certain other Business Combinations involving
the Company and any Interested Shareholder, unless the transaction is approved
by a majority of the members of the Board of Directors who are unaffiliated with
the Interested Shareholder and who were Directors before the Interested
Shareholder became an Interested Shareholder, or unless certain minimum price
and form of consideration requirements are met. In addition, unless approved by
a majority of the Independent Members of the Board, the Company would not be
permitted to engage in any Business Combination with an Interested Shareholder
for a period of five years from the date such person became an Interested
Shareholder.
As more fully discussed below, the Board of Directors believes that the
Business Combination Amendment will help assure that the Company's shareholders
will be treated equally if certain kinds of Business Combinations are effected.
However, the Business Combination Amendment may make it more difficult to
accomplish certain transactions which are opposed by the incumbent Board of
Directors and which may be beneficial to certain shareholders.
The Board of Directors has observed that it has become a relatively common
practice in corporate takeovers to pay cash to acquire a controlling equity
interest in a company and then to acquire the remaining equity interest in such
company by paying the balance of the shareholders a price for their shares which
is lower than the price paid to acquire control and/or is in a less desirable
form of consideration, frequently securities of the purchaser that do not have
an established trading market at the time of issue. The Board considers that
such "two-tier pricing" tactics can be highly disruptive to the Company and can
result in unfair and dissimilar treatment to the Company's shareholders. By
their very nature they tend (and are designed) to cause concern on the part of
shareholders that if they do not act promptly, they risk either being relegated
to the status of minority shareholders in a controlled company or being forced
to accept a lower price for all of their shares. Thus, such tactics pressure
shareholders into selling as many of their shares as possible either to the
purchaser or in the open market, without having the opportunity to make a
considered investment choice between remaining a shareholder of the company or
disposing of their shares. However, their very actions in selling their shares
facilitate the purchaser's acquisition of a controlling interest in the company,
at which point the purchaser is able to force the exchange of the shareholder's
remaining shares for a lower price in a Business Combination.
The problems caused by partial offers and two-tier pricing are so serious
that many states, including Kentucky, have adopted legislation addressing them
in various respects; however, in Kentucky, domestic insurance companies are
exempt from the statute. It is not clear whether an interpretation could be
rendered that the Company would be included within this exemption because of its
affiliation with Investors Heritage Life Insurance Company, a domestic
insurer.
The Business Combination Amendment, if approved, will incorporate the Business
Combinations Act into the Company's Articles of Incorporation.
The Business Combination Amendment is designed to achieve a measure of
assurance that any multi-step attempt to take over the Company is made on terms
which offer similar treatment to all shareholders. The Business Combination
Amendment is not designed to prevent or discourage tender offers or other
acquisition proposals for the Company where the Business Combination has been
approved by the Independent Members of the Board of Directors. Further, the
Business Combination Amendment does not preclude a person from making a tender
offer for or otherwise acquiring some of the shares of the Company's stock
without proposing a Business Combination in which the remaining shares of stock
are purchased.
It should be noted that while the Business Combination Amendment is
designed to help assure substantially similar treatment of all shareholders in
the event of a takeover, it is not the purpose of the Business Combination
Amendment to assure that shareholders will receive a premium price for their
shares in a takeover. Accordingly, the adoption of the Business Combination
Amendment would not preclude the Board's opposition to any future takeover
proposal which it believes not to be in the best interest of the Company and its
shareholders, whether or not such a proposal satisfied the minimum price and
form of consideration requirements of the Business Combination Act.
DESCRIPTION OF THE BUSINESS COMBINATION ACT
The following description of the Business Combination Act is qualified in
its entirety by reference to the text of the Kentucky Revised Statutes. Exhibit
1 to this Proxy Statement provides various definitions from the Business
Combinations Act which are relevant to the following description. You are
encouraged to refer to Exhibit 1.
Special Vote Requirement For Business Combinations
Under Kentucky law, mergers, share exchanges, sales of substantially all
of the assets of the Company and the adoption of a plan of dissolution of the
Company must generally be approved by the Board of Directors and by the
affirmative vote of a majority of the outstanding voting shares. Certain other
transactions, such as sales of less than substantially all of the assets of the
Company do not require any shareholder approval under Kentucky law.
Under the proposed Business Combination Amendment, a Business Combination
must be approved either by a majority of the Independent Members of the Board of
Directors who are also Continuing Directors, or by the affirmative vote of at
least (a) 80% of the votes entitled to be cast by outstanding shares of Voting
Stock of the corporation, and (b) two-thirds of the votes entitled to be cast by
holders of Voting Stock other than Voting Stock Beneficially Owned by the
Interested Shareholder who is, or whose Affiliate is, a party to the Business
Combination or by an Affiliate or Associate of such Interested Shareholder,
voting together as a single voting group (collectively, (a) and (b) the "Special
Vote Requirements"). Unless exempt from the operation of the Business
Combinations Act, the failure to comply with these voting requirements shall
render the Business Combination void. The Independent Members of the Board of
Directors who are also Continuing Directors are not required to either approve
or disapprove any proposed Business Combination.
Exception To Special Vote Requirements
The Special Vote Requirement for a Business Combination would not be
necessary if (1) the transaction has been approved by a majority of the
Independent Members of the Board of Directors who are also Continuing Directors
or (2) all of the minimum price and form of consideration requirements described
below are satisfied. In the event the requisite Board approval is given or the
minimum price and form of consideration requirements are met with respect to a
particular Business Combination, the normal shareholder vote requirements of
Kentucky law would apply. Further, Business Combinations between the Company
and its subsidiaries are exempt from the Special Vote Requirements; therefore,
normal voting requirements of Kentucky would also apply to such transactions.
Minimum Price And Form Of Consideration Criteria
Unless approved by a majority of the Independent Members of the Board who
are also Continuing Directors, the consideration being paid to the shareholders
of each class of Voting Stock would be required to be either cash or the same
type of consideration used by the Interested Shareholder in acquiring the same
class of stock. In addition, the Market Value of such consideration on the
Valuation Date would be required to meet certain minimum price criteria
described below. If these minimum price and form of consideration criteria are
met, the Special Vote Requirements will not apply.
In the case of payments to holders of the Company's common stock, the
aggregate amount of cash and the Market Value as of the Valuation Date of
consideration other than cash would have to be at least equal to the highest of
the following:
(1) the highest per share price paid by the Interested Shareholder for the
shares of common stock acquired by it (a) within the five-year period
immediately prior to the Announcement Date, or (b) in the transaction in which
it became an Interested Shareholder, whichever is higher;
(2) the Market Value per share of common stock on the Announcement Date
or the Determination Date, whichever is higher; or
(3) the price per share equal to the Market Value per share of common
stock multiplied by the fraction of (a) the highest per share price paid by the
Interested Shareholder for any shares acquired during the five-year period
immediately prior to the Announcement Date, over (b) the Market Value per share
of common stock on the first day of such five-year period on which the
Interested Shareholder acquired any shares of common stock.
In making any price calculations, appropriate adjustments are required to
be made to reflect any reclassification (including any reverse stock split),
recapitalization, reorganization, or any similar transaction which has the
effect of reducing the number of outstanding shares of the stock. The
shareholders are entitled to receive consideration in the same form as the
Interested Shareholder has previously paid for the shares purchased by it. If
the Interested Shareholder has paid for shares with varying forms of
consideration, the form of consideration required to be used shall be either
cash or the form used to acquire the largest number of shares previously
acquired by the Interested Shareholder.
The Special Vote Requirements shall not apply if after the Interested
Shareholder has become an Interested Shareholder and prior to the consummation
of a Business Combination, there has been a reduction in the annual rate of
dividends paid, except as necessary to reflect any subdivision of the stock, or
an increase in the annual rate of dividends as necessary to reflect any
reclassification (including any reverse stock split), recapitalization,
reorganization or any similar transaction which has the effect of reducing the
number of outstanding shares of the stock. Further, the Special Vote
Requirement is not applicable if prior to the consummation of the Business
Combination the Interested Shareholder becomes the Beneficial Owner of any
additional shares of stock of the Company.
Five-Year Waiting Period
Under the proposed Business Combination Amendment, the Company would be
unable to engage in any Business Combination with any entity or person who is at
the time of such Business Combination an Interested Shareholder, unless the
Interested Shareholder became such prior to March 28, 1986, for a period of five
years following the Determination Date unless such Business Combination or the
transaction in which the Interested Shareholder became such is approved by a
majority of the Independent Members of the Board prior to the Determination
Date.
Interested Shareholder
Currently Harry Lee Waterfield II and the affiliated group disclosed in
footnote 5 of this proxy statement are the only shareholders known to the
Company which would be classified as Interested Shareholders (see "Election of
Directors"). Also as disclosed in this proxy statement, Investors Heritage Life
Insurance Company owns more than 10% of the outstanding common stock of the
Company; however, pursuant to Kentucky law, such shares are not entitled to be
voted (see "Voting Securities"). The Special Vote Requirements of the Business
Combination Act will not apply to any Business Combination proposed by Mr.
Waterfield and the affiliated group because they became an Interested
Shareholder before March 28, 1986 and have held more than 10% of the Company's
common stock continuously since that time.
Vote Required To Amend Or Repeal
The Business Combination Act provides that a vote of the holders of 80% of
the votes entitled to be cast by outstanding shares of Voting Stock and two-
thirds of the Voting Stock not owned by any Interested Shareholder would be
required in order to alter or repeal the Business Combination Amendment, or to
adopt any provisions inconsistent with the Business Combination Act.
CONSIDERATIONS IN SUPPORT OF THE BUSINESS COMBINATION AMENDMENT
As previously discussed, a number of companies have been the subject of
tender offers for, or other acquisitions of, less than all of their outstanding
shares of stock. In many cases, such purchases have been followed by Business
Combinations in which the tender offeror or other purchaser has paid a lower
price for the remaining outstanding shares than the price it paid in acquiring
its original interest in the corporation and has paid a less desirable form of
consideration. The Business Combination Amendment is intended partially to
prevent certain of the potential inequities of Business Combinations which
involve two or more steps by requiring that in order to complete a Business
Combination which is not approved by a majority of the Continuing Directors, an
Interested Shareholder must either acquire (or assure itself of obtaining the
affirmative votes of) at least 80% of the Voting Stock prior to the Business
Combination or be prepared to meet the minimum price and form of consideration
requirements of the Business Combination Act. The Business Combination
Amendment is also designed to protect those shareholders who have not tendered
or otherwise sold their shares to a purchaser who is attempting to acquire
control by ensuring that at least the same price and form of consideration is
paid to shareholders in the initial step of the acquisition. In the absence of
the Business Combination Amendment, an Interested Shareholder who acquired
control of the Company could subsequently, by virtue of such control, force
minority shareholders to sell or exchange their shares at a price which would
not reflect any premium such purchaser may have paid in order to acquire its
controlling interest and would effectively be set by such Interested
Shareholder. Such a price might very well be lower than the price paid by such
purchaser in acquiring control and may also be in a less desirable form of
consideration (e.g., equity or debt securities of the purchaser instead of
cash).
The minimum price and form of consideration requirements of the Business
Combination Amendment may require that a purchaser pay shareholders a higher
price for their shares and/or structure the transaction differently than would
be the case without the Business Combination Amendment. However, these
requirements would not apply to a Business Combination approved by a majority of
the Continuing Directors. Accordingly, the Board of Directors believes that, to
the extent a Business Combination is involved as part of a plan to acquire
control of the Company, adoption of the Business Combination Amendment would
increase the likelihood that a purchaser would negotiate directly with the
Board. The Board believes that it is in a better position than the individual
shareholders of the Company to negotiate effectively on behalf of all
shareholders because the Board is likely to be more knowledgeable than any
individual shareholder in assessing the business and prospects of the Company.
Accordingly, the Board is of the view that negotiations between the Company and
the purchaser would increase the likelihood that shareholders would receive a
higher price for their shares from anyone desiring to obtain control of the
Company through a Business Combination or otherwise.
Although not all acquisitions of a substantial block of a corporation's
shares of stock are made with the objective of acquiring control of the
corporation through a subsequent Business Combination, in most cases a purchaser
desires to have the option to consummate such a Business Combination. Assuming
that to be the case, the Business Combination Amendment would tend to discourage
purchasers whose objective is to seek control of the Company at a relatively low
price, since acquiring the remaining equity interest would not be assured unless
the minimum price and form of consideration requirements were satisfied or a
majority of the Continuing Directors were to approve the transaction. In no
event, however, would the Company be permitted to engage in any Business
Combination with an Interested Shareholder, unless the Interested Shareholder
became such prior to March 28, 1986, for a period of five years following the
Determination Date unless such Business Combination or the transaction in which
the Interested Shareholder became such is approved by a majority of the
Independent Members of the Board. The Business Combination Amendment should
also discourage the accumulation of large blocks of the Company's shares of
stock, which the Board believes to be disruptive to the stability of the
Company's vitally important relationships with its employees and customers, and
which could possibly precipitate a change of control of the Company on terms
unfavorable to the Company's other shareholders.
CONSIDERATIONS AGAINST THE BUSINESS COMBINATION AMENDMENT
Tender offers or other negotiated acquisitions of shares of stock are
usually made at prices above the prevailing trading price of the Company's
stock. The Business Combination Amendment may discourage such purchases,
particularly those of less than all the Company's shares, and may thereby
deprive holders of the Company shares of stock of an opportunity to sell their
shares at a higher price. Because of the higher percentage requirements for
shareholder approval of any subsequent Business Combination and the possibility
of having to pay a higher price to other shareholders in such a Business
Combination, it may become more costly for a purchaser to acquire control of the
Company. The Business Combination Amendment requirements may therefore decrease
the likelihood that a tender offer will be made for less than all of the Voting
Stock and, as a result, may adversely affect those shareholders who would desire
to participate in such a tender offer.
Further, a purchaser seeking to take over the Company by means of a two-
step acquisition may, in order to preserve the ability to comply with the
minimum price requirements of the Business Combination Amendment, offer an
amount per share in the first step which is less than it might have offered in
the absence of the Business Combination Amendment. Moreover, a potential
purchaser of shares of stock seeking to obtain control of the Company may also
be discouraged from purchasing stock because an amendment to the Articles would
be needed in order to change or eliminate these provisions.
The effect of adoption of the Business Combination Amendment would be to
give veto power to a majority of the Independent Members of the Board of
Directors with respect to a Business Combination which 80% of the shareholders
may believe to be desirable and beneficial. To this extent, the Business
Combination Amendment may favor incumbent management to the detriment of certain
shareholders.
If approved, a change of control of the Company may be delayed unless
holders of a substantial percentage of the outstanding voting securities approve
the change of control transaction. The overall effect of the proposal is to
render more difficult the accomplishment of mergers or the assumption of control
by a principal shareholder, and thus make more difficult the removal of
management. The effect of these changes may negatively impact shareholders
desiring a change of control. The proposed amendment would also give the
holders of a minority of the total shares outstanding and entitled to vote a
veto power over a merger which management and/or a majority of the shareholders
may believe is desirable and beneficial.
VOTE REQUIRED; BOARD OF DIRECTORS' RECOMMENDATION
The affirmative vote of the holders of a majority of the outstanding
shares of common stock entitled to vote at the annual meeting is required to
authorize the proposed amendment. If the amendment is authorized, the text of
Article XIV of the Company's Articles of Incorporation will be as follows:
ARTICLE XIV
The corporation elects to be included under and subject to the provisions
of Kentucky Revised Statutes Section 271B.12-200 through Section 271B.12-
230 as they may be amended from time to time by the General Assembly of
the Commonwealth of Kentucky, generally, without qualification or
limitation.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
PROPOSAL TO AMEND THE ARTICLES OF INCORPORATION TO ADD NEW ARTICLE XIV. Proxies
solicited by management will be voted FOR the proposal unless the vote against
the proposal or abstention is specifically indicated.
SHAREHOLDER PROPOSALS FOR THE 1996 MEETING
Shareholders who wish to suggest nominees or offer proposals intended to
be presented at the 1996 annual meeting must forward this information to the
Secretary of the Company no later than December 22, 1995.
COMPENSATION OF EXECUTIVE OFFICERS PAID BY THE CORPORATION AND ITS SUBSIDIARIES
The Company does not pay any of its executive officers a regular salary;
therefore, the Company does not have a Compensation Committee. The expense of
the retirement plan to Kentucky Investors, Inc., for its executive officers is
none. Eight executive officers of the Company, who also serve as Directors
and/or officers of the Company's subsidiary, Investors Heritage Life Insurance
Company, were compensated by IHLIC.
STOCK PERFORMANCE GRAPH
The following graph sets forth the cumulative total shareholder return
(assuming reinvestment of dividends) to the Company's shareholders during the
five year period ended December 31, 1994, as well as an overall stock market
index (Russell 2000) and the Company's peer group index selected on an industry
basis. The component companies utilized in the peer group are identical to
those used last year and include The Liberty Corp., NWNL Cos. Inc., Pioneer
Financial Services Inc., Provident Life and Accident Insurance Company,
Torchmark Corp., UNUM Corp., USLife Corp., and Washington National Corp. The
market capitalization of each peer group company is weighted in the performance
graph presented below.
Comparison of Five-Year Cumulative Total Return*
Kentucky Investors, Russell 2000 Index, Peer Group
(Performance results through 12/31/94)
This performance graph appears here.
1989 1990 1991 1992 1993 1994
KINV $100.00 $ 102.69 $105.54 $104.29 $111.46 $114.76
RUSSELL 2000 $100.00 $ 80.49 $117.56 $139.21 $165.52 $162.24
PEER GROUP $100.00 $ 81.70 $118.37 $164.86 $159.71 $127.90
Assumes $100 invested at the close of trading 12/89 in Kentucky Investors common
stock, Russell 2000 Index, and Peer Group.
*Cumulative total return assumes reinvestment of dividends.
Source: Value Line, Inc.
Factual material is obtained from sources believed to be reliable, but the
publisher is not responsible for any errors or omissions contained herein.
AUDITORS
Ernst & Young, Louisville, Kentucky, is the independent auditing firm for
the Company and has been since 1981, including the most recent year of 1994. A
representative is expected to be present at the shareholders' meeting with the
opportunity to make a statement and will respond to appropriate questions. The
services provided by Ernst & Young during 1994 consisted of the audit of the
Company's financial statements and audit of the Company's employee benefit
plans. No member of the firm of Ernst & Young has any relationship with the
Company other than the usual relationship that exists between independent
auditors and clients.
OTHER MATTERS
There were no other transactions to which the Company was or is to be a
party, in which any officer or Director or nominee for election as Director had
any direct or indirect material interest.
At the date of this proxy statement, management knows of no other matters
to come before the meeting. However, if any other matter properly comes before
the meeting, it is the intention of the persons named in the proxy statement to
vote on such matters in accordance with their best judgment.
By Order of the Board of Directors
KENTUCKY INVESTORS, INC.
Frankfort, Kentucky
April 19, 1995
Wilma Yeary, CPS, Secretary
EXHIBIT 1
TO THE PROXY STATEMENT OF KENTUCKY INVESTORS, INC.
FOR THE PROPOSED AMENDMENT TO THE
ARTICLES OF INCORPORATION TO ADD ARTICLE XIV
DEFINITIONS
"Affiliate," including the term "affiliated person," means a person who
directly, or indirectly through one (1) or more intermediaries, controls, or is
controlled by, or is under common control with, a specified person.
"Control," including the terms "controlling," "controlled by" and "under
common control with," means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a person,
whether through the ownership of voting securities, by contract, or otherwise
and the beneficial ownership of ten percent (10%) or more of the votes entitled
to be cast by a corporation's voting stock creates a presumption of control.
"Associate," when used to indicate a relationship with any person, means:
(a) any corporation or organization (other than the corporation or a
subsidiary of the corporation) of which such person is an officer, director or
partner or is, directly or indirectly, the beneficial owner of ten percent (10%)
or more of any class of equity securities;
(b) any trust or other estate in which such person has a substantial
beneficial interest or as to which such person serves as trustee or in a similar
fiduciary capacity; and
(c) any relative or spouse of such person, or any relative of such
spouse, any one (1) of whom has the same home as such person or is a director or
officer of the corporation or any of its affiliates.
"Beneficial owner," when used with respect to any voting stock, means a
person
(a) who, individually or with any of its affiliates or associates,
beneficially owns voting stock, directly or indirectly; or
(b) who, individually or with any of its affiliates or associates, has:
(1) the right to acquire voting stock, whether such right is exercisable
immediately or only after the passage of time and whether or not such right is
exercisable only after specified conditions are met, pursuant to any agreement,
arrangement, or understanding or upon the exercise of conversion rights,
exchange rights, warrants or options, or otherwise;
(2) the right to vote voting stock pursuant to any agreement,
arrangement, or understanding; or
(3) any agreement, arrangement, or understanding for the purpose of
acquiring, holding, voting or disposing of voting stock with any other person
who beneficially owns, or whose affiliates or associates beneficially own,
directly or indirectly, such shares of voting stock; however, for the purposes
of this Section and KRS 271B.12.230 the beneficial owner of any voting stock
held by, or owned through participation in, any purchase, savings, option,
bonus, appreciation, profit sharing, thrift, incentive, pension, stock ownership
or similar plan for employees or officers of the corporation or any of its
subsidiaries shall be deemed to be the shareholder of record of such voting
stock as shown on the stock transfer books of the corporation.
"Business combination" means:
(a) unless the merger or consolidation does not alter the contract rights
of the stock as expressly set forth in the articles of incorporation or change
or convert in whole or in part the outstanding shares of stock of the
corporation, any merger or consolidation of the corporation or any subsidiary
with any interested shareholder or any other corporation, whether or not itself
an interested shareholder, which is, or after the merger or consolidation would
be, an affiliate or associate of an interested shareholder who was an interested
shareholder prior to the transaction;
(b) any sale, lease, transfer, or other disposition, other than in the
ordinary course of business, in one (1) transaction or a series of transactions
in any twelve-month period, to any interested shareholder or any affiliate or
associate of any interested shareholder, other than the corporation or any
subsidiaries, of any assets of the corporation or any subsidiary having,
measured at the time the transaction or transactions are approved by the board
of directors of the corporation, an aggregate book value as of the end of the
corporation's most recently ended fiscal quarter of five percent (5%) or more of
the total market value of the outstanding stock of the corporation or of its net
worth as of the end of its most recently ended fiscal quarter;
(c) the issuance or transfer by the corporation, or any subsidiary, in
one transaction or a series of transactions in any twelve-month period, of any
equity securities of the corporation or any subsidiary which have an aggregate
market value of five percent (5%) or more of the total market value of the
outstanding stock of the corporation, determined as of the end of the
corporation's most recently ended fiscal quarter prior to the first such
issuance or transfer, to any interested shareholder or any affiliate or
associate of any interested shareholder, other than the corporation or any of
its subsidiaries, except pursuant to the exercise of warrants or rights to
purchase securities offered pro rata to all holders of the corporation's voting
stock or any other method affording substantially proportionate treatment to the
holders of voting stock;
(d) the adoption of any plan or proposal for the liquidation or
dissolution of the corporation in which anything other than cash will be
received by an interested shareholder or any affiliate or associate of any
interested shareholder; or
(e) any reclassification of securities, including any reverse stock
split; or recapitalization of the corporation; or any merger or consolidation of
the corporation with any of its subsidiaries; or any other transaction which has
the effect, directly or indirectly, in one transaction or a series of
transactions, of increasing by five percent (5%) or more the proportionate
amount of the outstanding shares of any class of equity securities of the
corporation or any subsidiary which is directly or indirectly beneficially owned
by any interested shareholder or any affiliate or associate of any interested
shareholder; or
(f) any receipt by an interested shareholder or any affiliate or
associate of such interested shareholder of the benefit directly or indirectly,
except proportionately as a shareholder of such corporation, of any loans,
advances, guaranties, pledges or other financial assistance, or any tax credits
or other tax advantages provided by or through such corporation.
"Continuing director" means any member of the board of directors who is
not an affiliate or associate of an interested shareholder or any of its
affiliates, other than the corporation or any of its subsidiaries, and who was a
director of the corporation prior to the time the interested shareholder became
an interested shareholder, and any successor to such continuing director who is
not an affiliate or associate of an interested shareholder or any of its
affiliates, other than the corporation or any of its subsidiaries, and was
recommended or elected by a majority of the continuing directors at a meeting at
which a quorum consisting of a majority of the continuing directors is present.
"Independent member" of the board of directors means any director who is
not an officer or full-time employee of the corporation or an affiliate or
associate of an interested shareholder or any of its affiliates.
"Interested shareholder" means any person, other than the corporation or
any of its subsidiaries, who:
(a) is the beneficial owner, directly or indirectly, of ten percent (10%)
or more of the voting power of the outstanding voting stock of the corporation;
or is an affiliate of the corporation and at any time within the five-year
period immediately prior to the date in question was the beneficial owner,
directly or indirectly, of ten percent (10%) or more of the voting power of the
then outstanding voting stock of the corporation. The term interested
shareholder shall not mean any entity or person holding or owning voting stock
for, or through participation in, any purchase, savings, option, bonus,
appreciation, profit sharing, thrift, incentive, pension, stock ownership or
similar plan for employees or officers of the corporation or any of its
subsidiaries;
(b) for the purpose of determining whether a person is an interested
shareholder, the number of shares of voting stock deemed to be outstanding shall
include shares deemed owned by the person through application of the definition
of beneficial owner but shall not include any other shares of voting stock which
may be issuable pursuant to any agreement, arrangement, or understanding, or
upon exercise of conversion rights, warrants or options, or otherwise.
"Market value" means:
(a) in the case of stock, the highest closing sale price during the
thirty-day period immediately preceding the date in question of a share of such
stock on the composite tape for New York stock exchange listed stocks, or, if
such stock is not quoted on the composite tape on the New York stock exchange,
or if such stock is not listed on such exchange, on the principal United States
securities exchange registered under the Securities Exchange Act of 1934 on
which such stock is listed, or, if such stock is not listed on any such
exchange, the highest closing bid quotation with respect to a share of such
stock during the thirty-day period preceding the date in question on the
National Association of Securities Dealers, Inc., Automated Quotations System or
any system then in use, or if no such quotations are available, the fair market
value on the date in question of a share of such stock as determined by a
majority of the continuing directors at a meeting of the board of directors at
which a quorum consisting of at least a majority of the continuing directors is
present; and
(b) in the case of property other than cash or stock, the fair market
value of such property on the date in question as determined by a majority of
the continuing directors at a meeting of the board of directors at which a
quorum consisting of at least a majority of the continuing directors is present.
"Subsidiary" means any corporation of which voting stock having a majority
of the votes entitled to be cast is owned, directly or indirectly, by the
corporation.
"Voting stock" means shares of capital stock of a corporation entitled to
vote generally in the election of directors.
"Announcement date" means the first general public announcement of the
proposal or intention to make a proposal of the business combination or its
first communication generally to shareholders of the corporation, whichever is
earlier.
"Determination date" means the date on which an interested shareholder
first became an interested shareholder.
"Valuation date" means:
1. for a business combination voted upon by shareholders, the latter of
the day prior to the date of the shareholders vote or the date twenty (20) days
prior to the consummation of the business combination; and
2. for a business combination not voted upon by shareholders, the date of
the consummation of the business combination.
Proxy KENTUCKY INVESTORS, INC. Proxy
200 CAPITAL AVENUE, FRANKFORT, KENTUCKY 40601
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Harry Lee Waterfield II and Jerry F. Howell, or
either of them, attorneys with full power of substitution to vote as proxies for
the undersigned at the annual meeting of Shareholders of Kentucky Investors,
Inc. to be held on May 11, 1995, or at any adjournment thereof, and vote as
designated below with all powers the undersigned would possess, if present, upon
matters described in the notice of annual meeting and proxy statement dated
April 19, 1995 as follows:
PROPOSAL(S) DIRECTORS RECOMMEND A VOTE "FOR" EACH PROPOSAL
(1) Election of __FOR all nominees __WITHHOLD AUTHORITY
Directors listed below (except to vote for all nominees
as marked to the below
contrary below)
INSTRUCTION: To withhold authority to vote for any individual nominee, strike a
line through the nominee's name as follows: Helen S. Wagner, Gordon Duke, Robert
M. Hardy, Jr.
(2) Amendment to Article VI of the Articles of Incorporation.
___For ___Against ___Abstain
(3) Amendment to Article X of the Articles of Incorporation.
___For ___Against ___Abstain
(4) Amendment to the Articles of Incorporation to add Article XIII.
___For ___Against ___Abstain
(5) Amendment to the Articles of Incorporation to add Article XIV.
___For ___Against ___Abstain
(6) On any other matter which may come before the meeting in accordance with
their best judgement.
This proxy when properly executed will be voted in accordance with instructions
specified but in the absence of any instructions will be voted "FOR" Items (1),
(2), (3), (4), and (5).
Please sign exactly as name appears on address. If shares of stock are held
jointly, all joint owners should sign. If signing as attorney, administrator,
executor, guardian, trustee or corporate officer, please add your title as such.
_____________________________
_____________________________
Shareholder's signature
Date_________________________, 1995
To be counted, this proxy must be signed, dated and received by the Corporate
Secretary of Kentucky Investors, Inc., 200 Capital Avenue, P.O. Box 717,
Frankfort, Kentucky 40602, on or before May 11, 1995.
