UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2001
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________________ to
___________________
Commission File Number: 33-96358
BOURBON BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
Kentucky 61-0993464
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
P.O. Box 157, Paris, Kentucky 40362-0157
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (859)987-1795
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No _____
Number of shares of Common Stock outstanding as of July 20, 2001:
2,792,720.
BOURBON BANCSHARES, INC.
Table of Contents
Part I - Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of Income and
Comprehensive Income 4
Consolidated Statements of Changes in
Stockholders' Equity 6
Consolidated Statements of Cash Flows 7
Notes to Consolidated Financial Statements 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 19
Part II - Other Information 21
Signatures 22
Exhibits
3.1 Bylaws of Bourbon Bancshares, Inc. 23
11 Earnings Per Share Calculation 46
Item 1 - Financial Statements
BOURBON BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS (unaudited)
(thousands)
6/30/2001
12/31/2000
Assets
Cash and due from banks
$ 9,138
$ 11,596
Federal funds sold
4,660
3,749
Cash and cash equivalents
13,798
15,345
Investment securities:
Available for sale
69,840
52,823
Held to maturity
-
15,231
Mortgage loans held for sale
2,072
868
Loans
273,420
272,277
Allowance for loan losses
(3,366)
(3,388)
Net loans
270,054
268,889
Federal Home Loan Bank stock
3,728
3,598
Bank premises and equipment, net
9,224
8,299
Interest receivable
3,873
4,262
Intangible assets
1,567
1,744
Other assets
690
788
Total assets
$374,846
$371,847
Liabilities and Stockholders' Equity
Deposits
Non-interest bearing
$ 44,579
$ 48,439
Time deposits, $100,000 and over
37,177
40,306
Other interest bearing
210,867
212,071
Total deposits
292,623
300,816
Securities sold under agreements to repurchase
3,118
8,189
Other borrowed funds
1,762
1,257
Federal Home Loan Bank advances
36,517
21,644
Interest payable
2,301
3,427
Other liabilities
663
654
Total liabilities
336,984
335,987
Stockholders' equity
Common stock
6,612
6,627
Retained earnings
30,620
29,241
Accumulated other comprehensive income
630
(8)
Total stockholders' equity
37,862
35,860
Total liabilities & stockholders' equity
$374,846
$371,847
BOURBON BANCSHARES, INC.
CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME (unaudited)
(thousands, except per share amounts)
Six Months Ending
6/30/2001
6/30/2000
INTEREST INCOME:
Loans, including fees
$ 12,181
$ 11,197
Investment securities
1,939
2,045
Other
351
225
Total interest income
14,471
13,467
INTEREST EXPENSE:
Deposits
6,137
5,426
Other
994
788
Total interest expense
7,131
6,214
Net interest income
7,340
7,253
Loan loss provision
384
375
Net interest income after provision
6,956
6,878
OTHER INCOME:
Service charges
1,852
1,264
Loan service fee income
134
146
Trust department income
182
249
Investment securities gains (losses), net
75
(76)
Gain on sale of mortgage loans
156
44
Other
221
177
Total other income
2,620
1,804
OTHER EXPENSES:
Salaries and employee benefits
2,973
2,655
Occupancy expenses
904
776
Amortization of intangibles
208
216
Advertising and marketing
215
182
Taxes other than payroll, property and income
175
168
Other
1,231
1,057
Total other expenses
5,706
5,054
Income before taxes
3,870
3,628
Income taxes
1,151
1,008
Net income
$ 2,719
$ 2,620
Other Comprehensive Income, net of tax:
Change in Unrealized Gains on Securities
638
(27)
Comprehensive Income
$ 3,357
$ 2,593
Earnings per share
Basic
$ 0.97
$ 0.93
Diluted
0.95
0.91
BOURBON BANCSHARES, INC.
CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME (unaudited)
(thousands, except per share amounts)
Three Months Ending
6/30/2001
6/30/2000
INTEREST INCOME:
Loans, including fees
$ 6,054
$ 5,756
Investment securities
952
1,019
Other
239
158
Total interest income
7,245
6,933
INTEREST EXPENSE:
Deposits
2,949
2,800
Other
520
390
Total interest expense
3,469
3,190
Net interest income
3,776
3,743
Loan loss provision
192
187
Net interest income after provision
3,584
3,556
OTHER INCOME:
Service charges
1,032
649
Loan service fee income
66
73
Trust department income
81
90
Investment securities gains (losses), net
57
(75)
Gain on sale of mortgage loans
81
44
Other
38
38
Total other income
1,355
819
OTHER EXPENSES:
Salaries and employee benefits
1,499
1,330
Occupancy expenses
451
383
Amortization of intangibles
104
108
Advertising and marketing
108
91
Taxes other than payroll, property and income
87
84
Other
631
537
Total other expenses
2,880
2,533
Income before taxes
2,059
1,842
Income taxes
621
530
Net income
1,438
1,312
Other Comprehensive Income, net of tax:
Change in Unrealized Gains on Securities
(11)
(3)
Comprehensive Income
$ 1,427
$ 1,309
Earnings per share
Basic
$ 0.51
$ 0.46
Diluted
0.50
0.45
BOURBON BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (unaudited)
(thousands, except number of shares)
Accumulated
Other
Total
- ----Common Stock----
Retained
Comprehensive
Stockholders'
Shares
Amount
Earnings
Income
Equity
Balances, December 31, 2000
2,808,067
$ 6,627
$ 29,241
$ (8)
$ 35,860
Common stock issued
11,400
39
-
-
39
Common stock purchased
(25,797)
(54)
(501)
-
(555)
Net change in unrealized gain (loss)
on securities available for sale,
net of tax
-
-
-
638
638
Net income
-
-
2,719
-
2,719
Dividends declared - $.30 per share
-
-
(839)
-
(839)
Balances, June 30, 2001
2,793,670
$ 6,612
$ 30,620
$ 630
$ 37,862
BOURBON BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(thousands)
Six Months Ending
6/30/2001
6/30/2000
Cash Flows From Operating Activities
Net Income
$ 2,719
$ 2,620
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation
482
395
Amortization
208
216
Investment securities amortization (accretion), net
(14)
(48)
Provision for loan losses
384
375
Investment securities gains (losses), net
(75)
76
Originations of loans held for sale
(12,226)
(6,061)
Proceeds from sale of loans
11,178
7,894
Federal Home Loan Bank Stock Dividends
(130)
(58)
Gain on sale of mortgage loans
(156)
(44)
Losses (gains), including write-downs, on real
estate acquired through foreclosure, net
(10)
-
Changes in:
Interest receivable
389
(431)
Other assets
98
(202)
Interest payable
(1,126)
262
Other liabilities
(336)
(369)
Net cash from operating activities
1,385
4,625
Cash Flows From Investing Activities
Purchases of securities available for sale
(28,513)
(12,618)
Proceeds from sales of securities available for sale
6,239
14,759
Proceeds from principal payments, maturities and
calls of securities available for sale
21,539
6,145
Purchases of securities held to maturity
-
(632)
Proceeds from maturities and calls of securities
held to maturity
-
115
Net change in loans
(1,549)
(22,444)
Purchases of bank premises and equipment, net
(1,407)
(585)
Net cash from investing activities
(3,691)
(15,260)
Cash Flows From Financing Activities:
Net change in deposits
(8,193)
4,585
Net change in securities sold under agreements to
repurchase and other borrowings
(4,566)
1,158
Advances from Federal Home Loan Bank
15,000
5,000
Payments on Federal Home Loan Bank advances
(127)
(10,184)
Proceeds from issuance of common stock
39
137
Purchase of common stock
(555)
(114)
Dividends paid
(839)
(733)
Net cash from financing activities
759
(151)
Net change in cash and cash equivalents
(1,547)
(10,786)
Cash and cash equivalents at beginning of period
15,345
20,717
Cash and cash equivalents at end of period
$ 13,798
$ 9,931
BOURBON BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(thousands)
Three Months Ending
6/30/2001
6/30/2000
Cash Flows From Operating Activities
Net Income
$ 1,438
$ 1,312
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation
240
200
Amortization
104
109
Investment securities amortization (accretion), net
4
(27)
Provision for loan losses
192
187
Investment securities gains (losses), net
(57)
75
Originations of loans held for sale
(7,191)
(3,127)
Proceeds from sale of loans
5,668
4,993
Federal Home Loan Bank Stock Dividends
(66)
-
Gain on sale of mortgage loans
(81)
(44)
Losses (gains), including write-downs, on real
estate acquired through foreclosure, net
(14)
-
Changes in:
Interest receivable
69
(540)
Other assets
(113)
(941)
Interest payable
(874)
(46)
Other liabilities
(180)
(11)
Net cash from operating activities
(861)
2,140
Cash Flows From Investing Activities
Purchases of securities available for sale
(25,258)
(6,280)
Proceeds from sales of securities available for sale
6,131
12,759
Proceeds from principal payments, maturities and
calls of securities available for sale
13,201
1,206
Purchases of securities held to maturity
-
(363)
Net change in loans
(3,141)
(19,032)
Purchases of bank premises and equipment, net
(706)
(505)
Net cash from investing activities
(9,773)
(12,215)
Cash Flows From Financing Activities:
Net change in deposits
(4,958)
336
Net change in securities sold under agreements to
repurchase and other borrowings
1,092
3,809
Advances from Federal Home Loan Bank
10,000
5,000
Payments on Federal Home Loan Bank advances
(58)
(76)
Proceeds from issuance of common stock
9
7
Purchase of common stock
(271)
(114)
Dividends paid
(418)
(367)
Net cash from financing activities
5,396
8,595
Net change in cash and cash equivalents
(5,238)
(1,480)
Cash and cash equivalents at beginning of period
19,036
11,411
Cash and cash equivalents at end of period
$ 13,798
$ 9,931
BOURBON BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. In Management's opinion, the financial information, which is
unaudited, reflects all adjustments, (consisting solely of normal
recurring adjustments) necessary for a fair presentation of the
financial information as of June 30, 2001 and December 31, 2000, and
for the six and three month periods ended June 30, 2001 and June 30,
2000 in conformity with generally accepted accounting principles.
These financial statements should be read in conjunction with Bourbon
Bancshares, Inc. (Company) Annual Report on Form 10-K.
2. INVESTMENT SECURITIES
Period-end securities are as follows:
(in thousands)
Amortized
Unrealized
Unrealized
Fair
Cost
Gains
Losses
Value
Available for Sale
June 30, 2001
U.S. Treasury
$ 10,569
$ 24
$ -
$ 10,593
U.S. government agencies
11,550
91
(4)
11,637
States and political subdivisions
17,333
663
(5)
17,991
Mortgage-backed
23,001
191
(88)
23,104
Equity securities
2,290
277
(178)
2,389
Other
4,148
-
(22)
4,126
Total
68,891
1,246
(297)
69,840
December 31, 2000
U.S. Treasury
14,970
24
(2)
$ 14,992
U.S. government agencies
4,999
40
(11)
5,028
States and political subdivisions
3,272
94
-
3,366
Mortgage-backed
22,876
141
(139)
22,878
Equity securities
2,230
96
(256)
2,070
Other
4,489
-
-
4,489
Total
52,836
395
(408)
52,823
Held to Maturity
December 31, 2000
States and political subdivisions
15,231
417
(10)
15,638
3. LOANS
Loans at period-end are as follows:
(in thousands)
6/30/2001
12/31/2000
Commercial
$ 18,587
$ 17,452
Real estate construction
15,602
15,270
Real estate mortgage
162,034
162,306
Agricultural
53,365
52,008
Consumer
23,832
25,241
Total
273,420
272,277
4. Basic earnings per common share is net income divided by the weighted
average number of common shares outstanding during the period.
Diluted earnings per common share includes the dilutive effect of
additional potential common shares issuable under stock options.
The factors used in the earnings per share computation follow:
Six Months Ended
June 30,
2001 2000
(in thousands)
Basic Earnings Per Share
Net Income $2,719 $2,620
Weighted average common shares outstanding 2,800 2,812
Basic earnings per share $ 0.97 $ 0.93
Diluted Earnings Per Share
Net Income $2,719 $2,620
Weighted average common shares outstanding 2,800 2,812
Add dilutive effects of assumed exercise
of stock options 49 63
Weighted average common and dilutive
Potential common shares outstanding 2,849 2,875
Diluted earnings per share $ 0.95 $ 0.91
Three Months Ended
June 30,
2001 2000
(in thousands)
Basic Earnings Per Share
Net Income $1,438 $1,312
Weighted average common shares outstanding 2,796 2,815
Basic earnings per share $ 0.51 $ 0.46
Diluted Earnings Per Share
Net Income $1,438 $1,312
Weighted average common shares outstanding 2,796 2,815
Add dilutive effects of assumed exercise
of stock options 49 62
Weighted average common and dilutive
Potential common shares outstanding 2,845 2,877
Diluted earnings per share $ 0.50 $ 0.45
Stock options for 600 shares (for the period and quarter ended June
30, 2001) and 600 shares (for the period and quarter ended June 30,
2000) of common stock were not considered in computing earnings per
share because they were antidilutive.
5. Dividends per share paid for the quarter ended June 30, 2001 were
$0.15 compared to $0.13 for June 30, 2000. This is the same rate of
dividend paid for the first quarters of the respective years.
6. Beginning January 1, 2001, a new accounting standard requires all
derivatives to be recorded at fair value. Unless designated as
hedges, changes in these fair values will be recorded in the income
statement. Fair value changes involving hedges will generally be
recorded by offsetting gains and losses on the hedge and on the
hedged item, even if the fair value of the hedged item is not
otherwise recorded. The Company periodically enters into non-
exchange traded mandatory forward sales contracts in conjunction with
its mortgage banking operation. These contracts, considered
derivatives, typically last 90 days and are used to hedge the risk of
interest rate changes between the time of the commitment to make a
loan to a borrower at a stated rate and when the loan is sold. The
Company did not have any mandatory forward sales contracts at June
30, 2001.
As allowed in conjunction with the adoption of this standard, the
Company transferred its entire securities held to maturity portfolio
to available for sale. As a result of this transfer and the
corresponding adjustment to fair value, on January 1, 2001 securities
increased $407,000, other assets decreased $138,000, and accumulated
other comprehensive income increased $269,000.
Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Forward-Looking Statements
This discussion contains forward-looking statements under the Private
Securities Litigation Reform Act of 1995 that involve risks and
uncertainties. Words such as "believes," "anticipates," "expects,"
"intends," "plans," "targeted," and similar expressions are intended to
identify forward-looking statements but are not the exclusive means of
identifying such statements. Although the Company believes that the
assumptions underlying the forward-looking statements contained herein
are reasonable, any of the assumptions could be inaccurate, and
therefore, there can be no assurance that the forward-looking statements
included herein will prove to be accurate. Factors that could cause
actual results to differ from the results discussed in the
forward-looking statements include, but are not limited to: economic
conditions (both generally and more specifically in the markets,
including the tobacco market, in which the Company and its bank
operate); competition for the Company's customers from other providers
of financial and mortgage services; government legislation and
regulation (which changes from time to time and over which the Company
has no control); changes in interest rates (both generally and more
specifically mortgage interest rates); material unforeseen changes in
the liquidity, results of operations, or financial condition of the
Company's customers; and other risks detailed in the Company's filings
with the Securities and Exchange Commission, all of which are difficult
to predict and many of which are beyond the control of the Company. The
Company undertakes no obligation to republish revised forward-looking
statements to reflect events or circumstances after the date hereof or
to reflect the occurrence of unanticipated events.
Summary
Bourbon Bancshares, Inc. recorded net income of $2.7 million, or $0.97
basic earnings per share and $0.95 diluted earnings per share for the
first six months ended June 30, 2001 compared to $2.6 million, or $0.93
basic earnings per share and $0.91 diluted earnings per share for the
six month period ending June 30, 2000. The first six months reflects an
increase in net income of 4%. For the three month period ending June
30, 2001, net income was $1.4 million ($0.51 basic earnings per share
and $0.50 diluted earnings per share) compared to $1.3 million ($0.46
basic earnings per share and $0.45 diluted earnings per share) for the
same period in 2000. This was an increase in net income of 10%.
Return on average assets was 1.44% for the first six months ended June
30, 2001 compared to 1.51% for the same time period in 2000, a decrease
of 5%. For the three month period ended June 30, 2001, the return on
average assets was 1.51% compared to 1.50% for the same period in 2000.
Return on average equity was 14.7% and 16.1% for the six months ended
June 30, 2001 and 2000, respectively, a decrease of 9%. The return on
equity was 15.4% and 15.8% for the three month period ended June 30,
2001 and June 30, 2000, respectively.
The softening loan demand and slight temporary tightening of our net
interest margin due to the rapidly falling loan rates have contributed
to smaller increases in net income.
Loans increased $1.1 million from $272.3 million on December 31, 2000 to
$273.4 million on June 30, 2001. This increase was mainly attributable
to an increase in commercial and agricultural loans, while being offset
by a reduction in consumer loans.
Total deposits decreased from $300.8 million on December 31, 2000 to
$292.6 million on June 30, 2001, a decrease of $8.2 million. The
decrease is mainly attributable to non-interest bearing deposits
decreasing $3.9 million and time deposits of $100,000 and over
decreasing $3.1 million. The decline in total deposits was primarily
from being less price competitive while loan demand was softer.
Net Interest Income
Net interest income was $7.0 million for the six months ending June 30,
2001 compared to $6.9 million for the six months ending June 30, 2000,
resulting in an increase of $78 thousand or 1%. The interest spread was
4.04% for the first six months of 2001 compared to 4.38% for the same
period in 2000, a decrease of 34 basis points. Typically, banks have
experienced declining margins over the past two quarters as a result of
the general decline in interest rates. The Federal Reserve has dropped
the discount rate from 6% at December 31, 2000 to 3.25% at June 30,
2001. These decreases have had a short term effect on net interest
income, particularly a decrease in loan interest income. However, as
our interest rate shock simulation model that follows shows, changes in
interest rates are expected to have a minor effect on net interest
income, and therefore the decline in net interest margin is felt to be
temporary.
For the first six months, the yield on assets decreased from 8.41% in
2000 to 8.32% in 2001. The cost of liabilities increased from 4.04% in
2000 to 4.29% in 2001, mainly a result of increasing rates and costs of
time deposits in the first six months of 2000 and continuing throughout
the entire year of 2001. Decreasing rates during the first six months
of 2001 have caused the cost of liabilities to decline during 2001 and
at a greater rate during the second quarter of 2001. Year to date
average loans are up $16.0 million, or 6.4% from June 30, 2000 to June
30, 2001, resulting in an increase in loan interest income of $984
thousand for the first six months of 2001 compared to the first six
months of 2000. Average deposits also increased from June 30, 2000 to
June 30, 2001, up $11.5 million, or 4.0%. This increased volume has
resulted in an increase in deposit interest expense of $711 thousand for
the first six months of 2001 compared to the same period in 2000. The
banking industry continues to battle competition for deposit dollars,
and this trend is expected to continue.
Non-Interest Income
Non-interest income increased $0.8 million for the six month period
ended June 30 from $1.9 million in 2000 to $2.7 million in 2001. An
increase of $588 thousand in service charges from the first six months
of 2000 to the comparable 2001 period is mainly attributable to an
increase in checking service charges and overdraft charges of $561
thousand. Overdraft income increased principally due to the
implementation of a new "Kentucky Courtesy" overdraft program and an
increase in overdraft fees in the last quarter of 2000. "Kentucky
Courtesy" is available to qualified customers, and is an overdraft
protection service that pays checks up to the "Kentucky Courtesy" limit.
Trust deparment income decreased in the first six months of 2001
compared to the same period in 2000, primarily due to the drop in market
prices of assets held and higher than normal estate fees collected in
2000. Investment securities net gains were $151 thousand greater for
the first six months of 2001 compared to the same period in 2000. Net
gains from sale of securities were mainly attributable to municipal
securities being called at premiums before their maturity, and the sale
of U.S. Treasury Notes. U.S. Treasury Notes are sold before maturity
when the total return (gain and net interest) can be improved.
The increase in gain on sale of mortgage loans of $112 thousand during
the first six months of 2001 compared to the same 2000 period is
attributable to a decrease in rates in 2001 as compared to 2000. The
decrease in rates resulted in an increase in loan originations and
refinances. Volume of loan sales are inverse to rate changes. Rates
have fallen in the first six months of 2001 and as a result, we expect a
favorable impact on our loan sales in 2001 compared to 2000. The
increase in other income of $54 thousand in the first six months of 2001
as compared to the same time period in 2000 is primarily a result of an
increase in debit card income of $38 thousand and an increase in
brokerage fee income of $22 thousand. We continue to promote the use of
electronic products and the use of our brokerage services to better
serve our customers financial needs.
For the three month period ending June 30, 2001, total other income
increased $546 thousand from the same period in 2000. This is
principally due to the increase in service charges of $383 thousand
(mainly due to the overdraft fees mentioned earlier) and an increase in
investment securities net gains of $132 thousand for the three month
period ended June 30, 2001 compared to the same period in 2000.
Non-Interest Expense
The increase of $652 thousand in non-interest expenses from $5.1 million
for the six months ended June 30, 2000 to $5.7 million for the same
period in 2001 was a result of several factors. Salaries and benefits
increased $318 thousand for the first six months of 2001 compared to
2000, an increase of 12%. The increase is due to annual salary
increases and increased staffing. Staffing has mainly been increased in
branches to better serve our customers. Salaries, excluding bonuses and
incentives, increased 10% from the first six months of 2000 to the first
six months of 2001. Employee benefits increased $61 thousand and
incentives increased $51 thousand during these comparable periods. For
the three month period ending June 30, 2001 compared to the same period
in 2000, salaries and benefits increased $169 thousand, or 13%. The
explanations for these changes are consistent with the six months
changes mentioned earlier.
Occupancy expense increased $128 thousand to $904 thousand for the first
six months of 2001 compared to first six months of 2000. Depreciation
increased $86 thousand during these comparable periods. The three month
increase from 2000 to 2001 in occupany expenses was $68 thousand.
Renovation of existing facilities and the purchase of hardware and
software for recent technological advances have added to the
depreciation expense. Currently, the construction a new full service
facility in Cynthiana is under way and is expected to be complete toward
the end of the third quarter of 2001. These increases are a result of
the Company's continued emphasis on improving and maintaining its
facilities, and to stay current with our technology.
Advertising and marketing costs increased $33 thousand to $215 thousand
for the first six months of 2001 as compared to the same period in 2000.
The three month increase from 2000 to 2001 was similar to the first
three months increase. Continued efforts have been made by the Company
to promote the name and the products of Kentucky Bank using various
forms of promotional materials and selected types of media, including
television.
Other expenses for the first six months of 2001 compared to 2000
increased $174 thousand to $1.2 million. Internet banking and debit
card expenses increased $76 thousand and losses on checking account
overdrafts increased $66 thousand from 2000 to 2001. Other expenses
increased $94 thousand for the three month period ended June 30, 2001
compared to the same period ended June 30, 2000. Internet banking and
debit card expenses mentioned earlier increased $33 thousand for the
three month period ended June 30, 2001 from the same period ended June
30, 2000. Losses on checking account overdrafts increased $55 thousand
for the three month period ended June 30, 2001 compared to the same
period ended June 30, 2000, primarily attributable to the implementation
of the new "Kentucky Courtesy" overdraft program. Outside of these
changes, the other changes are primarily the result of the growth of the
Bank and the general increase in the cost of doing business.
Income Taxes
The tax equivalent rate for the six months ended June 30 was 30% for
2001 and 28% for 2000. The tax equivalent rate for the three months
ended June 30 was 30% for 2001 and 29% for 2000. The increase in the
tax equivalent rate is mainly attributable to a tax benefit in 2000.
These rates are less than the statutory rate as a result of the tax-free
securities and loans held by the Company.
Stock Repurchase Program
On October 25, 2000, the Company announced that its Board of Directors
approved a stock repurchase program. The Company is authorized to
purchase up to 100,000 shares of its outstanding common stock. Shares
will be purchased from time to time in the open market depending on
market prices and other considerations. Through June 30, 2001, 30,279
shares have been purchased.
Liquidity and Funding
Liquidity risk is the possibility that the Company may not be able to
meet its cash requirements. Management of liquidity risk includes
maintenance of adequate cash and sources of cash to fund operations and
meeting the needs of borrowers, depositors and creditors. Excess
liquidity has a negative impact on earnings as a result of the lower
yields on short-term assets.
Cash and cash equivalents were $13.8 million as of June 30, 2001
compared to $15.3 million at December 31, 2000. In addition to cash and
cash equivalents, the securities portfolio provides an important source
of liquidity. Total investment securities available for sale totaled
$69.8 million at June 30, 2001. The available for sale securities are
available to meet liquidity needs on a continuing basis.
The Company maintains a relatively stable base of customer deposits
which is expected to be adequate to meet its funding demands. In
addition, management believes the majority of its $100,000 or more
certificates of deposit are no more volatile than its core deposits.
Generally, the Company relies upon net cash inflows from financing
activities, supplemented by net cash inflows from operating activities,
to provide cash used in its investing activities. As is typical of many
financial institutions, significant financing activities include deposit
gathering, and the use of short-term borrowings, such as federal funds
purchased and securities sold under repurchase agreements along with
long-term debt. The Company's primary investing activities include
purchasing investment securities and loan originations. Management
believes there is sufficient cash flow from operations to meet investing
and liquidity needs related to reasonable borrower, depositor and
creditor needs in the present economic environment.
Management is aware of the potential problem of funding sustained loan
growth. Therefore, in addition to deposits, other sources of funds,
such as FHLB advances may be used. The Company relies on FHLB advances
for both liquidity and asset/liability management purposes. These
advances are used primarily to fund long-term fixed rate residential
mortgage loans. As of June 30, 2001, we have sufficient collateral to
borrow an additional $14 million from the FHLB. In addition, as of June
30, 2001 over $53 million is available in overnight borrowing through
various correspondent banks. In light of this, management believes
there is sufficient liquidity to meet all reasonable borrower, depositor
and creditor needs in the present economic environment.
Non-Performing Assets
As of June 30, 2001, the Company's non-performing assets totaled $1.1
million or 0.4% of loans compared to $1.8 million or 0.7% of loans at
December 31, 2000. The decrease in accruing loans which are past due 90
days or more was due principally to one line of credit totaling $788
thousand in 2000, which was subsequently paid in full. (See table
below) Real estate loans composed 74% and 96% of the non-performing
loans as of June 30, 2001 and December 31, 2000, respectively. Forgone
interest income on the non-accrual loans for both 2001 and 2000 is
immaterial.
Nonperforming Assets
6/30/01
12/31/00
(in thousands)
Non-accrual Loans
$ 182
$ 307
Accruing Loans which are
Contractually past due
90 days or more
872
1,365
Restructured Loans
-
130
Total Nonperforming and Restructured
1,054
1,802
Other Real Estate
173
165
Total Nonperforming and Restructured
Loans and Other Real Estate
$ 1,227
$ 1,967
Nonperforming and Restructured Loans
as a Percentage of Loans
0.39%
0.66%
Nonperforming and Restructured Loans
and Other Real Estate as a Percentage
of Total Assets
0.33%
0.53%
Provision and Reserve for Possible Loan Losses
The first six months 2001 provision for loan losses of $384 thousand is
higher than the comparable 2000 period by $9 thousand. Loan growth and
an increase in charge-offs have required management to increase the
provision in order to maintain a reserve for loan losses that is
representative of the risk of loss based on the quality of loans
currently in the portfolio. Net charge-offs for the six month period
ending June 30, 2001 were $406 thousand compared to $146 thousand for
the same period in 2000. Net charge-offs for the three month period
ending June 30, 2001 were $250 thousand compared to $122 thousand for
the same period ending June 30, 2000. The increase is mainly
attributable to several small consumer loans. Future levels of charge-
offs will be determined by the economic environment surrounding
individual loans. Management feels the current loan loss reserve is
sufficient to meet expected loan losses.
Loan Losses
Six Months Ended June 30
(in thousands)
2001
2000
Balance at Beginning of Period
$ 3,388
$ 3,104
Amounts Charged-off:
Commercial
63
-
Real Estate Mortgage
30
24
Agricultural
8
6
Consumer
349
161
Total Charged-off Loans
450
191
Recoveries on Amounts
Previously Charged-off:
Commercial
2
3
Real Estate Mortgage
2
1
Agricultural
1
1
Consumer
39
40
Total Recoveries
44
45
Net Charge-offs
406
146
Provision for Loan Losses
384
375
Balance at End of Period
3,366
3,333
Loans
Average
271,836
243,846
At June 30
273,420
260,874
As a Percentage of Average Loans:
Net Charge-offs
0.15%
0.06%
Provision for Loan Losses
0.14%
0.15%
Allowance as a Percentage of
Period-end Loans
1.23%
1.28%
Allowance as a Multiple of
Net Charge-offs
8.3
22.8
Allowance as a Percentage of
Non-performing and Restructured Loans
319%
155%
Loan Losses
Quarter Ended June 30
(in thousands)
2001
2000
Balance at Beginning of Period
$ 3,424
$ 3,268
Amounts Charged-off:
Commercial
60
-
Real Estate Mortgage
27
24
Agricultural
8
6
Consumer
181
111
Total Charged-off Loans
276
141
Recoveries on Amounts
Previously Charged-off:
Commercial
1
2
Real Estate Mortgage
1
1
Agricultural
1
1
Consumer
23
15
Total Recoveries
26
19
Net Charge-offs
250
122
Provision for Loan Losses
192
187
Balance at End of Period
3,366
3,333
Loans
Average
272,007
249,048
At June 30
273,420
260,874
As a Percentage of Average Loans:
Net Charge-offs
0.09%
0.05%
Provision for Loan Losses
0.07%
0.08%
Allowance as a Multiple of
Net Charge-offs
13.5
27.3
Item 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Asset/Liability management control is designed to ensure safety and
soundness, maintain liquidity and regulatory capital standards, and
achieve acceptable net interest income. Management considers interest
rate risk to be the most significant market risk. The Company's
exposure to market risk is reviewed on a regular basis by the
Asset/Liability Committee. Interest rate risk is the potential of
economic losses due to future interest rate changes. These economic
losses can be reflected as a loss of future net interest income and/or a
loss of current fair market values. The objective is to measure the
effect on net interest income and to adjust the balance sheet to
minimize the inherent risk while at the same time maximize income.
Management realizes certain risks are inherent and that the goal is to
identify and minimize the risks. The primary tool used by management is
an interest rate shock simulation model. The Bank has no market risk
sensitive instruments held for trading purposes. The following table
depicts the change in net interest income resulting from 100 and 300
basis point changes in rates. The projections are based on balance
sheet growth assumptions and repricing opportunities for new, maturing
and adjustable rate amounts. In addition, the projected percentage
changes from level rates are outlined below within the Board of
Directors specified limits. As of June 30, 2001 the projected
percentage changes are within the Board approved limits and the
Company's interest rate risk is also within Board approved limits. The
projected net interest income report summarizing the Company's interest
rate sensitivity as of June 30, 2001 is as follows:
(in thousands)
PROJECTED NET INTEREST INCOME
Level
Rate Change:
- - 300
- - 100
Rates
+ 100
+ 300
Year One (7/1/01 - 6/30/02)
Interest Income
$24,491
$26,698
$27,804
$28,917
$31,142
Interest Expense
9,691
11,473
12,525
13,508
15,464
Net Interest Income
14,800
15,225
15,279
15,409
15,678
PROJECTED DOLLAR INCREASE (DECREASE) FROM "LEVEL RATES"
Year One (7/1/01 - 6/30/02)
Interest Income
$(3,313)
$(1,106)
N/A
$ 1,113
$ 3,338
Interest Expense
(2,834)
(1,052)
N/A
984
2,940
Net Interest Income
(479)
(54)
N/A
129
398
PROJECTED PERCENTAGE INCREASE (DECREASE) FROM "LEVEL RATES"
Year One (7/1/01 - 6/30/02)
Interest Income
- -11.9%
- -4.0%
N/A
4.0%
12.0%
Interest Expense
- -22.6%
- -8.4%
N/A
7.9%
23.5%
Net Interest Income
- -3.1%
- -0.4%
N/A
0.8%
2.6%
Board approved limit
>-10.0%
>-4.0%
N/A
>-4.0%
>-10.0%
The projected net interest income report summarizing the Company's
interest rate sensitivity as of June 30, 2000 is as follows:
(in thousands)
PROJECTED NET INTEREST INCOME
Level
Rate Change:
- - 300
- - 100
Rates
+ 100
+ 300
Year One (7/1/00 - 6/30/01)
Interest Income
$26,066
$28,177
$29,232
$30,288
$32,399
Interest Expense
11,416
13,296
14,237
15,177
17,057
Net Interest Income
14,650
14,881
14,995
15,111
15,342
PROJECTED DOLLAR INCREASE (DECREASE) FROM "LEVEL RATES"
Year One (7/1/00 - 6/30/01)
Interest Income
$(3,166)
$(1,055)
N/A
$ 1,055
$ 3,167
Interest Expense
(2,820)
(940)
N/A
940
2,820
Net Interest Income
(346)
(115)
N/A
115
347
PROJECTED PERCENTAGE INCREASE (DECREASE) FROM "LEVEL RATES"
Year One (7/1/00 - 6/30/01)
Interest Income
- -10.8%
- -3.6%
N/A
3.6%
10.8%
Interest Expense
- -19.8%
- -6.6%
N/A
6.6%
19.8%
Net Interest Income
- -2.3%
- -0.8%
N/A
0.8%
2.3%
Board approved limit
>-10.0%
>-4.0%
N/A
>-4.0%
>-10.0%
These projected changes in net interest income as of June 30, 2001 are
comparable to the projected changes in net interest income as of June
30, 2000. In 2001, year one reflected a decline in net interest income
of 3.1% with a 300 basis point decline compared to the 2.3% decline in
2000. The 300 basis point increase in rates reflected a 2.6% increase
in net interest income in 2001 compared to 2.3% in 2000. Percentage
changes in 2001 are greater when compared to 2000. Therefore, changes
in interest rates should have a larger effect on net interest income.
Part II - Other Information
Item 1. Legal Proceedings
The Company is not a party to any material legal proceedings.
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
The registrant's 2001 Annual Meeting of Shareholders was held May
2, 2001. Proxies were solicited by the registrant's board of directors.
There was no solicitation in opposition to the board's nominees as
listed in the proxy statement, and all of the nominees were elected by
vote of the shareholders. Voting results for each nominee were as
follows:
Votes For
Votes Withheld
William M. Arvin
2,157,362
470
James L. Ferrell
2,157,362
470
The following directors have a term of office that will continue
following the Annual Meeting: Henry Hinkle, Theodore Kuster, Robert G.
Thompson, William R. Stamler and Buckner Woodford.
A proposal to approve the appointment of the firm of Crowe, Chizek
and Company LLP as the independent accountants for the Corporation to
audit the Corporation's financial statements for its year ending December
31, 2001 was approved by a majority of the outstanding shares of the
registrant's common stock. A total of 2,137,644 shares were voted in
favor of the proposal; and 19,400 shares were voted against.
The total number of Common Shares outstanding as of March 15, 2001,
the record date for the Annual Meeting of Shareholders was 2,803,317.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
1. Exhibits as required by Item 601 of Regulation S-K.
3.1 Bylaws of the Registrant dated March 9, 1993, as
amended March 13, 2001
11 Earnings Per Share Calculation
2. No reports on Form 8-K have been filed during the quarter
for which this report is filed.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused the report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Bourbon Bancshares, Inc.
Date ___8/13/01_________ __/s/Buckner Woodford____________
Buckner Woodford, President and C.E.O.
Date ___8/13/01_________ __/s/Gregory J. Dawson___________
Gregory J. Dawson, Chief Financial Officer
EXHIBIT 3.1
BYLAWS
OF
BOURBON BANCSHARES, INC.
(The "Corporation")
ARTICLE I
Offices
1.1 Principal office. The principal office of the Corporation
shall be located in Paris, Kentucky. The Corporation may have such
other offices, either within or outside the Commonwealth of Kentucky,
as the business of the Corporation may require from time to time.
1.2 Registered Office. The registered office of the Corporation
shall be at Fourth and Main Streets, Paris, Kentucky. The address of
the registered office may be changed from time to time by the Board of
Directors.
ARTICLE II
Shareholders
2.1 Annual Meetings. The annual meeting of the shareholders
shall be held at such time, place and on such date as the Board of
Directors shall designate and as stated in the notice of the meeting,
said date to be no later than six months following the end of the
Corporation's fiscal year. The purpose of such meeting shall be the
election of directors and the transaction of such other business as
may properly come before it. If the election of directors shall not
be held on the day designated for an annual meeting, or at any
adjournment thereof, the Board of Directors shall cause the election
to be held at a special meeting of the shareholders to be held as soon
thereafter as may be practicable. Failure to hold the annual meeting
at or within the designated time, or to elect directors at or within
such time, shall not work any forfeiture or a dissolution of the
Corporation, and shall not otherwise affect valid corporate acts.
2.2 Special meetings. Special meetings of the shareholders for
any purpose or purposes shall be called by the
Chief Executive Officer at the written request of a majority of the
members of the Board of Directors, or upon the written demand of the
holders of not less than 67% of all the outstanding shares of the
Corporation entitled to vote at such meeting.
2.3 Place of Special Meetings. The Board of Directors may
designate any place within or outside the Commonwealth of Kentucky as
the place for any special meeting of shareholders called by the Board of
Directors. If no designation is properly made, or if a special meeting
is otherwise called, the place of meeting shall be at the principal
office of the Corporation in the Commonwealth of Kentucky.
2.4 Notice of Annual or Special Meetings. The Corporation shall
give notice to shareholders of record of the date, time and place of
each annual or special shareholders meeting to be held, and, in case of
a special meeting, the purpose or purposes for which the meeting is
called, no less than 10 days nor more than 60 days before the date of
the meeting. Notice shall be given in written form, delivered
personally or by telegraph, teletype, any other form of wire or wireless
written communication or by mail or private carrier, by or at the
direction of the Chief Executive Officer or the Secretary. If notice is
given by mail, such notice shall be deemed to be delivered when
deposited in the United States mail correctly addressed to the
shareholder at his address as it appears on the stock transfer books of
the Corporation, with postage prepaid. If notice is given by private
carrier, such notice shall be deemed to be delivered upon delivery of
such notice to a private carrier, in any envelope required by such
private carrier for delivery without charge to the shareholder,
correctly addressed to the shareholder at his address as it appears on
the stock transfer books of the Corporation. If notice is given by
telegraph, teletype or any other form of wire or wireless written
communication, notice shall be deemed to be delivered upon proper
transmission of such written communication to the shareholder's address
as it appears on the stock transfer books of the Corporation or through
a wireless communication telephone number for a shareholder's business
or residence address known to the Corporation that the Corporation
reasonably believes will result in the receipt of such written
communication (or all material information as to its contents) by the
shareholder. An affidavit (a) of mailing of notice of a meeting of
shareholders, executed by the Secretary, any Assistant Secretary or any
transfer agent of the Corporation, (b) of delivery of notice, executed
by any private carrier or any independent company engaged in the
transmission and delivery of telegraphs, and (c) of proper transmission
of notice by teletype or any other form
2
of wire or wireless written communication, executed by any officer of
the Corporation, shall be prima facie evidence of the giving of such
notice. The notice of every meeting of the shareholders may be
accompanied by a form of proxy approved by the Board of Directors in
favor of such person(s) or matter(s) as the Board of Directors may
determine.
2.5 Advance Notice of Shareholder Business. At any annual
meeting of the shareholders, only such business shall be conducted, and
only such proposals shall be acted upon, as shall have been properly
brought before the meeting. To be properly brought before an annual
meeting, business must be (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of
Directors, (b) otherwise properly brought before the meeting by or at
the direction of the Board of Directors or (c) otherwise properly
brought before the meeting by a shareholder in compliance with the
procedures set forth in this Section 2.5. For business to be properly
brought before an annual meeting by a shareholder, the shareholder must
have given timely notice thereof in writing to the
Secretary of the Corporation. To be timely, a shareholder's notice must
be delivered to or mailed and received at the principal office of the
Corporation, not less than 60 nor more than 90 days prior to the
scheduled date of the meeting, regardless of any postponement, deferral
or adjournment of that meeting to a later date; provided, however, that
if less than 70 days' notice or prior public disclosure of the date of
the meeting is given or made to shareholders, notice by the shareholder
to be timely must be so received not later than the close of business on
the 10th day following the day on which such notice of the date of the
annual meeting was mailed or such public disclosure was made. A
shareholder's notice to the Secretary shall set forth as to each matter
the shareholder proposes to bring before the annual meeting (a) a brief
description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual
meeting, (b) the name, age, business address, residence address and
principal occupation or employment of the shareholder proposing such
business, (c) the class and number of shares of the Corporation which
are beneficially owned by the shareholder and (d) any material interest
of the shareholder in such business. Notwithstanding anything in these
Bylaws to the contrary, no business shall be conducted at any annual
meeting except in accordance with the procedures set forth in this
section 2.5. The chairman of the annual meeting shall, if the facts
warrant, determine and declare to the meeting that business was not
properly brought before the meeting and in accordance with the
3
provisions of this Section 2.5, and if he should so determine, he shall
so declare to the meeting and any such business not properly brought
before the meeting shall not be transacted.
2.6 Closing Transfer Books and Fixing of a Record Date. The
Board of Directors of the Corporation may close its stock transfer books
for a period not exceeding 70 days, immediately prior to the date of any
meeting of shareholders, or the date for the payment of any dividend or
for the allotment of rights, or the date when any exchange or
reclassification of shares shall be effective; or in lieu thereof, may
fix in advance a date, not exceeding 70 days prior to the date of any
meeting of shareholders, or to the date for the payment of any dividend
or for the allotment of rights, or to the date when any exchange or
reclassification of shares shall be effective, as the record date for
the determination of shareholders entitled to notice of, or to vote at,
such meeting, or shareholders entitled to receive payment of any such
dividend or to receive any such allotment of rights, or to exercise
rights in respect of any exchange or reclassification of shares. The
shareholders of record on such record date shall be the shareholders
entitled to notice of, and to vote at, such meeting, or to receive
payment of such dividend or to receive such allotment of rights, or to
exercise such rights, in the event of an exchange or reclassification of
shares, as the case may be. If the transfer books are not closed and no
record date is fixed by the Board of Directors, the date on which notice
of the meeting is mailed, or the date on which the resolution of the
Board of Directors declaring such dividend is adopted or such other
action is taken, as the case may be, shall be deemed to be the record
date for the determination of the shareholders of the Corporation and
the number of shares owned by them for all of the purposes set forth in
the immediately preceding sentence. When a record date has been
established as provided herein, such record date shall be effective for
any adjournment of the meeting for which such record date was
established, unless the meeting is adjourned (other than by court order)
to a date more than 120 days after the date fixed for the original
meeting, in which case the Board of Directors shall establish a new
record date in accordance with these Bylaws. If a court orders a
meeting adjourned to a date more than 120 days after the date fixed for
the original meeting and provides that the original record date continue
in effect, the Board of Directors need not establish a new record date.
2.7 Voting Record. The officer or agent having charge of the
Corporation's stock transfer books shall make, at least 5 business days
before every meeting of shareholders,
4
a list of the shareholders entitled to notice of the shareholders'
meeting. The list shall be arranged by voting group (and within each
voting group by class or series of shares) and show the address of and
number of shares held by each shareholder. Such shareholders' list
shall be available for inspection by any shareholder, beginning 5
business days before the meeting for which the list was prepared and
continuing through the meeting, at the Corporation's principal office or
at a place identified in the meeting notice in the city where the
meeting will be held. A shareholder, his agent or attorney may on
written demand inspect and copy the list during regular business hours
and at the shareholder's expense, during the period it is available for
inspection, subject to the Corporation's ability to refuse to permit
such inspection or copying without a court order. The Corporation shall
make the shareholders' list available at the meeting, and any
shareholder, his agent or attorney shall be entitled to inspect the list
at any time during the meeting or any adjournment.
2.8 Quorum. A majority of the outstanding shares of the
Corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum of the shareholders for all purposes unless a
greater or lesser quorum shall be provided by law or the Corporation's
Articles of Incorporation and in such case the representation of the
number so required shall constitute a quorum. Once a share is
represented for any purpose at the meeting, it shall be deemed present
for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting, unless a new record date is or must be set
for that adjourned meeting. In the absence of a quorum, the
shareholders so present may, by majority vote, adjourn the meeting from
time to time in the manner provided in Section 2.9 of these Bylaws.
2.9 Adjournments. Any meeting of shareholders, annual or
special, may adjourn from time to time to reconvene at the same or some
other place, and notice need not be given of any such adjourned meeting
if the time and place thereof is announced at the meeting at which the
adjournment is taken. At the adjourned meeting, the corporation may
transact any business which might have been transacted at the original
meeting. If after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to
persons who are shareholders as of the new record date.
2.10 Organization. The Chairman of the Board, or such other
person as may have been designated for the purpose by the Board of
Directors, or if no such designation shall have been made, a chairman
elected by the shareholders present,
5
shall act as chairman of meetings of shareholders. The Secretary of
the Corporation shall act as secretary of meetings of shareholders,
but in the absence of the Secretary the chairman of the meeting may
appoint any person to act as secretary of the meeting.
2.11 Voting. Unless otherwise required by the Kentucky Business
Corporation Act, the Corporation's Articles of Incorporation or these
Bylaws, (a) any question brought before any meeting of shareholders
shall be decided by the vote of the holders of a majority of the
shares represented and entitled to vote on the matter and (b) each
shareholder represented at a meeting of shareholders shall be entitled
to cast one vote for each share entitled to vote on the matter held by
such shareholder; provided, however, that at each election for
directors, each shareholder entitled to vote shall have the right to
cast as many votes in the aggregate as he shall be entitled to vote
under the Corporation's Articles of Incorporation, multiplied by the
number of directors to be elected at such election, and each
shareholder may cast the whole number of votes for one candidate or
distribute such votes in whole numbers among two or more candidates.
The Board of Directors, in its discretion, or the chairman presiding
at a meeting of shareholders, in his discretion, may require that any
votes cast at such meeting shall be cast by written ballot.
2.12 Proxies. At all meetings of shareholders, a shareholder
may vote by a proxy signed by the shareholder or by his duly
authorized attorney-in-fact. Such proxy shall be filed with the
Secretary of the Corporation before or at the time of the meeting. No
proxy shall be valid after 11 months from the date of its execution,
unless otherwise expressly provided in the proxy. A proxy may be
revoked in writing at any time unless the appointment form
conspicuously states that it is irrevocable and the appointment is
coupled with an interest. The effective time of such revocation shall
be the time the Secretary of the Corporation receives the written
notice of revocation.
2.13 Voting of Shares by Certain Holders.
(a) Shares standing in the name of another corporation may
be voted by that corporation's president or by proxy appointed by him or
by such other person as the board of directors of such other corporation
may determine.
6
(b) Shares held by an administrator, executor, guardian or
conservator may be voted by him, either in person or by proxy, without a
transfer of such shares into his name. Shares standing in the name of a
trustee may be voted by him, either in person or by proxy, but no
trustee shall be entitled to vote shares held by him without a transfer
of such shares into his name.
(c) Shares standing in the name of a receiver may be voted
by such receiver, and shares held by or under the control of a receiver
may be voted by such receiver without the transfer thereof into his name
if authority so to do is contained in an appropriate order of the court
by which such receiver was appointed.
(d) Where shares are held jointly by two or more
fiduciaries, unless the Secretary of the Corporation is given written
notice to the contrary by any of such fiduciaries, the vote of one or
more of such fiduciaries shall be presumed to be the vote of all such
fiduciaries. Where shares are held jointly by two or more fiduciaries
and written notice is given to the Secretary of the Corporation that the
vote of one or more of such fiduciaries may not be presumed to be the
vote of all such fiduciaries, the vote of the majority of such
fiduciaries (or both in the case of two fiduciaries) shall control the
manner of voting or the giving of a proxy unless the instrument or order
appointing the fiduciaries otherwise directs. Where, in any case,
fiduciaries are equally divided upon the manner of voting shares jointly
held by them, any court of competent jurisdiction may, upon petition
filed by any of the fiduciaries, or by any beneficiary, appoint an
additional person to act with the fiduciaries in determining the manner
in which the shares shall be voted upon the particular questions as to
which the fiduciaries are divided.
(e) A shareholder whose shares are pledged shall be
entitled to vote such shares until the shares have been transferred into
the name of the pledgee, and thereafter, the pledgee shall be entitled
to vote the shares so transferred.
(f) Neither treasury shares of its own stock held by the
Corporation, nor shares held by another corporation if a majority of the
shares entitled to vote for the election of directors of such other
corporation is held by the Corporation, shall be voted at any meeting or
counted in determining the total number of outstanding shares at any
given time.
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(g) The Secretary or any shareholder may demand written
proof that the person asserting the right to vote shares pursuant to
this Section 2.13 holds the position he claims to hold and has been
properly authorized to vote the shares he represents. Such proof, if
demanded, shall be presented prior to the voting of such shares by such
person.
2.14 Inspectors of Elections. The Board of Directors or the
chairman of the meeting may appoint two or more inspectors to tally and
certify each vote required to be tallied and certified by them as
provided in the resolution of the Board of Directors appointing them or
in their appointment by the chairman of the meeting, and to perform such
other acts or duties as may be requested by the chairman of the meeting
or required by law. On request of the chairman of the meeting or as
otherwise required by law, the inspectors shall make and execute a
written report to the chairman of the meeting certifying any facts found
by them and matters determined by them. The report shall be prima facie
evidence of the facts stated and of the vote certified by the
inspectors.
2.15 Attendance at Meeting as Waiver. Attendance by a
shareholder at a meeting of shareholders (a) waives objection to lack of
notice or defective notice of the meeting, unless the shareholder at the
beginning of the meeting objects to holding the meeting or transacting
business at the meeting; and (b) waives objection to consideration of a
particular matter at the meeting that is not within the purpose or
purposes described in the meeting notice, unless the shareholder objects
to considering the matter when it is presented.
ARTICLE III
Directors
3.1 General Powers. The business affairs of the Corporation
shall be managed by its Board of Directors.
3.2 Number, Tenure and Qualifications. The number of directors
of the Corporation shall be not less than five (5) and no more than
fifteen (15), and within this range shall be fixed by resolution adopted
by a majority of the Board of Directors from time to time. Each
director shall hold office for the term for which he was elected and
until his successor shall be elected and qualified, whichever period is
longer, or until his death or until he shall resign or shall have been
removed in the manner hereinafter provided.
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3.3 Removal and Resignations. Subject to the rights of the
holders of any class or series of Preferred Shares then outstanding, at
a meeting of shareholders called expressly for the purpose of removing
one or more directors, any director or the entire Board of Directors may
be removed, with cause, by a vote of the holders of not less than 67% of
the shares then entitled to vote at an election of directors. Whenever
the holders of the shares of any class or series are entitled to elect
one or more directors by the provisions of the Articles of
Incorporation, the provisions of this Section shall apply, in respect to
the removal of a director or directors so elected, to the vote of the
holders of the outstanding shares of that class or series and not to the
vote of the outstanding shares as a whole. Any member of the Board of
Directors may resign from the Board of Directors at any time by giving
written notice to the Chairman of the Board or President of the
Corporation. Any such resignation shall take effect at the time
specified therein or, if no time is specified, upon receipt thereof; and
unless otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.
3.4 Annual and Regular Meetings. An annual meeting of the Board
of Directors shall be held without other notice than this Bylaw for
organization, the election of officers and the transaction of such other
business as may properly come before the meeting within 30 days after
each annual election of directors. The Board of Directors may provide
by resolution the time and place, either within or outside the
Commonwealth of Kentucky for the holding of regular meetings without
other notice than such resolution.
3.5 Special Meetings. Special meetings of the Board of
Directors may be called by, or at the request of, the Chairman of the
Board or by any two directors. All special meetings of the Board of
Directors shall be held at the principal office of the Corporation
unless some other place shall be specified in the notice of the meeting.
3.6 Notice. Notice of any special meeting shall be given at
least 36 hours prior thereto, either in person or by telephone, or in
written form delivered personally or by telegraph, teletype, any other
form of wire or wireless written communication or by mail or private
carrier, to each director at such business address (and business wire or
wireless communication telephone number, if any) as he shall register
with the Secretary of the Corporation. If mailed, such notice shall be
deemed to be delivered at the earliest of the following: (a) when
received, (b) five days after its deposit in the United States mail, as
evidenced by the postmark, if mailed postpaid and correctly addressed,
or (c)
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on the date shown on the return receipt, if sent by registered or
certified mail, return receipt requested, and the receipt is signed by
or on behalf of the director. If notice is given by a private carrier,
such notice shall be deemed to be delivered upon delivery of such notice
to a private carrier, in any envelope required by such private carrier
for delivery without charge to the director, correctly addressed to the
director at his business address. If notice is given by telegraph,
teletype or any other form of wire or wireless written communication,
notice shall be deemed to be delivered when receipt of such written
communication is confirmed (whether by telephone or otherwise) by any
person present at the director's business address to which such written
communication has been transmitted. Any director may waive notice of
any meeting. The attendance of a director at any meeting shall
constitute a waiver of notice of such meeting, except where a director
at the beginning of the meeting (or promptly upon the director's
arrival) objects to holding the meeting or transacting business at the
meeting and does not thereafter vote for or assent to action taken at
the meeting. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the Board of Directors need be
specified in the notice or waiver of notice of such meeting.
3.7 Quorum. A majority of the total number of directors as
constituted from time to time shall be necessary and sufficient to
constitute a quorum for the transaction of business at any meeting of
the Board of Directors. In the absence of a quorum, a majority of the
directors present may adjourn the meeting from time to time until a
quorum is present and the meeting may be held as adjourned without
further notice.
3.8 Organization. Meetings of the Board of Directors shall be
presided over by the Chairman of the Board, if any, or in his absence
the Vice-chairman, if any, or in the absence of the Chairman of the
Board and Vice Chairman, if any, the President, or in his absence by a
chairman chosen at the meeting. The Secretary shall act as secretary of
the meeting, but in his absence the chairman of the meeting may appoint
any person to act as secretary of the meeting.
3.9 Manner of Acting. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of
the Board of Directors, unless otherwise required by the Articles of
Incorporation.
3.10 Participation by Telephonic Means. Members of the Board of
Directors, or of any committee designated by the Board of Directors, may
participate in a meeting of such
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Board or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in
the meeting can hear and speak to each other at the same time, and
participation in a meeting pursuant to this provision shall constitute
presence in person at the meeting.
3.11 Increase or Decrease to Number of Directors; Vacancies.
Subject to Section 3.2, the Board of Directors may increase or decrease
by 30% or less the number of directors last elected by the shareholders
of the Corporation. Subject to the rights of the holders of any series
of Preferred Shares then outstanding, newly created directorships
resulting from any increase in the authorized number of directors or any
vacancies in the Board of Directors resulting from death, resignation,
retirement, disqualification, removal from office or other cause shall
be filled by a majority of the remaining directors then in office, and
directors so chosen shall hold office for a term expiring at the next
annual meeting of shareholders and until his successor shall have been
duly elected and qualified, or until his earlier resignation or removal.
No decrease in the number of directors constituting the Board of
Directors shall shorten the term of any incumbent director.
3.12 Compensation. Directors may be paid their expenses, if any,
of attendance at each meeting of the Board of Directors, and may be paid
a stated salary as director, a fixed sum for attendance at each meeting
of the Board of Directors or some combination thereof. No such payment
shall preclude any director from serving the Corporation in any other
capacity and receiving compensation therefore. Members of special or
standing committees may be allowed like compensation for attending
committee meetings.
3.13 Action by Written Consent. Any action required or permitted
to be taken by the Board of Directors at a meeting may be taken without
a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all of the directors.
3.14 Nominations of Director Candidates. Only persons who are
nominated in accordance with the procedures set forth in this Section
3.14 shall be eligible for election as directors. Nominations of
persons for election to the Board of Directors of the Corporation may be
made at a meeting of shareholders by or at the direction of the Board of
Directors or by any shareholder of the Corporation entitled to vote for
the election of directors at the meeting who complies with the notice
procedures set forth in this Section 3.14. Such nominations, other than
those made by or at
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the direction of the Board of Directors, shall be made pursuant to
timely notice in writing to the Secretary of the Corporation. To be
timely, a shareholder's notice shall be delivered to or mailed and
received at the principal office of the Corporation not less than 60
days nor more than 90 days prior to the meeting; provided, however, that
in the event that less than 70 days' notice or prior public disclosure
of the date of the meeting is given or made to shareholders, notice by
the shareholder to be timely must be so received not later than the
close of business on the 10th day following the day on which such notice
of the date of the meeting was mailed or such public disclosure was
made. Such shareholders' notice shall set forth (a) as to each director
whom the shareholder proposes to nominate for election or re-election as
a director, (i) the name, age, business address and residence address of
such person, (ii) the principal occupation or employment of such person,
(iii) the class and number of shares of the Corporation which are
beneficially owned by such person and (iv) any other information
relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or as otherwise
required, in each case pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended (including, without limitation, such
persons' written consent to being named in the proxy statement as a
nominee and to serving as a director if elected); and (b) as to the
shareholder giving the notice, (i) the name and address, as they appear
on the Corporation's stock transfer books, of such shareholder and (ii)
the class and number of shares of the Corporation which are beneficially
owned by such shareholder. At the request of the Board of Directors any
person nominated by the Board of Directors for election as a director
shall furnish to the Secretary of the Corporation that information
required to be set forth in a shareholder's notice of nomination which
pertains to the nominee. No person shall be eligible for election as a
director of the Corporation unless nominated in accordance with the
procedures set forth in this Section 3.14. The chairman of the meeting
shall, if the facts warrant, determine and declare to the meeting that a
nomination was not made in accordance with the procedures prescribed by
the Bylaws, and if he should so determine, he shall so declare to the
meeting and the defective nomination shall be disregarded.
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ARTICLE IV
Committees
4.1 Committees. The Board of Directors may, by resolution
passed by a majority of the full Board of Directors, designate one or
more committees, each committee to consist of two or more of the
directors of the Corporation. The Board of Directors may designate
one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the
committee. In the absence or disqualification of a member of the
committee, and in the absence of a designation by the Board of
Directors of an alternate member to replace the absent or disqualified
member, the members thereof present at any meeting and not
disqualified from voting, whether or not they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at
the meeting in place of any such absent or disqualified member. Any
such committee, to the extent permitted by law and to the extent
provided in the resolution of the Board of Directors, shall have and
may exercise all of the powers and authority of the Board of Directors
in the management of the business and affairs of the Corporation, and
may authorize the seal of the Corporation to be affixed to all papers
which may require it. Each committee shall keep regular minutes and
report to the Board of Directors when required.
4.2 Committee Rules. Unless the Board of Directors
otherwise provides, each committee designated by the Board of
Directors may make, alter and repeal rules for the conduct of its
business. In the absence of such rules, each committee shall conduct
its business in the same manner as the Board of Directors conducts its
business pursuant to Article III of these Bylaws.
ARTICLE V
Officers
5.1 Classes. The officers of the Corporation shall be chosen by
the Board of Directors and shall be a President (who shall be the
Chief Executive Officer of the Corporation unless the Board of
Directors shall expressly designate the Chairman of the Board, if any,
as such), a Secretary and a Treasurer. Further, the Board of
Directors may elect or appoint a Chairman of the Board, a Vice
Chairman, one or more Vice Presidents (whose titles may be modified by
words such as "Executive," "Senior," "Finance," "Operations" or words
of similar ranking or descriptive import), a Controller,
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Assistant Secretaries, Assistant Treasurers and such other officers and
assistants to offices as it from time to time deems necessary. Any two
or more offices may be held by the same person. The Chairman of the
Board, if any, the Vice-Chairman, if any, and the President shall be
directors of the Corporation.
5.2 Election and Term of Office. The officers of the
Corporation shall be elected by the Board of Directors at its annual
meeting held after the Annual Meeting of Shareholders. If the election
of officers is not held at any such meeting, such election shall be held
as soon thereafter as is practicable. Vacancies may be filled or new
offices created and filled at any meeting of the Board of Directors.
Each officer shall hold office until his successor is duly elected or
until his death or until he shall resign or shall have been removed in
the manner hereinafter provided.
5.3 Removal and Resignations. Any officer or agent elected or
appointed by the Board of Directors may be removed by the Board of
Directors whenever, in its judgment, the best interests of the
Corporation would be served thereby, but such removal shall be without
prejudice to the contract rights, if any, of the person so removed.
Election or appointment of an officer or agent shall not of itself
create contract rights. Any officer of the Corporation may resign at
any time by giving written notice to the President or Secretary of the
Corporation. Any such resignation shall take effect at the time
specified therein or, if no time is specified, upon receipt thereof; and
unless otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.
5.4 Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise may be filled by the
Board of Directors for the unexpired portion of the term.
5.5 Chairman of the Board of Directors. The Chairman of the
Board of Directors shall preside at all meetings of the shareholders and
of the Board of Directors, subject to Sections 2.10 and 3.8 of these
Bylaws. The Chairman of the Board (if expressly designated as Chief
Executive Officer) shall have general supervision over the entire
business of the Corporation. Except where by law the signature of the
President is required, the Chairman of the Board (provided he is the
Chief Executive Officer) shall possess the same power as the President
to sign all contracts, certificates and other instruments of the
Corporation that may be authorized by the Board of Directors.
14
5.6 Vice-Chairman. The Vice Chairman, if any, shall have such
duties and powers as from time to time may be assigned by these Bylaws
or the Board of Directors.
5.7 President. The President shall be the Chief Executive
Officer of the Corporation unless the Board of Directors expressly
designates by resolution the Chairman of the Board to be such, in which
event the President shall be the Chief Operating Officer of the
Corporation. Subject to the direction of the Board of Directors, and
the Chairman of the Board if he shall be the Chief Executive Officer of
the Corporation, the President shall have general supervision over the
administration and operations of the Corporation. Except as otherwise
provided in these Bylaws, he shall perform all the duties and functions
and exercise all the powers of the Chairman of the Board in the absence
or disability of the Chairman of the Board. The President may sign
certificates for shares of the Corporation, any deeds, mortgages, bonds,
contracts or other instruments which the Board of Directors has
authorized to be executed, except in cases where the signing and
execution thereof is expressly delegated by the Board of Directors or by
these Bylaws to some other officer or agent of the Corporation or is
required by law to be otherwise signed or executed. The President
shall, in general, perform all duties incident to the office of
President and such other duties as may be assigned to him by the
Chairman of the Board (unless he is not the Chief Executive Officer of
the Corporation) or the Board of Directors from time to time.
5.8 Vice-Presidents. Any Vice-President shall have such duties
and powers as shall be designated from time to time by the Board of
Directors.
5.9 Secretary. The Secretary shall (a) record all the
proceedings of the shareholders' meetings and of the Board of Directors'
meetings and (unless otherwise directed) all committees thereof in one
or more books to be kept for that purpose; (b) cause all notices to be
duly given in accordance with the provisions of these Bylaws or as
required by law; (c) be custodian of the corporate records and of the
seal, if any, of the corporation; (d) cause the lists, books, reports,
statements, certificates and other documents and records required
by law to be properly kept and filed; (e) sign with the President or
Vice-President certificates for shares of stock of the Corporation the
issuance of which shall have been duly authorized (the signature to
which may be a facsimile signature); (f) have charge of the stock and
transfer books of the corporation (which may, however, be kept by any
transfer agent or agents of the corporation); and, (g) in general,
perform all duties incident to the
15
office of Secretary, and have such other duties and powers as may be
designated from time to time by the Chairman of the Board (provided he
is the Chief Executive Officer), the President or the Board of
Directors.
5.10 Treasurer. The Treasurer shall supervise and conduct the
routine financial business of the Corporation and shall have care and
custody of its funds, securities and property subject to the supervision
of the President. The Treasurer shall keep permanent records of the
funds and property of the Corporation and shall have authority to
receive all monies and to pay out and disburse such monies under the
direction and control of the Board of Directors. The Treasurer shall
deposit daily to the credit of the Corporation all monies not required
for the convenience of the Corporation's business, in such banks, trust
companies or other depositories as the Board of Directors may from time
to time direct. The Treasurer shall in general perform all the duties
incident to the office of Treasurer, and have such other duties and
powers as may be designated from time to time by the Chairman of the
Board (provided he is the Chief Executive Officer), the President or the
Board of Directors.
5.11 Chief Financial Officer. The Chief Financial Officer shall
be the chief accounting officer of the Corporation and shall be in
charge of its books of account, accounting records and accounting
procedures. He shall have such other duties and powers as may be
designated from time to time by the Chairman of the Board (provided he
is the Chief Executive Officer), the President or the Board of
Directors.
5.12 Other officers; Assistant officers. If the Board of
Directors elects or appoints (i) other officers or (ii) assistants to
any other officers, such officers and assistant officers shall exercise
such powers and perform such duties as pertain to their respective
offices, or as may be conferred upon, or assigned to, them by the
Chairman of the Board (provided he is the Chief Executive Officer), the
President, the Board of Directors and, in the case of assistant
officers, the respective officer to whom they are assistants.
5.13 Compensation. The compensation of the Chairman of the Board
and the Vice-Chairman of the Board, if any, and the President of the
Corporation shall be fixed from time to time by the Board of Directors.
The compensation of the other officers of the Corporation may be fixed
by the President, although such compensation shall be reviewed at least
annually by the Board of Directors and may be altered by the
16
Board of Directors. No officer shall be prevented from receiving such
compensation by reason of the fact that he is also a director of the
Corporation.
ARTICLE VI
Clerks, Agents and Employees
The Board of Directors may appoint, from time to time, such
clerks, agents and employees as it may deem advisable for the prompt and
orderly transaction of the business of the Corporation, define their
duties, fix the salaries to be paid them and dismiss them. Subject to
the authority of the Board of Directors, the President, or any other
officer of the Corporation authorized by him, may appoint and dismiss
all or any of such clerks, agents and employees and prescribe their
duties and the conditions of their employment, and from time to time fix
their compensation.
ARTICLE VII
Contracts, Loans,
Checks and Deposits
7.1 Contracts. The Board of Directors may authorize any officer
or officers, or agent or agents, to enter into any contract and execute
and deliver any instruments in the name of and on behalf of the
Corporation. Such authority may be general or confined to specific
instances.
7.2 Loans and Evidences of Indebtedness. No loan shall be
contracted on behalf of the Corporation, and no evidence of indebtedness
shall be issued in its name, unless authorized by the Board of
Directors. Such authorization may be general or confined to specific
instances. Loans so authorized by the Board of Directors may be
effected at any time for the Corporation from any bank, trust company or
other institution, or from any firm, corporation or individual. A11
bonds, debentures, notes and other obligations or evidences of
indebtedness of the Corporation issued for such loans shall be made,
executed and delivered as the Board of Directors shall authorize. When
so authorized by the Board of Directors, any part of or all of the
properties, including contract rights, assets, business or goodwill of
the Corporation, whether then owned or thereafter acquired, may be
mortgaged, pledged, hypothecated or conveyed or assigned in trust as
security for the payment of such bonds, debentures, notes and other
obligations or evidences of indebtedness of the Corporation, and of the
interest thereon, by
17
instruments executed and delivered in the name of the Corporation.
7.3 Checks, Drafts, Etc. All checks, drafts or other orders for
the payment of money, issued in the name of the Corporation, shall be
signed by such person or persons and in such manner as may from time to
time be designated by the Board of Directors. Such designations may be
general or confined to specific instances.
7.4 Deposits. All funds of the Corporation not otherwise
employed shall be deposited, from time to time, to the credit of the
Corporation in such banks, trust companies and other depositories as the
Board of Directors may authorize. The Board of Directors may make such
special rules and regulations with respect to such bank accounts, not
inconsistent with the provisions of these Bylaws, as it may deem
expedient. For the purpose of deposit and for the purpose of collection
for the account of the Corporation, checks, drafts and other orders for
the payment of money that are payable to the order of the Corporation
shall be endorsed, assigned and delivered by such person or persons and
in such manner as may from time to time be authorized by the Board of
Directors.
ARTICLES VIII
Certificates for
Shares and Their Transfer
8.1 Certificates for Shares. Every shareholder shall be
entitled to have a certificate certifying the number and type of shares
of the Corporation owned by him, signed by, or in the name of the
Corporation by the Chairman of the Board, or Vice-Chairman, President or
a Vice-President and by the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary of the Corporation (except that when
any such certificate is countersigned by a transfer agent other than the
Corporation or its employee or by a registrar other than the Corporation
or its employee the signature of any such officers may be facsimiles).
Such certificates shall be in such form as may be determined by the
Board of Directors and by the laws of the Commonwealth of Kentucky. If
the Corporation shall be authorized to issue more than one class of
shares or more than one series of any class, the designations,
preferences and relative, participating, optional or other special
rights of each class of shares or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights shall be
set forth in full or summarized on the face
18
or back of the certificate that the Corporation shall issue to represent
such class or series of shares, provided that, except in the case of
restrictions on transfer of securities which are required to be noted on
the certificate, in lieu of the foregoing requirements, there may be set
forth on the face or back of the certificate that the Corporation shall
issue to represent such class or series of shares, a statement that the
Corporation will furnish without charge to each shareholder who so
requests the designations, preferences and relative, participating,
optional or other special rights of each class of shares or series
thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
8.2 Transfer of Shares. Transfer of shares of the Corporation
shall be made only on the books of the Corporation by the registered
holder thereof, or by his legal representative who shall furnish proper
evidence of authority to transfer, or by his attorney-in-fact thereunto
authorized by power of attorney duly executed and filed with the
Corporation, and on surrender for cancellation of the certificate for
such shares. The person in whose name shares stand on the books of the
Corporation shall be deemed the owner thereof for all purposes as
regards the Corporation.
8.3 Lost, Stolen or Destroyed Certificates. A new certificate
or certificates may be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been
lost, stolen or destroyed, upon the making of an affidavit of that fact
by the person claiming the certificate of shares to be lost, stolen or
destroyed. When issuing a new certificate or certificates, the
Corporation, acting through its officers or agents, including any
transfer agent or registrar, may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed certificate or certificates, or his legal
representative, to give the Corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost,
stolen or destroyed.
8.4 Regulations. The Board of Directors shall have the power
and authority to take such action and make such rules and regulations as
it may deem expedient concerning the issue, transfer and registration of
certificates for shares of the Corporation, including, without
limitation, the appointment of a transfer agent and registrar for the
Corporation.
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ARTICLE IX
Emergency Bylaws
The Board of Directors may adopt, either before or during an
emergency, as that term is defined by the Kentucky Business Corporation
Act, any emergency bylaws permitted by the Kentucky Business Corporation
Act which shall be operative only during such emergency.
ARTICLE X
Indemnification of Directors and Officers
10.1 General. The Corporation shall, to the fullest extent
permitted by, and in accordance with the provisions of, the Kentucky
Business Corporation Act, as it presently exists or may hereafter be
amended, indemnify each director and officer of the Corporation against
expenses (including attorneys' fees), judgments, taxes, fines, and
amounts paid in settlement, incurred by him in connection with, and
shall advance expenses (including attorneys' fees) incurred by him in
defending, any threatened, pending or completed action, suit or
proceeding (whether civil, criminal, administrative or investigative) to
which he is, or is threatened to be made, a party by reason of the fact
that he is or was a director or officer of the Corporation, or is or was
serving at the request of the Corporation as a director, officer,
partner, employee, or agent of another domestic or foreign corporation,
partnership, joint venture, trust or other enterprise. Advancement of
expenses shall be made upon receipt of an undertaking, with such
security, if any, as the Board of Directors or shareholders may
reasonably require, by or on behalf of the person seeking
indemnification to repay amounts advanced if it shall ultimately be
determined that he is not entitled to be indemnified by the Corporation
as authorized herein.
10.2 Non-Exclusive Right. The indemnification provided for by
Section 10.1 shall not be deemed exclusive of any other rights to which
directors or officers of the Corporation may be entitled under any
statute, provision in the Corporation's Articles of Incorporation,
agreement or action of the Board of Directors or shareholders of the
Corporation, or otherwise, and shall continue as to a person who has
ceased to be a director or officer of the Corporation, and shall inure
to the benefit of the heirs, executors, and administrators of such a
person.
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10.3 Insurance. Without in any way limiting the Corporation's
power to purchase and maintain insurance for any other purpose or on
behalf of any other person, the Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, partner, employee, or
agent of another domestic or foreign corporation, partnership, joint
venture, trust or other enterprise, against any liability asserted
against him and incurred by him in such capacity or arising out of his
status as such, whether or not the Corporation would have the power or
be obligated to indemnify him against such liability under the
provisions of Section 10.1 of these Bylaws or the Kentucky Business
Corporation Act.
ARTICLE XI
Miscellaneous
11.1 Amendments. The Board of Directors shall have the power and
authority to alter, amend or repeal these Bylaws, and to make new
Bylaws, by the vote of a majority of the entire Board of Directors,
subject always to the power of the shareholders to change or repeal such
Bylaws. Sections 2.5, 3.14 and this 11.1 of these Bylaws shall not be
altered, amended or repealed by the shareholders of the Corporation
unless the holders of at least 80% of the outstanding voting shares of
the Corporation shall have approved such alteration, amendment or
repeal.
11.2 Fiscal Year. The Board of Directors shall have the power to
fix, and from time to time change, the fiscal year of the Corporation.
11.3 Seal. The Board of Directors may adopt a corporate seal
which shall be circular in form and shall have inscribed thereon the
name of the Corporation, the state of incorporation, and the word
"SEAL".
11.4 Waiver of Notice. Whenever any notice is required to be
given under the provisions of these Bylaws, the Articles of
Incorporation, or the Kentucky Business Corporation Act, a waiver
thereof in writing, signed by the person or persons entitled to such
notice, whether before or after the time stated therein, shall be
equivalent to the giving of such notice.
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11.5 Voting of Shares Held by Corporation. Unless otherwise
ordered by the Board of Directors, the Chief Executive Officer of the
Corporation may from time to time appoint an attorney or attorneys, or
any agent or agents, to exercise in the name and on behalf of the
Corporation the powers and rights that the Corporation may have, as the
holder of shares or other securities in any other corporation, to vote
or to consent in respect of such shares or other securities; and the
Chief Executive Officer may instruct the person or persons so appointed
as to the manner of exercising such powers and rights; and the Chief
Executive Officer may execute or cause to be executed in the name and on
behalf of the Corporation and under its Corporate seal or otherwise, all
such written proxies, powers of attorney or other written instruments as
he may deem necessary in order that the Corporation may exercise such
powers and rights.
11.6 Form of Records. Any records maintained by the Corporation
in the regular course of its business, including its stock ledger,
books of account and minute books, may be kept on, or be in the form
of, punch cards, magnetic tape, photographs, microphotographs, or any
other information storage device, provided that the records so kept
can be converted into clearly legible form within a reasonable time.
The Corporation shall so convert any records so kept upon the request
of any person entitled to inspect the same.
11.7 Stock Ledger. The stock ledger of the Corporation shall be
the only evidence as to who are the shareholders entitled to examine
the stock ledger and the list of the shareholders entitled to vote at
every meeting of shareholders or the books of the Corporation, to vote
in person or by proxy at any meeting of shareholders, to receive
notice of any meeting of shareholders and to receive distributions on
shares of the Corporation. The Corporation shall not be bound to
recognize any equitable or other claim to or interest in such shares
on the part of any other person, whether or not it shall have express
or other notice thereof, except as otherwise provided by the laws of
the Commonwealth of Kentucky.
11.8 Construction. Unless the context specifically requires
otherwise, any reference in these Bylaws to any gender shall include
all other genders; any reference to the
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singular shall include the plural; and any reference to the plural shall
include the singular.
The above By-Laws of the Corporation
were adopted by the Corporation's
Board of Directors at a meeting held
on March 9, 1993, as amended by the
Corporations's Board of Directors at
a meeting held March 13, 2001.
___/s/William C. Reynolds, Jr.______
William C. Reynolds, Jr., Secretary
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Exhibit 11
Earnings Per Share
See Note 4 in Notes to Consolidated Financial Statements for computation
of per share earnings.
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