SCHEDULE 14A INFORMATION
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. ___)
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
[x]Definitive Proxy Statement Commission Only (as permitted
[ ]Definitive Additional Materials by Rule 14a-6(e)(2))
[ ]Soliciting Material Under Rule 14a-12
KENTUCKY FIRST BANCORP, INC.
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(Name of Registrant as Specified in Its Charter)
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(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)(1) and
0-11.
1. Title of each class of securities to which transaction applies:
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2. Aggregate number of securities to which transaction applies:
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3. Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
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4. Proposed maximum aggregate value of transaction:
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5. Total fee paid:
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[ ] Fee paid previously with preliminary materials:___________________________
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(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:
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2. Form, Schedule or Registration Statement No.:
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3. Filing Party:
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4. Date Filed:
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[KENTUCKY FIRST BANCORP, INC. LETTERHEAD]
October 5, 2001
Dear Fellow Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Kentucky First Bancorp, Inc. to be held at the main office of First Federal
Savings Bank, 308 North Main Street, Cynthiana, Kentucky on Wednesday, November
7, 2001 at 5:30 p.m., local time. Your Board of Directors and Management look
forward to personally greeting those stockholders able to attend.
The attached Notice of Annual Meeting and Proxy Statement describe the
formal business to be transacted at the meeting. During the meeting, we will
also report on the operations of the Company. Directors and officers of the
Company as well as representatives of Grant Thornton, LLP, the Company's
independent auditors, will be present to respond to any questions the
stockholders may have.
WE URGE YOU TO SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AS SOON AS
POSSIBLE EVEN IF YOU CURRENTLY PLAN TO ATTEND THE ANNUAL MEETING. Your vote is
important, regardless of the number of shares you own. This will not prevent you
from voting in person but will assure that your vote is counted if you are
unable to attend the meeting. On behalf of your Board of Directors, thank you
for your interest and support.
Sincerely,
/s/ Betty J. Long
Betty J. Long
President
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KENTUCKY FIRST BANCORP, INC.
308 NORTH MAIN STREET
CYNTHIANA, KENTUCKY 41031-1210
(859) 234-1440
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 7, 2001
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NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Meeting") of Kentucky First Bancorp, Inc. (the "Company"), will be held at the
main office of First Federal Savings Bank, 308 North Main Street, Cynthiana,
Kentucky at 5:30 p.m. on Wednesday, November 7, 2001.
A Proxy Card and a Proxy Statement for the Meeting are enclosed.
The Meeting is for the purpose of considering and acting upon:
1. The election of three directors of the Company;
2. A stockholder proposal opposed by the Board of Directors, as set forth
in this Proxy Statement, if presented at the Meeting; and
3. The transaction of such other matters as may properly come before the
Meeting or any adjournments thereof.
The Board of Directors is not aware of any other business to come before
the Meeting.
Any action may be taken on any one of the foregoing proposals at the
Meeting on the date specified above or on any date or dates to which, by
original or later adjournment, the Meeting may be adjourned. Stockholders of
record at the close of business on September 20, 2001, are the stockholders
entitled to notice of and to vote at the Meeting and any adjournments thereof.
You are requested to fill in and sign the enclosed form of proxy which is
solicited by the Board of Directors and to mail it promptly in the enclosed
envelope. The proxy will not be used if you attend and vote at the Meeting in
person.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Kevin R. Tolle
KEVIN R. TOLLE
SECRETARY
Cynthiana, Kentucky
October 5, 2001
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IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE YOUR COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES IN ORDER TO ENSURE A QUORUM. A SELF-ADDRESSED
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED IN
THE UNITED STATES. PLEASE ACT PROMPTLY.
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PROXY STATEMENT
OF
KENTUCKY FIRST BANCORP, INC.
308 NORTH MAIN STREET
CYNTHIANA, KENTUCKY 41031-1210
ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 7, 2001
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GENERAL
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This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Kentucky First Bancorp, Inc. (the
"Company") to be used at the Annual Meeting of Stockholders of the Company (the
"Meeting") which will be held at the main office of First Federal Savings Bank,
308 North Main Street, Cynthiana, Kentucky on Wednesday, November 7, 2001, at
5:30 p.m., local time. The accompanying notice of meeting and this Proxy
Statement are being first mailed to stockholders on or about October 5, 2001.
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VOTING AND REVOCABILITY OF PROXIES
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Stockholders who execute proxies retain the right to revoke them at any
time. Unless so revoked, the shares represented by such proxies will be voted at
the Meeting and all adjournments thereof. Proxies may be revoked by written
notice to the Secretary of the Company, at the address shown above, by filing of
a later dated proxy prior to a vote being taken on a particular proposal at the
Meeting or by attending the Meeting and voting in person. Proxies solicited by
the Board of Directors of the Company will be voted in accordance with the
directions given therein. WHERE NO INSTRUCTIONS ARE INDICATED, PROXIES WILL BE
VOTED FOR THE NOMINEES FOR DIRECTOR SET FORTH BELOW IN THIS PROXY STATEMENT AND
AGAINST THE STOCKHOLDER PROPOSAL AS DISCUSSED HEREIN. The proxy confers
discretionary authority on the persons named therein to vote with respect to the
election of any person as a director where the nominee is unable to serve or for
good cause will not serve, and matters incident to the conduct of the Meeting.
Proxies marked as abstentions, and shares held in street name which have been
designated by brokers on proxies as not voted, will not be counted as votes
cast. Proxies marked as abstentions or as broker non-votes will, however, be
treated as shares present for purposes of determining whether a quorum is
present.
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VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
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The securities entitled to notice of and to vote at the Meeting consist of
the Company's common stock, par value $.01 per share (the "Common Stock").
Stockholders of record as of the close of business on September 20, 2001 (the
"Record Date"), are entitled to one vote for each share of Common Stock then
held. As of the Record Date, there were 940,165 shares of Common Stock issued
and outstanding. The presence, in person or by proxy, of at least one-third of
the total number of shares of Common Stock outstanding and entitled to vote will
be necessary to constitute a quorum at the Meeting.
Persons and groups owning in excess of 5% of the Common Stock are required
to file certain reports regarding such ownership pursuant to the Securities
Exchange Act of 1934, as amended (the "Exchange Act") with the Company and the
Securities and Exchange Commission ("SEC"). Based on such reports (and certain
other written information received by the Company), management knows of no
persons other than those set forth below who owned more than 5% of the
outstanding shares of Common Stock as of the Record Date. The following table
sets forth, as of the Record Date, certain information as to those persons who
were the beneficial owners of more than five percent (5%) of the Company's
outstanding shares of Common Stock and the shares of Common Stock beneficially
owned by all executive officers and directors of the Company as a group.
PERCENT OF SHARES
NAME AND ADDRESS AMOUNT AND NATURE OF OF COMMON STOCK
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1) OUTSTANDING (2)
------------------- ------------------------ ------------------
Paul Lynch 72,973 7.76%
11 Victoria Drive
New Castle, Pennsylvania 16105
Betty J. Long 70,493 7.17%
750 Sandpiper Court
Lexington, Kentucky 40505
Kentucky First Bancorp, Inc. 104,972 (3) 11.17%
Employee Stock Ownership Plan
308 North Main Street
Cynthiana, Kentucky 41031-1210
All Executive Officers and Directors 258,073 (4) 24.59%
as a Group (10 persons)
<FN>
________________
(1) For purposes of this table, a person is deemed to be the beneficial owner
of any shares of Common Stock if he or she has or shares voting or
investment power with respect to such Common Stock or has a right to
acquire beneficial ownership at any time within 60 days from the Record
Date. As used herein, "voting power" is the power to vote or direct the
voting of shares and "investment power" is the power to dispose or direct
the disposition of shares. Except as otherwise noted, ownership is direct,
and the named persons exercise sole voting and investment power over the
shares of the Common Stock.
(2) In calculating the percentage ownership of each named individual and the
group, the number of shares outstanding is deemed to include any shares of
the Common Stock which the individual or the group has the right to acquire
within 60 days of the Record Date.
(3) These shares are held in a suspense account for future allocation among
participating employees as the loan used to purchase the shares is repaid.
The trustees of the Kentucky First Bancorp, Inc. Employee Stock Ownership
Plan (the "ESOP"), currently Directors Wilson, Morris and Rees, vote all
allocated shares in accordance with instructions of the participants.
Unallocated shares and shares for which no instructions have been received
generally are voted by the ESOP trustees in the same ratio as participants
direct the voting of allocated shares or, in the absence of such direction,
as directed by the Company's Board of Directors. As of the Record Date,
59,162 shares had been allocated.
(4) Includes 25,258 shares which have been allocated to the accounts of
executive officers in the ESOP and 109,205 shares which may be purchased
pursuant to options exercisable within 60 days of the Record Date. Does not
include 45,810 unallocated shares held by the ESOP.
</FN>
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PROPOSAL I -- ELECTION OF DIRECTORS
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The Company's Board of Directors is composed of eight members. The
Company's Certificate of Incorporation requires that directors be divided into
three classes, as nearly equal in number as possible, each class to serve for a
three year period, with approximately one-third of the directors elected each
year. The Board of Directors has nominated Betty J. Long, Milton G. Rees and
Wilbur H. Wilson, all of whom is currently a member of the Board, to serve as a
director for a three-year period.
If any nominee is unable to serve, the shares represented by all valid
proxies will be voted for the election of such substitute as the Board of
Directors may recommend or the size of the Board may be reduced to eliminate the
vacancy. At this time, the Board knows of no reason why any nominee might be
unavailable to serve.
Under the Company's Bylaws, directors shall be elected by a plurality of
the votes of the shares present in person or by proxy at the Meeting. Votes
which are not cast at the Meeting, either because of abstentions or broker
non-votes, are not considered in determining the number of votes which have been
cast for or against the election of a nominee.
2
Unless otherwise specified on the proxy, it is intended that the persons
named in the proxies solicited by the Board will vote for the election of the
named nominees.
The following table sets forth the names of the Board's nominees for
election as directors of the Company and of those directors who will continue to
serve as such after the Meeting. Also set forth is certain other information
with respect to each person's age, the year he or she first became a director of
the Company's wholly owned subsidiary, First Federal Savings Bank (the "Bank" or
"First Federal"), the expiration of his or her term as a director, and the
number and percentage of shares of the Common Stock beneficially owned. With the
exception of Russell M. Brooks, all of the individuals were initially appointed
as director of the Company in 1995 in connection with the Company's
incorporation.
SHARES OF
YEAR FIRST COMMON STOCK
ELECTED AS BENEFICIALLY
AGE AT THE DIRECTOR CURRENT TERM OWNED AT THE PERCENT OF
NAME RECORD DATE OF THE BANK TO EXPIRE RECORD DATE (1) CLASS (2)
---- ----------- ----------- --------- --------------- ---------
BOARD NOMINEES FOR TERMS TO EXPIRE IN 2004
Betty J. Long 54 1995 2001 70,493 (3) 7.17%
Milton G. Rees 70 1968 2001 24,746 (4) 2.62%
Wilbur H. Wilson 62 1980 2001 30,869 (5) 3.25%
DIRECTORS CONTINUING IN OFFICE
William D. Morris 77 1963 2002 25,721 (6) 2.72%
Russell M. Brooks 50 1999 2002 6,101 (7) 0.65%
Luther O. Beckett 77 1968 2003 19,956 (8) 2.12%
Diane E. Ritchie 52 1987 2003 9,243 (9) 0.97%
John Swinford 69 1968 2003 23,456 (10) 2.48%
<FN>
______________
(1) Includes stock held in joint tenancy; stock owned as tenants in common;
stock owned or held by a spouse or other member of the individual's
household; stock allocated through certain employee benefit plans of the
Company; stock in which the individual either has or shares voting and/or
investment power and shares which the individual has the right to acquire
at any time within 60 days of the Record Date. Each person or relative of
such person whose shares are included herein exercises sole or shared
voting and dispositive power as to the shares reported. Does not include
shares with respect to which Directors Wilson, Morris and Rees have "voting
power" by virtue of their positions as trustees of the trust holding
104,972 shares under the Company's ESOP. The ESOP trustees must vote all
allocated shares held in the ESOP in accordance with the instructions of
the participants. Unallocated shares and allocated shares for which no
timely direction is received are voted by the ESOP trustees in proportion
to the participant-directed voting of allocated shares.
(2) In calculating the percentage ownership of each named individual, the
number of shares outstanding is deemed to include any shares of the Common
Stock which the individual has the right to acquire within 60 days of the
Record Date.
(3) Includes 8,300 shares held for the benefit of Ms. Long by the 401(k) Plan,
1,669 shares held in an IRA account, 10,799 shares allocated to her ESOP
account and 43,393 shares which she has the right to acquire pursuant to
options exercisable within 60 days of the Record Date.
(4) Includes 1,135 shares held by spouse and 3,474 shares which may be acquired
pursuant to options exercisable within 60 days of the Record Date.
(5) Includes 15,000 shares held by spouse and 8,679 shares which may be
acquired pursuant to options exercisable within 60 days of the Record Date.
(6) Includes 1,000 shares held by spouse and 6,844 shares which may be acquired
pursuant to options exercisable within 60 days of the Record Date.
(7) Includes 3,700 shares held in an IRA account and 2,410 shares allocated to
his ESOP account.
(8) Includes 1,679 shares which may be acquired pursuant to options exercisable
within 60 days of the Record Date.
(9) Includes 8,685 shares which may be acquired pursuant to options exercisable
within 60 days of the Record Date.
(10) Includes 5,209 shares which may be acquired pursuant to options exercisable
within 60 days of the Record Date.
</FN>
3
The principal occupation of each director of the Company is set forth
below.
BETTY J. LONG has served as President and Chief Executive Officer of the
Bank since May 1994 and has been a member of the Board of Directors of the Bank
since January 1995. Prior to assuming her current position, Ms. Long served as
Vice President of the Bank from 1986 to 1994. She joined the Bank in 1965.
MILTON G. REES retired in 1993. Prior to his retirement, Mr. Rees was the
owner and manager of Harrison Motor Co. in Cynthiana, Kentucky.
WILBUR H. WILSON is a retired physician in Cynthiana, Kentucky. Dr. Wilson
is Past Chairman of the Board of the Harrison County Health Department and Past
Chairman of the Board of the Wedco District Health Department.
WILLIAM D. MORRIS has been retired since 1988 from his position as a
certified public accountant and a partner in the firm of Morris, Ingram &
Brunker in Cynthiana Kentucky. Mr. Morris served as President of the Bank from
January 1, 1987 until December 31, 1993 and has served as Chairman of the Board
since that date. Mr. Morris serves on the Board of Directors of the Cynthiana
Library Board. He is a former Board member of the Cynthiana-Harrison County
Community Service Center, the Society for Retarded Citizens and the Industrial
Foundation.
RUSSELL M. BROOKS is Executive Vice President of the Company and the Bank.
Mr. Brooks assumed the positions in June, 1998. Prior to joining the Company, he
served as Vice President of Kentucky Bank, Paris, Kentucky from 1996 to 1998 and
served as Chief Executive Officer of Jessamine First Federal Savings and Loan,
Nicholasville, Kentucky from 1989 until its acquisition by Kentucky Bank in
1996. From 1984 to 1989, Mr. Brooks served as Chief Executive Officer of Harlan
Federal Savings and Loan.
LUTHER O. BECKETT retired from his position as Executive Vice President and
Secretary of the Bank in June 1992, a position he had held since 1967. Mr.
Beckett currently serves as Vice Chairman of the Board of Directors.
DIANE E. RITCHIE is purchasing manager for Stamler Corporation in
Millersburg, Kentucky. She served as Vice President, Branch Manager and
Marketing Officer of the Bank from March 1996 to June 1998. Prior to becoming an
officer of the Bank, she was a buyer for Grede Foundries, a foundry based in
Cynthiana, Kentucky for 24 years.
JOHN SWINFORD is an attorney with the law firm of Swinford & Sims, P.S.C.,
based in Cynthiana, Kentucky. He is President of the Board of Trustees of the
Cynthiana/Harrison County Library.
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MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
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The Board of Directors of the Company meets monthly and may have additional
special meetings. During the year ended June 30, 2001, the Board held 12 regular
meetings. No director attended fewer than 75% of the total number of Board
meetings held during the year ended June 30, 2001 and the total number of
meetings held by committees on which such director served during such fiscal
year.
The Company's Nominating Committee consists of the Board of Directors. The
Board of Directors met one time in that capacity during fiscal year 2001.
The Company's Audit Committee consists of three directors appointed
annually by the Board of Directors. Directors Morris, Rees and Wilson comprise
the Company's Audit Committee. All members of the Audit Committee meet are
deemed to be independent within the meaning of Rule 4200(a)(15) of the National
Association of Securities Dealers' listing standards. The Audit Committee meets
periodically during the year to examine and approve the audit report prepared by
the independent auditors of the Company, to review the independent auditors to
be engaged by the Company, to review the internal audit function and internal
accounting controls. The Committee also meets as needed with the Company's
independent auditors to review the Company's accounting and financial reporting
policies and practices. The Audit Committee has adopted a written charter, a
copy of which is attached as Exhibit A to this Proxy Statement. The Audit
Committee met eight times during the year ended June 30, 2001. The Company's
Salary Committee consisted of Directors Wilson, Morris and Rees.
4
The Company's Salary Committee meets on an as needed basis to review and
designate compensation levels for officers of the Company and the Bank. This
Committee met twice during fiscal year 2001.
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EXECUTIVE COMPENSATION
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Summary Compensation Table. The following table sets forth cash and noncash
compensation for each of the last three fiscal years awarded to or earned by the
Chief Executive Officer of the Company and the Bank. No executive officer
received salary and bonus in excess of $100,000 during the fiscal year ended
June 30, 2001.
ANNUAL COMPENSATION
NAME AND FISCAL ------------------------ ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
------------------ ------ ------ ----- ------------
Ms. Betty J. Long 2001 $ 63,400 $2,650 $25,885 (1)
President and Chief 2000 63,400 2,650 20,630
Executive Officer 1999 61,600 2,600 21,129
<FN>
__________
(1) Consists of contributions by the Company to Ms. Long's account in the ESOP.
</FN>
Option Year-end Value Table. The following table sets forth information
concerning the value of options held by the Chief Executive Officer at June 30,
2001. The number of shares underlying options and the exercise price were
adjusted in fiscal year 2001 to reflect the Company's November 1996 return of
capital distribution.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END (1)
-------------------------------- --------------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
Ms. Betty J. Long 43,393 -- $119,873 $ --
<FN>
____________
(1) Based on the aggregate fair market value of the shares of Common Stock
underlying the options at June 30, 2001, less the aggregate exercise price.
For purposes of this calculation, the fair market value of the Common Stock
is based upon the closing price of the Common Stock on June 30, 2001 of
$12.50 per share. All options granted to Ms. Long were granted at an
adjusted exercise price of $9.7375 per share.
</FN>
Supplemental Executive Retirement Agreement. In order to provide Ms. Betty
J. Long with competitive retirement benefits, and thereby to encourage her
continuing service as the President and Chief Executive Officer of the Bank, the
Bank has entered into a supplemental executive retirement agreement (the "SERA")
with Ms. Long effective January 1, 1995. Pursuant to the terms of the SERA, upon
Ms. Long's termination of employment with the Bank, for any reasons other than
"just cause" (as determined under Ms. Long's employment agreement), she will be
entitled to receive annual payments from the Bank in an amount equal to the
product of (i) her "Vested Percentage" and 60% of her "Average Annual
Compensation," less (ii) her "Annual Offset Amount." Under the SERA, "Vested
Percentage" means 6.67% per calendar year of Ms. Long's service with the Bank
beginning January 1, 1995 (up to a maximum Vested Percentage of 100%), "Average
Annual Compensation" means the average of Ms. Long's highest annual compensation
for three of the five calendar years preceding her termination of employment,
and "Annual Offset Amount" means the annual amount that would be payable to Ms.
Long if her accounts under the Bank's tax-qualified retirement plans were paid
to her in substantially equal payments over the number of years for which
benefits are payable under the SERA, with such payments deemed to commence upon
termination of Ms. Long's employment. Such annual payments shall be made for her
life, with a 50% benefit payable to her surviving spouse, if any.
5
In the event Ms. Long terminates employment due to disability as determined
under her employment agreement, Ms. Long would receive annual payments for life
in an amount per year equal to 60% of her Average Annual Compensation, less her
Annual Offset Amount. In the event Ms. Long's spouse survives her, he shall be
entitled to receive 50% of the amount Ms. Long would have received: (i) in the
event benefit payments had commenced prior to her death, had she survived to
collect the full benefits payable for her retirement or disability, or (ii)
otherwise had she retired on the date of her death, with a Vested Percentage
equal to 100%. Termination for just cause would result in her forfeiture of all
retirement benefits under the SERA. In the event the Bank terminates Ms. Long's
employment for other than "just cause" or in the event of termination of
employment in connection with a change in control (as defined in the Option
Plan), then Ms. Long's Vested Percentage shall be deemed to be 100% (unless she
had terminated employment before the change in control), and the present value
of the benefits payable to Ms. Long would be paid in one lump sum within 10 days
of termination of employment or within 10 days following a change in control, if
earlier.
Employment Agreements. The Company and the Bank have each entered into a
separate employment agreement (the "Employment Agreements"), with Ms. Betty J.
Long, President and Chief Executive Officer of the Bank and of the Company. In
such capacity, Ms. Long is responsible for overseeing all operations of the Bank
and the Company, and for implementing the policies adopted by the Board of
Directors. The Board of Directors believe that the Employment Agreements assure
fair treatment of Ms. Long in relation to her career with the Company and the
Bank.
The Employment Agreements became effective on the date of completion of the
Conversion and provide for a term of three years, with an annual base salary
equal to her existing base salary rate in effect on the date of Conversion. On
each anniversary date from the date of commencement of the Employment
Agreements, the term of her employment under the Employment Agreements may be
extended for an additional one-year period beyond the then effective expiration
date, upon an affirmative determination by the Board of Directors that the
performance of Ms. Long has met the required performance standards and that such
Employment Agreements should be extended. The Employment Agreements provide for
a salary review by the Board of Directors not less often than annually, as well
as with inclusion in any discretionary bonus plans, retirement and medical
plans, customary fringe benefits and vacation and sick leave. The Employment
Agreement will terminate upon Ms. Long's death or disability, and is terminable
by the Bank for "just cause" as defined in the Employment Agreements. In the
event of termination for just cause, Ms. Long will have no right to receive
compensation or benefits. If the Company or the Bank terminates her without just
cause, she will be entitled to a continuation of her salary and benefits from
the date of termination through the remaining term of the Employment Agreement
plus an additional 12-month period (but not in excess of applicable OTS
limitations). If the Employment Agreements are terminated due to Ms. Long's
"disability" (as defined in the Employment Agreements), she will be entitled to
a continuation of her salary and benefits through the date of such termination,
including any period prior to establishment of disability. In the event of Ms.
Long's death during the term of the Employment Agreement, her estate will be
entitled to receive his or her salary through the end of the month of her death.
Ms. Long may voluntarily terminate her Employment Agreement by providing at
least 90 days' written notice to the Boards of Directors of the Bank and the
Company, in which case she would be entitled to receive only her compensation,
vested rights and benefits up to the date of termination.
The Employment Agreements contain provisions stating that in the event of
Ms. Long's involuntary termination of employment in connection with, or within
12 months after, any change in control of the Bank or the Company, other than
for "just cause," Ms. Long will be paid within 10 days of such termination an
amount equal to the difference between (i) the product of 2.99 times his or her
"base amount," as defined in Section 280G(b)(3) of the Internal Revenue Code,
and (ii) the sum of any other parachute payments, as defined under Section
280G(b)(2) of the Internal Revenue Code, that she receives on account of the
change in control. The Employment Agreements also provide for a similar lump sum
payment to be made in the event of Ms. Long's voluntary termination of
employment within one year following a change in control, upon the occurrence,
or within 90 days thereafter, of certain specified events following the change
in control, which have not been consented to in writing by her, including (i)
the requirement that she perform her principal executive functions more than 30
miles from the Bank's current primary office, (ii) a reduction in her base
compensation as then in effect, (iii) the failure of the Company or the Bank to
maintain existing or substantially similar employee benefit plans, including
material vacation, fringe benefits, stock option and retirement plans, (iv) the
assignment of duties and responsibilities which are other than those normally
associated with her position with the Bank, (v) a material reduction in the
Employee's authority and responsibility, (vi) the failure to elect or re-elect
Ms. Long to the Company's or the Bank's Board of Directors; and (vii) a material
reduction in her secretarial or other administrative support. "Control"
generally refers to the acquisition, by any person or entity, of the ownership
or power to vote more
6
than 25% of the Bank's or Company's voting stock, the control of the election of
a majority of the Bank's or the Company's directors, or the exercise of a
controlling influence over the management or policies of the Bank or the
Company. In addition, under the Employment Agreements, a change in Control
occurs when, during any consecutive two-year period, directors of the Company or
the Bank at the beginning of such period (the "Continuing Directors") cease to
constitute at least a majority of the Board of Directors of the Company or the
Bank, unless the election of replacement directors was approved by at least a
majority vote of the Continuing Directors then in office. The Employment
Agreements with the Bank provide that within five business days before or after
a change in control which was not approved in advance by a resolution of a
majority of the Continuing Directors, the Bank shall fund, or cause to be
funded, a trust in the amount of 2.99 times Ms. Long's base amount, that will be
used to pay amounts owed her upon termination, other than for just cause, within
12 months of the change in control. The amount to be paid to Ms. Long from this
trust upon her termination is determined according to the procedures outlined in
her Employment Agreement with the Bank, and any money not paid to her is
returned to the Bank. The aggregate payments that would be made to Ms. Long
assuming her termination of employment under the foregoing circumstances at June
30, 2001 would have been approximately $285,000. These provisions may have an
anti-takeover effect by making it more expensive for a potential acquiror to
obtain control of the Company. In the event that Ms. Long prevails over the
Company and the Bank in a legal dispute as to the Employment Agreement, she will
be reimbursed for her legal and other expenses.
--------------------------------------------------------------------------------
DIRECTORS' COMPENSATION
--------------------------------------------------------------------------------
The Company's directors receive fees of $200 per month. The Bank's
directors receive fees of $800 per month. The directors also receive $50 per
special meeting and committee meeting attended (with the exception of the Chief
Executive Officer and the Executive Vice President). The Chairman receives a fee
of $300 per month for his service on the Company Board and receives a fee of
$1,000 per month for his service on the Bank Board.
Pursuant to the Kentucky First Bancorp, Inc. Stock Option and Incentive
Plan (the "Option Plan"), non-employee directors of the Company received
automatic grants of stock options in fiscal year 1996. Each director who was not
an employee on the effective date of the Option Plan received options to
purchase 8,679 shares (adjusted for the November 1996 return of capital
distribution) of Common Stock at an exercise price equal to the fair market
value of the Common Stock on the date of grant ($9.7375 per share, adjusted for
the November 1996 return of capital). All such options will expire on April 2,
2006. In addition, pursuant to the MRP, non-employee directors each received a
plan share award of 2,777 shares of restricted Common Stock. Such shares vest at
the rate of 20% per year from the effective date of the award (April 3, 1996).
Director Retirement Plan. The Bank's Board of Directors has adopted a
retirement plan for its non-employee directors (the "Directors' Plan"),
effective January 1, 1995. A participant in the Directors' Plan will receive a
one-time payment following termination of service on the Board in an amount
equal to the product of his or her "Benefit Percentage," his or her "Vested
Percentage," and $14,400. A participant's "Benefit Percentage" is based on his
or her overall years of service on the Board of Directors of the Bank, and
increases in increments of 33-1/3% from 0% for less than five years of service,
to 33-1/3% for six to 12 years of service, to 66-2/3% for 13 to 19 years of
service, and to 100% for 20 or more years of service. A participant's "Vested
Percentage" equals 33-1/3% if the participant is serving on the Board on the
date of the Conversion, increases to 66-2/3% if the participant completes one
year of service following the Conversion, and becomes 100% if the participant
completes a second year of service following the Conversion. However, in the
event a participant terminates service on the Board due to "disability" or
death, or in the event of a "change in control" (as such terms are defined in
the Directors' Plan) while serving as a director, the participant's Vested
Percentage becomes 100% regardless of his or her years of service. This
provision may have the effect of deferring a hostile change in control by
increasing the costs of acquiring control. If a participant dies, his or her
surviving spouse, or if none, the participant's estate, will receive an amount
equal to 100% of the benefit that would have been paid to the participant if the
participant (i) had retired on the date of his or her death, and (ii) had a
Vested Percentage equal to 100%. The Bank will pay all benefits under the
Directors' Plan from its general assets.
Deferred Compensation Program. The Bank has entered into separate deferred
compensation agreements (the "Deferred Compensation Program") with Directors
Rees, Ritchie, Swinford, and Wilson, pursuant to which they will receive certain
benefits in lieu of cash compensation they otherwise would have received.
7
In addition, as part of the Incentive Compensation Plan ("Incentive
Compensation Plan"), directors may elect to defer the receipt of all or part of
their compensation. Under the deferred compensation program, deferred amounts
are credited to a bookkeeping account ("Deferral Account") in the participant's
name, which is credited quarterly and according to the terms of the
participant's deferred compensation agreement. The Deferral Account is adjusted
at the end of each calendar year to credit the participant's Deferral Account
with the appreciation or depreciation that would have occurred if the deferred
amounts had been invested based upon the participant's choice between (i) 3%
times the Multiplier, (as defined under the First Federal Savings Bank Incentive
Compensation Plan), (ii) Common Stock, and (iii) the Bank's highest annual rate
of interest on certificates of deposit having a one-year term. Deferred
compensation agreements are prospective only and irrevocable with respect to
amounts deferred pursuant thereto, except that a participant may at any time,
and from time to time, (i) change the beneficiary designated therein, (ii)
prospectively change the investment selection applicable to his deferral
account, and/or (iii) file a deferred compensation agreement which supersedes a
prior deferred compensation agreement as to amount deferred on or after the
January 1st which coincides with or next follows execution of the superseding
agreement. In addition, participants may cease future accruals at any time. The
Bank will pay all benefits under the Deferred Compensation Program from its
general assets.
For financial reporting purposes, the fees and compensation which are
deferred will be expensed as though paid in cash when earned. For tax purposes,
participants who entered into deferred compensation agreements will defer
ordinary income taxation on amounts otherwise payable in cash. Tax recognition
will occur as deferred amounts, and any earnings attributable thereto, are paid
from the trust to participants, and the Bank will then be entitled to a
corresponding deduction.
--------------------------------------------------------------------------------
TRANSACTIONS WITH MANAGEMENT
--------------------------------------------------------------------------------
Mr. Swinford, an attorney in Cynthiana, Kentucky, serves as local counsel
for the Bank. Swinford & Sims, P.S.C., a firm in which Mr. Swinford is a partner
performs title and document work in connection with mortgage loans. In fiscal
year 2001, fees for such services totaled $6,184. Mr. Swinford is paid a monthly
retainer fee of $300.
The Bank offers loans to its directors, officers, and employees. These
loans currently are made in the ordinary course of business with the same
collateral, interest rates and underwriting criteria as those of comparable
transactions prevailing at the time and do not involve more than the normal risk
of collectibility or present other unfavorable features. Under current law, the
Bank's loans to directors and executive officers are required to be made on
substantially the same terms, including interest rates, as those prevailing for
comparable transactions and must not involve more than the normal risk of
repayment or present other unfavorable features. Furthermore, loans above the
greater of $25,000 or 5% of the Bank's capital and surplus (i.e., up to
$500,000) to such persons must be approved in advance by a disinterested
majority of the Board of Directors. At June 30, 2001, the Bank's loans to
directors and executive officers totaled $204,843, or 1.9% of the Bank's
stockholders equity at that date.
--------------------------------------------------------------------------------
RELATIONSHIP WITH INDEPENDENT AUDITORS
--------------------------------------------------------------------------------
Grant Thornton LLP was the Company's independent certified public
accountants for the 2001 fiscal year. The Board of Directors presently intends
to renew the Company's arrangement with Grant Thornton LLP to be its independent
certified public accountant for the fiscal year ending June 30, 2002. A
representative of Grant Thornton LLP is expected to be present at the Meeting to
respond to appropriate questions and to make a statement, if so desired.
8
--------------------------------------------------------------------------------
AUDIT COMMITTEE REPORT
--------------------------------------------------------------------------------
The Audit Committee has reviewed and discussed the audited financial
statements of the Company with management and has discussed with Grant Thornton
LLP, the Company's independent auditors, the matters required to be discussed
under Statements on Auditing Standards NO. 61 ("SAS 61"). In addition, the Audit
Committee has received from Grant Thornton LLP the written disclosures and the
letter required to be delivered by Grant Thornton LLP under Independence
Standards Board Standard No. 1 ("ISB Standard No. 1") addressing all
relationships between the auditors and the Company that might bear on the
auditors' independence. The Audit Committee has reviewed the materials to be
received from Grant Thornton LLP and has met with representatives of Grant
Thornton LLP to discuss the independence of the auditing firm.
In connection with the new standards for independence of the Company's
independent auditors promulgated by the Securities and Exchange Commission,
during the Company's 2001 fiscal year, the Audit Committee will undertake to
consider in advance of the provision of any non-audit services by the Company's
independent auditors whether the provision of such services is compatible with
maintaining the independence of the Company's independent auditors.
Based on the Audit Committee's review of the financial statements, its
discussion with Grant Thornton LLP regarding SAS 61, and the written materials
provided by Grant Thornton LLP under ISB Standard No. 1 and the related
discussion with Grant Thornton LLP of their independence, the Audit Committee
has recommended to the Board of Directors that the audited financial statements
of the Company be included in its Annual Report on Form 10-KSB for the year
ended June 30, 2001, for filing with the Securities and Exchange Commission.
THE AUDIT COMMITTEE
William D. Morris
Milton G. Rees
Wilbur H. Wilson
--------------------------------------------------------------------------------
AUDIT AND OTHER FEES PAID TO INDEPENDENT ACCOUNTANT
--------------------------------------------------------------------------------
AUDIT FEES
During the fiscal year ended June 30, 2001, the aggregate fees billed for
professional services rendered for the audit of the Company's annual financial
statements and the reviews of the financial statements included in the Company's
Quarterly Reports on Form 10-QSB filed during the fiscal year ended June 30,
2001 were $28,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
The Company did not engage Grant Thornton LLP to provide advice to the
Company regarding financial information systems design and implementation during
the fiscal year ended June 30, 2001.
ALL OTHER FEES
For the fiscal year ended June 30, 2001, the aggregate fees paid by the
Company to Grant Thornton LLP for all other services (other than audit services
and financial information systems design and implementation services) were
$3,250.
9
--------------------------------------------------------------------------------
PROPOSAL II -- STOCKHOLDER PROPOSAL
--------------------------------------------------------------------------------
Mr. Paul Lynch, 2625 Wilmington Road, New Castle, Pennsylvania 16105, a
stockholder of the Company submitted the proposal set forth below which may be
presented for a vote at the Meeting. The proposal is required to be included in
this Proxy Statement by the rules of the Securities and Exchange Commission and
is not endorsed by the Board of Directors of the Company, nor is the Board in
any way responsible for the contents of the proposal or the accompanying
supporting statement. Based solely on information he has provided to us in
writing, we understand that Mr. Lynch is the beneficial owner of 72,972.872
shares of Common Stock. THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST
APPROVAL OF THE STOCKHOLDER PROPOSAL. THE PROPOSAL IS AS FOLLOWS:
"RESOLVED, that the Corporation's shareholders do not approve of
the Corporation's recent financial performance and, believing that the
value of their investment in the Corporation can only be maximized
though its sale or merger, hereby strongly urge that the board of
--------------
directors immediately take the necessary steps to achieve a sale,
merger or other acquisition of the Corporation as promptly as possible
on terms which will maximize shareholder value."
The stockholder's supporting statement is as follows:
"Proponent believes the Corporation's management is not acting in
the best interest of its shareholders. Proponent does not believe the
Corporation has meaningfully improved its performance during the past
five years. Proponent does not believe that the current management has
either the commitment or the strategic plan needed to improve on its
past record. Proponent believes that investors would find Kentucky
First Bancorp, Inc. more attractive if its management showed greater
interest in maximizing the value to its shareholders by seeking to
sell the Corporation. Proponent believes that the only way this
management team can maximize value is for the Corporation to promptly
seek to be acquired."
RECOMMENDATION OF THE BOARD OF DIRECTORS AND MANAGEMENT RESPONSE
While the proposal is non-binding, your Board of Directors does not believe
that approval of this proposal is in the best interests of stockholders and
recommends that stockholders vote AGAINST this proposal for the following
reasons:
o APPROVAL WOULD CREATE SIGNIFICANT UNCERTAINTY AMONGST OUR CUSTOMERS AND
EMPLOYEES.
By effectively putting a "For Sale" sign on the Company, approval of this
proposal would create a significant amount of uncertainty among our customers
and employees. We believe our business will be hurt as a result and our ability
to compete in an already extremely competitive marketplace will be greatly
hampered. Stockholders will suffer as a result since poor performance could lead
to declines in our stock price. Ultimately, should the Company consider a merger
transaction, our ability to maximize stockholder value would be reduced.
o MR. LYNCH SEEMS TO EQUATE THE BOARD'S STRATEGY OF CONTROLLED GROWTH AS
EVIDENCE OF POOR PERFORMANCE. OUR ACTUAL RESULTS SHOW WE ARE OUTPERFORMING
OUR PEERS.
In correspondence with Mr. Lynch, it is apparent that he believes that
controlled asset growth is a weakness. On the contrary, what matters most to
you, our stockholders, should be the return we are generating from those assets.
Growth is easy to obtain, but frequently it is too expensive; it is desirable
but only if it can be obtained at a reasonable cost. Given certain
circumstances, strategies can reduce size but improve earnings and earnings per
share.
Earnings of a financial institution are largely dependent upon the spread
between the interest earned on loans and investments and the interest paid on
deposits and borrowings. Managing the interest rate spread is crucial to
optimizing earnings. The Company has had a relatively high level of risk due to
upward movements in interest rates throughout the period that it has operated as
a stock institution. In an effort to control our cost of funds and, thus, keep
the interest rate spread and earnings from decreasing significantly, we became
less aggressive in pricing certificates of deposit during a time period of
rising general market interest rates that began in October 1998 and ended in May
2000.
10
The result was an expected reduction in deposits but enhancement to earnings per
share and to stockholder value. While such an approach may mean that our
deposits, at times, may decline somewhat, we believe that our overall
profitability will be enhanced. After all, isn't that what matters most.
Contrary to Mr. Lynch's assertion, decreases in total assets are not necessarily
signs of poor management but rather, in this case, result from a strategic
decision on the part of management.
According to data prepared by the Office of Thrift Supervision ("OTS"), we
have consistently outperformed our peers in generating a return on average
equity ("ROAE"). For example, for the six months ended June 30, 2001, we
generated a return on average equity of 6.57% compared to a median ROAE of 6.32%
for similar-sized stock thrift institutions in the Central region of the United
States and nearly double the median ROAE for all thrifts within the Commonwealth
-------------
of Kentucky. Our return on average assets, our net interest income and our
non-interest expense have, according to the OTS reports, also outperformed our
peers.
Earnings per share have shown a consistent pattern of improvement during
the period that the Company has operated as a stock institution. Diluted
earnings per share were $.60 in fiscal 1997, $.75 in fiscal 1998 and 1999, and
$.79 in fiscal 2000 and 2001. The Board anticipates continued improvement in
diluted earnings per share in fiscal 2002. The return that each stockholder
receives per share is a far greater indicator of performance than is the level
of total assets. Many fast growth companies do not exist today because of
uncontrollable growth.
o SINCE GOING PUBLIC IN 1995, THE BOARD HAS UNDERTAKEN MANY INITIATIVES TO
INCREASE THE VALUE BEING RETURNED TO STOCKHOLDERS.
The Company has actively repurchased its stock, particularly in recent
periods when the market for bank and thrifts stocks was depressed and the
Company's stock, like that of most of its peers, was trading below book value.
By doing so, the Company has sought to utilize its excess capital. The effects
of stock repurchases are to increase the value of the stock for all remaining
stockholders. As of June 30, 2001, the Company owns 448,460 treasury shares, or
approximately 32% of the total shares issued in 1995 in the Company's initial
public offering. The cost to the Company of those shares totals $5.25 million,
or an average of $11.72 per share. Though such repurchases cause a decrease in
total assets, they provide significant accretive benefits to earnings per share
and to book value per share.
In August 1995, the Company's stock was offered at a price of $10.00 per
share and, in November 1996, $3.00 of the cost was returned in the form of a
special dividend. Six years after the initial offering, the stock is trading at
a price of $12.77 per share, or an average annual return of approximately 13%.
Additionally, quarterly dividends of $.125 per share through October 2000 and
$.15 per share since January 2001 have been paid to the stockholders. While the
Common Stock is not actively traded, we note that, based upon data prepared by
SNL Securities, in calendar year 2001, the Company's common stock has
outperformed their index of publicly traded thrift institutions, increasing by
23.1% as of August 27, 2001 compared to 7.9% for the SNL Thrift Index.
o WE BELIEVE THE PROPONENT DOES NOT UNDERSTAND THE MARKET IN WHICH WE
OPERATE.
On several occasions Mr. Lynch has requested a seat on the Board of
Directors. The Board has declined to nominate him because the Board believes
that people who live and work in the market in which we operate make better
directors than someone from out of state, who has little or no ties to the
central Kentucky area. Our Board members are active in the community and know
and understand the economic realities of our market. Historically, tobacco
farming represented the most significant business in the area. As this business
has declined as a result of the various lawsuits and government initiatives
seeking to limit tobacco growing, our local agricultural economy has suffered.
We have avoided the problem loan increases that many other financial
institutions are currently facing because of our conservative loan underwriting
but also because of our knowledge of our local market. Based on OTS data, our
non-performing loans have consistently been lower than our peers. Prudent
conservative lending practices can best be performed by people who understand a
local market's complexities and have a vested interest in that market. The Board
believes that stockholder value is best preserved by local individuals directing
your Company's operations. In the long run, we believe our strategy will
generate a better return for our stockholders than will an aggressive strategy
of growth just for growth's sake.
11
o THE BOARD UNDERSTANDS ITS FIDUCIARY DUTIES TO STOCKHOLDERS.
Your Board is well aware of its fiduciary duties to stockholders. We too
are stockholders, as evidenced by the fact that the directors' and officers'
beneficial ownership is in excess of 24% of the Company's total beneficial
shares outstanding. The Board strongly believes that adoption of the proposal is
not in the best long-term interests of the stockholders. In the Board's opinion,
the proponent is pursuing a short-term agenda, without regard to the long-term
interests of the Company or the other stockholders. The proponent's actions have
already resulted in the Company incurring expenses and diverting resources that
could have been put to better use. The Board has determined that at the present
time it believes the stockholder value can be best enhanced through remaining an
independent institution. AS SUCH, WE STRONGLY RECOMMEND THAT STOCKHOLDERS VOTE
AGAINST THIS PROPOSAL.
VOTE REQUIRED
Approval of this proposal would require the affirmative vote of at least a
majority of the votes cast, in person or by proxy, at the Meeting.
--------------------------------------------------------------------------------
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
--------------------------------------------------------------------------------
Pursuant to regulations promulgated under the Exchange Act, the Company's
officers, directors and persons who own more than ten percent of the outstanding
Common Stock are required to file reports detailing their ownership and changes
of ownership in such Common Stock, and to furnish the Company with copies of all
such reports. Based on the Company's review of such reports which the Company
received during the last fiscal year, or written representations from such
persons that no annual report of change in beneficial ownership was required,
the Company believes that, during the last fiscal year, all persons subject to
such reporting requirements have complied with the reporting requirements with
the exception of Officer Kevin R. Tolle who filed a Form 4 late.
--------------------------------------------------------------------------------
OTHER MATTERS
--------------------------------------------------------------------------------
The Board of Directors is not aware of any business to come before the
Meeting other than those matters described above in this Proxy Statement.
However, if any other matters should properly come before the Meeting, it is
intended that proxies in the accompanying form will be voted in respect thereof
in accordance with the determination of the Board of Directors.
--------------------------------------------------------------------------------
MISCELLANEOUS
--------------------------------------------------------------------------------
The cost of soliciting proxies will be borne by the Company. The Company
will reimburse brokerage firms and other custodians, nominees and fiduciaries
for reasonable expenses incurred by them in sending proxy materials to the
beneficial owners of Common Stock. In addition to solicitations by mail,
directors, officers and regular employees of the Company may solicit proxies
personally or by telegraph or telephone without additional compensation. The
Company has retained Regan & Associates, Inc. to assist in the solicitation of
proxies by mail, personally or by telephone or other means of communication, for
a fee of $4,000 including expenses.
The Company's Annual Report to Stockholders, including financial
statements, is being mailed to all stockholders of record as of the Record Date.
Any stockholder who has not received a copy of such Annual Report may obtain a
copy by writing to the Secretary of the Company. Such Annual Report is not to be
treated as a part of the proxy solicitation material or as having been
incorporated herein by reference.
12
--------------------------------------------------------------------------------
STOCKHOLDER PROPOSALS
--------------------------------------------------------------------------------
In order to be eligible to be considered for inclusion in the Company's
proxy materials for the next Annual Meeting of Stockholders, any stockholder
proposal to take action at such meeting must be received at the Company's
executive office at 308 N. Main Street, Cynthiana, Kentucky 41031-1210, no later
than June 10, 2002. Any such proposal shall be subject to the requirements of
the proxy rules adopted under the Exchange Act.
In order for a stockholder of the Company to make any director nominations
and/or proposals other than pursuant to the Exchange Act, he or she must give
notice thereof in writing to the Secretary of the Company not less than thirty
days nor more than sixty days prior to the date of any such meeting; provided,
however, that if less than forty days' notice of the meeting is given to
stockholders, such written notice must be delivered or mailed, to the Secretary
of the Company not later than the close of business on the tenth day following
the day on which notice of the meeting was mailed to stockholders.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Kevin R. Tolle
KEVIN R. TOLLE
SECRETARY
Cynthiana, Kentucky
October 5, 2001
--------------------------------------------------------------------------------
FORM 10-KSB
--------------------------------------------------------------------------------
A COPY OF THE COMPANY'S FORM 10-KSB FOR THE FISCAL YEAR ENDED JUNE 30, 2001
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION WILL BE FURNISHED WITHOUT
CHARGE TO STOCKHOLDERS AS OF THE RECORD DATE UPON WRITTEN REQUEST TO THE
SECRETARY, KENTUCKY FIRST BANCORP, INC., P.O. BOX 368, CYNTHIANA, KENTUCKY
41031-1210.
--------------------------------------------------------------------------------
13
EXHIBIT A
AUDIT COMMITTEE CHARTER
The Audit Committee ("the Committee"), of the Board of Directors ("the Board")
of Kentucky First Bancorp, Inc. ("the Company"), will have the oversight
responsibility, authority and specific duties as described below.
COMPOSITION
The Committee will be comprised of three or more directors as determined by the
Board. The members of the Committee will meet the definition of independent
director as follows:
o the director has not been employed by the Company or its affiliates in the
current or past three years; the director has not accepted any compensation
from the Company or its affiliates in excess of $60,000.00 during the
previous fiscal year (except for board fees, retirement plan benefits, or
non-discretionary compensation);
o the director does not have an immediate family member who is, or has been
in the past three years, employed by the Company or its affiliates as an
executive officer;
o the director has not been a partner, controlling shareholder or an
executive officer of any for-profit business to which the Company made, or
from which it received, payments (other than those which arise solely from
investments in the corporation's securities) that exceed five percent of
the Company's consolidated gross revenues for that year, or $200,000.00,
whichever is more, in any of the past three years;
o the director has not been employed as an executive of another entity where
any of the Company's executives serve on that entity's compensation
committee.
The members of the Committee and the Chairman of the Audit Committee will be
appointed by the Board and will be ratified at the organizational meeting of the
full Board held in conjunction with the Annual Meeting date. The members of the
audit committee will be listed in the proxy statement distributed to the
shareholders.
RESPONSIBILITY
The Committee is part of the Board. It's primary function is to assist the Board
in fulfilling its oversight responsibilities with respect to (i) the annual
financial information to be provided to shareholders and the Securities and
Exchange Commission (SEC); (ii) the internal audit and external audit process.
In addition, the Committee provides an avenue for communication between the
independent accountants, management and the Board. The Committee should have a
clear understanding with the independent accountants that they must maintain an
open and transparent relationship with the Committee, and that the ultimate
accountability of the independent accountants is to the Board and the Committee
as representatives of the Company's shareholders. The Committee will make
regular reports to the Board concerning its activities.
While the Audit Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Audit Committee to plan or conduct audits or
determine that the Company's financial statements are complete and accurate or
are in accordance with generally accepted accounting principles. The
responsibility to plan and conduct audits is that of the Company's independent
accountants.
AUTHORITY
Subject to the prior approval of the Board, the Committee is granted the
authority to investigate any matter or activity involving financial accounting
and financial reporting, as well as the internal controls of the Company. In
that regard, the Committee will have the authority to approve the retention of
external professionals to render advice and counsel in such matters. All
employees will be directed to cooperate with respect thereto as requested by
members of the Committee.
A-1
MEETINGS
The Committee is to meet at least four times annually and as many additional
times as the Committee deems necessary. The Committee will meet quarterly to go
over the internal audit reports as prepared by various bank employees. Content
of the agenda for each meeting should be cleared by the Committee Chair.
ATTENDANCE
Committee members will strive to be present at all meetings. As necessary or
desirable, the Committee Chair may request that members of management and
representatives of the independent accountants be present at the Committee
meetings.
SPECIFIC DUTIES
In carrying out its oversight responsibilities, the Committee will:
1. Review and reassess the adequacy of this charter annually and recommend any
proposed changes to the Board for approval.
2. Review the scope and general extent of the independent accountant's annual
audit. The Committee's review should include an explanation from the
independent accountants of the factors considered by the accountants in
determining the audit scope, including the major risk factors. The
independent accountants should confirm to the Committee that no limitations
have been placed on the scope or nature of their audit procedures. The
Committee will review annually with management the fee arrangement with the
independent auditors.
3. Inquire as to the independence of the independent accountants and obtain
from the independent accountants, at least annually, a formal written
statement delineating all relationships between the independent accountants
and the Company as contemplated by Independence Standards Board No.1,
Independence Discussions with Audit Committees. The Audit Committee will
also be responsible for discussions with the independent accountants any
disclosed relationships and their impact on the accountant's independence.
The Committee shall also recommend to the Board that it take appropriate
action to oversee the independence of the independent accountant.
4. Have a predetermined arrangement with the independent accountants that they
will advise the Committee through its Chairman and management of the
Company of any matters identified through procedures followed for interim
quarterly financial statements prior to the filing of the form 10QSB for
each quarter. Also the independent accountants will provide confirmation to
the Audit Committee at the end of each of the first three quarters of the
year that they have nothing to report to the Committee, if that is the
case, or the written enumeration of required reporting issues.
5. At the completion of the annual audit, review with management and the
independent accountants the following:
- The annual financial statements and related footnotes and financial
information to be included in the Company's annual report to
shareholders and on Form 10KSB.
- Results of the audit of the financial statements and the related
report thereon and, if applicable, a report on changes during the year
in accounting principles and their application.
- Significant changes to the audit plan, if any, and any serious
disputes or difficulties with management encountered during the audit.
Inquire about the cooperation received by the independent accountants
during their audit, including access to all requested records, data
and information. Inquire of the independent accountants whether there
have been any disagreements with management which, if not
satisfactorily resolved, would have caused them to issue a nonstandard
report on the Company's financial statements.
- Other communications as required to be communicated by the independent
accountants by Statement of Auditing Standards (SAS) 61 as amended by
SAS 90 relating to the conduct of the audit. Further, receive a
A-2
written communication provided by the independent accountants
concerning their judgment about the quality of the Company's
accounting principles, as outlined in SAS 61 as amended by SAS 90, and
that they concur with management's representation concerning
unrecorded audit adjustments.
If deemed appropriate after such review and discussion, recommend to
the Board that the financial statements be included in the Company's
annual report on FORM 10KSB.
6. After preparation by management and review by independent accountants,
approve the report required under SEC rules to be included in the
Company's annual proxy statement. The charter is to be published as an
appendix to the proxy statement every three years.
7. Meet with management and the independent accountants to discuss any
relevant significant recommendations that the independent accountants
may have, particularly those characterized as "material" or "serious".
8. Recommend to the Board the selection, retention or termination of the
Company's independent accountants.
A-3
REVOCABLE PROXY
KENTUCKY FIRST BANCORP, INC.
CYNTHIANA, KENTUCKY
--------------------------------------------------------------------------------
ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 7, 2001
--------------------------------------------------------------------------------
The undersigned hereby appoints Luther O. Beckett, John Swinford and Diane
E. Ritchie with full powers of substitution, to act as proxies for the
undersigned, to vote all shares of common stock of Kentucky First Bancorp, Inc.
(the "Company") which the undersigned is entitled to vote at the Annual Meeting
of Stockholders (the "Meeting"), to be held at the main office of First Federal
Savings Bank, 308 North Main Street, Cynthiana, Kentucky, on Wednesday, November
7, 2001 at 5:30 p.m., local time, and at any and all adjournments thereof, as
follows:
VOTE
FOR WITHHELD
I. The election as directors of all
nominees listed below (except as
marked to the contrary below). [ ] [ ]
Betty J. Long
Milton G. Rees
Wilbur H. Wilson
INSTRUCTION: TO WITHHOLD YOUR VOTE
FOR ANY INDIVIDUAL NOMINEE, INSERT THAT
NOMINEE'S NAME ON THE LINE PROVIDED BELOW.
________________________________________
FOR AGAINST ABSTAIN
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II. Stockholder Proposal [ ] [ ] [ ]
The Board of Directors recommends a vote "FOR" the above-listed nominees
and "AGAINST" the stockholder proposal.
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THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR EACH OF THE NOMINEES FOR DIRECTOR LISTED ABOVE AND
AGAINST THE STOCKHOLDER PROPOSAL. IF ANY OTHER BUSINESS IS PRESENTED AT THE
MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS PROXY IN ACCORDANCE
WITH THE DETERMINATION OF THE BOARD OF DIRECTORS. AT THE PRESENT TIME, THE BOARD
OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING. THIS
PROXY CONFERS DISCRETIONARY AUTHORITY ON THE HOLDERS THEREOF TO VOTE WITH
RESPECT TO THE ELECTION OF ANY PERSON AS DIRECTOR WHERE THE NOMINEE IS UNABLE TO
SERVE OR FOR GOOD CAUSE WILL NOT SERVE AND MATTERS INCIDENT TO THE CONDUCT OF
THE MEETING.
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THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Meeting or at
any adjournment thereof and after notification to the Secretary of the Company
at the Meeting of the stockholder's decision to terminate this proxy, then the
power of said attorneys and proxies shall be deemed terminated and of no further
force and effect.
The undersigned acknowledges receipt from the Company prior to the
execution of this proxy of a Notice of Annual Meeting of Stockholders, a proxy
statement dated October 5, 2001 and an annual report.
Dated: ____________________________, 2001
____________________________________ ________________________________
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
____________________________________ ________________________________
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears on the envelope in which this card was
mailed. When signing as attorney, executor, administrator, trustee or guardian,
please give your full title. If shares are held jointly, each holder should
sign.
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PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
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