<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant[ X ]
Filed by a Party other than the Registrant[ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
THE BANK OF KENTUCKY FINANCIAL CORPORATION
-------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
-------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and O-11.
1) Title of each class of securities to which transaction
applies:
--------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
--------------------------------------------------------------
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule O-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
--------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------
5) Total fee paid:
--------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
O-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
--------------------------------------
2) Form, Schedule or Registration Statement No.:
--------------------------------------
3) Filing Party:
--------------------------------------
4) Date Filed:
<PAGE> 2
THE BANK OF KENTUCKY FINANCIAL CORPORATION
1065 BURLINGTON PIKE
FLORENCE, KENTUCKY 41042
(606) 371-2340
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Notice is hereby given that the Annual Meeting of Stockholders of The
Bank of Kentucky Financial Corporation ("BKFC") will be held at the Triple Crown
Country Club, One Triple Crown Boulevard, Union, Kentucky 41091, on April 28,
2000, at 5:00 p.m. Eastern Daylight Saving Time (the "Annual Meeting"), for the
following purposes, all of which are more completely set forth in the
accompanying Proxy Statement:
(i) To reelect four directors of BKFC for terms expiring in
2003;
(ii) To ratify the selection of Crowe, Chizek and Company
LLP as the auditors of BKFC for the current fiscal
year; and
(iii) To transact such other business as may properly come
before the Annual Meeting or any adjournments thereof.
Only stockholders of BKFC of record at the close of business on March
13, 2000, will be entitled to receive notice of and to vote at the Annual
Meeting and at any adjournments thereof. Whether or not you expect to attend the
Annual Meeting, we urge you to consider the accompanying Proxy Statement
carefully and to SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY SO THAT YOUR
SHARES MAY BE VOTED IN ACCORDANCE WITH YOUR WISHES AND THE PRESENCE OF A QUORUM
MAY BE ASSURED. The giving of a Proxy does not affect your right to vote in
person in the event you attend the Annual Meeting.
By Order of the Board of Directors
Florence, Kentucky Rodney S. Cain, Secretary
April 3, 2000
<PAGE> 3
THE BANK OF KENTUCKY FINANCIAL CORPORATION
1065 BURLINGTON PIKE
FLORENCE, KENTUCKY 41042
(606) 371-2340
PROXY STATEMENT
PROXIES
The enclosed Proxy is being solicited by the Board of Directors of The
Bank of Kentucky Financial Corporation, a Kentucky corporation ("BKFC"), for use
at the 2000 Annual Meeting of Stockholders of BKFC to be held at the Triple
Crown Country Club, One Triple Crown Boulevard, Union, Kentucky 41091, on April
28, 2000, at 5:00 p.m., Eastern Daylight Saving Time, and at any adjournments
thereof (the "Annual Meeting"). Without affecting any vote previously taken, the
Proxy may be revoked by a stockholder before exercise by executing a later-dated
Proxy or by giving notice of revocation to BKFC in writing or in open meeting.
Attendance at the Annual Meeting will not, of itself, revoke a Proxy.
Each properly executed Proxy received prior to the Annual Meeting and
not revoked will be voted as specified thereon or, in the absence of specific
instructions to the contrary, will be voted:
FOR the reelection of Harry J. Humpert, Robert B. Sathe, Herbert H.
Works and Robert W. Zapp as directors of BKFC for terms expiring in 2003;
FOR the ratification of the selection of Crowe, Chizek and Company LLP
("Crowe Chizek") as the auditors of BKFC for the current fiscal year.
Proxies may be solicited by the directors, officers and other employees
of BKFC in person or by telephone, telecopy, telegraph or mail. The cost of
soliciting proxies will be borne by BKFC.
Only stockholders of record as of the close of business on March 13,
2000 (the "Voting Record Date"), are eligible to vote at the Annual Meeting and
will be entitled to cast one vote for each common share of BKFC ("Share") owned.
BKFC's records disclose that, as of the Voting Record Date, there were 5,292,142
votes entitled to be cast at the Annual Meeting.
This Proxy Statement is first being mailed to stockholders of BKFC on
or about April 3, 2000.
VOTE REQUIRED
ELECTION OF DIRECTORS
The presence, in person or by proxy, of a majority of the issued and
outstanding Shares entitled to vote at the Annual Meeting is necessary to
establish a quorum at the Annual Meeting. At the Annual Meeting, four directors
are to be elected for terms expiring in 2003. Stockholders may cumulate votes in
the election of directors. Cumulative voting enables a stockholder to cast the
number of votes such stockholder is entitled to cast times the number of
directors to be elected; and each stockholder may cast all votes for any one
nominee, or distribute such votes among two or more nominees.
The four nominees receiving the greatest number of votes will be
elected as directors. Shares as to which the authority to vote is withheld and
shares held by a nominee for a beneficial owner which are present in person or
by proxy but are not voted with respect to the election of directors
("Non-votes") are not counted toward the election of directors or toward the
election of the individual nominees specified on the Proxy. If a stockholder has
signed and dated a proxy in the form of the enclosed Proxy, but has not voted
for the election of directors by marking the appropriate box on the Proxy, such
person's Shares will be voted FOR the reelection of Messrs. Humpert, Sathe,
Works and Zapp as directors of BKFC for terms expiring in 2003 and will not be
treated as Non-votes.
-1-
<PAGE> 4
RATIFICATION OF SELECTION OF AUDITORS
The affirmative vote of the holders of a majority of the votes cast in
person or by proxy at the Annual Meeting is necessary to ratify the selection of
Crowe Chizek as the auditors of BKFC for the current fiscal year. The effect of
a Non-vote or an abstention is the same as a vote against ratification. If a
stockholder has signed and dated a proxy in the form of the enclosed Proxy, but
has not voted on the ratification of the selection of Crowe Chizek as the
auditors by marking the appropriate box on the Proxy, such person's Shares will
be voted FOR the ratification of the selection of Crowe Chizek as the auditors
of BKFC for the current fiscal year.
VOTING SECURITIES AND OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
only persons known to BKFC to own beneficially more than five percent of the
outstanding Shares as of March 13, 2000:
<TABLE>
<CAPTION>
Amount and Nature Percentage of
Name and Address(1) of Beneficial Ownership(2) Shares Outstanding
- ---------------- ----------------------- ------------------
<S> <C> <C>
Rodney S. Cain and
Jacqueline M. Cain 930,313 (3) 17.58%
R. C. Durr and
R. C. Durr Company, Inc. 941,649 (4) 17.77
</TABLE>
- -----------------------------
(1) Mr. and Mrs. Cain, Mr. Durr and R. C. Durr Company, Inc., through Mr.
Durr, its sole stockholder, may be contacted in care of BKFC at 1065
Burlington Pike, Florence, Kentucky 41042.
(2) A person is the beneficial owner of Shares if such person, directly or
indirectly, has sole or shared voting or investment power over such
Shares or has the right to acquire such voting or investment power
within 60 days. All Shares are owned with sole voting and investment
power by each person listed, unless otherwise indicated by footnote.
(3) Includes 923,047 Shares owned jointly by Mr. and Mrs. Cain and 750
Shares that may be acquired upon the exercise of options.
(4) Includes 628,674 Shares owned by R. C. Durr Company, Inc. and 6,750
Shares that may be acquired upon the exercise of options. Mr. Durr is
the sole stockholder of R. C. Durr Company, Inc.
-2-
<PAGE> 5
The following table sets forth certain information with respect to the
number of Shares beneficially owned by each director of BKFC and by all
directors and executive officers of BKFC as a group as of March 13, 2000:
<TABLE>
<CAPTION>
Amount and Nature of Percent of Common
Name and Address(1) Beneficial Ownership(2) Shares Outstanding
- ---------------- -------------------- ------------------
<S> <C> <C>
Rodney S. Cain 930,313(3) 17.58%
Ruth Seligman-Doering 72,940(4) 1.38
R. C. Durr 941,649(5) 17.77
Robert D. Fulkerson 26,716(6) .50
Harry J. Humpert 37,589(7) .71
David E. Meyer 83,073(8) 1.57
Dr. John E. Miracle 81,276(9) 1.54
Mary Sue Rudicill 70,690(10) 1.33
Robert B. Sathe 96,160(11) 1.82
William E. Snyder 35,013(12) .66
Herbert H. Works 25,836(13) .49
Robert W. Zapp 173,650(14) 3.28
All directors and executive officers of
BKFC as a group (12 persons) 2,574,905 48.28%
</TABLE>
(1) Each of the persons listed in this table may be contacted at the
address of BKFC, 1065 Burlington Pike, Florence, Kentucky 41042.
(2) A person is the beneficial owner of Shares if such person, directly or
indirectly, has sole or shared voting or investment power over such
Shares or has the right to acquire such voting or investment power
within 60 days. All Shares are owned with sole voting and investment
power by each person listed, unless otherwise indicated by footnote.
(3) Includes 923,047 Shares owned jointly by Mr. Cain and his wife and 750
Shares that may be acquired upon the exercise of options.
(4) Includes 3,250 Shares that may be acquired upon the exercise of
options.
(5) Includes 628,674 Shares owned by R. C. Durr Company, Inc., of which Mr.
Durr is the sole stockholder, and 6,750 Shares that may be acquired
upon the exercise of options.
(6) Includes 9,375 Shares owned jointly by Mr. Fulkerson and his wife, 450
Shares held by Mr. Fulkerson's wife, 5,832 Shares held by Mr.
Fulkerson's wife as custodian for Mr. Fulkerson's daughter, 1,489
Shares allocated to the Burnett Federal Savings Bank Employee Stock
Ownership Plan (the "ESOP") account of Mr. Fulkerson, with respect to
which Mr. Fulkerson has sole voting but no investment power, and 2,010
Shares that may be acquired upon the exercise of options.
(7) Includes 12,888 Shares owned by Mr. Humpert's wife and 4,250 Shares
that may be acquired upon the exercise of options.
(8) Includes 74,342 Shares held in trust, with respect to which Mr. Meyer
shares investment power only as co-trustee, and 3,000 Shares that may
be acquired upon the exercise of options.
(9) Includes 29,050 Shares owned by Dr. Miracle's wife, 17,100 Shares held
in a trust of which Dr. Miracle is the trustee and with respect to
which Dr. Miracle has sole voting and investment power and 750 Shares
that may be acquired upon the exercise of options.
(10) Includes 1,500 Shares owned jointly by Ms. Rudicill and her husband,
13,500 Shares owned by Belleview Sand and Gravel, Inc., of which Ms.
Rudicill is Chairman and which is owned by Ms. Rudicill and her
husband, and 5,250 Shares that may be acquired upon the exercise of
options.
(11) Includes 3,000 Shares that may be acquired upon the exercise of
options.
(12) Includes 5,250 Shares that may be acquired upon the exercise of
options.
(13) Includes 3,000 Shares that may be acquired upon the exercise of
options.
(14) Includes 30,090 Shares owned jointly by Mr. Zapp and his wife, 8,244
Shares held by Mr. Zapp's wife as custodian for Mr. Zapp's three
children, 43,584 Shares owned by his wife, 3,184 Shares allocated to
Mr. Zapp's ESOP account, with respect to which Mr. Zapp has sole voting
but no investment power, and 3,600 Shares that may be acquired upon the
exercise of options.
-3-
<PAGE> 6
BOARD OF DIRECTORS
ELECTION OF DIRECTORS
The Amended Articles of Incorporation and By-Laws of BKFC provide for a
Board of Directors consisting of not less than nine directors and not more than
fifteen directors, divided into three classes. The Board of Directors of BKFC
currently consists of eleven directors. The four directors whose terms expire in
2000 have been nominated for reelection as directors of BKFC. Each of such four
directors will be elected for a three-year term. In accordance with BKFC's
By-Laws, any vacancy on the Board of Directors may be filled by the Board of
Directors for the remainder of the full term of the directorship. Each of the
directors of BKFC is also a director of The Bank of Kentucky, Inc. (the "Bank"),
BKFC's only subsidiary.
The entire Board of Directors of BKFC acts as a Nominating Committee
for selecting nominees for election as directors. In accordance with Section 3.3
of the By-Laws of BKFC, nominees for election as directors may be proposed only
by the directors or by a stockholder entitled to vote for directors if such
stockholder has submitted a written nomination to the Secretary of BKFC by the
later of the November 30th immediately preceding the annual meeting of
stockholders or the sixtieth day before the first anniversary of the most recent
annual meeting of stockholders held for the election of directors (unless the
annual meeting is not held on or before the thirty-first day following such
anniversary, in which case such written notice must be submitted no later than
the close of business on the seventh day following the day on which the notice
of the annual meeting is mailed to stockholders). Each such written nomination
must state the name, age, business or residence address of the nominee, the
principal occupation or employment of the nominee, the number of Shares owned
either beneficially or of record by each such nominee and the length of time
such Shares have been so owned.
If any nominee is unable to stand for election, the Proxies will be
voted for such substitute as the Board of Directors recommends. As of the date
of mailing this Proxy Statement, the Board of Directors knows of no reason why
any nominee would be unable to serve if elected. Stockholders may cumulate votes
in the election of directors.
The Board of Directors proposes the reelection of the following
directors for terms expiring in 2003:
<TABLE>
<CAPTION>
Director of Director of the
Name Age Position(s) Held BKFC Since(1) Bank Since
---- --- ---------------- ------------- ----------
<S> <C> <C> <C> <C>
Harry J. Humpert 74 Director 1995 1995
Robert B. Sathe 53 Director 1994 1990
Herbert H. Works 71 Director 1994 1992
Robert W. Zapp 48 President, CEO and 1994 1990
Director
</TABLE>
- -----------------------------
(1) BKFC acquired the Bank in 1995. BKFC acquired Burnett Federal Savings
Bank ("Burnett") and caused it to be merged into the Bank in 1995.
-4-
<PAGE> 7
The following directors will continue to serve after the Annual Meeting
for the terms indicated:
<TABLE>
<CAPTION>
Term Director of Director of the
Name Age Position(s) Held Expires BKFC Since(1) Bank Since
---- --- ---------------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Rodney S. Cain 61 Secretary and Director 2001 1994 1990
Ruth Seligman-Doering 59 Director 2001 1994 1990
R. C. Durr 80 Chairman and Director 2001 1994 1990
David E. Meyer 65 Director 2002 1994 1991
John E. Miracle 57 Director 2002 1994 1991
Mary Sue Rudicill 56 Director 2002 1994 1991
William E. Snyder 53 Director 2002 1995 1995
</TABLE>
- -----------------------------
(1) BKFC acquired the Bank in 1995.
Harry J. Humpert is the President of Humpert Enterprises, Inc., a
company which operates Klingenberg's Hardware and Paint in Covington, Kentucky.
Mr. Humpert became Chairman of the Board of Directors of Burnett in 1990.
Robert B. Sathe has been a Regional Vice-President of CIGNA Financial
Advisors, Inc., for the last eighteen years.
Herbert H. Works has been the President of Boone-Kenton Lumber for 24
years. Mr. Works served on the Board of Directors of Fifth Third Bank of Boone
County from 1980 until 1991, when he resigned in order to serve as a director of
the Bank.
Robert W. Zapp was the Executive Vice President and the Senior Loan
Officer of Fifth Third Bank of Boone County from January 1982 until June 1988.
From June 1988 until January 1990, Mr. Zapp was the President of Fifth Third
Bank of Kenton County, formerly Security Bank. Mr. Zapp resigned as President of
such institution in order to participate in the organization of the Bank.
Currently, Mr. Zapp is the President and the Chief Executive Officer of the Bank
and BKFC.
Rodney S. Cain was a director of Fifth Third Bank of Boone County,
formerly Boone State Bank, from 1977 until January 1990. Mr. Cain has served as
the Secretary of the Bank since 1990 and of BKFC since 1994. Mr. Cain is also
the Chairman and CEO of Wiseway Supply and has served in that capacity since
1972.
Ruth M. Seligman-Doering is currently a director of Charles Seligman
Distributing Company, Inc., and has also been its President and CEO for the past
eight years.
R. C. Durr was one of the founders of Boone State Bank. From the time
Boone State Bank was organized in 1971 until Boone State Bank was acquired by
Fifth Third Bank in 1985, Mr. Durr was active in the day-to-day management of
the activities of the institution. After such acquisition, Mr. Durr served as
the Chairman of the Board of Fifth Third Bank of Boone County, the successor to
Boone State Bank, until he resigned in order to participate in the organization
of the Bank. Mr. Durr has served as the Chairman of the Board of Directors of
the Bank since 1990 and of BKFC since 1994.
David E. Meyer is the President of Wolfpen Associates, a commercial
real estate firm; the managing partner of two commercial real estate investment
firms, Meyer Realty and Florence Commercial; the President of Fuller Square
Corporation, which owns the property on which Florence Commercial's building is
located; and the retired President of H. Meyer Dairy Company. Mr. Meyer served
as a director of Fifth Third Bank, Northern Kentucky, from 1981 through January
1991.
John E. Miracle, D.M.D., had a private dental practice for thirty
years. Dr. Miracle retired from practice in September 1999.
-5-
<PAGE> 8
Mary Sue Rudicill has been the Chairman of Belleview Sand and Gravel,
Inc., and Gravelview Trucking Company for fifteen years. Ms. Rudicill is a
director of Farmer's Mutual Life Insurance Company and was formerly a director
of Fifth Third Bank of Boone County.
William E. Snyder has been the Vice President and General Manager of
Freightliner Trucks of Cincinnati Incorporated since July 1997. From December
1996 to July 1997, Mr. Snyder was the Manager of Wholesale Operations of Bob
Sumerel Tire Co. Prior to such time, Mr. Snyder was the Vice President of
Freightliner of Cincinnati, Inc., a company which operates a truck dealership
located in Northern Kentucky, for five years. Mr. Snyder also served as the
Treasurer of Burnett from 1990 to 1995.
MEETINGS OF DIRECTORS
The Board of Directors of BKFC met seven times for regularly scheduled
and special meetings during the fiscal year ended December 31, 1999. Each
director attended at least 75% of the aggregate of such meetings held during his
or her service as a director, except Mr. Cain.
The Board of Directors of the Bank met 12 times for regularly scheduled
and special meetings during the fiscal year ended December 31, 1999.
COMMITTEES OF DIRECTORS
The Board of Directors of BKFC has no standing committees. Nominations
for election to the Board of Directors are determined by the entire Board of
Directors. See "Election of Directors."
The Board of Directors of the Bank has several committees, including an
Audit Committee and a Compensation Committee.
The Audit Committee's functions are to develop and ensure compliance
with an audit policy and to ensure that an independent audit is performed
annually. The members of the Audit Committee are Messrs. Humpert, Works and
Meyer and Ms. Rudicill, and the Audit Committee met two times in 1999.
The Compensation Committee's functions are to make recommendations to
the Board of Directors regarding the President's compensation. The members of
the Compensation Committee are Messrs. Meyer and Miracle and Ms. Rudicill, and
the Compensation Committee met one time in 1999.
EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
executive officers of BKFC:
Name Age Position(s) Held
- ---- --- ----------------
R. C. Durr 80 Chairman of the Board
Robert W. Zapp 48 President and Chief Executive Officer
Rodney S. Cain 61 Secretary
Robert D. Fulkerson 48 Assistant Secretary and Treasurer
For biographical information regarding each of these executive
officers, except Mr. Fulkerson, see "BOARD OF DIRECTORS - Election of
Directors."
Robert D. Fulkerson was Vice President of Fifth Third Bank of Boone
County from 1985 until 1990. He served as Vice President of the Bank from 1990
until 1995 and has served as Senior Vice President of the Bank since 1995. He
has also been the Assistant Secretary of BKFC since 1996 and its Treasurer since
1998.
-6-
<PAGE> 9
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
EXECUTIVE COMPENSATION
BKFC does not pay any compensation to its executive officers. Executive
officers of the Bank are compensated by the Bank for services rendered to the
Bank. Except for the President of the Bank, no director or executive officer of
BKFC received more than $100,000 in salary and bonus payments from the Bank
during the year ended December 31, 1999. The following table sets forth certain
information with respect to compensation paid to the President of the Bank.
<TABLE>
<CAPTION>
Summary Compensation Table
------------------------
Long-Term
Compensation
- ----------------------------------------------------------------------------------------------------------------------
Annual Compensation (1) Awards
------------------------ All Other
Securities underlying Compensation
Name and Principal Position Year Salary($) Bonus($) Options/SARs (#) ($)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Robert W. Zapp, President 1999 $149,616 $110,000 6,000/-0- $29,676(2)
and CEO 1998 $139,711 $87,500 6,000/-0- $67,003(3)
1997 $132,211 $70,000 -0-/-0- $31,590(4)
</TABLE>
- -----------------------------
(1) Does not include amounts attributable to other miscellaneous benefits.
The cost to BKFC of providing such benefits to Mr. Zapp was less than
10% of his cash compensation.
(2) Consists of contributions of $12,000 to the Bank's Profit Sharing Plan
for Mr. Zapp's account, a matching contribution to Mr. Zapp's 401(k)
plan account of $2,646 and premium payments of $15,030 for a
split-dollar life insurance policy. Allocations to Mr. Zapp's ESOP
account for fiscal year 1999 have not yet been determined.
(3) Consists of contributions of $14,400 to the Bank's Profit Sharing Plan
for Mr. Zapp's account, a matching contribution to Mr. Zapp's 401(k)
plan account of $3,360, premium payments of $13,245 for a split-dollar
life insurance policy, and the $35,998 value at December 31, 1998, of
allocations to Mr. Zapp's ESOP account.
(4) Consists of contributions of $14,461 to the Bank's Profit Sharing Plan
for Mr. Zapp's account, a matching contribution to Mr. Zapp's 401(k)
plan account of $1,988, premium payments of $9,095 for a split-dollar
life insurance policy and the $6,046 value at December 31, 1997, of
allocations to Mr. Zapp's ESOP account.
DIRECTOR COMPENSATION
Although BKFC and the Bank do not pay regularly established director's
fees, each director of the Bank, except Mr. Zapp, received a $500 bonus in
December 1999.
-7-
<PAGE> 10
STOCK OPTION PLAN
At the 1997 Annual Meeting of Stockholders of BKFC, the stockholders
approved The Bank of Kentucky Financial Corporation 1997 Stock Option and
Incentive Plan (the "Stock Option Plan"), providing for the award of options to
purchase up to 360,000 Shares, as adjusted for the stock dividend in the nature
of a 2-for-1 stock split in April 1998 and the stock dividend in the nature of a
3-for-2 stock split in April 1999 (the "Stock Splits"). Options to purchase
1,000 Shares, 1,500 Shares and 1,500 shares were awarded in 1997, 1998 and 1999,
respectively, pursuant to the Stock Option Plan to each of the non-employee
directors, after adjustments for the Stock Splits. Pursuant to the Stock Option
Plan, options to purchase a total of 145,500 Shares have been granted to
employees and directors of BKFC and the Bank.
The following table sets forth information regarding all grants of
options to purchase Shares of BKFC made to Mr. Zapp during the fiscal year ended
December 31, 1999:
<TABLE>
<CAPTION>
Options/SAR Grants in Last Fiscal Year
- -----------------------------------------------------------------------------------------------------------------------------------
Potential Realizable
Value at Assumed Annual
Rates of Stock Price
Appreciation
Individual Grants for Option Term
- ---------------------------------------------------------------------------------------------------------- -------------------
Number of Securities % of Total Options/
Underlying SARs Granted to Exercise or Expiration
Name Options/SARs Granted (#)(1) Employees in Fiscal Year Base Price ($/share) Date 5%($) 10% ($)
- ---- --------------------------- ------------------------ -------------------- ---- ----- -------
<S> <C> <C> <C> <C> <C> <C>
Robert W. Zapp 6,000 14.81% $21.17 1/15/09 $79,870 $202,405
- ----------------------------
</TABLE>
(1) Options granted were ISOs, of which one-fifth are exercisable each year
for five years beginning on January 15, 1999.
The following table sets forth information regarding the number and
value of unexercised options held by Mr. Zapp at December 31, 1999:
<TABLE>
<CAPTION>
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End Values
----------------------------------------------------------------------------------------------
Number of Securities Underlying Value of Unexercised
Shares Unexercised Options/SARs at In-the-Money Options/SARs at
Acquired on Value 12/31/99 12/31/99 ($)(1)
Name Exercise (#) Realized Exercisable/Unexercisable Exercisable/Unexercisable
- ---- ------------ -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Robert W. Zapp -0- -0- 1,200/10,800 $27,700/$171,300
- ----------------------------
</TABLE>
(1) For purposes of this table, the value of the options was determined by
multiplying the number of Shares subject to unexercised options by the
difference between the exercise price for the unexercised options and
the fair market value of BKFC's Shares, which was $31.25 per Share on
December 31, 1999, based on a purchase of BKFC Shares on December 30,
1999. No established trading market for BKFC's Shares existed at
December 31, 1999, BKFC's Shares are not traded on any securities
exchange and the prices at which its Shares are traded are not quoted
by a national quotation service.
COMPENSATION COMMITTEE REPORT
BKFC is a bank holding company, which directly owns all of the
outstanding capital stock of the Bank. BKFC's business consists primarily of the
business of the Bank. The financial results of BKFC depend primarily upon the
Bank's financial results.
-8-
<PAGE> 11
The Compensation Committee of the Board of Directors of the Bank (the
"Committee") is composed exclusively of non-employee directors. The committee's
philosophy is to tie executive compensation to the achievement of the Bank's
goals and the resulting performance of BKFC. The Committee reviews executive
performance and compensation and makes recommendations to the full Board of
Directors of the Bank for approval.
The Committee's goal is to accomplish the following specific objectives
through the use of base salary and incentive plans:
(1) Motivate personnel to perform and succeed according to the goals
outlined in the Bank's annual profit plan;
(2) Retain key personnel critical to the long-term success of the
Bank; and
(3) Utilize incentive plans, such as stock options, that reward
executives for corporate success and align the interests of
management with those of the stockholders.
BASE SALARY. Base Salary is the foundation of the Bank's compensation
program, providing income on which the officer can rely, but which is not so
large as to eliminate the officer's motivation to work hard to increase
shareholder value. An officer's base salary is directly related to his or her
position, job responsibilities, performance and contribution to the Bank's
success. The Committee reviews peer group information with respect to
compensation and company performance on a regional and national basis to ensure
salaries are competitive and in line with the industry.
BONUS PLAN. The Bank also has a bonus compensation plan pursuant to
which awards are based on the Bank's achievement of predetermined goals relating
to return on average equity and return on average assets, and on the
participant's achievement of goals relating to his or her individual
contributions to the Bank. Threshold, target and maximum goals for corporate
performance are generally established at the beginning of each fiscal year.
All awards are established as a percentage of each participant's base
salary. Percentages differ due to the contribution of the individual to the
Bank's success. The senior management bonus plan awards are based solely on the
achievement of the Bank's goals.
STOCK OPTIONS. The Committee annually reviews the appropriateness of
granting stock options to the officers of the company. The purposes of this
long-term incentive compensation are to provide an incentive to officers to
promote the success of the business and thereby increase stockholder value, and
to attract and retain the best available personnel. The Committee grants options
based on an individual's performance and contribution to the Bank's success. All
options granted to date to executive officers have a term of 10 years and may be
first exercised to the extent of one-fifth each year for the first five years
after the date of grant.
SECTION 162(m) OF THE INTERNAL REVENUE CODE. Section 162(m) of the
Internal Revenue Code of 1986, as amended, prohibits a publicly-held
corporation, such as BKFC, from claiming a deduction on its federal income tax
return for compensation in excess of $1 million paid for a given fiscal year to
the chief executive officer and the four most highly compensated officers of the
corporation other than the chief executive officer at the close of the
corporation's fiscal year. The $1 million compensation deduction limitation does
not apply to "performance-based compensation."
Although none of the officers of BKFC or the Bank currently receive
annual cash compensation near $1 million, the difference between the fair market
value of the shares acquired upon the exercise of a non-qualified option and the
exercise price is considered compensation in the year of exercise. An option
award must meet several requirements to qualify as "performance-based
compensation." BKFC has determined that the options to purchase BKFC currently
outstanding qualify for exemption from the $1 million limit. Neither BKFC nor
the Bank has a policy requiring that all compensation payable in 2000 and
thereafter to the covered officers be deductible under Section 162(m). The Board
of Directors of both companies will, however, continue to consider carefully the
after-tax cost and value to BKFC and the Bank of all compensation.
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<PAGE> 12
CEO COMPENSATION. Robert W. Zapp has been the President and the Chief
Executive Officer of the Bank since August 1990 when the Bank was opened. The
committee used the executive compensation policy described above to determine
Mr. Zapp's compensation.
In setting the base salary, cash incentive award and amount of stock
options, the Committee made an overall assessment of Mr. Zapp's leadership in
achieving the Bank's long-term strategic and business goals. The Bank achieved
its corporate goals, including those related to return on equity and return on
assets, and Mr. Zapp was determined to have contributed substantially to the
Bank's success.
COMPENSATION COMMITTEE
David E. Meyer
John Miracle
Mary Sue Rudicill
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors of the Bank has a Compensation Committee whose
members are Messrs. Meyer and Miracle and Ms. Rudicill. None of such persons are
employees of the Bank or BKFC.
PERFORMANCE GRAPH
The following line graph compares the yearly percentage change in BKFC
cumulative total shareholder return against the cumulative return of a broad
index of The Nasdaq National Market and an index of banks with total assets of
more than $250 million and less than $500 million. The graph assumes the
investment of $100 on April 3, 1995. Cumulative total shareholder return is
measured by dividing (i) the sum of (A) the cumulative amount of dividends for
the measurement period, assuming dividend reinvestment, and (B) the difference
between the price of BKFC common shares at the end and at the beginning of the
measurement period; by (ii) the price of BKFC common shares at the beginning of
the measurement period.
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<PAGE> 13
BANK OF KENTUCKY FINANCIAL CORP.
TOTAL RETURN PERFORMANCE
[GRAPH]
<TABLE>
<CAPTION>
PERIOD ENDING
-------------------------------------------------------------
INDEX 04/03/95 12/31/95 12/31/96 12//31/97 12/31/98 12/31/99
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Bank of Kentucky Financial Corp. 100.00 150.29 151.03 199.70 559.88 808.93
Russell 2000 100.00 122.74 142.98 174.95 170.50 206.74
SNL $250M-$500M Bank Asset-Size Index 100.00 125.69 163.21 282.27 252.78 235.17
</TABLE>
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<PAGE> 14
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Bank has extended loans to certain of its and BKFC's directors and
executive officers, their affiliates and members of their families. All such
loans were made in the ordinary course of business on substantially the same
terms, including interest rates and collateral requirements, as those prevailing
at the time for comparable transactions with other persons and did not present
more than the normal risk of collectibility or other unfavorable features.
The Bank has a lease agreement for office premises located at 1065
Burlington Pike with Mr. Durr, R. C. Durr Company, Inc., Mr. Cain, and Mr.
Cain's sons, John S. Cain, Rodney C. Cain and David Alfred Cain, each of whom is
a lessor under the lease agreement. The annual rental expense under this lease
was $178,170 for each of the years ended December 31, 1999, 1998 and 1997. The
lease has an initial term of 15 years expiring in 2006 and may, at the option of
the Bank, be renewed for three successive five-year periods.
The Bank has a lease agreement for office premises located on Weaver
Road in Boone County, Kentucky, with Ms. Seligman-Doering and Mr. Sathe as
lessors under the lease agreement. Total rental expense under this lease was
$64,886 for each of the years ended December 31, 1999, 1998 and 1997. The lease
has an initial term of 15 years expiring in 2007 and may, at the option of the
Bank, be renewed for three successive five-year periods.
The Bank has a lease agreement for office premises located on Kentucky
Highway 18 in Boone County, Kentucky, with William R. Rudicill, the husband of
Ms. Rudicill. Total rental expense under this lease was $11,056 for the year
ended December 31, 1999, and $10,051 for each of the years ended December 31,
1998 and 1997. The lease has an initial term of 15 years expiring in 2008 and
may, at the option of the Bank, be renewed for three successive five-year
periods.
The Bank has a lease agreement for office premises located on Houston
Road in Boone County, Kentucky, with Dr. Miracle, Geraldine G. Miracle, Jennifer
A. Meyer, Maria A. Meyer, Leila L. Meyer, Herbert E. Works, Mark T. Wilson,
Nicolette Wilson, Bryan E. Wilson and Josephina Wilson, each of whom is a lessor
under the lease agreement. Geraldine Miracle is Dr. Miracle's spouse. Jennifer
Meyer, Maria Meyer and Leila Meyer are daughters-in-law of Mr. Meyer. Herbert E.
Works is the son of Mr. Works. Mark Wilson, Nicolette Wilson, Bryson Wilson and
Josephina Wilson are Mr. Works' wife's sons and their wives. The annual rental
expense under this lease was $73,467 for each of the years ended December 31,
1999, 1998 and 1997, respectively. The lease has an initial term of 15 years
expiring in 2009 and may, at the option of the Bank, be renewed for three
successive five-year periods.
The Bank has a ground lease agreement for office premises located at
12020 Madison Pike in Nicholson, Kentucky, with Nicholson Properties LLC. R. C.
Durr owns 50% of Nicholson Properties LLC. The annual rental expense under this
agreement is $24,000. The lease has an initial term of five years expiring in
2001 and may, at the option of the Bank, be renewed for an additional term of
five years at an annual expense of $26,400.
The Bank has a lease agreement for office premises located on U.S. 42
in Boone County, Kentucky, with Burnett Mortgage Company, LLC, of which Mr.
Humpert and Mr. Snyder are members. Total rental expense under this lease was
$89,495 for 1999. The lease was effective in May 1998 with an initial term of 15
years and may, at the option of the Bank, be renewed for three successive
five-year periods.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the federal securities laws, BKFC's directors and executive
officers and persons holding more than ten percent of the outstanding Shares are
required to report their ownership of Shares and changes in such ownership to
the Securities and Exchange Commission (the "SEC") and BKFC. The SEC has
established specific due dates for such reports. Based upon a review of such
reports, BKFC must disclose any failures to file such reports timely in proxy
statements used in connection with annual meetings of stockholders. Ms. Doering
filed late two reports with respect to one transaction each; Mr. Humpert filed
late one report with respect to one transaction; and Mr. Snyder filed late one
report with respect to one transaction.
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<PAGE> 15
SELECTION OF AUDITORS
The Board of Directors has selected Crowe Chizek as the auditors of
BKFC and its subsidiaries for the current fiscal year and recommends that the
stockholders ratify the selection. Crowe Chizek has been the auditor of BKFC
since 1995. Management expects that a representative of Crowe Chizek will be
present at the Annual Meeting, will have the opportunity to make a statement if
he or she so desires and will be available to respond to appropriate questions.
The affirmative vote of the holders of a majority of the votes cast is
necessary to ratify the selection of Crowe Chizek as the auditors of BKFC for
the current fiscal year.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
SELECTION OF CROWE CHIZEK AS THE AUDITORS FOR THE CURRENT FISCAL YEAR.
PROPOSALS OF SECURITY HOLDERS AND OTHER MATTERS
Any proposals of stockholders intended to be included in BKFC's proxy
statement and proxy card for the 2001 Annual Meeting of Stockholders (other than
nominations for directors, as explained herein at "BOARD OF DIRECTORS - Election
of Directors") should be sent to BKFC by certified mail and must be received by
BKFC not later than December 4, 2000. In addition, if a stockholder intends to
present a proposal at the 2001 Annual Meeting without including the proposal in
the proxy materials related to that meeting, and if the proposal is not received
by February 19, 2001, then the proxies designated by the Board of Directors of
BKFC for the 2001 Annual Meeting of Stockholders of BKFC may vote in their
discretion on any such proposal any shares for which they have been appointed
proxies without mention of such matter in the proxy statement or on the proxy
card for such meeting.
Management knows of no other business that may be brought before the
Annual Meeting, including matters incident to the conduct of the Annual Meeting.
It is the intention of the persons named in the enclosed Proxy to vote such
Proxy in accordance with their best judgment on any other matters that may be
brought before the Annual Meeting.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. WHETHER OR NOT YOU
EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE URGED TO FILL IN, SIGN
AND RETURN THE PROXY IN THE ENCLOSED SELF-ADDRESSED ENVELOPE.
By Order of the Board of Directors
Florence, Kentucky Rodney S. Cain, Secretary
April 3, 2000
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<PAGE> 16
REVOCABLE PROXY
THE BANK OF KENTUCKY FINANCIAL CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
April 28, 2000
The undersigned hereby appoints R. C. Durr and Rodney S. Cain, or
either of them, with full powers of substitution and resubstitution, to act as
proxy or proxies for the undersigned to vote all shares of common stock of The
Bank of Kentucky Financial Corporation (the "Company") that the undersigned is
entitled to vote at the Annual Meeting of Stockholders (the "Meeting") to be
held on April 28, 2000, at Triple Crown Country Club, One Triple Crown
Boulevard, Union, Kentucky 41091, and at any and all adjournments thereof, as
follows:
The Board of Directors recommends a vote "FOR" the election of the directors
nominated and "FOR' Proposal II.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR THE ELECTION OF THE DIRECTORS NOMINATED AND FOR PROPOSAL
II. IF ANY OTHER BUSINESS IS PRESENTED AT SUCH MEETING, THIS PROXY WILL BE VOTED
BY THOSE NAMED IN THIS PROXY IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE
BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
This proxy shall be deemed terminated and of no further force and effect if the
undersigned attends and votes in person at the Annual Meeting or gives written
notice of revocation or submits a later-dated proxy received by the Company
before the Meeting.
The undersigned acknowledges receipt from the Company, prior to the execution of
this Proxy, of a Notice of the Meeting, a Proxy Statement dated April 3, 2000,
and a copy of the 1999 Annual Report to Stockholders.
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<PAGE> 17
<TABLE>
THE BANK OF KENTUCKY FINANCIAL CORPORATION 2000 ANNUAL MEETING
<S> <C> <C> <C> <C>
I. ELECTION OF DIRECTORS: 1-Harry J. Humpert 2-Robert B. Sathe __ FOR all nominees __WITHHOLD
AUTHORITY
For a term expiring in 2003 3-Herbert H. Works 4-Robert W. Zapp listed to the left (except to vote for all nominees
as specified below). listed to the left.
(Instructions: To withhold authority to vote for any indicated nominee, write the number(s)
of the nominee(s) in the box provided to the right.)
- --------------------------------
(Instructions: If you wish to vote cumulatively, indicate how you want your votes allocated
among the nominees in the box provided to the right.)
- --------------------------------
II. The ratification of the appointment of Crowe, Chizek and Company LLP as independent ___ FOR
auditors for the Company for the year ended December 31, 2000. ___AGAINST ___ ABSTAIN
In their discretion, the proxies are authorized to vote on any other business that may properly come before the Meeting
or any adjournment thereof.
Check appropriate box Date ______________________, 2000 NO. OF SHARES
Indicate changes below:
Address Change? __ Name Change? __
------------------------------------------------------
Signature(s) in Box
Please sign exactly as your name appears on this
card. When signing as attorney, executor,
administrator, trustee or guardian, please give your
full title. If shares are held jointly, only one
holder's signature is required.
</TABLE>
-15-
