U.S. SECURITIES AND EXCHANGE COMMISSSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): January 2,2003
CITIZENS FIRST CORPORATION
(Exact Name of Registrant as Specified in Charter)
Kentucky 333-67435 61-0912615
(State or Other Jurisdiction of (Commission File Number) (IRS Employer Identification No.)
Incorporation)
1805 Campbell Lane, Bowling Green, Kentucky 42104
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (270) 393-0700
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
ITEM 2. Acquisition or Disposition of Assets.
On January 2, 2003, Citizens First Bank, Inc., a wholly owned subsidiary of Citizens First Corporation (the "Company"),
acquired 100% of the capital stock of Commonwealth Mortgage of Bowling Green, Inc., a Kentucky corporation ("Commonwealth") and
Southern Kentucky Land Title, Inc., a Kentucky corporation ("Southern"), pursuant to a Stock Purchase Agreement dated December 2,
2002 (the "Purchase Agreement":) among the Bank, Commonwealth, Southern, and the shareholders of each of Commonwealth and Southern.
As a result of the acquisition, Commonwealth and Southern became wholly-owned subsidiaries of the Bank and indirect wholly-owned
subsidiaries of the Company. Commonwealth originates 1-4 family residential mortgages for sale to the secondary mortgage market.
Southern provides title insurance agency services for real estate purchase contracts.
The assets of these entities consist of leased real estate and improvements, fixtures, furniture, equipment and other
personal property. The Bank currently intends to continue to operate the assets of Commonwealth and Southern at the same locations
and under the same names.
The aggregate purchase price for the stock of Commonwealth and Southern consisted of $400,000. The shareholders have the
right to receive a deferred purchase price, calculated as a percentage of future earnings through December 31, 2007, payable in cash
and common stock of the Company as provided in the Purchase Agreement. The purchase price was determined by the Company based upon
its analysis of the financial performance and assets of Commonwealth and Southern.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
A. Financial Statements of Businesses Acquired.
If required, to be filed by amendment on or before March 17, 2003.
B. Pro Forma Financial Information.
If required, to be filed by amendment on or before March 17, 2003.
C. Exhibits
2.1 Stock Purchase Agreement by and among Citizens First Corporation, Citizens First Bank, Inc., Scott T. Higdon, Mark A.
Vaughn, Commonwealth Mortgage of Bowling Green, Inc. and Southern Kentucky Land Title, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
CITIZENS FIRST CORPORATION
Date: January 17, 2003 /s/ Mary D. Cohron
Mary D.Cohron
President and
Chief Executive Officer
(Principal Executive Officer)
Date: January 17, 2003 /s/ Bill D. Wright
Bill D. Wright
Vice-President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
Exhibit Index
2.1 Stock Purchase Agreement by and among Citizens First Corporation, Citizens First Bank, Inc., Scott T. Higdon, Mark A.
Vaughn, Commonwealth Mortgage of Bowling Green, Inc. and Southern Kentucky Land Title, Inc.
EXHIBIT 2.1
Stock Purchase Agreement by and among Citizens First Corporation, Citizens First Bank, Inc., Scott T. Higdon, Mark A. Vaughn,
Commonwealth Mortgage of Bowling Green, Inc. and Southern Kentucky Land Title, Inc.
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (the "Agreement") is made and entered into as of this second day of December 2, 2002, by
and among CITIZENS FIRST BANK, a Kentucky corporation, 1805 Campbell Lane, Bowling Green, Kentucky (hereinafter "Citizens"), CITIZENS
FIRST CORPORATION (hereinafter "CFC") and SCOTT T. HIGDON and MARK A. VAUGHN (hereinafter sometimes jointly referred to as
"Sellers"). This Agreement is joined in by COMMONWEALTH MORTGAGE OF BOWLING GREEN, INC. (hereinafter "Commonwealth") and SOUTHERN
KENTUCKY LAND TITLE, INC. (hereinafter "Southern"), both Kentucky corporations, for the purposes set forth herein and, generally,
where the context requires.
RECITALS:
1.1 Sellers own all of the outstanding capital stock of Commonwealth and Southern with Scott T. Higdon owning fifty (50)
shares of Commonwealth and five hundred (500) shares of Southern and Mark A. Vaughn owning fifty (50) shares of
Commonwealth and five hundred (500) shares of Southern;
1.2 Sellers wish to sell to Citizens one hundred (100) shares of Commonwealth and one thousand (1,000) shares of
Southern constituting all authorized, issued and outstanding capital stock of Southern and Commonwealth (the
"Stock");
1.3 Citizens wishes to buy the Stock from the Sellers subject to and upon the terms and conditions set forth in this
Agreement; and
1.4 Following the acquisition of the Stock from Sellers pursuant to the terms of this Agreement, it is Citizens' present
intent to maintain Commonwealth and Southern as wholly owned subsidiaries of Citizens.
In consideration of the premises and the mutual covenants herein contained, and other good and valuable
consideration, the receipt, adequacy, and sufficiency of which are hereby acknowledged, the Sellers, Citizens, CFC, Commonwealth and
Southern hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE
Section 1.1 Purchase and Sale. Upon the terms and conditions set forth herein, at
the Closing contemplated by Article 8, which shall occur on the Closing Date (as defined in Section 8.1), the Sellers shall sell and
deliver the Stock to Citizens and Citizens shall purchase, and take title to, the Stock from the Sellers.
ARTICLE 2
PURCHASE PRICE
Section 2.1 Purchase Price. The purchase price payable by Citizens to the Sellers
jointly (hereinafter referred to as the "Purchase Price") for the Stock is comprised of two components. The first component is FOUR
HUNDRED THOUSAND DOLLARS ($400,000.00) which shall be paid to Sellers at closing in immediately available funds--TWO HUNDRED THOUSAND
DOLLARS ($200,000.00) being payable to Scott T. Higdon and TWO HUNDRED THOUSAND DOLLARS ($200,000.00) being payable to Mark A.
Vaughn. The second component is a deferred purchase price based upon the continued performance of Commonwealth and Southern as an
operating division (the Operating Division) of Citizens and is calculated as hereinafter in this section set forth.
Section 2.2 Calculation of Deferred Purchase Price. Citizens
and Sellers have agreed that the reasonable expectation of Citizens is that the Operating Division shall generate net income, as
hereinafter defined, for Citizens during the next five (5) calendar years as hereinafter set forth (the "Baseline"). "Net Income"
for determining the Baseline shall be determined by Citizens' Certified Public Accountants in accordance with GAAP consistently
applied and shall be composed of three distinct segments: (1) Net interest income after provision expense, plus (2) non-interest
income, less (3) non-interest expense. The determination of Net Income in this manner shall be conclusive on all parties to this
Agreement. Further definition of the three distinct segments of Net Income is as follows:
(1) Net interest income after provision expense - Gross interest income calculated from residential real estate
loans originated by the "Operating Division" and in the loan portfolio of Citizens, less provision expense
for potential loan losses [calculated annually as one percent (1%) of the positive difference from January
1st of each year to December 31st of the same year, in portfolio loans outstanding, originated by the
"Operating Division" and on the loan system of Citizens], less a charge for funds used (calculated as the
total average cost of funds of Citizens for the year).
(2) Non-interest income - income generated by the Operating Division, other than interest income.
(3) Non-interest expense - all direct expense of the Operating Division, including, but not limited to:
salaries expense, employee benefit expense, building and equipment expense, telephone expense, and
advertising and professional fee expense.
BASELINE
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year net income
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(a) 2003 (includes period from 15 November 2002 $200,000.00
through 31 December 2003)
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(b) 2004 $250,000.00
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(c) 2005 $275,000.00
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(d) 2006 $300,000.00
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(e) 2007 $325,000.00
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Sellers, who shall become employees of Citizens in accordance with Article 6 of this Agreement, shall be entitled to receive as
additional compensation for the stock purchased pursuant to the terms of this Agreement an amount equal to one hundred percent (100%)
of the Net Income generated by the Operating Division up to the Baseline, plus twenty-five percent (25%) of the amount, if any, by
which the net earnings of the Operating Division for such annual period exceeds the Baseline. This deferred purchase price shall be
divided equally between Sellers unless Sellers notify Citizens in writing of a different allocation. Sellers shall be entitled to
receive this deferred purchase price whether or not either or both of them remain employed by Citizens through 31 December 2007. In
the event of the death of either or both of Sellers during such period, Citizens shall pay to such Seller's estate the deferred
purchase price. It is the express intent of the parties that the deferred purchase price is not contingent upon Sellers' continued
employment by Citizens.
Section 2.3 Payment of Deferred Purchase Price. The deferred purchase price earned during each of the five (5)
years as set forth above (including that period of time from 15 November 2002 through 31 December 2002 being included with calendar
year 2003) shall be payable jointly to the Sellers between 1 January and 30 January each year based upon the Net Income generated
during the previous calendar year as compared to the Baseline. The deferred purchase price shall be paid by issuance to the Sellers
of common stock of CFC in an amount equal to no less than twenty-five percent (25%) of such deferred payment. The balance of the
deferred payment, at Sellers' option, may be paid either in common stock of CFC or cash, but such payment in common stock shall not
exceed in total during each year fifty percent (50%) of the deferred payment. The valuation for the common stock to be issued shall
be the average of the value of the stock on the ten (10) closing days immediately preceding 31 December during each calendar year.
CFC, by entering into this Agreement, acknowledges its obligation to issue its common stock in accordance with the provisions of this
Agreement. An example of calculation of the deferred purchase price for year one is set forth on Exhibit A, attached hereto and
incorporated herein by reference.
Section 2.4 Investment Intent. Sellers are acquiring the common stock of CFC for their own account and not with a
view to the distribution thereof within the meaning of Section 2(11) of the Securities Act of 1933, as amended (the "Securities
Act"). Each Seller is an accredited investor, as such term is defined in Rule 501(a) of the Securities Act. Each Seller
understands that the shares of Stock of CFC will be restricted securities under the federal securities laws inasmuch as they are
being acquired in a transaction not involving a public offering and that under such laws and applicable regulations such securities
may be resold without registration under the Securities Act only in certain limited circumstances. In this connection, each Seller
represents that he is familiar with SEC Rule 144 as presently in effect and understands the resale limitations imposed thereby and by
the Securities Act, a copy of which is annexed hereto marked Exhibit B and incorporated herein by reference. It is understood that
the certificates evidencing the shares of common stock of CFC may bear a legend to such effect.
ARTICLE 3
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF SELLERS AND COMMONWEALTH
The Sellers and Commonwealth make the following representations, warranties and covenants to Citizens:
Section 3.1 Organization, Due Authorization and Corporate Authority of CommonwealthSection 3.1 Organization, Due
Authorization and Corporate Authority of Commonwealth. Commonwealth is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Kentucky. Commonwealth has no subsidiaries and has had none since its inception.
Commonwealth is duly qualified, licensed and in good standing to transact business in all jurisdictions, if any, in which such
qualification, licensing or good standing is required. Commonwealth has the corporate power and authority to own or lease its
properties and to carry on its businesses in the places where such properties are now owned, leased or operated and such businesses
are now conducted.
A copy of Commonwealth's Articles of Incorporation and all amendments thereto, and its Bylaws as amended and
currently in force, have been delivered to Citizens; such copies are true, complete and correct as of the Closing Date. Copies of
the stock records and corporate minutes of Commonwealth have been delivered to Citizens for its review and are true, correct and
complete. These stock records reflect accurately all transactions in the capital stock of Commonwealth. Since the time that Sellers
have owned the outstanding stock of Commonwealth, all actions reflected in the stock records and in the minute books were duly and
validly taken in compliance with the laws of the applicable jurisdiction relating to corporate governance and authority.
Commonwealth has full corporate power and authority to make, execute and perform this Agreement and the transactions
contemplated herein, and the execution, delivery and performance of this Agreement and the transactions contemplated herein by
Commonwealth have been duly authorized by all necessary corporate action of Commonwealth. This Agreement constitutes the valid and
binding obligation of Commonwealth and the Sellers enforceable against each of them in accordance with its terms. Sellers have the
absolute and unrestricted right, power, authority and capacity to execute and deliver this Agreement and the documents contemplated
hereby and to perform their obligations herein and therein.
Section 3.2 Capitalization. Commonwealth has authorized capital stock consisting of one
hundred (100) shares of no par value common stock, of which one hundred (100) shares are currently issued and outstanding and held by
Sellers. All of the issued and outstanding stock of Commonwealth is duly authorized and validly issued, fully-paid and
nonassessable, and there are no preemptive rights in respect thereof. There are no outstanding options, warrants or other rights to
subscribe for or purchase, or any contracts or commitments providing for the issuance of, or the granting of rights to acquire, and
no securities have been issued which are convertible into or exchangeable for, any shares of capital stock or any other equity
ownership interest of Commonwealth.
Section 3.3 Title to Stock. The Sellers own one hundred (100) shares of common stock of
Commonwealth, constituting one hundred percent (100%) of the outstanding stock of Commonwealth and the sole equity interest in
Commonwealth. The Sellers shall have on the Closing Date and shall transfer to Citizens good title to all shares of the Stock, free
and clear of any liens, encumbrances, restrictions, options, hypothecations, pledges, adverse claims and other defects in title.
There are no outstanding agreements, arrangements or understandings restricting the right of the Sellers to vote, pledge, sell or
otherwise dispose of the Stock.
Section 3.4 No Default. Neither Sellers nor Commonwealth is or will be required to give any
notice to or obtain any consent from any person in connection with the execution and delivery of this Agreement or the consummation
or performance of any of the transactions contemplated hereby. Neither the execution and delivery of this Agreement or any agreement
required hereby to be executed by the Sellers or Commonwealth nor the performance by the Sellers or Commonwealth in compliance with
their terms shall:
(a) conflict with or result in a breach of or constitute or result in a default under:
(i) any of the terms, conditions or provisions of the charter or bylaws of Commonwealth;
(ii) any judgment, order, injunction, statute, decree, regulation or ruling of any court or
governmental authority, domestic or foreign, applicable to the Sellers or Commonwealth; and
(iii) any material agreement or contract or legally binding commitment to which the Sellers or
Commonwealth is a party; or
(b) result in the creation or imposition of (or the obligation to create or impose) any lien,
charge or encumbrance upon any of the property or assets of Commonwealth pursuant to the terms of any
indenture, mortgage, deed of trust, lease, agreement or other instrument to which Commonwealth is a party
or by which it may be bound.
Section 3.5 Financial Statements. The Sellers have delivered to Citizens a true,
correct and complete copy of the balance sheets of Commonwealth as of the end of each fiscal year since its inception, and any
interim period balance sheets prepared since the 31st day of October, 2002, and the statements of income and stockholder's equity
for each fiscal year since its inception, and any interim period statements of income and stockholder's equity prepared since the 31st
day of October, 2002, (all of such financial statements are sometimes referred to herein as "Commonwealth Financial
Statements").
The Commonwealth Financial Statements have been prepared substantially in accordance with generally accepted
accounting principles, subject to year-end adjustments in the case of non-fiscal year-end dates and periods of less than a full
fiscal year, and present fairly the financial results and financial condition of Commonwealth for the periods and at the dates
indicated. Commonwealth has no liabilities or obligations of any nature (whether known or unknown and whether absolute, accrued,
contingent or otherwise) except for liabilities or obligations reflected or reserved against in the Commonwealth Financial Statements
and current liabilities incurred in the ordinary course of business since the date thereof.
Since the date of the Commonwealth Financial Statements, there has not been any material adverse change in the
business, operations, properties, prospects, assets or condition of Commonwealth, and no event has occurred or circumstance exists
that may result in such a material adverse change.
Section 3.6 Tax Returns
(a) All federal, state and, if any, local tax returns and tax or information reports required
to be filed by the Sellers with respect to Commonwealth and all federal, state and, if any, local tax
returns and tax reports required to be filed by Commonwealth, prior to Closing will be or have been filed
with the appropriate governmental agencies in all jurisdictions in which such returns and reports are
required to be filed; neither the Sellers nor Commonwealth have requested any extension of time within
which to file any such returns or reports which have not been filed.
(b) All federal, state and, if any, local income, profits, franchise, withholding and sales,
use, occupation, property, payroll, excise and other taxes (including interest and penalties) due from
Commonwealth have been fully paid or adequately provided for in the Commonwealth Financial Statements.
Section 3.7 Property.
(a) Commonwealth owns no interest in real property other than a leasehold interest in the
building addressed at 1301 U.S. 31W Bypass, Bowling Green, Kentucky, in which it currently conducts its
business. Commonwealth has good title to all personal property (including fixtures, but excluding assets
held under capitalized leases), tangible and intangible, whether or not reflected in its books and records
and whether or not reflected in its most current balance sheet included in the Commonwealth Financial
Statements as being owned by it, free and clear of any mortgage or pledge, and free and clear of any other
liens, claims or encumbrances (other than liens disclosed in the Commonwealth financial statements or
otherwise in writing), if any.
Section 3.8 Leased Property. The Sellers have previously provided to Citizens copies
of all licenses, leases, or agreements for any space in, or for the use of, any real or personal property owned by another Person,
and currently in effect or for which Commonwealth has any obligation or liability as lessee or guarantor. Commonwealth is and has
been in full compliance with all applicable terms and requirements of each such license, lease or agreement, and no event has
occurred or circumstance exists that (with or without notice or lapse of time) may contravene, conflict with or result in a violation
or breach of or give Commonwealth or any other person the right to declare a default or exercise any remedy under or to cancel,
terminate or modify any such license, lease or other agreement.
Section 3.9 Employee Benefit Plans. Commonwealth has disclosed to Citizens in writing and provided to Citizens
copies of any and all employment agreements between Commonwealth and its employees as well as lists of all written or oral employee
benefit plans including, without limitation, any profit sharing, deferred compensation, incentive compensation, bonus, stock
ownership, stock purchase, phantom stock, retirement, vacation, severance, disability, death benefit, hospitalization, medical or
other plan, arrangement or understanding (whether or not legally binding) providing benefits to any current or former employee,
officer or director of Commonwealth and any employment, consulting, bonus, severance, termination or indemnification agreement,
arrangement or understanding between Commonwealth and any officer, director or employee of Commonwealth (collectively "Benefit
Plans"). Commonwealth has delivered to Citizens true, complete and correct copies of each Benefit Plan or, in the case of any such
Benefit Plans which are unwritten, descriptions thereof. Each Benefit Plan has been administered, and complies in form and operation
with, in all material respects in accordance with its terms and all applicable laws.
Section 3.10 Compliance with Laws. Commonwealth has complied with and is not in any default under (and has not
been charged with or received notice with respect to, nor is threatened with or under investigation with respect to, any charge
concerning any violation of any provision of) any federal, state or local law, regulation, ordinance, rule or order (whether
executive, judicial, legislative or administrative) or any order, writ, injunction or decree of any court, agency or instrumentality
and no action, suit, proceeding, hearing, investigation, charge, complaint, claim, demand or notice has been filed or commenced
against Commonwealth alleging any failures to comply.
Section 3.11 Related Party Transactions. No employee, officer or director of Commonwealth or any member of his
immediate family is indebted to Commonwealth, nor is Commonwealth indebted (or committed to make loans or extend or guarantee credit)
to any of them. None of such persons has any direct or indirect ownership interest in any firm or corporation with which
Commonwealth is affiliated or with which Commonwealth has a business relationship, or any firm or corporation that competes with
Commonwealth, except that employees, officers or directors of Commonwealth and members of their immediate families may own stock in
publicly traded companies that may compete with Commonwealth. No member of the immediate family of any officer or director of
Commonwealth is directly or indirectly interested in any material contract with Commonwealth.
Section 3.12 Agreements, Contracts and CommitmentsSection 3.9 Employee Benefit Plans. Commonwealth has disclosed
to Citizens in writing and provided to Citizens copies of any and all employment agreements between Commonwealth and its employees as
well as lists of all written or oral employee benefit plans including, without limitation, any profit sharing, deferred compensation,
incentive compensation, bonus, stock ownership, stock purchase, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, medical or other plan, arrangement or understanding (whether or not legally binding) providing benefits to
any current or former employee, officer or director of Commonwealth and any employment, consulting, bonus, severance, termination or
indemnification agreement, arrangement or understanding between Commonwealth and any officer, director or employee of Commonwealth
(collectively BenefitPlans). Commonwealth has delivered to Citizens true, complete and correct copies of each Benefit Plan or, in
the case of any such Benefit Plans which are unwritten, descriptions thereof. Each Benefit Plan has been administered, and complies
in form and operation with, in all material respects in accordance with its terms and all applicable laws. Section 3.10 Compliance
with Laws. Commonwealth has complied with and is not in any default under (and has not been charged with or received notice with
respect to, nor is threatened with or under investigation with respect to, any charge concerning any violation of any provision of)
any federal, state or local law, regulation, ordinance, rule or order (whether executive, judicial, legislative or administrative) or
any order, writ, injunction or decree of any court, agency or instrumentality and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand or notice has been filed or commenced against Commonwealth alleging any failures to
comply. Section 3.11 Related Party Transactions. No employee, officer or director of Commonwealth or any member of his immediate
family is indebted to Commonwealth, nor is Commonwealth indebted (or committed to make loans or extend or guarantee credit) to any of
them. None of such persons has any direct or indirect ownership interest in any firm or corporation with which Commonwealth is
affiliated or with which Commonwealth has a business relationship, or any firm or corporation that competes with Commonwealth, except
that employees, officers or directors of Commonwealth and members of their immediate families may own stock in publicly traded
companies that may compete with Commonwealth. No member of the immediate family of any officer or director of Commonwealth is
directly or indirectly interested in any material contract with Commonwealth. Section 3.12 Agreements, Contracts and Commitments.
(a) Commonwealth is and has been in full compliance with all applicable terms and
requirements of each contract or agreement disclosed pursuant to this Section 3.12, and no event has
occurred or circumstance exists that (with or without notice or lapse of time) may contravene, conflict
with or result in the violation or breach of or give Commonwealth or any other person the right to declare
a default or exercise any remedy under or to cancel, terminate or modify any such contract or agreement.
Except as previously disclosed in writing by the Sellers to Citizens, Commonwealth does not have in effect:
(i) any executive compensation, profit-sharing or bonus plan, incentive or deferred
compensation agreement, agreement or arrangement entitling any employee to any fringe benefits or vacation pay,
employee pension, health or retirement plan, employee stock option or stock purchase plan or group life, health or
accident insurance or other employee benefit plan, agreement, or any arrangement or commitment, whether or not
legally binding;
(ii) any employment, consulting or exclusive sales agency agreement, contract or legally
binding employment commitment on the part of Commonwealth with any natural person which requires more than
thirty-one (31) days' notice for cancellation without penalty; or
(iii) any agreement, contract or legally binding commitment relating to the disposition or
acquisition of any equity ownership interest in any business enterprise.
(b) The Sellers and Commonwealth have delivered to Citizens:
(i) all agreements, contracts or legally binding commitments relating to present or future
capital expenditures by Commonwealth which in the aggregate exceed $5,000.
(ii) all agreements, contracts, indentures, or other instruments relating to the borrowing of
money by Commonwealth or the guaranty by Commonwealth of any obligation for the repayment of borrowed money or the
performance of any other obligation; and
(iii) any other agreements, contracts or commitments or performance or surety bonds of
Commonwealth which, when aggregated with all other such agreements, contracts, commitments or performance or surety
bonds, involve the payment or potential payment by Commonwealth of $5,000 or more.
(c) The Sellers have previously disclosed in writing to Citizens all binding oral and written
contracts and agreements with respect to furniture, equipment, management, and other services in or for
Commonwealth, which require more than thirty-one (31) days' notice for cancellation without penalty.
Neither Commonwealth nor the Sellers shall renew or extend said contracts without Citizens' consent, which
shall not be unreasonably withheld; provided, however, that Sellers or Commonwealth may in the ordinary
course of business renew, without Citizens' consent, any contract involving an amount which, when combined
with amounts payable under all other contracts which are renewed without Citizens' consent, is not in
excess of $5,000.
Section 3.13 Actions, Suits, Etc.
(a) There is no action, suit, claim or proceeding pending or threatened in writing within the
last six (6) months against Commonwealth in any court or before any arbitrator or governmental agency,
domestic or foreign.
(b) There are no judgments unsatisfied against Commonwealth and no consent decrees to which
Commonwealth is subject.
(c) There is no litigation or proceeding pending or threatened against the Sellers which
would adversely affect the Sellers' ability to perform their obligations under this Agreement.
3.14 Licenses, Trademarks, Service Marks, Trade Names, Logotypes, Commercial Symbols and Copyrights. Commonwealth holds all
necessary federal and state licenses required for Commonwealth where the failure to hold such licenses would materially affect
Commonwealth's ability to engage in the business presently conducted by it. Neither the Sellers nor Commonwealth has any trademarks,
service marks, trade names, logotypes, commercial symbols, copyrights and licenses now used by Commonwealth to conduct its business.
Section 3.15 Bank Accounts and Powers of Attorney. The Sellers
have previously disclosed in writing to Citizens the name and address of each bank in which Commonwealth has accounts or safe deposit
boxes, the account number, account name and type of account, and the names of all persons authorized to draw thereon and to have
access thereto as of the date hereof, the names of all persons holding powers of attorney from Commonwealth as of the date hereof and
each bank account's respective cash balance on the date hereof.
Section 3.16 Insurance. Commonwealth and the Sellers shall keep all insurance policies or
renewals thereof affecting or covering Commonwealth and its operations in force and in effect up to and including the date of the
Closing.
Section 3.17 Union Agreements, Employee
Relations and Immigration Laws. Commonwealth is not a party to any union or collective bargaining agreements, nor is there any
current attempt to unionize any of the employees of Commonwealth.
During the periods of the ownership of Commonwealth by the Sellers, Commonwealth has not been the subject of a union
election. The Sellers have provided Citizens copies of (i) any written grievances filed by employees of Commonwealth during the
twelve-month period immediately preceding the date hereof and (ii) any material correspondence, regardless of date, filed with
respect to the employment or termination of employment of any of the key employees of Commonwealth.
Commonwealth's payroll for the operation of Commonwealth for the two-week period ending the 31st day of December,
2002 has been provided by the Sellers to Citizens and is representative of and does not differ in amount materially from
Commonwealth's normal payroll obligations. During the period of the Sellers ownership of Commonwealth, there have been no strikes,
lockouts, or other work stoppages, picketing or labor disputes in which Commonwealth is or was involved. The Sellers have previously
provided to Citizens in writing the name and current annual salary and other compensation or the rate of compensation payable by
Commonwealth to each of its employees and the profit-sharing, bonus or other form of extra compensation paid or payable by
Commonwealth to or for the benefit of each such person for its current fiscal year. Except for accrued and unused vacation, sick or
personal leave (all accrued in the ordinary course of business and on usual and customary terms), there are no binding oral or
written contracts, agreements or arrangements obligating Commonwealth to increase the compensation or benefits paid or payable to any
of Commonwealth's employees now or at any future time.
Commonwealth has never, to the Sellers and Commonwealth's knowledge, employed a natural Person in violation of the
Immigration Reform and Control Act of 1986, as amended.
Section 3.18 Disclosure. Neither this Agreement, nor any of the agreements contemplated hereby or delivered in
connection herewith or therewith contains any untrue statement of a material fact or omits to state a material fact necessary to make
the statements herein or therein not misleading in light of the circumstances in which they were made.
ARTICLE 4
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF SELLERS AND SOUTHERN
The Sellers and Southern make the following representations, warranties and covenants to Citizens:
Section 4.1 Organization, Due Authorization and Corporate Authority of SouthernSection 4.1 Organization, Due
Authorization and Corporate Authority of Southern. Southern is a corporation duly organized, validly existing and in good standing
under the laws of the Commonwealth of Kentucky. Southern has no subsidiaries and has had none since its inception. Southern is duly
qualified, licensed and in good standing to transact business in all jurisdictions, if any, in which such qualification, licensing or
good standing is required. Southern has the corporate power and authority to own or lease its properties and to carry on its
businesses in the places where such properties are now owned, leased or operated and such businesses are now conducted.
A copy of Southern's Articles of Incorporation and all amendments thereto, and its Bylaws as amended and currently
in force, have been delivered to Citizens; such copies are true, complete and correct as of the Closing Date. Copies of the stock
records and corporate minutes of Southern have been delivered to Citizens for its review and are true, correct and complete. These
stock records reflect accurately all transactions in the capital stock of Southern. Since the time that Sellers have owned the
outstanding stock of Southern, all actions reflected in the stock records and in the minute books were duly and validly taken in
compliance with the laws of the applicable jurisdiction relating to corporate governance and authority.
Southern has full corporate power and authority to make, execute and perform this Agreement and the transactions
contemplated herein, and the execution, delivery and performance of this Agreement and the transactions contemplated herein by
Southern have been duly authorized by all necessary corporate action of Southern. This Agreement constitutes the valid and binding
obligation of Southern and the Sellers enforceable against each of them in accordance with its terms. Sellers have the absolute and
unrestricted right, power, authority and capacity to execute and deliver this Agreement and the documents contemplated hereby and to
perform their obligations herein and therein.
Section 4.2 Capitalization. Southern has authorized capital stock consisting of one
thousand (1,000) shares of no par value common stock, of which one thousand (1,000) shares are currently issued and outstanding and
held by Sellers. All of the issued and outstanding stock of Southern is duly authorized and validly issued, fully-paid and
nonassessable, and there are no preemptive rights in respect thereof. There are no outstanding options, warrants or other rights to
subscribe for or purchase, or any contracts or commitments providing for the issuance of, or the granting of rights to acquire, and
no securities have been issued which are convertible into or exchangeable for, any shares of capital stock or any other equity
ownership interest of Southern.
Section 4.3 Title to Stock. The Sellers own one thousand (1,000) shares of common stock
of Southern, constituting one hundred percent (100%) of the outstanding stock of Southern and the sole equity interest in Southern.
The Sellers shall have on the Closing Date and shall transfer to Citizens good title to all shares of the Stock, free and clear of
any liens, encumbrances, restrictions, options, hypothecations, pledges, adverse claims and other defects in title. There are no
outstanding agreements, arrangements or understandings restricting the right of the Sellers to vote, pledge, sell or otherwise
dispose of the Stock.
Section 4.4 No Default. Neither Sellers nor Southern is or will be required to give any
notice to or obtain any consent from any person in connection with the execution and delivery of this Agreement or the consummation
or performance of any of the transactions contemplated hereby. Neither the execution and delivery of this Agreement or any agreement
required hereby to be executed by the Sellers or Southern nor the performance by the Sellers or Southern in compliance with their
terms shall:
(a) conflict with or result in a breach of or constitute or result in a default under:
(i) any of the terms, conditions or provisions of the charter or bylaws of Southern;
(ii) any judgment, order, injunction, statute, decree, regulation or ruling of any court or
governmental authority, domestic or foreign, applicable to the Sellers or Southern; and
(iii) any material agreement or contract or legally binding commitment to which the Sellers or
Southern is a party; or
(b) result in the creation or imposition of (or the obligation to create or impose) any lien,
charge or encumbrance upon any of the property or assets of Southern pursuant to the terms of any
indenture, mortgage, deed of trust, lease, agreement or other instrument to which Southern is a party or by
which it may be bound.
Section 4.5 Financial Statements. The Sellers have delivered to Citizens a true,
correct and complete copy of the balance sheets of Southern as of the end of each fiscal year since its inception, and any interim
period balance sheets prepared since the 31st day of October, 2002, and the statements of income and stockholder's equity for each
fiscal year since its inception, and any interim period statements of income and stockholder's equity prepared since the 31st day of
October, 2002, (all of such financial statements are sometimes referred to herein as "Southern Financial Statements").
The Southern Financial Statements have been prepared substantially in accordance with generally accepted accounting
principles, subject to year-end adjustments in the case of non-fiscal year-end dates and periods of less than a full fiscal year, and
present fairly the financial results and financial condition of Southern for the periods and at the dates indicated. Southern has no
liabilities or obligations of any nature (whether known or unknown and whether absolute, accrued, contingent or otherwise) except for
liabilities or obligations reflected or reserved against in the Southern Financial Statements and current liabilities incurred in the
ordinary course of business since the date thereof.
Since the date of the Southern Financial Statements, there has not been any material adverse change in the business,
operations, properties, prospects, assets or condition of Southern, and no event has occurred or circumstance exists that may result
in such a material adverse change.
Section 4.6 Tax Returns.
(a) All federal, state and, if any, local tax returns and tax or information reports required
to be filed by the Sellers with respect to Southern and all federal, state and, if any, local tax returns
and tax reports required to be filed by Southern, prior to Closing will be or have been filed with the
appropriate governmental agencies in all jurisdictions in which such returns and reports are required to be
filed; neither the Sellers nor Southern have requested any extension of time within which to file any such
returns or reports which have not been filed.
(b) All federal, state and, if any, local income, profits, franchise, withholding and sales,
use, occupation, property, payroll, excise and other taxes (including interest and penalties) due from
Southern have been fully paid or adequately provided for in the Southern Financial Statements.
Section 4.7 Property.
(a) Southern owns no interest in real property other than a leasehold interest in the
building addressed at 1301 U.S. 31-W Bypass, Bowling Green, Kentucky, in which it currently conducts its
business. Southern has good title to all personal property (including fixtures, but excluding assets held
under capitalized leases), tangible and intangible, whether or not reflected in its books and records and
whether or not reflected in its most current balance sheet included in the Southern Financial Statements as
being owned by it, free and clear of any mortgage or pledge, and free and clear of any other liens, claims
or encumbrances (other than liens disclosed in the Southern financial statements or otherwise in writing),
if any.
Section 4.8 Leased Property. The Sellers have previously provided to Citizens copies
of all licenses, leases, or agreements for any space in, or for the use of, any real or personal property owned by another Person,
and currently in effect or for which Southern has any obligation or liability as lessee or guarantor. Southern is and has been in
full compliance with all applicable terms and requirements of each such license, lease or agreement, and no event has occurred or
circumstance exists that (with or without notice or lapse of time) may contravene, conflict with or result in a violation or breach
of or give Southern or any other person the right to declare a default or exercise any remedy under or to cancel, terminate or modify
any such license, lease or other agreement.
Section 4.9 Employee Benefit Plans. Southern has disclosed to Citizens in writing and provided to Citizens copies
of any and all employment agreements between Southern and its employees as well as lists of all written or oral employee benefit
plans including, without limitation, any profit sharing, deferred compensation, incentive compensation, bonus, stock ownership, stock
purchase, phantom stock, retirement, vacation, severance, disability, death benefit, hospitalization, medical or other plan,
arrangement or understanding (whether or not legally binding) providing benefits to any current or former employee, officer or
director of Southern and any employment, consulting, bonus, severance, termination or indemnification agreement, arrangement or
understanding between Southern and any officer, director or employee of Southern (collectively "Benefit Plans"). Southern has
delivered to Citizens true, complete and correct copies of each Benefit Plan or, in the case of any such Benefit Plans which are
unwritten, descriptions thereof. Each Benefit Plan has been administered, and complies in form and operation with, in all material
respects in accordance with its terms and all applicable laws.
Section 4.10 Compliance with Laws. Southern has complied with and is not in any default under (and has not been
charged with or received notice with respect to, nor is threatened with or under investigation with respect to, any charge concerning
any violation of any provision of) any federal, state or local law, regulation, ordinance, rule or order (whether executive,
judicial, legislative or administrative) or any order, writ, injunction or decree of any court, agency or instrumentality and no
action, suit, proceeding, hearing, investigation, charge, complaint, claim, demand or notice has been filed or commenced against
Southern alleging any failures to comply.
Section 4.11 Related Party Transactions. No employee, officer or director of Southern or any member of his
immediate family is indebted to Southern, nor is Southern indebted (or committed to make loans or extend or guarantee credit) to any
of them. None of such persons has any direct or indirect ownership interest in any firm or corporation with which Southern is
affiliated or with which Southern has a business relationship, or any firm or corporation that competes with Southern, except that
employees, officers or directors of Southern and members of their immediate families may own stock in publicly traded companies that
may compete with Southern. No member of the immediate family of any officer or director of Southern is directly or indirectly
interested in any material contract with Southern. Section 4.9 Employee Benefit Plans. Southern has disclosed to Citizens in
writing and provided to Citizens copies of any and all employment agreements between Southern and its employees as well as lists of
all written or oral employee benefit plans including, without limitation, any profit sharing, deferred compensation, incentive
compensation, bonus, stock ownership, stock purchase, phantom stock, retirement, vacation, severance, disability, death benefit,
hospitalization, medical or other plan, arrangement or understanding (whether or not legally binding) providing benefits to any
current or former employee, officer or director of Southern and any employment, consulting, bonus, severance, termination or
indemnification agreement, arrangement or understanding between Southern and any officer, director or employee of Southern
(collectively BenefitPlans). Southern has delivered to Citizens true, complete and correct copies of each Benefit Plan or, in the
case of any such Benefit Plans which are unwritten, descriptions thereof. Each Benefit Plan has been administered, and complies in
form and operation with, in all material respects in accordance with its terms and all applicable laws. Section 4.10 Compliance
with Laws. Southern has complied with and is not in any default under (and has not been charged with or received notice with respect
to, nor is threatened with or under investigation with respect to, any charge concerning any violation of any provision of) any
federal, state or local law, regulation, ordinance, rule or order (whether executive, judicial, legislative or administrative) or any
order, writ, injunction or decree of any court, agency or instrumentality and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand or notice has been filed or commenced against Southern alleging any failures to comply. Section
4.11 Related Party Transactions. No employee, officer or director of Southern or any member of his immediate family is indebted to
Southern, nor is Southern indebted (or committed to make loans or extend or guarantee credit) to any of them. None of such persons
has any direct or indirect ownership interest in any firm or corporation with which Southern is affiliated or with which Southern has
a business relationship, or any firm or corporation that competes with Southern, except that employees, officers or directors of
Southern and members of their immediate families may own stock in publicly traded companies that may compete with Southern. No
member of the immediate family of any officer or director of Southern is directly or indirectly interested in any material contract
with Southern.
4.12 Agreements, Contracts and Commitments.
(a) Southern is and has been in full compliance with all applicable terms and requirements of
each contract or agreement disclosed pursuant to this Section 4.12, and no event has occurred or
circumstance exists that (with or without notice or lapse of time) may contravene, conflict with or result
in the violation or breach of or give Southern or any other person the right to declare a default or
exercise any remedy under or to cancel, terminate or modify any such contract or agreement. Except as
previously disclosed in writing by the Seller to Citizens, Southern does not have in effect:
(i) any executive compensation, profit-sharing or bonus plan, incentive or deferred
compensation agreement, agreement or arrangement entitling any employee to any fringe benefits or vacation pay,
employee pension, health or retirement plan, employee stock option or stock purchase plan or group life, health or
accident insurance or other employee benefit plan, agreement, or any arrangement or commitment, whether or not
legally binding;
(ii) any employment, consulting or exclusive sales agency agreement, contract or legally
binding employment commitment on the part of Southern with any natural person which requires more than thirty-one
(31) days' notice for cancellation without penalty; or
(iii) any agreement, contract or legally binding commitment relating to the disposition or
acquisition of any equity ownership interest in any business enterprise.
(b) The Sellers and Southern have delivered to Citizens:
(i) all agreements, contracts or legally binding commitments relating to present or future
capital expenditures by Southern which in the aggregate exceed $5,000.
(ii) all agreements, contracts, indentures, or other instruments relating to the borrowing of
money by Southern or the guaranty by Southern of any obligation for the repayment of borrowed money or the
performance of any other obligation; and
(iii) any other agreements, contracts or commitments or performance or surety bonds of Southern
which, when aggregated with all other such agreements, contracts, commitments or performance or surety bonds,
involve the payment or potential payment by Southern of $5,000 or more.
(c) The Sellers have previously disclosed in writing to Citizens all binding oral and written
contracts and agreements with respect to furniture, equipment, management, and other services in or for
Southern, which require more than thirty-one (31) days' notice for cancellation without penalty. Neither
Southern nor the Sellers shall renew or extend said contracts without Citizens' consent, which shall not be
unreasonably withheld; provided, however, that Sellers or Southern may in the ordinary course of business
renew, without Citizens' consent, any contract involving an amount which, when combined with amounts
payable under all other contracts which are renewed without Citizens' consent, is not in excess of $5,000.
Section 4.13 Actions, Suits, Etc.
(a) There is no action, suit, claim or proceeding pending or threatened in writing within the
last six (6) months against Southern in any court or before any arbitrator or governmental agency, domestic
or foreign.
(b) There are no judgments unsatisfied against Southern and no consent decrees to which
Southern is subject.
(c) There is no litigation or proceeding pending or threatened against the Sellers which
would adversely affect the Sellers' ability to perform their obligations under this Agreement.
Section 4.14 Licenses, Trademarks, Service Marks, Trade Names, Logotypes, Commercial Symbols and Copyrights. Southern holds all necessary
federal and state licenses required for Southern where the failure to hold such licenses would materially affect Southern's ability
to engage in the business presently conducted by it. Neither the Sellers nor Southern has any trademarks, service marks, trade
names, logotypes, commercial symbols, copyrights and licenses now used by Southern to conduct its business.
Section 4.15 Bank Accounts and Powers of Attorney. The Sellers
have previously disclosed in writing to Citizens the name and address of each bank in which Southern has accounts or safe deposit
boxes, the account number, account name and type of account, and the names of all persons authorized to draw thereon and to have
access thereto as of the date hereof, the names of all persons holding powers of attorney from Southern as of the date hereof and
each bank account's respective cash balance on the date hereof.
Section 4.16 Insurance. Southern and the Sellers shall keep all insurance policies or
renewals thereof affecting or covering Southern and its operations in force and in effect up to and including the date of the Closing.
Section 4.17 Union Agreements, Employee
Relations and Immigration Laws. Southern is not a party to any union or collective bargaining agreements, nor is there any current
attempt to unionize any of the employees of Southern.
During the periods of the ownership of Southern by the Sellers, Southern has not been the subject of a union
election. The Sellers have provided Citizens copies of (i) any written grievances filed by employees of Southern during the
twelve-month period immediately preceding the date hereof and (ii) any material correspondence, regardless of date, filed with
respect to the employment or termination of employment of any of the key employees of Southern.
Southern's payroll for the operation of Southern for the two-week period ending the 31st day of December, 2002,
has been provided by the Sellers to Citizens and is representative of and does not differ in amount materially from Southern's normal
payroll obligations. During the period of the Sellers ownership of Southern, there have been no strikes, lockouts, or other work
stoppages, picketing or labor disputes in which Southern is or was involved. The Sellers have previously provided to Citizens in
writing the name and current annual salary and other compensation or the rate of compensation payable by Southern to each of its
employees and the profit-sharing, bonus or other form of extra compensation paid or payable by Southern to or for the benefit of each
such person for its current fiscal year. Except for accrued and unused vacation, sick or personal leave (all accrued in the ordinary
course of business and on usual and customary terms), there are no binding oral or written contracts, agreements or arrangements
obligating Southern to increase the compensation or benefits paid or payable to any of Southern's employees now or at any future time.
Southern has never, to the Sellers and Southern's knowledge, employed a natural Person in violation of the
Immigration Reform and Control Act of 1986, as amended.
Section 4.18 Disclosure. Neither this Agreement, nor any of the agreements contemplated hereby or delivered in
connection herewith or therewith contains any untrue statement of a material fact or omits to state a material fact necessary to make
the statements herein or therein not misleading in light of the circumstances in which they were made.
ARTICLE 5
CONDUCT OF COMMONWEALTH AND SOUTHERN PENDING THE CLOSING
Section 5.1 Operation of Business of Commonwealth and Southern. From the date of this Agreement to Closing, except
to the extent to which Citizens shall otherwise consent, the business of Commonwealth and Southern shall be operated only in the
ordinary course or otherwise as permitted by this Agreement and the best efforts shall be exerted by Commonwealth, Southern and
Sellers to preserve the present business organization and relationships of Commonwealth and Southern.
Section 5.2 Access to Records. Between the date of this Agreement and the Closing Date, Commonwealth and Southern
shall make available to Citizens, at reasonable times and following reasonable notice, access to the property, contracts, books and
records of Commonwealth and Southern and shall furnish during such period all information concerning the affairs and condition of
Commonwealth and Southern as Citizens may reasonably request. All such data and information shall be kept confidential by Citizens.
ARTICLE 6
EMPLOYMENT OF SELLERS
Section 6.1 Employment Agreement. Sellers shall enter into employment agreements
with Citizens in form annexed hereto marked EXHIBIT A and incorporated herein by reference, which employment agreements shall provide
for an annual salary to each of Sellers of ONE HUNDRED THOUSAND DOLLARS ($100,000.00) and shall further provide that Sellers shall be
charged with operation of the Operating Division. Sellers' compensation pursuant to the employment agreement shall be in addition to
payments Sellers receive for the sale of the Stock pursuant to this Stock Purchase Agreement.
Section 6.2. Non-compete. The Sellers acknowledge that it is vital to the continuation of the Operating
Division that Sellers not compete with Citizens. Therefore, Sellers agree that in addition to any non-compete provisions set forth
in their employment agreement (EXHIBIT A) that they shall not, for period of one (1) year from the date of their cessation of
employment with Citizens, without the prior consent of Citizens, be employed or engaged directly or indirectly as an officer,
director, shareholder, partner, joint venturer, owner, part owner, manager, operator, employee, agent, salesman or investor in any
business entity which conducts substantially similar business to that of Citizens or the Operating Division in Warren County,
Kentucky or in any of the counties adjoining Warren County.
Section 6.3 Remedies. All of the terms and conditions of this Article shall remain in full force and effect
whether or not either or both of Sellers shall remain employed by Citizens. Each Seller expressly acknowledges and agrees that a
violation by them, or either of them, of the terms of Article 6.2 would result in irreparable and continuing injury to Citizens for
which there would be no adequate remedy at law. Therefore, in the event either of Sellers shall fail to comply with the provisions
of Article 6.2, Citizens shall be entitled to such injunctive and other relief as may be necessary or appropriate to cause such
Seller to comply with the provisions of Section 6.2 and to recover, in addition to such relief, Citizens' reasonable costs and
attorneys' fees incurred in obtaining same. Said right to injunctive relief shall be in addition to and not in lieu of such rights
or damages or other remedies as Citizens may be entitled to receive.
ARTICLE 7
REAL ESTATE
The Sellers presently own the real property addressed at 1301 U.S. 31W Bypass, Bowling Green, Kentucky, by virtue of
their ownership interest in H and V Property, LLC, the record title owner. Sellers agree that on or before the Closing Date, they
shall enter into a real estate sales contract which shall provide that the real property addressed at 1301 U.S. 31W Bypass, Bowling
Green, Kentucky, shall be sold to Citizens for its fair market value; the form of the real estate contract being annexed hereto
marked EXHIBIT C and incorporated herein by reference. Sellers and Citizens agree to each undertake the obtaining of an appraisal
from a MAI or similarly qualified appraiser. The fair market value for purposes of this agreement shall be the average of the two
appraisals.
ARTICLE 8
CLOSING
Section 8.1 Place, Time and Date of ClosingSection 8.1 Place, Time and Date of Closing. The payments and
deliveries contemplated by this Agreement (other than the post-closing payments contemplated by this Agreement) shall be made at the
law office of English, Lucas, Priest and Owsley, 1101 College Street, Bowling Green, Kentucky, at a Closing to commence at
approximately 10 a.m., local time, on (i) 2 January 2003, or (ii) at such other place, time and date as Citizens and the Sellers
shall agree. The date on which such payments and deliveries occurs is the "Closing Date", and such payments and deliveries
constitute the "Closing." The Closing shall not be deemed or required to have occurred unless and until all of the conditions set
forth in this Agreement have been satisfied (or appropriately waived); and none of such actions shall be deemed to have been taken
unless and until all of them have been taken (or the requirement that they be taken appropriately waived); but if all such actions
are taken (or appropriately waived), then the Closing shall be effective on the Closing Date.
Section 8.2 Closing Deliveries by Sellers, Commonwealth and Southern. At or before the Closing, Sellers,
Commonwealth and Southern, as appropriate, shall deliver to Citizens:
(a) The certificates representing the Stock in proper form for transfer free from any notation of any
adverse claim conveying to Citizens good and marketable title to the Stock free and clear of all liens, claims,
charges, rights and encumbrances of any nature whatsoever.
(b) Opinion of counsel for Southern and Commonwealth dated the Closing Date stating that each of these
corporations is duly organized, validly existing and in good standing under the laws of the Commonwealth of
Kentucky, has the corporate power to own its own properties and carry on its business and to execute and perform
this Stock Purchase Agreement and the transaction contemplated herein as well as any other documents necessary to
carry out the transactions contemplated by this Agreement. This opinion shall further state that this Agreement has
been duly authorized and executed by both Southern and Commonwealth and is enforceable in accordance with its terms;
that the capitalization of Southern and Commonwealth set forth in Articles 3 and 4 herein are true and correct and
that the Stock to be acquired by Citizens has been duly authorized, validly issued, is fully paid and nonassessable
and is free and clear of all liens and encumbrances and that the execution and performance of this Agreement and
consummation of the transactions contemplated hereby will not conflict with the articles or bylaws of Commonwealth
or Southern or any contract to which Commonwealth, Southern or the Sellers are a party. This opinion shall further
disclose any recorded liens or security interests with respect to the personal property of either Commonwealth or
Southern.
(c) Closing certificate of Commonwealth, Southern and the Sellers that all representations and
warranties contained in this Agreement are true and correct in all respects on and as of the Closing Date.
(d) A certificate from the Secretary of State certifying that both Commonwealth and Southern are in
good standing.
(e) Resignations of Sellers as sole officers and directors of Commonwealth and Southern.
(f) The minute books of Commonwealth and Southern, which minute books shall include each corporation's
articles of incorporation and all amendments thereto; each corporation's bylaws, as amended and currently in force;
copies of the stock records and all corporate minutes as of the Closing Date.
(g) Executed real estate contract in accordance with Article 7.
(h) Executed employment agreements in accordance with Article 6.
Section 8.3 Closing Deliveries by Citizens. At or before the Closing, Citizens shall deliver to the Sellers:
(a) The Purchase Price in accordance with the provisions of Article 2.
(b) Opinion of counsel for Citizens dated the Closing Date stating that Citizens is duly organized,
validly existing and in good standing under the laws of the Commonwealth of Kentucky and that it has full corporate
power and authority to execute and perform this Agreement and the transactions contemplated herein and that same
have been duly authorized by all necessary corporate action of Citizens.
Section 8.4 Receipt of Consents. Citizens shall have received all regulatory and other consents and approvals
which it may, in its sole discretion, deem required in order to consummate the transactions contemplated hereby.
ARTICLE 9
SURVIVAL; INDEMNIFICATION
All representations, warranties, covenants and obligations in this Agreement or any other certificate or document
delivered pursuant to this Agreement will survive the Closing. The right to indemnification, payment of damages or other remedy
based on such representations, warranties, covenants and obligations will not be affected by any investigation conducted with respect
to, or any knowledge acquired at any time, whether before or after the execution and delivery of this Agreement or the Closing Date,
with respect to the accuracy or inaccuracy of or compliance with any such representation, warrant, covenant or obligation. Sellers,
jointly and severally, without limitation as to time, will indemnify Citizens and its agents, representatives and affiliates
against, and hold each of them harmless from and against, all losses, claims, damages, liabilities, costs (including the costs of
preparation and reasonable attorneys' fees and expenses) arising, directly or indirectly, from or in connection with (i) any breach
or inaccuracy of any representation or warranty of Company or Sellers made in this Agreement or in any other certificate or document
delivered by Sellers pursuant to this Agreement; (ii) any breach or noncompliance by either Seller of any covenant or agreement of
such Seller in this Agreement; and (iii) any and all actions, suits, proceedings, claims, demands, assessments and judgments incident
to any of the foregoing. The remedies provided in this Section shall not be exclusive of or limit any other remedies that may be
available to Citizens or the other indemnified persons. Citizens may set off any amount to which it may be entitled under this
Article against amounts otherwise payable under Article 2.
ARTICLE 10
DEFAULT AND REMEDIES
Section 10.1 Citizens Default. In the event of a material breach or default by Citizens under this Agreement and
the termination of same by Sellers in accordance with Article 14.11 and further if such breach is not as a result of any act or
omission of Sellers, then, in that event, only, TWENTY-FIVE THOUSAND DOLLARS ($25,000.00) shall be paid jointly to Sellers as
liquidated damages, and all parties shall be relieved of and released from any further liability hereunder. Sellers and Citizens
agree that such sum is a fair and reasonable amount to be retained by Sellers as agreed and liquidated damages in light of Sellers'
agreement not to continue to actively market Commonwealth or Southern or their stock therein for sale and costs incurred by Sellers
and shall not constitute a penalty or forfeiture.
Section 10.2 Sellers' Default. If Sellers shall become in breach of or default under this Agreement, Sellers
acknowledge that because of the unique nature of this transaction, the failure of Sellers to carry out their obligations to perform
this Agreement on the Closing Date would cause irreparable injury; Citizens shall, in addition to any other remedies available to it,
have the remedy of specific performance.
ARTICLE 11
BROKER'S COMMISSION
Citizens and the Sellers respectively warrant that there are no brokers, finders or other consultants acting on
behalf of, or at the request of, Citizens or the Sellers in this transaction, the fees or commissions of which or to whom the other
party shall have any liability. The Sellers shall indemnify and hold Citizens harmless from and against the claims of all persons or
entities whomsoever who claim commissions through the Sellers for fees or commissions or any other fees arising out of the sale and
purchase of Commonwealth and/or Southern or the transactions contemplated hereby. Citizens shall indemnify and hold the Sellers
harmless from and against the claims of all persons or entities whomsoever who claim commissions through Citizens for fees or
commissions or any other fees arising out of the purchase or sale of Commonwealth and/or Southern or the transactions contemplated
hereby.
ARTICLE 12
NOTICES
All notices, demands or requests provided for or permitted to be given pursuant to this Agreement must be in
writing. If not otherwise provided hereunder, all notices, demands or requests to be sent to any party hereto, or any assignee or
any party, shall be deemed to have been properly given or served by delivering same personally to each party or by sending a
facsimile copy or delivering same by overnight delivery at the following addresses:
As to Sellers:
Scott T. Higdon
1301 31-W Bypass
Bowling Green, KY 42101
Fax No. (270) 796-2628
With a copy to:
__________________________
__________________________
__________________________
Fax No. (___) ______________
Mark A. Vaughn
1301 31-W Bypass
Bowling Green, KY 42101
Fax No. (270) 796-2628
With a copy to:
George E Strickler, Jr.; Bell, Orr, Ayers, and Moore
1010 College Street PO Box 738
Bowling Green, KY 42102-0738
Fax No. (270) 781-9027
As to Citizens:
Citizens First Bank
1805 Campbell Lane
Bowling Green, KY 42104
Attention: Mary Cohron
Fax No. (270) 393-0716
With a copy to:
English, Lucas, Priest and Owsley
1101 College Street, P. O. Box 770
Bowling Green, KY 42102-0770
Attention: Keith M. Carwell
Fax No. (270) 782-7782
ARTICLE 13
CONFIDENTIALITY
From the date of execution of this Agreement, to the Closing:
(a) Citizens and Sellers shall keep strictly confidential and shall cause their agents and
representatives to keep strictly confidential any and all information which either party has obtained from
the other as a result of the provision to such party of information or documents accessed and inspected as
contemplated herein. Neither party shall use any information obtained from the other party pursuant to
such access and inspection for any purpose other than in connection with the transactions contemplated by
this Agreement. If Citizens is requested pursuant to, or required by, applicable law or regulation to
disclose any information about the Sellers, Commonwealth and/or Southern, Citizens will provide to the
Sellers, Commonwealth and/or Southern prompt notice of such request or disclosure, to enable the recipient
to seek an appropriate protective order or otherwise attempt to prevent such disclosure. Citizens, if
required to do so by applicable law or order, may disclose any such information.
(b) Citizens and Sellers agree that Citizens shall be entitled to issue an appropriate press
release or make such other public notification as it may deem necessary or advisable with respect to this
transaction.
(c) Notwithstanding any terms in the Agreement to the contrary, this Article 13 shall
continue in full force and effect and shall survive any termination of this Agreement or this Agreement
being deemed null and/or void.
ARTICLE 14
MISCELLANEOUS
Section 14.1 Third Party Rights. It is the intention of the parties that nothing in this Agreement
shall be deemed to create any right with respect to any person or entity not a party to this Agreement.
Section 14.2 Parties in Interest; Assignment. All covenants and agreements contained in this
Agreement by or on behalf of any of the parties to this Agreement shall bind and inure to the benefit of their respective
successors and assigns, whether so expressed or not. No party to this Agreement may assign its rights or delegate its
obligations under this Agreement to any other person or entity without the express prior written consent of the other party.
Section 14.3 Construction; Governing Law. The section headings contained in this Agreement are
inserted as a matter of convenience and shall not affect in any way the construction of the terms of this Agreement. This
Agreement shall be governed by and interpreted in accordance with the laws of the Commonwealth of Kentucky.
Section 14.4 Entire Agreement; Amendment and Waiver. This Agreement, including the exhibits hereto,
constitutes and contains the entire agreement between the parties hereto with respect to the transactions contemplated
hereby and supersedes any prior writing by the parties. The parties may, by mutual agreement in writing, amend this
Agreement in any respect, and any party, as to such party, may in writing (1) extend the time for the performance of any
obligations of the other party; (2) waive any inaccuracies in representations and warranties by the other party; (3) waive
performance of any obligations by the other party; and (4) waive the fulfillment of any condition that is precedent to the
performance by such party or any of its obligations hereunder. No such waiver shall be deemed to constitute the waiver of
any other breach of the same or of any other term or condition of this Agreement. Any such amendment or waiver must be
signed by an officer of the parties or party to such amendment or waiver.
Section 14.5 Severability. The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of the remaining provisions.
Section 14.6 Counterparts. This Agreement may be executed in one or more counterparts, any one of which need
not contain the signatures of more than one party but all of which taken together shall constitute one and the same Agreement.
Section 14.7 Expenses. All costs and expenses incurred in connection with the Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs and expenses.
Section 14.8 Further Assurances. At and after the Closing, Citizens and Sellers will, without further
consideration, execute and deliver such other instruments and documents and do all other acts and things as the other party or
parties may reasonably request in order to effect or confirm the transactions contemplated by this Agreement.
Section 14.9 Exhibits. The exhibits attached to this Agreement constitute a part of this Agreement and are
incorporated herein by reference in their entirety as if fully set forth in this Agreement at the point where first mentioned.
Section 14.10 Time of Essence. Time is of the essence to the performance of the obligations set forth in this
Agreement.
Section 14.11 Termination. Anything contained in this Agreement to the contrary notwithstanding, this Agreement
may be terminated at any time prior to the Closing Date:
(a) By the mutual written consent of Sellers and Citizens;
(b) By Citizens or Sellers if the other party to this Agreement shall have materially breached any of
its representations and warranties set forth in this Agreement and such other party shall have failed to cure such
breach within a cure time mutually agreeable to the parties;
(c) By Citizens in the event of a material adverse change to the value of the Stock; or
. (d) By either party in the event this transaction has not closed by the 2nd day of January, 2003.
Section 14.12 Attorneys' Fees. If any party hereto incurs any legal fees, whether or not an action is
instituted, to enforce or interpret the terms of this Agreement or to recover damages or injunctive relief for breach of this
Agreement, it is agreed that the successful or prevailing party shall be entitled to reasonable attorneys' fees, expert witness fees
and other costs in addition to any other relief to which it or they may be entitled.
Section 14.13 Joint Preparation This Agreement shall be deemed to have been prepared jointly by the parties
hereto. Any ambiguity herein shall not be interpreted against any party hereto and shall be interpreted as if each of the parties
hereto had prepared this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Stock Purchase Agreement the day and year first
hereinabove written.
SELLERS:
/s/Scott T. Higdon
SCOTT T. HIGDON
/s/Mark A. Vaughn
MARK A. VAUGHN
CITIZENS:
CITIZENS FIRST BANK
BY: /s/ Mary D. Cohron
CFC:
CITIZENS FIRST CORPORATION
BY: /s/ Mary D. Cohron
COMMONWEALTH:
COMMONWEALTH MORTGAGE OF
BOWLING GREEN, INC.
BY: /s/Scott T. Higdon
SCOTT T. HIGDON
BY: /s/Mark A. Vaughn
MARK A. VAUGHN
SOUTHERN:
SOUTHERN KENTUCKY LAND TITLE,
INC.
BY: /s/Scott T. Higdon
SCOTT T. HIGDON
/s/Mark A. Vaughn
MARK A. VAUGHN
EXHIBIT A-- At Will Employment Agreement-Mark A. Vaughn
At Will Employment Agreement-Scott T. Higdon
EXHIBIT B--Real Estate Contract
