UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act
of 1934
For the quarter ended March 31, 1995 Commission File Number 0-13030
Trans Financial, Inc.
(Exact name of registrant as specified in its charter)
Kentucky 61-1048868
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
500 East Main Street, Bowling Green, Kentucky 42101
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (502)781-5000
Trans Financial Bancorp, Inc.
(Former name, former address, and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No _
The number of shares outstanding of the issuer's class of common stock on May 8,
1995: 11,213,857 shares.
The Exhibit Index is on page 18. This filing contains 41 pages (including this
facing sheet).
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Part I - Financial Information
Item 1. Financial Statements
<PAGE>
Consolidated Balance Sheets
(Unaudited)
In thousands, except share data March 31 December 31 March 31
1995 1994 1994
Assets
Cash and due from banks $75,476 $80,828 $64,403
Interest-bearing deposits with banks 197 197 196
Federal funds sold and
resale agreements 29,175 - 23,248
Mortgage loans held for sale 7,680 6,541 26,653
Securities available for sale(amortized
cost of $232,046 as of March 31, 1995;
$242,079 as of December 31, 1994;
and $230,771 as of March 31, 1994) 224,522 229,643 231,066
Securities held to maturity (market
value of $84,541 as of March 31, 1995;
$81,209 as of December 31, 1994;
and $150,215 as of March 31,1994) 85,725 84,758 147,112
Loans, net of unearned income 1,153,935 1,143,716 1,045,184
Less allowance for loan losses 12,880 12,529 12,640
Net loans 1,141,055 1,131,187 1,032,544
Premises and equipment, net 37,401 36,440 33,214
Other assets 53,271 48,241 36,687
Total assets $1,654,502 $1,617,835 $1,595,123
Liabilities and Shareholders' Equity
Deposits:
Non-interest bearing $175,583 $192,433 $169,722
Interest bearing 1,240,162 1,143,076 1,198,793
Total deposits 1,415,745 1,335,509 1,368,515
Federal funds purchased and
repurchase agreements 33,409 74,553 28,409
Other short-term borrowings 37,798 48,033 36,254
Long-term debt 37,172 37,334 41,287
Other liabilities 13,201 10,774 8,798
Total liabilities 1,537,325 1,506,203 1,483,263
Shareholders' equity:
Preferred stock - - 1,010
Common stock, no par value. Authorized
25,000,000 shares; issued and
outstanding 11,212,969; 11,203,247;
and 11,164,865 shares,respectively 21,024 21,006 20,934
Additional paid-in capital 42,935 42,810 42,398
Retained earnings 61,702 59,587 52,887
Unrealized net gain (loss) on
securities available for sale,
net of tax (4,923) (8,073) (1,578)
Employee Stock Ownership Plan shares
purchased with debt (3,561) (3,698) (3,791)
Total shareholders' equity 117,177 111,632 111,860
Total liabilities
and shareholders' equity $1,654,502 $1,617,835 $1,595,123
See accompanying notes to consolidated financial statements.
<PAGE>
Consolidated Statements of Income
(Unaudited)
In thousands, except per share data
For the three months ended March 31 1995 1994
Interest income
Loans, including fees $26,681 $20,986
Federal funds sold and resale
agreements 241 169
Securities available for sale 3,305 2,744
Securities held to maturity 1,285 2,168
Mortgage loans held for sale 157 549
Interest-bearing deposits with banks 4 9
Total interest income 31,673 26,625
Interest expense
Deposits 12,653 10,071
Federal funds purchased
and repurchase agreements 465 203
Long-term debt and other
borrowings 1,512 959
Total interest expense 14,630 11,233
Net interest income 17,043 15,392
Provision for loan losses 520 438
Net interest income after
provision for loan losses 16,523 14,954
Non-interest income
Service charges on deposit accounts 1,891 1,680
Loan servicing fees 924 605
Gains on sales of securities
available for sale, net - 77
Gains (losses) on sales of mortgage
loans held for sale, net (62) 92
Trust services 318 307
Brokerage fees 466 270
Other 1,123 1,057
Total non-interest income 4,660 4,088
Non-interest expenses
Compensation and benefits 7,223 6,465
Net occupancy expense 1,088 1,118
Furniture and equipment expense 1,483 1,165
Deposit insurance 762 815
Professional fees 930 757
Postage, printing & supplies 830 866
Communications 373 259
Other 2,874 2,856
Total non-interest expenses 15,563 14,301
Income before income taxes 5,620 4,741
Income tax expense 1,825 1,604
Net income $3,795 $3,137
Net income applicable to
common stock $3,795 $3,117
Primary earnings per share $0.34 $0.28
Fully-diluted earnings per share $0.34 $0.28
See accompanying notes to consolidated financial statements.
<PAGE>
Consolidated Statements of Changes in Shareholders' Equity
(Unaudited)
In thousands, except per share data
For the three months ended March 31 1995 1994
Balance January 1 $111,632 $112,036
Net income 3,795 3,137
Issuance of common stock 144 170
Cash dividends declared:
Common stock (1,681) (1,237)
Preferred stock - (20)
Change in unrealized gain (loss) on
securities available for sale,
net of taxes 3,150 (2,296)
ESOP debt reduction 137 70
Balance March 31 $117,177 $111,860
See accompanying notes to consolidated financial statements.
<PAGE>
Consolidated Statements of Cash Flows
(Unaudited)
In thousands, except per share data
For the three months ended March 31 1995 1994
Cash flows from operating activities:
Net income $3,795 $3,117
Adjustments to reconcile net income to cash
provided be operating activities:
Provision for loan losses 520 438
Gains on sales of securities available for sale - (77)
Losses(Gains) on sales of mortgage loans
held for sale, net 62 (92)
Gain on sale of premises and equipment (163) (219)
Depreciation, amortization and accretion, net 2,003 2,139
Proceeds from sale of mortgage loans held for sale 13,378 62,552
Originations of mortgage loans held for sale (14,579) (43,935)
Decrease (increase) in other assets (2,190) 568
Increase (decrease) in other liabilities 379 (242)
Net cash provided by operating activities 3,205 24,249
Cash flows from investing activities:
Net decrease (increase) in interest-bearing deposits
with banks - 251
Net decrease (increase) in federal funds sold
and resale agreements (29,175) 9,530
Proceeds from sales of securities available for sale 1 5,221
Proceeds from maturities, prepayment and call of securities:
Available for sale 10,264 25,054
Held to maturity 1,928 5,269
Purchases of securities:
Available for sale (536) (19,306)
Held to maturity (3,000) (12,841)
Net increase in loans (10,100) (39,040)
Purchases of premises and equipment (1,813) (1,623)
Proceeds from disposals of premises and equipment 207 785
Net cash and cash equivalents inflow from acquisition 37,045 -
Net cash provided by (used in) investing activities 4,821 (26,700)
Cash flows from financing activities:
Net increase (decrease) in deposits 39,130 (7,712)
Net increase (decrease) in federal funds purchased
and repurchase agreements (41,144) (1,295)
Net increase (decrease) in other short-term (10,236) 11,254
borrowings
Repayment of long-term debt (25) (2,860)
Proceeds from issuance of common stock 144 170
Dividends paid (1,681) (1,236)
Net cash provided by (used in) financing activities (13,812) (1,679)
Net decrease in cash and cash equivalents (5,786) (4,130)
Cash and cash equivalents at beginning of year 80,828 68,533
Cash and cash equivalents at end of period (note 3) $75,476 $64,403
See accompanying notes to consolidated financial statements.
<PAGE>
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and, therefore, do not
include all information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting only of normal recurring accruals) considered necessary
for a fair presentation have been reflected in the accompanying financial
statements. Results of interim periods are not necessarily indicative of results
to be expected for the full year.
The accounting and reporting policies of Trans Financial, Inc. and its
subsidiaries ("the company") conform to generally accepted accounting principles
and general practices within the banking industry. The consolidated financial
statements include the accounts of Trans Financial, Inc. and its wholly-owned
subsidiaries. All significant inter-company accounts and transactions have been
eliminated in consolidation. A description of other significant accounting
policies is presented in the 1994 annual report to shareholders.
Results for the first three months of 1994 have been restated to include
Peoples Financial Services, Inc. and FGC Holding Company, which were acquired
during the second and third quarter of 1994, respectively, and accounted for
using the pooling of interests method of accounting.
(2) Allowance for Loan Losses
An analysis of the changes in the allowance for loan losses follows:
In thousands, except per share data
For the three months ended March 31 1995 1994
Balance January 1 $12,529 $12,504
Provision for loan losses 520 438
Loans charged off (319) (440)
Recoveries of loans previously charged off 150 138
Net charge-offs (169) (302)
Balance March 31 $12,880 $12,640
(3) Statement of Cash Flows
For purposes of reporting cash flows, cash and cash equivalents include cash
on hand and amounts due from banks. Certain non-cash investing and financing
transactions are summarized as follows:
Three months ended March 31 (Dollars in thousands) 1995 1994
Securities transferred from held to maturity
to available for sale $- $6,142
Increase (decrease) in unrealized loss
on securities available for sale, net of tax 3,150 (2,297)
Loans transferred to foreclosed property 73 314
Reclassification of debt from long-term to short-term - 10,000
Debt transactions of Employee Stock Ownership Plan (net)(137) (70)
(4) Impaired Loans
During 1993 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 114, Accounting by Creditors for Impairment
of a Loan ("SFAS 114"). This statement was adopted on a prospective basis on
January 1, 1995. SFAS 114 requires that impaired loans be measured at the
present value of expected future cash flows, discounted at the loan's effective
interest rate, at the loan's observable market price, or at the fair value of
the collateral if the loan is collateral dependent. The company accrues daily
interest income on impaired loans which are classified as accruing. Cash
receipts on impaired loans are applied to the recorded investment in the loan,
including accrued interest receivable. The adoption of SFAS 114 did not have a
material effect on the company's consolidated financial statements.
The company's recorded investment in impaired loans was $5,158,000 at March
31, 1995. Of that amount, $4,695,000 represents loans for which an allowance for
loan losses, in the amount of $1,448,000, has been established under SFAS 114.
For the three months ended March 31, 1995, the average balance of impaired loans
was $4,560,000.
During the first three months of 1995, the company recognized $56,000 in
interest on impaired loans.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
General
Incorporated in 1981, Trans Financial, Inc. ("the company") is a bank and
savings and loan holding company registered under the Bank Holding Company Act
of 1956 and the Home Owners' Loan Act, which has two commercial bank
subsidiaries:
Trans Financial Bank, National Association, headquartered in Bowling Green,
Kentucky ("TFB-KY") and
Trans Financial Bank Tennessee, National Association, headquartered in
Cookeville, Tennessee ("TFB-TN, NA");
and two thrift subsidiaries:
Trans Financial Bank, Federal Savings Bank, headquartered in Russellville,
Kentucky, ("TFB, FSB") and
Trans Financial Bank of Tennessee, F.S.B., headquartered in Tullahoma,
Tennessee, ("TFB-TN, FSB").
Collectively, these four institutions are referred to in this report as "the
banks".
In addition, the company owns a full-service securities broker/dealer, Trans
Financial Investment Services, Inc.; a mortgage banking company, Trans Financial
Mortgage Company; and a full-service travel agency, Trans Travel, Inc.
On March 23,1995, the operations of Trans Financial Bank, National Association
, headquartered in Bowling Green, Kentucky, of Trans Financial Bank of Martin,
National Association ("TFB-Martin"), and of Trans Financial Bank of Pikeville,
National Association (formerly Trans Financial Bank), headquartered in
Pikeville, Kentucky, were consolidated, with TFB-KY being the resulting entity.
On April 21, 1995, the operations of TFB-TN, FSB and TFB, FSB were consolidated,
with TFB-TN, FSB being the resulting entity under the name Trans Financial Bank,
F.S.B., with its headquarters now located in Russellville, Kentucky.
The company had total consolidated assets of $1.655 billion on March 31, 1995.
Loans totaled $1.141 billion on that date, deposits were $1.416 billion and
shareholders' equity was $117 million.
On February 15, 1994, the company merged with Kentucky Community Bancorp, Inc.
("KCB") of Maysville, Kentucky, the holding company for The State National Bank,
Peoples First Bank, and Farmers Liberty Bank, with combined assets of
approximately $175 million. Under the terms of the merger, the shares of KCB
common stock outstanding were converted into 1,374,962 shares of common stock of
the company. These three banks were consolidated into the operations of Trans
Financial Bank, National Association on March 31, 1994.
On April 22, 1994, the company merged with Peoples Financial Services, Inc.
("PFS") of Cookeville, Tennessee, the holding company for Peoples Bank and Trust
of the Cumberlands ("Peoples Bank") and Citizens Federal Savings Bank
("Citizens"), with combined assets of approximately $120 million. Under the
terms of the merger, the shares of PFS common stock outstanding were converted
into 1,302,254 shares of common stock of the company. Peoples Bank became TFB-
TN, NA and Citizens was consolidated into the operations of TFB-TN, FSB on July
29, 1994.
On August 31, 1994, the company merged with FGC Holding Company ("FGC") of
Martin, Kentucky, the holding company for First Guaranty National Bank, with
approximately $125 million in assets. Under the terms of the merger, the shares
of FGC common stock outstanding were converted into 1,050,000 shares of common
stock of the company and the shares of FGC preferred stock were retired. First
Guaranty became TFB-Martin on September 30, 1994.
The transactions described in the preceding three paragraphs have been
accounted for using the pooling of interests method of accounting and,
accordingly, all financial data has been restated as if the entities were
combined for all periods presented.
The discussion that follows is intended to provide additional insight into the
company's financial condition and results of operations. This discussion should
be read in conjunction with the consolidated financial statements and
accompanying notes presented in Item 1 of Part I of this report.
Results of Operations
Overview
For the three months ended March 31, 1995, the company's net income increased
21%, from $3.1 million, or $.28 per share, to $3.8 million, or $.34 per share,
as compared to the first quarter of 1994. Results for the first quarter produced
an annualized return on average assets of 0.95% and a return on average common
equity of 13.54%, compared with returns of 0.80% and 11.37%, respectively, for
the comparable period of 1994.
Net Interest Income
Net interest income totaled $17.0 million in the first quarter of 1995,
compared with $15.4 million in the comparable 1994 period - an 11% increase. Net
interest margin for the first quarter also increased from the prior year, to
4.68% from 4.25%. This reflects the positive impact of prime rate increases
during 1994 and a more favorable mix of earning assets, primarily due to
continued loan growth and the redeployment of funds from matured investment
securities. Increases in the prime lending rate have had a positive impact on
net interest margin because approximately $500 million of the company's
commercial and consumer loans are tied to the prime rate. At the same time,
while rates on earning assets have risen, increases in the company's funding
costs have not kept pace with the increase in loan yields.
The following table shows, for the first three months of 1995 and 1994, the
relationships between interest income and expense and the levels of interest-
earning assets and interest-bearing liabilities.
<PAGE>
<TABLE>
Average Consolidated Balance Sheets and Net Interest Analysis
For the three months ended March 31
Dollars in thousands
1995 1994
Average Average Average Average
Balance Interest Rate Balance Interest Rate
Assets:
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans, net of unearned income $1,140,559 $26,681 9.49% $1,027,622 $20,986 8.28%
Securities available for sale 226,580 3,305 5.92% 235,367 2,744 4.73%
Securities held to maturity 86,729 1,285 6.01% 150,617 2,168 5.84%
Mortgage loans held for sale 6,898 157 9.23% 34,838 549 6.39%
Federal funds sold
and other interest income 17,410 245 5.71% 20,652 178 3.50%
Total interest-earning assets /
interest income 1,478,176 31,673 8.69% 1,469,096 26,625 7.35%
Non-interest-earning assets:
Cash and due from banks 70,111 63,251
Premises and equipment 36,972 33,544
Other assets 35,366 23,442
Total assets $1,620,625 $1,589,333
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing deposits:
Interest-bearing demand(NOW) $136,449 $856 2.54% $142,101 $847 2.42%
TransPlus (SuperNOW) 95,000 638 2.72% 104,026 605 2.36%
Savings deposits 136,083 988 2.94% 158,474 1,093 2.80%
Money market accounts 49,150 370 3.05% 58,868 369 2.54%
Certificates of deposit 693,837 8,748 5.11% 633,513 6,211 3.98%
Other time deposits 87,075 1,053 4.90% 95,797 946 4.00%
Total interest-bearing 1,197,594 12,653 4.28% 1,192,779 10,071 3.42%
deposits
Federal funds purchased
and repurchase agreements 46,633 465 4.04% 32,375 203 2.54%
Long-term debt and
other borrowings 88,946 1,512 6.89% 72,364 959 5.37%
Total borrowed funds 135,579 1,977 5.91% 104,739 1,162 4.50%
Total interest-bearing liabilities /
interest expense 1,333,173 14,630 4.45% 1,297,518 11,233 3.51%
Non-interest-bearing liabilities:
Non-interest-bearing deposits 161,844 170,125
Other liabilities 11,967 9,499
Total liabilities 1,506,984 1,477,142
Shareholders' equity 113,641 112,191
Total Liabilities
and Shareholders' Equity $1,620,625 $1,589,333
Net interest-rate spread 4.24% 3.84%
Impact of non-interest bearing
sources and other changes in
balance sheet composition 0.44% 0.41%
Net interest income /
margin on interest-earning $17,043 4.68% $15,392 4.25%
assets
Net interest margin is net interest income divided by average interest-earning
assets. For computational purposes, non-accrual loans are included in interest-
earning assets. Net interest spread is the difference between the average rate
of interest earned on interest-earning assets and the average rate of interest
expensed on interest-bearing liabilities. Average balances are based on daily
balances.
</TABLE>
<PAGE>
Analysis of Changes in Net Interest Income
Changes in interest income and interest expense resulting from changes in
volume (average balances) and interest rates for the quarter ended March 31,
1995, as compared to the same period in 1994, are shown in the following table.
Three Months 1995 vs. 1994 Increase
(decrease)
in interest income
and expense
In thousands due to changes in:
Volume Rate Total
Interest-earning assets:
Loans $2,451 $3,244 $5,695
Securities available for sale (106) 667 561
Securities held to maturity (945) 62 (883)
Mortgage loans held for sale (566) 174 (392)
Federal funds sold
and other interest income (31) 98 67
Total interest-earning assets 803 4,245 5,048
Interest-bearing liabilities:
Interest-bearing demand (NOW) (34) 43 9
TransPlus (SuperNOW) (55) 88 33
Savings deposits (160) 55 (105)
Money market accounts (66) 67 1
Certificates of deposit 634 1,903 2,537
Other time deposits (92) 199 107
Total interest-bearing deposits 227 2,355 2,582
Federal funds purchased
and repurchase agreements 112 150 262
Long-term debt and
and other borrowings 248 305 553
Total borrowed funds 360 455 815
Total interest-bearing liabilities 587 2,810 3,397
Increase (decrease)
in net interest income $216 $1,435 $1,651
The change in interest due to both rate and volume has been allocated to changes
in average volume and changes in average rates in proportion to the relationship
of absolute dollar amounts of the change in each.
The preceding two tables reflect the general increase in interest rates over
the past year. The tables also reflect increased volumes of loans, certificates
of deposit and borrowed funds, while all other categories of interest-bearing
assets and liabilities have decreased.
Provision for Loan Losses
The provision for loan losses was $520 thousand (.18% of average loans, on an
annualized basis, excluding mortgage loans held for sale) in the first quarter
of 1995, compared with $438 thousand (.17% of average loans) in the first
quarter of 1994. Net loan charge-offs were $169 thousand (.06% of average loans)
for the three months ended March 31, 1995, and $302 thousand (.12% of average
loans) for the comparable period in 1994.
The provision for loan losses and the level of the allowance for loan losses
reflect the quality of the loan portfolio and result from management's
evaluation of the risks in the loan portfolio. Further discussion on loan
quality and the allowance for loan losses is included in the Asset Quality
discussion later in this review.
Non-Interest Income
Non-interest income for the first quarter of 1995 increased $572 thousand over
the first quarter of 1994. The increase reflects the company's expanding
mortgage loan servicing portfolio and brokerage services, as well as continued
improvement in its traditional line of banking products and services.
Loan servicing fees increased $319 thousand, brokerage revenues increased $196
thousand, and service charges on deposit accounts increased $211 thousand. These
increases were partially offset by a $77 thousand decline in gains on sales of
securities available for sale, and a loss of $62 thousand on mortgage loans held
for sale, compared to a $92 thousand gain during the first quarter of 1994.
Non-Interest Expenses
Non-interest expenses increased $1.3 million for the first three months of
1995, compared to the first quarter of 1994.
Expenses associated with the development and operation of new financial
services (such as the securities broker/dealer and the travel agency) increased
$458 thousand. Excluding these expenses, first quarter 1995 compensation and
benefits increased $504 thousand, and furniture and equipment expense increased
$293 thousand.
The efficiency ratio (non-interest expenses as a percentage of net interest
income before provision for loan losses plus non-interest income) for the first
quarter of 1995 was 71.7%, versus 73.4% for the same period in 1994. Excluding
consulting fees for profit enhancements and the formation of new financial
services, the efficiency ratio for the first quarter of 1995 was 70.4%.
Income Taxes
Income tax expense totaled $1.8 million in the first three months of 1995,
compared with $1.6 million in the comparable 1994 period. These represent
effective tax rates of 32.5% and 33.8%, respectively.
Balance Sheet Review
Overview
Assets at March 31, 1995, totaled $1.655 billion, compared with $1.618 billion
at December 31, 1994, and $1.595 billion a year ago. Average total assets for
the first quarter increased $31 million (2%) over the past year to $1.621
billion. Average interest-earning assets increased $9 million to $1.478 billion.
Loans
Total loans, net of unearned income, averaged $1.141 billion in the first
quarter of 1995, excluding mortgage loans held for sale of $6.9 million. For the
comparable period in 1994, loans averaged $1.028 million, excluding the $34.8
million of mortgage loans held for sale.
The company continues to experience strong loan growth. At March 31, 1995,
loans net of unearned income (excluding mortgage loans held for sale) totaled
$1.154 billion, compared with $1.144 billion at December 31, 1993, and $1.045
billion a year ago. During the first quarter of 1995, the company sold to a non-
affiliate bank $16 million of participations in its commercial loan portfolio.
Excluding the impact of these participations, loans increased at an annualized
rate of 9% from year-end 1994 to March 31, 1995.
Asset Quality
With respect to asset quality, management considers three categories of assets
to merit additional scrutiny. These categories include (a) loans which are
currently nonperforming, (b) foreclosed real estate, and (c) loans which are
currently performing but which management believes require special attention.
Nonperforming loans, which include nonaccrual loans, accruing loans past due
over 90 days and restructured loans, totaled $7.5 million at March 31, 1995,
down $397 thousand from December 31, 1994, and down $1.1 million from the end of
the first quarter of 1994. The ratio of nonperforming loans to total loans (net
of unearned income) was .65% at March 31, 1995, compared with .69% at the end of
1994 and .82% a year ago. Nonperforming assets, which include nonperforming
loans and foreclosed property, totaled $12.8 million at the end of 1995's first
quarter. The ratio of nonperforming assets to total assets decreased to .77% at
March 31, 1995, from .91% a year ago.
The following table presents information concerning nonperforming assets,
including nonaccrual and restructured loans. Management classifies a loan as
nonaccrual when principal or interest is past due 90 days or more and the loan
is not adequately collateralized and in the process of collection, or when, in
the opinion of management, principal or interest is not likely to be paid in
accordance with the terms of the obligation. Consumer installment loans are
charged off after 120 days of delinquency unless adequately secured and in the
process of collection. Loans are not reclassified as accruing until principal
and interest payments are brought current and future payments appear certain.
Loans are categorized as restructured if the original interest rate, repayment
terms, or both were restructured due to a deterioration in the financial
condition of the borrower. However, restructured loans that demonstrate
performance under restructured terms and that yield a market rate of interest
may be removed from restructured status in the year following the restructure.
Nonperforming Assets
Dollars in thousands
March 31 December March 31
31
1995 1994 1994
Nonaccrual loans $5,393 $4,375 $6,694
Accruing loans which are contractually
past due 90 days or more 2,103 3,514 1,870
Restructured loans 26 30 41
Total nonperforming and restructured 7,522 7,919 8,605
loans
Foreclosed real estate 4,951 4,998 5,886
Other foreclosed property 305 199 102
Total nonperforming assets and $12,778 $13,116 $14,593
restructured loans
Nonperforming and restructured loans
as a percentage of net loans 0.65% 0.69% 0.82%
Total nonperforming assets and
restructured loans
as a percentage of total assets 0.77% 0.81% 0.91%
Three credit relationships account for $2.8 million, or 52%, of the March 31,
1995, nonaccrual balance. The first of these loans is to a manufacturing concern
and is secured by commercial real estate and equipment. The loan has been on
nonaccrual since 1992. During 1993, $775,000 of the loan balance was charged
off, reducing the carrying value of the loan to $1.5 million. In the second
quarter of 1994, the borrower resumed making partial principal payments and, at
March 31, 1995, the loan had a balance of $1,452,000. Appropriate amounts have
been specifically allocated in the evaluation of the allowance for loan losses
for this credit exposure. The second loan has an outstanding balance of $783,000
and is secured by a first mortgage on an apartment complex. The borrower
experienced cash flow difficulties due to high vacancy rates, and the loan was
placed on nonaccrual in 1994, when it became apparent that payments would not
remain timely. The property is expected to be sold at a price sufficient to
liquidate the principal balance. The third credit, with a balance of $595,000,
represents a 13.3% participation in a loan secured by a first mortgage on an
apartment complex. Increasing vacancy rates and unusually high maintenance
expenses adversely affected cash flow. The credit was placed on nonaccrual in
February 1995, when the borrower was no longer able to make timely payments.
Foreclosure proceedings were instituted, but have been delayed by the borrower
filing a bankruptcy petition. The estimated value of the collateral is expected
to provide for the full repayment of the principal balance. The remaining March
31, 1995 nonaccrual balance consists of various commercial and consumer loans,
with no single loan exceeding $150,000.
Foreclosed real estate at March 31, 1995 includes two properties with an
aggregate book value of $2.6 million, or 52% of the outstanding balance. The
first property was acquired through foreclosure in 1986 with an unsatisfied loan
balance at the time of $1.8 million. In order to facilitate the disposal of the
property, the company entered into a joint venture with a real estate developer
and developed the land for industrial and other commercial use. During 1993, the
company dissolved the joint venture and retained title to the property. Several
parcels have been sold above carrying value. The book value of the property at
March 31, 1995, including development costs, was $1.1 million. Based on an
appraisal of the property and previous sales experience, management does not
anticipate any significant loss to be incurred on disposition. The second
property included in foreclosed real estate relates to a wood products
manufacturing facility. Based on an appraisal of the property, the company wrote
down its carrying value by $210 thousand in the third quarter of 1994, reducing
it to its current balance of $1.5 million. The facility was closed in 1992 and
is presently listed for sale with a commercial real estate firm. Management is
of the opinion that no significant additional loss will be incurred in the
disposal of the facility.
As of March 31, 1995, the company had $1.6 million of loans which were not
included in the past due, nonaccrual or restructured categories, but for which
known information about possible credit problems caused management to have
serious doubts as to the ability of the borrowers to comply with the present
loan repayment terms. Based on management's evaluation, including current market
conditions, cash flow generated and appraisals, no significant losses are
anticipated to be incurred in connection with these loans. These loans are
subject to continuing management attention and are considered in determining the
level of the allowance for loan losses.
The allowance for loan losses is established through a provision for loan
losses charged to expense. The allowance represents an amount which, in
management's judgment, will be adequate to absorb probable losses on existing
loans. At March 31, 1995, the allowance was $12.9 million, up from $12.5 million
at December 31, 1994, and $12.6 million at March 31, 1994. The allowance as a
percentage of nonperforming loans (an indication of the relative ability to
cover problem loans with existing reserves) increased to 171% at March 31, 1995,
from 158% at year-end 1994 and 147% at March 31, 1994. The ratio of the
allowance for loan losses to total loans (excluding mortgage loans held for
sale) at March 31, 1995, was 1.12%, compared with 1.10% at December 31, 1994,
and 1.21% at the end of 1994's first quarter.
The adequacy of the allowance for loan losses is determined on an ongoing
basis through analysis of the overall quality of the loan portfolio, historical
loan loss experience, loan delinquency trends and the economic conditions within
the company's market area. Additional allocations from the allowance are based
on specifically identified potential loss situations. These potential loss
situations are identified by account officers' evaluations of their own
portfolios as well as by an independent loan review function.
Securities, Federal Funds Sold and Resale Agreements
Securities, including those classified as held to maturity and available for
sale, decreased from $378 million at March 31, 1994, to $314 million at year-end
1994, and $310 million at March 31, 1995 - the result of maturities, prepayments
and calls. Funds provided by the reduction in securities were utilized to fund
growth in the loan portfolio.
Federal funds sold and securities purchased under agreements to resell
increased to $29.2 million at March 31, 1995, from $-0- at December 31, 1994,
and $23.2 million a year ago. The increase in the balance of these short-term
assets since year-end 1994, is due to the purchase during the first quarter of
approximately $40 million of deposits from Fifth Third Bank of Kentucky, Inc.
Deposits and Borrowed Funds
Total deposits averaged $1.359 billion in the first quarter of 1995, a
decrease of $3.5 million (0.25%) from the comparable 1994 period. Interest-
bearing accounts increased $4.8 million, while non-interest-bearing accounts
decreased $8.3 million over the past year. During the first quarter of 1995, the
company issued $30 million of 24-month brokered certificates of deposit with an
all-in cost of 7.90%.
Long-term debt averaged $37 million in the first quarter of 1995, a decrease
of $6.8 million from the first quarter of 1994. Average short-term borrowings,
including advances from the Federal Home Loan Bank ("FHLB") and federal funds
purchased and repurchases, increased $38 million period to period, in order to
fund additional loan growth.
Capital Resources and Liquidity
The company's capital ratios at March 31, 1995, December 31, 1994, and March
31, 1994 (calculated in accordance with regulatory guidelines) were as follows:
March 31, December 31, March 31,
1995 1994 1994
Tier 1 risk based 9.11% 9.50% 9.47%
Regulatory minimum 4.00 4.00 4.00
Total risk based 12.84 13.35 13.57
Regulatory minimum 8.00 8.00 8.00
Leverage 6.79 6.97 6.63
Regulatory minimum 3.00 3.00 3.00
Capital ratios of all of the company's subsidiaries are in excess of
applicable minimum regulatory capital ratio requirements at March 31, 1995.
Generally speaking, the company relies upon net inflows of cash from financing
activities, supplemented by net inflows of cash from operating activities, to
provide cash used in its investing activities. As is typical of most banking
companies, significant financing activities include issuance of common stock and
long-term debt, deposit gathering, and the use of short term borrowing
facilities, such as federal funds purchased, repurchase agreements, FHLB
advances and lines of credit. The company's primary investing activities include
loan originations, offset by maturities, prepayments and sales of securities,
and loan payments.
Asset/Liability Management
Managing interest rate risk is fundamental to the financial services industry.
The company manages the inherently different maturity and repricing
characteristics of the lending and deposit acquisition lines of business to
achieve a desired interest sensitivity position and to limit exposure to
interest rate risk. The maturity and repricing characteristics of the company's
lending and deposit activities create a naturally asset-sensitive structure. By
using a combination of on- and off-balance-sheet financial instruments, the
company manages interest rate sensitivity within established policy guidelines.
The company's Asset/Liability Committee approves policy guidelines, provides
oversight to the asset/liability management process, and monitors and adjusts
exposure to interest rates in response to loan and deposit flows.
Asset/liability activity is reviewed monthly by the company's board of
directors.
An earnings simulation model is used to monitor and evaluate the exposure and
impact of changing interest rates on earnings. In today's interest rate
environment, which includes a complex array of both on- and off-balance-sheet
financial instruments, traditional static interest rate gap tables do not
provide the most comprehensive and informative disclosures about interest-rate
risks. The simulation model used by the company reflects the dynamics of all
interest-earning assets, interest-bearing liabilities and off-balance-sheet
financial instruments. It combines the various factors affecting rate
sensitivity into a two-year earnings outlook that incorporates management's view
of the most likely interest rate environment. The model is updated monthly for
multiple interest rate scenarios, projecting changes in balance sheet categories
and other relevant assumptions. In developing multiple rate scenarios, an
econometric model is employed to forecast key rates, based on the cyclical
nature of those rates, with a probability assigned to potential future events
which might affect those rates.
Among the factors the model utilizes which traditional interest rate gap
tables do not are rate of change differentials, such as federal funds rates
versus savings account rates, maturity effects, such as calls on securities, and
rate barrier effects, such as caps or floors on loans. It also captures changing
balance sheet levels, such as loans and investment securities, and floating rate
loans that may be tied or related to prime, treasury notes, CD rates or other
rate indices, which do not necessarily move identically as rates change. In
addition, it captures leads and lags that occur as rates move away from current
levels, and the effects of prepayments on various fixed rate assets such as
residential mortgages, mortgage-backed securities and consumer loans. These, and
certain other effects, are evaluated to develop multiple scenarios from which
the sensitivity of earnings to changes in interest rates is determined.
The following illustrates the effects on net interest income of multiple rate
environments compared to the rate environment of March 1995 (the "flat"
scenario). For example, in the scenario considered "most likely" the company
assumed that the federal funds rate and prime rate would be 5.50% and 8.50%,
respectively, in March of 1996, and would be slightly higher for ten of the
twelve months from March 31, 1995 to March 31, 1996.
Flat Most Likely Rising Declining
Assumptions:
Federal funds rate, March 1996 6.00% 5.50% 9.00% 4.50%
Prime rate, March 1996 9.00% 8.50% 12.00% 7.50%
Increase (decrease) in
net interest income -0-% (.71)% 4.97% (2.45)%
Management concludes that the company is asset sensitive at March 31, 1995,
which indicates that net interest income is expected to be positively impacted
during a period of rising interest rates; however a uniform period of decreasing
rates would adversely impact the company. It should be noted, however, these
results do not take into account any future actions which could be undertaken to
reduce an adverse impact if there were a change in interest rate expectations or
in the actual level of interest rates.
To assist in achieving a desired level of interest rate sensitivity the
company has entered into off-balance-sheet interest rate swap transactions which
effectively convert fixed-rate certificates of deposit to floating rate
instruments. The company pays a variable interest rate on each swap and receives
a fixed rate, as shown below (as of March 31, 1995):
Notional Fixed Rate Floating Rate
Amount (Receiving) (Paying)
$20,000,000 4.38% 6.31% (LIBOR)
50,000,000 9.58 9.00 (Prime)
30,000,000 10.40 9.00 (Prime)
In a higher interest rate environment, the increased contribution to net
interest income from on-balance-sheet assets will substantially offset any
negative impact on net interest income from these swap transactions. Conversely,
if interest rates decline, these off-balance-sheet transactions will mitigate
the company's exposure to reduced net interest income.
Part II - Other Information
Item 1. Legal Proceedings
In the ordinary course of operations, the company and its subsidiaries are
defendants in various legal proceedings. In the opinion of management, there is
no proceeding pending or, to the knowledge of management, threatened in which an
adverse decision could result in a material adverse change in the business or
consolidated financial position of the company.
Item 2 and 3.
No information is required to be filed for these items.
Item 4. Submission of Matters to a Vote of Security Holders
The registrant's 1995 Annual Meeting of Shareholders was held April 24, 1995.
Proxies were solicited by the registrant's board of directors pursuant to
Regulation 14 under the Securities Exchange Act of 1934, there was no
solicitation in opposition to the board's nominees as listed in the proxy
statement, and all of the nominees were elected by vote of the shareholders.
Voting results for each nominee were as follows:
Votes For Votes Withheld
Mary D. Cohron 8,172,883 41,317
Floyd H. Ellis 8,065,814 148,387
David B. Garvin 8,172,883 41,317
Douglas M. Lester 8,171,283 42,917
James D. Scott 8,068,245 145,955
Thomas R. Wallingford 8,170,399 43,801
A proposal (Proposal II) to approve the Trans Financial Bancorp, Inc. 1995
Executive Stock Option Plan was approved by a vote of the majority of the
outstanding shares of the registrant's common stock. A total of 7,687,062 shares
were voted in favor of the proposal; 441,429 were voted against; and 85,709
abstained (including broker non-votes).
A proposal (Proposal III) to amend Article I of the Articles of Incorporation
to change the name of the company to Trans Financial, Inc. was approved by a
vote of the majority of the outstanding shares of the registrant's common stock.
A total of 8,147,312 shares were voted in favor of the proposal; 28,475 were
voted against; and 38,413 abstained (including broker non-votes).
The total number of shares of common stock outstanding as of March 1, 1995,
the record date of the Annual Meeting of Shareholders, was 11,203,468.
Item 5. Other Information
No information is required to be filed for this item.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The exhibits listed on the Exhibit Index on pages 18 through 19 of this Form
10-Q are filed as a part of this report.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the period covered by this
report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Trans Financial, Inc.
(Registrant)
Principal Executive Officer:
Date: May 15, 1995 /s/ Douglas M. Lester
Douglas M. Lester
Chairman of the Board, President
and Chief Executive Officer
Principal Financial Officer:
Date: May 15, 1995 /s/ Edward R. Matthews
Edward R. Matthews
Chief Financial Officer
Exhibits
Sequentially
Numbered Pages
4(a)Restated Articles of Incorporation of the registrant 20-31
4(b)Articles of Amendment to the Restated Articles of Incorporation
of the registrant 32-40
4(c)Restated Bylaws of the registrant are incorporated by reference
to Exhibit 4(b) of the registrant's report on Form 10-K for
the year ended December 31, 1993.
4(d)Rights Agreement dated January 20, 1992 between Manufacturers
Hanover Trust Company (subsequently assigned to First Union
National Bank of North Carolina) and the
registrant is incorporated by reference to Exhibit 1 to the
registrant's report on Form 8-K dated January 24, 1992.
4(e)Form of Indenture (including Form of Subordinated Note) dated
as of September 1, 1993, between the registrant and First
Tennessee Bank National Association as
Trustee, relating to the issuance of 7.25% Subordinated
Notes due 2003, is incorporated by reference to Exhibit 4 of
Registration Statement on Form S-2 of the registrant (File
No. 33-67686).
10(a)1987 Stock Option Plan is incorporated by reference to
Exhibit 4(a) of Registration Statement on Form
S-8 of the registrant (File No. 33-43046).*
10(b)1990 Stock Option Plan is incorporated by reference to
Exhibit 10(d) of the registrant's Report on Form 10-K
for the year ended December 31, 1990.*
10(c)1992 Stock Option Plan is incorporated by reference to
Exhibit 28 of the registrant's Report on Form 10-Q
for the quarter ended March 31, 1992.*
10(d)1994 Stock Option Plan is incorporated by reference to the
registrant's Proxy Statement dated March 18, 1994, for
the April 25, 1994 Annual Meeting of Shareholders.*
10(e)Employment Agreement between Douglas M. Lester and the
registrant is incorporated by reference to Exhibit 10(c)
of the registrant's Report on Form 10-K for the year
ended December 31, 1990.*
10(f)Employment Agreement between Harold T. Matthews and
Trans Financial Bank, National Association is
incorporated by reference to Exhibit 10(e) of the registrant's
Report on Form 10-K for the year ended December 31, 1992.*
10(g)Description of the registrant's Performance Incentive Plan
is incorporated by reference to Exhibit 10(g) of the
registrant's Report on Form 10-K for the year
ended December 31, 1994.*
10(h)Form of Deferred Compensation Agreement between registrant
and certain officers of the registrant is incorporated
by reference to Exhibit 10(g) of the
registrant's Report on Form 10-K for the year ended December
31, 1992.*
10(i)Dividend Reinvestment and Stock Purchase Plan is incorporated
by reference to Registration Statement on Form S-3 of the
registrant dated May 15, 1991 (File No. 33-40606).
<PAGE>
Sequentially
Numbered Pages
10(j)Warrant dated as of February 13, 1992 between Morgan
Keegan & Company, Inc. and the registrant is incorporated
by reference to Exhibit 10(m) of Registration
Statement on Form S-2 of the registrant (File No. 33-45483).
10(k)Loan Agreement dated as of July 6, 1993 between First
Tennessee Bank National Association and the registrant is
incorporated by reference to Exhibit 10(p) to the
Registration Statement on Form S-2 of the registrant (File
No. 33-67686).
10(l)Underwriting Agreement dated as of September 9, 1993 among
Morgan Keegan & Company, Inc., J.C. Bradford and Company,
and the registrant is incorporated by
reference to Exhibit (1) to Registration Statement on
Form S-2 of the registrant (File No. 33-67686).
10(m)Subordinated Note dated as of September 16, 1993, by the
registrant is incorporated by reference to Exhibit 1
to Registration Statement on Form S-2 of the
registrant (File No. 33-67686).
10(n)Agreement and Plan of Reorganization dated November 9, 1993,
as amended January 6, 1994, among the registrant, Trans
Financial Acquisition Corporation and
Kentucky Community Bancorp, Inc. is incorporated by
reference to Exhibit 2 to the Registration Statement on Form
S-4 of the registrant (File No. 33-51575).
10(o)Agreement and Plan of Reorganization and Plan of Merger
dated December 27, 1993 between the registrant
and Peoples Financial Services, Inc. is incorporated by
reference to Exhibit 2 of the registrant's Report on Form 8-K
dated January 10, 1994.
10(p)Agreement and Plan of Reorganization and Plan of Merger
dated January 28, 1994 between the registrant
and FGC Holding Company is incorporated by reference to
Exhibit 2(a) and 2(b) of the registrant's Report on Form 8-K
dated February 18, 1994.
10(q)1995 Executive Stock Option Plan is incorporated by
reference to the registrant's Proxy Statement dated
March 9, 1995, for the April 24, 1995 Annual Meeting of
Shareholders.*
11 Statement Regarding Computation of Per Share Earnings 41
*Denotes a management contract or compensatory plan or arrangement of the
registrant required to be filed as an exhibit pursuant to Item 601 (10) (iii)
of Regulation S-K.
<PAGE>
<EX-4>
Exhibit 4(a)
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
TRANS FINANCIAL BANCORP, INC.
Pursuant to the provisions of KRS 271B.10-060 and 271B.10-070, the
undersigned corporation, Trans Financial Bancorp, Inc., hereby executes the
following Amended and Restated Articles of Incorporation:
FIRST: The name of the corporation is Trans Financial Bancorp, Inc.
SECOND:The text of the corporation's Amended and Restated Articles
of Incorporation is as follows:
ARTICLE I
Name
The name of the corporation is Trans Financial Bancorp, Inc.
ARTICLE II
Purposes
The purposes of the corporation are:
To engage in and carry on the business of a bank holding company; and
To engage in any or all business enterprises for which corporations may be
organized and which the Board of Directors may deem beneficial, profitable and
in the best interests of the corporation, and to do all other things deemed by
the Board of Directors to be necessary or desirable in connection with any of
the corporation's businesses.
ARTICLE III
Powers
The corporation shall have all the powers conferred upon a corporation
organized under the provisions of Chapter 271 B of the Kentucky Revised Statutes
and shall have all powers necessary, proper, convenient or desirable in order to
fulfill and further the purposes of the corporation.
ARTICLE IV
Duration
The corporation shall have perpetual existence.
ARTICLE V
Registered Office and Resident Agent
The registered office of the corporation in the Commonwealth of Kentucky is
500 East Main Street, Bowling Green, Kentucky 42101.
The resident agent is Douglas M. Lester, 500 East Main Street, Bowling Green,
Kentucky 42101.
ARTICLE VI
Capital Stock
The total number of shares which are authorized to be issued by the
corporation is 25,000,000 shares of common stock having no par value ("Common
Stock"), 50,000 shares of preferred stock having no par value ("Class A
Preferred Stock"), and 5,000,000 shares of preferred stock having no par value
("Class B Preferred Stock") (Class A Preferred Stock and Class B Preferred Stock
being hereinafter sometimes collectively referred to as "Preferred Stock").
A description of the foregoing classes of stock of the corporation and a
statement of the voting powers, preferences and relative rights and the
qualifications, limitations or restrictions granted to or imposed upon the
shares of each class is as follows:
Paragraph I
Preferred Stock
Authority is hereby vested in the Board of Directors, by resolution, to divide
any or all of the authorized shares of Preferred Stock into series and, within
the limitations imposed by law and these Articles of Incorporation, to fix and
determine as to each such series:
The voting rights and powers, if any, of the holders of shares of such series;
The number of shares and designation of such series;
The annual dividend rate;
The prices at, and the terms and conditions on which, shares of such series may
be redeemed;
The amounts payable on shares of such series in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
corporation;
The terms, if any, upon which shares of such series may be convertible into, or
exchangeable for, shares of any other class or classes or of any other series of
the same or any other class or classes, including the price or prices and the
rate of conversion or exchange, any adjustments thereof, and all other terms and
conditions;
The sinking fund provisions, if any, for the redemption or purchase of shares
of such series; and
Such other provisions as may be fixed by the Board of Directors of the
corporation pursuant to Kentucky law.
All shares of any one series of Preferred Stock shall be identical with each
other in all respects, except that shares of any one series issued at different
times may differ as to the dates from which dividends thereon shall be
cumulative. Except as permitted by the foregoing provisions of Paragraph I.A,
all shares of each series of Class A Preferred Stock shall rank equally and be
identical in all respects, and all shares of each series of Class B Preferred
Stock shall rank equally and be identical in all respects.
The corporation may at any time permitted by the resolution adopted by the
Board of Directors providing for the issue of any series of Preferred Stock and
at the redemption price or prices and on the terms and conditions stated in said
resolution, redeem the whole or any part of the shares of any series of
Preferred Stock at the time outstanding.
Except when otherwise herein or by statute specifically provided, or except as
provided by the resolution adopted by the Board of Directors providing for the
issue of any series, the holders of shares of Class A Preferred Stock or Class B
Preferred Stock shall not be entitled to vote at the election of directors or on
any question arising at any meeting of shareholders of the corporation.
To the extent permitted by Kentucky law, the shares of Preferred Stock shall be
convertible into other shares of the capital stock of this corporation upon such
terms and conditions and at such rates of conversion or exchange as may be
provided by the resolution adopted by the Board of Directors providing for the
issue of any series.
Paragraph II
Class A Preferred Stock
Except to the extent provided otherwise by the Board of Directors when
establishing a series of Class A Preferred Stock in accordance with Kentucky
law:
Class A Preferred Stock shall be preferred as to payment of dividends over
any other class of stock of the corporation. Before any dividends (other than
dividends payable in stock ranking junior to the Class A Preferred Stock) on any
class or classes of stock of the corporation ranking junior to the Class A
Preferred Stock shall be declared and set apart for payment or paid, the holders
of shares of Class A Preferred Stock of each series shall be entitled to receive
cash dividends (paid in lawful money of the United States), when and as declared
by the Board of Directors at the annual rate, and no more, fixed in the
resolution adopted by the Board of Directors providing for the issue of such
series. Such dividends shall be payable in cash quarterly on December 1, March
1, June 1 and September 1 in each year. All dividends with respect to Class A
Preferred Stock shall be cumulative from the date or dates of issue. Accrual of
dividends shall not bear interest.
So long as any shares of Class A Preferred Stock are outstanding, without the
consent (evidenced either by writing or in the event of a meeting of such
shareholders, by vote) of all holders of Class A Preferred Stock,
If dividends on Class A Preferred Stock for any past quarter shall remain
unpaid, or shall not have been declared and set apart for payment, the
corporation shall not declare and set apart for payment or pay any dividends
(other than dividends payable in stock ranking junior to the Class A Preferred
Stock) or make any distribution, on any other class or classes of stock of the
corporation ranking junior to the Class A Preferred Stock and shall not redeem,
purchase or otherwise acquire, or permit any subsidiary to purchase or otherwise
acquire, any shares of any such junior class if at the time of making such
declaration, payment, distribution, redemption, purchase or acquisition the
corporation shall be in default with respect to any dividend payable on, or any
obligation to retire, shares of Class A Preferred Stock; provided, however,
that, notwithstanding the foregoing, the corporation may at any time redeem,
purchase or otherwise acquire shares of any such junior class in exchange for,
or out of the net cash proceeds from the sale of, other shares of stock of any
junior class.
The corporation shall not create any class of stock ranking prior to or on a
parity with the Class A Preferred Stock or convertible into securities ranking
prior to or on a parity with the Class A Preferred Stock, as to dividends or
upon liquidation, or alter or change any of the provisions of the articles of
incorporation so as adversely to affect the preferences, special rights or
powers given to the Class A Preferred Stock, or increase the number of shares of
Class A Preferred Stock.
The corporation shall not alter or change any of the provisions of the articles
of incorporation or any resolution adopted by the Board of Directors providing
for the issue of any series of Class A Preferred Stock so as adversely to affect
the preferences, special rights or powers given to such series.
The corporation shall not pay or declare any dividend or make any distribution
on any shares of any class ranking junior to the Class A Preferred Stock, nor
shall any shares of any class ranking junior to Class A Preferred Stock be
purchased, redeemed or otherwise acquired for consideration, if the
shareholders' equity of the corporation (determined in accordance with generally
accepted accounting principles) at the close of the most recent fiscal quarter
ending more than 45 days prior to such declaration, payment, distribution,
purchase or redemption shall not exceed the aggregate amount payable upon
outstanding shares of Class A Preferred Stock in the event of dissolution or
liquidation of the corporation, plus the amount of such proposed dividend,
distribution, purchase or redemption; provided, however, the restrictions of
this subsection shall not [i] prevent the payment of any dividend or the
completion of any redemption to a holder of capital stock within 60 days after a
declaration of such dividend or redemption then permitted by the provisions of
this subsection, [ii] apply to the declaration and payment of dividends on
shares of any class ranking junior to Class A Preferred Stock, if payable solely
in shares of stock of any class ranking junior to Class A Preferred Stock, or
[iii] apply to the acquisition of any shares ranking junior to Class A Preferred
Stock through application of the proceeds of any shares of any class ranking
junior to Class A Preferred Stock sold at or about the time of such acquisition.
The corporation shall not effect a reduction of the stated capital of the
corporation, except any such reduction effected as a result of the redemption or
purchase of shares of the corporation's stock as permitted by this Article.
Class A Preferred Stock shall be preferred as to assets over any other class of
stock of the corporation so that the holders of shares of each series of Class A
Preferred Stock shall be entitled to be paid, before any distribution is made to
the holders of any other class of stock upon the voluntary or involuntary
dissolution, liquidation or winding up of the corporation the amount fixed in
the resolution adopted by the Board of Directors providing for the issue of such
series, but in such case the holders of Class A Preferred Stock shall not be
entitled to any other or further payment.
If upon any such liquidation, dissolution or winding up of the corporation
its net assets shall be insufficient to permit the payment in full of the
respective amounts to which the holders of all outstanding Class A Preferred
Stock are entitled as above provided, the entire remaining net assets of the
corporation shall be distributed among the holders of Class A Preferred Stock in
amounts proportionate to the full preferential amounts to which they are
respectively entitled.
Neither a consolidation nor merger of the corporation with or into any other
corporation, nor a merger of any other corporation into the corporation, nor the
purchase or redemption of all or any part of the outstanding shares of any class
or classes of stock of the corporation, nor the sale or transfer of the
properties of the corporation substantially as an entirety shall be construed to
be a dissolution or liquidation of the corporation within the meaning of the
foregoing provisions.
If at the time of any annual meeting of the shareholders of the corporation,
the corporation shall be in arrears in dividends upon the outstanding shares of
Class A Preferred Stock in an amount equal to dividends for a total of two
quarterly dividend periods, then at such annual meeting and at all meetings for
the election of directors thereafter, until all arrearage of dividends
accumulated on the outstanding shares of Class A Preferred Stock for all
preceding dividend periods shall have been paid, or declared and set apart for
payment, the holders of the outstanding shares of Class A Preferred Stock shall,
as a class, have the right to nominate and to elect that number of directors
(the "Special Directors") of the corporation which, when added to the number of
directors previously nominated and elected by holders of Class A Preferred Stock
and whose terms of office will continue beyond such election, shall equal the
whole number resulting from the division of the number of all authorized
directors by the number six (6), in that the holders of the outstanding shares
of Class A Preferred Stock, as a class, shall be entitled to cast for such
nominees in such election that number of votes as are necessary under cumulative
voting to elect the Special Directors. The holders of Class A Preferred Stock
shall have no right to vote for the election of any director other than the
Special Directors nominated by them. No person shall be eligible to be
nominated or serve as a Special Director, nor shall any shares of Class A
Preferred Stock be voted for such person, unless prior to his or her nomination
he or she shall execute and deliver to the corporation a binding resignation as
a director of the corporation, which resignation, by its terms, would become
effective in the event that all arrearages of dividends accumulated on the
outstanding shares of Class A Preferred Stock for all preceding quarterly
periods shall have been paid, or declared and set apart for payment.
Paragraph III
Class B Preferred Stock
Except to the extent provided otherwise by the Board of Directors when
establishing a series of Class B Preferred Stock in accordance with Kentucky
law:
Class B Preferred Stock shall be preferred as to payment of dividends over
any other class of stock of the corporation except Class A Preferred Stock.
Before any dividends (other than dividends payable in stock ranking junior to
the Class B Preferred Stock) on any class or classes of stock of the corporation
ranking junior to the Class B Preferred Stock shall be declared and set apart
for payment or paid, the holders of shares of Class B Preferred Stock of each
series shall be entitled to receive cash dividends, when and as declared by the
Board of Directors at the annual rate, and no more, fixed in the resolution
adopted by the Board of Directors providing for the issue of such series. Such
dividends shall be payable in cash semi-annually on June 15 and December 15 in
each year. All dividends with respect to Class B Preferred Stock shall be
cumulative from the date or dates of issue. Accrual of dividends shall not bear
interest.
So long as any shares of Class B Preferred Stock are outstanding, without the
consent (evidenced either by writing or in the event of a meeting of such
shareholders, by vote) of all holders of Class B Preferred Stock;
If dividends on Class B Preferred Stock for any past quarter shall remain
unpaid, or shall not have been declared and set apart for payment, the
corporation shall not declare and set apart for payment or pay any dividends
(other than dividends payable in stock ranking junior to the Class B Preferred
Stock) or make any distribution, on any other class or classes of stock of the
corporation ranking junior to the Class B Preferred Stock and shall not redeem,
purchase or otherwise acquire, or permit any subsidiary to purchase or otherwise
acquire, any shares of any such junior class if at the time of making such
declaration, payment, distribution, redemption, purchase or acquisition the
corporation shall be in default with respect to any dividend payable on, or any
obligation to retire, shares of Class B Preferred Stock; provided, however,
that, notwithstanding the foregoing, the corporation may at any time redeem,
purchase or otherwise acquire shares of stock of any such junior class in
exchange for, or out of the net cash proceeds from the sale of, other shares of
stock of any junior class.
With the exception of the Class A Preferred Stock, the corporation shall not
create any class of stock ranking prior to the Class B Preferred Stock, as to
dividends or upon liquidation, or alter or change any of the provisions hereof
so as adversely to affect the preferences, special rights or powers given to the
Class B Preferred Stock, or increase the number of shares of Class B Preferred
Stock.
The corporation shall not alter or change any of the provisions hereof or in
any resolution adopted by the Board of Directors providing for the issue of any
series of Class B Preferred Stock so as adversely to affect the preferences,
special rights or powers given to such series.
Class B Preferred Stock shall be preferred as to assets over any other class of
stock of the corporation (other than Class A Preferred Stock) so that the
holders of shares of each series of Class B Preferred Stock shall be entitled to
be paid before any distribution is made to the holders of any other class of
stock (other than Class A Preferred Stock) upon the voluntary or involuntary
dissolution, liquidation or winding up of the corporation, the amount fixed in
the resolution of the Board of Directors providing for the issue of such series,
but in such case the holders of Class B Preferred Stock shall not be entitled to
any other or further payment.
If upon any such liquidation, dissolution or winding up of the corporation
its net assets (after payment of all amounts due to the holders of Class A
Preferred Stock) shall be insufficient to permit the payment in full of the
respective amounts to which the holders of all outstanding Class B Preferred
Stock are entitled as above provided, the entire remaining net assets of the
corporation (after payment of all amounts due to the holders of Class A
Preferred Stock) shall be distributed among the holders of Class B Preferred
Stock in amounts proportionate to the full preferential amounts to which they
are respectively entitled.
Neither a consolidation nor merger of the corporation with or into any other
corporation, nor a merger of any other corporation into the corporation, nor the
purchase or redemption of all or any part of the outstanding shares of any class
or classes of stock of the corporation, nor the sale or transfer of the
properties of the corporation substantially as an entirety shall be construed to
be a dissolution or liquidation of the corporation within the meaning of the
foregoing provisions.
Class B Preferred Stock, Series 1992
Designation and Amount. There is hereby created a series of Preferred Stock,
such series being designated as "Class B Preferred Stock, Series 1992" (the
"Series 1992 Preferred Stock"), and the number of shares initially constituting
such series shall be 350,000. The number of shares constituting such series
may, unless prohibited by the Articles of Incorporation or by applicable law of
the Commonwealth of Kentucky, be increased or decreased by subsequent amendment
by the Board of Directors; provided, that no decrease shall reduce the number of
shares of Series 1992 Preferred Stock to a number less than the number of shares
then outstanding plus the number of shares issuable upon the exercise of
outstanding options, rights or warrants or upon the conversion of any
outstanding securities issued by the corporation convertible into Series 1992
Preferred Stock.
Dividends and Distributions.
The holders of Series 1992 Preferred Stock shall be entitled to receive as a
dividend per share per annum, when, as and if declared by the Board of Directors
out of the funds legally available for the purpose, an amount (rounded to the
nearest cent) equal to the greater of (1) $6.00 or (2) the sum of the Formula
Amounts with respect to each quarterly payment of dividends on the Series 1992
Preferred Stock. The Formula Amount for any such quarterly payment shall be the
Formula Number then in effect times the aggregate per whole share amount of (x)
dividends payable in cash and (y) a cash amount equal to the fair market value
of all dividends or other distributions payable in assets, securities or other
forms of noncash consideration (other than dividends or distributions solely in
Common Stock, no par value of the corporation ("Common Shares") or any
distribution of stock into which the Common Shares may be reclassified or
exchanged as contemplated by subparagraph (b) of this Section [2], declared on
the Common Shares since the immediately preceding date of a quarterly payment
of dividends on the Series 1992 Preferred Stock (a "Quarterly Dividend Payment
Date") or, with respect to the first Quarterly Dividend Payment Date, since the
first issuance of any share of Series 1992 Preferred Stock. As used herein, the
"Formula Number" shall be 100; provided, however, that if at any time after
January 20, 1992, the corporation shall (i) declare a dividend, or make a
distribution, on its outstanding Common Shares payable in Common Shares, (ii)
subdivide (by a stock split or otherwise) or split the outstanding Common Shares
into a larger number of Common Shares, or (iii) combine (by a reverse stock
split or otherwise) the outstanding Common Shares into a smaller number of
Common Shares, then in each such event the Formula Number shall be adjusted to a
number determined by multiplying the Formula Number in effect immediately prior
to such event by a fraction, the numerator of which is the number of Common
Shares that are outstanding immediately after such event and the denominator of
which is the number of shares that are outstanding immediately prior to such
event (and rounding the result to the nearest whole number); and provided
further that if at any time after January 20, 1992, the corporation shall issue
any shares of its capital stock in a reclassification or change of the
outstanding Common Shares (including any such reclassification or change in
connection with a merger in which the corporation is the surviving corporation),
then in such event the Formula Number shall be appropriately adjusted to reflect
such reclassification or change.
The corporation shall declare a dividend or distribution on the Series 1992
Preferred Stock as provided in Section D.[2](a) simultaneously with its
declaration of a dividend or distribution on the Common Shares (other than a
dividend payable in Common Shares or a subdivision of the outstanding Common
Shares); provided, that in the event no dividend or distribution (other than a
dividend payable in Common Shares or a subdivision of the outstanding Common
Shares) shall have been declared on the Common Shares during the period between
any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend
Payment Date, a dividend of $1.50 per share on the Series 1992 Preferred Stock
shall nevertheless be payable, out of the funds legally available for such
purpose, on such subsequent Quarterly Dividend Payment Date.
Dividends shall begin to accrue and be cumulative on outstanding Series 1992
Preferred Stock from the Quarterly Dividend Payment Date immediately preceding
the date of issue of such Series 1992 Preferred Stock, unless the date of issue
of such shares is prior to the record date for the first Quarterly Dividend
Payment Date, in which case dividends on such shares shall begin to accrue from
the date of issue of such shares, or unless the date of issue is a Quarterly
Dividend Payment Date or is a date after the record date for the determination
of holders of Series 1992 Preferred Stock entitled to receive a quarterly
dividend and before such Quarterly Dividend Payment Date, in either of which
events such dividend shall begin to accrue and be cumulative from such Quarterly
Dividend Payment Date. Accrued but unpaid dividends shall not bear interest.
Dividends payable on the Series 1992 Preferred Stock in an amount less than the
total amount of such dividends at the time accrued and payable on such shares
shall be allocated pro rata on a share-by-share basis among all such shares
outstanding at that time. The Board of Directors may fix a record date for the
determination of holders of Series 1992 Preferred Stock entitled to receive
payment of a dividend or distribution declared thereon, which record date shall
be the same as the record date for the corresponding dividend or distribution on
the Common Shares.
Voting Rights. The holders of Series 1992 Preferred Stock shall have the
following voting rights:
Subject to the provision for adjustment hereinafter set forth, each whole share
of Series 1992 Preferred Stock shall entitle the holder thereof to the number of
votes equal to the Formula Number then in effect for each share of Series 1992
Preferred Stock held of record on all matters submitted to a vote of the
shareholders of the corporation.
Except as otherwise provided in any Article creating a series of Preferred
Stock, by law or as otherwise provided herein, the holders of Series 1992
Preferred Stock and the holders of Common Shares and any other capital shares of
the corporation having general voting rights shall vote together as one class on
all matters submitted to a vote of the shareholders of the corporation.
Except as otherwise provided by law or as otherwise provided herein, the
holders of the Series 1992 Preferred Stock shall have no special voting rights
and their consent shall not be required (except to the extent that they are
entitled to vote with holders of Common Shares and any other capital stock of
the corporation having general voting rights as set forth herein) for taking any
corporate actions.
Certain Restrictions.
Whenever quarterly dividends or other dividends or distributions payable on the
Series 1992 Preferred Stock as provided in Section D.[2] hereof are in arrears,
thereafter until all accrued and unpaid dividends and distributions, whether or
not declared, on Series 1992 Preferred Stock outstanding shall have been paid in
full, the corporation shall not:
declare or pay dividends, or make any other distribution on, or redeem or
purchase or otherwise acquire for consideration any shares of stock ranking
junior (either as to dividends or upon liquidation, dissolution or winding up)
to the Series 1992 Preferred Stock;
declare or pay dividends, or make any other distributions, on any shares of
stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series 1992 Preferred Stock, except
dividends paid ratably on the Series 1992 Preferred Stock and all such parity
stock on which dividends are payable or in arrears in proportion to the total
amount to which the holders of all such shares are then entitled;
redeem or purchase or otherwise acquire for consideration shares of any stock
ranking on a parity (either as to dividends or upon liquidation, dissolution or
winding up) to the Series 1992 Preferred Stock, provided that the corporation
may at any time redeem, purchase or otherwise acquire shares of any such parity
stock in exchange for shares of stock of the corporation ranking junior (both as
to dividends and upon liquidation, dissolution or winding up) to the Series 1992
Preferred Stock; or
The corporation shall not permit any subsidiary of the corporation to purchase
or otherwise acquire for consideration any shares of stock of the corporation
unless the corporation could, under Section D.[4](a), purchase or otherwise
acquire such shares at such time and in such a manner.
Liquidation, Dissolution or Winding Up. Upon any liquidation, dissolution or
winding up of the corporation, no distribution shall be made (a) to the holders
of shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series 1992 Preferred Stock unless, prior
thereto, the holders of Series 1992 Preferred Stock shall have received the
greater of (1) $12 per share or (2) an aggregate amount per share equal to the
Formula Number then in effect times the aggregate amount to be distributed per
share to holders of Common Shares or (b) to the holders of shares of stock
ranking on a parity (either as to dividends or upon liquidation, dissolution or
winding up) with the Series 1992 Preferred Stock, except distributions made
ratably on the Series 1992 Preferred Stock and all other such parity stock in
proportion to the total amounts to which the holders of all such shares are
entitled upon liquidation, dissolution or winding up.
Consolidation, Merger, Exchange, etc. In case the corporation shall enter into
any consolidation, merger, combination, statutory share exchange or other
transaction in which the Common Shares are exchanged for or changed into other
stock or securities, money and/or any other property, then in any such case the
Series 1992 Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share equal to the Formula Number then in effect
times the aggregate amount of stock, securities, cash or any other property
(payable in kind), as the case may be, into which or for which each Common Share
is exchanged or changed.
No Redemption. Except as otherwise provided in Section D.[6], the Series 1992
Preferred Stock shall not be redeemable.
Rank. The Series 1992 Preferred Stock shall rank junior in terms of dividends
and liquidation, dissolution and winding up rights to any Class A Preferred
Stock and to all other series of the corporation's Preferred Stock hereinafter
issued unless the terms of such series shall provide otherwise.
Fractional Shares. The corporation shall not be required to issue fractional
shares of the Series 1992 Preferred Stock and in lieu of fractional shares, the
corporation shall pay an amount in cash equal to the same fraction of the
current market value of one share of Series 1992 Preferred Stock.
Paragraph IV
Common Stock
Subject to the preferential rights of Preferred Stock, such dividends (either
in cash, stock or otherwise) as may be determined by the Board of Directors may
be declared and paid on the Common Stock from time to time in accordance with
the laws of the Commonwealth of Kentucky.
Except when otherwise by statute specifically provided, and except to the
extent qualified or limited by the preferential voting rights of any shares of
Preferred Stock, the holders of the Common Stock shall be entitled to one vote
for each share of Common Stock standing in their names on the books of the
corporation at the election of directors and on any question arising at any
meeting of shareholders of the corporation.
Paragraph V
General
No holder of shares of the corporation of any class, as such, shall have any
preemptive right to subscribe to stock, obligations, warrants, subscription
rights or other securities of the corporation of any class, regardless of when
authorized.
For the purposes of this Article VI and of any resolution of the Board of
Directors providing for the issue of any series of Preferred Stock or of any
articles of amendment filed with the Secretary of State of the Commonwealth of
Kentucky (unless otherwise expressly provided in any such resolution or
articles) any class or classes of stock of the corporation shall be deemed to
rank junior to any other class or classes if the rights of the holders thereof
shall be subject or subordinate to the rights of the holders of shares of such
other class or classes in respect of the receipt of dividends or of amounts
distributable upon liquidation, dissolution, or winding up.
ARTICLE VII
Directors
The affairs of the corporation are to be conducted by a Board of Directors of
not less than nine (9) nor more than twenty (20) members, the number to be set
by the directors as provided in the by-laws. The directors shall be divided
into three classes, each class to be as nearly equal in number as possible. If
the classes of directors are not equal, the Board of Directors shall determine
which class shall contain an unequal number of directors. The term of office of
directors of the first class shall expire at the first annual meeting of
shareholders following their election. The term of office of directors of the
second class shall expire at the second annual meeting of shareholders following
their election. The term of office of the directors of the third class shall
expire at the third annual meeting of shareholders following their election.
Thereafter, at each annual meeting of shareholders the successors to the class
of directors whose term expires at the time of such meeting shall be elected to
hold office until the third annual succeeding meeting.
If the number of directors is changed, any increase or decrease shall be
apportioned among the classes so as to maintain the number of directors in each
class as nearly equal as possible. Any additional director or directors elected
to fill a vacancy shall be elected by the vote of 80% of the directors then in
office, although less than a quorum, and any director so chosen shall hold
office for a term that shall expire at the time of the next annual meeting of
shareholders at which directors are elected. In no case will a decrease in the
number of directors shorten the term of any incumbent director.
No director of the corporation shall be removed from office with or without
cause unless such removal is approved by the holders of 80% of the outstanding
stock of the corporation entitled to vote thereon.
This Article VII cannot be amended, altered or repealed without the approval
of the holders of 80% of the outstanding stock of the corporation, entitled to
vote thereon.
ARTICLE VIII
Shareholder Nomination of Director Candidates
Subject to the rights of holders of any class or series of stock having a
preference over the Common Stock as to dividends or upon liquidation,
nominations for the election of directors may be made by the Board of Directors
or a committee appointed by the Board of Directors or by any shareholder
entitled to vote in the election of directors generally. However, any
shareholder entitled to vote in the election of directors generally may nominate
one or more persons for election as directors at a meeting only if timely
written notice of such nomination or nominations has been given to the Secretary
of the corporation. To be timely, such notice shall be delivered to or mailed
and received at the principal executive offices of the corporation not later
than the close of business on the 10th day following the day on which notice of
the date of the meeting was mailed or public disclosure of the date of the
meeting was made, whichever first occurs. Each such notice to the Secretary
shall set forth: (a) the name, age and address of the shareholder who intends to
make the nomination; (b) a representation that the shareholder is a holder of
record of stock of the corporation entitled to vote at such meeting and intends
to appear in person or by proxy at the meeting to nominate the person or persons
specified in the notice; (c) the name, age, business and residence addresses,
and principal occupation or employment of each nominee; (d) a description of all
arrangements or understandings between the shareholder and each nominee and any
other person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the shareholder; (e) such other
information regarding each nominee proposed by such shareholder as would be
required to be included in a proxy statement filed pursuant to the proxy rules
of the Securities and Exchange Commission, had the nominee been nominated, or
intended to be nominated by the Board of Directors; and (f) the consent of each
nominee to serve as a director of the corporation if so elected. The
corporation may require any proposed nominee to furnish such other information
as may reasonably be required by the corporation to determine the eligibility of
such proposed nominee to serve as a director of the corporation. The presiding
officer at the meeting may refuse to acknowledge the nomination of any person
not made in compliance with the foregoing procedures.
ARTICLE IX
Call of Special Meetings of Shareholders
Special meetings of shareholders of the corporation may be called only by the
Board of Directors pursuant to a resolution adopted by a majority of the
Directors in writing, or by the holders of not less than fifty percent (50%) of
all shares entitled to cast votes at the meeting. Notice of a special meeting
must include a description of the purpose or purposes for which the meeting is
called.
ARTICLE X
A. In addition to the requirements of any applicable statute, these Articles
of Incorporation or any Preferred Stock designation which might require a lesser
vote or no vote, the affirmative vote of the holders of not less than 80% of the
outstanding stock of the corporation entitled to vote thereon, shall be required
for the approval of any Business Combination (as hereinafter defined) of this
corporation with any Control Person (as hereinafter defined); provided, however,
that such 80% voting requirement shall not be applicable if either: [i] the
Continuing Directors (as hereinafter defined) of the corporation by at least a
two-thirds vote of such Continuing Directors, have expressly approved such
Business Combination; or [ii] the cash or fair market value of the property,
securities, or other consideration to be received per share by the holders of
the stock of the corporation in the Business Combination is not less than the
Minimum Price Per Share (as hereinafter defined).
B. For purposes of this Article X:
The term "Business Combination" shall mean [a] any merger or consolidation of
this corporation or a subsidiary of this corporation, with or into a Control
Person, irrespective of which party is the surviving entity, [b] any sale,
lease, exchange, transfer or other disposition of all or any substantial part of
the assets of this corporation or a subsidiary, to a Control Person, [c] any
sale, lease, exchange, transfer or other disposition of all or any substantial
part of the assets of a Control Person to this corporation or a subsidiary, [d]
the issuance of any securities of this corporation or any subsidiary to a
Control Person, [e] the acquisition by this corporation or any subsidiary of any
securities of a Control Person, [f] any reclassification or recapitalization of
the stock of this corporation or any subsidiary which has the effect of
increasing the number or percentage of shares of stock of this corporation
Beneficially Owned (as hereinafter defined) by a Control Person, [g] the
adoption of any plan or proposal for the liquidation or dissolution of the
corporation proposed by or on behalf of any Control Person or any Affiliate or
Associate of any Control Person, or [h] any agreement, contract or other
arrangement providing for, or any series of transactions resulting in, any of
the transactions described above.
The term "Control Person" shall mean and include any individual, corporation,
partnership, or other person or entity which, together with and including their
Affiliates and Associates (as defined below) Beneficially Owns in the aggregate
ten percent (10%) or more of the outstanding Common Stock of this corporation.
The term "Affiliate" shall mean a person that directly or indirectly, through
one or more intermediaries, controls, or is controlled by, or is under common
control with, a specified person.
The term "Associate" of any person shall mean:
[a]Any corporation or organization (other than this corporation or its
subsidiary) 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 voting security of the corporation;
[b] Any trust or other estate in which such person has a ten percent
(10%) or greater beneficial interest or serves as trustee or in a similar
fiduciary capacity;
[c] Any relative or spouse of such person or any relative of such
spouse, any one of whom has the same home as such person or is a director or
officer of the corporation of any of its Affiliates.
"Beneficial Owner," when used with respect to any voting securities of the
corporation, means a person:
[a] That individually or with any of its Affiliates or Associates,
beneficially owns voting securities of the corporation, directly or indirectly;
or
[b] That, individually or with any of its Affiliates or Associates has:
[i] The right to acquire voting securities of the corporation (whether
such right is exercisable immediately or only after the passage
of time), pursuant to any agreement, arrangement, or
understanding or upon the exercise of conversion rights,
exchange rights, warrants or options, or otherwise; or
[ii] The right to vote voting securities of the corporation
pursuant to any agreement, arrangement, or understanding; or
[c] That has any agreement, arrangement, or understanding
for the purpose of acquiring, holding, voting or disposing
of voting securities of the corporation with any other
person that beneficially owns, or whose Affiliates or
Associates beneficially own, directly or indirectly,
such shares of voting securities of the corporation.
The term "Continuing Director" shall mean any member of the Board of Directors
who is not an Affiliate or Associate of a Control Person and who was a director
of the corporation prior to the time the Control Person became a Control Person,
and any successor to such Continuing Director who is not an Affiliate or
Associate of a Control Person and was recommended or elected by a majority of
the Continuing Directors.
The term "Minimum Price Per Share" shall mean the greater of: [a] the highest
price per share paid by the Control Person in acquiring stock of the corporation
within two (2) years immediately prior to the Date of Determination (as
hereinafter defined); or [b] the market price per share of the stock immediately
prior to the Date of Determination.
The term "Date of Determination" shall mean: [a] the date on which a binding
agreement (except for the fulfillment of conditions precedent, including,
without limitation, votes of shareholders to approve such transaction) is
entered into by this corporation, as authorized by its Board of Directors, and
any other person providing for any Business Combination; or [b] if such an
agreement as referred to in section [a] above is amended so as to make it less
favorable to this corporation and its shareholders, the date on which such
amendment is approved by the Board of Directors of the corporation; or [c] in
cases where neither sections [a] or [b] are applicable, the record date for the
determination of shareholders of the corporation entitled to notice of and to
vote upon the transaction in question.
C. In the event any Business Combination is approved, such transaction shall
not be consummated unless each of the corporation's stockholders, who dissent to
the proposed transaction pursuant to Subtitle 13 of KRS 271B, shall receive
incident to the consummation of the transaction, cash or property, securities or
other consideration with a fair market value per share not less than the greater
of: [i] the Minimum Price Per Share, or [ii] the fair value of such stock as
determined in accordance with Subtitle 13 of KRS 271B.
D. A majority of the Continuing Directors shall have conclusive power and
authority to determine, for the purpose of this Article X: [i] whether a person
is a Control Person; [ii] whether a person is an Affiliate or Associate of
another; [iii] whether the assets subject to a Business Combination constitute a
"substantial part of the assets of the corporation"; [iv] whether two or more
transactions constitute a "series of related transactions"; [v] the fair market
value of other consideration offered to shareholders as provided in A.[ii] and
C. above; [vi] the Date of Determination; [vii] the market price per share of
the corporation's stock; and [viii] such other matters with respect to which a
determination is required under this Article X, it being understood that this
provision is incapable of satisfaction unless there is at least one Continuing
Director. Any such determination shall be final and binding for all purposes
hereunder.
E. This Article X may not be amended, altered or repealed without the
affirmative vote of: [i] two-thirds of the Continuing Directors adopting a
resolution approving such amendment; and [ii] the holders of 80% of the
outstanding stock of the corporation entitled to vote thereon.
ARTICLE XI
Elimination of Director Liability
No director of the corporation shall be personally liable to the corporation
or its shareholders for monetary damages for a breach of his duties as a
director except for liability:
for any transaction in which the director's personal financial interest is in
conflict with the financial interest of the corporation or its shareholders;
for acts or omissions not in good faith or which involve intentional misconduct
or are known to the director to be a violation of law;
for distributions made in violation of the Kentucky Revised Statutes; or
for any transaction from which the director derives an improper personal
benefit.
If the Kentucky Revised Statutes are amended after approval by the
shareholders of this Article to authorize corporate action further eliminating
or limiting the personal liability of directors, then the liability of a
director of the corporation shall be eliminated or limited to the fullest extent
permitted by the Kentucky Revised Statutes, as so amended. Any repeal or
modification of this Article XI 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.
ARTICLE XII
Bylaws
The Bylaws for the corporation may be adopted, amended and repealed by the
Board of Directors, subject to repeal or change by action of the shareholders.
ARTICLE XIII
Incorporator
The name and address of the Incorporator is John P. Hines, 500 East Main
Street, Bowling Green, Kentucky 42101.
CERTIFICATE
Pursuant to KRS 271B.10-070(4), the undersigned hereby certifies that the
foregoing text of the Amended and Restated Articles of Incorporation contains in
Articles VI, VIII and IX thereof amendments of the corporation's Restated
Articles of Incorporation, requiring shareholder approval, which approval was
obtained on April 20, 1992 in the manner prescribed by the Kentucky Business
Corporation Act. The number of shares of the corporation outstanding at the
time of such adoption was 4,912,575 shares of common stock. The designation and
number of votes entitled to be cast by each voting group entitled to vote
separately thereon were as follows:
Class Number of Votes
Common Stock 3,258,616
The number of votes of each voting group indisputably represented at the meeting
was:
Class Number of Votes
Common Stock 2,147,145
The total number of undisputed votes cast for each of the amendments by the sole
voting group is as follows:
Amendment of Article VI: 1,718,626.912;
Amendment to Add Article VIII: 1,711,816.227;
Amendment to Add Article IX: 1,721,097.547;
Amendment to Delete Resolutions Creating 1988 Series and 1990 Series Class A
Preferred Stock: 1,882,883.941.
The number of undisputed votes cast for each of the amendments was sufficient
for approval by the sole voting group.
IN WITNESS WHEREOF, the undersigned duly authorized officer has executed
these Amended and Restated Articles of Incorporation this 29th day of April,
1992.
TRANS FINANCIAL BANCORP, INC.
By /s/ Douglas M. Lester
Douglas M. Lester,
President
THIS INSTRUMENT WAS PREPARED BY:
/s/ Clara M. Passafiume
Clara M. Passafiume
WYATT, TARRANT & COMBS
Citizens Plaza
Louisville, Kentucky 40202
(502) 589-5235
<PAGE>
<EX-4>
Exhibit 4(b)
ARTICLES OF AMENDMENT
TO THE
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
TRANS FINANCIAL BANCORP, INC.
Pursuant to the provisions of KRS 271B.10-060, the undersigned corporation
executes these Articles of Amendment to its Amended and Restated Articles of
Incorporation:
FIRST: The name of the corporation is Trans Financial Bancorp, Inc.
SECOND: An amendment to Article VI of the corporation's Amended and Restated
Articles of Incorporation to increase to 50,000,000 the number of shares of
authorized common capital stock was adopted by the shareholders of the
corporation in the manner prescribed by the Kentucky Business Corporation Act.
The text of Article VI of the corporation's Amended and Restated Articles of
Incorporation, as amended, is attached hereto as Exhibit A.
The amendment does not provide for an exchange, reclassification or
cancellation of issued shares.
The date of the adoption of the amendment by the shareholders of the
corporation was April 25, 1994.
The designation and number of outstanding shares, the number of votes entitled
to be cast by the sole voting group entitled to vote separately on the
amendments, and the number of votes of the sole voting group indisputably
represented at the meeting is as follows:
Designation And NumberNumber Of Votes Entitled To Number of Votes Indisputably
Of Outstanding SharesBe Cast By Sole Voting Group Represented At The Meeting
8,804,703 shares 8,804,703 7,151,501
Common Stock
The total number of undisputed votes cast by the sole voting group for the
amendment was 6,540,636. The number cast for the amendment by the sole voting
group was sufficient for approval by that voting group.
THIRD: An amendment to Article I of the corporation's Amended and Restated
Articles of Incorporation to change the name of the corporation to Trans
Financial, Inc. was adopted by the shareholders of the corporation in the manner
prescribed by the Kentucky Business Corporation Act.
The text of Article I of the corporation's Amended and Restated Articles of
Incorporation, as amended, is as follows:
ARTICLE I
Name
The name of the corporation is Trans Financial, Inc.
The amendment does not provide for an exchange, reclassification or
cancellation of issued shares.
The date of the adoption of the amendment by the shareholders of the
corporation was April 24, 1995.
The designation and number of outstanding shares, the number of votes entitled
to be cast by the sole voting group entitled to vote separately on the
amendments, and the number of votes of the sole voting group indisputably
represented at the meeting is as follows:
Designation And Number Number Of Votes Entitled To Number of Votes Indisputably
Of Outstanding SharesBe Cast By Sole Voting GroupRepresented At The Meeting
11,203,468 shares 11,203,468 7,730,470
Common Stock
The total number of undisputed votes cast by the sole voting group for the
amendment was 7,664,218. The number cast for the amendment by the sole voting
group was sufficient for approval by that voting group.
IN WITNESS WHEREOF, the undersigned has executed these Articles of Amendment
as of the 24th day of April, 1995.
TRANS FINANCIAL BANCORP, INC.
By: /s/ Douglas M. Lester
Douglas M. Lester, President
THIS INSTRUMENT PREPARED BY:
/s/ Jay B. Simmons
Jay B. Simmons
500 East Main Street
Bowling Green, Kentucky 42101
EXHIBIT A
TO
ARTICLES OF AMENDMENT
TO THE
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
TRANS FINANCIAL BANCORP, INC.
ARTICLE VI
Capital Stock
The total number of shares which are authorized to be issued by the
corporation is 50,000,000 shares of common stock having no par value ("Common
Stock"), 50,000 shares of preferred stock having no par value ("Class A
Preferred Stock"), and 5,000,000 shares of preferred stock having no par value
("Class B Preferred Stock") (Class A Preferred Stock and Class B Preferred Stock
being hereinafter sometimes collectively referred to as "Preferred Stock").
A description of the foregoing classes of stock of the corporation and a
statement of the voting powers, preferences and relative rights and the
qualifications, limitations or restrictions granted to or imposed upon the
shares of each class is as follows:
Paragraph I
Preferred Stock
A. Authority is hereby vested in the Board of Directors, by resolution, to
divide any or all of the authorized shares of Preferred Stock into series and,
within the limitations imposed by law and these Articles of Incorporation, to
fix and determine as to each such series:
[1] The voting rights and powers, if any, of the holders of shares of such
series;
[2] The number of shares and designation of such series;
[3] The annual dividend rate;
[4] The prices at, and the terms and conditions on which, shares of such
series may be redeemed;
[5] The amounts payable on shares of such series in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the affairs
of the corporation;
[6] The terms, if any, upon which shares of such series may be convertible
into, or exchangeable for, shares of any other class or classes or of any other
series of the same or any other class or classes, including the price or prices
and the rate of conversion or exchange, any adjustments thereof, and all other
terms and conditions;
[7] The sinking fund provisions, if any, for the redemption or purchase of
shares of such series; and
[8] Such other provisions as may be fixed by the Board of Directors of the
corporation pursuant to Kentucky law.
B. All shares of any one series of Preferred Stock shall be identical with
each other in all respects, except that shares of any one series issued at
different times may differ as to the dates from which dividends thereon shall be
cumulative. Except as permitted by the foregoing provisions of Paragraph I.A,
all shares of each series of Class A Preferred Stock shall rank equally and be
identical in all respects, and all shares of each series of Class B Preferred
Stock shall rank equally and be identical in all respects.
C. The corporation may at any time permitted by the resolution adopted by the
Board of Directors providing for the issue of any series of Preferred Stock and
at the redemption price or prices and on the terms and conditions stated in said
resolution, redeem the whole or any part of the shares of any series of
Preferred Stock at the time outstanding.
D. Except when otherwise herein or by statute specifically provided, or except
as provided by the resolution adopted by the Board of Directors providing for
the issue of any series, the holders of shares of Class A Preferred Stock or
Class B Preferred Stock shall not be entitled to vote at the election of
directors or on any question arising at any meeting of shareholders of the
corporation.
E. To the extent permitted by Kentucky law, the shares of Preferred Stock
shall be convertible into other shares of the capital stock of this corporation
upon such terms and conditions and at such rates of conversion or exchange as
may be provided by the resolution adopted by the Board of Directors providing
for the issue of any series.
Paragraph II
Class A Preferred Stock
Except to the extent provided otherwise by the Board of Directors when
establishing a series of Class A Preferred Stock in accordance with Kentucky
law:
A. Class A Preferred Stock shall be preferred as to payment of dividends over
any other class of stock of the corporation. Before any dividends (other than
dividends payable in stock ranking junior to the Class A Preferred Stock) on any
class or classes of stock of the corporation ranking junior to the Class A
Preferred Stock shall be declared and set apart for payment or paid, the holders
of shares of Class A Preferred Stock of each series shall be entitled to receive
cash dividends (paid in lawful money of the United States), when and as declared
by the Board of Directors at the annual rate, and no more, fixed in the
resolution adopted by the Board of Directors providing for the issue of such
series. Such dividends shall be payable in cash quarterly on December 1, March
1, June 1 and September 1 in each year. All dividends with respect to Class A
Preferred Stock shall be cumulative from the date or dates of issue. Accrual of
dividends shall not bear interest.
B. So long as any shares of Class A Preferred Stock are outstanding, without
the consent (evidenced either by writing or in the event of a meeting of such
shareholders, by vote) of all holders of Class A Preferred Stock,
[1] If dividends on Class A Preferred Stock for any past quarter shall
remain unpaid, or shall not have been declared and set apart for payment, the
corporation shall not declare and set apart for payment or pay any dividends
(other than dividends payable in stock ranking junior to the Class A Preferred
Stock) or make any distribution, on any other class or classes of stock of the
corporation ranking junior to the Class A Preferred Stock and shall not redeem,
purchase or otherwise acquire, or permit any subsidiary to purchase or otherwise
acquire, any shares of any such junior class if at the time of making such
declaration, payment, distribution, redemption, purchase or acquisition the
corporation shall be in default with respect to any dividend payable on, or any
obligation to retire, shares of Class A Preferred Stock; provided, however,
that, notwithstanding the foregoing, the corporation may at any time redeem,
purchase or otherwise acquire shares of any such junior class in exchange for,
or out of the net cash proceeds from the sale of, other shares of stock of any
junior class.
[2] The corporation shall not create any class of stock ranking prior to or
on a parity with the Class A Preferred Stock or convertible into securities
ranking prior to or on a parity with the Class A Preferred Stock, as to
dividends or upon liquidation, or alter or change any of the provisions of the
articles of incorporation so as adversely to affect the preferences, special
rights or powers given to the Class A Preferred Stock, or increase the number of
shares of Class A Preferred Stock.
[3] The corporation shall not alter or change any of the provisions of the
articles of incorporation or any resolution adopted by the Board of Directors
providing for the issue of any series of Class A Preferred Stock so as adversely
to affect the preferences, special rights or powers given to such series.
[4] The corporation shall not pay or declare any dividend or make any
distribution on any shares of any class ranking junior to the Class A Preferred
Stock, nor shall any shares of any class ranking junior to Class A Preferred
Stock be purchased, redeemed or otherwise acquired for consideration, if the
shareholders' equity of the corporation (determined in accordance with generally
accepted accounting principles) at the close of the most recent fiscal quarter
ending more than 45 days prior to such declaration, payment, distribution,
purchase or redemption shall not exceed the aggregate amount payable upon
outstanding shares of Class A Preferred Stock in the event of dissolution or
liquidation of the corporation, plus the amount of such proposed dividend,
distribution, purchase or redemption; provided, however, the restrictions of
this subsection shall not [i] prevent the payment of any dividend or the
completion of any redemption to a holder of capital stock within 60 days after a
declaration of such dividend or redemption then permitted by the provisions of
this subsection, [ii] apply to the declaration and payment of dividends on
shares of any class ranking junior to Class A Preferred Stock, if payable solely
in shares of stock of any class ranking junior to Class A Preferred Stock, or
[iii] apply to the acquisition of any shares ranking junior to Class A Preferred
Stock through application of the proceeds of any shares of any class ranking
junior to Class A Preferred Stock sold at or about the time of such acquisition.
[5] The corporation shall not effect a reduction of the stated capital of
the corporation, except any such reduction effected as a result of the
redemption or purchase of shares of the corporation's stock as permitted by this
Article.
C. Class A Preferred Stock shall be preferred as to assets over any other
class of stock of the corporation so that the holders of shares of each series
of Class A Preferred Stock shall be entitled to be paid, before any distribution
is made to the holders of any other class of stock upon the voluntary or
involuntary dissolution, liquidation or winding up of the corporation the amount
fixed in the resolution adopted by the Board of Directors providing for the
issue of such series, but in such case the holders of Class A Preferred Stock
shall not be entitled to any other or further payment.
If upon any such liquidation, dissolution or winding up of the corporation its
net assets shall be insufficient to permit the payment in full of the respective
amounts to which the holders of all outstanding Class A Preferred Stock are
entitled as above provided, the entire remaining net assets of the corporation
shall be distributed among the holders of Class A Preferred Stock in amounts
proportionate to the full preferential amounts to which they are respectively
entitled.
Neither a consolidation nor merger of the corporation with or into any other
corporation, nor a merger of any other corporation into the corporation, nor the
purchase or redemption of all or any part of the outstanding shares of any class
or classes of stock of the corporation, nor the sale or transfer of the
properties of the corporation substantially as an entirety shall be construed to
be a dissolution or liquidation of the corporation within the meaning of the
foregoing provisions.
D. If at the time of any annual meeting of the shareholders of the
corporation, the corporation shall be in arrears in dividends upon the
outstanding shares of Class A Preferred Stock in an amount equal to dividends
for a total of two quarterly dividend periods, then at such annual meeting and
at all meetings for the election of directors thereafter, until all arrearage of
dividends accumulated on the outstanding shares of Class A Preferred Stock for
all preceding dividend periods shall have been paid, or declared and set apart
for payment, the holders of the outstanding shares of Class A Preferred Stock
shall, as a class, have the right to nominate and to elect that number of
directors (the "Special Directors") of the corporation which, when added to the
number of directors previously nominated and elected by holders of Class A
Preferred Stock and whose terms of office will continue beyond such election,
shall equal the whole number resulting from the division of the number of all
authorized directors by the number six (6), in that the holders of the
outstanding shares of Class A Preferred Stock, as a class, shall be entitled to
cast for such nominees in such election that number of votes as are necessary
under cumulative voting to elect the Special Directors. The holders of Class A
Preferred Stock shall have no right to vote for the election of any director
other than the Special Directors nominated by them. No person shall be eligible
to be nominated or serve as a Special Director, nor shall any shares of Class A
Preferred Stock be voted for such person, unless prior to his or her nomination
he or she shall execute and deliver to the corporation a binding resignation as
a director of the corporation, which resignation, by its terms, would become
effective in the event that all arrearages of dividends accumulated on the
outstanding shares of Class A Preferred Stock for all preceding quarterly
periods shall have been paid, or declared and set apart for payment.
Paragraph III
Class B Preferred Stock
Except to the extent provided otherwise by the Board of Directors when
establishing a series of Class B Preferred Stock in accordance with Kentucky
law:
A. Class B Preferred Stock shall be preferred as to payment of dividends over
any other class of stock of the corporation except Class A Preferred Stock.
Before any dividends (other than dividends payable in stock ranking junior to
the Class B Preferred Stock) on any class or classes of stock of the corporation
ranking junior to the Class B Preferred Stock shall be declared and set apart
for payment or paid, the holders of shares of Class B Preferred Stock of each
series shall be entitled to receive cash dividends, when and as declared by the
Board of Directors at the annual rate, and no more, fixed in the resolution
adopted by the Board of Directors providing for the issue of such series. Such
dividends shall be payable in cash semi-annually on June 15 and December 15 in
each year. All dividends with respect to Class B Preferred Stock shall be
cumulative from the date or dates of issue. Accrual of dividends shall not bear
interest.
B. So long as any shares of Class B Preferred Stock are outstanding, without
the consent (evidenced either by writing or in the event of a meeting of such
shareholders, by vote) of all holders of Class B Preferred Stock.
[1] If dividends on Class B Preferred Stock for any past quarter shall
remain unpaid, or shall not have been declared and set apart for payment, the
corporation shall not declare and set apart for payment or pay any dividends
(other than dividends payable in stock ranking junior to the Class B Preferred
Stock) or make any distribution, on any other class or classes of stock of the
corporation ranking junior to the Class B Preferred Stock and shall not redeem,
purchase or otherwise acquire, or permit any subsidiary to purchase or otherwise
acquire, any shares of any such junior class if at the time of making such
declaration, payment, distribution, redemption, purchase or acquisition the
corporation shall be in default with respect to any dividend payable on, or any
obligation to retire, shares of Class B Preferred Stock; provided, however,
that, notwithstanding the foregoing, the corporation may at any time redeem,
purchase or otherwise acquire shares of stock of any such junior class in
exchange for, or out of the net cash proceeds from the sale of, other shares of
stock of any junior class.
[2] With the exception of the Class A Preferred Stock, the corporation
shall not create any class of stock ranking prior to the Class B Preferred
Stock, as to dividends or upon liquidation, or alter or change any of the
provisions hereof so as adversely to affect the preferences, special rights or
powers given to the Class B Preferred Stock, or increase the number of shares of
Class B Preferred Stock.
[3] The corporation shall not alter or change any of the provisions hereof
or in any resolution adopted by the Board of Directors providing for the issue
of any series of Class B Preferred Stock so as adversely to affect the
preferences, special rights or powers given to such series.
C. Class B Preferred Stock shall be preferred as to assets over any other
class of stock of the corporation (other than Class A Preferred Stock) so that
the holders of shares of each series of Class B Preferred Stock shall be
entitled to be paid before any distribution is made to the holders of any other
class of stock (other than Class A Preferred Stock) upon the voluntary or
involuntary dissolution, liquidation or winding up of the corporation, the
amount fixed in the resolution of the Board of Directors providing for the issue
of such series, but in such case the holders of Class B Preferred Stock shall
not be entitled to any other or further payment.
If upon any such liquidation, dissolution or winding up of the corporation its
net assets (after payment of all amounts due to the holders of Class A Preferred
Stock) shall be insufficient to permit the payment in full of the respective
amounts to which the holders of all outstanding Class B Preferred Stock are
entitled as above provided, the entire remaining net assets of the corporation
(after payment of all amounts due to the holders of Class A Preferred Stock)
shall be distributed among the holders of Class B Preferred Stock in amounts
proportionate to the full preferential amounts to which they are respectively
entitled.
Neither a consolidation nor merger of the corporation with or into any other
corporation, nor a merger of any other corporation into the corporation, nor the
purchase or redemption of all or any part of the outstanding shares of any class
or classes of stock of the corporation, nor the sale or transfer of the
properties of the corporation substantially as an entirety shall be construed to
be a dissolution or liquidation of the corporation within the meaning of the
foregoing provisions.
D. Class B Preferred Stock, Series 1992
[l] Designation and Amount. There is hereby created a series of Preferred
Stock, such series being designated as "Class B Preferred Stock, Series 1992
(the "Series 1992 Preferred Stock"), and the number of shares initially
constituting such series shall be 350,000. The number of shares constituting
such series may, unless prohibited by the Articles of Incorporation or by
applicable law of the Commonwealth of Kentucky, be increased or decreased by
subsequent amendment by the Board of Directors; provided, that no decrease shall
reduce the number of shares of Series 1992 Preferred Stock to a number less than
the number of shares then outstanding plus the number of shares issuable upon
the exercise of outstanding options, rights or warrants or upon the conversion
of any outstanding securities issued by the corporation convertible into Series
1992 Preferred Stock.
[2] Dividends and Distributions.
(a) The holders of Series 1992 Preferred Stock shall be entitled to receive
as a dividend per share per annum, when, as and if declared by the Board of
Directors out of the funds legally available for the purpose, an amount (rounded
to the nearest cent) equal to the greater of (1) $6.00 or (2) the sum of the
Formula Amounts with respect to each quarterly payment of dividends on the
Series 1992 Preferred Stock. The Formula Amount for any such quarterly payment
shall be the Formula Number then in effect times the aggregate per whole share
amount of (x) dividends payable in cash and (y) a cash amount equal to the fair
market value of all dividends or other distributions payable in assets,
securities or other forms of noncash consideration other than dividends or
distributions solely in Common Stock, no par value of the corporation ("Common
Shares") or any distribution of stock into which the Common Shares may be
reclassified or exchanged as contemplated by subparagraph (b) of this Section
[2], declared on the Common Shares since the immediately preceding date of a
quarterly payment of dividends on the Series 1992 Preferred Stock (a "Quarterly
Dividend Payment Date") or, with respect to the first Quarterly Dividend Payment
Date, since the first issuance of any share of Series 1992 Preferred Stock. As
used herein, the "Formula Number" shall be 100; provided, however, that if at
any time after January 20, 1992, the corporation shall (i) declare a dividend,
or make a distribution, on its outstanding Common Shares payable in Common
Shares, (ii) subdivide (by a stock split or otherwise) or split the outstanding
Common Shares into a larger number of Common Shares, or (iii) combine (by a
reverse stock split or otherwise) the outstanding Common Shares into a smaller
number of Common Shares, then in each such event the Formula Number shall be
adjusted to a number determined by multiplying the Formula Number in effect
immediately prior to such event by a fraction, the numerator of which is the
number of Common Shares that are outstanding immediately after such event and
the denominator of which is the number of shares that are outstanding
immediately prior to such event (and rounding the result to the nearest whole
number); and provided further that if at any time after January 20, 1992, the
corporation shall issue any shares of its capital stock in a reclassification or
change of the outstanding Common Shares (including any such reclassification or
change in connection with a merger in which the corporation is the surviving
corporation), then in such event the Formula Number shall be appropriately
adjusted to reflect such reclassification or change.
(b) The corporation shall declare a dividend or distribution on the Series
1992 Preferred Stock as provided in Section D.[2](a) simultaneously with its
declaration of a dividend or distribution on the Common Shares (other than a
dividend payable in Common Shares or a subdivision of the outstanding Common
Shares); provided, that in the event no dividend or distribution (other than a
dividend payable in Common Shares or a subdivision of the outstanding Common
Shares) shall have been declared on the Common Shares during the period between
any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend
Payment Date, a dividend of $1.50 per share on the Series 1992 Preferred Stock
shall nevertheless be payable, out of the funds legally available for such
purpose, on such subsequent Quarterly Dividend Payment Date.
(c) Dividends shall begin to accrue and be cumulative on outstanding Series
1992 Preferred Stock from the Quarterly Dividend Payment Date immediately
preceding the date of issue of such Series 1992 Preferred Stock, unless the date
of issue of such shares is prior to the record date for the first Quarterly
Dividend Payment Date, in which case dividends on such shares shall begin to
accrue from the date of issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the record date for the
determination of holders of Series 1992 Preferred Stock entitled to receive a
quarterly dividend and before such Quarterly Dividend Payment Date, in either of
which events such dividend shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear
interest. Dividends payable on the Series 1992 Preferred Stock in an amount less
than the total amount of such dividends at the time accrued and payable on such
shares shall be allocated pro rata on a share-by-share basis among all such
shares outstanding at that time. The Board of Directors may fix a record date
for the determination of holders of Series 1992 Preferred Stock entitled to
receive payment of a dividend or distribution declared thereon, which record
date shall be the same as the record date for the corresponding dividend or
distribution on the Common Shares.
[3] Voting Rights. The holders of Series 1992 Preferred Stock shall have
the following voting rights:
(a) Subject to the provision for adjustment hereinafter set forth, each
whole share of Series 1992 Preferred Stock shall entitle the holder thereof to
the number of votes equal to the Formula Number then in effect for each share of
Series 1992 Preferred Stock held of record on all matters submitted to a vote of
the shareholders of the corporation.
(b) Except as otherwise provided in any Article creating a series of
Preferred Stock, by law or as otherwise provided herein, the holders of Series
1992 Preferred Stock and the holders of Common Shares and any other capital
shares of the corporation having general voting rights shall vote together as
one class on all matters submitted to a vote of the shareholders of the
corporation.
(c) Except as otherwise provided by law or as otherwise provided herein,
the holders of the Series 1992 Preferred Stock shall have no special voting
rights and their consent shall not be required (except to the extent that they
are entitled to vote with holders of Common Shares and any other capital stock
of the corporation having general voting rights as set forth herein) for taking
any corporate actions.
[4] Certain Restrictions.
(a) Whenever quarterly dividends or other dividends or distributions
payable on the Series 1992 Preferred Stock as provided in Section D.[2] hereof
are in arrears, thereafter until all accrued and unpaid dividends and
distributions, whether or not declared, on Series 1992 Preferred Stock
outstanding shall have been paid in full, the corporation shall not:
[i] declare or pay dividends, or make any other distribution on, or redeem
or purchase or otherwise acquire for consideration any shares of stock ranking
junior (either as to dividends or upon liquidation, dissolution or winding up)
to the Series 1992 Preferred Stock;
[ii] declare or pay dividends, or make any other distributions, on any
shares of stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series 1992 Preferred Stock, except
dividends paid ratably on the Series 1992 Preferred Stock and all such parity
stock on which dividends are payable or in arrears in proportion to the total
amount to which the holders of all such shares are then entitled;
[iii] redeem or purchase or otherwise acquire for consideration shares of
any stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) to the Series 1992 Preferred Stock, provided that the
corporation may at any time redeem, purchase or otherwise acquire shares of any
such parity stock in exchange for shares of stock of the corporation ranking
junior (both as to dividends and upon liquidation, dissolution or winding up) to
the Series 1992 Preferred Stock; or
(b) The corporation shall not permit any subsidiary of the corporation to
purchase or otherwise acquire for consideration any shares of stock of the
corporation unless the corporation could, under Section D.[4](a), purchase or
otherwise acquire such shares at such time and in such a manner.
[5] Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the corporation, no distribution shall be made (a)
to the holders of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series 1992 Preferred Stock
unless, prior thereto, the holders of Series 1992 Preferred Stock shall have
received the greater of (l) $12 per share or (2) an aggregate amount per share
equal to the Formula Number then in effect times the aggregate amount to be
distributed per share to holders of Common Shares or (b) to the holders of
shares of stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series 1992 Preferred Stock, except
distributions made ratably on the Series 1992 Preferred Stock and all other such
parity stock in proportion to the total amounts to which the holders of all such
shares are entitled upon liquidation, dissolution or winding up.
[6] Consolidation, Merger, Exchange, etc. In case the corporation shall
enter into any consolidation, merger, combination, statutory share exchange or
other transaction in which the Common Shares are exchanged for or changed into
other stock or securities, money and/or any other property, then in any such
case the Series 1992 Preferred Stock shall at the same time be similarly
exchanged or changed into an amount per share equal to the Formula Number then
in effect times the aggregate amount of stock, securities, cash or any other
property (payable in kind), as the case may be, into which or for which each
Common Share is exchanged or changed.
[7] No Redemption. Except as otherwise provided in Section D.[6], the
Series 1992 Preferred Stock shall not be redeemable.
[8] Rank. The Series 1992 Preferred Stock shall rank junior in terms of
dividends and liquidation, dissolution and winding up rights to any Class A
Preferred Stock and to all other series of the corporation's Preferred Stock
hereinafter issued unless the terms of such series shall provide otherwise.
[9] Fractional Shares. The corporation shall not be required to issue
fractional shares of the Series 1992 Preferred Stock and in lieu of fractional
shares, the corporation shall pay an amount in cash equal to the same fraction
of the current market value of one share of Series 1992 Preferred Stock.
Paragraph IV
Common Stock
A. Subject to the preferential rights of Preferred Stock, such dividends
(either in cash, stock or otherwise) as may be determined by the Board of
Directors may be declared and paid on the Common Stock from time to time in
accordance with the laws of the Commonwealth of Kentucky.
B. Except when otherwise by statute specifically provided, and except to the
extent qualified or limited by the preferential voting rights of any shares of
Preferred Stock, the holders of the Common Stock shall be entitled to one vote
for each share of Common Stock standing in their names on the books of the
corporation at the election of directors and on any question arising at any
meeting of shareholders of the corporation.
Paragraph V
General
A. No holder of shares of the corporation of any class, as such, shall have
any preemptive right to subscribe to stock, obligations, warrants, subscription
rights or other securities of the corporation of any class, regardless of when
authorized.
B. For the purposes of this Article VI and of any resolution of the Board of
Directors providing for the issue of any series of Preferred Stock or of any
articles of amendment filed with the Secretary of State of the Commonwealth of
Kentucky (unless otherwise expressly provided in any such resolution or
articles) any class or classes of stock of the corporation shall be deemed to
rank junior to any other class or classes if the rights of the holders thereof
shall be subject or subordinate to the rights of the holders of shares of such
other class or classes in respect of the receipt of dividends or of amounts
distributable upon liquidation, dissolution, or winding up.
<PAGE>
<EX-11>
Exhibit 11.
Statement Regarding Computation of Per Share Earnings
In thousands, except per share amounts
For the periods ended March 31 1995 1994
Primary earnings per common share: (1)
Average common shares outstanding 11,205 11,156
Common stock equivalents 93 92
Average shares and share equivalents 11,298 11,248
Net income $3,795 $3,137
Less preferred stock dividends - (20)
Income available for common stock $3,795 $3,117
Primary net income per share $0.34 $0.28
Fully-diluted earnings per common share: (1)
Average common shares outstanding 11,205 11,156
Common stock equivalents 93 92
Average shares and share equivalents 11,298 11,248
Net income $3,795 $3,137
Less preferred stock dividends - (20)
Income available for common stock $3,795 $3,117
Fully-diluted net income per share $0.34 $0.28
(1)All common share and per share data have been adjusted to reflect shares
issued in acquisitions accounted for using the pooling-of-interests method of
accounting.
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 75476
<INT-BEARING-DEPOSITS> 197
<FED-FUNDS-SOLD> 29175
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 224522
<INVESTMENTS-CARRYING> 85725
<INVESTMENTS-MARKET> 84541
<LOANS> 1161615
<ALLOWANCE> 12880
<TOTAL-ASSETS> 1654502
<DEPOSITS> 1415745
<SHORT-TERM> 71207
<LIABILITIES-OTHER> 13201
<LONG-TERM> 37172
<COMMON> 21024
0
0
<OTHER-SE> 96153
<TOTAL-LIABILITIES-AND-EQUITY> 1654502
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</TABLE>
